A difference of Approx. $20 per barrel currently is showing on the oil bulletin for the Conoco-Phillips website for MT / Dec. 2012. Can I show this as a loss on income for tax purposes?
Sorry Marlene, I'm sure you can't deduct it as a loss. The price of oil fluctuates and that is a fact of life.
What I am trying to understand is what the price of oil is listed at from one part of our state to another part of the state--there is a vast difference and then when you see what Bloomberg, etc. says what the price per barrel is valued at. When these factors are looked at it doesn't seem to add up correctly. I realize the oil prices change daily but we never seem to get what others are listed at.
r w kennedy said:
Sorry Marlene, I'm sure you can't deduct it as a loss. The price of oil fluctuates and that is a fact of life.
Marlene, the wellhead price can vary greatly as does the quality of the oil. The bloomberg price is after the transportation charges are worked into the price. If it costs $20 to get a barrel of your oil to market you generally receive $20 less than the market price. Oil differs also, some is light and sweet and may bring more than the Bloomberg price although it is possible for oil to be too light and be worth less and some may be heavy and or sour with lots of H2S gas that requires some process before it can be put in a pipeline and therefore it is worth less than other oil although heavy crude may be perfect for other industries than fuel, like plastics or lubricants. If you can find online the posted rates for someone buying on the spot market they may list a state, range of gravities and what they will pay if the oil is lighter or heavier, these I think are wellhead prices and will look fairly low. The farther we are away from a major hub like Cushing Ok, the less we get for our oil. We just don't have that kind of infrastructure in our part of the country. If we had more pipline capacity I think the transport cost would go down considerably. Alot of oil currently leaves Mt and ND on trains and it costs more to move oil that way than pipelines. Unfortunately it appears that the government is against the new pipelines. The railroads seem to be getting a shot in the arm from hauling the oil. Shipping by rail can be a good thing. I have a friend whose oil is shipped by rail from ND to Louisiana by rail and he was getting $100 a barrel last month, he also has another well where he received $75 per barrel, which may have also been shipped by rail but I'm sure it didn't go to the same place. If it's any consolation, your operator probably isn't enjoying the low oil price any more than you are. There is alot that goes into the price you receive for your oil and I hope this does not confuse you more, although I'm afraid it might.
While it does not cover Montana, here is a price list that shows different prices for different areas. Also if you look at the bottom you will see additional price adjustments made for variations in the product.
http://www.paalp.com/Customer-Center/Crude-Oil-Price-Bulletins-1363.html
Thanks Rick! Your explanation helped expand my knowledge....
Rick Howell said:
While it does not cover Montana, here is a price list that shows different prices for different areas. Also if you look at the bottom you will see additional price adjustments made for variations in the product.
http://www.paalp.com/Customer-Center/Crude-Oil-Price-Bulletins-1363...
It's worth mentioning that the PAALP prices are physically traded prices on that day. That does not mean that is what your operator realized. Hopefully, your operator is getting better prices, but there's always a chance they're getting worse.
Use the Plains numbers as a good estimate, but know your checks will not reflect the exact same prices.
marlene ferrel said:
Thanks Rick! Your explanation helped expand my knowledge....
Rick Howell said:While it does not cover Montana, here is a price list that shows different prices for different areas. Also if you look at the bottom you will see additional price adjustments made for variations in the product.
http://www.paalp.com/Customer-Center/Crude-Oil-Price-Bulletins-1363...