Fascinating! What has been reported in 'old' (as in, not usually batshit crazy) media (which does not make it accurate or make sense) is our fuel prices are tied to what the world pays. We pay more because world pays more, particularly in a shortage. You have provided a far more logical explanation. Thank you!
I guess I may as well add my two cents here as I spent 10 years working for oil majors on East Coast product tankers, plus driving tanker trucks in Ontario and BC.
Where your gas and diesel come from is often a matter of expedience. Example: If Oil Co. A has a ship near Montreal and its next cargo is for Labrador but its refinery is in Sarnia, then they load up at Oil Co. B in Montreal instead of making a trip up the Seaway. Likewise, Oil co. B will load at Oil co. A in Sarnia if their ship is in the upper lakes with a next destination in the lakes. No idea how the accounting works, but it all balances out at some point I suppose. Either that or someone pays the difference. Not my department:)
Same thing happens with tanker trucks. When I worked for Co A we used to get our premium from Co. B on a regular basis. Pain in the ass as I had to load at two different terminals. The reason was not to save transportation costs but because one refinery would be short one product and long another, so a balancing act. Also, if you bought Texaco gas in Vancouver back then you were actually getting Gulf because Texaco had no west coast refinery. They're both gone now BTW. There were three refineries on the West Coast when I started in 81, now there's only one.
So if you think you're buying Brand A gasoline, you may actually be buying Brand B without ever knowing. Only exception I know of is Chevron which has additives for older cars that ran on leaded gas.
Also of interest (perhaps) is that the oil majors got rid of their ships and tanker fleets in the mid 80’s as it was too costly to operate them on the thin margins at that time. What followed was a game of hardball playing one contractor off against another, where you'd have 2 years of plenty followed by 2 years of drought, with drivers jumping back and forth from one to the other. Clever oil companies right? Nope, they just created an opportunity for big outfits like KAG (USA) to buy out the small contractors and dominate the transportation side, so back to square one.
Amusing anecdote: Being junior, I drove the big trucks with two trailers AKA trains. Senior guys didn’t want that, but I was just fine as it was mostly diesel hauling to truck stops on the highway, so no city work. However, from time to time you’d have these price wars and they’d put me on gas stations which inevitably had long line-ups you’d have to fight your way through to get on the site. On one occasion, after a half-hour crawl, I was just about at the fills with only one car blocking my way. I got out, and asked the lady driving if she would kindly move ahead so I could get the truck into position. She f’ing lost it and came back at me with “I’ve been waiting here for over an hour and I’m not moving!” Then I lost it and said, lady, you see this truck? If I can’t get it unloaded you ain't getting any damn gasoline!” Thought for sure I’d hear back on that one, but nope. Oh, and another time this guy got all bent out of shape with "that’s kind of a big truck to be fueling up here don’t you think?” I swear, you just can’t make this stuff up.
The fact that Venezeula needed to be secured shortly before the Iran war was launched points to the strategy. Venez produces heavy sour and so I am assuming it can substitute for Middle East heavy in the mix, in addition to Canadian supply.
The big picture strategy here I believe is that the US is retreating to the America's continents and giving up the petrodollar and the large deficits and global policeman role that comes with it.
US oil companies were reportedly up $60B in excess profits 2wks into the war. They will make some multiple of that by the time it ends. I'll speculate that a deal has been done to invest those profits into the needed rebuilding of Venez oil infrastructure.
The US was also reportedly planning to double gas exports from the gulf by 2030 but needed higher prices and major investment to do so. Arranging Iran to blow up 17% of major gas competitor Qatar, including scuttling their planned $30-40B gas expansion and keeping gas prices higher for 3 to 5 years solves the US gas investment hurdle.
Add in the Trump pitches for control of Greenland, Cuba, trolling Canada as the 51st state, and there is a clear picture here of a planned geopolitical realignment of which the Iran war is the fulcrum. The US will be the hegemon for the Americas only.
China is getting a PetroYuan system with a focus on linking Asian countries in particular to paying in Yuan for Homuz oil. There is some arrangement, possibly transitional, making the Yuan sales convertible into gold. The US was also reported as recently settling its deficit with China in gold. Russia has the energy resources to support Europe. It's early days but some reports have mentioned Germany rationalising it want this access again and of Russia's willingness to supply if the destructive politics settles down.
