Trumps Oil Industry....

[Valerie Williams + 129]

27 minutes ago, James Regan said:

How long on this forum have we been discussing how the LTO sector has been operating on borrowed time and capital, completely unsustainable and flawed business model. Is this the Kingdoms fault, everyone wants a scapegoat during times of woe. When looking at the KSA try looking at it from their side, how long could they be expected to make cuts vs zero reciprocation from the USA, quite the contrary production was ramping up and set to continue. Something had to give, it was always coming just when was the point. Well timed or bad timing, without doubt the shale play were always in the crosshairs of both KSA and RSA. 

A utopian dream of WTI trading, producing and being consumed privately in North America, is a dream. Fact- the oil industry is not a free market its controlled at some point from extraction to final consumer.

 

15 minutes ago, RSD said:

That's it in a nutshell.  How long is it going to take for U.S. production to fall to 8.5 mbbl/day like I calculated in my previous post?  If the U.S. puts tariffs on Saudi oil before U.S. production has fallen to the required level then kiss goodbye to any agreements - the Saudis will go back to 13.5 mbbl/day, the Russians will respond, and if demand is still weak then those levels of production and the resulting oil price will drive U.S. production down.

If the U.S. isn't careful then next time the U.S. wants a production cut OPEC++ will simply say "you start cutting and each month we will pro-rata our production based on your production for the previous month"

Well, when you put it THAT way. I guess we all just go home then. 

 

[RSD + 41]

2 minutes ago, Valerie Williams said:

 

Well, when you put it THAT way. I guess we all just go home then. 

 

Sadly it is the truth - the U.S. is the biggest producer and so it has to be prepared to make its fair share of production cuts when it wants production cuts made...

[RSD + 41]

12 minutes ago, Valerie Williams said:

 

Well, when you put it THAT way. I guess we all just go home then. 

 

I guess retiring at the end of February this year was a good decision.  38 years was enough.

[Valerie Williams + 129]

1 minute ago, RSD said:

Sadly it is the truth - the U.S. is the biggest producer and so it has to be prepared to make its fair share of production cuts when it wants production cuts made...

"They" say a crisis is when reality fails to meet expectations, and that is what the whole industry is dealing with now. But this isn't just a belt-tightening phase to get through a cyclical downturn. It's an existential crisis. The company I work for laid off 75% of employees during the downturn that lasted (for us, at least) from 2015 to 2018. I've never seen a slow period last that long before. I still work in a building with A LOT of empty desks. We are considered a very financially stable company, but I'm not sure even we will come through the other side of this one. We were just this past year starting to recover from 2015, then BAM! 2020.

The point is, everyone is talking about the Saudis as if they are just doing their thing, benevolently. But this attitude will mean that in a crisis of this magnitude, the only one left standing will be the Saudis. This is not making them the bad guy or the scapegoat - it's just reality. It costs them SO much less over there to produce, because it's just geographically easier to do. The result of this is that after this crisis, are we prepared to live in a world where the Saudi's own all the energy? Do we really think we shouldn't try to find a way to mitigate that?

[RSD + 41]

3 minutes ago, Valerie Williams said:

"They" say a crisis is when reality fails to meet expectations, and that is what the whole industry is dealing with now. But this isn't just a belt-tightening phase to get through a cyclical downturn. It's an existential crisis. The company I work for laid off 75% of employees during the downturn that lasted (for us, at least) from 2015 to 2018. I've never seen a slow period last that long before. I still work in a building with A LOT of empty desks. We are considered a very financially stable company, but I'm not sure even we will come through the other side of this one. We were just this past year starting to recover from 2015, then BAM! 2020.

The point is, everyone is talking about the Saudis as if they are just doing their thing, benevolently. But this attitude will mean that in a crisis of this magnitude, the only one left standing will be the Saudis. This is not making them the bad guy or the scapegoat - it's just reality. It costs them SO much less over there to produce, because it's just geographically easier to do. The result of this is that after this crisis, are we prepared to live in a world where the Saudi's own all the energy? Do we really think we shouldn't try to find a way to mitigate that?

