Originally Posted by
BenderRodriguez
Somewhat of a semantic argument. We are able to negotiate directly for the price of crude rather than be dependent on the market and the crack spread. We cut out the middle man with the refinery. Yes, you are correct that the crack spread is the main determinate in the ultimate price of jet fuel, but unlike any other carrier, we have a way to negotiate on the raw material. They have to take the retail product whereas we do not.
Crude is not an elastic commodity and I doubt we negotiate a lower price than the next guy. Refiners pay what the going price for the crude is. We have been able to source some Bakken crude which is a lower cost crude than WTI or Brent so that has helped, but refiners pay what the producers are charging which is not typically negotiable.
The entire reason why Trainor was sold is because they were having to source Brent which is a higher priced crude than WTI. They were at a disadvantage to the Gulf Coast refiners and couldn't compete so they sold the refinery. Then ND kicked off and started sending crude by rail to the East Coast which changed the economics of East Coast refineries.
Right now Bakken Crude sells for about a $12 discount to WTI...so about $35/bbl today. What Monroe Energy can do, is negotiate on the transportation costs to get the Bakken Crude to PA. That is usually about $12/bbl which is why it trades at a discount, otherwise everyone would buy WTI or Brent.
If you really want to get into a complicated mess figure out why Brent and WTI have about an $8-10 spread. If the U.S. would lift the export ban that has been in place since the Nixon administration the world oil market would see a huge shift in who controls supply.
At the end of the day though, the Saudi's will always control the oil market. They sit on Billions of bbls of oil that literally cost about $1/bbl to extract in some areas.