Balancing Act---Sanctions, Venezuela, Trade War and Demand

[TXPower + 643]

1 hour ago, Tom Kirkman said:

Not positive, but pretty sure that taking Iran's current government out of play is a fairly big, long term goal of Trump.

^Bingo.

[Jan van Eck + 7,558]

4 hours ago, Tom Kirkman said:

Not positive, but pretty sure that taking Iran's current government out of play is a fairly big, long term goal of Trump.

There can be no serious question that regime change is on the top of the Washington playbook list. 

And that is precisely why there is this intransigence inside Tehran.  Remember that it is not only the Ayatollah.  The top echelons of that government is composed of the "students" that knocked over the US Embassy back in 1978 and kidnapped the Ambassador, the marines stationed there as embassy guards, and others, and held them as prisoners, after parading them blindfolded and in chains through the streets.  Those hotheads now are the Government.  Regime change means they get pushed onto the ashcan of history.  They will fight that to the bitter end, including warfare with Israel.  It is precisely the "students" that are the big roadblock.  The rest of Iran is weary of all this confrontation and would like nothing better than a normalized relationship with the USA.  Indeed, well over 50% of that country was not even born at the time of the Embassy take-over.  For them, all that is ancient history, best forgotten.  It is that "old guard" of radicals that is the big problem.  The young would be delighted for regime change. Hard to do when you have no guns. 

[ceo_energemsier + 1,818]

7 hours ago, Osama said:

Has Trump Given Up On Keeping Oil Prices Low?

Below are my thoughts on the on-going conditions in market---relevant to this thread as well:

https://oilprice.com/Energy/Energy-General/Has-Trump-Given-Up-On-Keeping-Oil-Prices-Low.html

"Oil prices have rallied more than 2 percent this week after the Trump Administration canceled the waivers given to major consumers of Iranian oil - including both China and India which together account for almost 50 percent of the Islamic Republic’s exports. Trump’s decision will undoubtedly have unforeseen consequences for the oil market. However, in the short term, there are two key questions that must be addressed: One, now that the United States is the largest producer of oil in the world, will Trump ignore higher oil prices and focus less of forcing Saudi Arabia to increase output? And, two, if the United States does continue to press the Saudi Kingdom to make up for lost oil exports by Iran; will Saudi Arabia acquiesce to Trump’s demands?"

Cc: @Tom Kirkman, @William Edwards, @ceo_energemsier, @Marina Schwarz, @Jan van Eck, @Enthalpic

 

Ha hasnt given up and wont. KSA will play a major role in balancing supplies and assist in maintaining "level headed prices"

India has already declared that they will play by the US rules and not buy Iranian crude. China will move to replace the Iranian barrels as well. They (several Chinese indies and SOE's) are in the midst of negotiating term contracts with numerous producers/traders.

KSA will step upto the plate and atleast pump 500,000bpd into the supply stream if not more.

[Enthalpic + 1,496]

14 hours ago, ceo_energemsier said:

Yes obviously they werent so good at it or wasnt the right tech.... but some one did and still does ...................... a very good job on id'ing key markers , bio or non  and very specific sigs

Well it is an accredited lab (ISO 17025 / ISO 9000:2000) and the data was/is accepted by the courts as legally defensible.  I'm just saying the reports are filled with comments and opinions which is much different than a lot of the analytical chemistry and toxicology work we did.

The vast majority of our reports were accepted as evidence without protest by the defense -and therefore didn't require court appearances by our staff- not so with some of the fingerprinting files. The technologist would have to go to court and be accepted as an expert witness so they could make opinion statements and be subjected to cross-examination.

[Marc Savoie + 19]

On 4/25/2019 at 1:39 PM, Tom Kirkman said:

Not positive, but pretty sure that taking Iran's current government out of play is a fairly big, long term goal of Trump.

Certainly the wet dream of John R. Bolton. 

Tomkirkman: Is that your new Tinder profile pic?!?😛

[Tom Kirkman + 8,860]

3 hours ago, Marc Savoie said:

Certainly the wet dream of John R. Bolton. 

Tomkirkman: Is that your new Tinder profile pic?!?😛

This month the company I work for had pictures taken of our main global Engineering Operations managers, to showcase to customers our individual profiles and professional history blurbs.  I'm not much for selfies, so I just appropriated the photo the company took, and used it here.

