This Week in Petroleum (5-30-2007)
Posted by Robert Rapier on May 31, 2007 - 12:27pm
As I have been predicting, this was an all-time record low gasoline inventory for Memorial Day Weekend. This is 2.7 million barrels lower than the previous low inventory mark for Memorial Day. Woo-hoo?
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 2.0 million barrels compared to the previous week. At 342.2 million barrels, U.S. crude oil inventories are at the upper end of the average range for this time of year. Total motor gasoline inventories increased by 1.3 million barrels last week, but remain well below the lower end of the average range. Distillate fuel inventories inched higher by 0.1 million barrels per day, and are below the upper end of the average range for this time of year.Despite the high prices, demand is still exceptionally high:
Over the last four weeks, motor gasoline demand has averaged over 9.4 million barrels per day, or 1.4 percent above the same period last year. Distillate fuel demand has averaged nearly 4.2 million barrels per day over the last four weeks, up 2.9 percent compared to the same period last year. Jet fuel demand is up 0.1 percent over the last four weeks compared to the same four-week period last year.More under the fold.
U.S. crude oil imports averaged over 10.0 million barrels per day last week, down 874,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.6 million barrels per day, or 395,000 barrels per day more than averaged over the same four-week period last year.Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.6 million barrels per day, the third highest weekly average ever. Distillate fuel imports averaged 198,000 barrels per day last week.If gasoline imports hadn't been so strong (also something I have been predicting) then we could have actually seen a draw this week. If imports had been at last week's level - which was itself pretty healthy - we would have seen nearly a 1 million barrel draw on gasoline stocks. That would have likely set the market back on fire, and demonstrates just how dependent summer prices are on gasoline imports. But as I wrote last week:
While refiners are certainly making good profits from the recent rise, another result is that foreign refiners will want to get a piece of the action. As I commented a few weeks back, I can hear them scrambling to fill tankers to get the product to the U.S. Imports last week had increased by 700,000 barrels per day over the low point in February. I expect that trend to continue, and imports to start taking some of the pressure off of gasoline prices pretty soon.It certainly appears the exporters are responding to the price. We are feeling it in Europe as well, as prices have been climbing here.
Update: Yesterday, I posted that prices may soon mitigate, and then gasoline futures took a huge drop:
Front month June Gasoline futures fell over 10 cents a gallon, as analysts are looking for another storage build in Gasoline last week. Current estimates are for a gain of 1.2 million barrels of Gasoline last week, which if true would be the 4th consecutive week of increased storage.
I had no idea I had such a powerful influence on the market. :-) Ahead of the report, I will reiterate the prediction I made before the release of the May 16th report that "we will hit Memorial Day with record low inventory levels." I think we are likely to see another gasoline build, but no way are we going to close the 4 million barrel gap that would be required to keep us out of the record books.
Unless we see a surprising draw, I think gasoline prices are going to bounce around in this range for the next month or so. If we can claw our way out of this hole over the next month (I still expect imports, at these prices, to remain strong) then prices may mitigate. If we don't make up a lot of room prior to the really high demand season in July and August, then we haven't see the highs for gasoline yet.
I will update this after the release of tomorrow's Thursday's report. As was pointed out in the comments, this week's report will be delayed a day due to Memorial Day. So, on Thursday we will find out if this Memorial Day saw record low gasoline inventories.
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So, absent a major event: terrorism hit on refining/oil production capacity, major gulf hurricane, airstrikes on Iran, etc., it seems we're unlikely to experience shortages in the U.S. this year. Imports come to the rescue. Although maybe we'll see $4.00 + gas in July and August.
Where do inventories need to be at the end of June to avoid another price runup?
Why do you say "Imports come to the rescue"?
Not that you are wrong, but at this point, I can't say you are right. Import numbers have been all over the place, and don't even make 2006 levels.
So going forward, we don't know if we will get the imports, yet! And if gasoline futures drop, that will make the US buying power of those precious gasoline imports less effective.
I guess we will see, next week will tell us more, if imports hold steady or increase we might be able to say more.
And G*D help us if a hurricane hits dead on the GOM refineries in the peak July/August season...as you say.
Why do you say "Imports come to the rescue"?
