Why are we buying imported oil at over 100 dollars a barrel and domestic oil here in this country is selling?

for 80 dollars a barrel that is what wyo crude was at this amWhy are we buying imported oil at over 100 dollars a barrel and domestic oil here in this country is selling?
Because there's not enough of it -- and it wouldn't make any difference if we drilled Anwar and found 10 times as much oil as claimed. (all of which as public property belongs to us, but don't hold your breath that it won't be turned into immense profits or that you'll see a nickel of savings.





The phenomenon falls into a price allocation strategy known as ';peaking shaving.';





This is not an argument for it or against it. It is just the way things are done. Given that the economics is the science of how scare resources are allocated, it is an allocation system.





Note. Resources may not be scarce to you, but there is a presumption that this is true. If resources were not scarce, you'd walk into the grocery store and pay nothing or the cost of check out. Or fill your talk for nothing. Markets are allocation systems.





As demand increases, each incremental unit costs more than the earlier units. That could be the result of a mix on contracts for a given amount, which protects both sellers and users from excessive volatility. Each side reduces their risk and sacrifices potential advantage.





Sellers and buyers who wait to see what happens, may find a situation in which demand is greater than supply. As the Supply is sold, each increment is priced higher and demand is regulated by price.





As an example, if there is a supply of 100x of oil and a demand of 100x (c.p., ceteris paribus), there is in theory equilibrium. In reality, equilibrium might be at (arbitrarily) 100x of supply and 85x of demand. The sight oversupply forces sellers to compete on price within a fairly narrow range. If supply is 100x and demand 30x, some producers will fail and the others will reduce prices in competition for sales. That could result in sales below costs (allocated) because cash flow is required to keep the system running. Profits would be deferred until the future or the company fails.





Imagine instead a situation of 90x of supply AND demand.


Then something happens to raise demand to 110x and the most supply sellers can rationally command is 100x. There has to be a system of allocation.





While it's true that the costs have not risen, the middlemen will sell the final increment of supply to the user who offers the highest price. The earlier increments might sell for $80. The last increments might sell for $110 or $250, allocating the supply the person who needs it the most -- or can at least pay.





If the supply of a commodity good is infinite and costs remain the same, then you will pay the same price per unit no matter how many you use.





There's no much good news in this because oil is a global commodity. American oil usually costs more to find and raise than that in most countries (remember some costs are implied). Saudi Arabia (which furnishes a relatively small part of U.S. imports) has no reason to reduce its price to the United States. It's oil is in effect in a global pool that can be sold anywhere.





We would pay more than Europeans simply there are fewer ton-miles involved in shipping. It costs (depending demand) between $100,000 -$275,000 a day to lease a VLCC tanker. Logically a 26 day voyage and 26 day deadheading will cost a lot more than 14 days total. Shipping routes are less constrained for shorter hauls and it is usually cost-effective to use ships smaller than VLCCs. or ULCCs.





If you're worried about foreign oil, hope that Canada, Mexico and Venezuela don't get mad at the same time. We're screwed if that happens. We produce more oil than we import from any one sorce, but Canada is by far our largest single supplier of oil imports .. and were it not for Canadian Natural Gas, a lot of people would freeze or suffer heat exhaustion. Those three countries would take out about 40 percent of our supply.





Price shaving is also used by utilities. Same theory. There is probably spare capacity of some type on line, but the highest price will be paid as you move incrementally towar the point people turn off the hear or air. That system is peculiar in that our ';deregulation'; in most cases allows low cost producers to come in late and sell at the same price as a high cost producer, e.g. a nuclear plant as opposed to gas or oil generations.





Utilities in the regulated era were required to plan suficient power for the area they served under license as a regulated monopoly, meet standards, etc, etc. They generally sold power in a given geographic area on the marginal price theory. In that system, the assumption is that each additional unit is cheaper than the one before. Setting rates was a real science, but it worked. Our power costs have gone up 140 percent since 2001 and would you believe the only benefit I see is four companies where there used to be one -- and each company has a bunch of CEOS and officers who make three times what the old company did. And they were paid for their cost overruns they incurred through bad management faulty design and violation of law.





But on oil, we'd be even worse off in some ways if prices were below some point. A lot of Canadian oil requires a complicated, expensive recovery process. It became available after price rose enough to justify it.





And let's be real. While it generally costs more to produce our oil, a lot more relatively speaking, you have to figure if the risk factor. Through early 2001, the Middle East was it's usual unsettled place. But compared to the period of the tanker wars between Iraq and Iran -- there are a lot of tanker remains around the Straits of Hormuz where they were zapped by missile.





We went into Iraq with enough troops to defeat the Iraqi Army but not enough for an occupation which has nothing to do with warfighting - or insurgencies. Iraq oil production is still crap. Bush goes to Israels and makes kissy-faced with the Israelis (fine by me) then goes to the Saudis with his tin cup, saying, please sir, more.





We'd be better off negotiating with the Russians for 3 times the amount of oil we now buy from them. They've got huge reserves as long as we can refrain from bombing them into rubble. Or the other way around.





Gasoline in Baghdad, U.S. government subsidized, is 19 cents a gallon. The Chinese don't mind getting government involved in national security so while we do what we do, they negotiate long term contracts for production from Africa, Australia or Kazakhstan. The Kazaks got a bit loose with government corruption and poor oil field operations, so they got a wake up call (no threats of war, just real economic muscel) and now the tank cars and pipelines run a lot better.





You mention the WYO crude. The price that's paid for oil is marginally related to the final price. That oil has to go through a lot of speculation and get mixed with all the other oil (in the financial sense) before it gets to market.





I'm not sure what price you're looking at, but quantity aside, you've got to be careful comparing prices on different commodity markets. Natural gas which at the moment sells for more than $11 mcfe,





When Bush was elected light sweet crude was going for about $20-22 a barrel. It spent most of the Clinton era at under $20, dipped down to $14 or $15 at times. The Saudis had a price goal of $24 a Barrel until 2002.





The natural price of oil right now is probably $55-65 a barrel. Wyoming might not be in the oil business at the low end of the scale. The rest of the price is risk.





This war wasn't about oil, but it might as well have been.





By the way, to someone from Wyoming, that $80 is $80. If we assumed that Wyo oil was Saudi oil, Europeans would be paying 50 euros a Barrel. If the Dollar was where it was when Bush came to office, and if the dollar price was the same, the Euros would be paying 90 Euros.





We've been deluding ourselves that our economy was in good shape when it was just that good time feeling you get when you go out and max out the credit cards, then you go home and realized you can't buy your way out of debt as long as you live. Then you realize that you've been borrowing your own money to go into debt. Just take a look at the Chinese currency value against the dollar. Doesn't look so bad. That's because the Chinese government won't let the value go up or down. In real terms, The dollar value against the real Chinese currency is also in bad shape. You can't blame them.





You should try heating oil. It's now nearly 5 times the price it was in 2001 and it's same (effectively) as diesel. So we're going to be cold and everything we buy is going up -- a lot faster than the faked CPI.Why are we buying imported oil at over 100 dollars a barrel and domestic oil here in this country is selling?
Market up for refining and transportation . An also there is the broker market up or there profit .