Peak Oil News and Message Boards

It would take me too long to debunk all the errors and false assumptions in the above linked post.

So briefly - I've already previously posted the following:

1. Iran said it was using up the low quality oil in floating storage, which would be gone about July 1 or so.
2. Iran announced today it was cutting oil exports 200,000 bpd due to a severe energy crisis (not enough water to generate electricity at hydro-plants).

Also tankers usually make more money by shipping oil faster, and in the US, refineries operate something close to just-in-time, so shipping delays can cause real problems.

There's actually a web site where your can track world wide shipping. It's quite amazing. Maybe someone could figure out if what's said above even has one speck of truth to it.

I'd also like to know if the person writing this article predicted in 2007 prices this high this year. I did.

DantesPeak wrote:Also tankers usually make more money by shipping oil faster

The operative word being "usually". The rate for a VLCC carrying 2 million barrels is currently about $175,000/day. If oil goes up $1 in a day, that's a profit of $1.825 million per day for "engine trouble", "fog" etc.

It's just common sense that people are going to hold onto oil and delay sale in a climate of rapidly rising prices.

JohnDenver wrote:

DantesPeak wrote:Also tankers usually make more money by shipping oil faster

The operative word being "usually". The rate for a VLCC carrying 2 million barrels is currently about $175,000/day. If oil goes up $1 in a day, that's a profit of $1.825 million per day for "engine trouble", "fog" etc.

It's just common sense that people are going to hold onto oil and delay sale in a climate of rapidly rising prices.

I'm not saying that's impossible, just that there's no proof.

Here's that interesting ship tracking site. Maybe someone here could track ships in and out of one region and come to some conclusions - especially the Gulf of Mexico.

http://www.sailwx.info/shiptrack/shiplocations.phtml

It also has a neat hurricane tracking feature that may come in handy soon.

DantesPeak wrote:

JohnDenver wrote:

DantesPeak wrote:Also tankers usually make more money by shipping oil faster

The operative word being "usually". The rate for a VLCC carrying 2 million barrels is currently about $175,000/day. If oil goes up $1 in a day, that's a profit of $1.825 million per day for "engine trouble", "fog" etc.

It's just common sense that people are going to hold onto oil and delay sale in a climate of rapidly rising prices.

I'm not saying that's impossible, just that there's no proof.

Isn't the price of a load of oil set when it's loaded, not when it's delivered? I can't imagine an oil tanker floating around the world, looking for the highest price to unload at. This would also explain the occasional diversion of a tanker from its original destination due to a higher bid.

dunewalker wrote:

DantesPeak wrote:

JohnDenver wrote:

DantesPeak wrote:Also tankers usually make more money by shipping oil faster

The operative word being "usually". The rate for a VLCC carrying 2 million barrels is currently about $175,000/day. If oil goes up $1 in a day, that's a profit of $1.825 million per day for "engine trouble", "fog" etc.

It's just common sense that people are going to hold onto oil and delay sale in a climate of rapidly rising prices.

I'm not saying that's impossible, just that there's no proof.

Isn't the price of a load of oil set when it's loaded, not when it's delivered? I can't imagine an oil tanker floating around the world, looking for the highest price to unload at. This would also explain the occasional diversion of a tanker from its original destination due to a higher bid.

Yes. I am not a shipping expert but not many ships are diverted unless the port is closed for a strike, maybe a hurricane, etc.

We saw last year even with the Mideast typhoon not that many tankers were diverted.

dunewalker has to be correct here. There is no way the price of oil on a tanker is changing hourly...

You'd see the captain backing off on the throttle as they reload 321energy every 30 minutes

JD,

Let's assume that's all true, that speculators are having tankers idle in the water. What's wrong with that? Under your theory, high prices will cause a move to alternatives. It seems a bit contradictory lately for you start taking the position that oil prices should not be high, simply bc high oil prices, according to you, will cause the market to shift to alternatives. Please explain the apparent contradiction to me?

JD wrote:

"The operative word being "usually". The rate for a VLCC carrying 2 million barrels is currently about $175,000/day. If oil goes up $1 in a day, that's a profit of $1.825 million per day for "engine trouble", "fog" etc. It's just common sense that people are going to hold onto oil and delay sale in a climate of rapidly rising prices."