It's a question, which I answer with: High prices are likely to attract big imports, and mitigate prices somewhat. That seems to be what is happening lately. If import levels were not as strong as they are, gasoline prices might go up another $0.50.
RR-
you wanted a cite on the healthy energy returns on cattle-methane-ethanol-corn plants. Langley of EP3 is quoted as saying such plants get returns on the 40-to-1 level. Sounds great. We have to wait for long-term results. My experience in manufacturing is that initial results disappoint, but then you get better at doing things, and long-term results are actually better than hoped (if you can stay in business). These guys should be able to stay in business.
http://www.caller.com/ccct/business/article/0,2537,CCCT_873_5311809,00.html
First of all, it's E3 Biofuels. Second, here is what one of his engineers told me: "Langley isn't a technical guy, and that 40-1 was way off the mark. He probably believed what he was saying, but that isn't close to being correct." Of course, if you thought about it for 5 seconds, you would understand why. That is a far better energy return than sticking a straw in the ground and sucking oil - already processed by nature - out of the ground. You really need to know when to apply a bit of skepticism, and stop believing claims simply because you want to.
Third, the claim by Langley was made before the plant even started up. Remember what I asked for? Somebody who has demonstrated it? I presume you can't supply that information?
Is that why he uses the ambiguous term 'energy
units' ?
I've gotten friendly with a new neighbor who is a grad student at UNL and mentioned his work as a ruminant technician put him in contact with folks at the
Mead plant.
In ensuing conversation about energy issues he gave me this URL, that might me useful to you
http://beef.unl.edu/
I did a search a few weeks ago on Mead at the
site, but nothing caught my attention then.
Where IS that 'Theory of Everything' ?
Here
it is !
Sorry for the typo on EP3.
40 to 1 does sound high, that's why I ran it by you. But this plant, from what I read on renewable and ag websites and forums, is becoming the new norm in planning stages... Perhaps existing plants will be retrofitted. Time to go long on cow poop!
Yes, I cannot document energy returns until the plants are up and running for a couple years. It sounds like a terrific idea, one that will radically reduce energy inputs from fossil sources. I gather that burning the methane is better for all concerned too, as it does not go into atmosphere.
Another important aspect of this: It was not anticipated a few years ago. What else is cooking that we do not anticipate? With fossil crude at more than $60, what other remarkably useful techniques and inventions are on the way? I am sure many in this forum will say none worthy of mention, but I am not so sure.
If it is not 40 to 1 at the E3 plant, what did your engineer buddy hint at? 10 to 1 would be great. Even three to one would be nice. Of course, we have to measure fossil inputs. I understand the methane is an energy input, but it is "free" so to speak. The left over mash is used to feed the cows. I am sorry to eat the cows, but even sorrier when I eat pork, and how long till we see pig-and-potato plants?
As for skepticism, sheesh. Have you read these forums? Hook, line and sinker it is taken as faith that a mathematical model developed on light oil deposit extraction only in the Lower 48, in a period of cheap oil worldwide, will perfectly predict oil output globally in a period of higher oil prices, despite the reality of massive deposits of heavy oil and tar sands (which dwarf light oil), and despite the fact that Hubbert's Peak has not even predicted crude output in North America, let alone the world.
North American fossil crude output should move to new all-time records in coming years, thanks to Canadian tar sands ramping up to 4mbd, and the big Chevron strike starting up. That will mark roughly four decades on a rough plateau. Biofuels are ramping up sharply too, but remain too small to really talk about yet. In 10 years? Could be enough to seriously damage the fossil boys.
One man's skeptic is another man's cynic, and another man's dupe. Having been duped a lot, I hope I am moving to the skeptic range, but never into the land of cynics?
The question is have *you* read "these forums"? It seems not. You're as much faith and straw man as I have seen in awhile here. You've been here for two months, and you've got everything pegged. Who is the faithful dupe here?
You write,
"Having been duped a lot, I hope I am moving to the skeptic range, but never into the land of cynics?"
I rip roared a good guffaw out of that one. Yeah, it just isn't appropriately conservative to be cynical about the world, is it? Everything is just so wonderful and exuberant, evidence everywhere! God surely loves his little children. Another funny one, are you a stand-up comedian in your spare time? At least you have the "honesty" to use the unfriendly term "tar sands", the wholly "unbiased skeptical optimist" that you *surely* are...
