Implication of Crude Price Differntials to Oil Producing Countries - Essay Example

IMPLICATION OF CRUDE PRICE DIFFERNTIALS TO OIL PRODUCING COUNTRIES: A STUDY BASED ON A STATISTICAL ANALYSIS Crude oil prices rose substantially during 2003-2005. The price of Brent crude fluctuated between USD 40-50 per barrel in the winter 2004. is the most sought after product in hot demand by all the countries in the world. Price differentials between oil grades have fluctuated strongly along with the rise in oil prices. The prices of light, low-sulphur grades like American WTI and North Sea Brent grades have at times, risen much faster than those of so-called heavy crude grades that contain sulphur content. For Example, the price of Russian Urals Blend, a heavy grade has occasionally been almost 7 dollars lower per barrel than Brent. Growing price differentials have stemmed from tighter environmental regulations which have boosted the demand for lighter oil at the cost of heavier oil grades. What exactly are the factors that cause such huge price differentials Only the quality factors cause price differentials; or the demand and supply pattern of the crude oil to the world market also has a say in determining the price differentials. This study paper attempts to have a critical analysis of the various factors that contribute to the price differentials in the crude oil. 1.0 INTRODUCTION - BASICS OF CRUDE OIL PRICES: Unless refined, crude oil is of little use to the final petroleum product users. The mix and content of the final petroleum products is determined by the intrinsic properties of crude oil. Viscosity representing the thickness and density and sulphur content are the two important qualities of crude oil. Light crude oil requiring a simple refining process, is characterized with lower density. Light crude oils can produce more valuable final petroleum products such as gasoline. Contrasted to light crude oils are the heavy crude oils which require a complex refining process than distillation , have a low share of light hydrocarbons. Sulphur, a natural content of crude oil is an undesirable factor and requires heavy investments from the refineries to get it removed from the crude. Sweet crudes are those with less suplhur content and crudes with high sulphur content are referred to as sour crudes. Based on the type of crude oil, the yield of petroleum products is determined and thus different types of crude oils fetch different prices depending on the sulphur content. "Crude oils that yield a higher proportion of the more valuable final petroleum products and require simple refining processes (the light/sweet crude variety) usually command a premium over those that yield a lower percentage of the more valuable petroleum products and require more complex refining processes (the heavy/sour crude variety)." (Bassam Fattouh 2006) 1.1 FACTORS AFFECTING CRUDE OIL PRICES: However it may be noted that the differences in the quality is not the lone factor in determining the prices of crude oil. There are other factors also responsible for the price differentials in crude oil like the Driving Season and Heating Season in the US. There are certain other factors outside the oil sector which may also influence the crude oil prices. For instance: Because of certain utilities switching to alternative fuels, due to high price of gas, the price differential between light and heavy crude may narrow down. Environmental regulations and modifications in mandatory provisions relating to the product specifications may also affect the price differentials. Supply position of the heavy crude may also affect the prices. A disruption in the supply position of heavy crude or a decision to cut supplies by OPEC is likely to have its impact on the price differentials. Apart from the above the following factors also cause variations in the crude oil prices: Supply and demand for crude oil Supply and demand for petrol Freight rates Competition in the crude markets and Competition in the regional and domestic markets for petrol, Hence it becomes important to have proper tools to analyse the prices. Having made an insight into the basic concepts and factors underlying the determination of crude prices, the following part of the paper discusses the various statistical models available for arriving at the precise factor responsible for price fluctuations in the crude prices. In short, the crude oil prices are highly volatile due to a wide array of factors affecting them. Based on the above facts about the price differentials and the factors affecting them, this paper envisages bringing out a comprehensive report on the likely implications of such price differentials to oil producing countries by using the analytical models based on statistical reports of price differentials. 