The Business Intelligence Blog

Given the frantic oil price rise, here is some insight into how oil companies use Business Intelligence to maximize profits. Great & Must Read.

Every Wednesday morning, the shouts and hand gestures that make the Nymex trading floor in New York frantic begin to calm. Petroleum traders are waiting for the release of data from the U.S. Energy Information Administration (EIA) on countries’ inventories of crude oil and gasoline, as well as world crude prices.

At 10:30 a.m., the EIA’s website sees a storm of activity: 1,000 page views per second for 15 seconds, says Charlie Riner, a lead analyst for the site. Oil companies, commodities traders, analyst firms, and government agencies in the United States and other countries have written bots to collect the data. Then traffic ebbs.

In the oil and gas business, you are what you own. The amount of crude waiting to be refined, or the already-processed liquid in storage tanks ready to be sold and delivered, represents much of a company’s value at a given moment. As a refiner, Valero buys barrels of oil to heat and pressurize into other products, such as diesel fuel, asphalt and lubricants. The $95 billion downstream company owns 17 refineries that together can produce 3.1 million barrels of product per day.

But Valero doesn’t sell that much in a given day so it must store finished goods until they’re ready to be shipped to customers. The company tracks its own inventory movements the way a first-time mother studies her infant. How much of which products did we sell this morning? How about now? And now?

Market analysts run inventory reports “a few hundred times a day,” says Kirk Hewitt, vice president of accounting processing optimization . As the cost of crude fluctuates during trading hours, Valero sales and marketing staff want frequent updates so they can sell products at the most profitable price and buy crude to feed their refineries at the best price.

“We’re dealing with a commodity whose price changes every second,” Hewitt explains. “So our margins change every minute. Our costs change every minute.”