Canadian Taxpayers, Subsidising the Economy of the United States of the Americas; and our own Government VIPS Dictatorial Economic Ambitions.

What this all means: Oil and therefore gasoline prices are being MANIPULATED, at the federal level, in the United States of the Americas; and, in Canada. 

Open a newspaper and there is a good chance you will find a news story about the price of oil going one direction or the other. With spring and summer fast approaching, you just know, it is going to be the other.

A four-day rally in oil prices appears to be over for now as the price of crude slumped back below the $50-a-barrel level — and dragged the Canadian dollar but not added tax, getting ready for summer, AND Government/political vacations(write off-at taxpayer expense)-and of course, Canadians at least according to the general thinking in that country- are still have the responsibility of subsidising that country’s economy,  higher gasoline prices with it.

To the average consumer, it is easy to get the impression that there is a singular, worldwide market for this crucial energy source. Of course, in reality, there are different types of crude oil – the thick, unprocessed liquid that drillers extract below the earth – and some are more desirable than others are.

For instance, it is easier for refiners to make gasoline and diesel fuel out of low-sulphur, or “sweet,” crude than oil with high sulphur concentrations. Low-density, or “light,” crude is generally favourable to the high-density variety for the same reason. There are literally dozens of different oil benchmarks, with each one representing crude oil from a particular part of the globe. However, the price of most of them is pegged to one of three primary benchmarks. Where the oil comes from makes a difference, if you are a consumer/buyer.

Governments and politicians have proven: The less expensive it is to take delivery of the product, the more you as the consumer are willing to pay for it. Although this does, of course, not hold for oil shipped from the Middle East, it is none the less generally claimed that from a transportation standpoint, oil extracted at sea has certain advantages over land-based supplies, which depend on the capacity of pipelines.

Because of these nuances, buyers of crude oil – along with speculators who will never actually take delivery of it – NEED an easy way to value the commodity based on its quality and location. Benchmarks such as Brent, WTI and Dubai/Oman serve this important purpose.

The Main Benchmarks

Brent Blend – Roughly two-thirds of all crude contracts around the world reference Brent Blend, making it the most widely used marker of all. These days, “Brent” actually refers to oil from four different fields in the North Sea: Brent, Forties, Oseberg and Ekofisk. Crude from this region is light and sweet, making them ideal

When refiners purchase a Brent contract, they have a good idea of how good the oil will be and where it will come from.

West Texas Intermediate: supposedly, but usually, again, very incorrectly, refers to oil extracted from wells in the United States of the Americas and sent via pipeline to Cushing, Oklahoma. The fact that supplies are land-locked is one of the drawbacks to West Texas crude – It Is Relatively Expensive To Ship To Certain Parts Of The Globe-especially back into Canada where much if it is coming from in the first place. The product itself is very light and very sweet, making it ideal for gasoline refining, in particular. West Texas Intermediate supposedly continues to be the main benchmark for oil consumed in the United States of the Americas.

Dubai/Oman – This Middle Eastern crude is a useful reference for oil that is of course, according to the United States of the Americas slightly lower grade than West Texas Intermediate or Brent. It is a “basket” product consisting of crude from Dubai, Oman or Abu Dhabi - somewhat heavier and has higher sulphur content, putting it in according to the United States of the Americas-even though there are trying so hard to take over control of it- “the sour” category. Dubai/Oman is the main reference for Persian Gulf oil now still largely delivered to the Asian market.

Much of the global trading takes place on the futures market, with each contract tied to a certain category of oil. Because of the dynamic nature of supply and demand, the value of each benchmark is continually changing. Over the long-term, a marker that sold at a premium to another index may suddenly become available at a discount.

The price of a barrel of the benchmark NORTH AMERICAN OIL- West Texas Intermediate lost $4.60, or 8.7 per cent, to settle Wednesday at $48.45 in United States of the Americas dollars per barrel in New York. That drop came after a four-day stretch dating back to late last week when oil had run from $44 to more than $52, a gain of about 18 per cent.

That appears to be over — at least for now — as traders focused on the long term again, where the economics still point to huge oversupply in the market.© Al (Alex-Alexander) D. Girvan. All rights reserved.