[William Edwards + 708]

My simple mind works simple arithmetic and draws simple conclusions. OPEC production has dropped two million barrels a day since November. Iran's drop was less than half of that. This reveals more than a million barrels of spare OPEC capacity readily available to get back to November production levels. 

In the meantime, US production has grown another 300-400 MB/D, roughly matching global demand growth. If an additional 500 MB/D of Iranian export reductions occur, OPEC needs to only restore only half of their November production to cover the need. The US will continue to supply what is needed for demand growth.

My conclusion is that supply will be ample and the oversupply will grow, not decline. What Trump says or does will have no impact, except for the mindless, short-term knee-jerk reaction of the trading and media communities.

Note to Jan: Stick with the total global barrel balance. Bunker supply will be accommodated, comprising diesel, LSFO, HSFO, topped crude, LNG, LPG, etc. by the industry. The total barrels of oil used will not change. No $5 gasoline.

Edited April 26, 2019 by William Edwards

[William Edwards + 708]

On 4/25/2019 at 12:51 PM, ceo_energemsier said:

Ha hasnt given up and wont. KSA will play a major role in balancing supplies and assist in maintaining "level headed prices"

India has already declared that they will play by the US rules and not buy Iranian crude. China will move to replace the Iranian barrels as well. They (several Chinese indies and SOE's) are in the midst of negotiating term contracts with numerous producers/traders.

KSA will step upto the plate and atleast pump 500,000bpd into the supply stream if not more.

The Saudis have given up 2 MMB/D of output in the past four months as the rest of the world enjoyed the resulting price support of the trading community. You can be sure that they would dearly love to get back that lost market by adding 2 MMB/D of their crude tyo the supply. So Trump has a downhill ride until the Saudis recognize that you cannot put ten gallons of oil in a five gallon bucket. Then the price war will begin.

[ceo_energemsier + 1,818]

1 hour ago, William Edwards said:

The Saudis have given up 2 MMB/D of output in the past four months as the rest of the world enjoyed the resulting price support of the trading community. You can be sure that they would dearly love to get back that lost market by adding 2 MMB/D of their crude tyo the supply. So Trump has a downhill ride until the Saudis recognize that you cannot put ten gallons of oil in a five gallon bucket. Then the price war will begin.

I did say that KSA will be able to do atleast 500,000bpd to make the shortfall due to Iran barrels being removed from the market. However, they are capable of pumping 500,000 bpd and another 500,000bpd with ease within a short amount of time. In my opinion , from the data I have seen and corporate negotiations for "swing supply" not related with the total Iran barrels shut in, they maintain the capability and resources to release into the market a total of 2,7000,000bpd +/-. I have said this before , both KSA and Russia will be more than willing and happy to replace the Iranian barrels if required for as long as they can. There are "operational" scaling up being tested and implemented for when they maybe called upon to ramp up the production.

[William Edwards + 708]

13 minutes ago, ceo_energemsier said:

I did say that KSA will be able to do atleast 500,000bpd to make the shortfall due to Iran barrels being removed from the market. However, they are capable of pumping 500,000 bpd and another 500,000bpd with ease within a short amount of time. In my opinion , from the data I have seen and corporate negotiations for "swing supply" not related with the total Iran barrels shut in, they maintain the capability and resources to release into the market a total of 2,7000,000bpd +/-. I have said this before , both KSA and Russia will be more than willing and happy to replace the Iranian barrels if required for as long as they can. There are "operational" scaling up being tested and implemented for when they maybe called upon to ramp up the production.

Thanks. It appears that we are in agreement. There is plenty of supply capability without Iran's crude.

[ceo_energemsier + 1,818]

5 minutes ago, William Edwards said:

Thanks. It appears that we are in agreement. There is plenty of supply capability without Iran's crude.

🍾🍾

[Osama + 248]

On ‎4‎/‎25‎/‎2019 at 10:51 PM, ceo_energemsier said:

Ha hasnt given up and wont. KSA will play a major role in balancing supplies and assist in maintaining "level headed prices"

India has already declared that they will play by the US rules and not buy Iranian crude. China will move to replace the Iranian barrels as well. They (several Chinese indies and SOE's) are in the midst of negotiating term contracts with numerous producers/traders.

