Apparently
the Wall Street Journal (pay walled) yesterday commented on the G20 paper
concerning the regulation of transactions and reporting in the oil
markets. The nub of it, according to
Naked Capitalism was that the regulators had wimped out of taking the financial
trader boys in oils on to assert the need for transparency.
The supply
of oil is the bloodstream of the world economy.
It is a highly complex collection of businesses that are interdependent
and function at a high level of interaction.
Beyond that both almost all agriculture and most industry is critically
dependent on oil supplies and the relevant markets.
This means
that the money is attracted to it and that the monetary systems of the world
are integral to it in ways that very few people understand at all levels. If within those monetary systems the trading
in and therefore the pricing of oil is governed by a small number of expert
traders and speculators there is ample opportunity for problems.
These can
impact on everyone and all the economies and almost all human activity. But in the turmoil of recent years the oil
prices and their trading at times has been become chaotic in form. This means that the dependent economic
policies of very many states can also become chaotic.
One web site
mentioned often in this blog is the Oil Drum where a number of experts in the
field of oil production can publish their findings, opinions and theories. There is a lot to debate and to disagree
about and this is reflected in the content.
Very recently
in the UK there has been a issue
over the shutting down of the Coryton Refinery in Essex
which entails the loss of many jobs at the site and others in the local and
wider community.
The UK
But the
issues are much greater than that and much more complicated. The link below is to a 4500 word article on
European Refinery problems. It is not
easy reading but it tells you a lot.
Below that is a quote from the text that gives the key to the issues
involved.
Quote:
The Source of
Pain for European Refining
What is wrong?
What has happened? The malaise in European refining has not happened overnight.
The reasons are deep rooted and come from a number of causes:
Lack of
profitability and therefore under-investment over decades.
High end use
pricing due to taxation making up more than 50% of retail cost of transport
fuels The refiners have been unpaid tax collectors.
Changing fuel
specification standards, especially with respect to sulphur and aromatics
Change in product
mix which does not now fit the historic refinery configuration.
Growing US
gasoline exports making the European gasoline surplus more and more difficult
to dispose of.
Biofuel blending
especially with ethanol into the gasoline pool.
Carbon Emissions
and ETS (emissions trading scheme).
Put together, the
causes have made for a miserable 2011 and many refiners are either losing money
or are barely profitable, and this is before they start paying for carbon
emissions.
Unquote.
This is at
the large scale end. Down at local level
there is the small scale, notably the filling stations owned by small
businesses in less populated areas. One
good example of a closure last Autumn is this one in Scotland
Ellon is in
Aberdeenshire, just north of Aberdeen Scotland
This might
not be as easy as the politicians suggest.
Moreover, for the Unionist’s there is another problem in that the
Scottish oil industry in the not too distant future may turn out to be less of
an asset and more of a liability.
If indeed
the oil industry and the pricing of its products and management do go chaotic
then nobody can know what can happen or where or what the effects may be.
It is said
that there are now 50,000 Russians in Cyprus
I read somewhere that all these problems for oil refining add up to enough uncertainty to discourage investment in new capacity. In that sense it's simple enough problem, even though the forces creating the uncertainty are complex.
ReplyDeleteSimple, but not simple to resolve of course, for the reasons you describe.