Yes, biofuels are ramping up, with minimal impact on liquid fuels supplies. And, oh boy, we should really be excited about ruining the environment and the planetary climate with the likes of tar sands and oil shale.
This is not good news you are providing here; the news should be that we are doing everything in our power to live within and below our existing oil supplies, not discovering new ways to screw up the planet even worse.
I asked you some questions on May 10th designed to see if you were serious and or merely trying to instigate a circle jerk. The answer was not forthcoming which I have preliminarily equated with you trying to intitate the aforementioned circle jerk. Reference:
http://www.theoildrum.com/node/2529#comment-188487
Others have done the same sort of thing with a similar lack of substantive response.
Please don't suck up every poorly written under researched bit of nonsense that gets published. Do a little critical research. There are some very positive things that likely to occur in time IMO. I am not doomer. With some googling and a little critical review you can find them. Try not to give optomism a bad name.
A little prefunctory bebunking: The net energy gain on 4 million bbls per day of Canadian tar sands is nothing like even the return on ultra heavy crudes
... and
If by the "big Chevron strike" you are referring to the Jack #2 Discovery it will be a long time if ever before production begins and it will hardly be the cure for what you believe is expensive [$60] oil. It might be the sort of thing that keeps oil from doubling from here if there are enough of these high risk high investment prospects ... and enough ultra deep water rigs to explore them.
The facts on Jack II IIRC:
1.) A mulitfeature string of possible traps --
2.) at about 22,000 feet subsea -- 15,000 feet of rock in 7,000 feet of water --
3.) A hundred and fifty miles from existing infrastructure--
4.) With the published multi billion barrel projection of reserves based on a couple of wells both of which are either temporarily or permanently abandoned.
Jack II may turn out to be a big find a decade or so from now. For now, the publicity it receieved is not comensurate with its apparent economics.
These are the facts as we know them. Research Benjamin research.
North American fossil crude output should move to new all-time records in coming years, thanks to Canadian tar sands ramping up to 4mbd, and the big Chevron strike starting up
Hardly !
One third to one half of the net# new tar sands production will go to replace conventional Canadian production, whch is in steep decline (royalties to Alberta Gov't are taking a hit despite the boom).
Chevron (50% owner of Jack #2) wanted to influence US public opinion and did.
One 25% owner of Jack #2 is Statoil, 5/8s owned by the Kingdom of Norway, which could care less about US public opinion (and has a cultural thing about honesty). According to the 25% owner of Jack #2, more wells are needed before a decision to produce will be made.
Still, by the time tar sands get to 4 million b/day and Jack has produced it's first barrel, Prudhoe Bay oil production will be so low it will not be worth keeping the pipeline open. US Lower 48 production will be down some more (2+ million b/day on a long term trend of -200k b/d each year).
Best Hopes for Reality Based Planning,
Alan
# In the year of Peak Coal in the UK (1913) 13% of the coal produced was used to mine coal (stat from memory).
A lot of natural gas and a far amount of oil products are used to produce and upgrade the tar sands. So producing an extra XX barrels/day of tar sands takes a lot of energy up front to build and even more to produce. One should net that. So, for me, 4 million b/day of tar sands = 3 million b/day of new oil supply (+ GHG & environmental degradation). I value NG like oil since they can substitute for each other in some markets.
That 40 to 1 return must be ignoring the energy used to produce the corn. What about nitrogen fertilizer for example? Producing it is very energy intensive. E3 biofuels claims their operation produces some fertilizer but I doubt they produce all that is necessary to grow the corn, some of the nitrogen and other elements are going to be absorded by the cattle. What about the other foods the cattle eat? They aren't going to eat only distillers grain. The other types of cattle feed take energy to produce too.
Estimating the EROEI of a cattle-methane-ethanol-corn plants will be even more complex than a typical ethanol plant. How are the energy requirements to produce the various cattle feeds going to be divided between the ethanol and beef production? It isn't appropriate to just ignore the other types cattle feed. After all, some of the manure used to produce the methane originated from the other materials fed to the cattle.