KSA will step upto the plate and atleast pump 500,000bpd into the supply stream if not more.

Doing so will certainly eat into KSA's credibility as a reliable OPEC member and may prove harmful for their future in the cartel....my thoughts only and I can be wrong. At one point they'll have to side with somebody or may be, as things in diplomacy usually are , funny and unpredictable, this can go forever!

[Osama + 248]

8 hours ago, William Edwards said:

My conclusion is that supply will be ample and the oversupply will grow, not decline. What Trump says or does will have no impact, except for the mindless, short-term knee-jerk reaction of the trading and media communities.

Concur!

[ceo_energemsier + 1,818]

1 minute ago, Osama said:

Doing so will certainly eat into KSA's credibility as a reliable OPEC member and may prove harmful for their future in the cartel....my thoughts only and I can be wrong. At one point they'll have to side with somebody or may be, as things in diplomacy usually are , funny and unpredictable, this can go forever!

I think, it will be the opposite. It will give them credibility with the world markets in maintaining a stable market and as I said before "level headed prices" that are more or less good for a majority of interests for the most part. It will also buy them stars with the US , India and China. KSA will be more than happy to ramp up the production and take those additional $/bbls from Iranian pockets into their own and retake their market share. In essence, by increasing production, to replace the shut in Iranian barrels they will be siding with the US and the major buyers of Iranian crude who will need the alternate supplies.

[Osama + 248]

31 minutes ago, ceo_energemsier said:

I think, it will be the opposite. It will give them credibility with the world markets in maintaining a stable market and as I said before "level headed prices" that are more or less good for a majority of interests for the most part. It will also buy them stars with the US , India and China. KSA will be more than happy to ramp up the production and take those additional $/bbls from Iranian pockets into their own and retake their market share. In essence, by increasing production, to replace the shut in Iranian barrels they will be siding with the US and the major buyers of Iranian crude who will need the alternate supplies.

Well interesting points here. "KSA will be more than happy to ramp up the production and take those additional $/bbls from Iranian pockets into their own and retake their market share."---this makes sense!

Also, this would help them allay concerns regarding their significance and influence vis a vis being the Swing Producer (a position which I believe which is to remain with the Kingdom till a good amount of time to come).

[Osama + 248]

On ‎4‎/‎25‎/‎2019 at 7:51 PM, Jan van Eck said:

There can be no serious question that regime change is on the top of the Washington playbook list.  

And that is precisely why there is this intransigence inside Tehran.  Remember that it is not only the Ayatollah.  The top echelons of that government is composed of the "students" that knocked over the US Embassy back in 1978 and kidnapped the Ambassador, the marines stationed there as embassy guards, and others, and held them as prisoners, after parading them blindfolded and in chains through the streets.  Those hotheads now are the Government.  Regime change means they get pushed onto the ashcan of history.  They will fight that to the bitter end, including warfare with Israel.  It is precisely the "students" that are the big roadblock.  The rest of Iran is weary of all this confrontation and would like nothing better than a normalized relationship with the USA.  Indeed, well over 50% of that country was not even born at the time of the Embassy take-over.  For them, all that is ancient history, best forgotten.  It is that "old guard" of radicals that is the big problem.  The young would be delighted for regime change. Hard to do when you have no guns. 

Well "Regime Change" has not worked out in many cases e.g., Iraq. Vietnam another example. Afghanistan too.

[William Edwards + 708]

18 minutes ago, Osama said:

Well interesting points here. "KSA will be more than happy to ramp up the production and take those additional $/bbls from Iranian pockets into their own and retake their market share."---this makes sense!

Also, this would help them allay concerns regarding their significance and influence vis a vis being the Swing Producer (a position which I believe which is to remain with the Kingdom till a good amount of time to come).

In order to qualify as an actual swing producer, the producer must be willing to supply what is called for, whether the production level rises or falls, at the prevailing price at the moment. He can either choose that price himself, or accepts another's suggestion, but he has final say because he is supplying the last necessary increment of supply and, therefore, is the supplier of last resort AT HIS STATED PRICE. Currently the Saudis qualify and rather than choosing the price themselves, they accept the suggestion of the CME Group.