So the new world emerging will have three hegemons for three energy independent and possibly currrncy independent global regions: a US led Americas trading dollars, a China led, Asian, Yuan-based trading block, and perhaps a Russian led Europe, with a yet to be determined currency trading system. Gold the basis of settlement between these regions.
I'll also speculate that the US did a deal with Iran before the war started: that is, we have a real war between Israel, Iran and Lebanon, but a managed, controlled fake war between the US and Iran. Time will tell.
I love your take! It seems to align pretty well with current events. But it would mean a level of competence in the west I fail to see. I hope you're right though.
This is a pretty good take, and would be a good strategy for the U.S. if there were enough competent people to implement it. Who knows? Maybe the coming economic shock will wake enough people that this strategy becomes implemented.
I recall reading recently that significant quantities of oil/gas have been discovered in Cuban waters. To confirm, I ran it past Perplexity with the results here. So maybe the US interest there is more than just bringing mo' demokkkracy to the Cuban people.
Thanks. Although even that would take several years to play out. You've got to stabilize the politics (US ain't great at that), build up the infrastructure (maybe start at home?), and then 🤑🤑 (that we're great at!!)
This is a solid piece. I cut my teeth in exploration and production many many years ago and you nailed all the important stuff with one exception. You missed decline curves. All oil and gas basins face declining production over time. With much of the new shale production that has fueled the "energy independence" talk, the decline curves are precipitous. This is especially true in the Williston Basin (ND). So what's it mean? Simply this...looking out 5-10 years the picture is much, much bleaker than we are being led to believe. New drilling technologies will offset some (but not all) of the loss. Short term, though, I agree. There will definitely be a price shock and there will likely be spot shortages for a time. Good piece. Thank you.
There are some factors missing from this description. Perhaps one should first say that splitting hairs over what "energy independence" is, and whether the USA has it, misses the broader point. Which is: does the USA export more energy than it imports? Yes, it does. And by a huge margin.
The second thing to note is that while the US imports roughly six million barrels of oil per day, it exports about the same amount of REFINED petroleum products, such as gasoline, diesel, aviation fuel and NGL. This is not a nation that's struggling to fulfill its energy needs. The US has an abundant amount of energy, as well as an 18 million bpd refining capacity. It will use that abundance as a strategic lever while the rest of the world faces shortages.
I strongly agree with No1 that Europe is screwed six ways from Sunday. They are energy dependent and grossly so. Whereas for the USA, rising oil prices means more revenue as well as greater expense, for Europe there is no upside to offset the increased cost. It's deeply negative for every European nation, with the exception of Norway which is a net exporter of petroleum.
The EU inflicted great pain on itself in 2022 by banning Russian oil. That strategic blunder already drove European energy prices through the roof. Now, with the Gulf closed? It's an economic disaster with potentially catastrophic consequences.
As an aside, I will point out that shipments of petroleum products are already being diverted from Europe to Asia. Asia is currently outbidding the EU on the spot market.
"No domestic shale" - there is, in the UK, but thanks to eco~ and climate change~zealots it must on no account be accessed. As for food ... well, the official government policy is that solar farms and wind farms are better. The government/mainstream insanity is beyond description.
Increasing your country's supply of renewable energy is a strategic imperative. This is true whether or not you're a net exporter of petroleum. If you're a net importer, then renewable energy is an immediate imperative.
China is the poster child for this strategy. Renewable energy now accounts for 50% of China's power production. It has 1000 GW of solar power and 500 GW of wind power. The vast majority of the NEW power China is adding is also renewable.
They're not doing it for kicks. They're doing it because not having sufficient domestically produced energy is a huge strategic vulnerability.
Shale oil is not easy to access. Just having some shale oil does not mean it can be profitably produced, even from an EROIE perspective - which means it will never make sense. idk about UK oil in particular, but the situation of extracting oil is a lot more complex than people realize.
The UK has oil fields through Scotland in the sea. That's much easier. However, there is not much investment (at least a few years ago if I recall correctly) because the gov in its infinite wisdom levied "windfall taxes". Result: reduced investment, job loss, ultimately: a LOT less taxes...
Ah, but that is good for the environment, climate change. Believe it or not, but tiny Netherlands believes that by having an aggressive renewables energy policy it can make a positive dent in the global climate change!!
