Profit-Taking Pulls Oil Back From $103

NEW YORK — Oil futures retreated from a new overnight record above $103 as the dollar gained strength and Turkish forces withdrew from northern Iraq.

The slumping dollar and tension in the oil-rich Middle East have been among the factors in crude's dramatic 19 percent rise in February.

Still, many analysts believe any declines may be temporary and that oil is poised to rise above $103.76 a barrel. That's the price many believe to be oil's all-time high, on an inflation-adjusted basis, set in early 1980 during the Iranian hostage crisis.

Gasoline and diesel prices, meanwhile, continued to soar.

Gas prices rose 0.3 cent overnight to a national average of $3.164 a gallon, creeping closer to last May's record of $3.227 a gallon, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.

While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of nectarines, computers, clothing and virtually every other consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

"It's everything that gets shipped," Kloza said of diesel fuel's impact on the economy. "That is the one that is much scarier."

Gas and diesel prices are following light, sweet crude oil, which spiked to a new record of $103.05 overnight before falling 75 cents to settle at $101.84 a barrel on New York Mercantile Exchange.

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In London, Brent crude futures fell 80 cents to settle at $100.10 a barrel on the ICE Futures exchange.

Analysts cited profit-taking by investors who have bought into oil's recent runup for Friday's declines.

The dollar rose against the euro Friday, reversing one of the factors that has attracted huge flows of investment capital to the oil market. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. That logic tends to reverse itself when the dollar strengthens.

Also giving investors reason to sell was Turkey's decision to withdraw its forces from northern Iraq, which they invaded earlier this week in search of Kurdish rebels. Turkish attacks on Kurds in northern Iraq _ and the concern that Kurds would retaliate by cutting off oil supplies _ have helped propel oil to new records in recent months.

Traders also continue to fret over OPEC, which meets next week to consider production levels. The prospect that the Organization of Petroleum Exporting Countries might cut production has helped fuel oil's recent rise. But with prices holding above $100, most analysts now expect OPEC to hold production steady.

Despite oil's modest retreat Friday, many analysts believe the investment flows that have pushed prices higher this year are not about to dry up.

"We've just got a huge, huge speculative drive going on here," said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill. "The fresh buying brings in new buying."

Many analysts believe the underlying fundamentals of oil supply and demand do not justify such high prices. Some predict speculative investing could push oil prices as high as $120, while others argue prices have formed a bubble, and could crash back to the $70 range.

Other energy futures were mixed Friday. In other Nymex trading, March heating oil fell 0.59 cent to settle at $2.8397 a gallon while March gasoline futures rose 1.66 cents to settle at $2.5123 a gallon. Both contracts expired after the close of trading.

April natural gas futures fell 7.7 cents to settle at $9.366 per 1,000 cubic feet on the Nymex.

Comments

[margotb822]

I did a little looking into this situation and I found some interesting information that only confirms the artificially high price of oil,

Here is a good article: http://www.msnbc.msn.com/id/12410064/ (it's from 2006, but still, if not more, pertinent)

Excerpts:

Who is making money from all this?
Right now, oil producers — both countries and companies — are among the biggest winners. Though the market price for oil has doubled in the past two years, the cost of producing each new barrel hasn’t gone up much. That means most the rise in price is pure profit. That’s why big oil companies have been reporting huge profit gains in the past year.

Given enough political pressure, there’s no reason Congress or the White House couldn’t impose a cap on U.S. gasoline prices. Many countries artificially control pump prices — either by heavily subsidizing gasoline to keep prices low or, more commonly, by imposing heavy taxes to reduce consumption.

The cost of crude oil accounted for about 47 percent of the cost of a gallon of regular gas in 2004, the latest figures available from the Dept of Energy. Federal, state, and local taxes accounted for about 23 cents of every dollar spent at the pump. Uncle Sam gets about 18.4 cents per gallon and state and local taxes average about 21 cents — though state taxes vary widely. Refining costs and profits take about 18 cents from every dollar spent to fill up your tank. The cost of distribution and marketing, along with retail dealer profits, together make up another 12 percent.
(For non-math people, this adds up to $1.34 of production cost/taxes/retailer profits per gallon. Where does the rest go? Straight into the pockets of the oil production corporations)

My personal take: The demand for oil is inelastic, hence the fact that I actually paid $3.69 for regular today. I had no choice. In a time of war, the demand at the governmental level only increases and those artificially high costs are passed down from the government to the tax payers (or just tacked onto our debt, at this point). If there were to be a cap on the price of gas, it would stimulate the economy because the price of goods would drop (due to a drop in the cost of production and shipping), people would be able to spend more money on goods and travel, consumer confidence would rise, bolstering the economy.