2.0 STUDY OF THE INTERPLAY OF DIFFERENT FACTORS AFFECTING THE CRUDE OIL PRICE DIFFERENTIALS: As explained earlier the various crude oil differ in two important respects: One is the quality of the crude and the second is the location from which the crude is produced. These two factors are primarily responsible for the price differentials - quality by giving a large proportion of valuable products; and the location by being near to major markets reducing the cost of transportation. "Although the prices of these different crude oils move broadly together, two features are very important. First, the differentials (or discounts) between certain crude oils are very large; and second, the size of the differentials between given pairs of crude oils appears to change as the general oil price increases." (Robert Bacon and Silvana Tordo 2005) Such huge price differentials in crude oil are mostly caused by the quality differentials as well as the discounts/premiums offered by the market. There are different factors responsible for the Quality differentials. As per the International Crude Oil Market Handbook 2004, production of crude oil in less well-known oil producing countries has increased in the past years both due to increased demand for oil and with the intentions of the oil importing countries to enhance the supply sources. "Many developing countries are becoming oil exporters, producing crude oils that often differ markedly in quality from those principally traded." (Robert Bacon and Silvana Torda 2004) Hence it becomes important for the governments to have a thorough understanding of the factors causing the price differentials and act accordingly to evaluate the fairness of the prices at which they buy the oil. Although several analytical models have been developed by the oil companies and the consultants over the period for reviewing the price differentials, most of them do not take into account the quality characteristics of the oil, especially the 'acidity' which is a vital price determinant factor. This may have a big impact on the prices of the crude. "Until now statistical analysis of price differentials has focused on two main properties: the specific gravity (lightness) measured in degrees API (a scale devised by the American Petroleum Institute) and the percentage of sulphur content by weight"- (Bacon and Torda 2004). Graph Showing Crude Price Differentials: Crude Price Differentials and the Brent Price between January 2001 and April 2005 (US $ per barrel) The quantum and magnitude of the price differential is explained with the above graph. This figure illustrates the extent of price differentials between Arab Heavy from Saudi Arabia and Brent Heavy from UK North Sea and between Tapis Blend from Malaysia and Brent Blend and also how these changed during the period January 2001 to April 2005. Source: (Robert Bacon and Silvana Tordo 2005). The price differentials can be compared to the price of Brent which is shown in the same graph. The Graph indicates that in February 2005 when differentials were at their most extreme, the average price of Tapis blend was US S$ 55.10 and the average price for Arab Heavy was US $ 33.50, while the price of Brent was US $ 45.42. The objective of this study paper is to analyse using statistical models and conclude Whether quality of crude oil is the lone factor for the price differentials If not what other factors are responsible and What is the extent of the variation in the prices of crude oil these factors cause. There are different studies conducted in this field of which we would take the following for our literary review, being close to the very point. 