In the December issue of Energy Drop we tried to explain the complicated world of crude oil and petrol prices and what impacts these to make the prices go up and down.
Since then the price of crude oil dropped further to about $47 a barrel in late January with a corresponding drop in petrol prices at the pump. However, in the first part of February the prices jumped up again – about $13 a barrel.
This change has been driven by a variety of factors including the fact that the US crude market isn’t producing as much oil. As the price of oil has declined in other parts of the world, some of the new technologies in oil drilling used in the US have made their product too expensive. Another impact on price has been the big oil companies cost cutting which is starting to be felt.
The impact of supply and demand is always great. Currently there is extra demand out of China, however, among the OPEC countries other political considerations are also in play. Saudi Arabia wants to maintain its market share and therefore is continuing to keep the price of crude oil down. With the recent death of their King this strategy was less certain, but all indications are that the King’s successor is likely to continue with this policy.
Another important factor for us is that our dollar went down 5 cents against the US dollar in late January. Oil prices increasing and the exchange rate decreasing had a double impact on our prices.
At the pump the petrol prices generally follow the crude oil prices unless there is something particular happening in the region. For us, in Asia Pacific, the margins are currently quite good for the refineries so they are continuing to push out finished product.
This is a very volatile industry and prices can, and do, go up and down like yo-yos. We have ways of managing this price volatility, but what is important to remember is that the last month can never be a reflection of the next month.
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