I agree Keystone XL is an outlier where the refining process is export only. What it does do is provide oil revenue for further exploration and development. As for the refining process the US was 94% capacity in Jul 22 according to EIA. I don't think that has changed much over the past few months. Your not going to get much more out of our refineries. The oil would have to exported and refined or build new refineries. I do know we have refineries that were shut down whether it is cost effective to upgrade these refineries to meet today's requirements is something that should be explored. As for off shore drilling there are more places off shore than GOM that would also move the needle. These places are off limits. Alaska (no hurricane disruptions) certainly has the capacity for oil production which is also off limits. You and I both agree on one thing the incentives to produce oil are not there having the US purchase oil to replenish the SPR is a good idea but even then the SPR has limits. Although the website is not up to date there is relevant information. SPR Quick Facts Highest inventory - The SPR was filled to its then 727 million barrel authorized storage capacity on December 27, 2009; the inventory of 726.6 million barrels was the highest ever held in the SPR. Some interesting facts on oil refineries in the US can be found here. How many oil refineries are shut down in the US? As of January 1, 2022, there were 130 operable petroleum refineries in the United States.
Along those lines, and Ukraine Israel and Lebanon reach historic agreement, paving the way to potentially rich gas exploration | CNN
I actually support the XL because without it, canadian production lags and the ones producing are working on thinner margins which leads to less environmental responsibility and rehab of mined areas. Smaller, more likely to go bankrupt and reorganize to avoid environmental cleanup costs, are the ones that will work on the tighter margins. The upgrade costs for both the large Philly and the St Croix refineries was not economically viable in the former price environment with the reduced crack spread. As refinery capacity is squeezed and the crack spread increases, it may be worth it but the patient money required to finance the improvements has no confidence that the margins will remain that large over time. Demand destruction from covid has really spooked oil investment. Nobody bid on the Alaska leases, or at least nobody with the resources to develop them. The challenges related to the permafrost thawing makes it almost impossible to assure continues access to those areas with anything other than a helicopter. And Alaska oil almost goes exclusivley to the far east as the Jones act requires US flagged vessels to move it to the west coast. Those vessels transport costs make it cheaper to buy oil from others than ship oil from California. But even if that oil was exported, it would add to the global supply which would not be a bad thing. The GOM has the largest proven, accessible reserves and the nearby industry support mechanism for development and it isn't getting developed for the same reason that people don't invest in fixing the old refineries, no long-term confidence int he price of oil that is needed to pay back these 10 - 20 year projects. Talking about other areas that are off limits and have no support structure or record of discovery is a red meat thing for people to complain about with no basis in reality. The GOM is the lowest hanging fruit and it isn't getting picked, what makes you think someone is going to try and climb higher in the tree when there is fruit at ground level? And those environmental restrictions that shut down the refineries are legit to prevent cancer etc in surrounding communities and have been around a long time before Biden became POTUS.. DT even had standards waived for the Philly plant and they still couldn't make it work. Carlysle group, one of the most politically connected groups in DC, made bank ont he process though. They pulled off a classic DT business move by pulling large management fees even as the company formed to run the refinery went bankrupt. That $600M that was siphoned off by Carlysle Group would have been much better spent implementing the upgrades, but nobody was watching as they ran the business into the ground and took all the profits. Refiner goes belly-up after big payouts to Carlyle Group | Reuters Although little oil flowed, plenty of money did. Under a deal Philadelphia Energy Solutions (PES) signed in 2015, the refiner paid minimum quarterly payments of $30 million to terminal owner North Yard Logistics LP - even if little crude arrived. Much of that cash, in turn, flowed to the investors that own both PES and North Yard, led by the Carlyle Group, a global private equity firm with $178 billion in assets. The deal in effect guaranteed lucrative payouts to Carlyle regardless of whether the refinery benefitted from the arrangement. When oil market conditions made the rail shipments unprofitable later that year, the refinery took heavy losses while its investors continued to collect large distributions for two more years. The rail contract exemplifies the financial demands Carlyle imposed on PES in the years leading up to the refiner’s bankruptcy in January. The Carlyle-led consortium collected at least $594 million in cash distributions from PES before it collapsed, according to a Reuters review of bankruptcy filings. Carlyle paid $175 million in 2012 for its two-thirds stake in the refiner. As for off shore drilling there are more places off shore than GOM that would also move the needle. These places are off limits. Alaska (no hurricane disruptions) certainly has the capacity for oil production which is also off limits. The SPR is now down by over 200M barrels and we need to extend the releases to counter the Russian and OPEC+ cuts. We could easily agree to purchase 400M barrels over a 5 - 10 year period beginning in 2 years at ana greed to price ($80 per barrel with inflation escalators) and that would get the GOM development financed quickly
Oil Tumbles Anew as China’s Covid Bogeyman Returns (msn.com) Investing.com -- If Vladimir Putin and OPEC are oil bulls’ best friends, you can count on China and the Federal Reserve for having the back of the bears. In a way that’s become quite predictable these days, China’s Covid bogeyman pops up after crude prices have stacked up double-digit gains to announce new social curbs in the world’s largest oil importer. So was the case on Tuesday as Shanghai and other big Chinese cities, including Shenzhen, ramped up testing as coronavirus infections rose, with some local authorities hastily closing schools, entertainment venues and tourist spots. The result: a 3% tumble in crude prices since this week began, after last week’s 17% run-up.
