DrumBeat: July 6, 2007
Posted by Leanan on July 6, 2007 - 9:03am
Topic: Miscellaneous
New battery packs powerful punch
Until recently, large amounts of electricity could not be efficiently stored. Thus, when you turn on the living-room light, power is instantly drawn from a generator.A new type of a room-size battery, however, may be poised to store energy for the nation's vast electric grid almost as easily as a reservoir stockpiles water, transforming the way power is delivered to homes and businesses. Compared with other utility-scale batteries plagued by limited life spans or unwieldy bulk, the sodium-sulfur battery is compact, long-lasting and efficient.
Global warming threatens alternative-oil projects
Oil-sand, oil-shale, and coal-to-oil projects – alternative fuel sources that could enhance US energy security – have always faced one hurdle. They look good only when oil prices are high. Now, they have another challenge: global warming.
Gazprom will invest $420b in gas industry by 2030 to meet demand
Russian gas monopoly Gazprom will invest $420 billion in the gas sector by 2030 to ensure enough supplies to the domestic market and exports, its chairman said in remarks published yesterday.
Iran's Oil Industry: A House of Cards?
...Iran's energy sector is a house of cards. It is neglected, crumbling and underinvested. Many of its oil and gas fields are in dire need of foreign technical expertise to help reverse their natural decline. An analysis published last year in Proceedings, a journal of the National Academy of Sciences, asserts that, "Iran is suffering a staggering decline in revenue from its oil exports, and if the trend continues, income could virtually disappear by 2015." Iran's deputy oil minister, Mohammed Hadi Nejad-Hosseinian, confirmed recently that, "if the projects for increasing the capacity of the oil and protection of the oil wells will not happen, within ten years there will not be any oil for export."
Peru: Oil Industry Told To Keep Off Land
Oil companies from all over the world have been warned by Peru's national indigenous peoples' organization not to explore for oil in areas where uncontacted tribes live. The tribes face extinction from an oil boom in Peru that has seen 70% of the Peruvian Amazon opened up to exploration.
China, Russia sign supply deal
CHINA'S state-owned Sinopec Group has signed an agreement with Russian oil firm Rosneft to transport additional crude supplies via Mongolia.
India races for the world's cheapest car
The telecom revolution in India has made cheap mobile telephones accessible to even the country's poorest, and now India's underclass is likely to be able to go from two wheels to four when the cheapest entry-level autos hit the roads in the near future.
Frozen gas supply dreams to meet cold, harsh reality
Take a world hungry for new energy, suggest a huge untapped trough of frozen gas on the doorstep of the biggest consumers, and it's easy to fathom why some governments are salivating over methane hydrate.But even proponents say the cost, technology and environmental hurdles in developing the resources -- mostly subsea deposits that promise vast gas reserves -- mean it could be a decade or longer before any real results are delivered.
"The Coffeyville refinery going down is a major blow to supply as things were just returning to normal," said petroleum analyst Bryant Gimlin of Fort Lupton-based Gray Oil Co."The refinery is likely down for the long-haul," he said. "Some area refiners were quick to post (price) increases. Those that have it are going to take advantage of those that need it. This part of the country has been running on fumes since February."
ConocoPhillips Reports Malfunction at Refinery at Borger, Texas
ConocoPhillips, the second-largest U.S. refiner, reported a malfunction at its refinery in Borger, Texas, causing the flaring of about 500 pounds of sulfur dioxide, according to a report on a state-administered Web site.
Valero: 4Q Work at Calif., Texas, New Jersey Refineries
Valero Energy Corp. (VLO) said Thursday that it plans work that will impact production at its refineries in Texas City, Texas, Paulsboro, N.J., Benecia, Calif., and Wilmington, Calif., during the fourth quarter.
BP Carson Refinery to Lower Rates for 10 Days
BP Plc's Carson, California, refinery will run at lower rates for about 10 days to allow Europe's second-largest oil company to repair a compressor, a person familiar with the plant's status said.
