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‘Rapid increases in diesel prices reflect low inventories going into winter demand season’
Not Good. Not at all. I do not normally get queasy so easily, but I am beginning to feel it.
The ‘Weekly U.S. Ending Stocks of Distillate Fuel Oil’ as of October 28th increased by a whopping .004% (427,000 barrels). Obviously, no one in this Administration saw it coming.
Makes me wonder if it is just the incompetence of not realizing the unintended consequences, or else it was not unintended. It must be one or the other.
Yes. Definitely queasy.
THIS WEEK IN PETROLEUM by the EIA, Released November 2, 2022
Graphs A:https://www.eia.gov/petroleum/weekly/
Graphs B: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDISTUS1&f=W
In October 2022, the New York Harbor spot price for ultra-low sulfur diesel (ULSD) averaged $4.36 per gallon (gal), the highest monthly average price since May 2022 and the second-highest monthly average price on record (Figure 1). The diesel crack spread—the difference between the price of crude oil and an equivalent volume of diesel—marked a historic high at $2.14/gal in October, even higher than during the summer. By comparison, this high was $1.61/gal, or over four times, more than the diesel crack spread had been in October 2021. The increases in distillate prices, both in the United States and globally, have been the result of multiple factors:
* Low inventories of distillate fuel oil (which is primarily consumed as diesel), both in the United States and globally
* Increasing demand for distillate, partially related to seasonal drivers such as agricultural demand and home heating demand in the Northeast
* Less production of distillate related to seasonal refinery maintenance, as well as lower refinery utilization in Europe following labor strikes
* Higher costs of transporting distillate ahead of the EU’s February ban on petroleum product imports from Russia
U.S. inventories of distillate fuel oil have been below the five-year (2017–2021) low since the start of 2022 (Figure 2). Since April, total U.S. distillate inventories have been below the five-year low and more than 20% below the five-year average. The Northeast—the combined New England (PADD 1A) and the mid-Atlantic (PADD 1B) regions—has been more than 40% below the five-year low since the end of July. The low inventories have primarily been the result of less global refining capacity since 2020, as well as high demand in early 2022 and global trade disruptions later in the year linked to Russia’s full-scale invasion of Ukraine. Consumption through the summer in 2022 has remained below pre-pandemic levels, but has increased relative to 2020. Even when consumption has not been at above-average levels, the higher relative consumption combined with lower refinery production of distillate has contributed to the lower inventories. High crude oil prices contribute directly to higher prices for petroleum products such as distillate fuel oil, while constraints on refinery capacity further contribute to high prices by increasing the crack spread associated with the value of refining.
Prices at the New York Harbor pricing benchmark are higher relative to other U.S. benchmarks at Chicago, the Gulf Coast, or Los Angeles (Figure 3). The ULSD spot price at New York Harbor averaged 56 cents/gal higher than the Gulf Coast benchmark in October, compared with 17 cents/gal higher from January through September 2022. The reason for the increase at New York Harbor in October is a combination of normal seasonal increases in demand, abnormally low inventories, and limited distillate supplies available for import. As we discussed in our Winter Fuels Outlook, U.S. distillate demand is seasonal, in part because of its use in home heating mostly in the Northeast. The beginning of the winter demand cycle for home heating oil is likely the primary catalyst for rising prices because rising seasonal demand is drawing on already substantially strained regional inventories.
In addition to market conditions in the United States, a strike by refinery workers in France took several of that country’s refineries offline at the end of September through most of October. Reuters estimated the total refinery capacity that was taken offline by the strikes at 740,000 barrels per day in early October (b/d). Lower French refinery utilization is likely to further strain already low European distillate inventories, and the effects could ripple through the global market. In Europe, tight distillate supplies present additional complications compared with the United States because distillate is more widely used as the primary transport fuel in light-duty vehicles. Reduced natural gas imports into Europe from Russia may also be increasing demand for distillate as a potential alternative fuel for power generation, industry, or home heating oil this winter. As in the United States, distillate inventories at the Amsterdam Rotterdam Antwerp (ARA) storage hub have been well below their five-year average since the start of 2022 and were more than 1.0 million barrels below the five-year average through most of the summer
Although seasonal factors such as home heating are important in determining changes in U.S. distillate demand over the course of the year, distillate fuel oil is primarily consumed in the on-road transportation sector, which includes medium- and heavy-duty trucking. Large volumes of distillate are also consumed in the commercial, industrial, and rail sectors. As a result, distillate fuel demand is strongly tied to economic conditions and expectations. Concerns about rising interest rates and increasing inflation were also likely contributing to some relative weakness in distillate demand in September. The most recent increase in distillate prices in October follows a period of lower distillate demand (measured as product supplied) in September, which had been reducing some pressure on distillate prices (Figure 5). The low demand in September may have been partially a result of caution by rail operators who may have been reluctant to restock their diesel supplies because of the threat of a rail strike at that time. Renewed concerns about a rail strike in November may similarly contribute to some weakness in distillate demand from the rail sector.
Another uncertain factor relating to global distillate supplies in the near term is the potential for increasing refinery production of distillate fuel oil in China. China may begin exporting more distillate fuel oil in response to higher export quotas from the Chinese government, although whether exports from China actually rise to fill these quotas remains uncertain. In addition, trade press reports the first sales of distillate and other petroleum products from the newly started Al-Zour refinery in Kuwait, which could become a new source of distillate in the coming months.
The potential for reducing market pressure on inventories through new production is constrained by global capacity to transport distillate. A large volume of distillate fuel oil imports from Russia previously flowed into Europe by pipeline. But as buyers in Europe turn elsewhere to procure distillate, global demand for clean product tanker shipping has been increasing. (Clean product tankers are tanker ships that carry refined products such as gasoline, distillate, or jet fuel, as opposed to dirty product tankers that carry crude oil or residual fuel oil.) Distillate volumes needed to replace pipeline volumes will most likely need to travel by tanker, and tanker routes are also likely to become longer as European buyers increase purchases from the Middle East and United States. Even if inventories of distillate fuel oil on the U.S. Gulf Coast or Asia were to increase, limitations on available shipping capacity are likely to continue contributing to price premiums in the Northeast or European distillate markets because of higher tanker shipping rates.
Mrs. Smith
Weekly Petroleum Status Report, October 28, 2022.
https://www.eia.gov/petroleum/supply/weekly/pdf/wpsrall.pdf
HIGHLIGHTS
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.1 million barrels from the previous week. At 436.8 million barrels, U.S. crude oil inventories are about 3% below the five year average for this time of year. Total motor gasoline inventories decreased by 1.3 million barrels from last week and are about 6% below the five year average for this time of year. Finished gasoline inventories increased, but blending components inventories decreased last week. Distillate fuel inventories increased by 0.4 million barrels last week and are about 19% below the five year average for this time of year. Propane/ propylene inventories increased by 1.2 million barrels from last week and are 4% above the five year average for this time of year. Total commercial petroleum inventories decreased by 0.7 million barrels last week.
The Strategic Petroleum Reserve (SPR) is currently at 399.8 million barrels. A year ago it was 612.5 million barrels. That is a reduction of 212.7 million barrels in just one year. More depletion is scheduled from the SPR this year. (This puts all of us in a precarious position. Maybe we can squeak by if nothing significant occurs. Who knows.)
