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Post by bsutrack on May 12, 2022 20:53:17 GMT -6
Just ignore 00 the guy is a f--king moron. He doesn't seem to understand future increased supply will effect prices at the pump immediately. Apparently he also doesn't understand how the futures markets work or what they are used for. You're right but on slow nights he's my entertainment. Besides, he's trying to argue in my backyard on this one. |
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Post by sweep on May 12, 2022 20:53:41 GMT -6
More to the point, Federal land leasing produces now only 1/4 of production. AND, no lease impacted by Biden administration would possibly be in production by now. Pipelines have not been closed down causing lack of supply to gasoline refiners. bsutrack has a point about possible long term crude production. Biden has a point that energy mix can change. Putin and Covid have definitely thrown a monkey wrench into our economy. Admit that and we can talk about the long run. All pipelines, regardless if they cross Federal or private lands, need permits from the EPA. Most shale oil wells can normally be drilled and completed within 6 months. That's why the oil companies love them and have moved away from the longer term offshore deep water projects that have 5 to 7 year cycle times. So well drilled as recently as January of this year could be on production today if permits have been granted in a timely fashion. Joe doesn't give a crap about oil prices. |
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Post by bsutrack on May 12, 2022 20:55:44 GMT -6
It's all an opportunity for everyone to purchase that $70,000 EV. Not there is enough lithium, cobalt, nickel, or even copper for that to be possible. |
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Post by coastalcard on May 12, 2022 21:01:14 GMT -6
Meanwhile:
As we worry about the environmental impact of producing fossil fuel in the United States and continually push the green impact of electric vehicles which use fossil fuels to produce the electricity they store in their “battery fuel tanks”.........A typical EV battery weighs one thousand pounds. It contains twenty-five pounds of lithium, sixty pounds of nickel, 44 pounds of manganese, 30 pounds cobalt, 200 pounds of copper, and 400 pounds of aluminum, steel, and plastic. Inside are over 6,000 individual lithium-ion cells.
It should concern us that all those toxic components come from mining. For instance, to manufacture each EV auto battery, you must process 25,000 pounds of brine for the lithium, 30,000 pounds of ore for the cobalt, 5,000 pounds of ore for the nickel, and 25,000 pounds of ore for copper. All told, you dig up 500,000 pounds of the earth's crust for just - one - battery."
Today, there are dry cell batteries as well as wet cell batteries that are used in automobiles, boats, and motorcycles. The good thing is that ninety percent of them are recycled.
Unfortunately, we do not yet know how to effectively recycle rechargeable single use EV batteries.
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Post by 00hmh on May 12, 2022 21:10:22 GMT -6
All of which has some relevance to long term US production. That's a fraction of all energy production.
And it has VERY little to do with gasoline prices for the reasons I gave above.
Wrong again, of the 11.5 million BOPD the US produces each day, 8.5 million comes from what are called unconventional or shale oil wells. On average, these wells deplete 45% of their reserves in the first year of production, 70% in their first 3 years. It's a treadmill that is constantly in need of replacement. Basically you need to add about 3 million BOPD of production per year. Blocking these short gathering pipelines are in large measure why the US is producing 1.5 million BOPD less than at the end of 2019. If 1.5 million BOPD is such a small fraction of all energy production, why is Joe Biden wasting his time releasing 1 million BOPD from the SPR?
At the very least oil production for gasoline is a world market. Which is in large part why gas prices have gone up this year.
Federal leases would not have been in production. Whatever delay there is due to short gathering pipelines, domestic production is NOT the sole component in gasoline refining. Imported oil is suffering from price increase due to supply chain, Covid and Putin.
The treadmill long term for US oil production and that for gasoline refining products and how much that suffers is a good question. Whether Biden and green energy can replace long term loss of oil production without significant cost by means of conservation, green energy and other energy sources and whether it is worth those costs is a good question.
BUT. The in the short run it is not quite so easy to blame regulation for current gasoline pricing which have gone up in response to the economy reopening quickly, Covid and recently Putin. You cannot actually blame energy policy for all of that!
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Post by 00hmh on May 12, 2022 21:30:07 GMT -6
Just ignore 00 the guy is a f--king moron. He doesn't seem to understand a future increased supply will effect prices at the pump immediately. Really?
You want to tell me how opening up domestic exploration today will immediately reduce gas prices at the pump tomorrow? It neither reduces current demand for gasoline or the current supply of gasoline. Gasoline prices are notoriously variable in the short run. By season, by other uses of energy, and so on.
You think there is somebody out there now hoarding current production speculating on future shortages? In fact we are doing the opposite with releasing reserves aren't we?
