THE US Strategic Petroleum Reserve (SPR) Thread (merged)

[TheDude]

Drifter...look at the EIA historical data on stocks. You'll notice that we've had crude inventories lower than this on many an occasion. My point is that these NYMEX nimrods are so freaked out about prices they're paying way too much attention to these "massive drops," which are nothing out of the ordinary. With fewer people hitting the road this year they're even less meaningful.

I'm betting consumption will be way down this summer for some reason, so not worried about going below the MOL (which is estimated at ca. 270 billion barrels). I think that'll take a pretty severe supply disruption.

[TheDude]

You expecting producers to start cutting exports for short term gain, DP?

[Novus]

Oh wait, it was lower at this time in 2005. Really lower in 2004.

Frickin' newbs. Yuz pwnd, proto Doomers!

Either way the US is going to have to replace that draw down. In 2005 that oil could be had for $50 and in 2004 $40. In 2008 oil was at $130 and every single barrel of it was spoken for. In order to free up some supplies prices had to go up by a lot. In 2005 nobody had to go without for the US to consume what it needed. If $135 doesn't destroy some demand then we are going to $140 or $145 or maybe it will be the US to first one to blink at this game.

[joewp]

I highly doubt we are anywhere near shortage levels.

We aren't even outside of the average range yet!



Mountains out of mole hills, anyone?

You can't trust that chart because it doesn't break down the gasoline inventories based on finished gas versus blending components. Blending components are a higher portion of the inventory than even last year, if I recall correctly. The weekly storage report just tells us whether finished gas or blending components went up of down during the past week. I believe this week was the first time in several weeks that finished gasoline actually increased, but since they don't tell us numbers we don't know what the mix of finished to components is.

It's becoming apparent that the refinery runs are so low because they can't get the appropriate quality of oil to refine.

[BigTex]

Demand destruction will happen at some point. It takes time for people to begin re-ordering their lives around higher fuel costs.

I actually think that the U.S. auto industry is going to be booming in a couple of years when they roll out efficient vehicles and everyone rushes to buy them and give away their SUVs and trucks.

Frankly, this is exactly what we need. I have been watching wasteful uses of energy for years and will be happy to see a lot of it stop.

One example is big trucks idling at truck stops 24 hours a day. That's ridiculous.

There are lots of examples of that kind of thing that will stop as prices continue rising.

Another one that comes to mind is tightening up building standards dramatically and building smaller houses, but that only becomes cost effective when energy reaches a certain price point.

[DantesPeak]

You expecting producers to start cutting exports for short term gain, DP?

I should have mentioned net finished product imports (diesel + gasoline) are down 350,000 bpd. So the total import loss is 600,000 bpd with demand down 400,000 bpd.

We're losing 200,000 bpd since late February. Then as joewp says, that 200,000 bpd loss may be more specifically in the oil or oil product category we really need to have enough supplies.

[BigTex]

I keep hearing the term 'demand destruction' thrown around a lot like it's nothing. Maybe demand destruction should really be called 'economy destruction' or 'lifestyle destruction'. Demand destruction and capitalist economies don't mix well.

I agree that it's bad, but demand destruction in fossil fuels is at least possible, whereas demand destruction for something like oxygen for breathing would never occur. As supply stopped meeting amount demanded, people would just die.

[BigTex]

Hey Tex, I agree. I just wonder how much 'demand destruction' people can handle in their lives before everything falls apart. That's the big question.

We spend a lot of energy on entertainment. I see that being the first area people are likely to cut without it hurting immensely.

There is a lot of just aimless driving around that will be reduced.

It will probably be easier to reduce consumption in the U.S. than in Europe because we have so much more waste that can be eliminated.

This whole "summer driving season" business is not essential. People can just stay home.

In other words, I think there is a lot of demand destruction that WILL occur without it being the end of the world. The problem is going to be when even with that demand destruction prices remain high or even continue rising because of either declining production or continued increases in demand in other parts of the world.

[Novus]

I actually think that the U.S. auto industry is going to be booming in a couple of years when they roll out efficient vehicles and everyone rushes to buy them and give away their SUVs and trucks.

Too late for that now. The big three had their chance back in 2002 when they decided to continue with their big SUV policy. They would would have those efficient vehicles now if they were smarter. The whole idea behind PO is the single occupant car is doomed. The true shocker is going to come when Toyoda and Honda start calling for layoffs and closing factories.

[max_in_wa]

Frankly, this is exactly what we need. I have been watching wasteful uses of energy for years and will be happy to see a lot of it stop.

One example is big trucks idling at truck stops 24 hours a day. That's ridiculous.

Some of those may be refrigeration trucks so it isn't exactly the pinnacle of wastefulness.

On the other hand, I was strapping a few things to the back of my motorcycle outside home depot the other day, and all the while there was a car in the spot across from me just idling -- it was idling when I got to my bike and idling when I rode off. It was sort of a hot day for us -- maybe 75 or so -- but still -- to just sit in the car with the AC running is crazy wasteful and has to be CO risk as well.

A couple weeks ago I was in my car and stopped at Taco Hell -- drive through. I always turn off my engine while sitting there and waiting (good idea or not I don't know). Anyway, it took ten minutes for me to get through. There were 6 cars in line with me (ahead and behind) -- how much gas was burned just waiting to nudge forward six feet? Sidenote -- people seem to get real antsy behind you if you don't ride the bumper of the car ahead. Me, I'll kinda sit there till the ordering slot is open -- it isn't like nosing ahead every inch the second it comes available will make the process shorter.