1.2 Billion Reasons Why Our Energy Crisis Cannot Be Averted
Whether or not you believe peak oil is about to (or already has) occurred, our world is growing astronomically. But will the world continue to grow if oil exits the main energy stage within the next two decades?
Dave Cohen: Gas Subsidies and Iran
Violence erupted in Iran last week when Ahmadinejad's government imposed gasoline rationing, limiting drivers to 100 litres (26.39 gallons) per month of petrol at the subsidized price of about $0.42 per gallon. Angry protesters burned gas stations as they denounced the belt-tightening measure and the politicians who imposed it (photo below, source). Sanctions on Iran, the Islamic Republic's policies, and subsidies on gasoline in other countries adversely our ability to cope with a liquid fuels peak that is likely to arrive by 2015. The rioting also revealed the sacrosanct nature of driving, and just how tough it's going to be to change people's transportation habits all over the world to mitigate the effects of the crisis.
Cattle Producers Urge Equal Opportunity Energy Policy
The National Cattlemen's Beef Association says it supports efforts to reduce the nation's dependence on foreign oil by investing in renewable and alternative energy resources. But NCBA does not support the proposed increase in mandates for corn-based ethanol to 15 billion gallons of renewable fuels from feedgrain products by 2015."Sky-high mandates for feedgrain-based ethanol are not the solution," says Jay Truitt, NCBA vice president of government affairs.
UK: Nigeria fears push oil over $76
Oil prices have surged past $76 a barrel amid growing concern that unrest in Nigeria will hit exports.The kidnap of a three-year-old British girl this week has been seen as an escalation of the violence that has plagued the oil-rich Delta region.
Brent crude climbed as high as $76.01 a barrel, before falling back to trade 1.6% higher at $75.94. In New York, US light crude added 61 cents up $72.42.
Canada is marching north to assert sovereignty in the Arctic, to repel Danes and claim Hans Island, a rock the size of a football field between Ellesmere Island and Greenland. It is not quite war but it is enough for Canada’s Prime Minister to tour the Arctic Circle to assert Canadian control of the Northwest Passage.A mad scramble is under way for Arctic riches: fish, diamonds, oil and gas.
Strange season to top off the tank
Crude oil is now trading for $72 per barrel.But by the Citigroup analyst Tim Evans' account, it should be $62.
"There's no shortage of crude oil. And yet the market seems to be pricing in an imminent shortage," Evans said. "In my view the markets are relatively overvalued here, and the prices cannot be sustained."
Consumers shift to smaller engines amid high gas prices
The percentage of four-cylinder engines in U.S. vehicles has been rising slightly since 2002, but it still was only 25.4 percent of the U.S. engine mix in 2006, according to data collected by Ward’s Automotive Group.Still, in mid-sized vehicles where consumers have a choice, the majority has picked four-cylinder engines so far this year in nearly all of the best-selling models made by the top five U.S. auto sellers.
Steorn Orbo Demo delayed until further Notice
Irish Steorn has delayed the demo of their free energy technology Orbo until further notice.Initially the company wanted to demonstrate Orbo already on July 4th in the Kinetica museum in London. They had to postpone the demo to Thursday as reported yesterday. Today Steorn says on their site that the demo is delayed to an unannounced future date.
More bad news for “peak oil” enthusiasts — those wishful thinkers and doomsday peddlers who say the world is running out of oil. BP’s annual “Statistical Review of World Energy” shows “proved oil reserves continue to exceed 1.2 trillion barrels, equivalent to current production levels for more than 40 years.”
A craving to stay cool challenges power grid anew
With the state's first heat wave of the year, California's power grid operators warned residents to conserve energy or face rolling blackouts as the state did in 2000 and 2001.
Australia reliant on Middle East oil: experts
Oil and its refinery by-products play a fundamental role in just about every part of Australian life, and a large amount of it originates in the Middle East.Graeme Bethune, chief executive officer of energy advisory firm EnergyQuest, explains.