3.0 LITERARY REVIEW: While an extensive study of the different studies conducted by eminent scholars is not feasible within the scope of this study paper we will attempt to have a synopsis of the works done by some of them in the following few paragraphs: a) ESMAP Technical Paper 081: Crude Oil Price Differentials and Differences in Oil Qualities: A Statistical Analysis This paper represents an analytical study on the crude oil price differentials due to quality differences compiled by Robert Bacon and Silvana Tordo on behalf of the World Bank assisted Energy Sector Management Assistance Programme (ESMAP). This paper goes through the schematic approach of defining crude oil price differentials, dependence of price differentials on the quality differentials, statistical analysis of the price differentials and an estimate of the magnitude of the quality differentials and thus drawing a conclusion. "This report investigates the relationship between price differentials of a large number of different crudes and the Brent price. It finds that three quality variables-API, sulfur, and TAN-have important impacts of the size of the differential and that the magnitudes of these effects are proportionate to the general crude price level. This finding helps explain why the inter-crude variation of prices has increased with the general crude price level" (Robert Bacon and Silvana Torda 2005). The study reveals the correlation of the following factors on a small scale with the crude price differentials. Transport costs Seasonal differences Refining capacity utilization. b) Analysis of Petroleum Product Prices (1992-1997) and The Feasibility of a California Petroleum Product Reserve: A STAFF DRAFT REPORT BY Leon D. Brathwaite and Cheryl Bradley This study was conducted on behalf of the California Energy Commission to determine what the state of California can do to ensure price stability in the petroleum products, since there was a high volatility in the prices. The staff report on the basis of a regression analysis among other statistical models made an in depth study into the various factors that affected the petroleum product prices. In the study, the analysis of price of petroleum products with respect to prices differentials in crude oil was also studied. The study revealed the following results: Crude oil price is a reliable indicator of petroleum product prices Volatility of product prices so closely match that of crude oil prices that the illustrations often overlap. The predictability of the regression models improves with the addition of inventory though at a much lower rate than crude oil prices Other major crudes such WTI demonstrated similar correlation with gasoline and diesel prices. c) Energy Price Volatility by Faith Birol 2001 Study conducted on behalf of the International Energy Standing Group on Long-term co-operation This paper outlined the reasons for the price level volatility and also tried to forecast the prospects for price volatility based on other factors affecting the price. While this analysed the effect of other factors upon the oil prices, the paper did not do regression analysis on the variables affecting the oil prices. Based on the price indices and a standard deviation model the paper arrived at its conclusion. The paper did not give any conclusive idea on the prime factor responsible for the price changes. The conclusion is somewhat vague in announcing that the oil markets are unstable by nature and the instability derives both from internal and external factors to the oil market. It also complains about late and incomplete data available on the oil prices. Thus this paper has not attempted to provide a useful analytical model. - (Faith Birol 2001) 4.0 A CRITICAL ANALYSIS OF THE VARIOUS STUDIES ON THE CRUDE PRICE DIFFERENTIALS: The previous studies conducted reveal the following shortcomings: The Bacon and Tordo 2005 study emphasizes the fact that the quality differentials are the main factors for the variations in the price differentials, which in reality is different. There are various other factors which determine the price variability of crude. The Californian study does not bring about the essential characteristics of the crude price differentials as it says that the crude oil price is a reliable indicator of other petroleum product prices. The study on behalf of the International Energy Standing group on long-term co-operation cannot be regarded as up to the point since it did not conduct any regression analysis which is considered to be more authentic for the analysis of known variables. Moreover the paper is inconclusive. Analysis and Methodology: To illustrate the point of arriving at the factors responsible for causing the price differentials in crude oil, this study paper attempts to supplement the hypothesis that the crude price differentials are caused mainly by demand and supply pattern which is also affected by the seasonality factors. The paper also attempts to prove that it is not the quality of the crude alone which decides the crude price differentials. Outline of the Analysis: In our literary review of the three different works we considered elsewhere in this