Understanding Oil Prices

A Guide to What Drives the Price of Oil in Today's Markets
2. Auflage 2011
ISBN: 978-1-119-96272-4
Verlag: Turner Publishing Company

Buch, Englisch, 200 Seiten, Format (B × H): 157 mm x 235 mm, Gewicht: 450 g

Reihe: Wiley Finance Series

Oil prices have seen massive fluctuation over the past 10 years, with price per barrel growing from $9 to $140. More recently, we have seen fluctuation from $140 to $37/barrel, and back up to $120 - all in a matter of months. But why? It is still a popular belief that OPEC can affect the price of oil by regulating the volume of production and using this key raw material for their political aims, but the reality is quite different. In the last decade, despite a constant potential surplus of crude in the markets, we have seen the prices fluctuating dramatically with no apparent logic.

Starting from the Chernobyl accident and the Clean Air Act implementation in the US, structural changes within the oil industry have modified the dynamics of oil prices. The existing technological refining system is no longer adequate to transform, with the necessary continuity, the crude oils into the high-quality finished products demanded by the market. Furthermore, from the beginning of the year 2000, the oil futures market detached itself almost completely from its original nature (the barrel of oil), becoming a purely financial market, but still able to heavily affect the real oil prices. More sophisticated models are needed to understand this new scenario.

This book thoroughly demystifies the oil market, showing readers what really moves the price of oil today. It provides a comprehensive analysis of the industry fundamentals and the role of financial speculation, illustrating the complexity of the relationship of three different markets that regulate the oil sector: the crude oil market (raw material), the finished products market (gasoline, diesel, jet fuel, fuel oil, chemical feedstocks, lubricants), and the financial market (futures). It will provide an excellent grounding in the topic for anyone involved or interested in the oil markets, including financial analysts, traders, investors and energy market participants.

Autoren/Hrsg.

Carollo, Salvatore

Fachgebiete

• Wirtschaftswissenschaften Finanzsektor & Finanzdienstleistungen Internationale Finanzmärkte
• Wirtschaftswissenschaften Wirtschaftswissenschaften Literatur für Manager
• Wirtschaftswissenschaften Finanzsektor & Finanzdienstleistungen Börse, Rohstoffe
• Wirtschaftswissenschaften Wirtschaftssektoren & Branchen Energie- & Versorgungswirtschaft Öl- und Gasindustrie
• Wirtschaftswissenschaften Volkswirtschaftslehre Internationale Wirtschaft Internationale Finanzmärkte

Inhaltsverzeichnis

Foreword xiii

Preface xv

Quick Reference Guide xix

List of Figures xxiii

List of Tables xxvii

List of Boxes xxix

1 TheWorld Crude Oil Paradoxes 1

2 The Market Events from 2008 to 2011 7

World Energy Policy 8

The Financial Crisis and the Oil Market 10

Fundamentals or Financial Speculation? 17

Demand/Supply of Gasoline and Gasoil 21

WTI - Brent Differential 24

3 Evolution of the Price of Crude Oil from the 1960s up to 1999 29

1960-1980: The Oil Monopoly and the Two Crises in the 1970s 30

The 1980s: The Gradual Disappearance of OPEC 33

The Price War 35

1985-2000: From the Introduction of Brent as an International Benchmark to the Clean Air Act 37

The Suicide of OPEC 40

The Start of the Free Market 41

The Consequences of the Environmental Turnaround 44

4 Changes in the Market for Automotive Fuels 45

Evolution of Environmental Demand 45

Gasoline and its Components 50

Reforming 51

Cracking 52

Alkylation 53

Isomerization 53

Refiners Walk the Tightrope 53

The Fiscal Policy of the Industrialized Countries Regarding Fuels 55

5 World Oil Flow 63

Transformations in the Downstream 66

World Supply Structure 70

6 The Classical Model of the International Oil Market 73

7 The Short-term Model of the International Oil Market 81

8 The Brent Market 89

The Sale and Purchase Contract 90

The Forward Market for Brent (15 day Brent Contract) 94

The IPE Brent Market 100

The Divorce Between Oil Price and Oil 102

9 Principal Uses of the Forward and Futures Markets 105

Tax Spinning 105

Benchmarking 105

Hedging the Price Risks 106

Speculations on Operational Flexibilities at Loading 114

Market Structure: Contango and Backwardation 117

Procedures at the Loading Terminals 119

10 Problems of the Brent Forward Market 123

11 The European Refinery Crisis 131

12 Conclusions:We are Ourselves OPEC 155

Bibliography 163

Index 165

Über Autor(innen)

SALVATORE CAROLLO graduated in engineering from the University of Palermo, where he also served as a lecturer and researcher. In 1975 he began working at eni; both in Italy and abroad where he was active in various sectors of the petroleum downstream, refining, market research, supply and trading of crude oil. Since 1995 he has been based first in Amsterdam and then in London as the manager of the Upstream Marketing Department, where he is responsible for the commercial relations with several producing countries and eni partners in various joint ventures. Within this area he provides support to eni corporate university, through teaching activities at the Mater MEDEA and organising the annual Oil Market and Commercialization of Crude Oil seminar. He is often called in as an expert by various institutions in the oil sector to provide his own analysis on the dynamics of oil prices.