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An article on the importance of imports from the Houston Chronicle:
Reliance on foreign gasoline is growing
They do go on to point out, though, that everything is going to be OK and we will all live happily ever after.
I would point out that this claim from the article is inaccurate:
The Virgin Islands are #2. The UK is #1 when you count finished imports and blending components that end up as finished gasoline.
The UK is likely to continue to be a major exporter - as long as the British can reduce their gasoline consumption faster than Americans increase it. But at some point, the amount available for the refineries will be the never ending bottleneck - and then the trans-Atlantic circulation of another sort will begin to fade.
In a sense, Europeans have more or less decided that diesel is the better IC technology for the foreseeable future, while the U.S. remains very focused on gasoline - which leads to ethanol, which then entails expensive retooling and development for minimal gains and reduced efficiency - and lots of money being thrown around, with none of it hitting the ground - and little of it available for better solutions.
At some point, Americans will realize that though diesel will remain useful in a number of ways, gasoline is a pretty non-essential fuel - but that realization will be fought tooth and nail, and will only become accepted when all the alternatives have been played out.
Amazing to read about windbreak tree lines from the 1930s being cut down for increased corn planting - that is a truly unhealthy response to growing scarcity in the future.
Windbreak trees being cut down for increased planting? That's horribly irresponsible, but I'm not sure I could expect to see anything responsible being done any more, least of all from the Agri-Industry players like ADM and ConAgra. May ADM, ConAgra, and Monsanto burn... (Sadly enough, I'm sure I inadvertantly consume products from all of those companies.)
Why aren't products produced on US territory considered domestic production. The US Virgin Islands are US territory. The folks who think otherwise probably believe a passport is needed to visit Hawaii. Anybody know how to administer an online dope slap?
While this is not exactly the same thing as saying we have a bidding war for declining exports, it is pretty damn close.
Again, as Deffeyes predicted the cumulative shortfall between what the world would have produced at the 5/05 rate and what we have actually produced is on the order of 500 mb (EIA, Crude + Condensate, the primary feedstock used to make gasoline). This had to have had an effect on world gasoline production.
Meanwhile consumption in the exporting countries is increasing, in some cases exploding (for example, a 50% annual rate of increases in foreign car sales in Russia).
While this is not exactly the same thing as saying we have a bidding war for declining exports, it is pretty damn close.
For gasoline. Yes, there is a bidding war for gasoline. That's why the price has shot up, and has had the ripple effect it has had around the world. But the price of oil is right where it was a year ago. So, I don't think we are having a bidding war there. We have had demand destruction, yes. But at these prices, the market seems to be adequately supplied with oil.
If we can work our inventories down here in the U.S. - and then the price of oil starts to climb as we try to keep the tanks full - then there is an indication of a bidding war for oil. If the Saudi's don't respond to declining oil inventories by opening up the taps, then as I have said before I will conclude that they can't. But if they do - will you admit that they are setting on some spare capacity?
RR, the Saudi's have built a lot of refining capacity over the last 25 years, and my guess is that they are cutting their exports of light crude so they can keep their own refineries supplied and make that extra $30/bbl or so.
If they are in fact declining at Ghawar, and unable to find enough light, sweet crude to replace their production loss, it would make sense that they save their good crude for their own refineries and cut supplies to their competion, the refineries that make gas for export to the US West Coast. In other words, WT's export land hypothesis.
With a finite end in sight for their flush production it makes no sense to increase their production, even if they could. So what I'm concluding is that they won't increase production unless they feel that they are irretrievably losing market share. With the declines at the other supergiant fields and total Russian production losing market share seems unlikely. They can retain their current market share with reduced production, while getting higher prices, a total win for the KSA. I have a feeling that reading the entrails of a slaughtered sheep will give more clear and undebatable results that their production in response to prices.
On goes my tinfoil hat: will one know where any reported increase comes from? Will one know its not oil diverted from Iraq as mooted here sometime back? One can hardly put this kind of thing past these guys (I don't mean just or even primarily the Saudis).
Of course if you want to go that route, then what's to say that they aren't actually producing far more than they are saying, and they are only claiming the cuts just to keep the world scared so the price of oil stays high?
Hm, no, I don't get you. Why would they over-produce even if they could? They would just leave it in the ground, wouldn't they? That case could be made. But SA's influence on the market is rooted in its role as swing producer. The US is certainly interested in its maintaining that role. So there is every incentive for a SA-US collusion in such a scheme, i.e. hiding SA's peaking. Tell me why I am wrong to be suspicious.
"would they overproduce if they could"
Its possible. As I have posted before. One of the alphabets presented to Ronald Raygun the idea of asking the Sauds to overproduce to drive down the price of oil to make the Russian crude to expensive to produce.
Did that happen. The charts and prices say the Sauds might have done so. Russian oil was basically shut down, They went bankrupt, and the wall came down.
Now is there such a reason to do it again,..Perhaps.
Quid Clarius Astris
Ubi Bene ibi patria
Figure 1 shows that imported gasoline and blending components have been increasing at about 11% per year. This rapid growth is difficult to maintain, especially in light of the relatively flat world production. The graph shows Imports fell back from the expected high growth rate in 2006, and 2007 may be lower yet. In order to maintain the high growth rate, we need a lot of weeks with record increases.
Figure 2 shows net US refinery inputs have been barely increaasing since 2000. With this anemic growth in inputs, it is not surprising that imports need to increase.