If the U.S. cuts its daily production to 8.5mbbl/day then that production will survive so there won't be a lot of reliance on the Saudis - and most U.S. oil imports come from Canada anyway.  If there isn't a big hit now then there will be another over-production problem in 18 months time and it will be groundhog again and the cycle will just keep repeating itself...  OPEC is a way of matching production to demand and it works when it wants it to work (most of the time) - the U.S. just hasn't figured out a way of matching production to demand and so big boom and bust cycles will always be the result.

[Valerie Williams + 129]

20 minutes ago, RSD said:

If the U.S. cuts its daily production to 8.5mbbl/day then that production will survive so there won't be a lot of reliance on the Saudis - and most U.S. oil imports come from Canada anyway.  If there isn't a big hit now then there will be another over-production problem in 18 months time and it will be groundhog again and the cycle will just keep repeating itself...  OPEC is a way of matching production to demand and it works when it wants it to work (most of the time) - the U.S. just hasn't figured out a way of matching production to demand and so big boom and bust cycles will always be the result.

Hmmm. You don't sound like someone having an existential crisis. Maybe I am panicking a bit. I didn't lose my job through the last downturn, but there are much fewer of us to choose from this time around.

The US will probably never be able to match production that way. When I start one of my projects, it will be years before the machinery goes into service. There is no way to match that to the market. You just have to hope that the cyclical ups and downs will average out your initial labor and material investment. The Saudis have the advantage of a single point of control. But all the wealth that comes from that is also concentrated with the Saudi Royal family and their chosen few. I'll take the boom and bust model over that any day.

I have to say, you guys are all very zen about the motives of the Saudis. I hope you're right. It's just that, like on D Coyne's chart showing Saudi production levels over time, why do you suppose they maintain it at that level? Why not less? Is it not that at that level, they know it's just high enough to make it cost-prohibitive for the US to compete? And just low enough that the rest of the world will not become resentful and go to war with them?

Edited April 24, 2020 by Valerie Williams

[Dg56 + 16]

1 hour ago, Valerie Williams said:

 And just low enough that the rest of the world will not become resentful and go to war with them?

Sorry, but right now is not the best time to build a career in US O&G.   

[Valerie Williams + 129]

7 minutes ago, Dg56 said:

Sorry, but right now is not the best time to build a career in US O&G.   

Build it? That ship has sailed. Just trying to keep it until retirement.

[RichieRich216 + 454]

On 4/21/2020 at 11:52 PM, Ron Ron said:

If he had listened to the epidemiologist and infectious disease experts. The problem would have been far less serious. One reason was so pissed at washington states Gov. Inslee, is because the governor was pushing hard for Trump to listen to the expert. Unfortunately, Trump was convinced that the experts were wrong. So if you are correct then it is also true that the current crisis we are facing is the result of Trump surrounding himself with bussinessmen.

He has surrounded himself with all pertinent experts! Another never Trumper! 

[El Nikko + 2,145]

23 minutes ago, Dg56 said:

Sorry, but right now is not the best time to build a career in US O&G.   

Now that is pretty funny 😂

[El Nikko + 2,145]

35 minutes ago, Dg56 said:

Sorry, but right now is not the best time to build a career in US O&G.   

Now is the time for drinking and smoking as much as you can ram down your throat because....

Who f**king gives a sh*t at this point 😂🤣😂

This is the apocalypse

and it really is lol

[Enthalpic + 1,496]

6 hours ago, Gerry Maddoux said:

Haha, certainly not a renaissance man. I grew up in abject poverty, with no indoor plumbing. Then, when I was about six, we lucked into some oil and gas--not enough to make us rich but enough to lift us from poverty. That miracle addicted me to the oilfield. 

After college, I did virus research in a PhD program and carried that into medical school. There I took a turn and became an interventional cardiologist. That was my career. 

Fitzgerald was right: there are no second lives in America. After an illness laid me low a few years back, I attempted to reinvent myself, but did a pretty punk job of it writing medical mysteries. I know a lot about killer viruses and the heart, very little about anything else, I'm sorry to say. 

Cool, I would love to read them. Seriously.