paper we found certain inconclusive factors which really did not bring out the major contributing factor causing price differentials in the crude oil. This paper strongly advocates that - unlike the conclusion driven from the work of Bacon and Tordo 2005 which identifies the quality factors mainly responsible for the crude price differentials - the demand and supply pattern of the crude influenced by the seasonal factors is the major determinant of the price differentials in crude. With the help of available statistical data this paper attempts to prove this thesis. The paper also points out that although generally the crude oil prices are greatly influenced by the quality factors, the quality of the crude alone is not the determinant of the price differentials but there are other factors also like: Seasonality and Demand/Supply pattern Refining capacity utilization and Location of Production, transportation costs and proximity to the market which also do have a telling impact on the volatility of the crude prices. "However, differences in quality of crude oils are not the only determinant of oil price differentials and hence differentials are not constant over time". (Bassam Fattouh 2006) 'Seasonality and Demand/Supply Pattern' as a factor affecting the crude prices: "The price of crude oil, the raw material from which petroleum products are made, is established by the supply and demand conditions in the global market overall, and more particularly, in the main refining centers: Singapore, Northwest Europe, and the U.S. Gulf Coast. The crude oil price forms a baseline for product prices." (EIA Article 'Prices') The following statement generally goes to prove that the demand and supply pattern goes a long way in creating price differentials in crude oil. "Just since March 1 of this year, crude oil prices have increased by 23.1%. Oil market experts attribute the steep increase in crude prices to growing demand in China, India, and other rapidly developing market economies. The Wall Street Journal reported on April 29 that China's demand for oil grew 41% over the past four years, while total world demand grew by about 8%". - (Gasoline Column 2006). Consider the following graphs which show the relative demand position of crude oil by China. "China was self-sufficient in providing for its oil needs until 1993, when it became a net importer of oil. In the beginning of the 1980s, Chinese oil demand fell sharply in response to the economic reforms implemented at the time. Towards the end of the decade, and in the 1990s, however, growth in oil demand accelerated appreciably in the wake of surging industrial production. In 2003-2005,"-(Pavvo Suni 2005). This is quite evident from the increase in per capita consumption of crude oil in China and India as depicted in the Graph, which is showing an increasing trend while in other countries it is on the decline. To illustrate the statement that the demand and supply pattern does affect the price differentials, let us consider the available data on the price differentials for the Canadian Light and Heavy crude for the period from January to November 2000 which gives an idea about the overall effects of demand/supply of crude on its price differentials. Appendix I exhibits the price range of various Canadian crudes for the year 2000. An analysis of this data indicates the peak seasonal demand for light crude (for example Par Edmonton) during the period August to November 2000 when the prices are tend to be higher resulting in higher prices. However, during November 2000 the heavy crude because of the price differential doesn't show similar increase. The above analysis also proves the seasonality factor affecting the crude price differentials. For instance driving season in the US may vitiate the price of the crude oil, as during the driving seasons the roads are getting asphalted and asphalt is the direct derivative of refining the heavy crude and thus a heavy demand for heavy crude may bring down the price differential between heavy and light crude. Similarly during heating season, the gasoline would be in greater demand and depending on the coldness of the weather the usage of gasoline will vary and this will impact the light crude oil price which is the raw material for gasoline. The changes in prices from August 2000 through November 2000 as exhibited in Appendix I prove the point of seasonality in demand and the resultant effect on the oil prices. "Regardless of the source of crude oil, the price is determined in the world market and