Oil is selling for less than $10 across key North American hubs(worldoil.com)
worldoil.com
Oil is selling for less than $10 across key North American hubs
https://www.worldoil.com/news/2020/3/31/oil-selling-below-10bbl-at-key-american-hubs
153 comments
I’m not sure it would be practicing good social distancing to do a ton of construction work to double capacity, but yes, now would be a good time to fill existing reserves. Even oil tankers are getting reserved to store oil for later.
I don't know. Since the entire country is in lockdown the infrastructure arm of the Dutch government has been fast-tracking all kinds of infrastructure maintenance and upgrades that would usually disrupt traffic.
And road crews generally don't need to be super close to work effectively. Brilliant.
Not to mention that often times construction workers use respirators as part of their job.
The petroleum industry is much lighter on manpower-per-unit-profit than most other industries, and the job sites involved tend to allow workers to stay away from society for extended periods of time.
Oil tankers that are converted to FPSOs and FSOs are among the most expensive storage available for crude.
Oil tankers that are converted to FPSOs and FSOs are among the most expensive storage available for crude.
It looks like the current US administration agrees with this line of thinking [1].
[1] https://www.worldoil.com/news/2020/3/13/trump-to-fill-us-str...
[1] https://www.worldoil.com/news/2020/3/13/trump-to-fill-us-str...
What is the shelf life of oil?
Is there a point where not using the stored reserves by a certain year would make it unusable if bought today?
Is there a point where not using the stored reserves by a certain year would make it unusable if bought today?
Crude's been sitting in those formations since the dinos.
It's not going bad in a couple years. Petrol expires because it is heavily refined, cracked etc for higher octane rating at the cost of shelf-life.
To be fair, the conditions under ground are very different from the conditions in a tanker.
The u.s. strategic reserve is stored in salt mines.
Unrefined it is basically infinite. If it is refined it varies from months to years, to potentially decades depending on exactly what it is. But worst case, you can always refine it again if it goes bad.
Trump wanted that in the stimulus package, but it got tossed out somewhere along the way (I.e. it wasn’t funded).
Not sure who took it out, but it seemed like a great opportunity.
Not sure who took it out, but it seemed like a great opportunity.
What could this mean on a local/consumer level? Is there the potential to have a manufactured shortage?
No, you wouldn't have a manufactured shortage, because any one of the several entities with a strategic reserve could defect from the others and sell its product when the price increases. Not to mention that investment in production activity would sharply increase if spot price were to rally significantly.
On a consumer level, it would just delay the inevitable price decline of oil, heating fuel, diesel, gasoline, resid, and jet fuel, and that delay would be harmful to alternative energy investment and electric car sales. Not to mention it would benefit China, a place where industrial activity has already been rebooted.
The economy isn't down because oil prices are down. It's quite the opposite; the oil market is reflecting the economic reality. Prices were declining even prior to the OPEC+ meeting. If it were not for the market already softening, nobody would have been discussing additional production curbs at all. We had a mild winter, so heating fuel demand was low. Industrial production was interrupted, so that hurt demand for residual fuels that give energy to factories and power generation plants, as well as the ships that carry goods across oceans. Diesel was affected for the same reason. Jet fuel demand is down due to the complete standstill of the travel industry. Even bitumen and carbon black should see decreased demand because when people stop commuting and traveling, there is less need to resurface roads and replace tires. Plus, if you're not driving your car, you're not buying much gasoline.
Those are massive, natural reasons why demand is down for gasoline, middle distillates, and heavy residues. You can't bring that demand back by simply pumping a few-hundred-million barrels of oil into the ground for storage.
The way to induce a manufactured shortage would be by imposing import restrictions or tariffs.
On a consumer level, it would just delay the inevitable price decline of oil, heating fuel, diesel, gasoline, resid, and jet fuel, and that delay would be harmful to alternative energy investment and electric car sales. Not to mention it would benefit China, a place where industrial activity has already been rebooted.
The economy isn't down because oil prices are down. It's quite the opposite; the oil market is reflecting the economic reality. Prices were declining even prior to the OPEC+ meeting. If it were not for the market already softening, nobody would have been discussing additional production curbs at all. We had a mild winter, so heating fuel demand was low. Industrial production was interrupted, so that hurt demand for residual fuels that give energy to factories and power generation plants, as well as the ships that carry goods across oceans. Diesel was affected for the same reason. Jet fuel demand is down due to the complete standstill of the travel industry. Even bitumen and carbon black should see decreased demand because when people stop commuting and traveling, there is less need to resurface roads and replace tires. Plus, if you're not driving your car, you're not buying much gasoline.
Those are massive, natural reasons why demand is down for gasoline, middle distillates, and heavy residues. You can't bring that demand back by simply pumping a few-hundred-million barrels of oil into the ground for storage.
The way to induce a manufactured shortage would be by imposing import restrictions or tariffs.
1. The price of oil won't necessarily go up from here. If it goes to $5/bbl, that will make governments look a bit stupid when they filled every storage space available at $15/bbl in the open market. One scenario where price doesn't increase would be if there is destruction of demand for commuting, as people realize they can work from home just fine in the long term. Another would be if auto prices increase due to automakers shutting down production lines. A third would be if vacation travelers are still spooked by residual outbreaks after travel restrictions are lifted. On the production side, we haven't seen the kind of capitulation that would be required to change the who's-who of the market; the fracking industry has yet to go over the precipice and there's no sign of renewed OPEC+ cooperation, so there's no organic reason yet for prices to increase.
2. Strategic reserves are generally in salt domes and other accessible underground formations, so there is actually a cost to filling them and also to pumping them empty. And you can't exactly "double capacity" without buying old wells from corporations. So what you are proposing would actually be a bailout for oil producers.
3. Petroleum reserves are not terribly useful to the economy, aside from two particular cases: war and natural disaster. In war, supply chains get interrupted and fuel demand goes up. In natural disasters, production and storage can be interrupted. Outside of those two things, the ability for frackers and other high-cost producers to come online and sell oil will naturally act as a resistance to skyrocketing fuel prices in times of supply shock.
4. This could be a massive moment for renewable energy; goods transportation costs are very low and many people will be seeking work once the pandemic abates, so the government could establish WPA-style programs to build wind farms, electrical grid improvements, and solar farms -- instead of spending that money on buying fossil fuels in order to pump them back into the ground. Instead of spending money in an attempt to cling to fossil fuels, we could use this moment as an opportunity to pivot.
5. The sooner the price of oil bottoms and a few overextended frackers devalue themselves by selling at a loss in order to generate cash flow, the more likely it is that Saudi Arabia will be satisfied with the results of its price war and will return to the negotiating table to re-establish output curbs. If you try to artificially boost the price by buying crude, all you will end up doing is delaying the natural solution. Low prices solve the problem of low prices, by pushing many market participants out of the supply side and allowing the survivors to push up prices again in an attempt to capture their larger market share at a price point with a favorable profit margin.
6. Strategic petroleum reserves aren't that big, and many of them were already quite full prior to the selloff. Even the US SPR had only enough capacity to absorb all Saudi production for less than two weeks.
