Government Bailout of Oil Industry

[Gerry Maddoux + 3,627]

47 minutes ago, Geoff Guenther said:

As odd as it seems, several commenters convinced me (you may have been one) that a drop in oil price would raise the price of US NG.

Where that came from was the theory that low oil prices would stymie oil production in the shale basins, thereby reducing the amount of waste by-product: natural gas. 

They're probably wrong on that. Shale isn't going away; the net mineral acres and leaseholds are just going to be transferred to Exxon and Chevron. Sure, they will slow down a lot in order to allow for the oil supply/demand ratio to rebalance but there will still be an overabundance of natural gas, as the Delaware sub-basin is very, very gassy and gets gassier as wells decline. 

I don't personally think the price of NG is going anywhere. There are just enormous volumes of it being produced. LNG and CNG will both grow--almost logarithmically--until the takeaway is equal to the amount presented at the egress from the pipeline. At that point, venting and flaring will cease (thank God). Only then--and we're talking two years--will the price of NG begin to rise. And at that point the dry gas fields like Marcellus will start to come to life again.

[Douglas Buckland + 6,308]

6 hours ago, James Regan said:

I like Trump but I feel in this year of election he will not make a second term. One term Trump he is the whipping boy.

How much do you wanna bet?😂

[Douglas Buckland + 6,308]

Is it really Trump’s, or the government’s, job to protect the American shale oil industry (I believe that this is what we are talking about) from itself?

Many seem to be blaming the Saudi’s or the Russian’s for the present price collapse while totally ignoring the fact that the US shale oil industry showed absolutely no restraint, pumped unchecked into an already flooded market and reaped any benefit from any OPEC+ production cut.

Nobody ever took any serious action to dry up the glut. Everyone knew they were flooding an already saturated market. There is plenty of blame to go around!

Quit whining and start figuring out how to rectify the situation! Finger pointing and bitching won’t get it done!

The shale oil industry ‘sowed’ the wind and are now ‘reaping the whirlwind’.

[El Nikko + 2,145]

https://oilprice.com/Energy/Oil-Prices/Trump-Prepares-Aid-Package-To-Relieve-US-Oil-Producers.html

[ronwagn + 6,290]

6 hours ago, El Nikko said:

https://oilprice.com/Energy/Oil-Prices/Trump-Prepares-Aid-Package-To-Relieve-US-Oil-Producers.html

Edited March 10, 2020 by ronwagn
addition

[ronwagn + 6,290]

The Trump Administration will review solutions to the pain felt by US oil producers as oil prices fall to multi-year lows on Monday, according to Bloomberg.

Administration officials will present the President with options, which will include financial assistance to industries affected by the coronavirus and the oil price crash. These measures may include cash injections, tax credits, payroll tax cuts, and tariff reductions on specific Chinese imports, Bloomberg sources familiar with the matter said on Monday.

Oil prices fell sharply since on Monday after the OPEC+ talks fell apart on Friday and Saudi Arabia and Russia vowed to increase oil production in an oil price war that saw Saudi slash its OSP for April by between $6 and $8 per barrel.

By Monday afternoon, the WTI Crude grade had fallen 25.02% to $30.95—the largest oil price slide in years.

US oil companies were hit hard on Monday, with Chevron (-15.37%), Occidental (-52.01%), Apache (-53.86%), Marathon Oil (-46.81%), ExxonMobil (-12.22%), EOG Resources (-31.98%), ConocoPhillips (-24.87%), and Pioneer Natural Resource (-36.96%), all falling sharply on the day.

While US oil companies may be feeling the pinch, US consumers—mainly drivers—may be in for a real treat, with gasoline prices at the pump expected to fall. Average gasoline prices in the United States are already the lowest they’ve been in a year, according to Gas Buddy. Gasoline could dip below $2 per gallon in the coming weeks if the oil price war persists, Patrick DeHaan, head of petroleum analysis at Gas Buddy told USA Today.

And as gas prices go down, discretionary spending goes up—a positive development for the economy.

By Julianne Geiger for Oilprice.com

[wrs + 893]

Another thing Trump could do is to buy those 5 VLCCs that KSA is getting ready to send over here and put them in the SPR. He already announced the cancellation of the planned 12mmbbl sale.

[Dan Clemmensen + 1,011]

A basic uninformed question: Given that the US strategic oil reserve currently has about 200 billion bbl of empty capacity, would it make sense to permit oil traders to use that capacity at cost (or at a very low premium over the cost) for contango plays? Would this smooth out the extremes in the price excursions?  it would not require any government funds and it would add to the true strategic reserve. It would also ensure that the reserve is actually operating properly.

