The Jokes Write Themselves -- A Year Ago This Was A Parody That Became A Meme -- February 10, 2022

Link here.

The Ram EV 1500 will "carry" a range extender:

• a diesel-powered generator in the box

Notes From All Over -- The Early Evening Edition -- February 10, 2022

Spare capacity: there is no question that spare capacity is a myth. Link here. That's just one of many data points. The spare capacity myth has been pointed out for the past year or so.

But.

The myth of spare capacity has nothing to do with the price of gasoline. Up until recently it was pretty much divided between those who felt there is a lack of spare capacity with those who felt there is no lack of spare capacity. The consensus is that there is no space capacity. 

Backwardation. We now move to the next issue. Will there be a relative shortage of crude oil / gasoline this summer when airlines are back to full capacity and US driving season begins? The answer is here: backwardation. 

Cushing inventories: at their lowest seasonal level since 2009 and will need to rise to prevent a severe spike in physical pricing. Link here.  

**************************
Other News

Oasis, from WAR52, Oasis transcript:

• capital return program of $280 million in buybacks; and, base dividend + variable dividend;
• 41 wells be be drilled in 2022 with two rigs
• includes nine 3-mile laterals
• OFS (oil field services) costs for 2022 expected to increase 15%
• OMP (Oasis Midstream Partners) simplification and cash receipt now completed
• company paid $139 million to modify swaps

Wind turbines: inflation is no friend. Link here. 

Wind turbines and solar panels: outlook for utility-scale renewables sours after record year. Link to Rystad Eenrgy at oilprice. 

ISO NE: finally the EIA is reporting this, something we've been pointing out for months. To keep the lights on in Boston, ISO NE needed to use oil-fired generators. Link here or go directly to the EIA.

8 + 6 = 14. Link to Julianne Geiger:

• six new-generation ERP2 reactors (European Pressurised Reactor)
• a study of eight additional reactors
• along with nuclear energy
• 50 offshore wind parks in France, which currently has none; and,
• double the onshore solar capacity

No Runs, No Hits, No Errors -- February 10, 2022

Break, break: video from the Ambassador Bridge show port-a-potties on the bridge. $300 million / day crosses that bridge. $300 million / day. 

Now, back to the post.

So, why is gasoline so expensive? See this post. Shortly after posting it, a very perceptive reader asked the question that no is asking. Everyone is just assuming. 

The question the reader asked: with all that data (at that post) why is gasoline so expensive?

The reader rightly pointed out there is no shortage of gasoline right now. Based on the questions, and based on the answers by the WH press secretary, "everyone" assumes the price of gasoline is high because the price of crude oil is high. But the reader asked the "right" question: why is gasoline so expensive? It seems not to be related to the price of crude oil.

Okay, don't take that out of context. Of course, the price of gasoline correlates with the price of oil, but even if another one million bopd suddenly came to market, the price of gasoline would be minimally affected. 

Why? Is anyone paying attention to the news? The number one story on Shephard Smith (twenty minutes from now) will be the high rate of inflation. One has to go all the way back to 1982 to see inflation this high. 

Thank you, Mr Biden.

So, when crude oil goes to the refiner, what affects the price of the refined products. The cost of refining it, and those costs have gone way up in line with inflation.

And when the refined product, let's say, gasoline, leaves the refinery for its destination, what is the difference between wholesale and retail prices? All things being equal: transportation costs. And, for those who have been living under the Geico rock for the past year, there is a shortage of trucks; there is a shortage of drivers; there are new federal regulations adding to the cost of delivery; and on top of all of that, there's inflation. Just as groceries are more expensive, so is gasoline, due to inflation. 

So, release oil from the SPR (which will increase the price of oil, see linked post above), go for it, but that's not the problem. The problem is inflation. Nothing has changed over night, but all of a sudden gasoline is costing $6 / gallon in San Francisco. It's called inflation.

$6 gasoline: I don't watch the evening news so I would have missed this but my wife says there is one state that is now anticipating $6-gasoline. Here it is. Link here.

Gasoline prices have remained unattractively high across much of the United States in the latter half of 2021, and a new study reveals that one U.S. state may see gasoline prices near $6.

According to a new study published by GasBuddy this week, gasoline prices could reach $6 per gallon in San Fransisco, with Los Angelos and Sacramento reaching $5.50 per gallon. For some cities in California, this would be the highest nominal average ever paid.