2. Strategic reserves are generally in salt domes and other accessible underground formations, so there is actually a cost to filling them and also to pumping them empty. And you can't exactly "double capacity" without buying old wells from corporations. So what you are proposing would actually be a bailout for oil producers.
3. Petroleum reserves are not terribly useful to the economy, aside from two particular cases: war and natural disaster. In war, supply chains get interrupted and fuel demand goes up. In natural disasters, production and storage can be interrupted. Outside of those two things, the ability for frackers and other high-cost producers to come online and sell oil will naturally act as a resistance to skyrocketing fuel prices in times of supply shock.
4. This could be a massive moment for renewable energy; goods transportation costs are very low and many people will be seeking work once the pandemic abates, so the government could establish WPA-style programs to build wind farms, electrical grid improvements, and solar farms -- instead of spending that money on buying fossil fuels in order to pump them back into the ground. Instead of spending money in an attempt to cling to fossil fuels, we could use this moment as an opportunity to pivot.
5. The sooner the price of oil bottoms and a few overextended frackers devalue themselves by selling at a loss in order to generate cash flow, the more likely it is that Saudi Arabia will be satisfied with the results of its price war and will return to the negotiating table to re-establish output curbs. If you try to artificially boost the price by buying crude, all you will end up doing is delaying the natural solution. Low prices solve the problem of low prices, by pushing many market participants out of the supply side and allowing the survivors to push up prices again in an attempt to capture their larger market share at a price point with a favorable profit margin.
6. Strategic petroleum reserves aren't that big, and many of them were already quite full prior to the selloff. Even the US SPR had only enough capacity to absorb all Saudi production for less than two weeks.
5. I'm genuinely confused about this. Is the price war a war between Russia and S.A. about market share or is it a war on U.S. frackers about the prices in general? I'd take some combination of the two as a reasonable answer.
I guess it's probably the latter: RF wants to kill US fracking industry.
Maybe even payback for US trying to derail Nord Stream 2, or sanctions, or just all the anti-Russia bullshit in general.
> So what you are proposing would actually be a bailout for oil producers
In my mind a bailout is cash in exchange for nothing. If you're paying someone for the usage of something they own, isn't that just commerce?
In my mind a bailout is cash in exchange for nothing. If you're paying someone for the usage of something they own, isn't that just commerce?
The thought of humanity destroying the environment to get the oil and then, in a fit of panic and at great expense, pumping it back into the ground, caused me to erupt in laughter.
> Petroleum reserves are not terribly useful to the economy, aside from two particular cases: war and natural disaster.
It's not even clear that the US one is useful for war anymore. At the time it was built, the US was a net importer of about 5 million barrels/day of oil, so it made sense to have a buffer allowing the country to weather a few months of an embargo. But now the US is a net exporter. The strategic petroleum reserve can handle withdrawal of about 4 million barrels/day, compared to about 11 million barrels/day of regular US production, which is more than enough for total domestic demand. And the regular production is more geographically distributed and redundant. If anything, just leaving the oil in the ground in its original locations is a better strategic reserve nowadays, compared to pumping it out of one part of the US, only to pump it back into the ground in a different part of the US, into a facility that forms more of a single point of failure, and doesn't even have a faster withdrawal rate. That's just shuffling oil around between different holes in the ground as a kind of make-work job.
It's not even clear that the US one is useful for war anymore. At the time it was built, the US was a net importer of about 5 million barrels/day of oil, so it made sense to have a buffer allowing the country to weather a few months of an embargo. But now the US is a net exporter. The strategic petroleum reserve can handle withdrawal of about 4 million barrels/day, compared to about 11 million barrels/day of regular US production, which is more than enough for total domestic demand. And the regular production is more geographically distributed and redundant. If anything, just leaving the oil in the ground in its original locations is a better strategic reserve nowadays, compared to pumping it out of one part of the US, only to pump it back into the ground in a different part of the US, into a facility that forms more of a single point of failure, and doesn't even have a faster withdrawal rate. That's just shuffling oil around between different holes in the ground as a kind of make-work job.
Part of the strategy is that you don't know if those other wells are going to exist decades from now. The US was a net exporter in the early 1900s as well, but things changed.
> The price of oil won't necessarily go up from here. If it goes to $5/bbl, that will make governments look a bit stupid when they filled every storage space available at $15/bbl in the open market.
Companies can't actually produce oil for $5/bbl. In the long term that price would drive some of the producers out of the market and then the price would increase. It might go lower than it is right now before it goes back up, but it won't stay at $5/bbl in the long-term. They might give up the chance to pay $5/bbl instead, but it's unlikely they'd be losing money on the deal. Assuming they actually resell the oil when the price rebounds.
> This could be a massive moment for renewable energy; goods transportation costs are very low and many people will be seeking work once the pandemic abates, so the government could establish WPA-style programs to build wind farms, electrical grid improvements, and solar farms -- instead of spending that money on buying fossil fuels in order to pump them back into the ground. Instead of spending money in an attempt to cling to fossil fuels, we could use this moment as an opportunity to pivot.
WPA-style programs were never really efficient. They came out of the Keynesian argument that it's better to pay someone to dig holes and fill them back in than have them unemployed, because they're still not doing anything useful but at least then they have money to spend in the economy, and if you can get them to work doing anything even marginally useful then even better.
The biggest problem with it is that you're better off to just give them the money unconditionally (so they have it to spend) and then let them find a normal job with a normal level of productivity while still receiving the extra money, because there would be plenty of normal jobs now that everyone has some money to spend again and normal jobs are more productive than makework.
But that brings us back to the low oil prices. If you're going to stimulate employment by handing out cash, where does it come from? A carbon tax is a damn fine source, but even better when you have low oil prices, because then consumers don't feel it as much. And then you get your green jobs, automatically, because the carbon tax keeps oil and coal more expensive than electric cars and solar panels, and then there's a lot of demand for building electric cars and solar panels from all the people with money to spend because they're receiving the dividend from the carbon tax.
> The sooner the price of oil bottoms and a few overextended frackers devalue themselves by selling at a loss in order to generate cash flow, the more likely it is that Saudi Arabia will be satisfied with the results of its price war and will return to the negotiating table to re-establish output curbs.
I don't know about that. I think everybody sees the writing on the wall here -- we can't burn the known reserves we have in the ground or the world is totally screwed, so somebody is going to end up sitting on a whole lot of oil and coal that doesn't get sold before the world switches away from it. Nobody wants to be the ones holding the bag so everybody is now trying to sell their reserves for whatever they can get before one solution or another shuts down the demand permanently. That's not likely to change even if some of the producers go bust.
What gets price back up (some, maybe never fully to where they were) isn't the Saudis cutting production after the frackers go bust, it's just the frackers going bust. Which they'd still do even if we topped up the reserves, because that by itself wouldn't get the price up to where they'd need it to stay in business.
The real question is, if we top up the reserves, what are we supposed to do with them then? Do we want to be the ones holding the bag?