both imported and domestic crude oil is priced according to the supply/demand balance and pricing dynamics on the world oil market". - (Article Crude Oil) This statement further supports our claim that the demand/supply pattern is a major determinant of the crude price differentials. "With world oil prices remaining above $30 (U.S) a bbl, refiners Imperial Oil Limited, Shell Canada Limited, Suncor Energy Inc. and Petro-Canada posted an average price of $52.46 per bbl (Cdn.) for Edmonton sweet light crude last month. In contrast, the price paid for Imperial Bow River heavy crude averaged only $30.95. The $21.73 per bbl differential, based on Imperial light and heavy postings, was up from $18.35 per bbl in October and $9.53 in September. For the first 11 months this year, Bow River crude averaged $35.77 a bbl compared to a par price of $44.68. The rapid increase in the differential appears to be more the result of near-term demand issues rather than increased heavy crude production, according a report by HSBC Securities (Canada) Inc." (Editorial-Nickle's Weekly Energy Bulletin 2000) Figure 1 showing the price differentials between Canadian light-heavy crudes: The HSBC report attributed the following reasons for the heavy price differentials: Poor season for asphalt which is a major user for Canadian heavy; High oil and electricity prices in California had increased the residual fuel demand and resulted in a 71% increase in asphalt prices. The HSBC report also adds that as a direct impact the municipal and state governments were forced to curtail the paving programmes. an 'early and abrupt' end to the paving season caused by the curtailed paving programmes resulted in low demand for heavy oil. A second factor which contributed to this price differential is the high heating oil crack spread. The crack spread is he difference between what a refiner will receive for a barrel of end products and the price of oil .- (Editorial-Nickle's Weekly Energy Bulletin 2000) "Distillate inventories in the United States are down 19.4 million bbls (14.4%) from 1999 levels. In the U.S. Northeast, the largest heating oil market, inventories are at 57% of last year, HSBC said. The shortfall has driven up the spread, making it more profitable for refiners to run lighter crude streams. Refiners with upgrading capacity will pay less for heavy crudes to offset not only the increased cost of upgrading, but the foregone profits from not running a lighter stream, the report said." (Editorial-Nickle's Weekly Energy Bulletin 2000) "The third factor responsible for the price differential is the threat of supply interruptions in the winter resulting in backwardation which results in lower futures than current prices. This deterred the incentive for the refiners to stockpile heavy oil and hence the low price due to heavy supply". (Editorial-Nickle's Weekly Energy Bulletin 2000) The following data in respect of Canadian crudes derived from Appendix I show a sharp decline in the prices of all crudes in the month of December 2000 due to the seasonality factor. Month Exch. Rate Cdn Par Edmonton* Cdn Heavy Hardisty Cdn Par Chicago WTI NYMEX Chicago Brent Chicago Cdn Heavy Chicago Brent Montreal 2000-11 1.5429 329.37 233.19 338.51 337.14 332.11 243.01 329.78 2000-12 1.5208 268.52 173.48 277.66 276.53 266.30 183.30 264.00 Another Illustration: Figure2 shows the price for Canada's twomajor benchmark crude oils: Western Canada Select (WCS, heavy) and Edmonton Par (light, similar in quality to WTI). The prices for these crude oils are primarily based in the U.S. upper Midwest market, adjusted for quality and transportation costs from one of the twomajor Alberta hubs, Hardisty or Edmonton. The Midwest is the largest U.S. market for Canadian crude oil. Figure2 -Canadian Benchmark Crude Oil Prices Source: NEB "All crude oil is not valued equally. Light oil that is low in sulphur (sweet) is more valuable to refiners than heavy oil with higher sulphur content (sour). Canadian producers market a wide range of crude oils, ranging from heavy sour bitumen blends from Alberta's oil sands to pentanes plus (C5+) primarily obtained from natural gas. The difference in value between light and heavy oil (the differential) is primarily determined in the market for each type."