**************************************
Back to the Bakken

Active rigs:

$90.10	2/10/2022	02/10/2021	02/10/2020	02/10/2019	02/10/2018
Active Rigs	33	15	55	63	58

No new permits.

 

No permits renewed.

 

No DUCs reported as completed.

 

No runs, no hits, no errors.  

All Options Are On The Table -- Well, Not All -- The Keystone XL Certainly Is Not -- February 10, 2022

Updates

Later, 7:00 p.m. C.T.: wow, wow, wow -- less than an hour after posting the note below someone weighed in over on twitter saying the same thing -- but in a lot fewer words. Releasing oil from the SPR is .... bullish for oil. Link here.

Original Post 

Link here.

I'll assume everyone understands this graph: "total liquids" includes SPR + commercial (non-SPR).

Traders in "oil" look at many, many data points. This is just one of many data points they look at.

However all things being equal, as the number of "days remaining" the price of oil would increase. Again, all things being equal, as the number of "days remaining” decreases the price of oil would increase.

If the White House releases more oil from the SPR the number of "days remaining" will further decrease, all things being equal.

All things being equal, if more oil from the SPR is released, the number of "days remaining" will decrease.

All things being equal, the price of oil would/should/could rise after an SPR release.

End of discussion.

But, actually, there's more: there's a psychological issue involved. Computers won't pick up on it but human traders will. Some human traders will argue that, historically, a release of oil from the SPR occurs when the president understands there is a shortage of oil reaching the market -- such as an embargo, or a break of hostilities in the Mideast -- so, some traders will wonder if oil from the SPR is being released because the president "knows" something the rest of us don't know. By law, release of oil from the SPR is not to be done to manipulate the price of gasoline. [There is a way for President Biden to justify a release even if there is no "real" shortage.]

Finally, oil, like all commodities, is fungible. Once released onto the open market it can end up anywhere. XOM, for example, can take the SPR-oil and transfer a like amount of oil to Rotterdam, and pay back the SPR with less expensive oil down the road. 

Having said all that, how much SPR oil is actually going to be released?

Link here. 

If you recall, with the first release not too long ago, on the day the announcement was made, the SecEnergy was asked how much oil was being released; and what was daily demand for oil. She did not answer. Either she did not know or the room would have filled with laughter when 50 million bbls represented one-half day of global demand.

It's because 50 million bbls over 50 days is one million bbls/day. In round numbers:

• US oil demand: 20 million bopd
• global demand: 100 million bopd
• Oil is a globally-traded commodity.

One million bbls/day from the SPR has absolutely zero effect on global demand of 100 million bopd. It might have some effect on US oil demand, but not much.

That brings us to the next problem. US refiners are operating at 88% of their operable capacity. So supply them with more oil and it's unlikely they will produce more gasoline. 

That brings us back to gasoline demand and crude oil supply measured in days.

Gasoline demand has slumped considerably for the past four weeks; this past week was the first week in four or five weeks that oil demand has actually increased after a significant decline.

The amount of oil in storage, measure in days, has also been increasing. 

Releasing oil from the SPR, now, is a political stunt. Whatever the price of oil is one month after the SPR release, that price will have nothing to do with a release.

Gasoline Demand -- February 10, 2022

Link here.

Tracking Military Aircraft Over Europe -- February 10, 2022

I was up most of the night tracking military aircraft over England and Europe. I "caught" a C-5 enroute from Kuwait to RAF Mildenhall, England, and a KC-135T Stratotanker, departing/returning to Mildenhall, refueling track over northern Europe.

But my best "catch," without question, was spotting a Global Hawk drone over Kiev, running multiple tracks. I watched for about an hour before stopping. When I returned, I was unable to find it. It had departed from an unknown base in the Mediterranean. I'm thinking Sigonella, Sicily.