For those that don't believe the price of oil is artificially high, why do oil companies set consecutive quarters of record profits? Oil is not scarce, it is not difficult to extract or refine. If these were true, the money would be going back into the cost of production. It is not the case. The governments and the oil companies are taking our money all the way to their bank.

www.serveoutloud.blogspot.com

[TxAggie]

Yes, producers are making money, the result is jobs are created, taxes are paid, US and local governments receive royalties, severance taxes, road taxes, etc, etc. When did making profit in America become a bad thing? We can't all be the goverment. If we are going to pounce on oil companies for making a profit, why stop there? What about the banks, the drug companies, etc., let's just go ahead and shut down all our industries for making a profit.

Yes our government could impose caps on gasoline prices, the result would be job loss, loss of reserves, loss of production, increased reliance on foreign imports and gas lines- is this what you want?

Perhaps you prefer the "imposing heavy taxes" route. So you want to pay more for gasoline?

Your percentages of the breakdwon of the cost of refininng are inaccurrate (and based on 2004 numbers), The cost to find, produce, refine, including taxes royalties and the cost to drill, complete, build infrastructure are all up..You comment " Oil is not scarce, it is not difficult to extract or refine", is very telling, it shows you don't know what you are talking about. I would suggest you educate yourself on the industry before you opine on something that you have not done sufficiant research on to offer intelligent comment.

[margotb822]

Making money in America is not a bad thing, especially if you don't mind damaging the economy for it. The basic truth is that oil companies are making record profits at our expense. The cost of gas at the pump is such that people are dedicating more of their flexible income to fill up, resulting in less money being spent in other sectors. And, because oil is so expensive, goods are more costly to produce and ship, stores are more expensive to operate, everything between the good and the consumer is more costly. So, I'm glad that oil companies are making money...no one else is. (Oh, and as for banking, I would argue that the mortgage crisis is an indication that something went wrong in the pursuit of making money, but that's for another day).

Obviously, the current oil system isn't working. Something else needs to be done, and maybe that is a cap on oil somewhere along the line. I don't see a government subsidy to keep prices low (such as those found in Venezuela or the Middle East) as a feasible option. And, as far as heavy taxes, we were paying less for oil under Clinton before the oil company tax breaks of Bush.

Well, I found some information on oil industry jobs. Apparently no one wants them: http://money.cnn.com/2008/02/13/news/companies/oilworker_shortage/index.htm?section=money_topstories. Now, we could drill in the ANWR would create many jobs, but at what sacrifice?

When you say that taxes are being paid, I assume you mean that we are paying taxes on oil (because we have no choice at the pump). Oil companies are certainly getting some premium tax breaks for contributing very little to alternative energy development, and perhaps even hindering the development of these alternative energy.

As far as production, it's not nearly as expensive as one would have you believe. For a typical major oil company like Exxon, with its vertically integrated business from the wellhead all the way to the consumer, the average actual production cost is $14 to $19/bbl, depending on a lot of variables (and it is more expensive for imports, that is not in doubt).

Oil will become more scarce and difficult to extract, but we are looking at 80 years from now before we truly exhaust our oil supplies (on an average estimate). This will be plenty of time to develop alternative energy, IF we take it out of the hands of the oil companies. It is not in their best interest to have people using other fuels, so why would we entrust them to develop it? All those subsidies and tax breaks that are going to oil companies should be going to independent developers.

So maybe you should be more critical of the situation. We should expect more from our government and more from our corporations. You have bought the supply-side argument hook, line and sinker. The supply-side economy we have been running has drained our resources and exhausted our profits. I thought Reagan blew that myth out of the water in the 80s, but apparently, there are people who still believe that corporate profits equal booming economy. Look around and you will see quite the opposite. When the money is in the hands of the people, we will see economic growth. Let's get that money back to the people.