"Only about 13 per cent of the crude oil that we import comes from the Middle East, but we import increasing amounts of refined petrol and diesel from Singapore and Singapore gets most of its feed stock from the Middle East," he said.
While the US may succeed in procuring the passage of draft legislation securing the privatization of Iraqi oil fields and revenue sharing, the Kurdish Regional Government (KRG) is pushing ahead with plans premised on future carbon domination.
Nicaragua: Energy Crisis Rears its Ugly Head
With an energy deficit hovering between 20-30% of the nation's demand, embattled power-distribution company Unión Fenosa in mid-June began again implementing rolling blackouts across the country, shutting down whole cities for 6-10 hours at a time.
Fuel shortage causing problems on Flinders Island
The cost of flying to Flinders Island could go up if a critical shortage of aviation gas on the island is not resolved soon.Airlines of Tasmania has had to restrict the number of passengers it carries because it can no longer refuel on the island.
A previous contract to supply the fuel has been scrapped because of the costs involved.
When Building Green Ain't so Green
Look at the web site for the next green builder you see on TV or in the daily paper. Does the site show plans for a home with trees and no parking garage? Or, is it another house plan that tells you how many cars the garage will hold and says nothing about trees? Many green architects and builders are doing their best to create environmentally friendly homes. But most have a narrow focus on eco-techniques. They rarely understand that current construction is actually making environmental problems worse.
Saudi Aramco To Sell Crude to the US At Lower Price
Saudi Aramco, the world's largest state oil company, cut prices of its crude oil to be exported to the U.S. in August. It raised prices for Europe.Aramco cut prices of all grades it sells to the U.S. by between 35 cents and 50 cents a barrel, the Dhahran, Saudi Arabia-based company said in an e-mailed statement late yesterday. Aramco said it raised prices for shipments to Europe in August by between 40 cents and 70 cents a barrel.
Oil prices rose on Friday to $75 a barrel for the first time since August on renewed unrest in Nigeria’s delta oil producing region.
Nigerian Militants Snatch Five Foreigners in Volatile Delta
Gunmen overran an oil flow station in Nigeria's restive Niger Delta Wednesday, seizing five expatriate workers, officials said.Two New Zealanders, one Australian, a Venezuelan and a Lebanese were taken a day after the oil-rich delta's most outspoken militant group, the Movement for the Emancipation of the Niger Delta (MEND), said it would not extend a month-long truce with the government.
Nigeria kidnappers threaten to kill girl
he kidnappers of a 3-year-old British girl are threatening to kill her and then come after her parents if their demands aren't met, the girl's sobbing mother said Friday.
Protesters, Police Clash Near Oil Fields in Ecuador
Scores of police and protesters have been injured in clashes around the facilities of a Chinese oil company in the eastern Ecuadorian province of Orellana, authorities and human rights activists said Wednesday.
Food vs fuel wars just beginning
In 2005, easily extracted oil from the oilfields peaked. From now on, the flow will be at a reduced rate, eventually running dry. Oil extracted from the more difficult oilfields, requiring more technology and consequently more expense, is expected to peak in four years, according to some experts in the United Kingdom. Since the global demand for oil exceeds supply, oil prices are going to continue rising.
Fire Damages Petrobras' P-50 Platform
A fire broke out at about 4 p.m. local time (1900 GMT) in a room containing gas compression units, Petrobras said in a release. No one was hurt and no oil leaked into the sea.Oil production was temporarily interrupted, but was already partially restarted Wednesday evening, the company said. The company didn't disclose what the amount of the damage was.
UN climate change chief warns of impact on poverty, hunger
The UN's top climate change scientist on Thursday urged the world body to take greater account of the impact of global warming on hunger and poverty.
The former vice president (and almost president) wants to replace the current payroll tax with a consumer tax on fossil-fuel use.This "carbon tax" would, of course, raise the price of gasoline and home heating/cooling. And it would put the burden of generating the same level of federal revenues on consumers while reducing the tax burden on labor and capital (workers and employers). Unless the poor get a break on this consumption tax, it will hit them harder than wealthier folks.
