This page has been archived and commenting is disabled.
Oil Market Shell Games
By EconMatters, 6pm US CST, April 30, 2015
Magical Sleight of Hand
The old shell game of three shells and a pee where the viewer tries to guess under which shell the pee resides is often used to manipulate participants in order to take their money. Well the oil storage market is just about as shady as some guy on the corner trying to steal your money with deceptive sleight of hand in the age old shell game.
Cushing Oklahoma & the Gulf Coast is One Giant Storage PADD
Reporters and analysts focus of the Cushing Oklahoma levels, and noticed a draw in supplies, but this is the wrong metric to look at when analyzing what is taking place with regard to storage levels at Cushing Oklahoma.
Cushing Oklahoma did have a 500,000 barrel drawdown in overall supplies, however the Gulf Coast had a 1.4 Million build in supplies. Cushing oil supplies stand at 61.7 Million Barrels, and the Gulf Coast stands at 243.9 Million Barrels of oil in storage facilities.
Gulf Coast Storage Capacity
Does the Gulf Coast need any more oil for their refinery operations? Hardly, last year at this time the Gulf Coast had 215.3 Million barrels in storage, so the Gulf Coast has more than enough oil in storage to last the entire summer refining season in support of the export gasoline and refined products operations along the Gulf Coast.
Last year the Gulf Coast ended Labor Day the official end of the summer driving season at roughly 190 Million Barrels of oil in storage to give readers an idea of how much extra oil gets drained from Gulf Coast storage facilities during the heavy refinery utilization peak period for demand.
.png)
306 Million Barrels in Storage for two Regional Hubs
It is also worth noting that Cushing had 25 Million Barrels in storage this time last year, so in combination the two storage hubs which really should be counted as one storage hub for all intents and purposes has added almost 65 Million barrels of oil to storage during the past year. The combined storage facilities now have 306 Million barrels of oil with no place to go, no refinery needs, just sitting there taking up storage space and costs.
Fracklog
No wonder the last year has brought about the term Fracklog because the number of already drilled oil wells that are waiting for prices to recover before they start pumping totals more than 3,400 for the top three producing shale fields in Bakken, Eagle Ford and the Permian. There are more than 4,000 already drilled wells in total waiting to go online across the United States. One can really think of this metric as another form of storage facilities. When you add up all the Millions of barrels waiting to be pumped from these wells, the SPR, and the 5 storage PADD Regions we literally have become one giant storage facility here in the United States of Oil. And this doesn`t count the number of container ships parked off the coast and in ports waiting for higher prices before it finds a home.
Long-oriented Market
The oil market is a long oriented market, many participants have a vested interest in keeping it as high as possible by whatever means are necessary, and if that means moving the oil around from one storage PADD to another, having an armada of ships filled to the gills guarding our coasts, or being in Fracklog denial by golly they are going to make those oil prices rise. Build it and they will come mentality is prevalent in the oil industry.
3.png)
Peak Demand in 10 Years
2.png)
The problem is that the oil industry is a dying technology and all these nations are filled to the gills with a dying resource. The future is alternative Industry like solar, advanced battery storage, and electric modes of transportation all fueled with a form of energy better and more efficient than fossil fuels. Forget about Peak Oil, the new buzzword is Peak Demand, and in 50 years the oil industry will be another carcass on the side of the road of human advancement and evolutionary progress. Oil companies better not wait too long storing oil trying to manipulate the market for higher prices, as the world is going to need less and less of this stuff in the developed world every year, and the third world will be the next to replace fossil fuels and that demand curve will start declining as well. In short the oil market is a declining business over the next 50 years, and will ultimately go the way of the horse carriage.