Edited April 24, 2020 by Enthalpic

[Ron Ron + 18]

3 hours ago, Valerie Williams said:

"They" say a crisis is when reality fails to meet expectations, and that is what the whole industry is dealing with now. But this isn't just a belt-tightening phase to get through a cyclical downturn. It's an existential crisis. The company I work for laid off 75% of employees during the downturn that lasted (for us, at least) from 2015 to 2018. I've never seen a slow period last that long before. I still work in a building with A LOT of empty desks. We are considered a very financially stable company, but I'm not sure even we will come through the other side of this one. We were just this past year starting to recover from 2015, then BAM! 2020.

The point is, everyone is talking about the Saudis as if they are just doing their thing, benevolently. But this attitude will mean that in a crisis of this magnitude, the only one left standing will be the Saudis. This is not making them the bad guy or the scapegoat - it's just reality. It costs them SO much less over there to produce, because it's just geographically easier to do. The result of this is that after this crisis, are we prepared to live in a world where the Saudi's own all the energy? Do we really think we shouldn't try to find a way to mitigate that?

What about alternative energy?

[Valerie Williams + 129]

21 minutes ago, Ron Ron said:

What about alternative energy?

Elaborate

 

[El Nikko + 2,145]

33 minutes ago, Ron Ron said:

What about alternative energy?

Lol now that's funny..it's going to die if gas and oil prices stay depressed for months if not years 😂

[Valerie Williams + 129]

3 hours ago, Ron Ron said:

What about alternative energy?

 

2 hours ago, El Nikko said:

Lol now that's funny..it's going to die if gas and oil prices stay depressed for months if not years 😂

No, a serious question deserves a serious answer. The oil industry gets terrible PR in politics and media. We can’t afford to be flippant on this topic. Ron, it’s a massive topic, can you narrow down your inquiry? Were you asking why I don’t look for work in alternative energy, or were you wondering about alternatives as a replacement for carbon based fuels?

[Dan Clemmensen + 1,011]

3 hours ago, El Nikko said:

Lol now that's funny..it's going to die if gas and oil prices stay depressed for months if not years 😂

There appears to be some consensus that the pandemic is depressing oil a whole lot and  NG somewhat, but that Permian shut-ins will cause NG prices to go up post-pandemic. Meanwhile, pandemic reduction in demand for electricity has accelerated  coal plant retirement and  associated coal mine closings. Coal never comes back. Higher post-pandemic electricity demand will tend to maintain demand for wind and utility-scale solar, while higher electricity prices will continue demand for distributed solar if consumers still have a way to pay for it.

Post-pandemic oil is another story, with so many variables that I have no idea what will happen.

[RSD + 41]

10 hours ago, Valerie Williams said:

Hmmm. You don't sound like someone having an existential crisis. Maybe I am panicking a bit. I didn't lose my job through the last downturn, but there are much fewer of us to choose from this time around.

The US will probably never be able to match production that way. When I start one of my projects, it will be years before the machinery goes into service. There is no way to match that to the market. You just have to hope that the cyclical ups and downs will average out your initial labor and material investment. The Saudis have the advantage of a single point of control. But all the wealth that comes from that is also concentrated with the Saudi Royal family and their chosen few. I'll take the boom and bust model over that any day.

The U.S. offshore industry isn't the problem and never has been.  Alaska limits onshore oil exploration (and thus in effect production) by limiting the number of leases that it releases each year - Texas etc. needs to do the same to control production at sustainable levels.
 

The timing of COVID-19 hasn't helped the situation, but certainly that can't be blamed on the Saudis, and their shipments to the U.S. were being organised before the world discovered that America would make a complete mess of managing the virus.  The blame for the Saudi shipments probably lies with the Russians more than anyone - the Russians wouldn't agree to a new OPEC+ deal so that left everyone doing their own thing and so the Saudis had to find more buyers for their increased production.

Edited April 25, 2020 by RSD

[Wombat + 1,028]

On 4/15/2020 at 12:38 AM, Gerry Maddoux said:

Given what's happening in the world, especially with Mr. Trump having to deal with deeply-seated bureaucrats in the cozy chairs of the CDC and the NIH, and taking into consideration that our Saudi "allies" tried to choke us to death in the throes of the worst contagion since the 1918 flu, and then ladling on top of this toxic stew the juices of a press corp of incompetents trying to bleed him out at every outing, he is doing an exceptional job. 

