45 comments on TWIP (This Week in Petroleum) 8-29-2007
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45 comments on TWIP (This Week in Petroleum) 8-29-2007
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As I recall, we don't really have 20 days of supply. Some of this oil is filling the pipeline, and is in some sense not available for use.
If there is any kind of problem (hurricane coming, for example), and people suddenly start filling the gas tanks on their cars fuller, it would seem like we are already pretty much in to problem territory.
Does anyone have any calculations as to where we really stand? North Dakota is having trouble getting gasoline -one indication supplies are pretty low.
The whole "days of supply" concept is of no value. We could have zero days of supply, but as long as the truck was pulling up when we were, it wouldn't matter. We could have a 1000 days of supply but only one truck.
It's a national number, like real estate, that as you pointed out is meaningless in North Dakota.
Price is still the best indicator of availability.
Then why does the EIA use it?
And the $64,000 question is: Is price the best indicator of immediate availability or of long term availability?
Immediate availability!
C'mon Nate! You have had key posts based on discounting the future for the present.
Well I know what I think, but Im not always right.
It's more than mildly interesting that the markets believe that price is the best indicator of both of short term AND long term availability.
The price at the station is the immediate price. You can get the futures price from the nymex, which is a discounting mechanism based on what people think the future value will be.
http://www.nymex.com/lsco_fut_cso.aspx
Why does the EIA use it? Why do we need another 50B for Iraq? I just don't know.
Sorry - I was being sarcastic.
Im aware that the current price essentially equals the future price for the next 7 years, both on gas and on oil, which led to my statement - Why are the prices nearly identical? Glut of oil today? - futures prices in 2014 drop. Hurricane in the Gulf? 2012 futures rise (though not as much)
As long as there is no unlimited storage, these relationships dont decouple. But even if there was unlimited storage, I think prices of energy would be relatively flat all the way out the strip ( in a way there IS unlimited storage - that of keeping the resource in the ground.)
In other words, prices are going to tell us we have enough, until we don't.
That's cool. I agree with your last line completely.
You know, there are more boats for sale in the spring than in the fall, yet boats cost more in the spring. It's hard to explain the nuance to people that things cost what they cost based on what people will pay. Like I stated below, generic canned corn cost less than the national brand, but not because there is more of it.
When the days of supply does reach zero, I'm sure you and I agree completely on what the price will be that day!
I have been wondering if EIA's seasonal adjustment factors are getting out of whack. They keep saying we have don't have enough gasoline. I see no shortages anywhere. The doomsters cling to a single station closed in Missouri etc., when there are 200,000 gasoline stations n the USA.
Another query: If the EIA keeps warning about low supply, do station owners "top off" their tanks more than otherwise? I would, if I were a staion owner. So, do we have additional days supply in station tanks?
Lastly, as pointed out here, gasoline demand may finally be cooling off. Year-over-year increases in demand are shrinking. Given new models of cars have higher MPGs, we may be at the inflection point. Demand will start going down in the future.
When gasoline hits $4 a gallon ($1 in 1979 dollars) then we probably will see a big consumer shift. Back in 1979 we saw it. Gasoline is now $2.65 a gallon in Los Angeles. Much cheaper than 28 years ago.
You really can't criticize consumers for responding to price signals. The price signal today is that gasoline is not scarce, and takes an even smaller fraction of income than in 1979. Nevertheless, thanks to improving technologies, we are seeing demand flatline.
I suspect we will ease into an era of annual and secular declines in gasoline demand very soon. Since our refinery capacity will be bumped up slightly, I think we are nearly though the woods now. Worldwide refinery capacity is rising rapidly, and is predicted to actually glut markets by 2010.
Addtionally, in a couple of years, ethanol will male up 6 percent of US gasoline by volume, and it is not counted in the EIA survey.
I, too, would prefer a little more cushion than we seem to have now (I am still skeptical about the EIA seasonal adjustment factors). But, hey, there seems to be plenty of gasoline.
