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- 5 March 2008
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When you can grow a million barrels of oil in a few months, as you can with sugar in a paddock, you might have a point.Hi,
One factor that makes me suspicious of this move up is what is happening in the sugar market.
Sugar that is made into ethanol for fuel is languishing at 10-11 c lb, and has fallen over the last couple of months. When oil was $65-75 a barrel a couple of years ago, sugar rose to 17-19 c as an energy play. Seeing as oil is now double, then why is sugar so low.
Something is amiss and I expect oil to be very near it's peak and would think the correction will be bigger than most expect. This will be especially so if tied into a general recession around the world.
brty
Because in most places except Brasil, corn is twice as cheap to make ethanol compared to sugar ... see table on page (iv) of this report:Seeing as oil is now double, then why is sugar so low.
Tysonboss, you are a chicken playing with a $95 downside bet.... surely there's room to wind it higher!
Because in most places except Brasil, corn is twice as cheap to make ethanol compared to sugar ... see table on page (iv) of this report:
http://www.usda.gov/oce/EthanolSugarFeasibilityReport3.pdf
My suspicion is that a social conscience will cut in at some point, curbing the volume of agricultural feedstocks diverted to global fuel production.
You would assume that this would be the case, however,social conscience,is great untill it directly effects your hip pocket and way of life.
Could you imagine the reaction if say the un or some other type organization said o by the way with oil being at $200 a barrel and inflicting pain world wide,we have now going to reduce or ban food from fuel
It will be interesting to see how it all plays out,i believe,bio fuels will be an important part of the short term future ie next 10 years untill allternatives can be planned and brought on stream
Therefore I could not see why there would be a relationship between the price of sugar and oil.
You are kidding?
Its very simple. Traders see Governments throwing money at farmers to "help" the POO so as OIL runs up they throw their money on anything remotely related. Corn ,Sugar, solar panels whatever. SIMPLE.
While you say it can come from other sources, this would only make up a very small fraction of total inputs used for biodiesel and ethanol production at this point in time. ).
As I have stated biodiesel and ethanol just don’t stake up economically, socially and environmentally
I think your understanding of "fundamentals" in this area is poor.Fuel ethanol has gone up in price by 50% in the last 6 months, it has followed crude.
One of the materials you make fuel ethanol out of is sugar. The Brazilians are good at it, they also produce a fair bit of sugar at a low price. It doesn't take Einstein to work out that making ethanol has become more profitable for them, and you would expect less sugar would be made available for foodstuffs.
Cost of production in Brazil is estimated at 81 cents a gallon according to the USDA article by Pilbara. If you can sell it for $2.40 a gallon, you would think they are pinning the ears back.
Like I said, something is amiss in current pricing of sugar and oil, either sugar will rise in price or oil will fall because of these fundamentals. Because sugar was following oil up last year, but has been falling for the last couple of months, I'm leaning towards sugar being a leading indicator for the price of oil at present.
brty
It doesn't take Einstein to work out that making ethanol has become more profitable for them, and you would expect less sugar would be made available for foodstuffs.
at present.
brty
yep rich feedstocks are still too "valuable" (high efficiency) ... we need to be able to break down cellulose ... some animals that can break down cellulose (cows, horses, kangaroos etc) and it's great if you can live by eating grass ... wowee free food, but the problem with this "free" food is you have to eat all day and have no time for anything else (low efficiency)!!You point escapes me.
Neither corn nor sugar are grown mostly for ethanol: They are food crops.
Highlights
U.S. crude oil refinery inputs averaged nearly 15.3 million
barrels per day during the week ending May 23, up 214 thousand
barrels per day from the previous week’s average. Refineries
operated at 87.9 percent of their operable capacity last week.
Gasoline production moved higher compared to the previous
week, averaging about 9.1 million barrels per day. Distillate fuel
production decreased last week, averaging 4.3 million barrels
per day.
U.S. crude oil imports averaged 9.0 million barrels per day last
week, down 278 thousand barrels per day from the previous
week. Over the last four weeks, crude oil imports have averaged
nearly 9.7 million barrels per day, 579 thousand barrels per day
below the same four- week period last year. Total motor gasoline
imports (including both finished gasoline and gasoline blending
components) last week averaged 1.0 million barrels per day.
Distillate fuel imports averaged 250 thousand barrels per day
last week.
U.S. commercial crude oil inventories (excluding those in the
Strategic Petroleum Reserve) decreased by 8.8 million barrels from
the previous week. At 311.6 million barrels, U.S. crude oil
inventories are in the lower half of the average range for this time of
year. The drop was due to temporary delays in crude oil tanker
off-loadings on the Gulf Coast. Total motor gasoline inventories
decreased by 3.2 million barrels last week, and are near the lower
limit of the average range. Finished gasoline inventories remained
unchanged last week while gasoline blending components
inventories decreased during this same time. Distillate fuel
inventories increased by 1.6 million barrels, and are in the lower
half of the average range for this time of year.
So the US alone is drawing down combined crude and refined product stocks at the rate of 1 million barrels per day. And that's only oil companies etc, it doesn't include what consumers might also be doing - running down stocks of heating oil, petrol etc either hoping for a price drop or because they simply can not pay the current price.It might be true that "speculation" is driving oil prices to regular higher highs, but US data on inventories continue to underpin these same fools.
Below is taken from the latest EIA report:
UmmmAnd with not even OPEC now saying we're about to see a production rise that leaves only one option in the long term regardless of price. Lower consumption.
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