Maritime Fuel

[Gerry Maddoux + 3,627]

The Oct. 7, '19 edition of Barron's has an interesting article entitled, "A Sea Change Is Coming To Global Shipping Fuel." A direct quote is, ". . . 60,000 oceangoing freight ships carry $7 Trillion in goods and commodities around the world. Just one of the largest . . . can belch as much sulfur oxide gas, a major contributor to acid rain and respiratory diseases, as 50 million diesel-burning cars." That's an enormous problem, no matter how you feel about climate change. On Jan. 1, '20, the International Maritime Organization (IMO) will mandate that either sulfur scrubbers are installed or, alternatively, that these freighters use a fuel with no more than 0.5% sulfur content, compared to 3.5% today. A fellow named Tor Svelland, chief investment officer at Svelland Capital, a hedge fund, ". . . thinks the new rules will cause a demand spike in the oil market four to six times as big as 2008, when oil rose to $145 from the high $80s. It's the biggest thing happening in the freight and in the oil markets."

Even thought Tor is likely touting his investment, this is a very big deal!

Unless . . .

Another quote from the article, not Mr. Svelland: "Indeed, industry groups are . . . lobbying to make sure the Trump administration doesn't try to delay the rules."

I'm a lifelong Republican but I can safely say that oilmen in Texas, especially the shale operators, are beginning to resent the fact that every time oil snuck up to a level where everyone could make a buck, Mr. Trump tweeted it down. And that he let the Saudi prince off the hook for the Kashoggi murder in order to gain leverage: low oil prices equals a stock market run. And now this. I mean, the US oil industry is, in general, not in a healthy condition. Even Chevron and Exxon are trading at ancient levels. I'm not dissing the president and I'm not even a great cheerleader for tight oil, but it has gotten to the point that a geopolitical s***storm results in no more than a one-day rally in the price of oil. At some point we have to let the market forces of fear and greed duke it out with oversupply and stubborn pedal-to-the-metal drilling into Tombstone Rock. And if this maritime fuel mandate timetable is pushed out, it will once again signal--straight from the Oval Office--that the US oil industry doesn't matter. I suppose it could be argued that tight oil drillers have become Ouroboros, the mythical serpent that ate its own tail, and as such, perhaps their remaining soft underbellies deserve to be gobbled up by the super-majors. A concern is that at some point, when the DUCs are completed and more and more wells are in decline at the same time the super-majors are trying to digest those body parts, there could well be an inflection point that makes our tanks and fighters, our commuters and first-responders all susceptible to a major disruption in, say, the Saudis' oilfields. In that dispositive eventuality, even if we eased sanctions on Iran to allow a lot of oil back on the global market, a protracted hiatus in drilling for tight oil could place the US and her allies in a most vulnerable position. In one fell swoop, the IMO mandate coming (supposedly) with the New Year could result in a badly needed swing of the old pendulum.

 

[Douglas Buckland + 6,308]

2 hours ago, Gerry Maddoux said:

, it will once again signal--straight from the Oval Office--that the US oil industry doesn't matter.

What a shame....the US shale oil industry has never had any compassion for the rest of us in the global oil industry who have been out of work for years while they drilled themselves into debt, produced irresponsibly and kept the oil price down and over supply up.

Don’t expect sympathy for the international oil community.

[J.mo + 165]

You two whine more than any grown men I've ever met lol. 

[J.R. Ewing + 19]

8 hours ago, J.mo said:

You two whine more than any grown men I've ever met lol.