U.S. crude oil refinery inputs averaged 15.8 million barrels per day during the week ending October 28, 2022 which was 406,000 barrels per day more than the previous week’s average. Refineries operated at 90.6% of their operable capacity last week. Gasoline production increased last week, averaging 9.5 million barrels per day. Distillate fuel production increased last week, averaging 5.1 million barrels per day.
U.S. crude oil imports averaged 6.2 million barrels per day last week, increased by 25 thousand barrels per day from the previous week. Over the past four weeks, crude oil imports averaged about 6.1 million barrels per day, 0.5% more than the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 286,000 barrels per day, and distillate fuel imports averaged 121,000 barrels per day.
Total products supplied over the last four-week period averaged 20.3 million barrels a day, down by 0.5% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.6 million barrels a day, down by 8.2% from the same period last year. Distillate fuel product supplied averaged 4.1 million barrels a day over the past four weeks, up by 5.1% from the same period last year. Jet fuel product supplied was up 0.7% compared with the same four-week period last year.
The West Texas Intermediate crude oil price was $87.85 per barrel on October 28, 2022, $2.38 above last week’s price and $4.35 more than a year ago. The spot price for conventional gasoline in the New York Harbor was $3.152 per gallon, $0.203 more than last week’s price but $0.615 above a year ago. The spot price for No. 2 heating oil in the New York Harbor was $4.540 per gallon, $0.396 above last week’s price and $2.198 over a year ago.
The national average retail regular gasoline price decreased to $3.742 per gallon on October 31, 2022, $0.027 below last week’s price but $0.352 over a year ago. The national average retail diesel fuel price decreased to $5.317 per gallon, $0.024 per gallon lower than last week’s price but $1.590 higher than a year ago.
Mrs. Smith
D-D-D-D, D-D-D-D….
Oh, not Beethoven
Stands for a deeper dive into the diesel debacle.
https://www.theblaze.com/op-ed/horowitz-its-worth-a-government-shutdown-to-fight-the-climate-energy-shutdown
https://www.americanthinker.com/articles/2022/11/youd_better_be_prepared_for_the_perfect_transportation_storm.html
Mrs. Smith
What a difference a generation makes. I did not include this in my prior post because I cannot document the authenticity of what I was told. But here goes anyway for what it is worth.
Everyone knows that today oil companies are vilified by some in the political realm. But that was not true during WWII.
At that time, one of the most important commodities was fuel. Gasoline for vehicles. Cars, trucks, and tanks. Aviation fuel. The war could not be fought and won without it.
So important was it that, in spite of a wartime draft for able-bodied men, oil-field workers were exempted.
Why? Because they were deemed to be more valuable creating oil here than fighting in the Armed Forces. I was told many workers did quit their jobs and joined the services. But it was optional.
I cannot say if this is true and accurate, but if it is, it shows a remarkable change in the attitudes of then and now.
Just like I personally know men that served in Vietnam that tell of returning home to West Coast airports, and being met by people denigrating them with profanity and spitting on them.
Shameful. That will mostly not happen today. I hope.
Veterans Day is approaching.
Fly the flag with pride.
Mrs. Smith
I get the satire.
What I found to be disappointing were Joe’s comments about a Windfall Profits Tax and on Exxon. Here are my thoughts on those topics.
For over 100 years Exxon has benefited this country at a level the Ds never have and never could. Exxon created enormous wealth for the shareholders, the country, and the global community.
They are only after Exxon because of their political contributions. When the price of oil dropped at the outset of Covid and Exxon needed to borrow billions of dollars to pay dividends to the shareholders, where were Ds? In fact, where were any politicians?
In spite of all the turmoil and panic, Exxon did not cut the dividend. It paid it on time. Exxon supported those shareholders just like the shareholders had supported Exxon. Also, unlike some, Exxon kept supporting their customers, their employees, USA energy needs, and national security.
When Exxon’s earnings fell 22 billion dollars in 2020, where were the Ds? Now that the pendulum has swung back the other way, the Ds want to try to use these high earnings for political gain. No equilibrium? No fair play?
If we wish to regulate profits of oil companies perhaps we should do the same with the earnings of tech companies, Silicone Valley companies, celebrities, entertainers, and attorneys.
Let us try it out. Make it retroactive. Put a new spin on socialism. Make it from the top down. Flat tax it. No deductions. No write-offs. No endowments or trusts.
Shame on them. If there are any Windfall Profits, it is due to the inept and incompetent policies of this administration. And, just another example of the character of today’s modern Ds.
Elites? Smartest people in the room? Surely you jest. Laughing Loudly, Longly, and Bigly.
Mrs. Smith
“Maybe it’s just me … But I hesitate every time I see the WOO.”
It may very well be just YOO.
And yes, it is “real and objective”. OPEC is one of the major factors that influence global oil prices. Their members supply about 40% of the world’s crude oil, and OPEC’s oil exports represent about 60% of total petroleum traded internationally. So the World Oil Outlook (WOO) will clearly carry weight within the oil and gas industry.
My WOO WOO from the ‘Oil Outlook’ is that we are going to be using just as much, or more, oil in 2045 as we are today. So, oil companies are not likely to be going out of business any time soon.
Drill Tau 2.
WOO, WOO. I think I can. I think I can. I think I can. WOO, WOO.
Mrs. Smith
While hunkering down, I was wondering what besides gasoline, groceries, and virtually most other goods and services require diesel for delivery?
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WDISTUS1&f=W
When we run out of diesel (25 days) how will we go to work? No gasoline delivered to stations. No trucks, trains or buses running. Will we even have jobs to go to?
How will grocery stores restock?
Ships? Ambulances? Fire Trucks? Drilling Rigs? What else am I missing?
Post with you later. Running to the store to stock up on food and fill my tanks and gas cans.
Way to go Joe.
Mrs. Smith
OPEC launches 2022 edition of World Oil Outlook, October 31, 2022
KEY MESSAGE VIDEO - WORLD OIL OUTLOOK: https://players.brightcove.net/pages/v1/index.html?accountId=34306109001&playerId=HkZYMNjxl&videoId=6314505575112&autoplay=true
INTERACTIVE - 2022 WORLD OIL OUTLOOK 2045: https://woo.opec.org
The 2022 OPEC World Oil Outlook (WOO) was today launched at the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) 2022 in the United Arab Emirates (UAE). First published in 2007, the WOO offers a detailed review and assessment of the medium- and long-term prospects for the global oil and energy industries to 2045.
Highlights from this year’s WOO include:
1. The world economy is expected to more than double in size, and the global population rise by 1.6 billion between now and 2045.
2. Global primary energy demand is forecast to continue growing in the medium - and long-term, increasing by a significant 23% in the period to 2045.
3. The world needs to annually add on average 2.7 million barrels of oil equivalent a day to 2045.
4. All forms of energy will be needed to address future energy needs.
5. Energy poverty remains an issue throughout the forecast period, with a wide gap remaining between developed and developing countries.
6. Oil is expected to retain the largest share in the energy mix throughout the outlook period, accounting for almost a 29% share in 2045.