It is not just in the U.S. that the politicians are completely deranged and out of touch with reality.
Not shale - it's conventional crude trapped in sandstone reservoirs under the seabed. Much easier and cheaper to extract than shale.
Proven reserves are roughly 2-3 billion barrels remaining (declining), but there's still significant undeveloped potential. The issue isn't geology - it's economics. The UK windfall tax pushed the effective tax rate on profits to ~75%, which killed the investment case almost overnight.
Like our old power grid, that has not been hardened for EMP attack or a CME, we have refineries that are not up to the task of refining what we pump out of the ground. Nice!
Many people are asking "...if we are energy independent Mr. President, why are gas prices continuing to rise at the pumps??"
It doesn't matter to them... as long as people aren't rioting, they will continue to rake in record corporate profits for US corporations. The US Govt represents these interests, not the people at the pump...
This is becoming my favorite substack. And I love Paul Krugman and Heather Cox Richardson. Read 'em everyday. I might have to adjust my substack budget.
“… try eating wine…” #Truth…. But what about beer? 😆 https://www.thecatholictelegraph.com/lent-fast-beer/63676 “Back in the 1600s, Paulaner monks moved from Southern Italy to the Cloister Neudeck ob der Au in Bavaria. “Being a strict order, they were not allowed to consume solid food during Lent,” the braumeister and beer sommelier of Paulaner Brewery Martin Zuber explained in a video on the company’s website.
They needed something other than water to sustain them, so the monks turned to a common staple of the time of their region – beer. They concocted an “unusually strong” brew, full of carbohydrates and nutrients, because “liquid bread wouldn’t break the fast,” Zuber noted.
This was an early doppelbock-style beer, which the monks eventually sold in the community and which was an original product of Paulaner brewery, founded in 1634. They gave it the name “Salvator,” named after “Sankt Vater,” which “roughly translates as ‘Holy Father beer,’” Zuber said.”
🤣 A solvent, preservation mechanism (in more ways than one), remedy, inhibition-fighter, parasitic cleanse, and currency - probably what I will have to end up producing with my labor once the U.S. receives its karmic equivalent of “sending them back to the stone ages”. My worst-case scenario investment strategy: a still. 😬
"Upgrading a refinery to switch between crude types costs between $100 million and $1 billion per facility. No1’s rushing to do that." But maybe we should?
At $1-2B per day spend rate on the War on Iran, I suspect that the US has already spent enough to pay for all of the refinery conversions we'd need to become truly energy independent.
In the long term, there is enough natural gas on the deep ocean floors in the form of Methane Hydrate (est. 1.2 million cubic miles) to power civilisation for the next century
Sorry, it was but a crude attempt at refining my thoughts - I was running on a low reserve of ideas and had to drill pretty deep to extract anything worth reading. Glad it didn't leave you feeling slick.
I recall reading like a decade ago or more that the US shale pumpers where extremely dependent on oil high prices to pay back debt and make a margin. That would explain the war against Iran AND the arabs. The oilers still run the US the Bush way.
My grandfather grew the grain he fed his mule, and chopped his own firewood. I haven’t seen energy independence since his passing.
Fascinating! What has been reported in 'old' (as in, not usually batshit crazy) media (which does not make it accurate or make sense) is our fuel prices are tied to what the world pays. We pay more because world pays more, particularly in a shortage. You have provided a far more logical explanation. Thank you!
I guess I may as well add my two cents here as I spent 10 years working for oil majors on East Coast product tankers, plus driving tanker trucks in Ontario and BC.
Where your gas and diesel come from is often a matter of expedience. Example: If Oil Co. A has a ship near Montreal and its next cargo is for Labrador but its refinery is in Sarnia, then they load up at Oil Co. B in Montreal instead of making a trip up the Seaway. Likewise, Oil co. B will load at Oil co. A in Sarnia if their ship is in the upper lakes with a next destination in the lakes. No idea how the accounting works, but it all balances out at some point I suppose. Either that or someone pays the difference. Not my department:)
Same thing happens with tanker trucks. When I worked for Co A we used to get our premium from Co. B on a regular basis. Pain in the ass as I had to load at two different terminals. The reason was not to save transportation costs but because one refinery would be short one product and long another, so a balancing act. Also, if you bought Texaco gas in Vancouver back then you were actually getting Gulf because Texaco had no west coast refinery. They're both gone now BTW. There were three refineries on the West Coast when I started in 81, now there's only one.