In fact those futures prices reflect (duh) expected future price of crude which may of course cause higher gasoline prices in the future depending on demand. Of course futures markets reflect all kinds of inflation risks. A very great one will be the cost of retooling industry to deal with the increased risk of supply chain. That risk hit us dramatically during Covid and now threats of war may make energy supply markets overseas very risky. As risk in any market goes up, guess what, the price reflects a risk premium.
Nobody is arguing that energy prices long term are easily predicted to be higher.
Gasoline prices at the pump today reflect reduced current supply, which has many reasons. Refusing to recognize those other reasons for current pricing would be very dumb.
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Post by 00hmh on May 12, 2022 21:56:03 GMT -6
Just ignore 00 the guy is a f--king moron. He doesn't seem to understand future increased supply will effect prices at the pump immediately. Apparently he also doesn't understand how the futures markets work or what they are used for. You're right but on slow nights he's my entertainment. Besides, he's trying to argue in my backyard on this one. No, we are arguing different topics. You are arguing reasonably about price pressure for domestic oil production from regulation, especially longer term, just unreasonably denying other factors which explain current gasoline pricing. And you are ignoring a host of other issues related to the gas pricing which are more important than the oil business.
Long term I don't think so, but in the intermediate term, I agree we are going to be dependent on oil and gas, but I am not convinced the answer is leasing on Federal land or using current pipeline technology without paying some attention to environmental issues. It's not clear to me Biden has the answer either.
There is a very interesting discussion possible how we adjust energy consumption, longer term, as well as how we change production of energy. Although we have reduced greatly the dependence on foreign energy we have not eliminated the risk of supply. And although we are increasing alternative energy I don't see an answer there.
Energy conservation is going to be part of the answer, but that is almost as tricky as the oil business.
But back to the actual topic of gas prices, the thread is apt. In fact we may in the future see prices for gasoline as high as Europe has had. I shudder to think what their prices will be. But current prices have very little to do with the regulatory issues you are raising. And the politics of leasing federal land and environmental safety of pipelines is not to be dismissed by waving a flag about gas price at the pump.
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Post by 00hmh on May 12, 2022 22:09:48 GMT -6
Meanwhile: It should concern us that all those toxic components come from mining. For instance, to manufacture each EV auto battery, you must process 25,000 pounds of brine for the lithium, 30,000 pounds of ore for the cobalt, 5,000 pounds of ore for the nickel, and 25,000 pounds of ore for copper. All told, you dig up 500,000 pounds of the earth's crust for just - one - battery." VERY good point. Energy conservation to reduce pollution of several types, is a good idea. Creating other environmental risks looks a little loony.
We are a nation which needs automobiles. Whether we need them quite as much as we think we do or have historically used them is open to debate. Whether we need them to consume as much gasoline is surely debatable. What we cannot do is ignore the externality of auto use, whether is air pollution, energy use, or the new environmental risk electric cars with batteries create.
We are going to pay for all of those things in the longer run,
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Post by bsutrack on May 12, 2022 22:31:21 GMT -6
Wrong again, of the 11.5 million BOPD the US produces each day, 8.5 million comes from what are called unconventional or shale oil wells. On average, these wells deplete 45% of their reserves in the first year of production, 70% in their first 3 years. It's a treadmill that is constantly in need of replacement. Basically you need to add about 3 million BOPD of production per year. Blocking these short gathering pipelines are in large measure why the US is producing 1.5 million BOPD less than at the end of 2019. If 1.5 million BOPD is such a small fraction of all energy production, why is Joe Biden wasting his time releasing 1 million BOPD from the SPR?
At the very least oil production for gasoline is a world market. Which is in large part why gas prices have gone up this year.
Federal leases would not have been in production. Whatever delay there is due to short gathering pipelines, domestic production is NOT the sole component in gasoline refining. Imported oil is suffering from price increase due to supply chain, Covid and Putin.
The treadmill long term for US oil production and that for gasoline refining products and how much that suffers is a good question. Whether Biden and green energy can replace long term loss of oil production without significant cost by means of conservation, green energy and other energy sources and whether it is worth those costs is a good question.
BUT. The in the short run it is not quite so easy to blame regulation for current gasoline pricing which have gone up in response to the economy reopening quickly, Covid and recently Putin. You cannot actually blame energy policy for all of that!
