- Schork Oil Outlook: Nat Gas Bulls Didn’t Stand A Chance
- Farr: An Extended Period—No Fat Lady in Sight
- Schork Oil Outlook: More Strength in Crude
- Pociask: In The Electronics War Does The Consumer Really Win?
- Busch: G20 Affirms Weak Dollar
- What Stocks to Buy Amid Health Care Overhaul: Strategist
- Tamminen: Why Does Oklahoma Want To Drown New York?
- Stimulus II? Jobs Tax Credit=Cash For Clunkers
- Busch: It Ain't All Bad News
- Keith Bergelt: The Case for Market Based Patent Reform
MOST SHARED
- China Signals That It May Allow Currency to Rise Against Dollar
- Short Sales Stall
- Retailers Brace for Black Friday With Steps to Control Crowds
- Website Launches That Gives Free Access to Concerts
- UPS Sees 2010 Volume Growth, Higher Rates
- Gold Hits Record High Above $1,115 as Dollar Slides
- Wal-Mart: Buy a BlackBerry, Get a $100 Gift Card
- Dodd on Regulatory Reform
- Hottest Zip Codes for Home Prices
- Bear Stearns Fund Manager - Before His Day in Court
- Opposing Views on Coca-Cola Price Target
- How To Play China's 'Amazing' Run: Analysts
- Could Going Solo Ruin Your Career?
- Commercial Real Estate Best Place For Money: Strategist
- Schork Oil Outlook: Nat Gas Bulls Didn’t Stand A Chance
- Enterprise Tech Companies to Focus On: Portfolio Manager
- Agassi Book Buzz Paying Off Early
- Cadillac Converj Smart Extension of Volt
- China Signals It May Let Currency Rise Against Dollar
- Commercial Real Estate Near Disaster: Fund Manager
- Treasury Report Says $209 Billion Left in TARP Funds
- This Town Will Pay YOU $10,000 to Buy a House
- Commentary: Falling Far Short of Health Care Reform
- Dodd: Financial Reform Bill Is Open for 'Discussion'
- AIG CEO Ready to Quit over Pay Constraints: Report
- Pay Caps Make it Hard for GM to Hire Execs: Whitacre
- Housing Market Helped by Tax Credit: Realogy CEO
RSS FEED
CNBC Guest Blog
Text Size 
Dramatic energy market price swings have been de rigueur, of late, but today’s large drop had a compelling rationale: China is literally raising pump prices nearly 20% overnight.
To consumers there, I say, welcome to our world.
Just after the start of trading, today, it was announced that virtually all categories of transportation fuels would rise 1,000 to 1,500 Yuan per tonne. International measures of fuels are often represented in metric tonnes, as opposed to our more familiar gallons. This translates into about a fifty cent per gallon price rise to take effect tomorrow.
The timing of the move was also surprising, but also shrewd. I was among many analysts who supposed such a move would not occur prior to the Olympics, but the upcoming meeting in Saudi Arabia this weekend appears to have served to hasten the Chinese government’s move.
Most of the focus all week has been on handicapping how much additional crude oil Saudi Arabia would put on the market. Estimates are ranging from 200,000 to 600,000 additional barrels of crude oil, and the math is complicated by earlier production increases and whether or not they are to be included in Sunday’s announced number.
However, I have wondered what Saudi Arabia was going to require of consuming countries. This is, after all, a summit of leading producing and consuming nations. China’s move appears to be a tip of their hat to the effort. Also, while it’s a hollow gesture, at best, given the lead time in producing additional supplies of oil, President’s Bush’s call to open the Outer Continental Shelf may represent the best the United States can offer conferees.
In my view, in order for there to be follow-through selling into and after the meeting, Saudi Arabia will have to step up on three fronts: announce a large production increase, inform the world community that there still exists a fair amount of spare production capacity, and signal that it will aggressively discount the more sour or heavy sulfur-laden crude oil that is going begging in the world market. Believe it or not, greater discounting of these crude oil varieties is necessary for them to be refined profitably into diesel and other fuels in the current environment.
While I have some reservations that we will be witnessing the expenditure of the world’s final resources to combat high prices, at least in terms of crude oil output, further subsidy rollbacks in other countries could represent a seminal moment, where we see prices finally begin to decline steadily.
The Saudis and others leading nations are making a real, coordinated attempt to do something about high prices. From a consumer’s perspective, to quote the late great Tim Russert of NBC News: “go get ‘em.”
_________________________________________
 |
Data is a real-time snapshot *Data is delayed at least 15 minutes