Based upon Al Falih's comments a few months ago, There is a limit to how low Saudi Arabia will allow production swings without objection. As I recall, he said "not down to 8 MMB/D. Another 2 MMB/D or US and others growth, or a de cline in demand, will push KSA to that limit. Then what? Big price war? $20/B crude? The IMO alteration of demand for Saudi-type crude could push us there.

[ceo_energemsier + 1,818]

1 minute ago, William Edwards said:

In order to qualify as an actual swing producer, the producer must be willing to supply what is called for, whether the production level rises or falls, at the prevailing price at the moment. He can either choose that price himself, or accepts another's suggestion, but he has final say because he is supplying the last necessary increment of supply and, therefore, is the supplier of last resort AT HIS STATED PRICE. Currently the Saudis qualify and rather than choosing the price themselves, they accept the suggestion of the CME Group.

Based upon Al Falih's comments a few months ago, There is a limit to how low Saudi Arabia will allow production swings without objection. As I recall, he said "not down to 8 MMB/D. Another 2 MMB/D or US and others growth, or a de cline in demand, will push KSA to that limit. Then what? Big price war? $20/B crude? The IMO alteration of demand for Saudi-type crude could push us there.

KSA may not/does not have a choice in being labeled as swing producer and may not and or actually does not have the option to set the price to produce as a swing producer. Unlike 40 years ago , the global oil trade is much more transparent in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil. Agree on the fact that KSA will now allow their production to drop to a certain level  as per your quote of Al Falih, the 8mmbpd level will be very uncomfortable for them. They may adjust the volumes but I dont believe that there would be any reason that KSA will be willing to deal with or live in a 20$/bbl price environment going forward. They cannot survive with that price level and will  certainly face a very very dire situation. Self preservation is the motivation and KSA Royals will not permit 20$/bbl prices. Re. the IMO , KSA will strive to keep their existing market share and they will try to provide the crude streams to match the demand. They have sufficient amount of light crude, super light crudes and condensate to blend with heavier crude oil to appeal to the refiners requirement of lighter sweeter, low sulphur m higher API crude oils.

[William Edwards + 708]

6 hours ago, ceo_energemsier said:

KSA may not/does not have a choice in being labeled as swing producer and may not and or actually does not have the option to set the price to produce as a swing producer. Unlike 40 years ago , the global oil trade is much more transparent in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil. Agree on the fact that KSA will now allow their production to drop to a certain level  as per your quote of Al Falih, the 8mmbpd level will be very uncomfortable for them. They may adjust the volumes but I don't believe that there would be any reason that KSA will be willing to deal with or live in a 20$/bbl price environment going forward. They cannot survive with that price level and will  certainly face a very very dire situation. Self preservation is the motivation and KSA Royals will not permit 20$/bbl prices. Re. the IMO , KSA will strive to keep their existing market share and they will try to provide the crude streams to match the demand. They have sufficient amount of light crude, super light crudes and condensate to blend with heavier crude oil to appeal to the refiners requirement of lighter sweeter, low sulphur m higher API crude oils.

There are two or three major differences in our understanding. First, if the Saudis, or OPEC, could prevent the price from dropping to $20, why did they spend 15 years trying to get the price above the $20 range (in current dollars) in the eighties and nineties? The answer is that they, like you, have an incorrect understanding of the pricing mechanism. Without a correct understanding they have been unable to actually set the price at a predetermined level, or even keep it within pre-selected bounds. The just keep hoping that the CME will establish a desirable price. That "stable" price has varied from $20/B to $150/B, randomly, without conforming to correlatable fundamental driving forces. 

I apologize if I come across as arrogant on this subject, but since my understanding of the mechanism is sound and has been judged so by reputable thinkers, I think bluntness is appropriate. Since it is unlikely that either you or I will be able to spend the time necessary for me to change your thinking, we must remain at odds on the pricing question. My model continues to explain the major price trends, as it has for the past fifty years. I would be interested in seeing an alternate mechanism that can prove that claim of validity for the alternative.