Global warming ravaging Mount Everest, sons of conquerors say
The sons of Sir Edmund Hillary and Tenzing Norgay told British newspaper The Independent that their fathers would no longer recognise the world's highest mountain, saying the base camp is now 40 metres (132 feet) lower than it was 53 years ago..."Base camp used to sit at 5,320 metres. This year it was at 5,280 metres because the ice is melting from the top and side. Base camp is sinking each year," said Peter Hillary, who himself has twice reached Everest's summit.
Could this be the global-warming generation?
The "Live Earth" shows that start Saturday in Australia are meant to be more than a planetary party. Event founder Al Gore hopes they will kick-start a global civic crusade to combat climate change and to inspire individuals everywhere to do their part.Will the event mark the debut of a "Global Warming Generation" – a significant shift in attitudes and behavior? Or will it simply be a fun, musical follow-up to Mr. Gore's film, "An Inconvenient Truth," that resonates little beyond the current advocates?
A new Round-Up has been posted at TOD:Canada.
Today's headlines lead with coverage of the on-going crisis in the debt markets, and an explanation of the financial engineering underlying much of the global liquidity bubble. Debt ratings have not been adjusted to reflect current market conditions, meaning that 'asset' valuations are over-stated. No institution wants to force asset sales for fear of revealing just how much real valuations differ from nominal ones, but eventually such a sale will occur - with the potential to cause an abrupt repricing of a wide range of 'assets' (many of which will actualy be revealed to be essentially worthless). Leverage will magnify the losses, leading to a very serious financial crisis. One estimate puts the potential losses, once assets are eventually marked to market, at 20 times the sum involved in the LTCM crisis in 1998 - so far, and getting worse by the day.
The Round-Up is also convering the Canadian energy scene, as well as environmental and international news, in that order. Oil companies leaving Venezuela and aiming for the oil sands are finding that all is not clear sailing, while China is entering the oil sands for the first time. Nunavut seeks control over future oil and gas revenues, NL wants to bypass Quebec in selling electricity to the US, and the slow down in natural gas drilling is hurting frontier communities in Alberta and BC.
There is a LaRouche link in there! Have you no shame? Have you no sense of decency, sir?
We live in times where LaRouche madness is matched by our current administration. Strange days indeed...
Chinese billionaire Li Ka-shing bought a controlling interest in Husky oil years ago. Since then there have been other Chinese interests in the oilsands. The Chinese tried to buy Noranda Mining but was blocked by the Canadian government in 2004. CNOOC of China bought MEG Energy in 2005 for its oilsands holdings. Some multinational oil companies owned oil and gas blocks in China.
Technically, that is, in a jurisdictional sense, Li Ka-shing is not a 'Chinese' billionaire but a Hong Kong SAR billionaire. The legal systems are entirely different. Hong Kong law is pretty much identical to English law, for obvious reasons.
It always galls me when people refer to Li Ka-shing as a 'Chinese' billionaire, unless they mean that designation in a simple ethnic sense. In political and economic terms, Li Ka-shing is a product of Hong Kong, not China.
It is not really right to raise Li Ka-shing and then talk about 'the Chinese'. It's like saying a Singaporean billionaire has bought something up, and then concluding that Beijing is on the march.
Hong Kong is no longer a British colony. It is under Chinese rule, although it retains some financial freedoms.
One factory in China paid a monthly wage of "900-2,500 yuan (US$118-$326)," 6/2007. That is more than the minimum wage. Company owners were able to pool capital and buy businesses abroad, including oilfields.
http://www.atimes.com/atimes/China_Business/IF06Cb01.html
Husky Oil has Canadian oil sands leases and offshore conventional oil projects.
Utah consumers will sue big oil, we need volume compensation on gas pumps. Another make work project for lawyers and politicos.
I recall the thermal expansion coefficient for naphtha to diesel fluid range is around 950 to 1000 parts per million per deg C.