See graphic below:

• Global Hawk -- call sign, Forte-One-Two
• multiple tracks over northeast Ukraine, along the Belarus border where it was reported that the Russians had just begun joint training operations
• the drone departed from an unknown base in the Mediterranean
• note the altitude: 51,000 feet
• ground speed: 337 knots
• not much other data provided

Websites:

• Global Hawk, Northrop Grumman;
• Global Hawk, wiki;
• Phoenix drones, Seapower: all five NATO RQ-4D Phoenix drones are on station at Sigonella, Sicily, November 13, 2020;

From last night:

From Seapower:

Seven Best Places To Dine -- Valentine's Day -- Badlands -- North Dakota -- February 10, 2022

From beautifulbadlands:

• #1: Belfield, ND -- Burly's Roughrider Bar and Steakhouse
• #2: Dickinson, ND -- BrickHouse Grille
• #3: Sidney, MT -- South 40
• #4: Watford City -- Tobacco Gardens Resort & Marina
• #5: Williston, ND -- Eleven; often referred to "the Williston."
• #6: Wibaux, MT -- Gem Theatre
• #7: Williston, ND -- Sagas

The following eating establishments rounded out the remaining list of the Best of the Best Places to Dine on Valentine’s Day in the Beautiful Badlands of North Dakota and Montana: 

• Paleremo Bar & Grille, Palermo, North Dakota 
• Eight Ball Inn, Medicine Lake, Montana 
• Elks Lodge Underground, Dickinson, North Dakota 
• The Dog House Bar, Manning, North Dakota
• Fluffy Fields, Dickinson, North Dakota 
• Shamrock Club, Wibaux, Montana
• Double Barrel Saloon & Casino, Fairview, Montana
• Gunners Ridge Bar & Grill, Glendive, Montana
• 109 Club and Steakhouse, Lignite, North Dakota 
• AJ’s Cafe, Tioga, North Dakota 
• Little Missouri Saloon, Medora, North Dakota 
• Theodore’s at the Rough Rider, Medora, North Dakota 
• Outsider’s Bar & Grill, Watford City, North Dakota 
• Pastime Club and Steakhouse, Marmarth, North Dakota
  

Notes From All Over, Part 1 -- Thursday, February 10, 2022

Closed: link here.

TTE: boosting investor returns after record profit. Link here. 

Semiconductors: AMD sets all-time CPU market-share record as Intel gains in desktop and notebook PCs. Link here. Long article; lots of data. 

ARM: with Nvidia deciding not to go forward with plans to acquire ARM, ARM is likely to go public within the fiscal year ending March 31, 2023. 

Copper: copper looking to break out. Some say it already has.

Daimler Truck: reached new high since being spun off a few months ago. Trading at $37.65.

Weather models: "climate scientists" encounter limits of computer models, bedeviling policy; The WSJ. 

More and more stories now being published suggesting "climate scientists" manipulated data to fit an agenda.

Electricity prices: Germans now pay the highest electricity prices in the world. Link here. Needs to be fact checked. 

At 36.19 cents/kwh, Germans pay 3x what those in the US pay; 4x more than the Chinese. German magazine attributes high prices to "dümmste energy policy in the world."

Japan: wow, the Ukranian crisis has been a godsend for Japan. 

Japan is going broke paying for all that incredibly expensive imported LNG when coal would be so much cheaper. What's a country to do? Oh, that's an idea. Be the hero and divert all that incredibly expensive imported LNG to Europe. And, Japan, then can burn that incredible inexpensive coal. Wow. What a deal. And that's exactly what they're going to do. Link here. Global warming is for chumps.

CDC: this is perhaps the most interesting story of the month, how the CDC fell behind the curve in determining US health policy. Huge misstep. 

Again, the slow-footed bureaucracy failed to understand human behavior; kept with confusing policies. Americans have finally had enough and will now go their own way. CDC is in a no-win situation here. Either they stick with "their science" and hope things go badly for those states that relax mandates, or they change policy to appear they are listening to the public who are no longer interested in "science."

Link here. For the CDC: what changed? They don't have an answer. 

Spare capacity: another month, another OPEC miss. Can't meet production quotas for second month in a row. 

They have publicly said they want to increase production by 400,000 bopd -- ever since the announcement, they have failed. Inshallah. How bad is it? This past month's increase was only 160,000 b/d vs the 400,000 b/d quota increase. So, after three months, production needs to increase by 1.2 million b/d to meet quota "mandates." Everything's a "mandate" these days, I guess. Also, here. And, here, with  SPGlobal link. If SPGlobal reporting it, it has to be accurate. WH says countries around the world have the capacity to increase production; Art Berman would like to see the list.