It's just common sense that prices are set before shipping, just as for most everything else we buy. If they're going to delay sale & wait for higher prices, they do it by warehousing the oil, or leaving it in the ground.

Maybe Iran made a bad futures bet and they had to take delivery on a bunch of their own oii? Ouch.

seahorse wrote:Please explain the apparent contradiction to me?

seahorse, I don't believe there is any contradiction between:

A) High prices will drive the shift to alternatives.
B) A significant part of the current price is due to financial factors (weak dollar, securitization of commodities, momentum investing, index speculators, hoarding etc.)

To put it simply: I believe both of those statements are true.

More generally, I'm interested in exploring financial factors because it is politically incorrect for orthodox peak oilers to do so. They militantly believe that supply and demand is the only relevant factor, and dismiss any information which conflicts with that, without even really looking at it. So it's a blind spot, and somebody needs to keep an eye on it.

Another analyst talking about tankers offshore:

Feer said analysts concluded there had been a problem unloading stocks of crude because of fog at US terminals, and in fact there is a lot of oil "sitting in tankers offshore."

Link

JohnDenver wrote:They militantly believe that supply and demand is the only relevant factor, and dismiss any information which conflicts with that, without even really looking at it. So it's a blind spot, and somebody needs to keep an eye on it.

I don't think that's true, but I can see that it would suit your position to think so.

As for delaying tankers deliberately, the more they are delayed, the less that can be shipped and more money is lost. Suppose a producer ships a load of oil to be traded at the target post (others have said this isn't the way it works, but suppose it is) but delays unloading to get a higher price. Let's say the shipment is worth X dollars. If the length of time from loading to unloading, then return, is Y days, then that is X/Y dollars per day. If the unloading is delayed by 5 days, that is X/(Y+5) dollars per day. So money can be lost. Only if the price rises enough to more than cover for this lost revenue would it be worth it. But it would be a gamble. We've seen prices drop by almost $10 in a couple of days, so a delay, in that time, would be very costly indeed. Eventually, enough producers would realise that gambling is a mug's game and revert to normal delivery strategies. Even if they didn't, the delay would stop as soon as there are not enough tankers to actually load the oil in the first place; from then on, there would, essentially, be no noticeable deliberate delays.

On MSNBC, an "oil analyst" said it doesn't make economic sense for Iran to store oil in tankers (to raise prices), bc its far cheaper simply to not produce it. So, I doubt Iran would be storing on on tankers and paying tankers to sit there just to jack up the price of oil when they could simply stop or reduce their production.


DP posted this article on another thread speculating as to why Iran may be storing oil on tankers (basically, as he already said, to use for power generation bc a drought is affecting power generation).

News

seahorse wrote:JD,

Let's assume that's all true, that speculators are having tankers idle in the water. What's wrong with that? Under your theory, high prices will cause a move to alternatives. It seems a bit contradictory lately for you start taking the position that oil prices should not be high, simply bc high oil prices, according to you, will cause the market to shift to alternatives. Please explain the apparent contradiction to me?

If I may interject, I think JD is describing what is basically a gouging play that helps to keep the price high and rising. He does not dispute peak oil. That's not the issue here.

TonyPrep wrote:

JohnDenver wrote:They militantly believe that supply and demand is the only relevant factor, and dismiss any information which conflicts with that, without even really looking at it. So it's a blind spot, and somebody needs to keep an eye on it.

I don't think that's true, but I can see that it would suit your position to think so.

As for delaying tankers deliberately, the more they are delayed, the less that can be shipped and more money is lost. Suppose a producer ships a load of oil to be traded at the target post (others have said this isn't the way it works, but suppose it is) but delays unloading to get a higher price. Let's say the shipment is worth X dollars. If the length of time from loading to unloading, then return, is Y days, then that is X/Y dollars per day. If the unloading is delayed by 5 days, that is X/(Y+5) dollars per day. So money can be lost. Only if the price rises enough to more than cover for this lost revenue would it be worth it. But it would be a gamble. We've seen prices drop by almost $10 in a couple of days, so a delay, in that time, would be very costly indeed. Eventually, enough producers would realise that gambling is a mug's game and revert to normal delivery strategies. Even if they didn't, the delay would stop as soon as there are not enough tankers to actually load the oil in the first place; from then on, there would, essentially, be no noticeable deliberate delays.

