Quality Matters -- David Messler -- March 10, 2022

Article for the day: some much needed substance on the Russian oil debate, link to David Messler.

• Biden’s decision to ban Russian oil imports to the U.S. had a predictable effect on oil prices, but the long-term impact on the U.S. oil industry is less clear.
• While the volume of oil imported from Russia wasn’t significant, the quality of the oil was as it was used to improve the API gravity of the throughput from U.S. refineries.
• To replace this heavy oil, the U.S. is now looking to Iran, Saudi Arabia, and Venezuela, not countries that the U.S. would want to rely on in a crisis.
  

Wow, we've been talking about this for years. This is/was what the Keystone XL was all about. Heavy oil. Pretty amazing.

Now we are looking high and low for replacements in a lot of places with less than savory reputations, and some under U.S. sanctions currently. As I have explained in various places recently, oil companies need blending stock to improve the API gravity of the throughput from their refineries. As the BTU Analytics graph below shows, the major fracking basins that produce most of the ~9 mm BOPD that we rely upon, produce very little of this heavy oil. That’s just life.

What this means though is that we have to replace like for like in terms of API gravity oil, and once again therein lies the rub. Nations that the president is contacting to ease the strain on American motorists include: Venezuela, Saudi Arabia, and Iran. What is the likelihood of our "friends" in these far-flung places coming to our rescue?

Oh, oh: this is before the Russian ban which doesn't kick in until May, 2022, and before the current SPR release is completed (another 50 million bbls to be released from the SPR):