Companies can't actually produce oil for $5/bbl. In the long term that price would drive some of the producers out of the market and then the price would increase. It might go lower than it is right now before it goes back up, but it won't stay at $5/bbl in the long-term. They might give up the chance to pay $5/bbl instead, but it's unlikely they'd be losing money on the deal. Assuming they actually resell the oil when the price rebounds.
> This could be a massive moment for renewable energy; goods transportation costs are very low and many people will be seeking work once the pandemic abates, so the government could establish WPA-style programs to build wind farms, electrical grid improvements, and solar farms -- instead of spending that money on buying fossil fuels in order to pump them back into the ground. Instead of spending money in an attempt to cling to fossil fuels, we could use this moment as an opportunity to pivot.
WPA-style programs were never really efficient. They came out of the Keynesian argument that it's better to pay someone to dig holes and fill them back in than have them unemployed, because they're still not doing anything useful but at least then they have money to spend in the economy, and if you can get them to work doing anything even marginally useful then even better.
The biggest problem with it is that you're better off to just give them the money unconditionally (so they have it to spend) and then let them find a normal job with a normal level of productivity while still receiving the extra money, because there would be plenty of normal jobs now that everyone has some money to spend again and normal jobs are more productive than makework.
But that brings us back to the low oil prices. If you're going to stimulate employment by handing out cash, where does it come from? A carbon tax is a damn fine source, but even better when you have low oil prices, because then consumers don't feel it as much. And then you get your green jobs, automatically, because the carbon tax keeps oil and coal more expensive than electric cars and solar panels, and then there's a lot of demand for building electric cars and solar panels from all the people with money to spend because they're receiving the dividend from the carbon tax.
> The sooner the price of oil bottoms and a few overextended frackers devalue themselves by selling at a loss in order to generate cash flow, the more likely it is that Saudi Arabia will be satisfied with the results of its price war and will return to the negotiating table to re-establish output curbs.
I don't know about that. I think everybody sees the writing on the wall here -- we can't burn the known reserves we have in the ground or the world is totally screwed, so somebody is going to end up sitting on a whole lot of oil and coal that doesn't get sold before the world switches away from it. Nobody wants to be the ones holding the bag so everybody is now trying to sell their reserves for whatever they can get before one solution or another shuts down the demand permanently. That's not likely to change even if some of the producers go bust.
What gets price back up (some, maybe never fully to where they were) isn't the Saudis cutting production after the frackers go bust, it's just the frackers going bust. Which they'd still do even if we topped up the reserves, because that by itself wouldn't get the price up to where they'd need it to stay in business.
The real question is, if we top up the reserves, what are we supposed to do with them then? Do we want to be the ones holding the bag?
Surprisingly, we can produce oil for even less than $5/bbl out of existing reservoirs. I can't imagine any new project every going ahead at a $5/bbl price, but the facility I work at could go for years and years at a lifting cost of $5/bbl. And if demand is in enough decline, then you don't even need any new projects. I'm not saying that $5/bbl is credible, but there is absolutely nothing to guarantee that prices will increase from here.
On another topic, unfortunately this is a 'massive moment for renewable energy' but not in a good way. Their great competitor, fossil fuels, have now just tripled their cost-effectiveness. And government subsidies for renewables are also being pinched to balance budgets.
In an interesting twist, the fossil fuel company I work at are now on the hunt for 'distressed assets' in the renewables industry.
I have no idea what our current situation means long term for climate change, but cheap oil is going to be with us for some time now.
On another topic, unfortunately this is a 'massive moment for renewable energy' but not in a good way. Their great competitor, fossil fuels, have now just tripled their cost-effectiveness. And government subsidies for renewables are also being pinched to balance budgets.
In an interesting twist, the fossil fuel company I work at are now on the hunt for 'distressed assets' in the renewables industry.
I have no idea what our current situation means long term for climate change, but cheap oil is going to be with us for some time now.
I didn't mean to suggest that nobody can extract oil at $5/bbl but rather that not everybody can. When the people who can't do that go bust, supply goes down, price goes up. Also, $5/bbl would generally tend to stimulate demand -- not in the midst of this coronavirus obviously, but eventually that will pass.
Oil was above $60/bbl three months ago. A rebound wouldn't have to be $60, it could just be $20 or $30.
It would only stay around $5/bbl if we actually do the carbon tax or something of a similar nature. That could suppress demand to an arbitrary degree indefinitely and then wholesale prices might never rebound.
Oil was above $60/bbl three months ago. A rebound wouldn't have to be $60, it could just be $20 or $30.
It would only stay around $5/bbl if we actually do the carbon tax or something of a similar nature. That could suppress demand to an arbitrary degree indefinitely and then wholesale prices might never rebound.
Yes, you may have heard before but global warming is something to think long term about it
The strategic reserves are one time and not immense.
And that oil isn't necessarily burnt.
Oil is dying. Fossil fuels are dying. Not in a hopeful environmental sense, but in an economic sense.
Electric cars are here, not in some far off hopeful environment with a few for rich people and nerds but here. Countries have mandated electric only in the near future. Coal mines are going broke. Renewable energy is often cheaper than fossil fuel energy.
This whole price crash is because two countries whose economies rely very heavily on oil profits can't really survive on $50 once they got used to $100 oil. Oil is $22 today because the monopoly was broken with North American oilsands kinds of production and enormous in ground capacity puts a price cap on oil.
We're watching two countries fight over the scraps of the oil market. Now this is on the scale of decades, but it's not just far off thinking but near-term risk of oil demand plummeting ... the current world economic shutdown is just a little extra nudge.
If we filled and doubled all of those strategic petroleum reserves, there would be serious doubt if they would ever – ever be used.
We are in the early stages of exponential growth of batteries replacing fossil fuels. After a generation, internal combustion will seem quaint.
Electric cars are here, not in some far off hopeful environment with a few for rich people and nerds but here. Countries have mandated electric only in the near future. Coal mines are going broke. Renewable energy is often cheaper than fossil fuel energy.
This whole price crash is because two countries whose economies rely very heavily on oil profits can't really survive on $50 once they got used to $100 oil. Oil is $22 today because the monopoly was broken with North American oilsands kinds of production and enormous in ground capacity puts a price cap on oil.
We're watching two countries fight over the scraps of the oil market. Now this is on the scale of decades, but it's not just far off thinking but near-term risk of oil demand plummeting ... the current world economic shutdown is just a little extra nudge.
If we filled and doubled all of those strategic petroleum reserves, there would be serious doubt if they would ever – ever be used.
We are in the early stages of exponential growth of batteries replacing fossil fuels. After a generation, internal combustion will seem quaint.
>Coal mines are going broke.
Maybe some are, but world coal consumption is actually increasing. Imho the bigger effect here is developed countries externalizing pollution and manufacturing costs (electric cars take a lot more energy to make) to countries that don't mind burning whatever they can find. China has enormous reserves of brown coal - they'll happily burn it to make our solar panels and wind turbines.
http://theconversation.com/explaining-the-increase-in-coal-c...