Ill tell you one thing for certain. The energy return on cow manure to methane will be much higher if we just throw the cow in the biodigester, and higher still if we use whatever we feed the cow directly in the biodigester, and produce no cows at all.
The energy return in this situation is predicated on societies choice to eat meat/dairy. If that part of the equation is relaxed, it allows the other variables to move higher.
Thats why straight energy return, out of context, doesnt give you the whole story (though more than just dollars do)
"no cows at all"?
Wait until NCBA gets wind of their new slogan "Beef is not what's for dinner..."
How about we make an an exception for Kobe cows? I mean, while we're using up energy on cows, lets at least throw in beer and massages for 'em before it's "off with their heads". Uhrmmm, marbling.
Just a thought...
/me runs from rabid vegans
Excellent comment, Nate. Just like we all learned in school, from the sun's rays to plants to herbivores to carnivores, energy is lost every step of the way. Getting more from a cow than was put into feeding the cow would mean that energy was created out of nothing, and that's impossible. Even oil, which would not be around if not for the sun and is great because it has soaked up solar energy for millions of years (and is thus more dense than solar energy), is terribly inefficient, too. The best bet is to go directly to the source.
I've said before that 80% of American cropland is dedicated to feeding livestock, and there are many other reasons why growing livestock (at the very least the way we're doing it) is in no way beneficial to humanity (much less to the livestock, themselves).
I have the solution. We just need a gene therapy that will make us capable of photosynthesis. Then we can skip the intermediate stages and not have to eat at all. Throw in some cheetah genes so we can run real fast and we won't need cars.
Nah, we should just take Alice’s magic potion and become 1/10 th of our size. Then we’d only need 1/10th of the oil we consume today. Oops, we’d have to shrink the world as well to cut down transport ...oh, then we’d be shrinking the oil fields too, oh dear, back to the drawing board! Something will come up!
No, No. I think you have something there. Small, photosynthetic, and fast.
Once it goes transgenic in the wild we'll have ... Triffids!
That really would serve us right!
But didn't you just post on your blog that gasoline futures are down(they may be up by now).
No doubt, if the prices hold we can attract some more imports, but it is easy to maintain that we will be tight for most of the summer unless we increase somewhere substantially.
It appears that the import numbers are pretty weak compared to 2006 especially in the light of the higher prices.
How much higher do we need to go to guarantee the import levels will be maintained at minimums?
But, definitely NO argument that if the imports that are there - weren't - we would have even higher prices - but probably higher than you project, because then we would be pushing rationing or shortages.
It's a thin line. As my home province(Ontario) so excellently demonstrated in the first quarter '07.
FWIW, I didn't say it was wrong, just not necessarily right...yet. If imports deliver, it is absolutely correct. I am just not ready to jump to a final conclusion until after the long weekend data (which I mistakenly thought would be this week).
This week's import number was the 3rd highest ever. That's what I am talking about. These prices will probably keep import levels high. But if I look forward to July and August, I still don't think we are supplying enough. I plan to do that exercise next week, because those months far outstrip Memorial Day in terms of demand.
Not questioning that at all, imports have not followed past trends, so I ask why? And, therefore, will they?
That's it. I do hope they grow, but we are looking a week ahead at a time, and as you say it doesn't look too encouraging.
It comes down to we still need more data (just like the KSA situation). Probably a few weeks more to get a full picture.
There needn't be shortages if the prices are high enough. People who can't afford the prices will not be buying and will figure other ways to save on using gasoline. Unfortunately, some people who need it more than others can't afford it, while the ones who can afford it waste it in their honking SUVs. (Canadians, here, are just as bad.)
The bidding war is well underway. Individual Europeans have more options than Americans, given the way their cities are designed. They can forgo some of the expensive gas. If they had the extent of urban sprawl as US, then the bidding war would be worse.
Here in Canada we are a little bit isolated. We are a net exporter so our dollar is climbing. But that is causing a problem with our manufacturing and export industries.
I had read that while oil inventories in the US were in the upper end of the 5 yr avg, global oil inventory levels were closer to the middle of the 5 yr. avg. range.