So an 18 degree F increase in temperature is about 1 % or about 1.28 ounces per gallon. Or 3 cents per gallon for $3.00 gas, so for 9 cents per gallon it requires 54 deg F rise or $9 dollar gas and an 18 deg F rise. IMO 20 gallon tank may vary by 10 to 20 cents with today’s prices.
http://hypertextbook.com/physics/thermal/expansion/
Since pump calibration is based on 60 Deg F there is much more room for extra gas energy in the winter than for less gas energy in summer.
The mid point of 0 to 100 is not 60 Deg F. So the consumer is actually ripping off the retailer.
BTW: From upstream online 1206 GMT Brent 77.43, Bonny light 79.28, Tapis 78.20
One also suspects that the temperature of the gasoline as it comes out an underground storage tank to the pump is somewhat less than the ambient air temperature in the summertime.
IMO, this is a ridiculous lawsuit, but it shows how touchy people are getting about the whole gasoline situation...
This whole thing seems frivolous, but it's actually a blessing in disguise. If the industry loses, which it probably will given the public mood, they will have to install more expensive equipment in their pumps. This cost will be passed along to consumers as higher prices. Then, in the winter, the pumps will give people less gas, effectively raising the price again.
The best part is that it's consumers clamoring for higher prices. We just need a way to replicate this with a few hundred other small tweaks. Maybe next we can get the public to call for compensation for the loss of energy when the companies blend with ethanol. That should require more expensive equipment, and point out to people the lower energy content of ethanol.
'which it probably will given the current mood...' kjmclark I agree that this lawsuit is frivilous but I dont think our government gives a whit about 'our current mood' based on the commutation recently bestowed on Scooter. I believe that the prevailing mood was that Libby should spend a bit of time in the pokey, but it didnt happen.
Just another day in paradise watching the Atlantic for whirling dirvishes.
What you want as the driver is the lowest price per CALORIE of the fuel. To power a car, it's the calories in the fuel that count. A better measure of fuel economy would be miles per megacalorie or gigacalorie.
In the mean time, miles per unit MASS of the fuel is better. i.e. miles or kilometres per kilogramme. As we all know, diesel has more calories per kilo than gasoline and more so than ethanol. If you were to drive a Harrier, you'd want the fuel with the most calories per kilo. That way, you'd get the best range on a load of fuel, a "tank o' gas".
The lawsuit is a mixed blessing. As noted, if the litigant wins, the winter gas price will rise by some amount. But beware. The gas prices will stay high simply from the oil peak anyways. The suit is more academic than anything. The calorie difference from summer and winter with the present system is rather minimal. Using the car's A/C will make a bigger difference. The difference as I see it? 10 percent. Significant, but not earth-shattering.
Someone wants media attention with a political point. That seems to be the motive for the lawsuit. How he conjured up the fact that calories per key is the correct way to measure fuel use is anyone's guess. Maybe he is a dinkum pilot. Nobody knows.
Petrol prices high enough yet? Just wait!
This talk about volume compensation is silly. Don't they realize that if they make a gallon 1-2% bigger in the summer the gas stations will just charge 1-2% more for it?
Most gas is stored in underground tanks which are at the temperature of the surrounding ground. This is much closer to the 60 Deg F calibration temperature than the ambient air temperature of most hot climates. The same principal of cool ground temperatures allows ground source heat pumps to work efficiently. I doubt you would have much of a temperature difference from the 60 degree reference temperature to amount to anything. No legal case here.
True enough, except that this is the USA. A good legal position is not required, as we have a jury system, i.e. one which in especially in politicized civic cases works on cheap moronic sentiment and envy. And in this matter, both are in limitless supply.
I very seriously doubt it. The ground is often an excellent insulator, and there will be a void space of some sort between the tank and the 'secondary containment.' So I doubt that gas delivered to a modern high-volume station that sells it out in a day or two would ever reach "cave temperature". However, I haven't stuck any thermometers down into tanks, so I will await the "investigation" to tell us at ludicrous expense.