[cbrasher1 + 272]

they gonna bailout Ford too? we talk about energy sector debt, being on an energy forum, but other companies are strapped as well...

https://www.ccn.com/forget-the-dow-coronavirus-could-send-ford-stock-to-zero/

[Dan Clemmensen + 1,011]

Ford is not being directly attacked by the actions of foreign governments (Russia and Saudi Arabia) like the US oil industry. Ford and much of the rest of the US economy will benefit from lower gasoline prices. The economic effects of the Covid-19 pandemic are much broader and will require a much broader response: this is separate from the foreign attack on US oil.  (Note: we need to stop pumping oil out of the ground within 10 to 20 years to avoid climate catastrophe, but that's a separate problem with a separate set of solutions).

[cbrasher1 + 272]

2 minutes ago, Dan Clemmensen said:

Ford is not being directly attacked by the actions of foreign governments (Russia and Saudi Arabia) like the US oil industry. Ford and much of the rest of the US economy will benefit from lower gasoline prices. The economic effects of the Covid-19 pandemic are much broader and will require a much broader response: this is separate from the foreign attack on US oil.  (Note: we need to stop pumping oil out of the ground within 10 to 20 years to avoid climate catastrophe, but that's a separate problem with a separate set of solutions).

you cannot be serious? there is no global warming, and no catastrophe coming...if this is your belief, why be on an oil forum? and what are you doing for your part? do you drive a car? on highways? house? toothpaste, clothes, little fancy electronics? i will guess yes to all of the above....so nothing, yet you believe the hype? now, the real question...are you in agreement with biden that in this "climatic emergency" 😂😂 millions should lose their jobs??

[El Nikko + 2,145]

Just now, cbrasher1 said:

you cannot be serious? there is no global warming, and no catastrophe coming...if this is your belief, why be on an oil forum? and what are you doing for your part? do you drive a car? on highways? house? toothpaste, clothes, little fancy electronics? i will guess yes to all of the above....so nothing, yet you believe the hype? now, the real question...are you in agreement with biden that in this "climatic emergency" 😂😂 millions should lose their jobs??

Getting really really sick of my daughter coming home telling me damn near every lesson is attacking the oil industry, some of the subjects have got nothing to do with energy like English! Next thing they're doing in class is "Why is oil bad" not 'is oil bad' or 'what are the pros and cons of oil'. The poor kid is well aware of our predicament as we already had a really bad year in 2019 and it really upsets her yet these useless socialist teachers who are a net drain and don't earn a penny for the country can just sit their talking out of their asses to a bunch of uninformed kids. It's about time they put their money where their mouth is and stop using it.

To be quite honest I might write the damn work myself and make her teacher look like an idiot

[ronwagn + 6,290]

5 minutes ago, El Nikko said:

Getting really really sick of my daughter coming home telling me damn near every lesson is attacking the oil industry, some of the subjects have got nothing to do with energy like English! Next thing they're doing in class is "Why is oil bad" not 'is oil bad' or 'what are the pros and cons of oil'. The poor kid is well aware of our predicament as we already had a really bad year in 2019 and it really upsets her yet these useless socialist teachers who are a net drain and don't earn a penny for the country can just sit their talking out of their asses to a bunch of uninformed kids. It's about time they put their money where their mouth is and stop using it.

To be quite honest I might write the damn work myself and make her teacher look like an idiot

I never paid much for college and was on the GI Bill. I did pay taxes for the state universities all my life. I have always thought they should lose funding for promoting socialism and said so. I never got any support. What I can't quite understand is why so many alumni support this indoctrination. It just made me mad and I even got kickback from professors. 

[0R0 + 6,251]

35 minutes ago, cbrasher1 said:

they gonna bailout Ford too? we talk about energy sector debt, being on an energy forum, but other companies are strapped as well...

https://www.ccn.com/forget-the-dow-coronavirus-could-send-ford-stock-to-zero/

The Fed should be liquifying the credit markets to avoid further breakdowns - we had a 9 day breakdown of investment grade issuance before the Fed announced cuts last week, junk credit is still distressed with no issues. In end 2018 the Fed had gotten so tight that there were no issues for 41 days in the junk category and a full week with no investment grade issues. Similar investment grade issue problems were in evidence prior to the start of the Fed rate cuts last summer. 