7. Other Renewables – combining mainly solar, wind and geothermal energy – expand by 7.1% p.a. on average, significantly faster than any other source of energy.
8. All major fuel types witness growth, with the exception of coal.
9. Globally, oil demand is projected to increase from almost 97 million barrels a day (mb/d) in 2021 to around 110 mb/d in 2045.
10. Non-OECD countries drive oil demand growth, expanding by close to 24 mb/d over the forecast period, whereas the OECD declines by over 10 mb/d between 2021 and 2045.
11. India is set to be the largest contributor to incremental demand, adding around 6.3 mb/d to 2045.
12. Oil demand in aviation leads the sectoral breakdown with growth of 4.1 mb/d from 2021 to 2045, given its slower initial recovery from the COVID-19 pandemic. It is followed closely by road transportation and petrochemicals.
13. Non-OPEC liquids supply expands in the medium-term to 71.4 mb/d by 2027, before an expected decline to 67.5 mb/d by 2045.
14. OPEC liquids are set to grow to 42.4 mb/d by 2045, with its share of global supply rising from 33% in 2021 to 39% in 2045.
15. Global refining capacity additions are projected at 15.5 mb/d between 2022 and 2045.
16. Robust medium and long-term refinery capacity expansion in the Asia-Pacific, Middle East and Africa, is partly offset by closures in developed regions.
17. Strong demand growth is expected to lead to a tightening medium-term downstream market relative to 2021.
18. The global oil sector will need cumulative investment of $12.1 trillion in the upstream, midstream and downstream through to 2045, equating to over $500 billion each year.
19. Recent annual investment levels have been significantly below this, due to industry downturns, the pandemic, and the increasing focus on environmental, social, and governance (ESG) issues.
20. Crude and condensate flows between the Middle East and Asia-Pacific remain the most important oil trade link, with volumes increasing from below 13.5 mb/d in 2021 to 19.5 mb/d in 2045.
21. The Asia-Pacific region is forecast to remain the most important crude oil importing region throughout the forecast period, with imports rising by over 7.5 mb/d.
22. Technological advancements are set to shape the global energy landscape while public policies relating to energy demand and supply are expected to become more stringent over the forecast period.
23. Enhanced global cooperation could allow for a more coherent, balanced and integrated approach for realizing the Paris Agreement and the interlinked Sustainable Development Goals.
The WOO 2022 is available for download on the OPEC website and via two digital interfaces, the OPEC WOO App and a comprehensive interactive version, which can be accessed at woo.opec.org.
Mrs. Smith
Some thoughts to pass the weekend.
I pulled the crystal ball out and polished it up for a look at a possible future path for Gulfslope.
The battle to increase exploration for more oil and gas will be front and center. I have no idea how the battle lines will be drawn or what the battles will entail. But even so, I am not so worried about the outcome, although patience and perseverance is required.
One of the greatest powers of Congress is to deny funding to groups or activities that rely on government money (like climate research grants, EV purchases, or student loans). Let the special interests fund their own projects and jobs. Do not stick the taxpayers with paying to service this astronomical level of debt.
These are budget cutting opportunities we can use to help pay off debt without raising taxes.
If you cannot outright fire whichever ones are against the will of the people, just defund them, shut them down, and shut them up. It works. This is one of the reasons we have elections.
The idea that we will end fossil fuels anytime in the near future is just some politician’s dream agenda being used to further the quest for power and control over the population.
The truth is that those ‘green dreams’ will not work out with today’s available technology and infrastructure.
Automakers and States wishing to go to 100% EV production and sales better have a contingency plan in place if they care about shareholders, the voters, and jobs (especially, theirs).
In spite of the best efforts of ‘green faced’ politicians, I speculate that, at best, renewables will secure around 35% of the energy mix by 2035. EVs will be less than that in total vehicles in use.
100% renewable energy is about a generation premature and the people are aware of it.
We should stop the subsidizing of green projects and EVs. Require them to be competitive in the marketplace, if they can be. Let the investors shoulder the risk of success, not the taxpayers.
Another budget cutting opportunity.
Therefore, while they continue to develop and mature, renewables will exist mostly to supplement oil and gas, not the other way around.
Fossil fuels and nuclear will continue to be the primary energy sources far into the future.
So, instead of being denigrated as in the past, the future perception of exploration and drilling will be that it is vital to the well-being of our society, provides hundreds of thousands of jobs and billions in tax revenue. It will be desired, supported, and celebrated.
Fast-forwarding, the Tau 2 will be drilled, along with other Gulfslope projects, and all ends well.
Patience and perseverance prevails.
Mrs. Smith
Another perspective on fake science and climate.
https://www.aier.org/article/fake-science-fuels-climate-extremism/
Mrs. Smith
Buddy, can you spare me some (climate) change?
You hear it all the time. The ‘science’ is settled and 97% of the scientists surveyed agree that we are doomed if we do not curtail use of fossil fuels in the next 12 hours, or whatever time interval they hope will stick.
But, do not worry. As with all previous ‘the world is ending’ predictions, once those predictions fail to materialize, we will be presented with a new and more accurate forecast to fret over.
One which is also endorsed by a different set of 97% of the scientists that were randomly (I am certain) surveyed.
It is almost always better to be informed than platformed. So, in case you are interested in actual facts, from one that is engaged in the climate topic for earning of a living and needs to be accurate, I present this link.
Please excuse my predilection for alliteration, as well as the instrumental lack of inane innuendo insanely intended for influencing, involving, inciting, and attracting interest to any subjects of limited appeal. And, of course, picking up a peck of Pepper Piper’s pickled peters, or something similar like that.
https://townhall.com/columnists/pauldriessen/2022/10/25/lets-talk-about-real-climate-cataclysms-n2614974
Mrs. Smith
Words straight from the horses mouth. John Kerry, U.S. Special Presidential Envoy For Climate, speaks candidly.
An Excerpt: “…..There are currently proposals for up to twenty new liquid-natural-gas terminals in the Gulf of Mexico, but “we don’t need big new pumping plans,” Kerry said. “We do need to make up for Russia’s gas, that’s legit, but it can’t be huge new infrastructure.”
https://www.newyorker.com/news/daily-comment/john-kerry-is-looking-for-money-to-help-save-the-climate
Now, if we can only get him to stop using his private jet.
https://www.foxnews.com/politics/john-kerrys-family-private-jet-emitted-300-metric-tons-carbon-biden-took-office
Mrs. Smith
Are the operative words ‘tiny’, ‘scissors’, and ‘weedwhacker’? Sounds like extreme caution should be the thought for the day.
100% Reliable Green Energy? All the data I have seen indicates that there is not available land surface in the USA to allow enough windmills and solar farms to generate the amount of electricity we use now, which is 22% renewables and 78% gas, coal, and nuclear. This is not even considering how much more we will need when we go to 100% EVs, which at this time only make up 2% of global transportation. So ‘reliable renewable energy’ sounds like a fool’s errand to me. But then I am not a politician, so who knows?
Has anyone heard about the continuing possibility of a so-called ‘climate emergency’ being pushed by D senators? Seems that there are reports the administration is still having discussions about declaring a ‘climate emergency’ and ordering the shut-down of domestic oil and gas exports if they lose the midterms. And the EPA recently revoked a project permit for a new Phillips 66 oil export terminal near Corpus Christi, Texas (Bluewater Terminal). Bluewater is revising and re-submitting the permit.