If I am allowed to make some changes in your wording, I can "correct" your statement "KSA may not/does not have a choice in being labeled as swing producer and may not and or actually does not have the option to set the price to produce as a swing producer. Unlike 40 years ago , the global oil trade is much more transparent in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil.", i.e., KSA does  have a choice in being swing producer and  actually does have the option to set the price as a swing producer. As was the case 40 years ago , the global oil trade is transparent, although through different publications, in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil. The mis-undertanding of the industry regarding futures prices, actually prices for a distinct and separate commodity, and how they relate to real oil transactions, has perverted the industry's attempts to gain a valid understanding of the mechanism for pricing real oil. 

The bottom line for the actual oil pricing mechanism: The establishment of the price comes first as set or allowed by the swing producer. Demand follows price. Production levels follow demand. The idea that production levels come first and the other elements follow is ruled out by the law of conservation of matter. Until you are able to fit ten gallons of oil in a five gallon bucket you will be unable to control the price by manipulations of production. You can change the direction of price moves over a limited production range, as allowed by tankage, but you cannot determine and achieve a specific price level or bounding ranges by trying to manipulate production. Regarding production level, producers are followers, not leaders. The customer (consumer) has ultimate control  of quantity and the producer must follow accordingly.

Turning to the IMO, I am quite interested in learning how you describe the process whereby KSA removes their share of the 13,000 tons/D of sulfur from their petroleum streams, overnight, that is mandated on January 1, 2020. I suggest that the only practical means for achieving this sulfur reduction is by leaving it in the ground, still residing in high sulfur crude. Replacement of the sour crude (left in the ground) by naturally occurring substitutes of other oil that does not contain much sulfur is both prompt and economical. Think through a switch of Arabian crude containing 2% S being replaced by US crude with less than 0.3% S. Even better, shut in Canadian oil sands production containing 5% S and replace it with US tight oil. Even though sour crude producers have not yet clicked in to the approaching disaster of a significant and abrupt reduction in demand for sour crude, it seems very likely to be here very soon. You say that KSA cannot live again with $20 oil, just hide and watch! It will be temporary, only a few years because economics drive adaptation, but it is a realistic possibility.

[ronwagn + 6,290]

On 4/22/2019 at 11:49 AM, BigJets said:

My own personal opinion is Trump is a master of misdirection.  USA has almost full control of the oil market save Russia and some of OPEC.  Trump says he wants lower fuel prices so his constituents will be happy, and he has been able to keep prices low until now.  Part of Trumps constituents are also made up of Big oil and he wants to see those people happy as well.  Trump knows the importance of oil to the American economy.  So, Trump cancels future waivers from Iran which applies pressure to big consumers like India and China, and causes prices to go up (less supply/vehicles, growing demand).  India and China can keep getting their oil from Iran, but it's going to look bad, there will be penalties if caught, and India and China will have to go to shady, unsecure vehicles to get their black market Iranian oil (not safe investment). 

Trump is so far ahead of everyone in his understanding of the power of the oil/energy market that he has gone big on endorsing pipeline makers, steel producers, manufacturing in general.  He received a big investment in our southern border which should help finance related work and drive oil/energy demand nationally.  He has kept a door open to KSA when the media all but wanted to kill that relationship (over bs Islamic brotherhood Kashoggi), and has remained committed in lending a hand in defeating Iranian backed Houthies in Yemen.  

The failures of the last administration in Libya has all but shutdown Libyan production, or at the very least made Libyan oil production anything but "certain", and distribution uncertain, providing USA with further control of output levels globally.  As well as the failure of the last administration foreign policies in Venezuela have revealed what would happen to a nations oil production output once you allow socialism to take over, its dead and the country is dying. Good luck getting return from either Venezuela or Libya.  Russia and China will dump plenty of assets in Venezuela all for naught; USA (we) will let China and Russia dump assets, because it will all be wasted; Russia and China have no way to assert authority in Venezuela (you would need a blue water navy in order to assert authority in Venezuela, something neither Russia or China currently maintain).  Trump was wise, to begin what will be a very strong relationship with Brazil.   

America will be, for a long time, #1 safest investment for all of your oil/energy needs.  Good luck to those nations who procure from anywhere else, you (they) are going to need it!   

At the end of the day, you are a nation, who would you rather buy oil from?  where is your safest oil/energy investment?    USA or Russia?  USA or Libya?  USA or Venezuela?  USA or Iran? 