The real point is that any difference will rarely exceed a couple of cents, and the posted price will adjust to compensate, leaving little effect on the 'consumer'. But the cosseted monopolists - the lawyers and the manufacturers of massively overpriced "certified" equipment - will laugh all the way to the bank.
Some gasoline will be in the line close to surface before you start to pump, buy your gas early in the morning before it gets hot and you might save a little. If you remove things stored in your car that are not essential, you get better mileage with less of a weight load.
"Saudi Aramco To Sell Crude to the US At Lower Price"
Sounds like Europe needs to bomb someone...
I always thought there was one world price for a particular oil, or if there were any differentiation it was down to the cost of delivery (which would be cheaper for Europe).
So where is this difference coming from, and which arm needs to be twisted to put it right?
I suspect it's a reflection of the U.S. refinery issues. It's a bottleneck, which means demand for crude is down in the U.S. (Since refineries are customers for crude.)
Good ol' supply and demand.
I dont think the price differential has anything to do with supply and demand.
SA needs protection from some of its neighbors and the US has probably made a point, during discussions with SA, of how much the war in Iraq is costing America and the fact that our presence in the area is a buffer against Al Queda and other potential adversaries of SA...as long as our troops dont tred on 'the holy land.'
After all, our huge military presence in the mid east is to control the oil flow from that region...we are not there to harvest the dates.
In regard to the price break for the US the word 'extortion' comes to mind.
There is a great deal of intelligence on this board but little in the way of street smarts.
Governments are nothing more than mafia writ large. Governments go to a great deal of trouble to maintain a monopoly on violence and from that monopoly springs all other powers of governments. To paraphrase Mao...power comes from the barrel of a gun...
The U.S. is Saudi's best customer. Doesn't it make sense they would cut us a deal ? If you drink at the same pub for 30 years, every day, its nice to have the bartender slip you a complimentary beverage once in a while, no?
According to the BP statistical review, the inter-area movements from the middle east to Europe and the US were 3.208mbpd and 2.276mbpd respectively. Doesn't say how much was from which country - but it would appear there's a good chance that Europe imports ~50% more from the region than the US.
That's a fair amount of product that they can shift over to their best customer, the U.S.A.!
But not by much.
Japan, who they cut exports to this spring, was their 2nd best, according to 2005 data.
"US 16.4%, Japan 16.1%, South Korea 9.1%, China 6.9%, Singapore 5.1%, Taiwan 4.2% (2005)"
http://www.exchangerate.com/country_info.html?cont=All&cid=203
And it is not our best supplier for crude:
"During the first five months of 2005, Saudi Arabia exported 1.57 million bbl/d of oil (of which 1.51 million bbl/d was crude) to the United States. For this time period, Saudi Arabia ranked fourth (after Canada, Mexico, and Venezuela) as a source of total (crude plus refined products) U.S. oil imports, and third for crude only."
However,
"Saudi Arabia is eager to maintain and even expand its market share in the United States for a variety of economic and strategic reasons. During the first five months of 2005, Saudi Arabia's share of U.S. crude oil imports was 14.9 percent, up from 13.9 percent during the first five months of 2004 "
http://www.eia.doe.gov/emeu/cabs/saudi.html
Any more recent data appreciated.
Are you suggesting that SA would do us a favor for past protection that we have afforded them? What is past is a wash. Governments take actions based on what is in the deal for themselves or how it will effect their interests. There are no free drinks.
Of course. The U.S. (including the UK) is in the best position to protect their good friends over there (like the Saudi Royals), aren't they?
Actually, this may make a strange kind of sense, though it has little to do with economics.
Iraq is a disaster area, and the Saudis realize that the only effective counterweight to the Iranians creating a Shia protectorate (with considerable oil reserves) is American military forces.