This may be a petty and vindictive administration, but surely they cannot be serious about preventing exports of petroleum products. Is this an example of the economic and commodity warfare spec mentioned? Does not the Constitution protect us from this political overreach?
Think of the ramifications of that for a moment. I suppose the next thing might be to suspend future elections. Might as well if they intend to disregard the will of the people when it does not match up with their political goals. Is that a coup or not?
Yes. Hunkering down might be good advice. Just get comfortable and wait it out.
Then visualize yourself asking “Hey, where did all these Chinese soldiers come from?” Perhaps they are here to drill the Tau 2?
How much will China pay for the USA? Will it be a lump sum or installments? Who gets the money? Asking for a friend. Lol.
Mrs. Smith
But can it go neck and neck with the gas-powered big boys?
My advice is to make sure your needs and application fall within the limits of the performance offered.
Here are some interesting articles:
https://issuesinsights.com/2022/10/21/bidens-lies-about-energy-can-no-longer-be-ignored/
https://www.americanthinker.com/blog/2022/10/its_not_gasoline_that_should_worry_us_its_diesel.html
https://townhall.com/columnists/spencerbrown/2022/10/20/so-what-is-esg-anyway-n2614725
https://hotair.com/jazz-shaw/2022/10/18/confirmed-new-england-facing-natural-gas-shortages-rolling-blackouts-this-winter-n504063
Mrs. Smith
I will support legislation that will mandate that all politicians, wealthy persons with net annual incomes greater than $1,000,000, and members of all environmental organizations MUST drive and own, including the spouses and children, ONLY EVs or net zero vehicles, planes, boats, even snowmobiles.
This is to allow them to demonstrate the viability of this ‘transition’ away from the fossil fuel economy.
Why put this on the backs of the working man and the poor, when the wealthy are better able to lead or can fund groups to eliminate the green economy?
Time to lower the environmental footprint of the wealthy with their SUVs, private jets, yachts, etc. And for the likes of Al Gore, John Kerry, and others to walk the talk.
Mrs. Smith
Just wondering what are the emissions from making sugar? I am in favor of putting sugar into the fuel of all vehicles in Washington, DC if it will lower political pollution. If we have enough left over, perhaps we can use it in other areas as well. As you indicated, EVs will not be affected.
Mrs. Smith
Rupert Darwall: The Insanity Of Western Energy Policy - Video
https://www.youmaker.com/embed/03cde624-a9ab-4d38-b24c-b84fd424a824?r=16x9&d=1493
Mrs. Smith
A new Congress can mostly nullify the current administration. But Joe can still bombard us with executive orders, and he always has the veto for legislation he does not like.
I see it as more likely a stalemate situation rather than a checkmate one.
Change is coming whether he likes it or not. And I believe one of those changes will be an increase in domestic oil and gas exploration.
Here are some interesting articles:
https://dailycaller.com/2022/10/14/tougaw-renewables-dont-meet-americas-energy-needs-so-why-the-taxpayer-subsidies/
https://meaninginhistory.substack.com/p/briefly-noted-dimon-unbound?utm_source=post-email-title&publication_id=473679&post_id=78292015&isFreemail=true&utm_medium=email
https://www.americanthinker.com/articles/2022/10/the_national_debt_elephant_in_the_room.html
https://nypost.com/2022/10/13/elites-realize-they-need-blue-collar-workers-they-derided/
Mrs. Smith
U.S. EIA ‘Winter Fuels Outlook’, Released October 2022:
https://www.eia.gov/outlooks/steo/special/winter/2022_Winter_Fuels.pdf
“In our Winter Fuels Outlook, we forecast that average household expenditures for home heating fuels will increase this winter because of both higher expected fuel costs and higher energy consumption due to colder temperatures. Compared with last winter, in nominal terms, we forecast expenditures for homes that heat with natural gas will rise by 28%, heating oil by 27%, electricity by 10%, and propane 5% from October–March.”
EIA ‘Short-Term Energy Outlook’, Released October 12, 2022:
https://www.eia.gov/outlooks/steo/pdf/steo_full.pdf
Mrs. Smith
OPEC - ‘Winter Oil Market Outlook’, 10/12/22 Release, Featured Article
FULL REPORT WITH GRAPHS: https://momr.opec.org/pdf-download/res/pdf_delivery_momr.php?secToken2=accept
OECD - Composite Leading Indicators (CLI), October 2022: https://www.oecd.org/sdd/leading-indicators/composite-leading-indicators-cli-oecd-10-2022.pdf
OPEC FEATURED ARTICLE:
In August 2022, global refinery intake level has reached 81 mb/d, the highest monthly level registered since the emergence of the COVID-19 pandemic (Graph 1). The strong product consumption during the summer season, amid positive fuel requirements from the industrial and manufacturing sectors, led to an increase of 2.5mb/d, y-o-y. However, in September, refinery intake fell by nearly 1.2 mb/d m-o-m with the start of peak autumn refinery maintenance in the US and Europe.
Meanwhile, global oil demand is now expected to grow by about 2.6 mb/d in 2022. However, risks are skewed to the downside, with slowing growth in the global economy, if continued, likely leading to lower oil demand in the months to come. While the first half of the year saw good levels of mobility, industrial activity and petrochemical feedstock requirements, the momentum has seen a slowdown due to reduced economic activity in recent months. A decrease in product output since last year due to refinery closures, pipeline and weather issues and other constraints, weighed heavily on total OECD product inventories, raising refinery margins to record-high levels.
On the US Gulf Coast, refinery margins soared to a record high of $49.92/b in June. Nevertheless, seasonal demand for gasoline throughout the driving season in the US was lower than expected, showing y-o-y declines from June to September 2022. In China, the government’s zero-COVID policy restrictions led to a y-o-y decline in oil demand in 2Q22, followed by a brief recovery in 3Q22. The newly announced lockdowns are expected to add to the uncertainty going forward. Looking ahead, refinery runs are expected to slow going into 4Q22 as heavy maintenance work unfolds globally. However, ongoing tightness in product availability, particularly for gasoil, should remain supportive for refinery runs, along with expectations of a slight pick-up in diesel consumption for heating demand amid some additional potential for gas-to-oil switching. This will also depend on the severity of the winter in the Northern Hemisphere. Nevertheless, current signs of economic slowdown may further soften oil market fundamentals beyond the seasonal refinery turnaround period.
Looking to the coming winter season, a seasonal pick-up in heating oil demand due to rising requirements in the Northern Hemisphere is projected. In 4Q22, OECD Europe and Americas, as well as OECD Asia Pacific, are expected to see an increase in demand for fuel oil and distillates required for heating. In addition, rising natural gas prices will potentially lead to some degree of gas-to-oil switching in power generation in
both Europe and Asia, supporting demand for residual fuels, heating oil and other fuels, which are forecast to grow by 0.5 mb/d y-o-y in 4Q22. In OECD Europe and the US, heating oil will be the main driver, followed by residual fuels, while in OECD Asia Pacific, residual fuels and other fuels are expected to drive heating fuel demand. In 1Q23, global demand for heating fuel is expected to grow by 0.6 mb/d, y-o-y. OECD Europe is expected to account for the largest increase by 0.4 mb/d, mostly heating oil. Heating fuel demand in OECD Asia Pacific is also expected to grow by 0.1 mb/d, y-o-y, while the US is forecast to show only marginal y-o-y growth.
