Originally Posted By: SVTCobra
I remember back in late 2008 with the price of oil real high that Valero, a major gasoline refinery in Texas, lost $400 million in one quarter because the price of oil was so high compared to the price of refined gasoline. They kept on refining the gasoline because it was cheaper to lose money refining gasoline than it was to shut their refineries down. I would think that if they control the price of oil, then why would they purposely lose money refining gasoline?
It's hard to scale that sort of business... a long trip from discovered reserves to market. Think of how long it takes to set up a rig, crude transportation, then find an existing refinery, tune it for the crude coming in, anticipate the mix of diesel/gas/jet fuel/etc the world will need, then ship it out again. And everyone's watching everyone else trying to guess their next move.
The speculators HELP this decision making immensely by analyzing everyone's output and setting target prices in the future. Fall 2008 was an odd time to be in the oil business with prices of everything falling out because demand dropped a couple percent.