Doesn't Russia sell to anyone they can and finance their own production? They also have far better positioning for export. They are close to the largest and fastest growing markets. Their problem is they are very dependent on good prices. I see lower prices as transportation gets smart and turns to natural gas fuel. They still have the transportation advantage but are limited to what they can sell it for. This will be interesting. 

[ronwagn + 6,290]

14 hours ago, William Edwards said:

There are two or three major differences in our understanding. First, if the Saudis, or OPEC, could prevent the price from dropping to $20, why did they spend 15 years trying to get the price above the $20 range (in current dollars) in the eighties and nineties? The answer is that they, like you, have an incorrect understanding of the pricing mechanism. Without a correct understanding they have been unable to actually set the price at a predetermined level, or even keep it within pre-selected bounds. The just keep hoping that the CME will establish a desirable price. That "stable" price has varied from $20/B to $150/B, randomly, without conforming to correlatable fundamental driving forces. 

I apologize if I come across as arrogant on this subject, but since my understanding of the mechanism is sound and has been judged so by reputable thinkers, I think bluntness is appropriate. Since it is unlikely that either you or I will be able to spend the time necessary for me to change your thinking, we must remain at odds on the pricing question. My model continues to explain the major price trends, as it has for the past fifty years. I would be interested in seeing an alternate mechanism that can prove that claim of validity for the alternative.

If I am allowed to make some changes in your wording, I can "correct" your statement "KSA may not/does not have a choice in being labeled as swing producer and may not and or actually does not have the option to set the price to produce as a swing producer. Unlike 40 years ago , the global oil trade is much more transparent in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil.", i.e., KSA does  have a choice in being swing producer and  actually does have the option to set the price as a swing producer. As was the case 40 years ago , the global oil trade is transparent, although through different publications, in terms of its global and regional benchmarks and how prices are set even for countries that use OSP's for marketing their crude oil. The mis-undertanding of the industry regarding futures prices, actually prices for a distinct and separate commodity, and how they relate to real oil transactions, has perverted the industry's attempts to gain a valid understanding of the mechanism for pricing real oil. 

The bottom line for the actual oil pricing mechanism: The establishment of the price comes first as set or allowed by the swing producer. Demand follows price. Production levels follow demand. The idea that production levels come first and the other elements follow is ruled out by the law of conservation of matter. Until you are able to fit ten gallons of oil in a five gallon bucket you will be unable to control the price by manipulations of production. You can change the direction of price moves over a limited production range, as allowed by tankage, but you cannot determine and achieve a specific price level or bounding ranges by trying to manipulate production. Regarding production level, producers are followers, not leaders. The customer (consumer) has ultimate control  of quantity and the producer must follow accordingly.

Turning to the IMO, I am quite interested in learning how you describe the process whereby KSA removes their share of the 13,000 tons/D of sulfur from their petroleum streams, overnight, that is mandated on January 1, 2020. I suggest that the only practical means for achieving this sulfur reduction is by leaving it in the ground, still residing in high sulfur crude. Replacement of the sour crude (left in the ground) by naturally occurring substitutes of other oil that does not contain much sulfur is both prompt and economical. Think through a switch of Arabian crude containing 2% S being replaced by US crude with less than 0.3% S. Even better, shut in Canadian oil sands production containing 5% S and replace it with US tight oil. Even though sour crude producers have not yet clicked in to the approaching disaster of a significant and abrupt reduction in demand for sour crude, it seems very likely to be here very soon. You say that KSA cannot live again with $20 oil, just hide and watch! It will be temporary, only a few years because economics drive adaptation, but it is a realistic possibility.

Do you think that the demand for lower sulfur fuel will help natural gas vehicles become more widely used? Natural gas is far less expensive as CNG or LNG. I have not researched how much it costs to remove the sulfur from natural gas versus crude oil but I imagine that it is much easier. 

[ronwagn + 6,290]

On 4/22/2019 at 7:02 PM, Jan van Eck said:

Tex, "spare capacity" [by which I assume you mean spare production capacity, not the storage stuff in those big tank farms] will disappear totally once 1/1/2020 rolls around.  On that date, assuming there is no extension of deadline and no widespread cheating, the world's shipping fleet will be switching over to low-sulfur diesel.  And the reason is that very few ships  have installed oil purification systems on-board, very  very few have converted to dual-fuel with natural gas as a co-fuel,  and there certainly is nowhere near enough diesel, or diesel refining capacity, out there to instantly supply the world's fleet.  

