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Wheat also hit a record today:
USDA Sees U.S. Wheat Stocks Dwindling
And the dollar hit a new record low compared to the euro. Compared to the record in 2006 (in dollars), the cost in € is about 10% less than last year. So, while oil may be more costly in $, it's not that way in €.
Over on the drumbeat thread, I wondered if ultra low gasoline inventories, versus high crude oil prices, in dollar terms, are an early sign that we may be beginning to lose out on the bidding war for declining world petroleum exports. What does seem odd is the low gasoline price.
What does seem odd is the low gasoline price.
And the low NG price -- but I suppose that's another subject.
No, it does make sense...because the gasoline price in the US is low, we are losing the bidding war. If the price were higher, we'd be winning the bid. Overall not surprising if we're tilting into recession.
who is outbidding the US?
Europe (not only EU), Japan, the net exporters, and BRIC.
On a feew months, I expect some caribean countries to also get into the team.
Chicken and egg issue. But I think people would/could pay more if they had to, so doesn't that mean the refiners could pay more for the crude? It still doesn't explain why the price is so low now - but it probably does mean it is temporary.
Question: do refiners have to borrow significant money to buy crude?
Production Declines Versus Net Export Declines
I have previously compared the final decline in Indonesian exports to the ELM, in terms of annual exponential decline rates. Well, take a look at the Texas production decline rate versus UK year over year changes in net exports (exponential decline rate per year).
Notice a slight difference?
This is why I think that it is a mistake to focus on total world production.
Texas Production Decline/UK Net Export Decline
(starting in 1973 and 2000 respectively, following 1972 and 1999 peaks):
-0.5%/-38.0%
-2.5%/+6.6%
-3.2%/-3.1%
-2.7%/-25.7%
-4.6%/-96.0%
-5.5%/-178.0%
-6.0%/Net Importer
what the gasoline market is telling you is that despite low ish inventories, no one is worried about running out of gas heading into winter. The market is allowing the refiners a small margin and that's it. But since distillate is much higher, refiners are still happy to run full for now. Gasoline is basically a byproduct at the margin if you can make $15/bbl on distillates.
Hello Calorie,
Thxs for the wheat info. Fertilizer prices are expected to accelerate too as their extraction, beneficiation, and distribution are directly linked to energy prices.
The Haber-Bosch nitrogen process is critical to food supplies, but if natgas gets depletion-scarce, then ammonia and urea prices will go through the roof.
If my Asphalt Wonderland had its act together: we would stop building suburbs, shopping extravaganzas, car-washes, and golf courses. We would be directing these funds into solar systems to power ammonia-making infrastructure from non-natgas sources.
Each passing day of our intense desert sunlight is another opportunity lost to harvest this ephemera, then convert it into optimizing long-term topsoil vitality. Such is life.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?
Totoneila
Rev. Dr. Shaw:
There were very few interstate natural gas lines in the US and none from the gigantic Texas and Louisiana fields to the north eastern US until 1948, when the Big Inch and Little Inch pipelines were purchased from the federal government by Texas Eastern Gas Transmission Company and converted to natural gas pipelines That's when gas began to displace coal because of ceap prices for power generation. (source: history of the Big Inch and Little Inch Pipelines, about a 50 page pdf, google it). As an example of cheap prices, I remember a lease I looked at in Nacadotches County, Texas about 2 years ago made in the 1940's and setting the minimum price for natural gas at 1/2 a cent per thousand cubic feet, or 1/60th of the then current posted prices for crude oil. It stuck in my mind because of the fantasticly cheap price.
When operators stuck dry gas, they just plugged the wells as dry. When there was condensate or crude associated with the gas, the operators would strip the liquids and flare the gas, resulting in fantastic waste. This still goes on worldwide, if you'll read Jerome a' Paris article in TOD Europe on building pipelines a couple of weeks ago he details a lot of this waste thats ongoing currently in the world and the inexpensive prices for gas in other regions of the world.
Besides building pipelines, lots of the Texas gas was used for making fertilizer and processes like manufacuring carbon black and also high energy processes such as aluminum and steel making. That's all been closed up now.
The answer for a lot of the stranded gas worldwide is to build things like fertizer plants where the gas is still cheap. Why the multinationals and investment banks aren't doing this is something I don't understand. ExxonMobil is building a huge gas to diesel plant in Qatar, but fertlizer is easier to store and ship than LNG.
Bob Ebersole
A little aside, the Tropical Storm is coming ashore right now in Halveston, and the gusts are reall rattling the windows!
Hello Oilmanbob,
Thxs for responding, but I am neither a Rev. or a Dr..
Gotta agree on the sad waste of Natgas, and how conversion to fertilizer is better than LNG processes. Recall my earlier postings on needed legislation to enforce fertilizer stock-piling to help send a Peakoil Outreach price signal to the unwashed masses.
I am unsure where Arizona gets most of it natgas; I am assuming it comes via long-distance spiderwebs from Texas and other Midwestern states. My guess is these webstrands will quickly become non-functional postPeak because midwestern farmers paying outrageous fertilizer prices and midwestern rural folk shivering through a cold winter will not put up with Arizonans' heating their jacuzzis, pools, and golf clubhouses for the annual winter 'wealthy snowbird' influx. The snowbird migration this year is predicted to be especially large and remunerative because of the Superbowl being hosted by my Asphalt Wonderland.
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?