You're dreaming. What this will do is guarantee that we'll be stuck with w/an inefficient fleet in a time of shortage. Where's the beef!? re mileage? The reality is that people are still buying big cars because gas is cheap. Where's the beef!? re demand? We use an astronomical amount of fuel. This is the deadly flaw in capitalism is that it allows things to be much cheaper than long-term scarcity should dictate. We will almost certainly have shortages by next summer IMO and yet we have cheap gas this.
Matt
Hey, whaddya know, BenjaminCole's back on the scene.
Fossil Flatheads rejoice!!!
The Fossil Flatheads are strong. They are growing. They are handsome. But mostly, they are right.
it is obviously antidoomer. either he got banned, or he likes lots of sock puppets.
"Days of supply" is a good indicator as to what sort of buffer we would have in an emergency. Less "days of supply" mean we have less room to maneuver with any sort of difficulties. There would be less supply for evacuations or emergency vehicles. This is where the SPR might make a big difference for us, if we reserve its use for real emergencies, of course.
Does that confuse crude with gasoline? We can't count SPR as days of supply for gasoline unless we account for the lag time between pulling the oil out and processing it.
Westexas has a post in todays drumbeat that say 2.4 days of supply in excess of MOL.
I often agree with WTs assumtions on things, but here ... no-no
Personally I don’t buy the idea that the”pipeline-content” is part of any statistics – no way. The transit oil is “the last oil” so to speak – and an added bonus to the post-oil tribes..
Of course the US has more than 1-2-3 days of backup supply – that is a no-brainer IMO.
On the contrary if the wrong guy farted in the Gulf – The US would have been empty in a week – because it takes at least a week for the smell to go by the jet stream, and as the strategic reserves are bound up in a small geo-spot, as I understand.. they will not yield much far and fast...
Sorry for being away for a while, (visited cali, nevada/vegas, and some inbetween states from there to michigan)
I lurked earlier, and WT understands that the MOL (minimum operating level) is the amount of crude needed to transport within the pipelines.
A given pipeline has a minimum and maximum value for transportation, go too high and the pipe will be air or a medium which is does not occupy enough of the tube to actually be pumped at any efficient level by the current pumps installed on the lines. If we are only 5 days worth of oil above that MOL, and 20 days of MOL is needed for regular transport, then if supply falls below the 25 day MOL (this is all hypothetical) the pipe will simply STOP WORKING PROPERLY.
Then all the oil will have to be moved on river barges, rail, and trucks!
The pipes having a min and max flow rate need to be understood as such, you cannot simply say put 10 barrels a day to MN and 45 to NV, the mins are quite high, and dictated by the pumps/infrastructure in use.
cheers, someone correct me if i am wrong here.
You are incorrect. The EIA itself has noted that the inventory numbers includes the MOL (Minimum Operating Level) which is what is in the pipelines. If that is the definition that the EIA uses for inventory then who are you to contradict them?
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
Ohh ,… thx GreyZone and jteehan .. and WT
… in this case I’m sorry for doubting these claims! BUT you didn’t actually provide me any usefull “direct” links for this …. Did you ?
Normally I prefer the idea of having trustworthy sources (knowledge) on my hand, before I argue something… this time “I only used my own logics”..
So what you actually are saying is that, according to EIA, the USA has only 1-3 days of overhead petroleum – I mean just in case of emergency? My man …
And the spite this, all you Americans feel all fine and your president sleeps well at night? How can Wall Street actually be working seemingly normally, with this in mind - ??
Parenthesis :
(I don’t get it; there must be more to these statistics)
Our president always sleeps well, after all he is blessed with a total lack of consciousness and an empty conscience. And Wall Street is nowhere near normal. Central Banks have injected over $1 TRILLION in "liquidity" into the markets in the past 2 weeks to prop up the markets from our subprime mess (much more than our compromised press is actually reporting).
I wonder if any of us will be giving thanks at Thanksgiving when we can't afford a turkey because of the bail out of the banking establishment? But I'm sure our Presidente will have a great feast and sleep very well with all of the extra tryptophan.
hehe yeah ckaupp - but you know what they say on Wall Street (?) - the fundamentals are all fine AND I reckon the US Oil Inventories are the pinnacle fundamental!