Oil production is a strange beast in that it's extremely inelastic. What I mean by that is a few million barrels overproduction or under production can cause violent swings in prices. Take for example back in 2Q,2020 when the world was producing about 9 million BOPD more than the lockdown dominate world needed. For a few days WTI traded at -$27 per barrel. Theoretically you needed to pay someone $27 to haul away the oil you produced. There was still millions of barrels of unused storage space, yet the market was sending a signal that at some time production needed to be reduced; hence, the negative prices. Today you have 1 to 2 million barrels being pulled out of storage each day to satisfy world demand that is that same amount above production. There is about 2.5 billion barrels of oil in storage around the world, so this withdrawal rate could be sustained for 3 to 5 years, yet the market is sending a signal with higher prices that something should be done now before it gets worse. Supply chains, Covid, and Putin are all somewhat self-inflicted problems. The supply chain problems were caused by the lockdowns that should have never been done. I blame Fauci in large part on that one. The Chinese should never have been the model on that one. Look now at their stupid zero Covid policies and what they are doing to cities like Shanghai. Putin would never have invaded Ukraine if the US withdrawal from Afghanistan had been handled correctly. Waiting to send the necessary arms and equipment to Ukraine until after the invasion also was a critical error. The real problem is underinvestment in the oil & gas industry. The ESG crowd (which essentially is the Democratic Party) has convinced the world we will not need oil and gas. That everything will be renewable energy in just a few years. They have convinced the world that much of the oil and gas already discovered will never be needed. That it will become a stranded resource and left in the ground. That has lead to something like $2 trillion in underinvestment in the oil and gas industry since 2015. The real problems will occur once the 2.5 billion barrels of oil in storage around the world is used up. Demand destruction will be needed to keep oil demand equal to available supply. From what I've read, demand destruction will start around $130 per barrel, but will need to go to $180 to be fully achieved. Essentially we Americans will be bidding against the Chinese and Europeans. What really sucks now is much of the oil we are pulling out of the SPR is going to Europe. www.reuters.com/markets/commodities/europe-refiners-benefit-us-emergency-oil-stock-releases-2022-05-12/"At least three vessels carrying crude oil from U.S. emergency stockpiles sailed for Europe in April as refiners there scrambled to replace Russian crude supplies, according to U.S. Customs data, ship tracking, and an industry source." So oil that was meant to protect US consumers from price shocks is being sent to Europe. But as you would say, it's a world market after all. |
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Post by bsutrack on May 12, 2022 22:38:36 GMT -6
Wrong again, of the 11.5 million BOPD the US produces each day, 8.5 million comes from what are called unconventional or shale oil wells. On average, these wells deplete 45% of their reserves in the first year of production, 70% in their first 3 years. It's a treadmill that is constantly in need of replacement. Basically you need to add about 3 million BOPD of production per year. Blocking these short gathering pipelines are in large measure why the US is producing 1.5 million BOPD less than at the end of 2019. If 1.5 million BOPD is such a small fraction of all energy production, why is Joe Biden wasting his time releasing 1 million BOPD from the SPR?
Federal leases would not have been in production.
A federal lease drilled in the New Mexico portion of the Permian Basin in November or December of last year would be on production by now. It takes under 6 months for those wells to be drilled and completed. A deep water well in the Gulf of Mexico would need 5 to 7 years. |
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Post by sweep on May 13, 2022 4:48:18 GMT -6
Just ignore 00 the guy is a f--king moron. He doesn't seem to understand a future increased supply will effect prices at the pump immediately. Really?
You want to tell me how opening up domestic exploration today will immediately reduce gas prices at the pump tomorrow? Like I said you don't understand how the futures market dictates current "at the pump" prices. It's all over your stupid little head. Let me give a a very simple example even you can understand. If Russia and Ukraine sign a peace accord tomorrow, the price of oil futures will drop even though the current supply is unchanged, the drop in futures prices will result in an immediate price reduction at the pump. It works exactly the same with increased domestic production, more oil is more oil. |
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Post by 00hmh on May 13, 2022 6:22:11 GMT -6
Really?
