"Saudi Armada heading to U.S.", "Dumping" is a WTO VIOLATION.

[Eyes Wide Open + 3,555]

6 hours ago, Jan van Eck said:

Nope. The Canadians will be right there with you.  Zero production, out of vast fields with enough oil in those sands for the next thousand years.  Oh, well. 

The million dollar question...how long does Tredeau last with all that money sitting in the ground.

[ronwagn + 6,290]

2 hours ago, Gerry Maddoux said:

Just a sec, how did he do this, and what exactly did he do?

He fully supported all the energy industries to the best of his abilities. That was a far cry from the Obama administration.

[Jan van Eck + 7,558]

24 minutes ago, Eyes Wide Open said:

The million dollar question...how long does Trudeau last with all that money sitting in the ground.

Answer:  indefinitely.  To grasp the brutal math of Canada and the Liberals, remember that the Liberal Party can do quite nicely with the parliamentary Ridings of Ontario and Quebec. Toss in some seats from the Maritimes and the Liberals can form a majority party in parliament.  Bluntly put, the Liberals do not need Alberta, and have long ago written it off. 

Way back when, the province of Alberta  (where most of the oil is) was involved with fringe politics, known then as "social credit."  Without getting into the theories of social credit, the upshot was that Alberta had placed itself out of the political mainstream.  Later a belated effort was made to get with the program, by voting for the "Progressive Conservatives" and Joe Clark, who became Prime Minister but stumbled on the world stage. After that, it was downhill. 

Canada runs in large part on refined fuels from the USA, and in the East, some fuels from offshore platforms in Newfoundland, and the big refinery in New Brunswick on either US oil from the Bakken or from Saudi oil.  The Montreal refineries operate off crude from the Middle East.  So Canada's oilsands oil has become irrelevant to the Liberal Party, and they can and will write off Alberta, which main function has been to provide a cash cow for the so-called "equalization payments" scheme of Ottawa - basically a gigantic inter-province wealth redistribution scheme.   But remember that manufacturing and farm products have a larger impact than oil sales, so the oil industry can be disregarded in terms of national politics for the Liberal Party.  -

Trudeau's big problem with the older voters is his image as a wuss.  His appeal to the younger voters is what is perceived as his "empathy."  These aspects have zero to do with the availability of domestic gasoline.  Alberta is interesting only to the Conservatives. 

For the Liberals, the dairy farms of Eastern Ontario and of Quebec are vastly more important that Alberta Oil, and so production quotas and price supports are integral to the Liberal Party envelope.  Keeping out cheap US milk is a cornerstone of Liberal Party platforms, much to the chagrin of Mr. Trump. 

Edited April 9, 2020 by Jan van Eck
Added paragraph about milk

[ronwagn + 6,290]

1 hour ago, BLA said:

Yea right.

You don't have to cut off relations with Saudi Arabia, but you should not allow a murderer continue as head of state. 

Sure what does the murder of a journalist matter.  Butcher him with bone saws , this the parts in a trash bag and dispose of them.  

Hey, he worked for Bezo so should have burnt him alive too. 

Let me ask you a question. Would you care if it was your mother that MbS cut up with bone saws ?  

Hey, mom don't get in the way of oil and politics.  I'll have to use my Black & Decker on you.  Sorry if that's against your sensibilities. 

Mother's day is right around the corner.  Don't forget to get her a card. 

 

It is fascinating how you can say that and nothing about what Putin and XI do to people all the time! This journalist was not an American citizen either. 

[ronwagn + 6,290]

25 minutes ago, Eyes Wide Open said:

The million dollar question...how long does Tredeau last with all that money sitting in the ground.

Well, he got reelected which I am still trying to figure out!

https://torontosun.com/opinion/columnists/kinsella-why-trudeaus-popularity-is-plummeting

Edited April 9, 2020 by ronwagn
reference

[Jan van Eck + 7,558]

56 minutes ago, ronwagn said:

12 hours ago, Jan van Eck said:

 

So, I would like opinions on what kind of plan the oil industry and the nation would need to get our own oil production up and running fast. How long will our oil storage hold out while we gear back up again? Can we build more storage for a suitable price?

Oil can be conveniently stored as a solid.  No need to build tanks  (although you could, always handy to have). 