Second, the U.S. and the House of Saud have a very long relationship, and to the extent the House of Saud can prop up its friends, it is in the House of Saud's interest to do so. Especially these days, as some of the arms trade corruption involving the British means that London is looking less attractive now. (And being completely cynical, it wouldn't surprise me much if the Bush League is working hard at making that such corruption cases stay off the radar of American justice.)
Further, the Europeans do seem to be price sensitive - higher oil prices lead to reduced demand. If production is stalling (this may be the preferred term for 'decline' in the near future), then it makes long term sense to make sure that a prime customer remains a prime customer as long as possible. Especially if another long term customer is already heading in the 'wrong' direction.
And if the dollar continues to decline, it may be a wash for both the Saudis and Europeans/Asians.
This indicates that oil is moving out of a purely economic framework in my eyes, since at least in theory, oil is fungible - or it used to be.
The point about refineries is certainly not incorrect - but if there is a refining bottleneck, why reduce the price? At least in part, this may be a way for gasoline imported from Europe to mask actual price increases in the U.S., deflecting blame from the Saudis.
Yep, that's the critical bit. If oil is moving from truely fungible to politically driven availability and pricing, then its an indicator we are moving from one playing field (artificial supply constraint) to another (political supply management).
That's an indicator of the first transition point, where demand first exceeds physical supply. The players are getting ready for the new game.
Oil has never been truly fungible, though. It's certainly far more so than natural gas, but it's still dependent on infrastructure. That's why prices are higher in Europe and Asia.
This is true, but there may be a couple of moves being played on the chessboard.
To an extent, Europe is a middleman, and earns a bit of money selling refined products across the Atlantic.
The Saudis, for a number of reasons, are getting into the refining business, and discouraging a competitor from investing in additional heavier refining capacity makes decent sense.
Crude isn't perfectly fungible - but diesel, heating oil, gasoline, etc. are.
I think it can be explained by infrastructure limits and the Saudis' desire to maximize their profits.
I don't think they're trying to discourage Europe. They are just charging more in Europe because they can. The Europeans will sell the refined products to us, and they're not going to be losing money on the deal.
Also, since the US crude inventory is so high, demand here should be lower so even offering a lower price to US buyers doesn't affect much because they are already "full". In other words, the lower price is a largely symbolic gesture that won't really impact KSA's bottom line very much but which might buy some good will with the US public. US crude inventories are building faster than refineries are producing product causing a steady net build in crude for the last several months. That cannot go on forever and KSA may be guessing there isn't much storage space left in the US.
Ghawar Is Dying
The greatest shortcoming of the human race is our inability to understand the exponential function. - Dr. Albert Bartlett
With all this excess crude couldn't the U.S. take advantage of the situation to refill the SPR?
That 'symbolic' part escaped me - it may be the simplest explanation. Giving a price break to a customer who can't really take advantage it is a clever trick.
Well, the certainly aren't trying to discourage the U.S. from buying Saudi crude, that seems clear.
But like a comment a few days ago about sterling exchange rates in terms of Brent pricing, this Saudi price shift is meaningless when viewed through an exchange rate lens - the euro has appreciated more against the dollar than the price differential, making this a bit harder to explain.
Though one off the cuff explanation is that the Saudis are one of the last sources left to sponge up all the dollars floating around.
Things are beginning to bounce around.
I cannot argue the ins and outs of the oil market as others do here. But from a geopolitical standpoint one cannot but be highly suspicious. I'll never forget an WSJ guest editorial several years ago, before the Iraq invasion, by a top military guy here: he advocated invading KSA and taking their oil and redistributing it for the common good. (Yeah right.) Point being, KSA is a protectorate but is also under the gun. Since the bog down in Iraq, they have shown signs of getting uppety, making oil deals with 'authoritarian' consumers and the like.
Fungible, shmungible. Yes, there are oil markets. But today's geopolitics are entirely about NOT leaving the control of the oil supply to the market. Get real. :)
The great game is changing from limit poker to table stakes. SA has a notoriously weak military so they need us to keep the bad guys at bay. Thanks davebygolly.
China will soon be able to provide the same service with better terms.
Alan