SPR at 35-year low (by the way, there are reports, June 14, 2022, that SPR is emptying at fastest rate ever)
refinery utilization highest since 2019
******************** Lego Getting Into Offshore Oil
This is very ironic. Years ago, Lego discontinued its relationship with Shell because Lego did not want to be associated with an oil company.
Lego "bricks" are made from "oil."
And, now we find out that Legoland in Denmark has a huge offshore oil rig.
Ah, the hypocrisy.
I have a reader who will be disturbed that the photo above at the link is undated as if I'm trying to "misinform" folks.
Ah, the tribulations of a blogger.
By the way, years ago, I started collecting Lego base plates, I suppose for about $3 / plate. They are now "going" for $10 a base plate. Just saying. One of my best investments ever.
Just to show you how remarkable the Bakken is, the well below was drilled back in 2012. Analysts would tell us that by now this would be the end of this well -- the end of its life -- the "dreaded Bakken decline" -- and here, ten years later a huge jump in production.
But note, that "first" month back into production, 11,336 bbls was over 19 days. That extrapolates to 18,000 bbls over 30 days and even more over 31 days. Wow. At $120 oil, that's $2.2 million at the wellhead in one month.
I could be wrong, but this is not generally seen in conventional wells, and the Hubbert Peak Oil theory would say it never happens.
Disclaimer: I am inappropriately exuberant about the Bakken. I often misread things. All postings are done quickly and almost have content and typographical errors when first posted. I correct errors when I find them. This well -- #22434 -- is not indicative of all Bakken wells, but there certainly are a lot of such wells.
Two Gale wells that were off line last time we checked are now back on line.
One well has shown a significant jump in production:
22434, 738, CLR, Gale 2-32H, Cedar Coulee, four sections, t12/12; cum 285K 1/21; offline 3/21; remains off line 9/21; cum 287K 3/21; back on line 11/21; cum 344K 4/22;
23541,1,545, Enerplus Resources, Honor 150-94-06B-18H TF, Spotted Horn, t6/14; cum 704K 12/20; off line 5/20; returned to production 9/20; cum 726K 7/21; cum 748K 4/22;
23542, 1,007, Enerplus Resources, Grace 150-94-06B-07H, Spotted Horn, t2/13; cum 371K 12/20; of
the four, this is the only standard two-section lateral; the other
three are the much-talked about, seldom-seen three-section laterals; was off line 4/20; but seems to be back on line 5/20; cum 382K 7/21; cum 396K 4/22;
26608,1,601, Enerplus Resources, Courage 150-94-06A-18H, Spotted Horn, t6/14; cum 655K 12/20; cum 669K 7/21; cum 682K 4/22;
26609,1,703, Enerplus Resources, Pride 150-94-06A-18H TF, Spotted Horn, t10/14; cum 564K 12/20; was off line 4/20 but seems to be back on line 5/20; cum 575K 7/21; cum 605K 4/22;
Note: two wells have changed status since last updated in mid-2021; actually three if you include #19502 which is now inactive. With the NDIC interactive map still not available, I cannot check the area to see what might be going on. But the limited data available suggests Whiting is drilling and/or completing two more Niemitalo wells. Note that, unless I made a typographical/content error, three of the current Niemitalo wells were once Kraken wells. The provenance for #22710:
original permit application: Fidelity Exploration (MDU)
Whiting installed pump in July, 2013, but still a Fidelity well
transferred to Kaiser-Francis Oil, January 22, 2016
transferred to Kraken on/before/around/after October 16, 2018
transferred to Whiting on/about September 22, 2021
The wells:
18481, 2,672, Whiting, Niemitalo 12-35H, Sanish, t5/10; cum 637K 5/21; cum 662K 4/22;
17575, 3,260, Whiting, Niemitalo 11-35H, Sanish, t3/09; cum 703K 5/21; cum 715K 4/22;
19502, IA/2,720, Whiting, Niemitalo 31-15XH, Sanish, t2/11; cum 511K 5/21; cum 513K 6/21; off line 7/21;
32624, 891, Whiting, Niemitalo 11-35H-2H, Sanish, t11/19; cum 244K 5/21; cum 307K 4/22;
22710, 615, Whiting/Kraken, Niemitalo 24-13H, Sanish, t1/13; cum 421K 5/21; cum 451K 4/22;
A huge "thank you" to a reader who fact-checked this for me.
