Gasoline Demand Up As "We" Move Into Holiday Season; Saudi Arabia Sticks With America

The Journal is reporting:

Gasoline prices are rising as the holiday season kicks off, as stronger demand in the U.S. and elsewhere takes a bite out of fuel supplies.

Gasoline futures, which tend to dictate prices at the pump, are up 7.6% in the past month, to $2.7192 a gallon on Wednesday.

Also, The Journal is reporting that Saudi Arabia will stick with America:

OPEC's raison d'etre is to get a high price for its oil. But selling to the highest bidder isn't always the preferred option. Consider the Organization of the Petroleum Exporting Countries' de facto leader, Saudi Arabia. West Texas Intermediate sets the pace for crude-oil prices on the coast of the Gulf of Mexico. It costs about $97 a barrel, a $15 discount to Brent, which aligns more closely with world prices.

All else equal, an oil exporter like Saudi Arabia might send more barrels elsewhere; Asia, say.

Yet U.S. imports of Saudi Arabian crude oil continue to bounce around between one million to 1.5 million barrels per day—roughly the level they have held since the late 1980s. Because U.S. crude-oil imports overall have fallen, 19% of barrels landing in September came from the kingdom, the highest proportion since the summer of 2003.

Why is Riyadh OK with selling all that oil at a discount?

The answer matters for investors in exploration and production companies and refiners. Partly it lies in Saudi Arabia's supply chain. Via its national oil company, it owns half of Motiva, a joint venture with Royal Dutch Shell that operates several Gulf coast refineries, including the 600,000 barrel per day Port Arthur facility in Texas. These are natural outlets for Saudi Arabian crude, and the resulting products such as diesel can then be sold either in the U.S. or exported anywhere at global prices.

Geopolitics is another motivation. The recent interim agreement on Iran has fueled speculation of a growing rift between Washington and Riyadh. Michael Levi at the Council on Foreign Relations reckons Saudi Arabia's leaders might view any foregone oil revenue as "a small price to pay to disabuse U.S. policy makers of the idea that they don't matter anymore." 

This is a great story, something I have talked about often (the Motiva refinery) and would not have known about had I not blogged. There are several story lines in this article that are carried throughout the blog over the years.