By the way, here is some research I did, let's see your sources.

http://home.earthlink.net/~oilandyou/
http://www.technologyreview.com/read_article.aspx?id=16767&ch=biztech
http://www.lifeaftertheoilcrash.net/Archives2007/RealCost.html
http://www.iags.org/costofoil.html
http://democrats.senate.gov/dpc/dpc-new.cfm?doc_name=fs-110-1-64
http://www.truthout.org/cgi-bin/artman/exec/view.cgi/66/23956
http://ezinearticles.com/?The-Greatest-Rip-Off-In-Texas---Oil-Companies-Havent-Paid-Their-Taxes-In-Years&id=790685

www.serveoutloud.blogspot.com

[ajax2]

Thanks Ben.

[WorkingClass]

A friend of mine makes an extra buck buying and selling radios outside one of those mega truck stops on the interstate. He was telling me today that the independent truckers are going out of business en-mass. He and I both work days in a family owned print shop that employs about 40 people. Our business has fallen of to a trickle. I have been there 8 years. A lot of them have been there over 20 years. We are all looking at each other like - its been good to know ya.

[civilbehavior]

It's not bad enough yet for most people to take notice. Not yet.

It will be when they find out that the former middle class America can't even buy food at Wally's world.

This is going to get a whole lot worse before it gets better folks and not one of the current presidential candidates are going to be aggressive enough to make the change we need.

Everyone better be thinking about how they are going to ride out the upcoming depression because it is on its way. We're well through the recession.

[Nova16]

Optimism regarding the world's oil reserves may be a "pipe" dream and the scenario doesn't look good and peak oil may have been achieved, as Wendigo2 points out.. With the high price of oil, world wide demand and imminent scarcity, there does not appear to be a "stimulus" package to develop a synthetic replacement for oil in the laboratory. Corn, grasses, sugar cane, hydrogen, methane, carbon, etc. all present some solution, but create additional problems elsewhere in the economy. Where does this country turn in its dependency on oil for its survival. The rate of consumption of millions of barrels a day cannot be replaced with existing methods to solve this galactic threat to our economy. This may require the talent and funding of galactic measures to thwart the oncoming calamity, but there doesn't seem to be a real concern in Washington to provide for such activity as long as the oil continues to flow from the Middle East and Venezuela.

[VictoriaLynnLewis]

2008 predictions
me/my family/3ki­ds/husband­=26,000.00 per year...Almost to the point of being screwed...
Anyone under that cut off point is screwed...­.hungry/ho­meless soon
If you make 100,000 and took out too big of a mortgage you are going to lose your home.
if you make 250,00 and lose your home big whoopi, go live in a hotel...
500,000-million/ Fuck U all..

[mmckinl]

Cheap energy is over ...

Unless there is a worldwide depression oil prices will outrun productivity increases creating an ever shrinking return on investment. When the financial markets wake up to this fact, stocks in just about all sectors will tank.

[civilbehavior]

CONSERVATI­ON.......C­ONSERVATIO­N.........­CONSERVATI­ON

And the political will to set an example.

[ajax2]

This is not supply driven. It is a move to protect those holding weak dollars.

[Gary47]

It'll be such a joy in so many ways when george and his neocon whaco pals are history.

[mrcontinental]

Has anyone heard from Pickens since he announced he was shorting oil?

[mmckinl]

LOL ...

My guess is he had already shorted and passed the shorts off on the idiots who believed him. Just like Cramers' little game of pump and dump for CNBC viewers.

[mrcontinental]

You're probably right mmc.

[Nova16]

When Bush was appointed to the White House to undertake "compassionate conservatism" a barrel of oil was $30. It has reached $103.76 a barrel and local gas stations are at $3.19.9 per gal of gasoline. This is just one item in a list of commodities and materials that have risen exponentially since the dolt was appointed "president". Everything has increased since the dolt was appointed--the national debt, personal debt, current accounts deficits, trade deficits, outsourcing, unemployment, energy, nation building, However, he has lowered our dependence on manufacturing, credit, housing , good government, common sense and the Constitution. But all is not lost, We still have those wonderful "faith based initiatives" to help us in some small way to survive the disaster of the Bush administration. Vote republican at your peril.