- (Article How Canadian Markets Work) Seasonal swings are also an important underlying influence in the supply/demand balance, and hence in price fluctuations. Other things being equal, crude oil markets would tend to be stronger in the fourth quarter (the high demand quarter on a global basis, where demand is boosted both by cold weather and by stock building) and weaker in the late winter as global demand falls with warmer weather. - (EIA Article 'Prices') The above statement is particularly true in the case of heavy crude oil which can be proved with the data available for the Canadian crudes for the year 2006 in Appendix II. It may be observed that there is heavy price differential in Canadian Par Edmonton (Light) and Canadian Heavy Hardisty (Heavy) and Canadian Heavy Chicago (Heavy) during January, February and March 2006 as shown in Appendix II due to seasonal factors. Consider the following price differentials established from Appendix II Differential Differential Between Cdn Par Edmonton& between Par Edmonton & Month Canadian Heavy Hardisty Canadian Heavy Chicago 01/06 130.92 116.85 02/06 146.09 132.09 03/06 117.28 103.24 10/06 81.64 67.62 11/06 83.77 69.00 12/06 77.53 62.66 Average 98.58 84.12 It may be observed from the above data that due to seasonal changes the demand pattern of the crude changes which necessarily has an impact on the price differentials. As the winter approaches the price differentials are less due to high demand and in the late winter the price differentials are more signifying less demand for heavy crude. Refining Capacity Utilisation - Effect on Crude oil Price Differentials. In this part of the paper we shall see that the refining capacity available to make the final petroleum products also play a crucial role in the price differentials of crude. The volatility in the price spread between oils of different qualities. is seen in the chart below, which plots the differential between key sweet and sour benchmarks in Asia, Europe and the US: "The widening in sulphur differentials in sweet and sour crude in Q4 2004 occurred simultaneously in all three major consuming markets. It is clear this was not the result of a market aberration in a particular region, but because of the greater demand for light crude resulting in higher prices for light crudes relative to sour crudes. This suggests that the refining capacity constraints were at play; while demand for low sulphur products were soaring availability of oil was primarily sour and not enough refining capacity was in place to process it." - (Statement of Platts 2006) "The third critical ingredient is refining capacity. British Petroleum reported that global refinery capacity increased by 1.8 million barrels a day between 2001 and 2004, while global crude production was up 5.3 mbd. Moreover, not enough of this capacity is able to process the increasingly heavy and sour crude supplies" "The marginal refining capacity in the world cannot process heavy, sour crudes at all, let alone process these crudes into light, sweet products. Converting existing refining capacity to process heavy, sour crudes to produce light, sweet products is expensive and time-consuming. In the U.S., the conversion (for the refiners who are converting) is a multi-year, multi-billion-dollar project. Some refiners have elected to produce light, sweet products only from light, sweet crudes. Others have elected to retire refining capacity. In parts of the world that supply markets with only higher sulfur products or that have dropped out of the market to supply low-sulfur products, little or no conversion will take place and the demand will continue for the diminishing fraction of light, sweet crudes". (Econbrowser 2005 Article Sweet and Sour Crude) Although the change in the price spread is pretty dramatic, the explanation is quite simple: (1) supply is down, (2) demand is up, and (3) the capital investments necessary to cope with facts (1) and (2) were not made. Government regulation in response to environmental concerns appears to have played an important role in both (2) and (3) Article: (Econbrowser 2005 Article Sweet and Sour Crude) "In 2005, the WTI-Arab Heavy oil price differential declined on a monthly basis from $14.90 at the beginning of the year to $9.45 in July with the exception of the month of May which saw the discount increase by $2 from the previous month. However, the moderate decline in the discount in the first half of the year was reversed in August and by the end of 2005, the Arab Heavy was at a discount of $14.60 to WTI." (Bassam Fattouh 2006) "This reverse can partly be explained by Hurricane Katrina which destroyed a large part of US refining capacity. OPEC reacted by making more of its heavy sour crude available to markets despite the fact that crude oil markets were