Maybe some are, but world coal consumption is actually increasing. Imho the bigger effect here is developed countries externalizing pollution and manufacturing costs (electric cars take a lot more energy to make) to countries that don't mind burning whatever they can find. China has enormous reserves of brown coal - they'll happily burn it to make our solar panels and wind turbines.
http://theconversation.com/explaining-the-increase-in-coal-c...
Even if 100% of the fuel used in the US were renewables, we'd still need oil. Petrochemicals are a foundation of modern industry.
How fast do you think America or the world will transition away from gas cars? Be realistic. Is there any way you see that happening in less than 25 years?
Yes, people get new cars rather frequently. 50% of new cars by 2030 easily.
With the upcoming generation, driving an ICE car will be a social stigma, and electric a status symbol.
With the upcoming generation, driving an ICE car will be a social stigma, and electric a status symbol.
For many people, a new-to-them car, is a used car. As long as used ICE vehicles are cheaper than Elec vehicles, there will be a significant demand.
Median age of cars on the road today is a little under 11 years.
Growing global warming problems and anti-environmenalist population aging means there will be growing support for taxing ICE and incentivizing electric vehicles.
The used market will begin to include more and more electrics.
Electrics are far cheaper to operate, competition and economies of scale will make electrics cheaper because they are far mechanically simpler.
Some places already have plans for banning ICE vehicles, cost be damned.
Growing global warming problems and anti-environmenalist population aging means there will be growing support for taxing ICE and incentivizing electric vehicles.
The used market will begin to include more and more electrics.
Electrics are far cheaper to operate, competition and economies of scale will make electrics cheaper because they are far mechanically simpler.
Some places already have plans for banning ICE vehicles, cost be damned.
Maybe in San Francisco.
I like your optimism but I’d still like those reserves filled up for cargo planes, fighter jets, helicopters, tanks, big trucks, etc. that, due to energy density, I’m not sure will run on batteries for quite some time, if ever.
https://www.eia.gov/todayinenergy/detail.php?id=9991
https://www.eia.gov/todayinenergy/detail.php?id=9991
Cars are hardly the only driver for fossil fuels.
Why oil price is crashing is simply variance in the greater scheme of things. Not some death knell to it, not in 2020. Industry will take far far longer to convert to electrical/alternative methods of energy.
Though I'll concede that oilsands/hydraulic fracking dealt a serious blow to oil prices worldwide.
Why oil price is crashing is simply variance in the greater scheme of things. Not some death knell to it, not in 2020. Industry will take far far longer to convert to electrical/alternative methods of energy.
Though I'll concede that oilsands/hydraulic fracking dealt a serious blow to oil prices worldwide.
Industry is electric by wide margins.
Batteries are cheaper than electric peak plants. Solar and wind are cheaper than coal and still benefiting from economies of scale and technology development.
Getting energy from the sun and wind is already cheaper than some fossil fuel sources. Conversion will accelerate as that gap widens.
Batteries are cheaper than electric peak plants. Solar and wind are cheaper than coal and still benefiting from economies of scale and technology development.
Getting energy from the sun and wind is already cheaper than some fossil fuel sources. Conversion will accelerate as that gap widens.
With oil so abundant and cheap - there's a renewed appeal in gas-operated cars.
So there are two general approaches people take to booms. Your income suddenly balloons and you have a choice.
Some people will expand their living standards to match their increased income. Others won't and will simply reap the extra rewards later. Some will know that winter is coming. Others just will know what they need and are not controlled by unconstrained wants.
Whenever the boom inevitable ends the first group is always the group that's in trouble.
In the 2000s in Australia was a massive construction boom. Tradesmen made huge money. Some bought expensive cars and houses and holidays. Post-GFC those days were over. Suddenly living on the big country estate was a problem because the $300/week you were spending on petrol was suddenly an issue.
Bringing this back to oil, on the one hand we have Norway who used their resource riches to create a sovereign wealth fund that last I heard was around $1T. On the other you have Venezuela, Russia and Saudi Arabia, where huge profits were pocketed by oligarchs, monarchs and kleptocrats.
At the same time, they needed the oil revenue to placate their people. Breakeven was once $10/barrel, then $20, then $30, then $50. Higher prices of course encouraged companies to invest in more expensive oil fields where the cost of extraction might well be $60+/barrel.
Saudi Arabia once tried to manipulate the market to wipe out the frackers (as the US became a huge net oil exporter). That was never going to work. They'd simply re-emerge when prices inevitable returned.
But now in a market where demand has fallen off a cliff, Saudi Arabia need to sell oil, pretty much at any price, to survive. A protracted price war does not bode well for either country but that's the predicament they're in.
This is another example of the delusion some people are in regarding this pandemic. When it's under control (or, more likely, run its course killing potentially millions), the world won't suddenly go back to the way it was. Capacity might be there but demand will take a long time to recover. You'll see this through the travel industry (particular cruises) and, with things like this, the oil and gas industry too. There's no containing it either.
Some people will expand their living standards to match their increased income. Others won't and will simply reap the extra rewards later. Some will know that winter is coming. Others just will know what they need and are not controlled by unconstrained wants.
Whenever the boom inevitable ends the first group is always the group that's in trouble.
In the 2000s in Australia was a massive construction boom. Tradesmen made huge money. Some bought expensive cars and houses and holidays. Post-GFC those days were over. Suddenly living on the big country estate was a problem because the $300/week you were spending on petrol was suddenly an issue.
Bringing this back to oil, on the one hand we have Norway who used their resource riches to create a sovereign wealth fund that last I heard was around $1T. On the other you have Venezuela, Russia and Saudi Arabia, where huge profits were pocketed by oligarchs, monarchs and kleptocrats.
At the same time, they needed the oil revenue to placate their people. Breakeven was once $10/barrel, then $20, then $30, then $50. Higher prices of course encouraged companies to invest in more expensive oil fields where the cost of extraction might well be $60+/barrel.
Saudi Arabia once tried to manipulate the market to wipe out the frackers (as the US became a huge net oil exporter). That was never going to work. They'd simply re-emerge when prices inevitable returned.
But now in a market where demand has fallen off a cliff, Saudi Arabia need to sell oil, pretty much at any price, to survive. A protracted price war does not bode well for either country but that's the predicament they're in.
This is another example of the delusion some people are in regarding this pandemic. When it's under control (or, more likely, run its course killing potentially millions), the world won't suddenly go back to the way it was. Capacity might be there but demand will take a long time to recover. You'll see this through the travel industry (particular cruises) and, with things like this, the oil and gas industry too. There's no containing it either.
Norway is an outlier in that the Government Pension Fund Global was founded explicitly to avoid rent-seeking behavior and corruption. Every other system to date was initially created to facilitate the opposite, US included. How many oil companies have a council of ethics dictating conflicts of interest for investment?
What is also terrible is that many multinational resource giants (not just oil) actively encourage corruption in countries without stable governance, further advancing their resource curse.
What is also terrible is that many multinational resource giants (not just oil) actively encourage corruption in countries without stable governance, further advancing their resource curse.
Interesting story about Norway's oil industry:
The Iraqi who saved Norway from oil
https://www.ft.com/content/99680a04-92a0-11de-b63b-00144feab...
