Thursday, April 28, 2005

This Week In Petroleum comments on the "Dependency" factor

Very nice commentary from This Week In Petroleum.
Of course, many might argue over whether this dependence on oil imports is good or bad. But given current market conditions, petroleum product prices would be even higher, at least in the short-term, if we imported less, as it would reduce the amount of oil and petroleum products that would be available, thus making each barrel or gallon even more costly than it currently is. Not only are imports needed to meet current demand, but imports can also help build inventories, as we saw happen last week. While crude imports were the third highest weekly average ever, crude oil inputs into U.S. refineries actually declined slightly. As a result, much of the increase in crude oil imports found its way into inventories, which built by 5.5 million barrels during the week ending April 22. Nevertheless, with refinery inputs expected to increase significantly over the summer as refiners try to produce as much gasoline as possible (while still needing imports to meet demand), crude oil inventories will likely be drawn down. So, for the time being, increases in oil imports help keep prices from being even higher – even if it flies in the face of the American sense of “rugged individualism.”

Interdependence is not an easy concept to explain. This quote explains at least one piece of it very elegently.


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