So, you are headed for a big mess in another eight months.  That seems like a lot of time, but it will be by in a flash. Will diesel get bid up through the roof?  Possibly.  Perhaps, probably.  What about the truckers, what will they do?   Set up barricades and burn old tires, most likely. But you are looking at road diesel at $5/gallon in the USA, so extrapolate that out for Europe and others.  Can Venezuela get back up and running to crank out diesel?  Probably not.  How about Russia?  Well, their diesel is low-grade stuff, and Western truck diesels really need at least 42 cetane to run.  So you would have to dilute Russian diesel with kerosine or jetfuel,which strikes me as not conducive to long-term planning.  

How about heating oil?  Lots of heating oil is consumed in the USA, Canada, and Germany.  How do you switch that over to gas or propane in eight months?  The crunch will come in the dark part of winter, not an encouraging prospect.  So I predict a very large increase in wood for heat.  That is good for the wood-furnace builders in the Czech Republic, not so good for the oil-tank builders. Unless people start doubling or tripling their in-house oil-tank capacity and fill up before December, to beat the price rush. 

Bottom line:  wood and coal are going to make a comeback.  The crunch on diesel is going to be a real killer. 

A diesel truck can be quickly converted to a natural gas truck. Once mechanics are trained it will not be a problem. 

[ronwagn + 6,290]

On 4/23/2019 at 2:22 PM, ceo_energemsier said:

There is sufficient refining capacity around the world, they will just need to reconfigure the refining process and some of their equipment to get a product slate that yields more of the low sulphur products as well as changing their refinery feedstock blending requirements to yield more low sulphur distillates and not as much of the fuel oil or residuals. This also means that the demand for lighter , sweeter, low sulphur (US shale crude oils) will go up maybe 1,500,000-2,800,000bpd. It also means that a number of new technologies are being developed and will be developed to cope with the specification requirements. We are currently testing (with success) 3 separate processes/technologies to upgrade existing refinery product slate from fuel oils to diesel grades and make them compliant with low sulphur requirements.

There are dozens of other companies who are also doing similar R&D and testing. We are at the stage whereby we have tested our proprietary technologies on a scale of 35,000bpsd to 125,000bpsd in different locations around the world.

Dual fuel capable vessels will be efficient and over the long term cost effective. There are several companies that are using LNG as bunkering fuel.

The most efficient, cost effective way to successfully implement the new IMO requirements is within the refining system.itself trough the technologies of upgrading existing "standard" run diesel and other fuels and also upgrading heavier , higher sulphur crude oils into lighter , sweeter, lower sulphur crude oil.

How much will the cost of low sulfur diesel be over current prices, in your opinion? A diesel truck can be converted to CNG or LNG fairly quickly compared to a ship. There are many minds working on a way to more quickly convert ships to LNG though. 

 https://www.bv.com/insights/expert-perspectives/conversion-lng-necessary-marine-industry

http://www.ngvglobal.com/

http://www.ngvglobal.com/blog/winners-selected-in-singaporean-low-cost-lng-retrofit-challenge-0412

Edited April 28, 2019 by ronwagn
added reference

[William Edwards + 708]

1 hour ago, ronwagn said:

Do you think that the demand for lower sulfur fuel will help natural gas vehicles become more widely used? Natural gas is far less expensive as CNG or LNG. I have not researched how much it costs to remove the sulfur from natural gas versus crude oil but I imagine that it is much easier. 

The beauty of LNG is that it contains essentially no sulfur, so no need to remove the minuscule quantity contained therein. The downside is the difficulty and expense of transporting and handling. Topped low sulfur crude is much simpler, requires very cheap processing, and can happen much more quickly. LNG has little chance or penetrating the market for the lowest cost BTU's at the burner.

[William Edwards + 708]

1 hour ago, ronwagn said:

A diesel truck can be quickly converted to a natural gas truck. Once mechanics are trained it will not be a problem. 

I suspect that you are missing too many important details in your analysis. I will mention but one. What does the industry do with the 2-3 million barrels a day of unwanted high sulfur bunker fuel that is displaced by your diesel fuel?