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So far in 2007, the US is importing about 150,000 bpd more of crude than in 2006. The US is also refining about 150,000 more bpd this year, and being that the US dollar is still the prime petrocurrency, it is not surprising that the US has the means and ability bid up the price just enough to meet its imports needs.
One or two week anomalies in imports do not represent a trend. The fact that most world prices are a few dollars less than a year ago also does not mean much, as we have seen only a month ago prices rose $5 in a matter of minutes with the slightest negative news in the Mideast.
It's premature to think we will make it through our second year post-peak light sweet crude without higher prices.
One or two week anomalies in imports do not represent a trend.
It's not one or two week anomalies. Look for yourself:
http://tonto.eia.doe.gov/dnav/pet/hist/wceimus2w.htm
We have been running ahead of last year's crude imports for 5 weeks (and will almost certainly set new records this summer, just as we did last summer), and yet crude prices are lower than last year:
http://tonto.eia.doe.gov/dnav/pet/hist/wtotworldw.htm
You have probably also seen the statements from China and India that they are importing record amounts of crude.
So, I will repeat the question I have asked here many times. What does it take to convince you that the import situation does not support an oil production peak? I have never received a satisfactory answer to this question. The response I usually get is either another question, or a red herring.
Well, some countries are seeing reduced imports.
http://news.bbc.co.uk/2/hi/south_asia/6642907.stm
Re: We have been running ahead of last year's crude imports for 5 weeks
maybe compared to last year but historically imports are back where they should be for the first time since last March:
We need a few more weeks to confirm this increase. Crude oil import number are extremely noisy and it is hard to see a short term trend. However, after running a 4-weeks moving average, we get a better view:
In addition, refinery utilization (89%) is still below average (should be around 92-93% at this time of the year) so what's the point to import more crude if we can't refine it? Crude oil stock coverage (excluding SPR) is around the historical average (22 days). I agree with you that the import numbers (and inventory levels) do not support a peak production hypothesis but rather a refinery bottleneck. Also, prices seems to have an effect on imports:
I agree with you that the import numbers (and inventory levels) do not support a peak production hypothesis but rather a refinery bottleneck. Also, prices seems to have an effect on imports:
Your charts and comments always great. So what of the world crude inventory numbers? Any data to support that it will be difficult to import more gasoline b/c of crude stocks below 'normal' in places where the US usually looks for finished products?
This morn
Crude oil Rises on signs Gasoline Supply is Insufficient
Re: So what of the world crude inventory numbers?
I have only data for the OCDE countries:
Stocks have been going down a little bit since the summer 2006 but are still at record high levels, clearly not consistent with a falling supply. Note that these numbers include both commercial and government controlled stockpiles (i.e. SPR) so this picture is maybe a little bit rosy.
Nice chart. Then maybe the refinery bottleneck exists elsewhere too. Gasoline up sharply today.
Is the chart updated through the first quarter of 2007?
http://ca.today.reuters.com/news/newsArticle.aspx?type=businessNews&stor...
IEA warns on oil inventories after big Q1 drop
Thu Apr 12, 2007 5:37 AM EDT
By Alex Lawler
No, the last available date is December 2006. The data is here:
http://tonto.eia.doe.gov/merquery/mer_data.asp?table=T11.03
From the IEA Oil Market Report (April 2007):
RE: clearly not consistent with a falling supply
When I build my food stockpile, I size it not on a given amount of liters or kilograms but on my family consumption: 10 years ago we were 2 adults, now there are 3 children, two cats and some chickens, so the stock is more important.
I find strange in this nice diagram that nearly all stocks did not grow very much in 20 years when the consumption did.
It looks like that neither governments nor businesses made stocks adjustments in line with the consumption growth, so either they could not (falling supply) or did not think about it or thougth they were big enough, in that case stock analysis is irrelevant.
A way to measure the adequacy of stocks relative to current demand levels is the stock coverage:
stock coverage has been increasing from 51 days in 2004 to 54-55 in 2006. If peak oil supply is occurring about now, I should expect a big drop in stock coverage.
Why a "big" drop. I think a consistent, even though gradual drop would be perfectly reasonable. For example, US production fall was very gradual initially. Mexican production had its highest month in 2003, highest year in 2004, but has only shown a significant decline over the last year. Typically, the initial signs of a peak have been subtle prior to becoming obvious. We just don't have a long enough period to determin yet. If the trend above were to continue only another 5 mos (I'm not stating it will - I'm waiting to see), it would actually be dramatic, and that is really not a very long period.
