The Ram EV 1500 will "carry" a range extender:
- a diesel-powered generator in the box
Thursday, February 10, 2022
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.
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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.
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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
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?
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.
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