So if you think you're buying Brand A gasoline, you may actually be buying Brand B without ever knowing. Only exception I know of is Chevron which has additives for older cars that ran on leaded gas.
Also of interest (perhaps) is that the oil majors got rid of their ships and tanker fleets in the mid 80’s as it was too costly to operate them on the thin margins at that time. What followed was a game of hardball playing one contractor off against another, where you'd have 2 years of plenty followed by 2 years of drought, with drivers jumping back and forth from one to the other. Clever oil companies right? Nope, they just created an opportunity for big outfits like KAG (USA) to buy out the small contractors and dominate the transportation side, so back to square one.
Amusing anecdote: Being junior, I drove the big trucks with two trailers AKA trains. Senior guys didn’t want that, but I was just fine as it was mostly diesel hauling to truck stops on the highway, so no city work. However, from time to time you’d have these price wars and they’d put me on gas stations which inevitably had long line-ups you’d have to fight your way through to get on the site. On one occasion, after a half-hour crawl, I was just about at the fills with only one car blocking my way. I got out, and asked the lady driving if she would kindly move ahead so I could get the truck into position. She f’ing lost it and came back at me with “I’ve been waiting here for over an hour and I’m not moving!” Then I lost it and said, lady, you see this truck? If I can’t get it unloaded you ain't getting any damn gasoline!” Thought for sure I’d hear back on that one, but nope. Oh, and another time this guy got all bent out of shape with "that’s kind of a big truck to be fueling up here don’t you think?” I swear, you just can’t make this stuff up.
The fact that Venezeula needed to be secured shortly before the Iran war was launched points to the strategy. Venez produces heavy sour and so I am assuming it can substitute for Middle East heavy in the mix, in addition to Canadian supply.
The big picture strategy here I believe is that the US is retreating to the America's continents and giving up the petrodollar and the large deficits and global policeman role that comes with it.
US oil companies were reportedly up $60B in excess profits 2wks into the war. They will make some multiple of that by the time it ends. I'll speculate that a deal has been done to invest those profits into the needed rebuilding of Venez oil infrastructure.
The US was also reportedly planning to double gas exports from the gulf by 2030 but needed higher prices and major investment to do so. Arranging Iran to blow up 17% of major gas competitor Qatar, including scuttling their planned $30-40B gas expansion and keeping gas prices higher for 3 to 5 years solves the US gas investment hurdle.
Add in the Trump pitches for control of Greenland, Cuba, trolling Canada as the 51st state, and there is a clear picture here of a planned geopolitical realignment of which the Iran war is the fulcrum. The US will be the hegemon for the Americas only.
China is getting a PetroYuan system with a focus on linking Asian countries in particular to paying in Yuan for Homuz oil. There is some arrangement, possibly transitional, making the Yuan sales convertible into gold. The US was also reported as recently settling its deficit with China in gold. Russia has the energy resources to support Europe. It's early days but some reports have mentioned Germany rationalising it want this access again and of Russia's willingness to supply if the destructive politics settles down.
So the new world emerging will have three hegemons for three energy independent and possibly currrncy independent global regions: a US led Americas trading dollars, a China led, Asian, Yuan-based trading block, and perhaps a Russian led Europe, with a yet to be determined currency trading system. Gold the basis of settlement between these regions.
I'll also speculate that the US did a deal with Iran before the war started: that is, we have a real war between Israel, Iran and Lebanon, but a managed, controlled fake war between the US and Iran. Time will tell.
I love your take! It seems to align pretty well with current events. But it would mean a level of competence in the west I fail to see. I hope you're right though.
This is a pretty good take, and would be a good strategy for the U.S. if there were enough competent people to implement it. Who knows? Maybe the coming economic shock will wake enough people that this strategy becomes implemented.
I recall reading recently that significant quantities of oil/gas have been discovered in Cuban waters. To confirm, I ran it past Perplexity with the results here. So maybe the US interest there is more than just bringing mo' demokkkracy to the Cuban people.
https://www.perplexity.ai/search/have-oil-and-gas-deposits-in-l-EcGX31jcSJe4cpL4HW867Q
Thanks. Although even that would take several years to play out. You've got to stabilize the politics (US ain't great at that), build up the infrastructure (maybe start at home?), and then 🤑🤑 (that we're great at!!)