Looking ahead, and despite the usual seasonal hike in oil demand for heating, the challenges presented by the heightened levels of uncertainty, the slowing economic growth and a possible resurgence of COVID restrictions in China and elsewhere are expected to impact oil demand in 2022 and 2023. With this in mind, the participating countries of the Declaration of Cooperation (DoC), in their 5th October 2022 meeting have pre-emptively and proactively decided to adjust their overall production, starting November 2022, downward by 2 mb/d (from the August 2022 required production levels), in an ongoing and relentless effort to provide a sustainable stability to the market.
Mrs. Smith
Hypocrisy exists in many areas. But one of the most egregious is in the lengths some use to perpetuate the renewable energy fable at the expense of fossil fuels. It is often just a shell game, and if you take your eye off the pea, you will find that a switch has been pulled.
Besides using fossil fuel energy to enhance quality of life in an environmentally supportive manner, my other two environmental sensitivities are protecting the forests and the oceans. So imagine my distress on this discovery.
The attached link outlines the details behind the ‘slight of hand’ (a euphanisum for deception) being used in the UK. These forests are practically irreplaceable and how these can be sacrificed for a green agenda (???) is tragic. The thing most ‘green’ here are the bills being stuffed into the pockets.
To me it looks more like the dishonest trying to take advantage of the public trust for personal enrichment.
What does it look like to you?
Is anything like this happening in your ‘neck of the woods’?
Link below:
https://finance.yahoo.com/news/drax-uk-power-station-owner-235313776.html
Mrs. Smith
But what if, as a nation, we accepted that we will need to learn to live on a couple of million barrels of oil per day less?
What if we do not pass up on the offer of higher gasoline and electricity prices? Actually higher prices for everything. Higher taxes too. Only thing going lower is the standard of living for all Americans that are not wealthy.
Do not forget to add in 3 more generous helpings of inflation, 2 heaping cups of open borders, and a big dose of crime. Mix well.
You now have a recipe for USA 2024. Refrigerate after opening because it is going to STINK.
One thing we can do, when it comes to domestic energy for the future, is to think ‘purple’, looking beyond just red and blue, allowing all available energy options to be utilized.
And part of that resolution is to drill Tau 2.
So, “Yes!”, I am positively there too.
Mrs. Smith
Confusing is the word I use to describe the country’s domestic energy policy as it stands today.
And it is evident that the current administration has no intent to change course, therefore we will crash on the rocks at full speed ahead.
This heading will result in the U.S. being grounded on the reef with the bottom ripped out, while all of us try to find a lifeboat before the ship gets broken up by the waves, and sinks to the bottom.
There are not many reasons to pursue a policy with the outcome conferred by this one. But one is coming in to focus. Can you see it now?
And the hipocrisy simply overwhelms any pretense of a serious solution. Venezuelan oil? Really?
Are we willing to punish lower and middle income Americans just to harass the oil companies? I would like to know.
Although we must read between the lines to find the true intent of this energy policy, the truth is evident to anyone willing to look. It is not even that hard to see. I admit, it is a little harder to believe.
More action is needed. But will we have to wait until the majority of the population abandons belief in the rhetoric of renewable energy before we can reverse the war on fossil fuels?
If these energy policies continue, we will be half the country we are now. Half the strength. Half the wealth.
Do we have the resilience and wherewithal to persevere and prevail? I suppose we must. We have no other choice. I speak neither Chinese nor Russian, lol.
The real question is will we have the time? Time may possibly be the commodity we run out of first.
But, right now, I must go howl at the moon. Want to join me?
One if by land, two if by sea. If by air, use all three.
Mrs. Smith
Interior Department Moves Forward with Leasing Provisions Mandated in Inflation Reduction Act, DOI 10/6/2022 News Release.
https://www.doi.gov/pressreleases/interior-department-moves-forward-leasing-provisions-mandated-inflation-reduction-act
WASHINGTON — The Department of the Interior today announced next steps that the Bureau of Ocean Energy Management (BOEM) and Bureau of Land Management (BLM) will take to comply with congressional direction on oil and gas leasing through the Inflation Reduction Act (IRA).
The IRA is a historic and transformational investment toward achieving President Biden’s ambitious goals to tackle the climate crisis while lowering costs for working families and creating good-paying jobs. It will enable the Interior Department to continue playing a leading role in the transition to a clean energy economy.
As the Department implements the IRA, it will continue to conduct robust environmental reviews and strong engagement with local, state and Tribal governments, stakeholders, community leaders and the American public.
Offshore Leasing Provisions
BOEM has prepared a Draft Supplemental Environmental Impact Statement (EIS) for two Gulf of Mexico oil and gas lease sales – Lease Sales 259 and 261. Congress directed that Lease Sale 259 be held by March 31, 2023, and Lease Sale 261 by September 30, 2023.
Onshore Leasing Provisions
The Department is committed to taking action that reflects a balanced approach to responsible energy development and management of our nation’s public lands. The IRA provided important modernization of the BLM’s oil and gas leasing program, including increasing the minimum royalty rate, minimum bid, and rental rates; assessing a fee for the filing of Expressions of Interest (EOIs); and eliminating non-competitive leasing.
Today, the BLM announced it will begin scoping for the next onshore oil and gas lease sales in New Mexico and Wyoming, under a strategy that includes onshore lease sales consistent with the terms of the law.
The BLM’s New Mexico office has posted for public comment a review of 45 parcels totaling 10,123 acres and the BLM’s Wyoming office is making available for public comment a review of 209 parcels totaling 251,087 acres. Scoping notices from other states to evaluate additional potential sale parcels will be posted in the coming weeks.
Those sales will implement the new fiscal terms as outlined in the IRA.
API Urges Department of the Interior to Support American Energy Security, Economic Strength with 5-Year (2023-2028) Offshore Program.
API’s submitted comments are available here: https://www.api.org/~/media/Files/News/2022/10/06/API-Comments-on-Proposed-Five-Year-Program
WASHINGTON, October 6, 2022 – The American Petroleum Institute (API) today submitted comments urging the Department of the Interior to open offshore acreage to safe and environmentally responsible American energy development. In the comments in response to the 2023-2028 National Outer Continental Shelf Oil and Gas Leasing Proposed Program and Draft Programmatic Environmental Impact Statement, API highlighted the importance of offshore leasing to U.S. economic strength and energy security and called on the Department of the Interior to uphold their statutory responsibility to take current and future energy needs into account by promptly issuing a final program that includes 11 lease sales.
Oil production from federal waters provides approximately 628 million barrels – or more than 15 percent – of total U.S. oil production. On June 30, 2022, as the current 5-year program expired, Interior put the U.S. in the unprecedented position of having a substantial gap between programs for the first time since this process began in the early 1980s. Without a 5-year program in place, no new offshore lease sales can be held outside of the three sales mandated by the Inflation Reduction Act, limiting domestic producers’ ability to meet future energy demand. According to an API poll from earlier this year, 9 in 10 Americans support the U.S. developing its own domestic sources of energy rather than relying on other regions of the world and 84 percent agree that producing natural gas and oil here in the U.S. helps make our country and allies more secure against actions by other countries such as Russia.
