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Oil and Gas - Practical Overview
Hi All!
Oil and Gas prices have been key market drivers and a huge topic of discussion both on Commonstock and all the other major investing mediums. I found an excellent article that does an extremely good job articulating the situation and answering key questions that many of you (myself included) may have.
A few key points I found interesting were:
- US Refining is a bottle neck and we are entering a high risk time period, Hurricane Season that could potentially further disrupt supply.
- State and Federal Oil/Gas Taxes - considering they were lifted today, this section is interesting. My personal take is that lifting the taxes will not materially effect the cost at the pump. The reduction in cost will likely be a wash as price decreases can increase demand. I believe the root issue is on the supply side. Then again.. I am not sure how much an $0.18 reduction will increase demand so let's see if it helps..
- Refiners are more incentivized to produce higher priced fuels such as jet fuel as the summer travel season ramps up and pent up demand from COVID has more people in the air.
- "The Price of Oil is set on the Global Market" - is a key point of the article and one that I do not entirely agree with. The article essentially implies that there is not much the US can do to bring the prices down even if we were to increase domestic supply. The reason I disagree with this point is simple market dynamics.. if the supply is significantly increased anywhere in the world, it will bring the prices globally down as a cheaper alternative will be available. I believe the US is making a strategic mistake on policy and all solutions provided, release of strategic reserves, gas tax holidays, etc. Do not fix the root problem, supply. Unless we incentivize the oil majors to invest in production and stop demonizing them prices will remain high.
I hope you all find this article as helpful and informative as I did!!
FinMasters
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Great breakdown on oil and gas. Well done as always Strib!
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