Publications: Notes at the Margin

"Money Matters": Inventories, Central Banks, Creditworthiness, and Interest Rates (January 9, 2023)


Those who follow oil markets fixate on inventories. For more than fifty years, they have focused on the stock levels of crude or products held in specific locations. Today, these individuals are affectionally called “barrel counters.”


In 1983, this economist was learning about and then writing on the low heating oil stocks in the US Northeast. The weekly data published by the American Petroleum Institute became a must-read item. The API reports published by Platts in the 1970s and 1980s, which we still have in our archives, would discuss stock levels, especially when they approached dangerous lows such as after the 1973 Arab oil embargo began.


Today, the barrel counters rely on data from the US Energy Information Administration and the International Energy Agency. The EIA weekly data provide market followers with current inventory estimates for the United States, and the IEA does the same for the Organization for Economic Co-operation and Development.

The graphical information presented by the EIA, the IEA, and other organizations, which generally cite EIA and IEA data, has gotten more elaborate. However, the story has not changed. Every presentation includes graphs showing current stocks, stocks in previous years, and a “normal” range based on historical averages and standard deviations.


The depressed distillate inventories in New England today have been a conversation topic for the press, government policy officials, and others for months. Again and again, oil market analysts focused on stocks have warned of problems there.


However, the graphs popularized by the EIA and IEA omit something very important: the cost of holding inventories. That is, oil or natural gas market analysts fail to account for changes that occur when the cost of holding stocks increases. That cost matters.


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