The screenshot below was sent to me by a trusted reader but no date was
provided for the actual news article. The date for the file photo was dated
July 25, 2019.
It turns out the AP fact-checked this and the story is accurate. The AP fact-check was apparently posted March 18, 2022.
But
most interesting, this occurred even earlier than I thought. The
EV-risk to the California grid apparently occurred even earlier, back during
the June, 2021 heat wave.
AP'S ASSESSMENT:
Missing context. The headline being shared was from a June 2021 heat
wave — not mid-March 2022 — and was a voluntary recommendation that
residents charge electric vehicles and do other activities outside of
certain peak periods.
The link is to a Fox source (FOXLA) and the google app generally doesn't allow a link to Fox.
So far, here in Texas, we haven't had similar alerts despite a record-breaking heat wave this weekend.
Huge thanks for a reader catching this, fact-checking and confirming, not only that it was accurate but it occurred last year, earlier than I had thought.
Again, my usual disclaimer.
All my posts are done quickly: there will be content and typographical errors. If anything on any of my posts is important to you, go to the source. If/when I find typographical / content errors, I will correct them.
Link here. It should be noted this is from the "liberal" twitter news feed.
Later, 3:34 p.m. CT: Sophia needed a new soccer ball today. I dropped by Dick's Sporting Goods which had no shortage of all sizes of soccer balls. I picked the one without looking at the price. I was pleasantly surprised to find that for only $16 -- less than a sushi dinner for one -- I was going to make Sophia very, very happy.
I have no idea what soccer balls cost these days, if this soccer ball was $8 last year and now $16 this year, that would be a 100% increase, "due to inflation." I wouldn't care a bit. To get a quality Nike ball that will thrill Sophia for $16, a purchase that I haven't made in three years, is awesome. Even if it's priced 100% more than last year.
Had it cost $24, I would have still bought it and still been thrilled. Still less than a sushi dinner for one.
See USPS stamp analogy below.
Later, 3:41 p.m. CT: quick, name the most "interesting" item not listed on the "inflation chart" below. Hint: this item is neither trivial nor inexpensive, and it's one product whose price doesn't affect sales from one week to week. By the way, that item leads me to think of another item that is not on the list.
Later, 3:46 p.m. CT: federal and state income taxes, property taxes; automobile maintenance costs; insurance costs; maintenance costs for yachts -- all these and many other costs are not reflected below. And these costs (insurance, taxes, maintenance, etc) are essential and recurring and yet they are not included.
Original Post
When talking about inflation, one needs to go through this chart, line by line.
Assuming it's accurate, a few comments.
First, for investors, it's an open-book test to figure out which sectors could be challenging as investment opportunities.
Third, two sectors that are usually at the top of "inflation lists": medical care and college tuition are now at the bottom. There may be explanations but different explanations for each.
the interesting thing folks never seem to consider: the US postage analogy
so what if US postage stamps increase by 100%: no one uses US postage stamps any more
likewise, the huge expenses -- in terms of dollars -- college tuition and medical expenses have gone up very little;
rents have increased but one can lock in monthly rents with 15-month leases;
"dining out" can be a very high-cost item and one most easily modified
Fourth, the "inflation list" cannot be reconciled / overlaid with investment sectors.
for example: "gasoline" and "vehicles, new and used" are at the top of the inflation list but unlikely that "oil" and "automakers" would be seen as similarly attractive by investors;
"semi-conductors" are spread throughout the inflation list; how does one invest?
PGA: could be an incredible day for the PGA today.
Later:
Wow, wow, wow! What an incredible day! Rory started to "scare" me four holes from the end, and then he came back strong. I am so amazed how he kept his composure. And I am very, very impressed with the Canadian spectators. Nothing got out of hand. It appears three Canadian police on bicycles were able to keep the hordes off the final green. Amazing. Rory wins by two. Tony Finau in second all by himself two strokes behind. Justin Thomas faded on the last hole and finished four strokes behind Rory. One for the ages. By the way, other than making a gazillion dollars this weekend, how did Phil Mickelson do on the Mideast Senior And European Junior Varsity League (aka, the LIV) do?