You want to tell me how opening up domestic exploration today will immediately reduce gas prices at the pump tomorrow? Let me give a a very simple example even you can understand. If Russia and Ukraine sign a peace accord tomorrow, the price of oil futures will drop even though the current supply is unchanged, the drop in futures prices will result in an immediate price reduction at the pump. It works exactly the same with increased domestic production, more oil is more oil. In the longer term and over time. Yes. Futures would drop immediately. Financial markets are very volatile. Product markets would adjust much more slowly. I'll give you a very slight price impact to reflect quick changes made in refining mix. And, a fraction of short term supply would be altered very quickly. Some oil on the way to the world market might head tomorrow to refiners. Some small immediate drop some places as domestic supply chain adjusts. Tomorrow's price at the pump? No significant drop. Even next month turns out doubtful. For one think we face seasonal price pressure. Ask bsutrack why gas prices at the pump nearly always go up as we enter summer. Not just demand but friction as refiners change production inputs and alter production of other products. |
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Post by sweep on May 13, 2022 6:28:50 GMT -6
Like I said you don't understand how the futures market dictates current "at the pump" prices. It's all over your stupid little head. Let me give a a very simple example even you can understand. If Russia and Ukraine sign a peace accord tomorrow, the price of oil futures will drop even though the current supply is unchanged, the drop in futures prices will result in an immediate price reduction at the pump. It works exactly the same with increased domestic production, more oil is more oil. Product markets would adjust more slowly. Well no shit ! No one said it would be a 1 for 1. |
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Post by 00hmh on May 13, 2022 8:17:37 GMT -6
Product markets would adjust more slowly. Well no shit ! No one said it would be a 1 for 1. The word "immediately" does mean that... or at least VERY soon.
Gas stations get gas maybe twice a week. At the pump supply can change for one station which may be able to drop prices as a result, and others do have some supply flexibility to match price drops nearby. So if one guy gets gas, all tend to lower prices to some degree. But assuming refiners begin immediately to use some reserves, the amount of gas being produced to deliver to the stations does not become available for delivery immediately, either. So lag exists there. And they almost certainly would not go quickly to maximum output until they see the oil flowing and assess where it will go. That takes time.
So an immediate futures price decrease, estimating the impact of Russian supply, still means the price at the pump will change slower.
When the sanctions went into place, when it was realized immediately this decreased future supplies, gas prices at the pump did NOT increase to the current level immediately, but did respond gradually over a few weeks. What is worse, this price increase due to the war is much longer term price increase because the interruption of world supply by such conflict has been demonstrated to be more serious than market makers had estimated. That means a new and permanent risk premium. At least until we change dramatically how much import we use.
The impact on imports will still reflect the shipping and other supply chain issues which currently exist, so price hikes due to "war" will be shown to be only part of the picture. At best.
I am glad that you are now acknowledging my point that price of gasoline is impacted by more than just leasing on public lands. The lead time there is months as bsutrack indicated, and what he did not indicate is how quickly any significant pumping from the ground will take place and how much the pipeline delays would be. I am not arguing with him that regulation is not part of the equation. But, it's simply not accurate to consider it the main factor of gas price at the pump.
In the spirit of your new more flexible position, I will acknowledge again as I said above that some gas would be immediately diverted, and refiners who have storage of crude may immediately change and use some of their inventory being held as reserve for contingency as soon as oil enters the supply chain. So perhaps a week or two we would see some price changes. But oil import even from the closest world sources would not increase to previous levels quickly no matter what. There is always significant lag with any interruption in supply, domestic or foreign. Refiners do keep some reserve to handle that. But think how foolish it would be to trust that a peace treaty means the world markets are back to normal. Covid and Putin have changed the market longer term, this disruption has been painfully shown to be more likely than we ever anticipated.
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Post by 00hmh on May 13, 2022 8:36:10 GMT -6
Federal leases would not have been in production.
A federal lease drilled in the New Mexico portion of the Permian Basin in November or December of last year would be on production by now. It takes under 6 months for those wells to be drilled and completed. A deep water well in the Gulf of Mexico would need 5 to 7 years. Sure but HOW MUCH of gasoline prices are explained by reduction is the transient supplies. What Biden and others anticipated as they formed policy a year ago, for the next few years and for the longer term, is a less severe adjustment where that reduction in domestic supply would be replaced at least in part by other sources of oil in the short run.
I believe policy makers consciously decided and anticipated gas at the pump to go up and accepted that as a cost for other gains, including environmental gain, intelligent change by the oil industry in pipelines over time, and were counting on incentive to reduce use of domestic oil for other purposes by conservation. None of that is short run, though. What happened in the last year meant the Biden administration was as surprised as the oil companies by the quick recovery of the economy and increased demand, and by the change in risk of oil imports.
The oil industry has done rather well to adjust considering everything. But you won't find me saying the gas price shock was anticipated to be as great as it is.
As for arguing in your back yard, I respect your knowledge. But I also see you believing what is good for big oil is always good. Plus. Economic forecasts are in my back yard, and causes of inflation due to supply chain and change in world markets due to Covid and increase in political risk is something the oil industry was blindsided by just as were the bureaucrats. It was not just politics, but I also acknowledge that. And OTOH, the oil industry has played politics to its benefit for decades.
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