If the world continues its 1.5% demand growth for oil the world will need about 1.3 million barrels a day every year in new production in addition to production used to replace declining production in existing mature fields. If OPEC continues to hold world production close to a flat line, eventually there might be some breakout action in oil futures.
Nigeria had hopes of peace and renewed production growth, yet youths continue to occupy the Bonny light pumping station demanding more money or jobs. The field is closed.
http://www.iol.co.za/index.php?set_id=1&click_id=86&art_id=nw20070531133...
Typically historical hurricane tracks were erratic. It is statistically unlikely for a Katrina like event in the oil patch this summer, yet threat of one remains.
Reports of a major oil find in Russia on the West Kamchatka shelf by Rosneft and the KNOC that might be up to 10 billion barrels by one report or in excess of 10 billion barrels by another are good news for the world's oil consumers. When the price of oil went from $23 to $63 the shipyards went into overtime building semi-subs and other drilling rigs. A ten billion barrel field might take a decade to develop and might produce a million barrels a day. The exact of size of the field needs to be proven by more drilling.
According to the EIA, world oil consumption rose 0.9 percent in 2006, compared to 1.8 percent in 2005, and 3.1 percent in 2004. I see a pattern here.
My guess for 2007 is fossil crude demand is nearly flat, as it has been falling more than 1 percent a year in this price regime. US demand fell in 2006, as did most of the developed world.
At $60 a barrel, it is likely we have seen Peak Demand, probably a good 10 to 30 years before Peak Oil. This is great news.
With PHEVs and biofuels on the way, it is likely we will never consume this much fossil oil again, if this price regime holds, It is a remarkable and seamless transition to a post-fossil economy. $60 is not painless, but it is not catastrophic either.
The bad news is that another glut could easily develop, setting up a replay of the 1979 oil price spike and then 25 year period of relatively low prices.
Mr. Cole,
Until people stop having children and stop preferring electric lights and motorized transportation to their 17th century equivalents, there will never be a peak in the demand for oil, but instead an undulating plateau created by involuntary demand destruction. There's a distinct difference between a lack of demand for a commodity versus an inability to pay for that commodity.
Now would you please, please, please go acquaint yourself with the work of Albert Bartlett of the University of Colorado regarding the exponential function? Please? Thank you.
FYI, this was Benjamin today over at the Wall Street Journal Blog:
I wonder if I should point out that as I write this, crude and gasoline are both trading higher? He better tell the traders that they should hurry and sell; that we are actually in a bear market.
Sounds like he's short, and trying to talk the market down.
The funny thing is this is most likely his exact critique of the likes of T Boone, Simmons and et al who talk of going long on hydrocarbons late into the night. Of course, talking to a market is like a schizophrenic trying to negotiate with an anthill to go somewhere else. It's not going to happen, the ants will do what they want to do no matter what someone tells them to do either way. Markets don't care about opinions in the long run, they care about "market forces". Who is right about where the market forces will take us? Since there is really no empirical way to predict such things (with a notable exception for M. King Hubbert's method which forecasted the lower 48 states correctly) it is a simple matter of "time will tell". Although, amazingly Hubbert doesn't even get this credit because many conservatives just flat out "claim" that oil production has been declining for almost 40 years now because of "environmental regulation and taxation". The apology for cheap energy knows no limit.
Long and short... perhaps two sides of the same PR coin. Either way, there is a substantial dissident, *disinterested* element to the PO bandwagon, which cannot be said of the opposing infinite-growth, techno-fix, cornucopian camp... However, their propaganda works so well, many individuals are willing to take up "intellectual-arms" against the idea of finite resource depletion and unsustainability! This is seen often at TOD, in the general culture and especially TV. Remember, everything is fine, was always fine, and always will be. And markets coast forever, increasing annually with the loving guidance of the economists at the oracle.
I wouldn't stay up nights worrying about $4 gas. Unless we have a crude shortage pushing it up to $100+, $4 crude whould mean refining/marketing margins on gasoline of $80 ish. Someone in gov't would step in to create rationing before they allowed that level of profit from a short term scarcity.
Of course, the us can bid any price for gasoline, asians will just have to suck it up and pay the price or step aside, as many must be doing now. WIth us refiners still down, the bidding war is not so much for crude as it is for product.