It depends also on how demand for oil will evolve (mainly reacting to prices), the stock coverage can remain constant if both demand an supply are falling at the same rate. However, a 54 days coverage can melt quite rapidly if demand is growing and supply is dropping or even staying constant.
Why, Khebab? This picture is the OECD only, the wealthiest part of the planet. In a market where supplies are constricting, it is common to see people build spare inventories at lower prices for consumption later when the price is higher.
Your statement would be true of the world as a whole but not of just the OECD. In fact, if the OECD is outbidding the rest of the world, a crude build in the OECD is one possible artifact of that. We cannot tell from these numbers without global data since the OECD is the wealthiest subset of nations on the planet.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
I think wealth is only half the picture. Energy as a portion of GDP is probably equally important.
If you were looking at Louis Vittion (sp?) handbags, then wealth would be the crucial factor. However, energy is only partially a luxury item.
Countries such as Thailand, Korea and China import oil in large part to fuel industry and exports. Oil is a leveraged resource in the production process. For every dollar less they spend on this oil they lose $1x dollars in industrial production and export revenue.
High oil prices are far more likely to lead to reduced consumption in poor Americans than mega-rich third world elites or those who are using it for industrial production and exports.
As Peakearl noted, the initial Lower 48 decline was quite gradual, an average of less than 1% per year, over the first two years, and this was without the benefit of nonconventional crude oil production.
Also, the OECD inventories don't reflect the world situation.
IMO, the key point is the world crude oil production response we have seen to the oil price increase. Oil prices are up by two-thirds, on average, relative to the average price in the 20 months prior to 5/05, and crude oil production is down by about 1%, relative to 5/05. The pattern of lower crude oil production versus higher crude oil prices is what we saw in the Lower 48 in the Seventies.
BTW, gasoline prices are jumping today. Traders noticed that outside the west coast, US gasoline inventories fell by about 700,000 barrels.
I think looking at stocks as just as snap shot in time doesnt tell the whole story... 10 years ago every major oil company would have held stocks for its own refining system..with all the mergers that have taken place Exxon/Mobil, BP/Amoco, Chevron/Texaco etc etc has meant that combined systems have meant synergies, such that costly working capital tied up in stocks can be reduced as the need of the 2 combined is not as great as the sum of the 2 companies as individuals...so comparing stocks even 5 years ago to current can be somewhat misleading as you are not comapring apples and apples. More importantly however is how the market looked at differnt points in time. A look at the forward curve of the market will give you a idea of the propensity of the market to store oil. In a contango it pays you to store and sell at a later date since the deferred price of oil is greater than the cost of storrage, time value of money and potential shrinkage...At the moment it pays you to store current crude production and sell out around late summer next year. Hence we have comfortable stocks of crude comapred to 5 yr averages (but then I'm falling into the trap above)..On the other hand gasoline is steeply backwardated and prompt production should be sold rather than stored and so it is no surprise stocks are low..
So when looking at storrage and comparing points in time it is important to know the market dynamics governing the periods being compared.
Thank you and goodnight.
Welcome to TOD, Fletch.
Good comment.
Question?
What is the world total of crude exports? Where can I find that? Focusing on one country, expecially the mac daddy of countries as of this moment, is a bit misleading. There was a nearly $5 spread between WTI and Brent and this is due to refineries I can see. However, when the Brent price is rising and now stands at $65 give or take, this prices have to arbitrage there way together. I surmise WTI rises more than Brent falls.
The Price within the oil sector is ambigous and does not convey value. I mean a cup of gas is far cheaper than even a cup of coffee! And I think we can both agree, cafeeine might be valuable, it's not more so than energy sources like oil. Instead of talking about the price of something lets talk raw numbers like volume. Thus this is why I am asking where total export numbers lie. Let's just compare some raw export numbers to see how much oil is being sent abroad and how much is staying home. When we've got a huge drop in spite of increased rig counts, something's not right. Just a thought.
I have always agreed that the US situation, while obviously a major factor, doesn't tell us the overall supply or export situation. This is why the concerned words coming recently from the IEA about supplies for the Pacific and Europe have been so notable. I am really wondering what tomorrow's OMR will have to say about this. Can't conclude much without this information going forward.
Robert asked:
The import situation only indicates that the US, Indian and Chinese domestic economies support importing crude at $61.81 (nymex) at this time. There's plenty of oil available at $61.81 today.