“The U.S. is now a global leader in both energy production and emissions reductions, thanks to the innovation and vitality of the U.S. oil and natural gas industry,” said Cole Ramsey, API vice president of upstream policy. “The ability of U.S. producers to provide more oil and natural gas supplies to the world market has also changed geopolitical dynamics for the better, resulting in greater energy security for the U.S. and its allies, in addition to global environmental benefits. Given the current global circumstances, rarely has a strong offshore leasing program been more essential to our energy security.”
In the comments, API expressed concern over the Proposed Program’s option to issue a final program with zero lease sales, which would jeopardize domestic production and weaken American energy security. According to a recent study conducted by API and the National Ocean Industries Association, a two-year lapse in federal offshore leasing could mean nearly 500,000 barrels per day less of production, cost nearly 60,000 American jobs and sacrifice billions in lost state and local revenues by 2040.
“The decisions made regarding future leasing will have short- and long-term implications for our nation’s energy and national security, prospects for job creation, and government revenue generation,” said Ramsey. “It is beyond time for a comprehensive energy policy that includes a robust offshore leasing program that ensures essential energy resources are made available; encourages investment opportunities and accelerates infrastructure development; and strengthens energy security, affordability, and reliability.”
API represents all segments of America’s natural gas and oil industry, which supports more than 11 million U.S. jobs and is backed by a growing grassroots movement of millions of Americans. Our approximately 600 members produce, process and distribute the majority of the nation’s energy, and participate in API Energy Excellence®, which is accelerating environmental and safety progress by fostering new technologies and transparent reporting. API was formed in 1919 as a standards-setting organization and has developed more than 800 standards to enhance operational and environmental safety, efficiency and sustainability.
CNN correspondent Kaitlan Collins tweeted “Top White House officials say President Biden is “disappointed by the shortsighted decision” from OPEC+ to cut oil production by 2 million barrels/day & that his admin will “consult Congress on additional tools and authorities to reduce OPEC's control over energy prices.”
Well here is an idea, slash regulations against the oil and gas industry and support more drilling, ASAP.
Note: I believe the U.S. is scheduled to release 1 million barrels/day through the end of November from the SPR.
The 45th Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 33rd OPEC and Non-OPEC Ministerial Meeting took place in person at the OPEC Secretariat in Vienna, Austria, on Wednesday, 5 October 2022.
In light of the uncertainty that surrounds the global economic and oil market outlooks, and the need to enhance the long-term guidance for the oil market, and in line with the successful approach of being proactive, and preemptive, which has been consistently adopted by OPEC and Non-OPEC Participating Countries in the Declaration of Cooperation, the Participating Countries decided to:
1. Reaffirm the decision of the 10th OPEC and non-OPEC Ministerial Meeting on 12 April 2020 and further endorsed in subsequent meetings including the 19th OPEC and non-OPEC Ministerial Meeting on 18 July 2021.
2. Extend the duration of Declaration of Cooperation until the 31st of December 2023.
3. Adjust downward the overall production by 2 mb/d, from the August 2022 required production levels, starting November 2022 for OPEC and Non-OPEC Participating Countries as per the attached table. https://www.opec.org/opec_web/static_files_project/media/downloads/Production%20table%20-%2033rd%20ONOMM.pdf
4. Reconfirm the baseline adjustment approved at the 19th OPEC and non-OPEC Ministerial Meeting.
5. Adjust the frequency of the monthly meetings to become every two months for the Joint Ministerial Monitoring Committee (JMMC).
6. Hold the OPEC and non-OPEC Ministerial Meeting (ONOMM) every 6 months in accordance with the ordinary OPEC scheduled conference.
7. Grant the JMMC the authority to hold additional meetings, or to request an OPEC and non-OPEC Ministerial Meeting at any time to address market developments if necessary.
8. Extend the compensation period to the 31st of March 2023. Compensation plans should be submitted in accordance with the statement of the 15th OPEC and Non-OPEC Ministerial Meeting.
9. Reiterate the critical importance of adhering to full conformity.
10. Hold the 34th OPEC and Non-OPEC Ministerial Meeting on 4 December 2022.
Well, maybe. Drilling exploration wells is risky enough as it is, and I fail to see how the sentiment in the market applies across the board to different companies and stocks.
GSPE is not XOM, and things that might wreck GSPE will not even cause XOM to wiggle. Some parallels perhaps, but could be apples and oranges just as easy.
So, to base investment decisions on the perceptions of others, those you do not know, and put all the money on their collective calculations, without knowing what it is they really do know, well it all sounds like a good way to lose your ‘ask’.
In conclusion, the best way to know the outcome is to drill the well. Just like the old driller’s saying, “keep it turning to the right”.
And Mr. Sietz is still doing that. There is nothing else left to say at this point.
Mrs. Smith
We are all aware that withdrawals from the SPR have been used to moderate the price increases for U.S. gasoline.
The SPR is primarily intended to supply our military during a time of hostilities when our energy producing facilities and infrastructure may be under attack.
Considering the global tensions and the apparent willingness of some to practice energy denial and threaten WW III, I hope this does not come back to take a big bite out of us at a time when fossil fuels still supply 80% of global energy.
If this occurs and we have exhausted our SPR reserves for these questionable political motives, we know who to put the blame on. Not that it will really matter. We will have other, really big problems to contend with.
An article regarding today’s OPEC meeting to discuss production cuts. Link below:
https://www.ft.com/content/64d35a40-5144-44f6-afca-c8b88c9d0ad5
‘UAE set to support Saudi Arabia and Russia on oil output cuts’, Released 10/5/2022
Influential Gulf state’s backing ahead of Opec+ meeting could hinder US efforts to stop deal.
UAE is likely to support substantial oil production cuts proposed by Saudi Arabia and Russia at Wednesday’s Opec+ meeting in a blow to US efforts to try to stop the deal.
Two people familiar with the discussions ahead of the meeting said the UAE was onboard despite a last-minute effort by the US and other western powers to talk the nation out of the deal. The Gulf state is among the most influential members of Opec+ outside of Saudi Arabia and Russia.
“While they respect their [the US] opinion the organisation needs to do what is in their best interests,” one Gulf Opec source said on Wednesday ahead of the meeting, where the group is expected to announce plans to reduce output by 1mn-2mn barrels a day or more.
The source added that the UAE had been contacted by the US and other western powers that oppose efforts to try and boost oil prices. The White House has indicated that it believes the cuts are unnecessary and come at a dangerous time for the world economy as it grapples with an energy crisis triggered by Russia’s full-scale invasion of Ukraine.
Suhail al-Mazrouei, the UAE energy minister, said on Wednesday that the risk of a recession, which could lower oil prices, was one factor that would drive Opec+’s decision.
“[Opec+] remains a technical organisation and it is very important the decision remains technical and not political,” said Mazrouei.
“Based on that we will take the right decision we see fit. A recession is a challenge?.?.?.?one of the fundamental factors we are all looking at.”