© EconMatters All Rights Reserved | Facebook | Twitter | Free Email | Kindle
»
- advertisements -
Haaa fucking haaaa haaaa.......alternative energy. What a gas. pun intended. Solar. Right. The reality is that technology has changed the game. We have unlocked a way to get oil and gas so rapidly that the oil industry gate keepers can no longer stop the incoming flood of oil. Their monopoly is over. Those in power propped up the middle east and have used it as a foil and scapegoat for high prices while they set up phony environmental movements in the US and Europe to thwart our energy production. Fracking has become the equivelent to printing money with oil.. But now that allot larger number of entities have printing presses (fracking technology) they are printing oil as fast as the cb's are printing money. And we all know what happens when money is printed. Its value drops. Now, the situation is that as these frackers all wait for oil prices to rise, they turn off the spigots and wait for the profit level to come back. Well, these frackers are going to all start accepting lower and lower prices to turn their taps on. Sooner or later a real market price will be realized but that does not happen until supply and demand reach equilibrium and that is nowhere near. The collapse in oil prices s good for us. Bad for the oil barrons. Get used to low oil prices.....until they make fracking illegal. The government will have to step in and make criminals out of the frackers to put the arabs in control again. But the genie is out of the bottle. Fracking is happening apl over the planet. As for alternative energy, whatever. Why try to make an alternative energy when we have an abundant energy supply ready to be tapped. Sorry unicorn rainbow farting crowd, but you are fucking gullible rubes.. The smart money is not in tue oil industry and it sure as hell is not in alternative energy.
Peak Oil + Peak Demand = Peak Confusion
The untapped well inventory is absolutely irrelevant. Relevant is the generation of supply at prices which the market could afford. It is well known that the development of the fracking industry in the US was a wrong bet on further significantly increasing oil and gas prices. One day the world will have consumed all accessible hydrocarbons and it seems naive to assume that the reserves shall remain unutilized. To me the development of solar energy has been so far a dissapointment since I do not live in California. I agree with the well worded comment supplied by Schacht Mat below.
Industry predicitons often follow the same pattern as stock market sentiments; ie: they tend to overshoot and undershoot, when a more balanced perspective is in fact appropriate. The symptomology; ie: that oil inventories are up and will remain elevated for another 18 months or so until the fracklog clears is well placed; however, the causology is asscoiated with peak debt loading in the OECD countries coupled with a demographic shift of consumers into their lower spending years, and not some sudden earth shattering move from fossil fuels to other alternatives. If that were so, then our two more predominant sources of energy, those being electricity and transportation, would be showing significant shifts (on the order of 15% to 25% changes) in their source mix, and that is simply not happening. A couple of percentage points here and there, and those subsidized during a period of peak debt, are political posturing and not sustainable paradigm shifts.
Truthfully told, we do not have either the lithium or the rare earth extraction and refining capacity to enable these shifts in the energy supply mix, not to mention the capital required to enable the infrastructure to develop and sustain alternative energy. And this pardigm shift will only become possible once we have an installed base of short term (under 24 hr) mass energy storage in support of the electricity grid, and a standardized alternative energy based vehicle refueling system/s installed with a density that meets or exceeds 20% of the current installed base of transportation fueling stations. Early adoption and bleeding edge development are not the primary drivers of the current oil glut, and thus it is disingenious to attribute rises in crude inventories to a paradigm shift to alternative renewable energies.
But by all means - if this article's purpose is to provide a path to a pre determined conclusion with the same level of scrutiny and impartial assessment as is found in the advertising industry - have at it - just understand the nature of the product that you are consuming (just like the energy industry, it is in fact traditional as opposed to "älternative")
If battery technology and solar power generation keep decreasing in cost/kWh and performance as they do today, the author is right. 5 years from now.
"three shells and a pee"? You might consider getting a wrong word checker to go along with your spell checker.
Methinks this author should give a read of Kunstler's The Long Emergency. The technology that replaces oil can only be built in factories powered by cheap oil.
Good catch on the long futures.
That's gonna leave a mark.
Pea not pee perhaps?
First fucking sentence. How are you supposed to take the rest seriously after that.
WTF people?