I have no idea what is happening to his blood pressure or his stress cortisol levels, but on the surface he is calm and looks rested. Those are the outward signals that a man is at peace with himself. I strongly imagine that he figured someone in the business of worrying about viruses and pandemics would have laid back some masks and gloves. And he didn't figure that a man--even a communist man--leading a country would dare lie about an infectious agent. 

What Mr. Trump found himself surrounded by when he took office made it appear that Julius Caesar was surrounded by loyal patriots. Our president has had to eliminate a Brutus here, a Rex Tillerson there. So what? This ain't private enterprise and never will be. This is gutter politics, and if you don't want to get dirty don't enter the fray. I like Mr. Tillerson but a Secretary of State he isn't--yet his name was floated by none other than Bob Gates. Mr. Trump has turned over his personnel at a rapid rate, but so what? It's his leeway to surround himself by people who do the job. 

And Melania manages to keep him down to Earth, lets not forget that? I think she doin great job!

[Wombat + 1,028]

On 4/16/2020 at 4:13 PM, James Regan said:

Trivial visualisation of the scope and why we need to get along, beware of emerging markets, Peru looks dangerous and I can't understand for the life of me why the US is so interested in Venezuela and Maduros drug trafficking, I would focus on their Oil reserves...........

Load of crap. Australia has more oil than Venezuela at the right price.

[Wombat + 1,028]

On 4/17/2020 at 8:56 AM, JoMack said:

Iran IRGC is buzzing U.S. naval vessels in the Persian Gulf yesterday.  Iran had weapons on board.  Russian planes are flyng over U.S.  forces in Alaska.  The coronavirus is starting to wane and the U.S. begins to prep to reopen the economy.  The Saudis are still pouring oil on the markets and we find that China's patient zero exposed the virus from the CCP bio lab (perhaps and purposeful?).  This is a mixture of enemies with eyes fixed on the U.S.  Trump, Pompeo, Espers and company have a lot on their plates to watch our backs at this critical time.  I hope we can survive the onslaught, since it appears this virus has opened the floodgates for the bad guys and they are coming at us from all directions.  Our energy stability is more important than ever, but it looks like it's last on the list, unfortunately.  Only opening our economy will be able to get prices up, with some help from Trump, since right now, Iran, SA, Russia and China believe we are weak and they have nothing to lose.  

Actually, they all losing even more money than the USA! I don't know why u panicking? U shld be laughin ur heads off? All this BS about US wells collapsing if shutin? I heard the opposite. Hard rock in Permian makes it easy, no damage? Opposite true of Saudi fields! What more, Saudi cannot go below 8.5mb/d or they not have enough gas to run their air-con in summer? Think urselves lucky folks?

[Wombat + 1,028]

On 4/21/2020 at 8:43 AM, Dan Clemmensen said:

Gerry, In your opinion, where would the price of oil be today if the Saudis had said and done nothing? We still have a >30% consumption crash.

You are absolutely correct Dan! In fact, despite being a Newbie, you already know a lot more about the oil market and it's dynamics than all the old farts here! So do I, and the truth doesn't suit em one bit mate

[Wombat + 1,028]

On 4/21/2020 at 12:14 PM, Hotone said:

The Saudis are taking this opportunity to buy big stakes in European companies; what do they know?

https://www.wsj.com/articles/saudis-take-big-stakes-european-oil-companies-11586382353

Nothing. They will just lose even more money!

[Wombat + 1,028]

On 4/21/2020 at 6:32 PM, Rob Plant said:

Oh well done you!!

Why don't you try to make something or employ people who have families that depend on this industry and the sub tier supply industries.

Your comment is frankly abhorrent!!

Go and crawl back under that rock you came out of!

Why are so many on this forum gleefully mocking those that will suffer hardship for years?? There seems to be many on here that are saying well at least we are better off than this country (our enemy). Dont you all get it the world economy needs to get back on its feet and having countries or huge industries in financial ruin isnt going to help that happen.

 

Oh sweet sugar-pop, don't u understand that their is a thing called a "business cycle" and it was gonna crush crude demand and demand for everything else anyway?????