Spending more doesn’t necessarily mean that you expand your living standards. It can also mean that you finally have the money to put into some necessity that you put off, like fixing your roof.
Negative prices:
It was $ -0.47 on Monday:
https://www.zerohedge.com/s3/files/inline-images/mercuria%20...
Wyoming Asphalt Sour $ -0.08 (was $ -0.19 earlier today)
It was $ -0.47 on Monday:
https://www.zerohedge.com/s3/files/inline-images/mercuria%20...
In inflation-adjusted terms, crude prices have fallen to the lowest since the 1930s
You could sequester a tonne of CO2 for under $30 right now, although the lack of demand of oil may be better for the environment if it manages to long-term reduce production.
Thanks for this comment - it sent me down an interesting rabbit hole.
Sure enough - oil is approximately 85% carbon by mass. A barrel of oil weighs around 140kg, and so contains about 120kg of carbon. Carbon dioxide is 27% carbon by mass, so that barrel of oil, when oxidized, will end up as 440kg of CO2. So 1 tonne of CO2 is 2.3 barrels of oil, which would cost you.... under $30
For comparison, to sequester it after burning would cost probably closer to $100 [1]
I guess this is a long winded way to say that an ounce of prevention is worth a pound of cure.
[1] https://energypost.eu/10-carbon-capture-methods-compared-cos...
Sure enough - oil is approximately 85% carbon by mass. A barrel of oil weighs around 140kg, and so contains about 120kg of carbon. Carbon dioxide is 27% carbon by mass, so that barrel of oil, when oxidized, will end up as 440kg of CO2. So 1 tonne of CO2 is 2.3 barrels of oil, which would cost you.... under $30
For comparison, to sequester it after burning would cost probably closer to $100 [1]
I guess this is a long winded way to say that an ounce of prevention is worth a pound of cure.
[1] https://energypost.eu/10-carbon-capture-methods-compared-cos...
I have actually contemplated a scenario where they pump oil into a hole in the ground for safe-keeping. It has several benefits:
* You're still producing oil meaning jobs are being maintained and money is flowing.
* You're potentially even refining some of it - at least certain types.
* You're safely storing it where it probably won't be stolen and is safely available if it ever increases in value.
* Storage is extremely low cost, potentially even free.
They could even pump it and then store it in the same hole it came from.
Okay that last part is obviously facetious, but there is something absurdly comical about two countries playing a game of chicken with their own petro-economies in the middle of a pandemic.
* You're still producing oil meaning jobs are being maintained and money is flowing.
* You're potentially even refining some of it - at least certain types.
* You're safely storing it where it probably won't be stolen and is safely available if it ever increases in value.
* Storage is extremely low cost, potentially even free.
They could even pump it and then store it in the same hole it came from.
Okay that last part is obviously facetious, but there is something absurdly comical about two countries playing a game of chicken with their own petro-economies in the middle of a pandemic.
The US strategic oil reserve is stored in "artificial caverns created in salt domes":
https://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve_(U...
Also if there is ever a doomsday scenario where we lose our capacity to manufacture solar cells and other renewable generators, extra oil could be really useful for jump starting manufacturing.
raw oil is very toxic, better to leave it where it's already contained.
refined oil has a TTL or expiration date.
refined oil has a TTL or expiration date.
I’ve never heard of crude oil expiring. Is that a thing? And if so, how long does it last?
I've never heard that raw oil is especially toxic. Are you sure you aren't thinking of used oil, which is?
My first job in the oil field was cleaning up oil spills. Specifically crude oil spilled from pipeline breaks as it was pumped from the storage tanks at the well site to refineries from processing.
Oil is a general term that can include everything from fluids like condensate to near asphalt grade fluids depending on the source rock composition, depth of burial, time in oil generation window, and a bunch of other things.
Being a hydrocarbon, it is composed of chains of hydrocarbon molecules in various configurations including things like benzene, a substance known to cause cancer in more states than just California. Many of the central Texas leases I worked on had storage tanks that were marked with signage warning about the presence of benzene and notifying workers to use appropriate protective gear. (late 1970's).
I couldn't count the number of times we had a big spill and I ended up covered head to toe with crude oil. I have no idea what was in it. I know that the hottest fires I have ever seen were crude oil fires. I will never forget all the fire tornadoes I saw swirling on rivers and lakes and in fields as we burned off spilled crude oil.
Anyway, crude oil is full of all kinds of nasty stuff and, like another poster mentioned, also has some produced water along with it that is very briny and frequently full of nasty shit itself. It is so toxic that operators have to pay to dispose of it. Areas around wells and above-ground storage ponds used in the 1920's an d1930's are still dead from the salt that washed out of those ponds and down creeks.
Personally, after 40 years in the business, I hope low oil prices are the nail in the industry's coffin. They dug their own graves and it's time to shove them in and backfill the hole.
Oil is a general term that can include everything from fluids like condensate to near asphalt grade fluids depending on the source rock composition, depth of burial, time in oil generation window, and a bunch of other things.
Being a hydrocarbon, it is composed of chains of hydrocarbon molecules in various configurations including things like benzene, a substance known to cause cancer in more states than just California. Many of the central Texas leases I worked on had storage tanks that were marked with signage warning about the presence of benzene and notifying workers to use appropriate protective gear. (late 1970's).
I couldn't count the number of times we had a big spill and I ended up covered head to toe with crude oil. I have no idea what was in it. I know that the hottest fires I have ever seen were crude oil fires. I will never forget all the fire tornadoes I saw swirling on rivers and lakes and in fields as we burned off spilled crude oil.
Anyway, crude oil is full of all kinds of nasty stuff and, like another poster mentioned, also has some produced water along with it that is very briny and frequently full of nasty shit itself. It is so toxic that operators have to pay to dispose of it. Areas around wells and above-ground storage ponds used in the 1920's an d1930's are still dead from the salt that washed out of those ponds and down creeks.
Personally, after 40 years in the business, I hope low oil prices are the nail in the industry's coffin. They dug their own graves and it's time to shove them in and backfill the hole.
That shit has been down there for literal ages. If you're talking about crude, it is toxic as is the brine that comes with it, hence the need for processing.
as a southern state beach-goer, you always wash the oil slicks off as soon as you find them. gasoline isn't carcinogenic because of the refining process, its because the oil itself will kill ya
From what I've seen/read as a layperson, crude oil is quite dangerous; it has all the volatiles that will eventually be isolated and sold or burned.
From an environmental standpoint this isn't particularly good as I'm pretty sure oil extraction and distribution and processing causes a ton of additional emissions both carbon and worse like methane.
Apparently Canadian oil sands oil is so unsaleable that in some cases they're paying to get rid of it.
https://www.cbc.ca/news/business/oil-price-plummet-monday-1....
https://www.cbc.ca/news/business/oil-price-plummet-monday-1....
In a way they've always been subsidized because nobody prefers WCS. Measures like Keystone XL are just part of the gargantuan efforts that governments and companies make to make them viable.
whats worse is that oil sands have some of the highest production costs because you need to add steam and a bunch of other stuff to separate the other junk from the black gold
[deleted]
US gas prices are down to $0.95 - $0.97 / gallon.