The Fed is woefully behind the curve. It keeps ignoring the heavy liquidity demand coming out of the Eurodollar system and ignores the treasury curve signaling deflation and market demand for deeply negative real yields. The Eurodollar system is funding trade and investment globally and is stretched by credit demand for delayed supply chain deliveries and thus payments, and by China and HK banks seeking extra liquidity in the Eurodollar market in the aftermath of the China banking fiasco. Where the interbank China repo market was in disarray for 6 months last year with 20% overnight rates. The Bail In policy at Baoshang bank's collapse is forcing Chinese institutional depositors out of the banks and into the bond markets to hold their cash. Part of what they are doing is holding dollar money market paper in the Eurodollar market and in HK, and China multinationals accumulating more offshore held US treasuries and using them for cash via the dollar repo markets in the Eurodollar system and the Eurodollar system in turn provides cash by repo and swaps in the US money markets.

Thus the Fed has to deal with not only the liquidity demand of the US, but that of Europe (with similar bail in policy) and of China, which is far more heavily monetized and financialized system than any other. The Fed's response has been creaky and oblivious. Powell reacting only when things actually break down in Repo or credit markets in the US right in front of his nose. 

 

[wrs + 893]

1 hour ago, Dan Clemmensen said:

A basic uninformed question: Given that the US strategic oil reserve currently has about 200 billion bbl of empty capacity, would it make sense to permit oil traders to use that capacity at cost (or at a very low premium over the cost) for contango plays? Would this smooth out the extremes in the price excursions?  it would not require any government funds and it would add to the true strategic reserve. It would also ensure that the reserve is actually operating properly.

The oil stored at Cushing is blended to make a specific API which is not possible with the SPR.  The SPR contains mostly sour oil which is not as desirable and the API is not controlled.  So the short answer is no.  Other issues with this oil is that it isn't easy to get the oil into and out of the various salt domes where it's stored.  

[El Nikko + 2,145]

3 minutes ago, ronwagn said:

I never paid much for college and was on the GI Bill. I did pay taxes for the state universities all my life. I have always thought they should lose funding for promoting socialism and said so. I never got any support. What I can't quite understand is why so many alumni support this indoctrination. It just made me mad and I even got kickback from professors. 

I wonder if they'd be ok with it if I was a teacher and promoted my politics to kids...hmmm thought not 😂

[0R0 + 6,251]

7 minutes ago, ronwagn said:

16 minutes ago, El Nikko said:

Getting really really sick of my daughter coming home telling me damn near every lesson is attacking the oil industry, some of the subjects have got nothing to do with energy like English! Next thing they're doing in class is "Why is oil bad" not 'is oil bad' or 'what are the pros and cons of oil'. The poor kid is well aware of our predicament as we already had a really bad year in 2019 and it really upsets her yet these useless socialist teachers who are a net drain and don't earn a penny for the country can just sit their talking out of their asses to a bunch of uninformed kids. It's about time they put their money where their mouth is and stop using it.

To be quite honest I might write the damn work myself and make her teacher look like an idiot

I never paid much for college and was on the GI Bill. I did pay taxes for the state universities all my life. I have always thought they should lose funding for promoting socialism and said so. I never got any support. What I can't quite understand is why so many alumni support this indoctrination. It just made me mad and I even got kickback from professors. 

This is part of the socialist movement where the entirety of union labor, i.e. all of public education and all university non-academic staff, are given marching orders from their unions. The academic world is locked into socialist dogma. It is actually not as bad now as it had been in the late 1960s. The new left is still promulgated by the same organizations with a different narrative intending to de-industrialize and promote poverty in order to gain large scale dependence of the population on government. It is left over from the Soviet led takeover of US academia by its communist agents in the 1920s and 1930s with the influx of socialist indoctrinated academics from Europe, and particularly Germany and Eastern Europe where these were heavily persecuted during the rise of Fascism.

The Chinese, Russians and EU heavily promote the socialist and environmental dogmas - China and EU are trying to prevent Americans from consuming energy as that competes with their own demand. And Russia is trying to suppress energy production. They put cash behind it, not just their regular propaganda and social influence schemes. They even have Biden, a known paid for Chinese intelligence asset running for president. Don't you know  they have already had a century of control of the peer review process of the social sciences and now 3 decades of control of climatology? The Socialist International has not died with the collapse of the Soviet empire. It continues marching on with Greens and US progressives in attendance every year along with their European counterparts and Chinese delegations and reading off the same list of talking points. 

 

[ronwagn + 6,290]

5 minutes ago, 0R0 said:

This is part of the socialist movement where the entirety of union labor, i.e. all of public education and all university non-academic staff, are given marching orders from their unions. The academic world is locked into socialist dogma. It is actually not as bad now as it had been in the late 1960s. The new left is still promulgated by the same organizations with a different narrative intending to de-industrialize and promote poverty in order to gain large scale dependence of the population on government. It is left over from the Soviet led takeover of US academia by its communist agents in the 1920s and 1930s with the influx of socialist indoctrinated academics from Europe, and particularly Germany and Eastern Europe where these were heavily persecuted during the rise of Fascism.

