Bloomberg.com: Asia

Bloomberg.com: Asia

The new refinery story continues. In India, one company is building a new refinery and another is expanding an exhisting refinary.

My point continues to be that the law of supply and demand is going to move the price of oil back to an average level. Because the oil supply demand curve meets in a spider web fashion, when the price finally drops it will drop lower than than all expectations.

The timing is the difficult part. A refinery annouced today may take two or three years to build. The quick reaction is in demand destruction. Demand has been destructed in many a place. Folks are riding buses, scooters and bikes. Small cars are selling and many a SUV is parked.

Much of the demand will come back as the price of gasoline settles back down. New refineries are needed. Several are being modified or built to handle the sour Saudi crude that is in abundant supply.