NASCAR: 3:00 p.m. CT today?
NBA: game 5, tomorrow night, Monday.
NHL: Stanley Cup, first game, Tampa Bay Lightning at Colorado Avalanche, Wednesday, June 15, 2022; the following Saturday, June 18, Father's Day eve.
The Mesha Stele, the first major epigraphic Canaanite inscription found in the region of Palestine, the longest Iron Age inscription ever found in the region, constitutes the major evidence for the Moabite language, and is a "corner-stone of Semitic epigraphy," and history.
The stele, whose story parallels, with some differences, an episode in the Bible's Books of Kings (2 Kings 3:4–28), provides invaluable information on the Moabite language and the political relationship between Moab and Israel at one moment in the 9th century BCE.
It is the most extensive inscription ever recovered that refers to the kingdom of Israel (the "House of Omri"); it bears the earliest certain extrabiblical reference to the Israelite god Yahweh.
It is also one of four known contemporary inscriptions containing the name of Israel, the others being the Merneptah Stele, the Tel Dan Stele, and one of the Kurkh Monoliths.
Its authenticity has been disputed over the years, and some biblical minimalists suggest the text was not historical, but a biblical allegory. The stele itself is regarded as genuine and historical by the vast majority of biblical archaeologists today.
I have to LOL. Does one really think the writer would have been sophisticated enough to write an allegory? On a stele? This is "transference" at its best. The big questions are:
exactly where was the stele located in reference to the contemporary audience?
exactly who was the audience for this stele?
why would a writer choose a stele to compose an allegory?
were steles unique or commonplace?
I finished the chapter on Masada yesterday.
********************* Word For The Day: Tattoo
I've seen a number of YouTube videos of "tattoos" and to my discredit, I have never looked up the etymology of tattoo.
But here it is, as good as it gets, from Edmund Wilson's The Dead Sea Scrolls, 1969, p. 223:
Tattoo is a word which the Israelis have borrowed from the English. "Tattoo" means primarily the beating of a drum at night to recall the soldiers to their quarters.
Wow, isn't that interesting?
More:
But as "tattoo" is defined by the Concise Oxford Dictionary the word may be extended to mean an "elaboration of this -- the drum beating -- with music and marching as entertainment."
And then Edmund Wilson goes on to describe the Israeli Jerusalem tattoo, on the night of May 14th, 1967, which preceded the next day's parade that celebrated the nineteenth anniversary of Israel's Independence Day.
********************* Global Warming
It is so incredibly hot today. LOL.
Hey, it's summer, and it hasn't been this hot in ten years in north Texas. I never complain about hot weather; I'll mention it but never complain about it. It's wonderful. And most Americans can handle summer weather better than winter weather, and that's a fact, Jack.
It's so hot today, I have to water the plants on the patio twice today and that's despite keeping them in the shade. Currently 94°F at DFW.
So far, the Texas grid is holding.
Air conditioning on in the apartment?
June 8, 2022, 90°F+: nope.
June 9, 2022, 90°F+: nope.
June 10, 2022, 99°F: nope.
June 11, 2022, 100°F: nope
June 12, 2022, 100°F+: not yet
************************** Crazy: I Remember When I Lost My Mind
A huge "thank you" to a reader who fact-checked this for me.
The above screenshot was sent to me by a trusted reader but no date was provided for the actual news article. The date for the file photo was July 25, 2019.
It turns out the AP fact-checked this and the story is accurate.
But most interesting, this occurred even earlier than I thought. The EV-risk to the California grid apparently occurred even earlier, back in the June, 2021 heat wave.
AP'S ASSESSMENT: Missing context. The headline being shared was from a June 2021 heat wave — not mid-March 2022 — and was a voluntary recommendation that residents charge electric vehicles and do other activities outside of certain peak periods.
The link is to a Fox source (FOXLA) and the google app generally doesn't allow link to Fox.