A Closer Look At Motley Fool And Berkshire Hathaway -- February 10, 2022

Two links:

• these four stocks are netting Warren Buffett a combined $3.1 billion in annual dividend income:
• Bank of America: $870 billion
• OXY: $800 billion
• Apple: $800 billion
• Coca-Cola, the laggard, only contributing $700 billion to Warren's annual income
• these four stocks make nearly 75% of Warren Buffett's portfolio:
• only one really counts, AAPL: $160 billion, 45% of invested assets
• Bank of America: $50 billion market value, 15% of invested assets
• and then we drop to "it almost doesn't matter": $30 billion, only 8% of invested assets
• and then it really doesn't matter: Coca-Cola: $25 billion, only 7% of invested assets

The reason I posted those two articles is because these two articles tell only part of the story. In addition to invested assets, Warren owns several companies in their entirety. Most notable: Burlington Northern railroad which used to trade publicly under the ticker symbol BNI.

I assume a clever expert could figure out how much BNI contributes to Buffett's wealth, but I'm neither clever nor an expert. 

But, one can use UNP as a proxy. When BNI last traded publicly, BNI and UNP were virtually identical, although UNP might have been somewhat better when it came to market value, financial statistics, etc.

So, let's look at UNP today and "assume" those numbers are very close to what BNI would be if broken out separated and still paid dividends. So, these are UNP numbers, but assume they are very similar to BNI:

• market cap: $160 billion; all numbers rounded, but UNP market cap actually exceeds Berkshire Hathaway's AAPL holdings;
• shares outstanding: 636.9 million
• annual div: $4.72 / share = annual dividends paid: $3.0062 billion -- or almost equal to the entire combined dividend from this top four invested assets ($3.1 billion)
• and Warren gets 100% of those dividends
• compare to paltry $800 billion from Apple which makes up almost 50% of Berkshire Hathaway's invested assets;

CLR And Hess Each Report A Nice Well -- Thursday, February 10, 2022

I'm still here. Sorry for the late start blogging. 

I'm finally up. I slept in. I was up most of the night tracking military a/c on flightradar24; then, up early to take Sophia to the bus stop; and, then back home to sleep in late. 

The military a/c tracks? I will post some screenshots later. I happened to catch an incredible track. Some folks may appreciate it.

Looks like a  busy, busy, busy day. 

Quick headlines, I see:

• ten-year Treasury yield goes above 2%;
• WTI goes back over $91 again; White House is monitoring;
• quite a surge; up almost 2%; gained $1.60; trading at $91.26 
• WH says countries around the world have the capacity to increase production; Art Berman would like to see the list.
  
• inflation numbers came in about as expected; highest in forty years; White House is monitoring;
• jobless numbers coming in better than ever;
• Joe's approval rating dropping faster than mask mandates; White House is monitoring;

Beautiful, beautiful weather in north Texas, DFW area.

• will get to 79°F tomorrow, which I read as 80°F
• daughter will be on the lake paddle boarding
• me? Biking

CLR: having a nice day. UP over 3% today; up almost $2; trading at $57.35. Someday they're going to say, "we really underestimated the Bakken."

**********************************
Back to the Bakken

Active rigs:

$91.34	2/10/2022	02/10/2021	02/10/2020	02/10/2019	02/10/2018
Active Rigs	33	15	55	63	58

Thursday, February 10, 2022: 24 for the month, 79 for the quarter, 79 for the year

• 38060, conf, Hess, GO-Braaten-156-97-2833H-2, Dollar Joe, nice well; first production, 8/21; t--; cum 125K 12/21; 
• 36582, conf, CLR, Pasadena Federal 11-11H, Banks, nice well; first production, 8/21; t--; cum 97K 12/21;
  

RBN Energy: everything you need to know about CO2 and carbon capture.

Not so long ago, most folks in the energy industry hardly gave carbon dioxide (CO₂) a thought. Sure, some CO₂ was used for enhanced oil recovery (EOR) and in some production areas the natural gas coming out of the ground had to be treated to remove high levels of CO₂. But otherwise, CO₂ wasn’t on the industry’s radar. Now though, CO₂ is a front-and-center concern not just for the energy industry but for society at large as the global economy tries to decarbonize. And while renewable energy like wind and solar will be part of that decades-long effort, so will the push to capture CO₂ and permanently store it deep underground. Put simply, it’s time for producers, midstreamers, and refiners alike to gain a deeper understanding of carbon capture and sequestration, how it will affect them, and — ideally — how they can profit from it.