Seems like it could go lower, but maybe stations and refineries won't reduce prices to maintain profits.
Seems like it could go lower, but maybe stations and refineries won't reduce prices to maintain profits.
18.4 cents per gallon is a federal tax. States and local governments add on various sales and per gallon taxes that average close to $0.50 per gallon, though the sales tax portion will have driven some of that tax cost down. California adds 58.8 cents per gallon of taxes plus a 2.25% sales tax. Other states can be much lower but no matter where you are, there's a price floor due to taxes.
The real question I haven't seen much discussion of, is who covers state and local govts massive loss of tax revenue. They cant print money like the fed.
Is the fed going to monetize their debt as well?
Is the fed going to monetize their debt as well?
I think 17% of that 2 trillion is going to directly to state and local governments. And a much of the rest of it will be indirectly taxed by state and local governments in various ways. https://www.visualcapitalist.com/the-anatomy-of-the-2-trilli...
They can raise property gax, income tax, or gas tax, and yes the Fed govt can print money and grant it to states, as it does for highways and Medicaid.
That doesn't actually follow. If the station across the street is selling at a loss, you can either keep prices high and make zero revenue, or sell at a loss and make some revenue.
Of course you'll go out of business after a while below that floor so this situation wouldn't be sustainable, but it's consistent with economics that it could happen. (edit: I guess saudi arabia et al. are pretty much in this position now)
Of course you'll go out of business after a while below that floor so this situation wouldn't be sustainable, but it's consistent with economics that it could happen. (edit: I guess saudi arabia et al. are pretty much in this position now)
Why would making revenue be preferable in this case? If I have to buy gas for $1 a gallon from my supplier and can only sell it for $0.90, why not close up shop for awhile, then I don't have to deal with maintenance, don't have to pay the cashier, etc.
Sure if you have fixed costs like debt you have to pay you may make a loss on your business as a whole, but selling at negative gross margins only makes sense if you're somehow being strategic about it.
Sure if you have fixed costs like debt you have to pay you may make a loss on your business as a whole, but selling at negative gross margins only makes sense if you're somehow being strategic about it.
I was assuming the station already paid for the gas...I think it depends on whether that's true or not.
> US gas prices are down to $0.95 - $0.97 / gallon.
In a few places maybe. For the vast majority of the US no, at least not yet.
In a few places maybe. For the vast majority of the US no, at least not yet.
$0.99/gal today in NOLA (https://www.reddit.com/r/NewOrleans/comments/fs4nts/walked_p...).
Generally, I've found that prices go up about $0.10/gal for each state you get away from the gulf coast (at least in the eastern US). Sometimes there's a few days delay to consider, too.
Generally, I've found that prices go up about $0.10/gal for each state you get away from the gulf coast (at least in the eastern US). Sometimes there's a few days delay to consider, too.
indeed. gas buddy shows my local (Portland) stations at $2.29 minimum (Costco) and $2.95 in the top 10 cheapest (Chevron).
And gas station owners know they can still hose idiots like me who drive cars that require 93 octane. Still paying $3.10 in suburban Chicago.
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Where are you seeing these numbers, a simple check of the AAA national average puts it at 1.997 and the lowest average at 1.556.
https://gasprices.aaa.com/state-gas-price-averages/
https://gasprices.aaa.com/state-gas-price-averages/
Gas futures (RBOB) are currently trading at slightly over 50 cents a gallon:
https://www.cmegroup.com/trading/energy/refined-products/rbo...
Of course the realities of the supply chain won't allow 50 cents a gallon fuel in the US, but it's interesting that April contracts (RBJ20) settled around this $0.55 mark - deliveries will shortly be happening at these ridiculous prices.
https://www.cmegroup.com/trading/energy/refined-products/rbo...
Of course the realities of the supply chain won't allow 50 cents a gallon fuel in the US, but it's interesting that April contracts (RBJ20) settled around this $0.55 mark - deliveries will shortly be happening at these ridiculous prices.
The numbers given there aren't accurate for my region. Or maybe they're some number of days behind.
Time to double or triple the federal gas tax
This is not a bad idea. Cap the prices to $2.50/gallon and whatever the difference is should be all taxed.
This is an especially good idea for any politician who hates the idea of being re-elected.
Is the political climate really this anti-environment in the US? In other long-distances western countries there is much better gas taxation.
h0h0h0 tax increases are coming, you think this $4T bill will pay itself? i fully expect gas prices to rubberband back to the $3-$4 range before this decade has gotten fully underway.
until then, i've unexpectedly found myself in a great place to be with a recently modified turbocharger on a family sedan ]:-)
until then, i've unexpectedly found myself in a great place to be with a recently modified turbocharger on a family sedan ]:-)
Last I saw was $1.88 here in Iowa. I guess it could be headed lower though.
Still more than $3 in California.
California is tier 3 gas which is more costly to produce. I think the rest of the US has to 2025 to change over.
Doesn't California have crazy fuel taxes? Or is there some other reason for their always high prices?
"Crazy" isn't the best choice of words. It has a loaded (negative) connotation.
California has high fuel taxes relative to other US states. It has low fuel taxes compared to most other countries. From random source [1], California is $0.35 per gallon. Fuel taxes in Canada vary from $0.64 to $1.55 per US gallon [2].
[1] https://www.salestaxhandbook.com/california/gasoline-fuel
[2] https://en.m.wikipedia.org/wiki/Motor_fuel_taxes_in_Canada
California has high fuel taxes relative to other US states. It has low fuel taxes compared to most other countries. From random source [1], California is $0.35 per gallon. Fuel taxes in Canada vary from $0.64 to $1.55 per US gallon [2].
[1] https://www.salestaxhandbook.com/california/gasoline-fuel
[2] https://en.m.wikipedia.org/wiki/Motor_fuel_taxes_in_Canada
Right now in vancouver bc, lowest I seen is 0.934$ cad per liter.
That's about $2.51 USD/galon.
We had the highest gas in north America for awhile (we might still do) in part taxes... we were one of first unfortunate folks to have high taxes and carbon taxes for years.
-i have paid more than 5$ USD/gallon for 91 octane gas =/
That's about $2.51 USD/galon.
We had the highest gas in north America for awhile (we might still do) in part taxes... we were one of first unfortunate folks to have high taxes and carbon taxes for years.
-i have paid more than 5$ USD/gallon for 91 octane gas =/
Without getting too far off topic: I sincerely wish we had higher taxes on fuel in the rest of Canada (and commensurate increase in relief for lower income folks whom it would disproportionately affect). Everyone complains about the price of gas, but no one cares to change their behaviour and purchasing habits in response. I drive the smallest, most fuel efficient hatchback I could buy 8 years ago, and intend to buy an electric car whenever I move on from this one. I do it for environmental reasons, but the economics don't hurt, either! I've saved 4000+ liters of gas compared to the SUVs/MUVs that most people buy these days.