Tapis is an incredible $12 premium to WTI, no doubt as a result of sa starving their asian customers. So, the spread between foreign crude and domestic gasoline is much lower than between domestic crude and gasoline - foreign refiners are obviously making more profit sending gasoline to the us market than serving their domestic one, but not nearly as much as our domestic refiners. This means that gasoline cannot drop much or asians will stop feeding our market and feed the new wannabe drivers in their own market, some of whom are now leaving their cars at home as we hit the roads.
If sa cut crude deliveries to the us instead of asia, crude would be higher here but, with asian refiners better supplied, more gasoline would be on the world market and prices would be lower. Neatly ironic, and illustrating the value of holding our foot on the Persian Gulf.
So despite the numbers not being good news, the price of oil is down on the day. Not that it makes much difference in the long run.
If the ability to pipe gasoline to the Northeast is reduced at the moment perhaps that will lead to price increases there? Who knows. A lot of things about the markets seem counter-intuitive.
Sounds like a bidding war for tight supplies.
sounds like typical arbitrage. The US has always set European wholesale prices indirectly.
I wish the Regional Gasoline Stocks graph was a little bit bigger over on TWIP. It seems to me that, as in previous weeks, the stocks build is asymmetrical. Majority of the build appears (again) to be on the West Coast, and a small bone thrown to the Midwest this week. Rocky Mount got stiffed, and the rest are basically flat.
Just an observation from This Week in Petroleum. Last year at this time, the “Estimated OPEC Contract Price” was $7.23 below the WTI price. This week it is $2.80 above the WTI price. That is a swing of $10.03!
What is going on here?
Ron Patterson
Ron :
This is a good guess, not an expert opinion, but I think that since Saudi is closer to both Europe and the Asian market that oil prices of OPEC crude is reflecting the price of Tapis and Brent rather than West Texas Intermediate. We've still got a lot of refineries shut down in the US, so domestic prices are down. We're importing huge amounts of gasoline, so the refineries in the far east and Europe are bidding up the price of their crude supplies.
First big sign that supplies are returning to normal was the Colonial pipeline going on proration. (Nominations exceeed capacity). That said to traders that theres a ton of gas being produced in the USGC.
This week, speculative longs were looking at a June contract at $2.4 with July at more like $2.25. So in 3 days you either have to take delivery of bbls in NY or roll to July and catch whatever profit you can. Given para 1 above, they ran to the exits and June/July spread collapsed.
It's not that uncommon for the gasoline peak to come in April/May. Trade is dominated by optimists.
Seems the whole system just breathed a sigh of relief then in response to the fact/belief that the gasoline appetite in the US is satiated for the moment. All the crude benchmarks fell off too.
It's not that uncommon for the gasoline peak to come in April/May. Trade is dominated by optimists.
How about you? Was that the top for gasoline demand in the US this summer?
sorry. I was imprecise.
What often peaks in spring is the NYMEX price of gasoline for the prompt month relative to prompt crude oil.
Once we're into the real demand season (Jun-July-Aug) where actual demand peaks, pump prices may stay firm but in the absence of a real shortage (stocks stay at reasonable levels) the speculative length takes profits and the futures fade.
Future lead the cash which leads the retail movements.
No that's fine. Think I'm getting your drift now. The price rules are more or less set for the demand season now. As long as this balance maintains the profits are about where they'll be and the futures can even drop off easing the price a bit.
Basically we'd have to lose imports or refinery capacity, get a big hike in demand, get an ill placed storm, or have a geo-political or terrorist 'event' to drive gasoline futures way up again?
None of which is out of the question, right, but today the optimists are controlling the market. Since the Colonial is full aren't they running the Midwest supply kinda tight at 46 mil. barrels of gasoline?
I'm no US pipe expert. My exposure was just to Colonial and only for a short while. The pipes to the Midwest (exploer for one) are smaller capacity I believe as the Midwest is closer to being in balance than PAD 1 which is massively short (and therefore gets most of the US imports).
Part of the summer problem is refining/marketing companies were put on a short leash by the top deck back in the 90's. Extra tankage was eliminated as putting in double bottoms/leak detection etc was expensive as is just having capital tied up in stocks just to make operation more comfortable. So we operate with smaller and smaller safety margins on stocks.