Going back a few years, the last one planned in LA was scrubbed because it was cheaper to ship stuff to under developed countries for processing or just import Russian oil… maybe the calculus has changed now along with a broader look at regional oil. Processing. Start keeping all the good oil here. Keystone was always talking points. Canadian high sulfur oil to be shipped over seas after being pumped south. Honda, LG to build $3.5B battery plant, hire 2,200 in Ohio
Oil refineries are incredibly expensive, and do not generate a very good return on investment. Chemical plants take the cheap products of the refinery and make value-added products from them, and some chemicals are fairly profitable. But oil products are not very profitable compared to the amount of capital involved in building the refinery. The return on investment is not very high. And that leads the refinery to be a bit more dangerous, as there is not enough capital to properly maintain the refinery and pay dividends to the investors. The BP refinery in Texas City had an explosion around 2005 that killed 15 people because they were not spending capital to solve process safety problems. You almost need some major federal government financing if you want more refining capacity in the U.S.--local tax breaks are not enough.
ANother 14 million barrels from the SPR to the market. I hope they start issuing some long-dated purchase contracts to companies to develop deepwater GOM soon Biden just took a big swing at lowering gas prices ahead of the midterm elections | Business Insider India President Joe Biden is once again stepping in to try and curb soaring gas prices, as Americans feel the pinch of higher prices and turn away from Democrats as the midterm elections approach. According to Reuters, Biden is expected to release 14 million more barrels of oil from the Strategic Petroleum Reserve (SPR). It's another effort to help bring down gas prices, which have skyrocketed due to a confluence of reduced oil production in the US alongside Russia's invasion of Ukraine. The reported move from Biden comes after gas prices began creeping up again at the end of September, another strain on Americans' wallets as inflation rose to 8.2% and core inflation, which excludes volatile food and energy prices, reached a 40-year high. Press Secretary Karine Jean-Pierre said in early October that the administration was not considering new releases from the SPR. But now more seem to be coming.
...President Joe Biden has reduced the SPR to it’s lowest level in almost 40 years. This after shutting vast swaths of U.S. oil production and then begging the Saudis for more oil. Lost in all of this is the fact that President Donald Trump, while in office, wanted to increase the SPR by 77 million barrels through a provision in the stimulus bill of 2020. This provision was stripped from the bill by congressional Democrats who called it a giveaway to the oil industry. Now, according to the article, Biden wants to refill the SPR through purchases from small and medium producers in an effort to keep them afloat. The very same reasoning Trump used when he proposed the idea, but I’m willing to bet the Nancy Pelosi and Chuck Schumer will think it’s just a great idea this time. Especially since the price of crude oil has gone from record lows when Trump proposed it to record highs under Biden and the Democrats. https://chicksonright.com/blog/2022...l-biden-now-considers-refilling-at-80-barrel/ “Trump in March of 2020 was looking to stabilize the oil industry after Covid-19 hit in 2020 and crushed global petroleum demand. With oil at the time priced at about $24 a barrel, Republicans proposed spending $3 billion to fill up the reserve. But the idea became a political football in larger negotiations on trillions in coronavirus relief, with Senate Democratic Leader Chuck Schumer proclaiming that his party had blocked a ‘bailout for big oil.'”