The Chinese, Russians and EU heavily promote the socialist and environmental dogmas - China and EU are trying to prevent Americans from consuming energy as that competes with their own demand. And Russia is trying to suppress energy production. They put cash behind it, not just their regular propaganda and social influence schemes. They even have Biden, a known paid for Chinese intelligence asset running for president. Don't you know  they have already had a century of control of the peer review process of the social sciences and now 3 decades of control of climatology? The Socialist International has not died with the collapse of the Soviet empire. It continues marching on with Greens and US progressives in attendance every year along with their European counterparts and Chinese delegations and reading off the same list of talking points. 

 

Yes, I never had an insider's view, but it became very clear that if you were not a socialist or fellow traveler you would not get advancement, tenure, job security, or even a job in the first place. In the seventies I was even told of a local newspaper I could not cite. 

[Dan Clemmensen + 1,011]

24 minutes ago, wrs said:

The oil stored at Cushing is blended to make a specific API which is not possible with the SPR.  The SPR contains mostly sour oil which is not as desirable and the API is not controlled.  So the short answer is no.  Other issues with this oil is that it isn't easy to get the oil into and out of the various salt domes where it's stored.  

Thanks for your answer. I knew the SPR segregates sour from sweet (roughly 2/3 sour, 1/3 sweet) and that it can handle 4.4 Mbbl/day input or output. I do not know the actual details of input and output, nor of blending and quality. However, if the SPR were ever needed for its original purpose, there would be a need to actually extract and process that oil, so surely the industry has a way to do that? Basically, if Saudi Arabia wants to "flood the market" by hiring a bunch of VLCCs, wouldn't it be nice to just buy that oil on the cheap and store it?

[El Nikko + 2,145]

1 minute ago, Dan Clemmensen said:

Thanks for your answer. I knew the SPR segregates sour from sweet (roughly 2/3 sour, 1/3 sweet) and that it can handle 4.4 Mbbl/day input or output. I do not know the actual details of input and output, nor of blending and quality. However, if the SPR were ever needed for its original purpose, there would be a need to actually extract and process that oil, so surely the industry has a way to do that? Basically, if Saudi Arabia wants to "flood the market" by hiring a bunch of VLCCs, wouldn't it be nice to just buy that oil on the cheap and store it?

That might be quite rational but at the moment most people in the oil industry would prefer blood right now...or at least tariffs.

[GeneralLevy + 5]

Plot twist: Saudi Arabia and Russia agreed all of this beforehand and are in fact acting in concert 

[Douglas Buckland + 6,308]

6 hours ago, cbrasher1 said:

they gonna bailout Ford too? we talk about energy sector debt, being on an energy forum, but other companies are strapped as well...

https://www.ccn.com/forget-the-dow-coronavirus-could-send-ford-stock-to-zero/

Didn’t we already bail out the auto industry years ago?

[cbrasher1 + 272]

1 hour ago, Douglas Buckland said:

Didn’t we already bail out the auto industry years ago?

gm and fiat/chrysler, no sure about ford though

[garycoates + 1]

On 3/9/2020 at 6:12 PM, Geoff Guenther said:

So Russia and the Saudis are about to take out the weakest players in the US and Canada. Many people on the boards are calling them zombies already, so maybe they can.

Functional governments would probably create taxes on any oil under $45/bbl, say 50% on any dollar below. 

Those taxes can do three things:

1) save more marginal American oil players from bankruptcy 

2) continue growing the North American gas markets, since we have more gas than we know what to do with and it's cleaner. 

3) continue to develop renewables, which will cut into Russian and Saudi profits in the long term (payback for trying to wipe out our industry).

Yes, it's a carbon tax, but one that disappears when the price war ends and protects our interests in the meantime. 

Tariff imported crude or petroleum products to keep oil out that us intended to scuttle the industry that are not from Canada or Mexico that we have trade deals with.   Simple you protect the domestic production market and still export to net importers.

we don't need Saudi Crude or anyone else's ... low oil prices don't help the domestic market when it creates unemployment and destroys domestic small and mid size businesses.

[surrept33 + 609]

17 minutes ago, garycoates said:

we don't need Saudi Crude or anyone else's ... low oil prices don't help the domestic market when it creates unemployment and destroys domestic small and mid size businesses.

 

There is something to be said for that, but it wouldn't happen overnight because:

https://www.eia.gov/todayinenergy/detail.php?id=41033

https://www.eia.gov/todayinenergy/detail.php?id=41653