Now combine that with boutique blends for specific markets and a refinery fall down can really make thing spike in the Midwest. But I can assure you that if the Colonial is full, ,people are trying to jam excess bbls into the Midwest however it is possible. Leftovers in the USGC are a real drag to get rid of. I remember a time when heating oil in the USG fell to 5-6 cts below NYH in December cycles when temps were mild and the pipe capacity was hit. The tariff in those days was just 2.5 cts so people were leaving $1/bbl on the table if they couldn't find a way to shoehorn their length into some pipe to somewhere. $1/bbl sounds like nothing now, but it was a huge profit/loss in those days.
I heard that gasoline/oil product barges on the Mississippi/Ohio Rivers & Intercoastal Canal are "very tight".
AFAIK, these are often used for blending components and specialty products.
Best Hopes,
Alan
OilcoEx,
Where do you find information like this: "Colonial pipeline going on proration". Please do tell.
was all over the energy news last week when gasoline dropped hard. Here's one story I just googled for
http://www.chron.com/disp/story.mpl/business/4828033.html
"motor gasoline demand has averaged over 9.4 million barrels per day, or 1.4 percent above the same period last year."
That suggests a pretty low elasticity in demand amongst American drivers. As someone said above, $4 gasoline isn't going to keep many people awake at night. Over here in UK standard petrol is just short of £1 a litre - by my calculation £1/litre = $7.15 / US gallon. And although we tend to run more economical vehicles, some people still drive as if it comes out of a tap for nothing.
if you can afford London real estate, gasoline at $7/US Gallon is a pittance!
Demand for gasoline is ridiculously inelastic. That's becuse people _must_ commute to work. The only way to elastify demand is to mandate a 4 day workweek, giving everyone a 3 day weekend every weekend. Let prices soar, and demand will drop as people stay home on those long weekends. Personally, I'd LOVE 3 day weekends every weekend. My social life would improve by 50 percent! Adding some more holidays would help too. Who _really_ likes to go to work anyways?
Sure, some Americans could use other commuting methods, but most Americans have no choice but to drive to work. With suburban sprawl as it is, they are trapped. Hence near-zero elasticity in demand.
Petrol prices high enough yet? Just wait!
The bad news is not that prices are high and inventories low, it is that, despite all that, the demand juggernaut continues its merry pace. Put this in the context that we need to do something radical in the next ten years or less to curb demand and the consider what we are (not) doing to make this happen.
The further bad news is that lower prices will just increase demand further. Using the market to influence supply just guarantees that we will experience yoyo pricing which does nothing to keep long term demand down and decreasing.
It takes decades to deplete giant oil fields like Prudhoe Bay, the largest oil field in North America.
During George Bush's eight years in office, the world will have consumed--from fossil fuel + nuclear sources--the energy equivalent of about 50 Prudhoe Bay Fields (about 600 Gb of oil equivalent energy).
Yes, and at about 20% or more of that, the US drained about a dozen Prudhoes worth. That's about one and a half a year. So nice of those cash strapped exporting countries to volunteer their 'surplus'. Or was it 'plata o plomo', the Mexican saying for silver or lead?
Somewhere in the Drumbeat it was mentioned that the US uses 40% of the world's gasoline. Wild. It's looking more and more like we are living in those interesting times that the old Chinese proverb refers to.
Has somebody an explanation for the low gasoline inventory and the high distillate (diesel) inventory? The difference in demand seems not to be the reason.
Could it be that less light oil and more heavy is refined and the heavier input leads to less gasoline and more diesel yield??
Gunther
One explanation I've heard is that less "stuff" is being shipped on railroads and trucks, which IMO reflects Americans being forced to cut back on discretionary spending in order to pay for rising food and energy costs.
"Cut thy spending and get thee to the non-discretionary side of the economy."
it's called summer ;).
Refiners are still running as hard as they can. With shutdowns they're having trouble keeping up with demand on gasoline. Meanwhile heating oil demand is nil as it's warm out. The only real demand is for trucks/trains/heavy equip + a few private cars. Stocks build on distillate from now to Dec to get ready for winter. Go look at NYMEX heat futures if you want to see why tanks are filling on mid distillate. 15 cts from now to next winter --- pays for a bit of tankage.