well-supplied. This episode has clearly shown that the problem was mainly a refining one: if the concern was about fear of shortage of crude oil supplies, the market would have reacted by purchasing whatever crude oil was out there and consequently price differentials would have narrowed or even disappeared." (Bassam Fattouh 2006) "In 2005, the opposite happened: the supply of heavy crude caused the differentials to widen considerably as supplies of heavy crude were plenty and refiners were only willing to buy heavy crude at large discounts" (Bassam Fattouh 2006). Another indication that the problem was mainly a refining one, rather than availability of crude oil, can be seen from the gasoline crack spread defined as the spread between the price of a barrel of gasoline and a barrel of crude oil. The main impact of Katrina was to raise the gasoline crack spread as the destruction of refining capacity led to a much faster rise in product prices than in crude oil prices. Usually when this occurs, the price of light/sweet crude oils increase relative to the heavy/sour crude variety. "when refinery capacity utilization becomes tight, especially with respect to the ability to process low quality crudes, these crudes would be expected to face a deeper discount to a high quality crude such as Brent". (Robert Bacon and Silvana Torda 2005) Location of Production, Transportation Costs and Proximity to Markets also Cause Crude Price Differentials "Oils produced close to major markets for refining will require less transportation and therefore will be more attractive and command a premium over oil produced further from the market which has to incur larger transportation costs to get to the market." (Robert Bacon and Silvana Torda 2005) "In the case of Brent and WTI, the crude produced is light and sweet (low sulfur). Both grades are produced in or near key oil consuming and refining centers. The twin advantage of quality and location means that these crude oil command relatively high prices in the market. . Dubai meanwhile is a medium heavy higher sulfur crude typical of the grades produced in the Persian Gulf but distant from consuming centers. As a result, it tends to sell at a lower price than Brent and WTI." (Statement of Platts 2006) 5.0 CONCLUSION: It appears that oil market instability is here to stay and crude oil markets will remain tight on average over the long term. Demand will grow so strongly in developing countries that supply increases will keep spare production capacity very limited and inventories will remain low. This means that equilibrium price of crude oil has risen permanently in response to increasing demand. Supply has not been able to meet the pace of growth in demand. In this context, the various statistical data and other information provided above, go to prove our hypothesis that the crude price differentials are caused mainly by the demand/supply pattern of the crude driven by the seasonality factors and the quality of crude alone is not the lone determinant of the price differentials. Industrialised countries are able to adjust more to higher oil prices compared to developing countries. Developing countries face greater difficulties because energy is used inefficiently. Oil demand thus will continue to increase rapidly for a long period of time, even if the relative importance of oil in total output declines. Rising oil prices and wide swings in prices will make the improvement of energy efficiency and development of alternative energy sources will be one of the world's leading area of search in the near future. Reference List: 1.Bassam Fattouh 2006 OPEC's Discounts on Heavy Crude Oil: Is a New Policy Instrument Taking Shape Oxford Institute for Energy Studies [Online] Available from: http://www.oxfordenergy.org/pdfs/comment_0606-3.pdf Accessed on 20th January 2007 2. Robert Bacon and Silvana Tordo 2005 Crude Oil Price Differentials and Differences in Oil Qualities: A Statistical Analysis Energy Sector Management Assistance Program Technical Paper 081 [Online] Available from: http://wbln0018.worldbank.org/esmap/site.nsf/files/081-05+Final+_for_Web.pdf/$FILE/081-05+Final+_for_Web.pdf Accessed on 20th January 2007 3. Robert Bacon and Silvana Torda 2004 Crude Oil Prices: Predicting Price Differentials Based on Quality Public Policy for Private Sector Note No 275 [Online] Available from: http://rru.worldbank.org/Documents/publicpolicyjournal/275-bacon-tordo.pdf Accessed on 20th January 2007 4. Staff Draft Report by Leon D.Brathwaite and Cheryl Bradley 1997 Analysis of Petroleum Product Prices (1992-1997) and The Feasibility of a California Petroleum Product Reserve [Online] Available from: http://www.energy.ca.gov/FR97/documents/CPPRFEAS.PDF Accessed on 20th January 2007 5. Faith Birol 2001 Energy Price Volatility: Trends and Consequences International Energy Agency Standing Group on Long term co-operation [Online] Available from: http://library.iea.org/textbase/papers/2001/Slt200148.pdf Accessed on 20th January 2007 6. Article Prices Energy Information Administration [Online] Available from: http://www.eia.doe.