A substantial sustained drop in price, or even a sustained plateau of price should be followed by a plummet if all these dudes try to rush their oil to market at the same time.

Seeking Alpha:

Also--the NYMEX canceled all but 22M barrels that were scheduled for May Delivery, over 20M barrels below Cushing’s normal capacity.

http://seekingalpha.com/article/78440-t ... airy-tales

JohnDenver wrote:

seahorse wrote:Please explain the apparent contradiction to me?

seahorse, I don't believe there is any contradiction between:

A) High prices will drive the shift to alternatives.
B) A significant part of the current price is due to financial factors (weak dollar, securitization of commodities, momentum investing, index speculators, hoarding etc.)

To put it simply: I believe both of those statements are true.

More generally, I'm interested in exploring financial factors because it is politically incorrect for orthodox peak oilers to do so. They militantly believe that supply and demand is the only relevant factor, and dismiss any information which conflicts with that, without even really looking at it. So it's a blind spot, and somebody needs to keep an eye on it.

I guess I consider myself a Peak oiler, but more importantly I consider myself a "Peak Cheap Oiler", because I don't think it's significant whether the peak is in 2008 or 2010 or 2015; the bottom line is that expensive oil is here to stay, and all of society is constructed on the idea of cheap oil. Even if all the theoretical alternatives could be developed (I don't believe any amount of alternatives will keep up with oil depletion, but I digress), it's apparent that they would only be viable at high oil prices, as we've already witnessed. Bottom line is there's going to be a lot of economic pain and societal chaos in the forseeable future. Whether it ends up as zombie hordes and dieoffs or just a smaller version of what we've already got is another thread.

They are in the tater.

Aug. 6 (Bloomberg) -- Oil-tanker rental rates may rise after last week's 46 percent slump spurred owners to slow their vessels, reducing supply and increasing costs for oil producers and refineries who hire the vessels.

Owners are telling captains to sail more slowly, according to three shipbrokers. The last time that happened, in the final months of 2007, rental rates posted the fastest two-month gain in at least 16 years, increasing costs for oil producers seeking to ship supplies to refineries.

The CHART OF THE DAY shows how slower sailing speeds at the end of last year helped bolster hiring rates. The average speed of very large crude carriers, or VLCCs, including those at anchor, has declined 3.8 percent to 10.21 knots since July 12.

``Panic will be moved from owners to the oil companies,'' Nikos Varvaropoulos, an official at Optima Shipbrokers, Greece's largest, said yesterday. The advance in the next several months may be ``even better'' than at the end of last year, he said.

Vessels on average slowed 20 percent to 12 knots in the final months of last year, according to a May 2 regulatory filing from Frontline Ltd., the world's largest owner of the vessels.

The hiring rates are in Worldscale points, which are a percentage of a nominal rate, or flat rate, for more than 320,000 specific routes. Flat rates for every voyage, quoted in U.S. dollars a ton, are revised annually by the Worldscale Association in London to reflect changing fuel costs, port tariffs and exchange rates.
link

From the Indian Ocean to the South Atlantic to the Gulf of Mexico, giant supertankers brimming with oil are resting at anchor or slowly tracing racetrack patterns through the sea, heading nowhere.

The ships are marking time, serving as floating oil-storage tanks. The companies and countries leasing them for that purpose have made a simple calculation: the price of oil has fallen so far that it is due for a rise.

Some producing countries are trying to force that rise by using the tankers to withhold oil from the market, while traders are trying to profit by buying cheap oil now to store and sell at a higher price later. Oil storage has become so popular that onshore tank capacity is becoming scarce.

Only six months ago, companies up and down the energy pipeline were rushing oil to market, struggling to keep up with galloping demand and soaring prices. Now, with the global economy slumping and people driving less, demand for oil has plunged — and the same companies are acting in ways that would have been unimaginable until recently.

Oil producers are shutting down rigs, refiners are producing less gasoline, and investment planning throughout the industry is in turmoil.

Link

Once again, if oil importing nations were smart, they'd be buying up oil and putting it in salt domes.