[nsdp + 449]

8 hours ago, Vinnie Moore said:

Not true. Trump is a genius, a great businessman. OBAMA depleted our national reserves so Trump has decided this is the best time to increase our national reserves with cheap Arab oil. As soon as he does that he will tighten the screws and get the oil markets back to normal. If Trump is unable to do so, the Saudis will lose more market share. You can bankrupt some US shale companies but you can'well above tht bankrupt the process of extraction nor the oil that sits in the Permian, Bakken, Eagleford etc etc. The US will come out stronger and Russia will capitalize on the Saudis loss of market share.

Definitely not astronaut materiel above.  Saudia imports to Port Neches  seldom leave the Free Trade Zone.  Second tanker in line unloads crude and loads refined product for sale in the Caribbean and South America at prices 20%above NY Harbor. The Merry go Round goes round and round.  Crack spread is $5-8/barrel higher than US refinery market crack spreads in the Gulf Coast.  Yields are 60% gasoline 40% distillate (40cents/gallon higher right now) instead of the 66:33(AKA 3:2:1 spread) for typical US refineries. Oil never enters the US for legal purposes. Saudia has been doing this  since the refinery reopened after the false start caused by acid in the pipes.  They make the most money off their Heavy Sour that way. and don't fight the glut of heavy oil from Canada.

Edited April 9, 2020 by nsdp
typos.

[ronwagn + 6,290]

16 minutes ago, Jan van Eck said:

Oil can be conveniently stored as a solid.  No need to build tanks  (although you could, always handy to have). 

I was thinking of underground as is salt caverns or old coal mines etc. Whatever is sensible. 

[Jan van Eck + 7,558]

Just now, ronwagn said:

I was thinking of underground as is salt caverns or old coal mines etc. Whatever is sensible. 

Those are not what they are cracked up to be.  Coal mines have fissures, would allow liquids to ooze out and into the groundwater, not so great.  Yes, you could line the mine, but that is laborious.  As for salt caverns, it is ineviatble that salt will enter into the oil, either by co-mixing or adsorbtion.

Remember that the strategic petroleum reserve was intended to provide a set-aside indefinite stockpile of bunker "C" for the US Navy.  In the old days, the Navy ran on bunker oil, and the fear was that, in the event of war, submarines would sink tankers coming in from say Venezuela.  So the idea was that there would be this indefinite stockpile of bunker oil for the navy.  Then the stockpile was raided in the "Teapot Dome" scandal,demonstrating that the best ideas are prone to pondscum and their venality.  Today's navy typically does not run on bunker C, instead the capital ships are nuclear and the smaller support vessels use marine gasoil, a grade of diesel distillate. 

My guess is that boilers used on bunker C are not sensitive to salt contamination, and besides, those ships are likely to get sunk soon enough.  So that was less of a factor than when you have to run the crude through a distillation process. I will leave it to the refining experts to advise if the oil commingles with the salt, and how that hurts refining. I remain unconvinced that salt caverns are the optimal solution for oil storage. 

[BLA + 1,666]

1 hour ago, ronwagn said:

It is fascinating how you can say that and nothing about what Putin and XI do to people all the time! This journalist was not an American citizen either. 

Putin, Xi, Mohamed bin Salmon.

Take your pick.  

MBS is just the Tyrant of the day.  

So your logic is as long as MBS, Putin or Xi don't kill Americans they can cut anyone up that doesn't agree with them with a medical saw.

Pretzel logic. 

Do you believe MBS should be allowed to dump 14 mm bbls of oil on the U.S. market  ? 

What do you believe in ?

 

[BLA + 1,666]

2 hours ago, ronwagn said:

So, I would like opinions on what kind of plan the oil industry and the nation would need to get our own oil production up and running fast. How long will our oil storage hold out while we gear back up again? Can we build more storage for a suitable price? Will we be able to get the workers back again? Would we have to pay sky high prices and have outages again? Now is the time to answer these questions.

I still think tariffs are the answer. They can be low enough to allow minimal imports and high enough to keep us producing. I am pretty sure that President Trump will get good advice and take it. 

Trump is listening to the advice of the oil majors Chevron, Exxon, Oxy etc.  Their agenda is very different than the independents and private firms.

He for some reason looks to please the Saudis.  

Oil industry will look different in the next few years.

[Douglas Buckland + 6,308]

12 hours ago, BLA said:

You can argue the definition of dumping all day long.

I don't know the legal definition of dumping.  Doesn't matter.  The Saudi action is a deliberate attempt to put U.S. shale out of business.  

Trump can impose Rick Perry's request to put a 90 day ban on Oil Imports.

The Shale industry will make a point of Trump's inaction if he fails to protect U.S. industry. The industry will scream dumping, harassment, predatory pricing, deliberate attempt to destroy U.S. industry.  AND THEY WILL HAVE THE BACKING OF MANY CITIZENS. 