[ErnestineBass]

YEEEEEEEE-HAAAAAW!

When BOOOsh starts bombing Iran, maybe my RDSA will go to $100 a share!

At that point, I'll cash out and use my after-tax profits to...keep buying $5 a gallon gasoline.

What a clusterf**k!

[mrcontinental]

What if it spilts? Better hang on to it EB.

[margotb822]

I shake my head in disbelief when I read this and then I cringe at the pump. How can our government allow this to happen to its citizens? I would argue for government regulation, but look at our corrput government. Bush and Co sit there and rake in the money, while they kill Americans, our economy, and slowly, it spreads to the rest of the world.

This is the answer to the economy question. Our lives are hinged around oil. Everything we touch is affected by the price of oil.

The question for all the candidates is: What are you going to do about the artifical inflation of the price of oil?

Honestly, I don't know the answer. I doubt it will be as simple as electing a new president, but I wish it were.

[TxAggie]

How can government regulation help? What would you do, cap the price of gasoline at the pump? Who would make and sell gasoline? Who would drill for it , build pipelines, refine the product then sell it at a loss? No one would.

[ErnestineBass]

If only the $70 a barrel analysts out-numbered the $120 a barrel analysts...sigh.

[Stretchumall]

"How high will gas prices have to go before you change your driving habits?"
This question was posed to the public more than five years ago, the writing was on the wall. I seen it as did many others.
Now! Why was impeachment taken off the table?
Fascist bunch of incompetents!

Got Rope?

[ErnestineBass]

How many turns in a hangman's knot?

Thirteen.

Line 'em up, Stretchumall!

[bradio1]

My wife and I both have 4 cyl cars. We have 2 kids. Yes, it's tough sometimes. I'm 6'4". Still the three of us fit in them ok. Our trunks are big enough for groceries and a stroller etc.... 8 cyl. cars must go, but also, we must limit the amounts of meat that we eat. Whoa, this soap box is kind of high so I'll get off now.

[ImmanuelGoldstein]

The problem is that most Americans don't burn gas going out and driving around in circle. We have constructed a society which requires lots of driving, and we'll start to see change only when we construct one that doesnt. But with car worship still at full flower it's going to take some pretty hard knocks to knock some sense in the heads of the public.
Don't like $4 gal. gas ? You'll love it when it's six or eight.

[EinChicago]

The problem is it's really not that easy to "change your habits". Unless you live in a few select places around the country, changing your habits is not feasible. Yeah. if you live in Chicago, you can take the el or cycle down the lakefront to work. But those options aren't available if you live outside the city. And that goes for 90% of america. The last 50 years has been built around using cars, and everything from the location of stores to houses, etc., is built around the car. Changing all of that will take time and a lot of it.

[Stretchumall]

Wallymart will just have to downsize and bring smaller stores to a neighborhood near you now that they have eliminated small mom and pop stores.

Got Rope?

[DELICIOUS]

GOOD THING CHENEY HAD THOSE SECRET MEETINGS WITH THE OIL CORPS WHEN OIL WAS STILL ONLY $1.50 A GALLON.

[fact finder]

All this is decided on the futures market , Not by supply and demand. Get rid of the stock market and let supply and demand determine prices. 1776

[EinChicago]

Exactly. Everyone remember why onions are the only excluded commodity? Oil is now disconnected from any supply or demand and is being manipulated as an abstract "balance book" concept investment. Th eporblem is that oil has very real world applications, and so a much more brittle tolerance for abstarct fluctuations and this is setting up teh bubble that will bring commodities crashing in teh next few months. everyone remember what happened to gold the last time it bubble this high? (hint, it lost about 60% of its value in a matter of hours when it crashed).

[EinChicago]

Bubbl;e bubble bubble. The former Enron and amaranth employees are at it again.

[ErnestineBass]

LOL!!! Your comment conjured up a mental image of Cheney, clad in a long black robe and a witch's hat, stirring a boiling cauldron with a boat paddle...

Bubble, bubble, toil and TROUBLE (for the have-nots).