There's also the untapped fields in the South Atlantic off the Falkland Islands.
It would come as no surprise in the coming years for a Milei led campaign to 'Liberate Malvinas'
not like the Brits could do anything about it anymore.
If you include the number of rubber dinghies on the southern shores, the Royal Navy has the world's largest fleet.
🎯
This is a solid piece. I cut my teeth in exploration and production many many years ago and you nailed all the important stuff with one exception. You missed decline curves. All oil and gas basins face declining production over time. With much of the new shale production that has fueled the "energy independence" talk, the decline curves are precipitous. This is especially true in the Williston Basin (ND). So what's it mean? Simply this...looking out 5-10 years the picture is much, much bleaker than we are being led to believe. New drilling technologies will offset some (but not all) of the loss. Short term, though, I agree. There will definitely be a price shock and there will likely be spot shortages for a time. Good piece. Thank you.
Thanks! Keep sharing. It's important for others to hear more from people that have knowledge in this field!
All I can do is start the conversation 😉
There are some factors missing from this description. Perhaps one should first say that splitting hairs over what "energy independence" is, and whether the USA has it, misses the broader point. Which is: does the USA export more energy than it imports? Yes, it does. And by a huge margin.
The second thing to note is that while the US imports roughly six million barrels of oil per day, it exports about the same amount of REFINED petroleum products, such as gasoline, diesel, aviation fuel and NGL. This is not a nation that's struggling to fulfill its energy needs. The US has an abundant amount of energy, as well as an 18 million bpd refining capacity. It will use that abundance as a strategic lever while the rest of the world faces shortages.
I strongly agree with No1 that Europe is screwed six ways from Sunday. They are energy dependent and grossly so. Whereas for the USA, rising oil prices means more revenue as well as greater expense, for Europe there is no upside to offset the increased cost. It's deeply negative for every European nation, with the exception of Norway which is a net exporter of petroleum.
The EU inflicted great pain on itself in 2022 by banning Russian oil. That strategic blunder already drove European energy prices through the roof. Now, with the Gulf closed? It's an economic disaster with potentially catastrophic consequences.
As an aside, I will point out that shipments of petroleum products are already being diverted from Europe to Asia. Asia is currently outbidding the EU on the spot market.
I'm sure there are a lot of items missing from it. And that's why I'm leaning on commenters like yourself to fill in blanks and/or provide context.
Thanks, and keep doing so! Much appreciated.
I'll do my best, No1. Cheers!
"No domestic shale" - there is, in the UK, but thanks to eco~ and climate change~zealots it must on no account be accessed. As for food ... well, the official government policy is that solar farms and wind farms are better. The government/mainstream insanity is beyond description.
"wind farms are better."
Prevention Mag just had a piece about how eating the blade of a windmill provides an excellent source of fiber. Just kidding.
""Just kidding.""
Good you added that... These days. It's unbelievable what you can find online. And half of it is even true! 🤣
I read it on the Internet. It has to be true!
Increasing your country's supply of renewable energy is a strategic imperative. This is true whether or not you're a net exporter of petroleum. If you're a net importer, then renewable energy is an immediate imperative.
China is the poster child for this strategy. Renewable energy now accounts for 50% of China's power production. It has 1000 GW of solar power and 500 GW of wind power. The vast majority of the NEW power China is adding is also renewable.
They're not doing it for kicks. They're doing it because not having sufficient domestically produced energy is a huge strategic vulnerability.
Shale oil is not easy to access. Just having some shale oil does not mean it can be profitably produced, even from an EROIE perspective - which means it will never make sense. idk about UK oil in particular, but the situation of extracting oil is a lot more complex than people realize.
The UK has oil fields through Scotland in the sea. That's much easier. However, there is not much investment (at least a few years ago if I recall correctly) because the gov in its infinite wisdom levied "windfall taxes". Result: reduced investment, job loss, ultimately: a LOT less taxes...
Ah, but that is good for the environment, climate change. Believe it or not, but tiny Netherlands believes that by having an aggressive renewables energy policy it can make a positive dent in the global climate change!!
