Bob Tippee
Consumers of oil products are restless again. They should be.
Prices of oil products are uncomfortably high. They should be, too.
In the US, television reporters are once again interviewing motorists complaining about "gouging" as they pump gasoline into pickup trucks and sport utility vehicles powered for speed.
But there's no gouging. Prices of gasoline, heating oil, and other products are high for a good reason.
The market is short.
It has fed so heavily on storage that inventories of crude oil and petroleum products are perilously low.
In the US, according to the Energy Information Administration, commercial inventories of crude fell to 269.8 million bbl during the week of Feb. 3.
That's their lowest level since October 1975. Crude stocks can't fall much more without compromising operations. They no longer represent a buffer supply.
US product stocks are low, too. Distillate inventories fell again last week. Gasoline inventories rose slightly but, like distillate stocks, remain at the low end of their range of the past 5 years.
Total commercial inventories—crude plus products—are below the lower end of the 5-year range. Inventories of natural gas are in similar shape.
Among all members of the Organization for Economic Cooperation and Development—representing the developed world—oil inventories are similarly low, although the numbers aren't as current as those of the US.
On Feb. 12, the International Energy Agency estimated OECD total-oil stocks for December at 2.52 billion bbl—low in terms of both the recent-year range and days of consumption coverage.
Reasons for the inventory squeeze are obvious. Since early December, oil supply from Venezuela has been crimped by strikes. The problem developed with global inventories already falling and with anxiety high over the possibility of war in Iraq.
The consequent elevation of price is central to a correction already under way. Major exporters have raised production. A weakening of demand soon will be evident. Uncertainty over Iraq won't last forever.
For now, though, inventory data make clear that the market is short. The indignation of motorists can't do anything about it. Different driving habits, however, can.
(Online Feb. 14, 2003; author's e-mail: [email protected])