[alokin]

I actually think that the U.S. auto industry is going to be booming in a couple of years when they roll out efficient vehicles and everyone rushes to buy them and give away their SUVs and trucks.

OK... and what about all these car makers in Japan and Europe which know much better making fuel efficient cars yet? I doubt that the big 3 have any chance against fiat renault daihatsu etc....


I really do think that the inventory up and down play a minor role in the current price race. It's more that some of the big prophets have announced prices of $150 or $ 200, and that PO goes mainstream.
And, that many countries have to admit that they can't pump more.

The US is not the center of the world and even if demand destruction is happening in the US, there is stil China and India with booming economies. Demand destruction happens when those economies stop to boom for whatever reason.

[mos6507]

They don't call it the long emergency for nothing. Demand destruction might buy some temporary relief only. It's going to require a continual adaptation (the powerdown).

[heroineworshipper]

Oil is moving because your government increased its inflation forecast to 3.4%.

[dorlomin]

Oil prices surged past the $135 a barrel mark today, after a warning from the International Energy Agency that global supplies could fall short of demand over the next 20 years.

Light, sweet crude for July delivery reached $135.04, representing a 40 per cent increase so far this year.

Oil prices have set new records in 10 of the last 14 trading sessions.

Sharp increases like these have not been seen since the first Gulf War and followed unexpected drops in US crude and gasoline stocks.

British Airways shares fell below £2 for the first time in almost five years, on concerns over the soaring cost of jet fuel.

Bleak economic news from the Federal Reserve, which increased investors concerns about rising costs and a shaky employment picture, also encouraged investors to seek out oil.

Prices have been threatening to break through the $130 barrier for the past few days amid fears that oil producing cartel Opec is unwilling to increase production and help bring down prices.

Now it has emerged that the IEA, the Paris-based agency which was set up during the 1970s oil crisis to monitor the oil market,is preparing a sharp downward revision to its oil-supply forecast, after a comprehensive attempt to assess the condition of the world's top 400 oil fields.

The IEA’s findings will not be released until November but early findings suggest that future crude supplies could be far tighter than previously thought.

“The oil investments required may be much, much higher than what people assume,” Fatih Birol, the IEA’s chief economist and the leader of the study, said. “This is a dangerous situation, ” he added.

For several years, the IEA has predicted that supplies of crude and other liquid fuels will increase steadily to keep pace withrising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently.

Concerns over future availability of oil have been reflected elsewhere. Goldman Sachs, the investment banks, has said that there could be a major shortage of oil over the next 10 years, which could see the price soar to $200 a barrel.

Goldman is advising clients, including airlines and haulage firms to buy oil supplies now for delivery in eight years time, to insulate themselves from further increases.

Following a month of almost daily price rises, petrol in the UK currently costs on average £1.13 a litre.

British motorists will see the impact of the latest increase feed through to the forecourts in the next four to six weeks. They have already experienced the highest monthly leap in diesel prices this decade following oil’s steady rise, according to the AA.

The motoring organisation said that between mid-April and mid-May the average price of diesel rose 6.76p to 124.17p a litre. The previous record rise - of 5.6p a litre - occurred between October and November last year.

Since early last week, the price of petrol has risen 1.73p a litre while diesel has gone up 2.66p.

Edmund King, AA president, said: “With many UK families embarking on their holidays next week, the timing could hardly be worse.“

"What alarms us most is the stream of comments coming from the industry and producers saying that oil is over-priced - the finger of blame being pointed at market speculators," Mr King said.

He added: “Oil prices have doubled since last year and this is not just due to strong demand from China and other nations. While huge profits are made in the financial centres, an increasing number of car owners are becoming desperate and businesses suffer from the hit on consumer spending.”

Crude oil prices for longer-term delivery contracts have risen further amid the supply concerns. Contracts for delivery in December 2015 have risen to 139.48 dollars a barrel, signalling the long-term fears that demand will outweigh global production

Earlier this month the Ernst & Young Item Club said it was not unreasonable to assume prices would continue to rise over the coming years, because factors driving the increases are not going to disappear. Hetal Mehta, Item club economist, said: “There is a major mismatch between supply and demand. Opec members appear unwilling or unable to raise their output whilst the thirst for oil, particularly in developing countries, appears to be unquenchable.”

Times

[ohanian]

Too late for that now. The big three had their chance back in 2002 when they decided to continue with their big SUV policy. They would would have those efficient vehicles now if they were smarter. The whole idea behind PO is the single occupant car is doomed. The true shocker is going to come when Toyoda and Honda start calling for layoffs and closing factories.

I can't wait for Toyoda to
layoff workers and close it's factories



http://www.toyoda.com/

[Micki]

Current July contracts;

US Light Sweet $134.73
Brent $134.84


What is interesting here is that Brent once again have caught up and surpassed US. Brent is generally considered less speculative and have more traders who actually take delivery.
Wonder if this is sending a sign that the price isn't so much based on speculation as many think (I don't mean here at PO).

[MrBean]

The US is not the center of the world and even if demand destruction is happening in the US, there is stil China and India with booming economies. Demand destruction happens when those economies stop to boom for whatever reason.

With stagnant global supply - a zero sum game -, only way for China and India to satisfy their growing demand is demand destruction elsewhere, especially in US. The number I've seen is 4% demand destruction in US. Sounds like Depression.