It is not just in the U.S. that the politicians are completely deranged and out of touch with reality.
What are the proven reserves in the area?
Is it Shale? I didn’t know there was ocean shale oil.
Quick search:
Not shale - it's conventional crude trapped in sandstone reservoirs under the seabed. Much easier and cheaper to extract than shale.
Proven reserves are roughly 2-3 billion barrels remaining (declining), but there's still significant undeveloped potential. The issue isn't geology - it's economics. The UK windfall tax pushed the effective tax rate on profits to ~75%, which killed the investment case almost overnight.
Like our old power grid, that has not been hardened for EMP attack or a CME, we have refineries that are not up to the task of refining what we pump out of the ground. Nice!
Many people are asking "...if we are energy independent Mr. President, why are gas prices continuing to rise at the pumps??"
This essay 'esplains it!
It doesn't matter to them... as long as people aren't rioting, they will continue to rake in record corporate profits for US corporations. The US Govt represents these interests, not the people at the pump...
This is becoming my favorite substack. And I love Paul Krugman and Heather Cox Richardson. Read 'em everyday. I might have to adjust my substack budget.
Very clear discussion of the complexities of the oil market. Highlights why Venezuela and Canada are so important the US
“… try eating wine…” #Truth…. But what about beer? 😆 https://www.thecatholictelegraph.com/lent-fast-beer/63676 “Back in the 1600s, Paulaner monks moved from Southern Italy to the Cloister Neudeck ob der Au in Bavaria. “Being a strict order, they were not allowed to consume solid food during Lent,” the braumeister and beer sommelier of Paulaner Brewery Martin Zuber explained in a video on the company’s website.
They needed something other than water to sustain them, so the monks turned to a common staple of the time of their region – beer. They concocted an “unusually strong” brew, full of carbohydrates and nutrients, because “liquid bread wouldn’t break the fast,” Zuber noted.
This was an early doppelbock-style beer, which the monks eventually sold in the community and which was an original product of Paulaner brewery, founded in 1634. They gave it the name “Salvator,” named after “Sankt Vater,” which “roughly translates as ‘Holy Father beer,’” Zuber said.”
Damn, you have a soft spot for the spirits it seems! 😂
🤣 A solvent, preservation mechanism (in more ways than one), remedy, inhibition-fighter, parasitic cleanse, and currency - probably what I will have to end up producing with my labor once the U.S. receives its karmic equivalent of “sending them back to the stone ages”. My worst-case scenario investment strategy: a still. 😬
Aye, same here.
If it has sugar in it, you can make something terrible with alcohol out of it.
Ive heard they made a mean schnaps out of dead rats in their boots back in Stalingrad
😬😅 If it gets this bad, I may opt for a quicker fate.
I, too, am passing on the boot rat schnaps LOL Sign me up for the back yard doppelbock tho!
✅😃🍻
Loved it but Salvator comes from Latin “salvare” - to save. Jesus = Salvator = savior
Savior Beer… I’ll take it!! 🍺🙏😄
"Upgrading a refinery to switch between crude types costs between $100 million and $1 billion per facility. No1’s rushing to do that." But maybe we should?
At $1-2B per day spend rate on the War on Iran, I suspect that the US has already spent enough to pay for all of the refinery conversions we'd need to become truly energy independent.
See Brad's comment here: https://no01.substack.com/p/americas-energy-independence/comment/238376533#comment-238376533
It's an interesting take!
heavy oil is needed for asphalt (think infrastructure), something the light one can't do.
In the long term, there is enough natural gas on the deep ocean floors in the form of Methane Hydrate (est. 1.2 million cubic miles) to power civilisation for the next century
The Japanese have been working on it for the last 50 years with exactly zero results.
I never thought I would read about crude with such absorption. But what a delightful and insightful read!
Sorry, it was but a crude attempt at refining my thoughts - I was running on a low reserve of ideas and had to drill pretty deep to extract anything worth reading. Glad it didn't leave you feeling slick.
🤣 👍 Good ol' NO1 is at it again.
😏
I recall reading like a decade ago or more that the US shale pumpers where extremely dependent on oil high prices to pay back debt and make a margin. That would explain the war against Iran AND the arabs. The oilers still run the US the Bush way.
I feel it’s more like collateral appreciation