It will have ramifications for Trump far beyond Texas.  

Trump should take notice.  

This would hurt his reelection chances.

It's in Trump's court now. Trump's move.

The freaking shale oil players caused this mess! No discipline, just greed! Many of us elsewhere have been out of work for 5 years now.

Quit whining!!!

[Jay McKinsey + 1,490]

1 hour ago, Jan van Eck said:

Those are not what they are cracked up to be.  Coal mines have fissures, would allow liquids to ooze out and into the groundwater, not so great.  Yes, you could line the mine, but that is laborious.  As for salt caverns, it is ineviatble that salt will enter into the oil, either by co-mixing or adsorbtion.

Remember that the strategic petroleum reserve was intended to provide a set-aside indefinite stockpile of bunker "C" for the US Navy.  In the old days, the Navy ran on bunker oil, and the fear was that, in the event of war, submarines would sink tankers coming in from say Venezuela.  So the idea was that there would be this indefinite stockpile of bunker oil for the navy.  Then the stockpile was raided in the "Teapot Dome" scandal,demonstrating that the best ideas are prone to pondscum and their venality.  Today's navy typically does not run on bunker C, instead the capital ships are nuclear and the smaller support vessels use marine gasoil, a grade of diesel distillate. 

My guess is that boilers used on bunker C are not sensitive to salt contamination, and besides, those ships are likely to get sunk soon enough.  So that was less of a factor than when you have to run the crude through a distillation process. I will leave it to the refining experts to advise if the oil commingles with the salt, and how that hurts refining. I remain unconvinced that salt caverns are the optimal solution for oil storage. 

Teapot dome scandal involved leases on oil fields, not storage. The SPR was created in the 1970's and is completely stored in salt caverns.

[BLA + 1,666]

13 minutes ago, Douglas Buckland said:

The freaking shale oil players caused this mess! No discipline, just greed! Many of us elsewhere have been out of work for 5 years now.

Quit whining!!!

Respectfully disagree. 

Whose whining ? Read your own post. 

Sorry to inform you but shale will survive and do just fine.  All those jobs lost are not coming back.

That's my opinion. OK.

There are not a lot of new land based conventional oil reserves left.  Most new conventional are all offshore.  

Edited April 9, 2020 by BLA

[Douglas Buckland + 6,308]

1 minute ago, BLA said:

Respectfully disagree. 

Whose whining ? Read your own post. 

Sorry to inform you but shape will survive and do just fine.  All those jobs lost are not coming back.

That's my opinion. OK.

I was not whining, just stating a fact.

You OPINION is that shale will do just fine. Many others respectfully disagree with your opinion.

The lost jobs may come back, but there will not be anyone, with the required experience, to fill them.

[Dan Clemmensen + 1,011]

1 hour ago, Jan van Eck said:

 

Remember that the strategic petroleum reserve was intended to provide a set-aside indefinite stockpile of bunker "C" for the US Navy.  In the old days, the Navy ran on bunker oil, and the fear was that, in the event of war, submarines would sink tankers coming in from say Venezuela.  So the idea was that there would be this indefinite stockpile of bunker oil for the navy.  Then the stockpile was raided in the "Teapot Dome" scandal,demonstrating that the best ideas are prone to pondscum and their venality.  Today's navy typically does not run on bunker C, instead the capital ships are nuclear and the smaller support vessels use marine gasoil, a grade of diesel distillate. 

My guess is that boilers used on bunker C are not sensitive to salt contamination, and besides, those ships are likely to get sunk soon enough.  So that was less of a factor than when you have to run the crude through a distillation process. I will leave it to the refining experts to advise if the oil commingles with the salt, and how that hurts refining. I remain unconvinced that salt caverns are the optimal solution for oil storage. 

🙂 The Teapot Dome scandal was about the Naval petroleum reserves in Wyoming and California. It occurred in 1924.  The current Strategic Petroleum Reserve was activated in response to the Arab Oil Embargo in 1973. The SPR is in Lousiana. It is not intended for the Navy, but for the country as a whole.

The DoE started a drawdown in 2017 to comply with a law passed by congress in 2015 as part of a sleazy bipartisan sleight-of-hand way to help "balance the budget", driven mostly by the Tea party. It made sense: we don't need as much reserve if we don't need to import much oil any more. Quite by accident, it's a good thing we did it, because we now have some extra storage capacity. We know the SPR  functions fairly well because we use it occasionally, e.g. just after hurricane Katrina knocked the gulf platforms off line.