RR, thank you for all your hard work and regular reports!
RR, thank you for all your hard work and regular reports!
+1...and thanks also for your contributions in holding up the Drumbeat for the last few days. Please keep us informed on the US gasoline situation.
U.S. petrol prices are high only in comparison to the past few years. The "real" inflation adjusted price is still below the previous peak in 1980-81, and doesn't come anywhere near to recovering the cost of U.S. forces deployed in the Middle East (whether or not one agrees with our presence there). A GAO study released in 2005 suggested that cost was in the area of $1.75-2.00/gallon.
It's also worth bearing in mind that as a percentage of consumer expenditures, petrol expenditures have declined significantly since 1980-81. How else can one explain the perceived inelasticity of U.S. demand, despite "high" nominal prices?
An article in the Thu, 31 May 07 Wall Street Journal (page D1) compared the fuel economy of a a 2007 Honda Civic to a 1986 Civic CRX and noted that the fuel economy of the former is nowhere near the latter. Why? Because the weight of virtually all vehicles has increased significantly, due in no small part to mandated safety equipment, as well as the mindless pursuit of more horsepower, ever larger vehicles, etc. Couple the trend toward larger, heavier vehicles with declining (in terms of overall consumer expenditures) relative petrol prices, and it's hardly a surprise that petrol demand remains strong.
It surprises me - well, maybe not - that politicians of both parties haven't increased the "real" price of petrol by increasing the Federal and State excise taxes so as to drive consumer demand toward more fuel efficient vehicles. A Federal excise tax of $1.00/gallon would provide enough revenue to reduce or eliminate the Alternative Minimum Tax, the marriage penalty, fund rapid transit improvements or pet social programs advanced by politicians.
Until the "real" price of petrol is high enough to force consumers to think twice about how it's used, consumption will continue to increase.
"... The only easy day was yesterday ..."
One more major refinery down today.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reut...
hardly a major shutdown. Losing a gas compressor means their flare went off giving people a big show. Doubt the refinery was much affected overall though.
yeah, sounds like they lost a HDS unit. what is with all of the compressor issues as of late? I've heard of several places having similar problems. maybe a lack of PM?
compressor failures have always been common in my experience. They are large complicated devices under a lot of stress by design. They just get noticed more as when one fails the only thing you can do with the gas in the very short term is dump it to flare. Really lights up a night sky and scares people.
"It surprises me - well, maybe not - that politicians of both parties haven't increased the "real" price of petrol by increasing the Federal and State excise taxes so as to drive consumer demand toward more fuel efficient vehicles"
That would eliminate the politicians.
Anyone read the cover-story article in the May 26 New Scientist titled "Earth's natural wealth: an audit"?
I failed to notice any mention of it here but maybe that is a result of me not being diligent enough in my stalking of TOD.
The Kamchatka "discovery" was not by drilling as I presumed, but there might be 10 billion barrels based on seismic data. I found they were supposed to be drilling in that area in 2007 and to do more drilling in 2008, however there has been no discovery by drill bit.
Whiting, In. BP refinery still not back up all the way. Now CNBC says it was a fire in the crude units. (Hope they get it right one of these times, LOL.) BP has declared 'Force Majeure' with their Canadian suppliers of crude to get out of deliveries to Whiting.
Yea, sounds like Colonial had a little burp, down for part of a day, enough to back up the delivery schedule, it has been fully nominated for years now, hard to say how long it may take to get caught up with nominations.
Luckily there is spare capacity on Explorer and Texas Eastern yet. And Williams Bros. serves a decent throughput into the midwest also.
Rail and truck shipments of fuels are generally just the last step to the gas station from the terminal. Any volume over any distance is severely cost-prohibitive and would only take place to alleviate some kind of emergency.
The only real exceptions to this general rule I can think of are Fuel Oil shipments to railroads via tank car and Propane into areas that aren't served by pipelines that accept LPGs.
I also am amazed that demand has not been dealt a serious blow yet. It means higher yet for the price is the only way to go... sigh