The Oil Information Cartel Is (Finally) Broken
A determined James Stafford of OilPrice.com just busted wide open an oil industry information cartel that has existed for decades.
Most investors look at West Texas Intermediate and Brent prices on Bloomberg or CME Futures, figuring the oil price is in the public domain. That assumption is about 2 percent correct, because there are hundreds of different grades of oil and hubs where it is bought and sold — and they all have different prices.
Since the age of oil began up until a few months ago, most real-time oil prices were jealously guarded by marketers, who used the information to their advantage in the daily multi-billion-dollar physical oil trade.
Today, I’m going to tell you the story of how Stafford and his small team made 18 months’ worth of calls, cajoling and ultimately paying for an amazing service you now get for free. It’s a true David vs. Goliath story, and just like in the original, the little guy wins in the end.
What Stafford and his team have assembled to date is remarkable — and free. You can access it through the link below:
This is an incredible and unprecedented collection of information available to the public.
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Stafford says that the feedback he has received has been exceptional. With no marketing effort, the oil price page is already receiving 40,000 visits daily.
It was an 18-month quest to democratize the world of oil pricing and bust the information cartel that has existed for decades.
A Simple Question With No Easy Answer
Stafford’s quest started well over a year ago when he received a phone call from a reporter working for the Wall Street Journal. The journalist wanted help finding a simple piece of information. He was writing an article about the African oil industry and simply wanted to know the current price for Bonny Light crude oil, the main benchmark price for Nigerian crude.
Now remember, this is a Wall Street Journal writer with access to an incredible network of contacts and research, not a casual retail investor sitting at home with pedestrian internet search skills and no industry contacts. You would expect that finding the current price for Africa’s main brand of crude would be a simple task for a Wall Street Journal writer.
You would be wrong.
Not only did the writer fail to find the current price for Bonny Light, but the best he could do was get a price from six months ago!
We were passing information around faster with the Pony Express 150 years ago.
The trouble that the writer was having surprised Stafford, who then realized that he, too, couldn’t get access to the current price of Bonny Light.
Given that Stafford is the founder of the very popular website OilPrice.com, not being able to find a price for a globally important type of crude did not sit well with him.
So Stafford put his head down and got to work.
Information Held Hostage; the Ransom? $30,000 Per Year
The internet has made information available to everyone with ease. Nowhere is this more true than in the investment world. I can tap into any SEC filing of any company within seconds. It wasn’t that long ago that I would have had to request that information by telephone and wait to receive it by mail.
The internet has sent the encyclopedia the way of the dodo bird, ruined many a local newspaper, and made the world a much smaller place. It has also leveled the playing field in many cases, especially when it comes to investing.
When it comes to obtaining global oil price information, however, the internet has done nothing. We are still completely in the dark.
Your first inclination may be to disagree with me. You know that you can look at the current (or historic) price of West Texas Intermediate or Brent crude any time you want. What you are missing is that those are just two oil benchmarks out of hundreds, perhaps even thousands.
People generally believe that oil is a single homogeneous substance. A barrel of oil is a barrel of oil is a barrel of oil.
That is not the case.
In its natural unrefined state, crude oil differs in consistency and density from very thin, volatile, and light oil to very thick, almost solid, heavy oil. It also differs in color, ranging in hue from pitch black to a light golden yellow.
Depending on where it is found, each type of oil has very unique properties when it comes to volatility, viscosity, and toxicity. In Canada alone, there are north of 70 different oil blends. You read that correctly — 70!
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Knowing the exact blend is essential for the refinery process, which has to account for the specific chemical properties and viscosity of the oil being processed.
Stafford knew that if he couldn’t find pricing for a major type of crude like Bonny Light, then there were countless other prices that would be even harder to get.
Stafford’s quest quickly led him to a discovery: The only place to obtain a fairly complete set of current oil price data required a subscription, which went for $30,000 to $50,000 per year.
The people behind this source knew they had the upper hand over people who needed that oil price data, and they exploited it. Even at such exorbitant cost, however, the oil price information wasn’t complete. The source only provided end-of-day prices for the various sources of crudes — nothing in real time.
This just motivated Stafford more. His focus became finding a way to open up the world of oil prices, making the information available to everyone.
But it wasn’t easy, and it certainly wasn’t cheap.
It took Stafford and his team almost 18 months of making phone calls, getting rejected, making more phone calls — over and over again. When Stafford found the right people, they were often reluctant to release the information for fear of ruffling the feathers of senior management.
Stafford ultimately succeeded simply by knocking on enough doors across the globe to find enough oil-industry people who were sick and tired of this oil price information being held hostage. Like Stafford, these people felt there should be transparency with respect to this information.
Stafford will be out of pocket by a couple hundred thousand dollars per year in order to secure the continued contractual commitments to supply this data.
The Result: Global Oil Price Information for Everyone (Finally)
Stafford and his team aren’t done. They are still making calls, sending emails, and adding different blends to their pricing list. Stafford knows of a few hard-to-get-ahold-of blends his pricing list still lacks. Certain OPEC blends in particular have been hard to pin down.
Well done, Mr. Stafford.
By Keith Schaefer via Oil and Gas Investments