2011 December 30

The Master Resource Report  2011-12-30

YOU ARE HERE: The Oil Journey

by Post Carbon Institute

Is oil really $100 per barrel?

With West Texas Intermediate (WTI) trading at $100 this week I thought it would be a good idea to look at the price of oil from some different perspectives.

Below is a graph illustrating the price of Brent and Malaysian Tapis. Both these crude benchmarks are trading well above the WTI price ($100/b) with Tapis having been over $118 this month.

click for larger view

Another way of looking at price is the refiners acquisition cost of crude oil. The latest data provide by the EIA is for October showing domestic produced crude was costing refineries $96.89/b with imported coming in at $101.71/b. With current spot prices near the same levels it seems safe to expect current acquisitions costs to hold in $100/b range this last week of the year. The result should be an average refiners acquisition cost of just over $100/b for 2011. 2011 should achieve a new record average acquisition cost record for the year, breaking 2008’s previous record of $94.74/b.

However that does not mean everyone is paying $100/b for oil. As noted above if the buyer is using Tapis the cost is closer to $118/b which helps explain the troubles facing Hawaiian Electric Corp. Since Hawaii generates nearly all its electric power from oil they are competing with other buyer of low-sulfur grades and paying $130/b according to the company (details in this week’s report).

Finally there is the question of how this year’s average price compares to the year of reckoning, 2008. In 2008 WTI spot prices averaged $99.67/b while Brent average slightly less at $96.94/b. 2011 (thru 12/28) saw WTI come in lower at $94.83/b and Brent 14.8% higher at $111.20/b. Since WTI did not reflect global crude oil prices it is probably safe to say on a global basis the world has set a new “World Record” based on the price of crude oil using the Brent benchmark. (EIA crude oil spot price)

Sadly like any “World Record” it will not stand for long. Any bets on what the new record will be and when it will be set?