Proposed Tax Makes Move on Oil Markets

Main Image
Daily Settlement Prices

This week's volatile price changes continued yesterday, as the market shook off an "on paper" bearish Department of Energy (DOE) inventory report to recoup a healthy portion of the losses seen in the past few days. February WTI had dropped by three dollars in the first two sessions this week, closing at its lowest level since mid-December and giving the "defenders of $50" bulls reason for pause.

The DOE data was not price supportive (see below), but other than a brief move down after the data came out, prices were strong most of the day. The likely cause of the price run-up was discussion about the Paul Ryan-proposed "Border Adjustment Tax," that would impose a duty on all domestically imported goods (including oil). This tax would surely cause the price of oil to rise (the United States still imports eight million barrels of oil per day), and it would also bring finished product prices with it. One bank has even suggested a 30-cent increase in the price of gasoline and heating oil with this measure. Duties collected from this Border Tax would help offset some of the lost revenue from lower corporate income taxes (as proposed by the new administration).

The results of this week's DOE report were as follows:
• Crude Oil - build of 4.1 MMbbls (versus expected build of 1.2 MMbbls)
• Gasoline - build of 5.0 MMbbls (versus expected build of 1.6 MMbbls)
• Distillate - build of 8.4 MMbbls (versus expected build of 0.9 MMbbls)

As expected, imports surged in the most recent reporting period, with cargoes that had been delayed for delivery at year-end (tax limitations) being officially imported last week. Refinery inputs increased week-on-week, which added to the glut of finished products. Distillate stocks are up nearly 20-million barrels in two weeks, and are at their highest level in over five years. They are especially high in PADD III, the Gulf Coast region.

The market not only didn't react negatively to the data, but in fact moved higher not long after it came out. At one point, February WTI was up nearly two dollars (with RBOB and Heating Oil up six cents) before a slight fade towards the close limited some of the day's gains. The day's ultimate increases (WTI up $1.43, products up over four cents) were about half of the cumulative losses from Monday and Tuesday. Clearly there was something else at work for the market to move so strongly higher on Wednesday, and the chatter about this "Border Tax" could be the reason. Keep on eye on it going forward.



PAPCO Newsletter Disclaimer. The information that is published in this newsletter, including the market reports, is derived from trade, statistical, and other sources that we believe are reliable and accurate. However, PAPCO does not guarantee the completeness, accuracy, or reliability of such information, and information should not be relied upon as such. Additionally, PAPCO assumes no responsibility for the material contained in the newsletter and the views expressed therein. Further, PAPCO expressly disclaims any express or implied warranties or guarantees with regard to such information. The information contained in this newsletter and any views expressed herein are provided for your informational purposes only and should not be interpreted in any way as an offer, invitation to make an offer, inducement, or recommendation to buy or sell options contracts, commodity futures, products, or any other type of security.



Post Comment

Commercial Price Risk Mgmt Lubricants Retail Home Heat About Us
Fuel Products
Fleet Card
Energy Markets
Manage Risk
Custom Solutions
6 Easy Steps
Pricing Tools
Weekly Updates
Inventory Mgmt
Branded Fuels
Unbranded Fuels
Custom Solutions
Site Development
C-Store support
Inventory Mgmt
Pricing & Incentives
Delivery Options
Service Programs
Price Protection
Service Areas
News & Events
Contact Us

Sign up for
Email Updates


4920 Southern Blvd
Virginia Beach, VA 23462

© Copyright 2019

Site Map
Privacy Statement
Terms & Conditions