If these markets could only support importing crude at $50/barrel, they would experience severe shortages of crude imports. The ability of one or three countries to maintain domestic crude inventories has little to do with total world supply availability and everything to do with price.
I am not sure you can push those price comparisons too far - from the table you reference, average price in March and April in 2006 was $56.33 and $64.28 versus $57.92 and $63.67 for this year. I would put those as practically unchanged. Price thus far for May does, granted, appear lower.
I thought you usually got accused of being an oil company stooge, but maybe I'm not pay enough attention.
No, that's what happens when I bother to correct some misconception about oil companies - like "They take refineries offline in the spring just to drive prices up." There are numerous myths out there, and I can't correct them without someone saying "You would say that."
I agree imports have little to do with po, at least now... dd in africa and other poor regions is still allowing china/us/exporters to consume more. Henry Groppe thinks that 60/b is high enough to generate more dd in poor places because some oil is still burned for heat/elect gen... however, imo the capital requirement for third world countries to switch from imported oil to imported ng will prove a formidable barrier.
It is interesting that, notwithstanding modest worldwide refinery expansion, just 2% increased us gasoline consumption is apparently causing a worldwide gasoline shortage, expressed by reduced production in the us and reduced imports into us. Certainly looks as if the quality of crude and/or all liquids is down.
Far better evidence of a peak is that c+c is still trending down from 2005 even though prices are still high enough to allow all producers near record profits - even norway off shore costs are only 30/b, providing plenty of incentive to produce more. All liquids also peaked in 2005 after correcting for the 1/3 reduced energy content of ethanol... indeed, this point may be a part of why higher all liquids are not sufficient to slake our gasoline thirst. IMO the burden of proof is on those predicting a future peak, and the prediction that sa will ever again produce 9mb/d for an extended period presents a similar challenge.
What one would expect at peak is that production plateaus, there would be a worldwide shortage of rigs (but not ships), project delays, one country after another apparently peaking, prices far higher than cost of production, widespread movements towards alternatives (not all of which would be either successful or sustainable), nationalization of energy supplies as prices rise and power flows from ioc's to resource owners, sympathetic price rises from alternative energy sources eg ng/coal/nuclear, and discussions by some exporters that perhaps it is anyway better to slow exports and save more for the future. Against all of these signs the bottoms up analysts are (still) looking for higher output to come on line fast enough to more than offset accelerating worldwide declines.
IMO we are repeating the seventies, with no end in sight, and will see higher avg prices every year until, if and when, sufficient lower cost alternatives are brought to market. I see us off the plateau by 2010, with widespread acknowledgement of po prompting a push for fuel efficient cars and frenzied bidding for the few us oil companies with expanding reserves. At the end of the seventies energy companies had grabbed 30% of the s&p500; in the present epoch we have so far only doubled to 10%.
Actually, there is some really bad news out today, with major retailers reporting their worst month in 28 years. Retail sales look awful. We may be seeing a recession. That will cut oil use.
Already (thanks to huge tax cuts for our wealthiest) the US Government is running big deficits, and our trade deficit – you don't want to know about it, We are still stuck in a hugely expensive war in Iraq.
What this boils down to may be a decrease in US demand for fossil crude soon. I confess, I do not know why we are using more and more gasoline as prices triple. It does take time for fleets to changeover, and habits to change, and we are changing, but too slowly. We are also importing 2 million people every year, so that is a factor too.
But recessions are shown to cut demand rather quickly. The bad news is that a recession will cut demand so much that oil prices will plunge too, leading us back to profligate ways.
I am still way optimistic on the long-term future, one in which we can drive down Peak Demand in front of Peak Oil. With bios and plug-in hybrids, the question need not be "how much growth in fossil oil use" but "How much is the drop this year?" Consider also that people are moving back into central cities, thus reducing commutes etc.
We are 5-10 years from there from move improved energy efficiency, but we are getting closer every day. The qustion is, will oil prices drop and flummox efficiency drives?
But for now, get ready for a recession. This one could be ugly.
This time there is China and India ready to pounce on any opportunity to step in an take any oil that the US leaves behind. Plus, any country that has any sense at all should view any price downturn as an opportunity to add to their SPR.
Well...the Shanghai index has doubled of late, and trades at 50 times earnings...we have seen this before...usually leads to bust (think Japan, and the NASDAQ bust in 2000) ...some say the yuan is 40 percent undervalued, and a correction must happen....you could see something ugly happen in China if the US goes into a recession....world supplies are adequate now, so a drop in demand should lead to price softness...demand for fossil crude has been weakening worldwide....just waiting on BP report on 2006, which should show third straight year of shrinking increases in fossil crude demand, and possibly a flat year...2007 may be flat, even without a recession...Europe and US close to flat already....fascinating epoch ahead... we may have passed Peak Demand already or soon, if this price regime holds....
