Who gains the most with high oil prices ? (Besides oil producers)

In “The Corporation” there is a market broker talking about how many people made money with gold in the post-9/11. While watching the twin towers crumble, though horrified, he kept thinking that gold will go up…

 I know Saudi Arabia, Venezuela and other oil producers are gaining much more money at these high prices. It was one reason Chavez for example could afford spending even more and helped him keep his position. Iran also is getting a good amount ! 

 Oil has hit the US$ 50 mark... who gains **MORE** with that besides oil producing countries ?  Do oil companies get a bigger share of the increased price ? Traders ?

The State of Alaska for one:

And by extension, the average Alaskan benefits also, as each receives a dividend check each October from the Alaska Permanent Fund, which is invested with royalties on Alaskan gas and oil. This year it is $919, but it has been as high as $1,963 for every man woman and child in the state.

Depends on large part on why prices are high. Here’s a (very brief) rundown – I’ll add to this as I think of stuff later.

Winners:

You’ve nailed the big winners – oil companies. As it happens, the less integrated an oil company is, the better under current circumstances where oil prices are increasing faster than the prices of the products made from them. That is to say, a little independent E&P guy in the Gulf of Mexico is seeing better earnings increases than Exxon. Exxon, as a net seller of crude, is seeing better earnings increases than an integrated oil company which is a net buyer (or less of a net seller). The national or independent oil companies associated with OPEC have actually been trying to get more integrated in recent years but are still very large net sellers of crude and thus are big winners.

Oil transport companies. The stories about supply problems aside, this run-up is in large part because of increased demand (though there’s a terror premium – see below). When demand is high, there is also high demand for transport. Pipeline operators (particularly those with unregulated pieces of their lines) and especially tanker companies beneft from high oil prices. In particular, movers of “clean products” – stuff like gasoline, jet fuel, etc. as opposed to crude or bunker fuel or heating oil are cleaning up (heh) right now.

Traders. Traders make money off of volatility, and high prices are usually accompanied by high volatility, at least until the market gets used to the high price, which it hasn’t in the case of oil just yet. It takes more capital to keep open positions, but those with the capital are eating pretty well right about now.

Providers of oil alternatives. Gas and NGL producers and coal are also up. In particular, gas is usually pretty well correlated with Oil on a BTU equivalent basis and is actually rich to oil right now.

Future providers of oil alternatives: The guys who make things like windfarms, shale-to-oil operations, etc. Some are actually making money, like the Canadian tar sands guys, but they mostly benefit from new capital – whenever oil gets expensive like this a ton of capital thinking the increase is permanent gets directed to these guys. Most of this capital will be lost, but if you’re an executive in this industry, you probably just granted yourself a nice bonus because you completed a new round of capital raising.

Ought to be winning but aren’t:

Oil Service Companies. Guys who construct rigs (onshore or offshore), supply them, do 3-D seismic, etc. usually benefit from high oil prices as exploration increases and as marginal fields become economic. But they’re not. This is because the market is not confident that the high prices are here to stay and are therefore conserving the capital which usually goes into exploration and exploitation at this point in the price cycle. As it happens, this serves to keep prices high for obvious reasons. So while the operators of ships which bring oil across the ocean are doing very well, the operators of ships which supply offshore rigs are going bankrupt around the world. Very, very odd times.

Mostly winners, sometimes losers:

Midstream providers. People like refiners, storage facilities which own inventory, etc. can make some money from inventory arbitrage but are at risk from the squeeze between crude prices and finished product prices. Earlier in the year everyone was doing quite well, but in the past month or so they’ve been seeing margin squeezes. If I knew how this movie was going to end, I’d be rich. (In fact, I’ve made a bet on how this movie will end and if I’m right I will be rich, but I can’t disclose the bet just now).

Losers:

Pretty much everybody else. In particular, the big losers are end-stream product manufacturers and salespeople. The gasoline retailers are getting creamed now, and plastic manufacturers, power companies which use oil or gas, and some fertilizer companies are having a tough go of it (though many fertilizer companies in particular were good buyers of gas and are sitting pretty – see below). And it goes without saying that now is not a fun time to run a fuel-intensive company like a trucking company or an airline or to be selling gas-guzzling products like SUVs.

However. However, the oil and gas and some finished products markets are pretty well developed at this point, and hedging or futures buying is frequent. So companies which bought forward much of their oil or related requirements are propsering as their competitors’ rising costs increase the cost of the average producer, sending prices up while their costs are locked in. Companies such as Southwest, which bought forward much of their jet fuel needs, have a distinct advantage over companies like the big airlines, which frankly don’t and didn’t have the balance sheets to make similar forward purchases.

I’ll add some more thoughts tomorrow.

Why is this the case? Demand for gasoline is relatively inelastic and all your competitors are paying more for your gas as well? Is it a case that the public will have “sticker shock” if prices go over a certain level? Is it a temporary thing?

Winners: Any firm that uses less oil in the maiking of their products than competitors
Alternative energy providers
Enviromentally concious consumers
State fuel tax budgets (although also losers due to slower economy)

I think most (all?) state fuel taxes are per-gallon, not per-dollar. Thus there would be no net gain, and perhaps a loss of gas consumption went down.

Thanks for the info…

Its like I thought… overall corporations win… consumers lose. How much though ?

The wierd thing is that if this keeps going for too long… especially if Bush gets reelected there will be much more investments in alternative energy. Bush might be “pro-environment” after all indirectly.

The government of Alberta makes out pretty well.

I apologise if it’s bad form to ressurect this thread, but Chevron’s announcement of 3rd quarter profits rising 62% over last year at this time sure points out that it’s not the companies who suffer from higher per-barrel costs.

from here.

And here, Exxon also announced profits on course for a record year.

Nice to see someone’s making out domestically while bills for fuel, heating, and transportation affect almost everyone else adversely.