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Thanks for your great posts, Robert! The only thing you didn't mention is that we have a minimum requirement for 185 million barrels in the system just to keep the pipelines running and process equipment primed, so our real inventories are much smaller than 200,000,000 barrels-really a two or three day supply.
I'm sure this keypost will draw your usual group of snipers and conspiracy theorists. I'd like to state in advance that I've always found your posts accurate and painfully honest,that you seek the truth and to make it available.
The only thing you didn't mention is that we have a minimum requirement for 185 million barrels in the system just to keep the pipelines running and process equipment primed, so our real inventories are much smaller than 200,000,000 barrels-really a two or three day supply.
The reason is that this is essentially brand new information to me. Obviously there is a minimum level that has to be in the pipelines, tanks, etc., but I did not know it was so high. A couple of comments that Paul Sankey made in his Senate testimony now sound fairly likely:
One of the things I love best about TOD is how quickly various information is diseminated to everyone here, and how we can all react and change our views. This data really seems to be showing Jeffrey's Export Land hypothesis is kicking in. It shows the true frailty of our system, and, IMO proves peak oil has happened. It may just be for geopolitical reasons, but the declines in Saudi production and Nigerian shut-ins make it unlikely that we will see the 88 mmbopd level that you predict in the next couple of years.
I really hope I'm wrong about this-the world needs the room so that the message can be spread. I sure hope this is just a temporary glitch, but when everybody is already running flat-out and barely keeping up any minor incident is magnified. Its terrifying !
Robert - I looked for that quote, about a 1970's style crisis, in the Senate pdf you linked to earlier in the article, but couldn't find it. Is it from another document (or am I just blind?)
Reason I ask is that I'd like to use it as a reference for telling others of the hairiness of the edge on which we are walking. - thanks
See the 2nd paragraph under executive summary in the PDF link.
Thanks Robert... turns out I am blind!
That statement to me sounds more ominous than what is being reported in the MSM... it just seems to have been totally overlooked by the newswires, blogs, and everything I read.
How did the Senate committee react to that testimony? It certainly poured cold water on the rants of some politicians.
I am watching the webcast right now:
Senate Energy Hearing Webcast
The hearing doesn't start until about the 22 minute mark. For the first 21 minutes there's nothing. I am interested to see how they reacted, but I just started watching it.
Sankey knows his stuff. If you want all the issues clearly laid out, he knows and understands the industry and the history. I am at the 53 minute mark right now, and he has been the most impressive speaker so far. Even if he is a Brit. :-) But they tend to be quite direct in their speech, and he told them that they need to keep in mind that Europe pays double the cost of the U.S. for gasoline.
I am really looking forward to the Q&A.
I just watched Senator Wyden from Oregon, and he left me with a very unfavorable impression. He kept asking why the oil companies weren't reinvesting their profits, and Sankey kept saying that they were. Wyden must have repeated this 3 or 4 times, and then he closed with it. He wasn't interested in Sankey's view, he just wanted to assert that profits aren't being reinvested.
That's my first and only impression of him, but I think he is probably pretty typical. They don't actually want to listen to what you have to say.
wyden's mind is already made up. His famous report which postulated that oilcos were shutting down refineries in some planned way to drive up prices was riddled with mistakes. He strikes me as the sort that decides what the answer should be and then searches for whatever data bolsters the pre conceived notion.
Anyone who looks at the data hard understands that refining capacity has grown by about a third from 1990. The bad news is that demand grew faster and imports are much less available due to spec changes and overall world demand growing. Those European, South American and AG export refineries now have other markets looking for product. Of course refiners didn't invest in excess capacity in the 90's. their margins were already poor due to excess investment worldwide in the 80's. Time to pay the piper until the herd all rushes to add capacity in the next 5 years.
I finished watching the web cast and wrote up my impressions:
http://i-r-squared.blogspot.com/2007/05/comments-on-senate-hearing-on-ga...