So far, here in Texas, we haven't had similar alerts despite a record-breaking heat wave this weekend.
Huge thanks for a reader catching this, fact-checking and confirming, not only that it was accurate but it occurred last year.
Are we back to counting DUCs? Of fifteen wells coming off the confidential list this next week only two -- both Zavanna wells -- 13% -- report production data. Link here.
one can debate the reason for the high price of oil and yet we are seeing more oil than necessary
I used to suggest it was a refining problem; that remains true to some extent;
a bigger problem is inflation (to include transportation inflation);
but it appears the big problem is spare capacity
For the reader concerned about dates: Yergin noted this in March, 2022.
Spare capacity:
although it was called something different years ago, we noted this on the blog maybe a decade ago;
a lot of folks call it under-investment, and that's been a recurrent theme over on twitter;
I was never concerned about under-investment, but I was wrong; I never anticipated Russia's suicidal ideation;
Josh Young started talking about this a year ago (?); perhaps too much of a new face to have been taken seriously, and he concentrated on Canadian oil;
there was the anomaly, February, 2020 - April, 2020
recovered to baseline February, 2021; the baseline extended back to late 2014, when oil plunged from $120 to $60
after February, 2021, steady increase but not clear what might happen, through October, 2021
but by January, 2022, the chart seemed to reflect what others were starting to notice: a question about spare capacity
from November, 2021, to June, 2022, it's been pretty much a straight line from $70 to $120
in March, 2022, when CNBC posted Yergin's analysis, oil was trading below $100 and just ready to break out
of course, March, 2022, was the month Russia invaded Ukraine
Thoughts:
so, let's put some numbers to this:
baseline, when global supply / demand (oil) balanced: $60
inflation: add 20% since March, and that's being very, very liberal; probably closer to 10% but let's say 20%, which adds $12 = $72
demand change from 2019 / 2020 anomaly (pandemic), it's almost looking like a wash at the moment; it certainly appears global oil supply is more than meeting global oil demand (global oil demand held back by continued on-again/off-again Covid lock downs in China); with that, I can't see adding anything to the $72-price point based on supply/demand now
going forward, inflation, add another 10% -- no one is suggesting that; that is way too high but let's put that in as a place holder, $72 + $7 = $80 in round numbers
spare capacity / under-investment: call it what you want but the market is looking ahead three months (height of driving season in US) and six months out (China continuing to open up) and analysts see a spare capacity / under-investment premium of $40 currently and as much as $80 if one accepts the analysis of Goldman Sachs, JPM, and others
remember: it's the price of that last bbl of oil that determines the price of oil.
Spare capacity / under-investment
under-investment? why? Oil sector pretty good at anticipating demand and responding in kind
so why the under-investment?
politicians suggest oil sector under-invested over the past twenty years for greedy reasons
to cut to the chase, under-investment wasn't for greedy reasons; under-investment was due 1000% due to "keystoning" of America; oil sector was not allowed to invest in America in the past ten years, perhaps twenty years if one considers when plans for the Keystone X were first being drawn up;
it will be impossible for the US to make up for that under-investment in any meaningful time frame; it's just not going to happen, and again, mostly due to continuing "keystoning of America";
Plan A: America's production would meet global demand; can't happen in current environment
Plan B: global demand will need to be met by OPEC (B1) and Russia (B2)
oil at $120 suggests analysts feel Plan B will fail
maybe, without Ukraine, Plan B would have held together for another year or so
Ukraine simply compressed in time the whole spare capacity issue
again, global oil supply more than meets demand now; price is forward-looking
analysts suggest Ukraine changed everything
What does this mean going forward:
WTI: in fairly narrow trading range right now -- $118 - $122
any signs of "truce talk" between Ukraine - Russia: skittish oil traders will take profits, get out quickly, resulting in quick drop in oil price to well under $100
if Russian sanctions aren't quickly lifted after truce, oil will gradually move higher again; the volatility in the price of oil after a truce is announced will ebb and flow in line with political comments coming out of the EU
OPEC will get a lot of ink but overall production cannot make up for shortfall in Russian production; we'll know more after Biden's visit to Saudi Arabia in July