Benjamin, how you doing....? :-)
Let's talk.
First, I can't help but notice that you have not been here real long as a registered poster.
The first thing you may have already noticed is that saying demand can drop as well as go up is EXTREMELY unpopular here. It ranks right up there with saying that any technology EXCEPT oil and gas technology can actually make a difference....not well recieved. Solar, wind, plug hybrid, electric, etc., are about as welcome here as they would be an ExxonMobil executive conference room.
But your views are refreshing, at least until they turn on the blocker on all of us! :-)
Now to some of your points:
First, it is interesting that you mention 28 years ago. I just finished sending my invite to my 30th high school reunion, so it is a period I remember well.
The United States has not suffered a serious recession in about that long. Oh, some little slow downs, yes, but not a serious recession. As you so correctly have pointed out in other posts, prior recessions of a great magnitude have flattened consumption of oil for a VERY long time, the last time, about a decade. Even when oil consumption recovered, it did not at first recover as fast as in prior periods, prices collapsed completely, and the oil industry suffered one of the most horrific periods since the great depression. This is what the oil companies fear, right or wrongly, much more than peak.
The problem is, no one KNOWS how much oil is out there. Oh, I know, they have fantastic charts, and "Linearizations", and production figures, but they just can't KNOW. But what can it matter, right? We know that peak is coming someday, so we should be ready now. I am one who absolutely believes, that for national security, balance of trade, and not funding our enemies, we should be on emergency efforts NOW to develop alternatives and a conservation economy of high technology "elegant design solutions. Why is it not happening?
For the same reason that, as you say, "I confess, I do not know why we are using more and more gasoline as prices triple."
The thing we must look at compared to the 1970's is not the price per se, but the price per hour worked, or how it compares to current American income and wealth, and the base from which it began rising as a percent of American consumer income and expenditure. The truth is, the penelty in gasoline/Diesel cost when compared against these things has been shockingly low.
For two decades, in the greatest economic recovery in history in the 1980's/90's, incomes rose, invested assets and income rose, and fuel prices, in one of the most counter cyclical moves in history, first dropped through the floor and then stayed there! By the time of the first Gulf War, oil prices were so cheap that it had become a threat to world peace, as the oil producers, with their backs against the wall, tried to beg for mercy.
Iraq, deep in debt from the Iran Iraq War with a growing population, felt they had to stop Kuwait from selling oil at idiotically cheap prices. When they invaded, Saudi Arabia was terrified, because they knew they had been doing the same thing as Kuwait.
All this a long way to explain: Gasoline is still not nearly expensive enough compared to wealth to make the effort to change worth it.
I did a chart last night, for my own education, showing what the yearly change in gasoline cost has been as prices increased for a relatively reasonable commute and gas mileage vehicle. The results were astounding:
For a 40 mile round trip daily commute (easily enough to get to the suburbs and back), and a car that gets only 20 miles per gallon (many get better), the cost breakdown, 52 weeks a year at $2.00 per gallon is $1040 dollars in fuel per year.
Now get this, if the price goes to $3.50 from the above $2.00, the cost to commute on the year is $1820, or an increase of $780 PER YEAR.
Should that horrible day of $4.00 gas arrive, the penelty will be $1040 dollars PER YEAR, for a daily 40 mile commute getting only 20 miles per gallon! And that's counting from $2.00 per gallon!
Last night when I ran some of these numbers, it sent folks into a bit of a snit. Frankly, that surprised me. The truth is though the price of fuel would indicate no need for major change! As a part of income, it's just not that big a deal. You can extend the math on out and see that fuel will have to get MUCH HIGHER to cause people to make major change.
Benjamin, here's the deal. The technology to reduce comsumption BIG is waiting on the shelf. But automakers, home builders, etc., are not going to put it in mass production until they see a real market for it. Selling the need for consumption reduction on "Peak Oil" alone will simply not work. I am interested in polling, it's one of the things I do for a living. Without leading them to an answer, if you ask most people if they have heard of "Peak Oil" more each day are saying yes. But a surprising number see it as oil company propaganda. I don't agree with that theory, but the message of "peak" gives itself very well to that interpretation....oil and gas are the only viable alternatives, demand cannot be reduced, the alternatives are all bogus "silver bb's", in other words, you are with the oil and gas companies and will have to accept the way they do business right to the bitter end.