Wyatt wasn't the only one who put his meager knowledge on display. Check this out:
Senator Menendez: Over the past few years, it seems that bracing for the onslaught of record high prices at the gas pump has become as common as planning for the summer vacation. And we see prices rise and fall, we understand the concept of a changing supply and demand chain, that's not foreign to us, but when we see no singular event, no visible cause for the increase in prices, consumers scratch their heads and try to figure out what's happening. This is the 3rd year in a row in which consumers are facing gasoline prices above the $3/gallon mark. Yet there's no devastating hurricane this year; there's no single event at a refinery or in an OPEC country that explains why, in the first half of May, consumers are already experiencing sticker shock. Mr. Sankey, when you say there is no price manipulation through the whole supply chain, then why do prices seem to spike during times of greatest motorist activities such as the summer, and Memorial Day weekend? Now, I am sure that demand is part of the answer, but it seems that we find that it is in these time periods that the prices spike. Is that just convenience, that it just conveniently happens that way? Is it just a pure coincidence?
Now remember, this is a guy who says he understands all about supply and demand, and now is asking if it's a coincidence that prices rise at the times of highest demand. If I had been a witness, it would have been hard for me to hide my disbelief at this question from another esteemed member of the Senate who happens to be formulating energy policy.
I think he is trying to insinuate that their is enough refining capacity and its being held back. The wording seems poor since I suspect he did not want to give the chance for a rebuttal of the underlying assumption he is trying to sneak in. If you heard this statement it does a good just of sneaking in this concept. So it probably sounds like pretty decent doublespeak to the average American.
Given that this stupidity is coming from a fairly powerful person in the US anyone that does not expect a witch hunt or big oil hunt in the near future is probably mistaken. And technically we really are not suffering direct peak oil effects yet just some temporary refining issues can you imagine the ton when real shortages become possible. We still have two more years before demand and supply diverge enough to make peak a significant factor.
I spoke too soon. . .
My daughter and son-in law are leaving next week on a road trip from Dallas to Oregon, where my daughter will be doing a six week internship program. I told them that, IMO, it was unlikely that they would see empty gas stations on the way out. However, I wasn't sure about the return trip (they may be flying back if one of them gets a job out there).
In any case, I then went to get the mail, and I stopped to fill up the Toyota. No gasoline at the first station I went to in North Dallas. Empty. Nada. None.
Lots of gas here in Oregon at @3.40 on the coast to @ 3.30 around Portland. We used to have a large differential between the coast and inland of 25-35 cents, which has now mostly evaporated. In fact, on one recent trip to Portland from the coast, gas was cheaper on the coast. I expect to see 4s in the dollar position on price signs by July at the latest.
Four $$$$ a gallon gasoline is here! Just three blocks down the street from where I sit typing this, (in San Francisco) there is a Shell gas-station. I walked by it the other day, and saw that Regular was priced at $4.33/gal. There was a mid-grade gasoline at $4.43/gal and something called V-test priced at $4.53. Diesel was around $3.85, if I recall correctly. But just across the street, there is a Chevron station, and here the prices across the board were about 65-70 cents a gallon cheaper. I’m wondering at this huge price difference, and why the Shell station would expect to get ANY business.
Antoinetta III
Yeah, there was an article linked in an earlier Drumbeat about the owner who raised the price over $4 to make a political statement/protest against Shell. We got to 3.99 9/10 for premium last summer here on the coast.
I filled everything up just in case and Chevron 91 octane at the American owned station was 3.25, 87 octane car gas was 3.05
The only unusual thing was several individual pumps out of service. Looking at other stations they also seemed to have several pumps out of service, but otherwise were selling gas just fine. No lines, lots of activity, almost like they are trying to control the rate at which they sell it.
According to my brother, there are many stations in Northwest Arkansas (Fayetteville area) that are out of gasoline. He suggested I fill up my cars before I drive up there to assist him with a project, because it was unlikely I'd be able to do so up there.
And you know... It's only going to get worse.
So most of the 200 million barrels is actually pipeline water volume, which really shouldn't be counted?
I think we are going to find out exactly how much reserves we have this summer.
Its not water, its gasoline. But its impossible to get it all out without constantly refilling and pumping from tanks. Lots of the crude inventory is the same-it needs to be in the system so that the equipment works properly, these are constant chemical processes.At least that's my understanding, but I'm in oil and gas exploration, not refining or marketing.so I'm not an expert.
I should have properly said "pipeline inventory." I'm more used to gas pipelines, gas as in nitrogen or methane.
to put it this way - you know when there are air-pockets in your waterpipe systems at home, after the plumber is gone ....
It is hissing at you ! I assume this will apply for oil as well .... all this hissing