Pages

Saturday, June 25, 2011

It Never Quits: Yet Another Story That Confirms That Saudi Unable to Make Up Shortfall

Update

June 28, 2011: I honestly can't remember if I posted my thoughts on why the IEA wanted oil released from global strategic petroleum reserves. I talked in broad terms (Saudis can't make up shortfall) but I don't remember how specific I got. 

Having said that, here's the reason: European refineries running perilously short of light oil, and Saudi couldn't make up the loss from Libya.
For comparison: some weeks ago the Williams County commissioners stopped all county road traffic "effective immediately." That "ban" lasted less than four days, and came to an abrupt end when the Tesoro refinery in Bismarck said it was making plans to shut down operations because it was running perilously close to running out of oil. Another phone call from the state government and Williams County commissioners called off the ban, saying that road repairs over the weekend were sufficient enough to return to "normal operations." Sure. 
Shutting down a refinery is not a simple process, and starting one back up is even less easy. There is no question in my mind that European refineries, particularly in France and Italy, were perilously close to having to shut down.

One can opine in generalities (supply not meeting demand) but one needs to get to the specific tipping point that resulted in the decision. The tipping point in this case: at least one refinery was getting ready to shut down just before the Europeans started taking their August vacations. Read the Minyanville article linked above. It is right on target.

The IEA wanted the US to support the decision even though it made no sense for the US to do so. Unless the strategic petroleum reserves outside the US were inadequate. Hmmm. Scary.


Original Post
Link here.
U.S. Treasury Secretary Timothy Geithner defended the decision by industrialized nations to release emergency oil reserves into global energy markets, saying on Friday that it was not a political move.

"It's really as simple as this: there's a war in Libya, costs between one and two million barrels a day in lost output, I think 140 million barrels off the market so far," he said in response to a question at Dartmouth College, where he spoke on a panel.

"Reserves exist to help mitigate those kinds of disruptions and we helped to organize a coordinated global international response to help ease some of that pressure," he added. [Of course, so would increased drilling, but that's another story, and an inconvenient truth for an administration that detests the oil industry.]
 Assuming you take him at his words, Saudi was not able to make up the shortfall from the Libyan "event" as they said they could. Remember, it was in March that the Libyan "event" began, and immediately Saudi said they could make up any shortfall.

I don't recall any news story that said Saudi was actually doing anything in March/April time frame, except stories that heavy Saudi oil was not what the Italian refineries wanted.

Then in May/June time frame OPEC met again, and disagreed about production. Saudi said they would increase production about one million bbls/day.

We have never gotten a straight story on how much Libyan oil was taken off the market; it was anywhere from 500,000 bbls/day to 1.5 million bbls (some said as much as 2 million which was laughable).

April - May - June is about 90 days. Geithner said 140 million bbls were lost due to Libyan "event."

140/90 = 1.55 million bbls/day.

I personally think that's high. I'm getting the feeling that even had there been no Libyan "event" the shortfall would have been about 500,000 bbls this summer for the European refineries had OPEC not increased production.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.