[Gerry Maddoux + 3,627]

14 minutes ago, Dan Clemmensen said:

The SPR is in Lousiana.

It's a small point but two or three of these SPR caverns are actually in Texas, one in particular near Beaumont and one close to Freeport--very close to refineries. These things are incredible. They were huge salt domes that were drilled into and water-flooded to dissolve the salt and carve out these storage tanks. The saltwater was pumped into the Gulf and somehow the walls of the caverns sealed over as hard as granite almost. I don't know much about leeching but these walls that resulted from hollowing out the salt domes are said to be bulletproof and I don't think much contamination of oil occurs. They're all along the crescent of the GOM, where the water level is barely subsurface and yet they remain insulated from water encroachment.

I personally think they shouldn't be tampered with. Ever. Except in war or sort sort of exogenous shock.  

[Dan Clemmensen + 1,011]

2 minutes ago, Gerry Maddoux said:

It's a small point but two or three of these SPR caverns are actually in Texas, one in particular near Beaumont and one close to Freeport--very close to refineries. These things are incredible. They were huge salt domes that were drilled into and water-flooded to dissolve the salt and carve out these storage tanks. The saltwater was pumped into the Gulf and somehow the walls of the caverns sealed over as hard as granite almost. I don't know much about leeching but these walls that resulted from hollowing out the salt domes are said to be bulletproof and I don't think much contamination of oil occurs. They're all along the crescent of the GOM, where the water level is barely subsurface and yet they remain insulated from water encroachment.

I personally think they shouldn't be tampered with. Ever. Except in war or sort sort of exogenous shock.  

I'm not sure. From 1973 until about 2005, that 800 million bbl of storage represented a certain number of days contingency against a cutoff of all imported oil. At one point, the net import reached maybe 10 million bbl/day, and the SPR could support an 80 day shutoff (numbers are rough of course). The SPR oil could only be drawn down at about 4 million bbl/day stretching over 160 days, I guess, but the idea was we could tighten our belts and tough it out it another oil embargo occurred.  But by about 2010, net imports had dropped by half, and by 2015 when the law passed, we were getting fairly close to breakeven and US+Canada were net exporters. This meant the SPR was no longer needed if we were just defending against an embargo. As it happened we now know we must defend against a sudden supply flood in addition to the traditional defense against a sudden embargo. In this regime, maybe we should strive to keep the SPR at 50%, at least until US+Canada becomes net importers again. Basically, the Saudis tried the 1974 embargo when we were vulnerable to it, and they tried the 2014 and 2020 supply flood when the though we were vulnerable to that. We need to defend against both. (And maybe we can make some money on this.)

[Gerry Maddoux + 3,627]

A big shooting war involving the Middle East could easily result in drawing down the SPR over the course of a couple of months. And it was located in close proximity to refineries for that very reason. 

Every president feels the intrinsic need to mess with it. 

It shouldn't be messed with. 

Any profit from selling it would be eaten up by the cost of getting it out and cleaning it up. 

[0R0 + 6,251]

13 hours ago, BLA said:

You can argue the definition of dumping all day long.

I don't know the legal definition of dumping.  Doesn't matter.  The Saudi action is a deliberate attempt to put U.S. shale out of business.  

Trump can impose Rick Perry's request to put a 90 day ban on Oil Imports.

The Shale industry will make a point of Trump's inaction if he fails to protect U.S. industry. The industry will scream dumping, harassment, predatory pricing, deliberate attempt to destroy U.S. industry.  AND THEY WILL HAVE THE BACKING OF MANY CITIZENS. 

It will have ramifications for Trump far beyond Texas.  

Trump should take notice.  

This would hurt his reelection chances.

It's in Trump's court now. Trump's move.

Trump will have the support of the oil patch in any case, because his alternative wants to shut it down altogether. 

That said, a stance that pretends to do something about the Saudi oil coming in will do him some good in TX and related areas. Perhaps MBS will cooperate and act like he was hurt. 

Besides, the Port Arthur refinery eats 600k/d so those 13 mil bbl are 20 days' worth of supply. How is that dumpig? 

Perhaps Trump should demand they blend in more local LTO, but they probably do that already, since it is cheaper than what they get for their oil elsewhere. Otherwise, the monthly delivery would be 18 mil bbl. Like many other US refineries, they are not structured to make enough diesel out of LTO to meet the market demand ratio of diesel to gasoline. 