Take a look at the last 5 days gasoline futures market:
http://finance.yahoo.com/q/bc?s=RBM07.NYM&t=5d
This is a playground for speculators. They come in, sell short, and then go on the air and give hysterical rantings about the refinery crisis and peak, ride the price up and dump. Can you read it any other way? And surely the futures traders for the companies in the oil and refinery industry would not be trading on such a thing, would they?
Go back to the Enron days. It was revealed in tape recordings released during the trials of the executives that they DID in fact trade in electric power futures, on the basis that they knew they were going to go up because they wree the ones who could drive them up! It was a sure bet. Enron, Calpine, Dynergy, Williams, Aquilla, and others ALL were playing the markets based on being able to wheel power on and offline. They showed no guilt about putting elderly people and children out of air conditioning in 100 degree heat. The damage they did to California's status as a dependable place to do business has still not been repaired.
And make no mistake: They are not afraid to use every outlet at their disposal to slander alternatives. If you listen to the oil companies, thin film solar, plug hybrids, advanced batteries, advanced hydraulic hybrids for trucks and buses, localized rail, thermal solar for air conditioning and refridgeration, and wind are all garbage. But wait? All of them? Could not even one or two of these options, maybe most of them, be viable? No. Despite the millions of dollars in research, the venture capitalists willing to invest in them, and the doctorate level technicians working on them, They are all "silver bb's".
It is easy for people to get tangled up with so much dis-information going on. Crude oil is holding stable,, but there are those who will tell you that we have a massive shortage, every major producer is not only in decline, they are "crashing"! Pity the poor speculators, the poor refiners, who cannot make money!
"That's how they do it you know....they lose money on transaction after transaction until they are filthy rich..."
1930's era movie "Nanotchka"
Thank you, be alert, your right, our time is coming, when we will no more be hostage to these guys than we are now to Enron! They are like dinosaurs breeding....and they know it. This is why they engage in slander that is so outragous that it can be seen through instantly.
Peak may be here now, or it may be here in 40 years, it really doesn't matter if we begin to build and design the future, and sell it on the real threat to the United States: National security, balance of trade, cleanliness, reduction of greenhouse gas, DIGNITY. And the future is NOT staring a mule up the azz. Damm, I just wish I were college age again, the opportunities, the variety, it will be astounding.....:-)
(edited for spelling and reduced length)
Roger Conner Jr.
Remember, we are only one cubic mile from freedom
For a 40 mile round trip daily commute
This does not fully express the gasoline demand of the suburbs. They must drive to shop, go to church, barber or any but home entertainment. Their children can rarely walk to school, the cost of services (plumber, police, pizza delivery) all have a higher imbedded energy cost in the suburbs.
The mileage related consumption items in a car/SUV are also a form of oil consumption. The costs of motor oil, tires, ATF, antifreeze all increase with the price of oil since they are all just processed oil. And all are mileage related costs.
You need to at least double that cost figure and tripling it would be reasonable.
Best Hopes,
Alan
PS: I will reply to your military base closing post when I have time. Out-of-town guests today. The chairman of the largest streetcar museum (in the US ?) is visiting :-)
As I recall, the average driver goes about 15,000 per year. Divided by 365 is 41 miles per day -- total per vehicle (a lot of homes have two cars though).
Suburbanites drive more than urbanites. I do a bit more than 2,000 miles/year in the years that I do not evacuate.
Per vehicle stats are chancy, given the hobby cars and speciality vehicles (oversized pickup to haul the boat and occasional heavy load) that dot American suburbia.
Best Hopes for fewer VMT,
alan
Right. And furthermore, the technology does not exist to significantly increase mileage w/o reducing weight/volume of the vehicle ie minivan/large suv. Clown cars are going to be a tough sell. PLus not only are super efficient vehicles considered gimmicky but they are also luxury items. The govt. is not just going to give them away! They will not be a realistic option during hard times for most people and the hard times are going to come first. It will almost always be cheaper,as we've discussed before, to keep the old beater on the rd. or buy someone else's at cut-rate and save the money there. SWitching the fleet over in any meaningful way would take a couple decades under these circumstances.
Matt
According to this week's CFTC commitment of traders report, non-commercial short positions rose (and long positions fell) while commercial (i.e. hedgers) did the opposite. So...I can read it another way. Commercial hedgers drove the price up -- NOT SPECULATORS.