peeker01 wrote:OK guys, what am I missing here? If the US imports 50 percent of it's crude, why are we discussing
the export of wti. Do we export our own crude so we can import saudi? Esplain it to me please?
Short answer:It's not that we're necessarily exporting it. It's pure price arbitrage, since it's hard to get it to ANY refinery.
Longer answer:There is a LOT of crude at Cushing, OK, where WTI is priced (by the rules of the contract). More comes in than can economically be moved out, since Cushing is:
1). Landlocked (no existing OUTGOING pipelines to major ports.
2). Receiving major new supply from the Tar Sands production in Canada.
3). Trucking, using trains, barges, etc. is woefully inadequate to close the gap and is also expensive, as a linked article in a couple of posts from Pops (thanks Pops) above points out.
In 2012, when the new outgoing pipeline is produced (and I think new storage is due in 2013, and other pipelines may come onstream later) -- this situation will dissipate. The oil can go to a port, where it can be cheaply shipped to, say, US refineries.
Since WTI is lighter/sweeter then Brent, it might even go back to its traditional premium price, in time, since it is easier to refine. This probably depends on how the refineries are tuned, for one thing.
(I read up on this on the net when the premium first zoomed toward $20 a barrel, wondering if there was a reasonable futures arbitrage speculation. After seeing how complex the whole thing was, that there was NO consensus, the behavior of Brent vs. WTI futures in further out months/years, and how supposed experts playing against WTI from a $7.00 premium were getting crushed like a BUG), I decided it was FAR too difficult a game to play).