Don’t fret, it was $5.09 here a couple years ago. And we don’t even have the high fuel taxes :/
Yeah, we have pretty high fuel taxes but it's a good deterrent for driving since we have high smog too. Adding taxes and having high emissions standards really helped reduce a ton of smog in the air since the 80s
In the summer we use a special blend of gas that costs more due the heat causing an inversion(?) I think
In the summer we use a special blend of gas that costs more due the heat causing an inversion(?) I think
High smog in all of California? Or just in those awful cities? Seems crazy to dictate taxes across the entire of a large state just because the urban areas have smog.
Urban areas tend to have higher smog concentrations, but most gases aren't known for their tendency to avoid travel and diffusion. Emissions have non-local effects. Some might even say global.
Additionally, gas taxes are about the most straightforward road use fee right now.
Still, non-metro areas tend to get a break. Never understood exactly why but my theory is either additional county/muni taxes, or real estate tends to be cheaper and with it station overhead. This goes out the window if it's an isolated refill chance, though, in which case it's whatever the market will bear.
Additionally, gas taxes are about the most straightforward road use fee right now.
Still, non-metro areas tend to get a break. Never understood exactly why but my theory is either additional county/muni taxes, or real estate tends to be cheaper and with it station overhead. This goes out the window if it's an isolated refill chance, though, in which case it's whatever the market will bear.
No, gas tax in California is just 2 cents higher per gallon than in Pennsylvania, while the price at the pump is 80 cents higher (as per https://www.usatoday.com/story/money/2020/02/06/states-with-... ). The oil companies claim it has to do with the special formulation decreasing the competition in the local market. Then again, maybe they're successfully acting as a cartel.
This article is a good summary of the various factors:
https://www.kqed.org/news/11755264/why-is-gas-so-expensive-i...
https://www.kqed.org/news/11755264/why-is-gas-so-expensive-i...
Special formulation for gas limits supply as well.
In Sacramento area it's like 2.40, I have seen it as low as 2.19 at the cheapest place.
$2.40 to $2.60 in San Jose, CA.
This is mostly due to tax.
similar - places around us (outside raleigh) are still $1.89 last several days.
this is likely due to lower demand still buying through gas from weeks prior. Prices are usually updated at the pump when a new truck brings a new delivery.
apex costco - $1.49
I paid $0.99 at Costco in OKC, OK on March 25th. I'm not sure what the price is now.
They're a big oil producing state, right? So probably always have among the lowest gas prices?
gasbuddy.com has a nice map of user-reported gas prices (https://www.gasbuddy.com/GasPriceMap?_ga=2.108840642.1740344...) and yes, Oklahoma's among the lowest prices, specifically the area just east of Oklahoma City.
Alaska also produces a ton of oil, but gas is crazy expensive since it's mostly refined far, far away.
$2.49 in Fountain Valley CA (that's Orange county); a very good price right now out here.
Where? It’s still above $2 in MA
Meanwhile Texas government doesn’t see need to allow extraction rate to change. https://www.texastribune.org/2020/03/30/texas-oil-producers-...
This happens often when there is a price shock--a kind of oil chicken where everyone keeps producing at a loss because they need to pay back the investments on the venture.
The article blames the corona lockdown, but other sources I’ve seen have the OPEC-Russia price war. Does anyone have some good analysis articles that break down the factors?
Its both.
Demand shock is leading to a loss of places to put it, so the price must fall to a low enough price to make it profitable to pay increasing amounts to store it until its worth something.
The price war has depressed the price enough that to keep revenue up companies must continue to pump flat out.
Quite a nasty scenario to find oneself in.
Demand shock is leading to a loss of places to put it, so the price must fall to a low enough price to make it profitable to pay increasing amounts to store it until its worth something.
The price war has depressed the price enough that to keep revenue up companies must continue to pump flat out.
Quite a nasty scenario to find oneself in.
[deleted]
Wikipedia actually has a reasonably good summary of the interplay between COVID-19 oil demand destruction and the recent Russia-OPEC / Russia-KSA oil market turning point.
https://en.wikipedia.org/wiki/2020_Russia%E2%80%93Saudi_Arab...
https://en.wikipedia.org/wiki/2020_Russia%E2%80%93Saudi_Arab...
It's both :)
Saudis and Russians have decided to increase their output of oil at the exact same time that most companies and businesses are choosing to reduce their oil consumption.
Additionally, there are not a lot of cheap ways to store oil long term, and it is difficult and costly to shut down production as well.
In Western Canada, pretty soon there will be negative oil prices, because the oil there is of a lower quality than others. Basically, they are paying for it to be trucked away so that it doesn't harm future production efforts.
Saudis and Russians have decided to increase their output of oil at the exact same time that most companies and businesses are choosing to reduce their oil consumption.
Additionally, there are not a lot of cheap ways to store oil long term, and it is difficult and costly to shut down production as well.
In Western Canada, pretty soon there will be negative oil prices, because the oil there is of a lower quality than others. Basically, they are paying for it to be trucked away so that it doesn't harm future production efforts.
I know nothing about how oil gets out of the ground. Why is it expensive to stop production at a well site?
In my mind you just turn the pump off that's sucking the oil out of the hole.
In my mind you just turn the pump off that's sucking the oil out of the hole.
For wells in Western Canada, in particular, the challenge is that the oil is so viscous (they're called "tar sands" for a reason) they have to heat (often with steam) the ground to pump it out. As you'd imagine, this requires a large amount of energy.
So stopping production implies letting the ground cool, and restarting implies dumping a lot of (expensive) energy back in before oil will flow.
So stopping production implies letting the ground cool, and restarting implies dumping a lot of (expensive) energy back in before oil will flow.
To continue production, they'd need to put at least as much energy into the ground as it takes to restart it as it always going to be cooling. The energy has to come from somewhere.
As others have noted, it's both. However, to the point of how dramatic the price war impact has been....
The day the oil war began, Brent dropped from $50 to $31 in two trading days, the greatest rapid decline in many decades. The 24% drop at that time was the greatest one day decline since 1991.
The day the oil war began, Brent dropped from $50 to $31 in two trading days, the greatest rapid decline in many decades. The 24% drop at that time was the greatest one day decline since 1991.
seems like the week before corona forced wfh is when saudi arabia decided to increase oil production. one of the first stock market drops was in response to that if i remember correctly.
https://www.cnbc.com/2020/03/08/saudi-arabia-to-hike-oil-out...
https://www.cnbc.com/2020/03/08/saudi-arabia-to-hike-oil-out...
The percentage of state and federal taxes per gallon is becoming significant. So there is some floor at the pump.
The producers should tell the financial community "We're destroying value by continuing to pump. We're essentially bankrupt at these prices." Then convert all their debt into equity at $0.000001 per share. Then go into care and maintenance and wait things out.
Or is the financial system inefficient ?
Or is the financial system inefficient ?
they would lose the ownership of their companies in this case.
it will be up to new owners - to wait things out - or to sell-off the equipment and licenses to somebody else
I'd expect oil to be negative in the next few weeks -- refineries are shutting down (and can't take the oil), most of the commercial storage facilities are full, and it's gone down far enough that it's uneconomical to pull it out of the ground (most of the articles that I've read put oil above $40.00 for most wells to turn a profit, and more than $3.50/mcf).