Any cut in production is likely to trigger a response from the White House if it results in a rise in prices ahead of crucial midterm elections in November.
Bob McNally, a former energy adviser to the George W Bush administration, said there would be real anger in the Biden administration if Saudi Arabia leads the group in a substantial cut that boosts prices.
“The number one thing that has steadied the Democrats’ ship ahead of the midterm elections is the decline in gasoline prices at the pump. Back when oil was at $120 this spring, it was like they were waiting for an execution, but the fall in the price gave them a reprieve.”
“Now they face the prospect of an ally pushing the price back up again, they’re unlikely to stand idly by if oil prices rise sharply in the coming weeks and months.”
Helima Croft, a former CIA analyst and head of commodities research at RBC Capital Markets, said on Tuesday evening that the White House would be working hard to lean on its allies in the Gulf.
“We believe the Washington response to tomorrow’s decision will absolutely require close watching and administration officials are reportedly working around the clock to stave off a big cut, appealing to countries that it maintains strong defence and strategic ties [with],” said Croft.
Potential responses if oil prices rise substantially include releasing additional barrels from the US Strategic Petroleum Reserve — though the White House has indicated this is not imminent — or looking to curb refined product exports from the US to try and keep domestic prices down.
Brent crude, the international benchmark, was trading around $91.50 a barrel on Wednesday, having risen more than 7 per cent this week after the Opec+ plans for a large cut became clear.
The Opec+ meeting was switched at the last minute from online to in-person at the group’s headquarters in Vienna for the first time since March 2020.
Mrs. Smith
I was never a big proponent of chart investing.
I view charts as a tool best used for documenting what has already happened and a less reliable indicator of what will happen next.
Because what happens next will depend on the causation of what influences the stock movement, and this movement is often not dependent on, or even influenced by, the stock trend charts.
I prefer investment decisions based on changes to the fundamentals. Following the industry fundamentals, and comparing to the company fundamentals, should lead to knowledge of how the company, and it’s stock, will fare in the market for the future. At least until fundamentals change again.
And that is the big difference between fundamentals and charts. With a chart, how long is the last data point going to indicate the trend? Is it only until the next data point is recorded?
Tracking fundamentals might give you hours, or even days, notice of the change to the trend. Plenty of time to plan and execute a strategy before the new trend develops. You get ahead of the curve and do not need to just react after it happens.
Time will tell the tale of GSPE. There are still many challenges to be addressed, but there have been some rather significant positive changes in the fundamentals in these past few weeks. Hopefully you did not miss them. In case you did, the charts should pick them up in a little while.
As for executive paychecks, someone needs to captain the ship, or it would have sunk in 400’ of water in the Gulf of Mexico. Are you aware that Mr. Seitz and some others do not receive paychecks?
The executives have already passed up a couple of opportunities to cash out and get some of their money back. They have not.
Perhaps that does not mean anything. Maybe it means a lot. Remember, time will tell the tale.
Mrs. Smith
You are correct spec. Bumping up against that ‘100 percent of the time’ average. Your ability to see all the moving parts and understand how they come into play makes reading your posts a delight. I especially enjoy when you share real life industry examples that are applicable to Gulfslope Energy, the current domestic environment, and the markets, so please keep doing that.
I do find RealClearEnergy consistently has informative articles about the state of the energy markets and how they got to be that way.
Here is an article that continues in that tradition. It is a comprehensive study on why things are, how they got to be, who did it, and why they did it.
It is long, so it is not post material. Not light reading, but if you have an interest, or an investment, in energy, it could be useful in sorting out the smoke and spin. See link:
https://assets.realclear.com/files/2022/10/2058_energyinflationwasbydesign.pdf
Warning: May Cause Drowsiness. Do Not Operate Heavy Equipment While Reading This Link.
A few excerpts from the article:
This “energy crisis was not sparked by Saudi Arabia and its Gulf allies or by Iranian ayatollahs. It was self-inflicted, a foreseeable outcome of policy choices made by the West: Germany’s disastrous Energiewende that empowered Vladimir Putin to launch an energy war against Europe; Britain’s self-regarding and self-destructive policy of “powering past coal” and its decision to ban fracking; and, the ‘current administration’s’ war on the American oil and gas industry.”
“….Domestic oil refinery capacity shortages are due to refinery closures, elevated oil prices, ESG policies aimed at reducing GHG emissions, Biofuels, ect.”
“Biofuels happen to have a net replacement ratio of less than 10 percent of conventional fuels…. They merely impose needless regulatory cost and trade at a market-clearing price indexed to the global price of crude oil. In fact, U.S. Department of Energy data show that, on an “energy-equivalent basis,” an 85 percent blend of ethanol with 15 percent gasoline has always sold at an on-highway premium to straight gasoline. Biofuels provide no protection against the volatility of crude oil prices.”
“….Even more humiliating for biofuel threshold inflation is the fact that ethanol from corn, which accounts for more than 87 percent of all biofuel production by volume, produces no GHG emissions improvement over gasoline and may actually cause as much as a 24 percent increase. That finding comes from a 2022 study published by the National Academy of Sciences. Researcher Holly Gibbs and her team found that biofuels had caused a 30 percent increase in corn prices between 2008 and 2016, which induced farmers to plow up vast expanses of grassland and increased the use of fertilizers by 3 - 8 percent. Products made from corn are found on 75 percent of the aisles in a typical grocery store. Thus, higher corn prices boost food prices throughout the entire store.”
“EVs…. the economic effect of this plan will be to degrade GDP growth as massive expenditures that could otherwise be used to finance improvements in societal well-being will be siphoned off to create a vehicle refueling infrastructure that is less efficient, more resource-intensive, less utilized, and more time-consuming for motorists than the one that already exists. The massive flood of expenditure will be used to create a network that adds nothing to net societal welfare and will likely subtract from it.”
“EV purchases are unlikely to generate any net economic growth because they merely substitute for conventional models. Anecdotal evidence thus far suggests that these EV purchases may actually degrade economic performance with their higher price tags, which will shrink demand for new autos and therefore auto production. Also, their higher percentage of foreign content will worsen GDP growth along with the balance of trade and current account deficits. China controls 70 percent of global EV battery production while the U.S. controls less than 10 percent. All the nickel, cobalt, and lithium used to produce EV batteries is sourced from outside the U.S.”
“….paring back the supply of CO2-emitting fossil fuel output today, decades before the multi-exajoule-producing low-carbon infrastructure is in place, which will presumably act as a substitute. They have driven us into “the energy transition’s looming valley of death” without a compass, a map, or any idea of how to escape.”
Mrs. Smith
The 45th Meeting of the Joint Ministerial Monitoring Committee (JMMC) and the 33rd OPEC and non-OPEC Ministerial Meeting will take place in person at the OPEC Secretariat in Vienna, Austria, on Wednesday, October 5, 2022.
https://www.opec.org/opec_web/en/press_room/7018.htm
I would like to see WTI maintain a range of $80 to $90 a barrel. Ah, the good old days when the USA was energy independent. Could the drilling environment in the GOM become a hotbed for oil and gas exploration once more? The ‘new’ energy renaissance? I am hopeful that we will begin to have some relief starting in a couple of months.
