Blegging again: On Singapore refined oil …

Thank you for the excellent responses to my previous bleg on refined oil prices.

Sadly I am in need of a little more help 🙂

According to the data series kindly provided by John Macilree the price of refined fuel has jumped pretty sharply, even as crude prices have stayed low.  I am wondering if anyone knows why this has happened.

I have five potential theories:

  • A cost shock to refineries around the world,
  • World demand for oil has recovered increasing demand for the refined product – however, there has been stocks of crude oil (implying that it won’t show up in the crude price until later),
  • Recent price movements have given refiners a view of the elasticity of demand – and they have discovered that the profit maximising price is actually higher,
  • Refiners have fallen into a position where it is easier for them to tacitly collude,
  • Prices had fallen “too sharply” as crude fell, and the recent steep increase is a correction to equilibrium.
5 replies
  1. Matt Nolan
    Matt Nolan says:

    Hi Paul,

    Thanks for the link – I had noticed that the Brent crude oil price was remaining relatively high. Even so – dated brent crude is under $40 a barrel.

    Although construction may also be playing a role (I would put that down as a cost shock) the fact is that global petrol prices are as high as they were in late-October/early-November even though crude (even measured by dated brent) is at least down 40%.

    When I try fitting it to different ARIMA specifications (using only data to 2000 to fit my coefficients) the last couple of month seem a touch out of place. Hence why I’m trying to fish out a bit of information.

    I’m currently thinking that prices should come back in a couple of months time – even if crude prices don’t change (which is consistent with the article you linked to). But if there are other “structural” factors sitting around here I would be very interested in them 😉

  2. Matt Nolan
    Matt Nolan says:

    Thanks John,

    Its a good site – but it doesn’t quite give me the “why” behind what is going on. It is true that volumes are falling – but the specific reasons for the shift are not clear.

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