Releasing SPR reserves going into the election makes total sense to me. I paid $3.40 over the last two weeks across 3 states as I got in my last hiking trip this year. It’s $3.60 now locally. If we really wanted to help oil prices we’d break up opec with some good old fashioned CIA revolutions.
this is correct that some areas have been declared off limits. The reality is these areas have never even been explored or proven to hold any reserves. The areas that are known to hold reserves and have the infrastructure to support offshore drilling are not being drilled for a reason. The uncertainty of future oil price prevents the investment required for the development of the resources and that doesn't change if it is GOM or the Pacific or Atlantic coasts or the Alaskan tundra. Large scale oil development will not happen without certainty on future oil revenues. That certainty can be provided by long-dated, fixed (w/ inflation escalator) price contracts. If you want us to develop our resources, go tell Exxon that you will pay $85 per barrel (inflation adjusted) for 400 M barrels over 8 - 10 years to refill the SPR and the machine will start. Do you support long dated fixed (+inflation) contracts. If you do, please let your senator know that the SPR legislation needs to be amended. small and medium production companies doing inland fracking do not have the pipeline or reserve capacity to expand at that scale the dems were wrong not to refill SPR when prices were low depending on the structure of the contract. If it committed to spot prices like the SPR language requires, that is too big of a chunk to take at spot prices lest the contract could be suspende dif oil reached X $ per barrel.
Looks like agreement has been reached, brokered by the US. Good to see US leadership and keeping a foothold in the region without military intervention U.S. Brokers Major Israel-Lebanon Sea Border Agreement
I guess it didn't make sense to you when Trump tried to do replenish the SPR at $ 24.00/barrel before the 2020 election?
that will be another exporter to the EU when they finally get it built. Israel already exports small volumes of LNG to the EU but this additional production will really ramp up the volume that Israel can push out to the market. Big blow to Iran and Hezbollah who didn't want the Lebanese gubmnt to get financing from the royalties on this resource. I wish they would build a pipeline to the EU instead of having to use LNG An Israel-Lebanon Border Deal Could Increase Natural Gas Supplies - The New York Times (nytimes.com) The increased production won’t make up for the gas that Europe is no longer getting from Russia. But energy experts say an Israeli-Lebanese agreement should give a vital push to efforts to produce more gas in that part of the world. Over the last four years, energy production in the eastern Mediterranean has been growing as Israel, Egypt, Jordan and Cyprus have worked together to take advantage of oil and gas buried under the sea. “This is a very important step for the region to come into its own,” said Charif Souki, the Lebanese American executive chairman of Tellurian, a liquefied natural gas company based in Houston. “Players are finally realizing that it’s better to cooperate than to continuously fight.” ................................................................. Chevron, the second-largest U.S. oil and gas company, and several smaller businesses are already producing gas from two larger fields off Israel’s coast. That fuel has increasingly replaced coal in the country’s power plants and factories. Israel now has so much gas that it has become a net exporter of energy, sending fuel to neighbors like Jordan and Egypt. Some of that gas has also found its way to Europe and other parts of the world from L.N.G. export terminals in Egypt. Chevron and its Israeli partners are discussing the possibility of building a floating liquefied natural gas platform in the Leviathan gas field, Israel’s largest. The companies are expected to make a decision on the project in a few months. But getting the gas out of the region will not be easy. Floating export terminals are vulnerable to terrorist attack. And, even if they could be adequately secured, the terminals will not be able to process as much gas as the larger coastal facilities used in major gas producers like the United States, Qatar and Australia. Building terminals on land can take several years, and often longer, because of opposition from environmental and other groups.
on the bright side, refineries that have been shut down for transition from summer blends and maintenance are coming back online so refinery output should be increasing heading into a time of decreased demand as summer driving season ends. This confluence of events should push distillate products volumes in storage up over the next couple of weeks which should tamper gas prices. French refinery workers also ended their strike so diesel exports should be reduced which will help to build volumes in storage Explainer: U.S. gasoline prices are falling again - here's why | Reuters U.S. oil refineries are running hard to replenish low inventories even has cold weather sets in, which usually corresponds with a drop in demand for fuel. The four-week moving average of gasoline demand is 2.4% lower than this time last year, while refinery utilization is 5% higher. Last month, U.S. gasoline prices rose largely due to regional refinery outages in the west coast and the Midwest. In California, costs are up more than $1 per gallon in the last month whereas in Texas, prices remain lower than a month ago. Refinery maintenance often occurs in the fall when demand drops after summer driving season. This fall, however, some refineries had to shut units without warning due to infrastructure problems. Three refineries in Washington state and California had planned maintenance while another had an unplanned outage in September, according to Refinitiv data and refining sources. In the Midwest, BP-Cenovus' Toledo refinery is still offline after a fatal explosion shut the plant late last month. In October, several French refineries shut as workers went on strike to combat the higher cost of living, which sent global distillate inventories lower and increased U.S. distillate exports.