[Wombat + 1,028]

On 4/22/2020 at 2:39 AM, Gerry Maddoux said:

        

 

Is America a roaring giant or crying baby?

Victor Davis Hanson

Marshal Admiral Isoroku Yamamoto commanded the Imperial Japanese Navy in World War II until he was killed in April 1943. Despite the dialogue from the 1970 WWII film “Tora! Tora! Tora!” Yamamoto probably did not say in the aftermath of the Pearl Harbor attack, “I fear all we have done is to awaken a sleeping giant and fill him with a terrible resolve.”

But Yamamoto likely either wrote or said something similar: “I can run wild for six months. After that, I have no expectation of success.”

Yamamoto summed up a general feeling among the Japanese admirals that the huge industrial capacity of the U.S. — which had been asleep during the Great Depression — along with the righteous anger and frenzy of an aroused American democracy would ensure the destruction of the Japanese empire in short order.

They were right.

In 1940, there were fewer than 500,000 service members in the U.S. military. At the time of the Pearl Harbor attack, that number had grown to nearly 2.2 million. By 1945, more than 12 million Americans were in the armed services. It was an astonishing mobilization for a nation of fewer than 140 million people.

The U.S. started the war with seven fleet aircraft carriers and one escort carrier. By war’s end, it was deploying 27 fleet and 72 escort carriers.

The U.S. Navy ended the war with a fleet eight times larger than it was at the time of the attack on Pearl Harbor. The American armada would become larger in total tonnage that all the world’s fleets in 1945 combined.

More incredible, by the end of 1944, the American gross domestic product exceeded the economic output of all the major belligerents on both sides of World War II put together: the Soviet Union, the United Kingdom, Japan, Italy and Germany.

As we struggle to defeat the coronavirus, an aroused America is talking grandly of restructuring the U.S. economy.

Politicians promise that major industries — pharmaceuticals, medical supplies, rare earths, military technologies — will return home to create millions of new jobs and better protect the population in times of crisis.

There are other vows to recalibrate our relationship with China to ensure that when the next successor to SARS and COVID-19 hits, American lives will not be jeopardized by the duplicity of the Chinese government. At the beginning of the outbreak, Beijing hid the origins, nature and transmissibility of the virus, then lied about its supposedly brilliant control of the epidemic.

The American public is already asking tough questions.

Does the U.S. really need almost 15,000 people flying in from China each day? At a time when American students owe $1.5 trillion in student loans, is it smart to have some 360,000 Chinese students enrolled in U.S. colleges? Is it safe to fund hundreds of labs on university campuses that conduct joint research with Chinese academics?

Does the United States really wish to curtail fracking, which has made it the largest producer of natural gas in the world and ensured that a quarantined America has plenty of fuel?

Is it prudent to release precious irrigation water out to the Pacific Ocean when California is the richest and most diverse producer of food in America?

Post-virus America can awake from this epidemic and economic shutdown in one of two different ways.

One, we can wake up as we did on Dec. 8, 1941, to ensure that Americans control their own fundamentals of life — food, fuel, medicine and strategic industries — without dependency on illiberal regimes. The military can refocus our defenses against nuclear missiles, cyberwarfare and biological weapons. On the home front, diversity is fine, but in a national crisis as serious as this one, the unity that arises from confidence in shared American citizenship saves lives.

Our other choice is to keep bickering and suffering amnesia, remaining as vulnerable as we were in the past.

We can scapegoat and play the blame game. We can talk not of an America in crisis, but of the virus’s effects on particular groups. We can decide that it is mean or even racist and xenophobic to hold the Chinese government accountable for its swath of viral destruction — and so we will not.

We can ridicule the idea of Americans again making their own things and call it protectionism or economic chauvinism. We can conduct endless congressional inquiries about who said what and when about the virus, and perhaps reopen impeachment.

Or we can have bipartisan commissions decide how best to return key industries to the U.S., prepare for the next epidemic and pay down the enormous debt we have incurred to defeat COVID-19.

In other words, the choice is ours whether America awakens as a roaring giant or a crying baby.

Victor Davis Hanson is a historian at the Hoover Institution, Stanford University.

I think the answer is already in, you a crying baby! Otherwise you wld be in military conflict with China already?