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/price_text.htm Accessed on 28th January 2007 7. Gasoline Column 2006 The FTC's Role in the Gasoline Industry: Paper from Oil and Gas Industry Initiatives. [Online] Available from: http://www.ftc.gov/ftc/oilgas/archive/060504.htm Accessed on 28th January 2007 8. Pavvo Suni 2005 Strong Demand Growth in China Keeping Crude Oil Prices High The Finnish Economy and Society Vol 205 [Online] Available from: http://www.etla.fi/files/1375_FES_05_2_strong_demand_growth_in_china_keeping_crude_oil_prices_high.pdf Accessed on 28th January 2007 9. Article Crude Oil-Petroleum Research Branch Canada [Online] Available from: http://www2.nrcan.gc.ca/es/erb/prb/english/View.aspx=686&oid=1072 Accessed on 28th January 2007 10. Editorial-Nickle's Weekly Energy Bulletin 2000 Light-Heavy Oil Differential Widened In November [Online] Available from: http://www.nickles.com/web/sample/d5ermont.asp Accessed on 28th January 2007 11. Article How Canadian Markets Work Energy Pricing Information for Canadian Consumers. [Online] Available from: http://www.neb-one.gc.ca/energy/EnergyPricing/HowMarketsWork/CO_e.htm Accessed on 28th January 2007 12. Statement of Platts 2006 Hearing on the World Crude Oil Prices Before the House energy and Commerce Committee [Online] Available from http://www.platts.com/Content/Oil/Resources/Methodology%20&%20Specifications/plattstestimony.pdf Accessed on 28th January 2007 13. Econbrowser 2005 Article Sweet and Sour Crude [Online] Available from: http://www.econbrowser.com/archives/2005/08/sweet_and_sour.html Accessed on 28th January 2007 Appendix I Selected Crude Oil Prices Monthly - 2000 Month Exch. Rate Cdn Par Edmonton* Cdn Heavy Hardisty Cdn Par Chicago WTI NYMEX Chicago Brent Chicago Cdn Heavy Chicago Brent Montreal 2000-01 1.4485 244.59 210.36 253.73 250.51 247.10 220.18 244.91 2000-02 1.4507 263.38 234.33 272.52 271.78 272.28 244.15 270.09 2000-03 1.4608 273.30 239.85 282.44 279.07 269.83 249.67 267.63 2000-04 1.4685 228.97 200.15 238.11 240.30 226.00 209.97 223.79 2000-05 1.4956 266.11 235.48 275.25 275.24 277.89 245.30 275.63 2000-06 1.4766 287.69 256.90 296.83 297.34 290.90 266.72 288.67 2000-07 1.4782 272.24 238.93 281.38 280.66 283.59 248.75 281.36 2000-08 1.4826 286.95 251.81 296.09 294.86 295.17 261.63 292.93 2000-09 1.4739 314.94 271.65 324.08 320.43 326.21 281.47 323.96 2000-10 1.5121 311.77 227.61 320.91 317.75 310.98 237.43 308.70 2000-11 1.5429 329.37 233.19 338.51 337.14 332.11 243.01 329.78 2000-12 1.5208 268.52 173.48 277.66 276.53 266.30 183.30 264.00 Average 1.4843 278.98 231.15 288.12 286.80 283.20 240.97 280.95 *Edmonton postings adjusted to 0.5% sulphur Source: Petroleum Resources Branch Canada Appendix II Selected Crude Oil Prices Monthly - 2006 Month Exch. Rate Cdn Par Edmonton Cdn Heavy Hardisty Cdn Par Chicago WTI NYMEX Chicago Brent Chicago Cdn Heavy Chicago Brent Montreal Brent Sarnia 2006-01 1.1577 452.39 321.47 464.77 483.15 486.62 335.51 483.50 487.70 2006-02 1.1496 424.00 277.91 436.34 453.11 458.12 291.91 453.98 458.18 2006-03 1.1567 426.42 309.14 438.79 464.49 471.57 323.18 467.99 472.19 2006-04 1.1444 470.61 388.97 482.97 511.06 522.99 402.99 521.75 526.35 2006-05 1.1105 507.06 429.22 519.84 501.81 507.93 443.71 505.14 509.74 2006-06 1.1138 502.19 401.14 514.99 503.05 501.03 415.65 498.39 502.99 2006-07 1.1273 537.76 447.85 550.74 535.47 545.82 462.58 543.74 548.84 2006-08 1.1189 506.32 423.76 519.26 520.62 537.85 438.44 534.29 539.38 2006-09 1.1156 447.74 342.55 460.67 454.84 454.66 357.21 453.07 458.16 2006-10 1.1277 392.71 303.49 405.70 426.96 433.10 318.22 432.84 437.93 2006-11 1.1357 395.97 312.20 409.00 430.75 440.63 326.97 441.76 447.39 2006-12 1.1539 427.33 349.80 440.44 457.14 473.22 364.67 478.28 483.91 Average 1.1343 457.54 358.96 470.29 478.54 486.13 373.42 484.56 489.40 Conversion: 1 meter = 6.29 barrel *Edmonton postings adjusted to 0.5% sulphur *Revised January 4th 2007 Source: Petroleum Resources Branch Canada Read More