[Dan Clemmensen + 1,011]

22 minutes ago, Gerry Maddoux said:

A big shooting war involving the Middle East could easily result in drawing down the SPR over the course of a couple of months. And it was located in close proximity to refineries for that very reason. 

Every president feels the intrinsic need to mess with it. 

It shouldn't be messed with. 

Any profit from selling it would be eaten up by the cost of getting it out and cleaning it up. 

If we are net exporters, how would that war draw down the SPR? A physical attack on US and Canadian production would, but such an attack could also hit the SPR, and even more easily.

I don't know about presidents, but congress felt the need.

How do you think we should respond to Saudi dumping?

[Douglas Buckland + 6,308]

15 minutes ago, Dan Clemmensen said:

If we are net exporters, how would that war draw down the SPR? A physical attack on US and Canadian production would, but such an attack could also hit the SPR, and even more easily.

I don't know about presidents, but congress felt the need.

How do you think we should respond to Saudi dumping?

Fly B-52’s full of pigs over Riyadh and dump them from a great height. This would likely wake them up with minimal collateral damage....except to the pigs and anyone hit by a flying pig or any portion thereof....

[Wombat + 1,028]

17 hours ago, Jan van Eck said:

Readers might note that "Dumping" is a specific set of events in which surplus product is sold at prices below that commanded in the home country for the same product.   Occasionally, Dumping is taken to mean selling at below the cost of production.  There is no hard evidence - yet - that the KSA is selling that crude for less than equal-quality crude is internally sold.  It is a bit of an abstract, as I assume that the production of petroleum goods inside KSA is all controlled by the State, and thus pricing ladders are artificial.  That said, is there evidence that the oil itself has not already been sold to oil traders?  Can traders "dump"?  Probably not.

I do not see any plausible way for anti-dumping laws to apply to the sale of Saudi oil at fire-sale pricing.  Yo9u have this cheap oil everywhere, the world is awash in it.  I would not put much stock into anything that Rick Perry says, he is a notorious dimwit.  Can the Trump Administration impose import quotas?  Yes, it can, and there is precedent for this.  Readers are invited to review the combination of tariffs and quotas on construction lumber from Canada into the USA  (a perennial sore point, for many decades, between them).  Will Trump do that?  My guess: no. 

The US economy benefits immensely from ultra-cheap oil.  The users of oil  products pay less, thus having more funds to spend on "something else."  Or, as in the case of the air carriers, they can offer lower fares, once the hedging contracts run out.  All that, cumulatively, puts more cash into individual pockets, be that corporations or individuals.  More cash ultimately results in more spending, and greater levels of economic activity.  OK, that is not so pleasant for the domestic oil industry, but it is what it is. 

More to the point, I don't hear anybody complaining about US getting $5 oil from Canada? I don't think anyone is "dumping", nobody asked for the corona virus. It was Russia that never cut their production because they feel they are in a far more powerful position than SA due to their $500 bn foreign reserves. Russia thinks that their reserves will last 5 years with oil at $30. I reckon 6-9 months and they be stuffed. Let them blow their savings, I don't care. Who cares if US production falls by 1mb/d for a few months? It will come straight back with a vengeance and Russia will be the big loser. They cannot possibly win a price war with SA. Don't forget, Chinese oil consumption already on its way back to normal and they far biggest importer of oil. Once oil storage tanks full, only the ME countries can still turn a profit. Putin will cry like a baby when he only gets $5/bbl.

[James Regan + 1,776]

1 hour ago, Douglas Buckland said:

Fly B-52’s full of pigs over Riyadh and dump them from a great height. This would likely wake them up with minimal collateral damage....except to the pigs and anyone hit by a flying pig or any portion thereof....

"Pigs on the Wing" - The main Problem with Flying Pigs is that the Price of Bacon would go up..........

[Wombat + 1,028]

15 hours ago, Gerry Maddoux said:

I knew that. I simply chose 1991 because the price/breakeven stuck in my mind . . . and it's on the way up from like 1963. 

I bought a nearly new 1962 Chevrolet in 1963 for $2,000. A new car of that caliber would now go for $50,000.

If you plug those numbers into the ratio, you come up with $87.50 for a barrel of oil, which I think is fair value. 

Yes and no. I think fair value = $65. Why? Coz u can't make perfect correlation to general inflation rate due to effect of greater efficiency in production these days. It is the same in mining. Everything becoming "low value" due to relentless cost efficiencies. Even gold will be virtually worthless within 10 years thanks to the automation and electrification of the mines and processing. Will be hardly worth the trouble, very low margins and oil heading the same way.