I was in Texas and it was under $2.00/gallon before everything started getting all locked-down due to COVID-19 -- my guess is that gas there will be in the $.80-$1.00 range in the near future. Between the decreased demand due to the "Stay-At-Home" order and the excess inventory (until all of the refineries shut down), we haven't seen the bottom yet.
I was in Texas and it was under $2.00/gallon before everything started getting all locked-down due to COVID-19 -- my guess is that gas there will be in the $.80-$1.00 range in the near future. Between the decreased demand due to the "Stay-At-Home" order and the excess inventory (until all of the refineries shut down), we haven't seen the bottom yet.
In New Orleans, you can already find it for 0.99/gal. Thread on Reddit from yesterday: https://www.reddit.com/r/NewOrleans/comments/fs4nts/walked_p...
[deleted]
And yet the Strategic Petroleum Reserve is still not quite full as of a couple days ago.
https://www.spr.doe.gov/dir/dir.html
https://www.spr.doe.gov/dir/dir.html
Apparently (as of 25/March) they weren't sure if they had money to refill it:
Given the current uncertainty related to adequate Congressional Appropriations for crude oil purchases associated with the March 19, 2020 solicitation, the Department is withdrawing the solicitation. Should funding become secure for the planned purchases, the Department will reissue the solicitation.
https://www.spr.doe.gov/doeec/2020-03_CrudeOilPurchase/Docs/...
Given the current uncertainty related to adequate Congressional Appropriations for crude oil purchases associated with the March 19, 2020 solicitation, the Department is withdrawing the solicitation. Should funding become secure for the planned purchases, the Department will reissue the solicitation.
https://www.spr.doe.gov/doeec/2020-03_CrudeOilPurchase/Docs/...
The Saudis Have a High-Stakes Plan to Win the Global Oil War
https://www.bloomberg.com/news/articles/2020-03-18/the-saudi-crown-prince-s-plan-to-win-the-global-oil-warAt $7 a gallon for West Texas crude on the futures that translates to under 17 cents a gallon. Course that doesn't include refining and transportation costs plus federal and state taxes.
I don't know about your area but here in Michigan we're still at $2 a gallon. My friends in Austin, Texas say gas there is $1.35 a gallon. Is it fair to assume that middlemen are making obscene profits or am I wrong?
I don't know about your area but here in Michigan we're still at $2 a gallon. My friends in Austin, Texas say gas there is $1.35 a gallon. Is it fair to assume that middlemen are making obscene profits or am I wrong?
Refining adds about 30 cents per gallon flat, a bit more with additives, higher octane cracks, etc.
Here in Texas, it's 20 cents state tax + 18.4 cents federal tax
Distribution ranges from 20 cents/gallon to well over 2 dollars to far-flung places, this is the explanation behind most regional variance in price, they run pretty lean, maybe cost + 5-7%. (It's a volume play.)
So 17 cents crude + 30 cents refining + 38 cents taxes + say 25 cents distribution to Austin gets you to $1.10 and the rest is margin, minus marketing and operating the retail location and you get net profit, typically in the 8-12 cent per gallon range.
When oil prices rise, the refiners usually extract most of the profit at the point of sale to distributors / retail.
Gasoline is profitable but distributed throughout the value chain.
Here in Texas, it's 20 cents state tax + 18.4 cents federal tax
Distribution ranges from 20 cents/gallon to well over 2 dollars to far-flung places, this is the explanation behind most regional variance in price, they run pretty lean, maybe cost + 5-7%. (It's a volume play.)
So 17 cents crude + 30 cents refining + 38 cents taxes + say 25 cents distribution to Austin gets you to $1.10 and the rest is margin, minus marketing and operating the retail location and you get net profit, typically in the 8-12 cent per gallon range.
When oil prices rise, the refiners usually extract most of the profit at the point of sale to distributors / retail.
Gasoline is profitable but distributed throughout the value chain.
Gas is still over $3 in Seattle. This is dumb
You'll have to look up your state taxes, they can make up a fairly large amount of the total cost of gas as the price goes down.
Is there any efficient way to invest in oil?
While a prolonged lock down is definitely a possibility, it's also quite possible that the market will recover which should bring the price per barrel closer to normal range.
Edit: Really surprised by being downvoted for asking a question
While a prolonged lock down is definitely a possibility, it's also quite possible that the market will recover which should bring the price per barrel closer to normal range.
Edit: Really surprised by being downvoted for asking a question
Try the ERX ETF when it drops back to recent lows $6-7, but only if you are very brave, have money you can afford to lose, but want a chance to 20x your stake:
https://finance.yahoo.com/quote/ERX
https://finance.yahoo.com/quote/ERX
Wow. It’s crazy how much it went down from this! Definitely “money that I can afford to lose” type of investment!
Don’t touch any oil etf, especially any leveraged etf. Even an unelevered etf, like the USO, will destroy your investment. Every month the USO rolls the position from the month 1 contract to month 2. We are in a deeply contango market and will remain so for a while, so every month you’re going to lose 2-4$ per bbl. So even if oil appreciates several dollars, you still lose. Oil etf’s are toxic waste.
If this market crashes, why even go near oil and oil producers? Lots of good opportunities elsewhere. Still if you want to bet, watch out for CVX and XOM.
The traditional way is to invest in large oil producers (XOM, BP, etc.), whose stocks are pretty strongly correlated with oil prices. But that's also placing a secondary bet that they won't go bankrupt before oil goes back up.
There are also ETFs that try to directly proxy oil prices by holding and continually rolling over near-dated oil futures. USO is the biggest of those. They have some technical issues tracking oil prices though, especially for long-term buy-and-hold strategies: https://www.investopedia.com/articles/markets/081116/uso-goo...
There are also ETFs that try to directly proxy oil prices by holding and continually rolling over near-dated oil futures. USO is the biggest of those. They have some technical issues tracking oil prices though, especially for long-term buy-and-hold strategies: https://www.investopedia.com/articles/markets/081116/uso-goo...
It would be so beautiful if we could start back the global economy with more remote work & less oil.
A wonderful thought indeed. Maybe in addition, if we take some of the handwashing seriously every flu season, we can reduce death rates from many diseases.
Still, diesel & co. are highly priced at the gas stations.
I'm waiting for the Oil to go again up and then the gas station prices further up
I'm waiting for the Oil to go again up and then the gas station prices further up
Since oil underpins the cost of so many things, are we seeing the beginning of a deflationary cycle?
With central banks around the world pumping money into the economies, can the extra money counteract the downward pressure?
It's a weird time to see glut of oil and glut of money flowing around.
With central banks around the world pumping money into the economies, can the extra money counteract the downward pressure?
It's a weird time to see glut of oil and glut of money flowing around.
According to CNBC, in some parts of the U.S. oil is selling for $4 a barrel. That's 4! This is crazy.
Putin is out to monopolize the oil market, and since Rosneft is a state company, he can weather the long term pain of cheap oil versus our private fracking businesses that need to make a profit.
https://en.wikipedia.org/wiki/Global_strategic_petroleum_res...