- and AFAIK the subprime-ramifications are not yet linked to any oil-issue so to speak - BUT as this posting is on oil-inventories, I'm having that in my puzzled mind here :-)
Certainly not all Americans feel fine. I certainly don't. This crap makes my stomach churn. I have no idea how anybody can go about business as normal after even a cursory review of energy, agriculture, and climate statistics.
- Scott
"Try sour grapes; you might like them."
Cultural insanity. Historians (if there is any civilization left) will look back on this era with incredulity and wonder how so many people could ignore what was plainly staring them in the face.
The asinine notion that we can treat the combined problems facing humans today with just the "free market" (ha! what a damned lie THAT is!) to solve them is beyond comprehension. If we were actually at war, the "free market" would have long ago been damned and we would have reacted to that as a crisis. And that is where the world is now - facing a combined crisis as serious as any global war could be. The problems facing us are huge and need addressed as the emergencies which they are, not as "business as usual" opportunities for one group of apes to screw another group of apes.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
I didn't find exactly what you were looking for, but the title of the EIA report is Crude Oil Stocks at Tank Farms and Pipelines.
http://tonto.eia.doe.gov/dnav/pet/pet_stoc_cu_s1_m.htm
Pipelines are indeed used in the calculation.
According to the NPC report, Lowest Operational Inventories are:
Crude 260-270M
Gasoline 185M
Distillates 85M
I didn't copy the report because it's 96 pages, but it's (officially anyway) everything you ever wanted to know about petroleum storage. (About page 53) http://www.npc.org/reports/R-I_121704.pdf
I have tended to be sceptical of comments by Matt Simmons and others that it will be shortages rather than high prices that will mark the crisis when it comes, but cutting inventories so close to the bone really makes it much more likely that it will indeed be shortages that finally gets people's attention.
Realisticaly, something needs to happen because here in LA, while people are bummed about the real estate quagmire, they are still happy driving the big SUV's the cash out refis bought. There just isn't any sense that $2.75 gasoline won't go on forever. Unless that price moves, or supplies run out, or people become unemployed, they will continue to feed the beast.
Great moniker!
As I noted yesterday, if we use the 185 mb number of the MOL for gasoline, we have less than one day of supply in excess of MOL. This means that, as noted above, there have to be spot shortages already occurring around the country.
In regard to crude oil, we have about 4.3 days of supply in excess of MOL, versus around 8-10 days that we used to carry in the Eighties to early Nineties. Presumably, the industry has gone to a Just In Time inventory situation, because of the SPR.
So, we don't have any short term crude oil supply problems, because of the SPR. However, the risk we run is that the SPR will die a "death of a thousand cuts," as we slowly drain it because of declining world crude oil exports.
As noted above, gasoline is a different situation, and I would expect to see reports of empty gas stations this weekend.
Is the gas-station business run communistically or by collusion? That would be the only way I could comprehend shortage resulting from such low levels of gasoline inventory. Were it a free market, I'd expect prices to run up to the point where the shortages reliably occurred in the poorest areas, and not "randomly".
Actually, I suspect that we are looking at spot shortages because prices are too low, encouraging consumption. It's pure speculation on my part, but I wonder if major oil companies have been deliberately trying to keep prices at the pump down.
In any case, I'm not an expert on this issue, but it's really not that easy, for a number of reasons, to shift supplies around the country. We actually experienced some closed gasoline stations here in the Dallas area in the spring, when distributors moved gasoline out of the Dallas market to Chicago, but they had to do it with caravans of tanker trucks.
If one reads George Ure then one would know that his people expect something to happen over the weekend.
Now reading your post what popped into my mind for no reason is "what if a statistically significant number of people traveling over the holiday couldn't find gas to get home?"
Or just some of them with the MSM playing Eveready Bunny?
Charlie Fox in capital letters, eh?