Awaiting further developments.
Mrs. Smith
Interesting report made public.
The overall theme in the 3rd Quarter Dallas Fed Energy Survey, which was released today, is that demand for petroleum products will outstrip supply and financial investors will return to the oil and gas sector.
This is consistent with Gulfslope’s opinion in their 10-Q for the quarterly period ended June 30th.
I value the opinions of the professionals in the oil and financial sectors, because their livelihoods depend on their ability to understand and correctly forecast trends that affect them.
”Special Questions” from the survey: (Data collected Sept. 14–22; 153 oil and gas firms responded to the special questions survey.)
1. Do you expect a significant tightening of the oil market by the end of 2024, given the current underinvestment in exploration? (85 percent) of executives said they expect a significant tightening of the oil market by the end of 2024.
2. Do you expect the age of inexpensive U.S. natural gas to come to an end as liquefied natural gas exports to Europe expand? Most executives (69 percent) expect the age of inexpensive U.S. natural gas to end by year-end 2025. An additional 12 percent of executives think it will happen by year-end 2030 and 3 percent expect it to occur after 2030. The remaining 16 percent don’t expect the age of inexpensive U.S. natural gas to end.
3. Do you expect financial investors to return to the oil and gas sector? The majority of the executives - (79 percent) - said they expect some financial investors to return to the oil and gas sector. 11 percent expect many will return, while 10 percent expect investors will not return.
4. In your opinion, will proposed carbon capture, utilization and storage projects be profitable with the increase in the 45Q tax credit in the 2022 Inflation Reduction Act? Slightly over half—54 percent—of executives expect most proposed carbon capture, utilization and storage projects won’t be profitable despite the increase in the 45Q tax credit in the 2022 Inflation Reduction Act. Forty-two percent expect some proposed projects to be profitable and 4 percent expect most projects to be profitable.
5. What net impact will the methane tax in the 2022 Inflation Reduction Act have on your firm? Most executives expect a negative net impact on their firm from the methane tax in the 2022 Inflation Reduction Act. 48 percent of executives said they think the net impact will be slightly negative, and an additional 14 percent anticipate it will be significantly negative. 31 percent expect a neutral impact. 7 percent anticipate a positive impact.
6. What do you expect WTI crude oil price to be at the end of 2022? Survey average: $88.74, Low Forecast: $65.00, High Forecast: $122.00, Price During Survey: $85.49.
The 3rd Quarter Dallas Fed Energy Survey link can be found in Gulfslope’s Intro.
Mrs. Smith
Good call regarding the swamp theater.
We have a Congresswoman on the Congressional Oversight Committee grilling bank executives and CEOs about climate goals, Net Zero, and domestic oil and gas policy.
I found that I was not at all surprised when she displayed hostility towards continuing oil production, mispronounced ‘Celsius’, and struggled to read her content off the teleprompter. U.S. citizen. Born in Detroit. Education much?
Reinforces my belief that too often for comfort these fools are, in fact, just empty suits…. Emphasis on ‘Zero’.
I hate to seem annoyed, but I get frustrated and disappointed in our representatives when they posture and role play, while appearing to not be fully informed about the topics and issues.
An eye-opening link:
Rep. @RashidaTlaib challenges bank CEOs to agree to stop funding fossil fuels, is rejected by every single one
— Tom Elliott (@tomselliott) September 21, 2022
Jamie Dimon: "That would be the road to Hell for America" pic.twitter.com/U7yr6AbtyF
Opinion of JP Morgan CEO regarding fossil fuels. Interesting link, worth the read. The good news is that loans for domestic oil and gas exploration will continue to be available.
https://www.washingtonexaminer.com/restoring-america/faith-freedom-self-reliance/jp-morgan-ceo-snaps-back-rep-tlaib-fossil-fuels.
Mrs. Smith
Thank you for your comments.
I admit to having a bit of sensitivity regarding the length of my posts. I really am working on it.
I have had limited time to devote to the board. So rather than do multiple shorter posts, I have been combining into somewhat longer posts.
Be warned, I have a Drill Tau 2 novel in the works.
See, progress… four short paragraphs.
Mrs. Smith
Drilling the Tau 2 is inevitable.
The only unknown is the timeline. Will it be before (2024) or after?
The unofficial energy strategy is to depress oil and gas and support renewables and EVs by raising prices and creating shortages. Might work too.
In my vision of future events, the global demand for oil, natural gas, and gasoline will remain much as it is now or increase.
But due to the shortages as a result of curtailing exploration, the global demand for more drilling will increase to the point that fossil fuels will not be denied.
In this scenario, the Tau 2 shines like the pot of gold at the end of the rainbow. It is ready to drill, or will be, without much effort, expense, or delay.
In addition, potential investors will find that the increased BOEM royalty rate, a minimum 16.66% up to maximum of 18.75%, as provided in the Inflation Reduction Act’s Offshore OCS will not apply to the Tau lease which will remain at 12.5%.
Why does this matter? Basically, it means that over the life of the lease, the investors will receive a higher return in the payout. This makes for a more attractive investment and helps dampen the negative effects of fluctuating crude prices.
Further, for all the other reasons we have discussed in our past posts, drilling the Tau 2 will jump to the top of this list.
Right now is the perfect time to make the changes we will need to make if we wish to be first in line to take advantage of future demands.
I support the suggestion to read the MD&A section and I think it is a very good idea.
Apologies for the length of the posts. Regrettably, I lack your talent for conciseness as I have been unsuccessful in finding a way to condense these thoughts down to three or four paragraphs and still be comprehensive. I will understand if posters decide that these remarks take too much time to read. As an aside, they take a long time to write as well.
Mrs. Smith
We can pretend that the markets and individual stocks, like GSPE, are not affected by policy, regulations, inflation, interest rates, financial disclosures, or anything else beyond the momentum of movement.
But in fact, all of those are influencers of a great magnitude and, as we have witnessed, can even result in the fostering of perceptions about the virtues of not investing in oil and gas drilling.
Persons unaware of the stress caused by the current situation in the domestic oil and gas industry must not be disturbed by it, or could even be in favor of it, and may not wish to have those arguments face the scrutiny of analysis.
But this is a forum for ideas and the exchange of opinions. With this in mind, I welcome discussion of any topics by interested persons.
Therefore consider that the drawdown of the SPR will be discontinued after November. Then the prices for crude will start the inevitable build back higher. Likely much higher. Higher prices are not always beneficial for drilling programs if it is thought that higher prices will hurt demand.
Then following closely after, with the continued depletion of current crude oil production and reserves, the availability of crude stock will become more and more stressed. This will put even more upward pressure on prices, as supplies of gasoline and other petroleum products become more scarce. Affordability will be a big issue.
Gulfslope stated in the most recent 10-Q that it believes that these shortages will force a re-evaluation of the industry pause in exploration activity and will result in significant motivation to resume drilling.
Might these price increases for crude oil and gasoline be by design to promote an agenda to convince consumers to move more quickly towards renewable energy and EVs, while moving away from natural gas and ICEs? Perhaps.
EVs and renewables are intended to replace oil and gas and thus are direct competitors. So what consequences should we be considering before we make the switch?
It is already established that EVs are not the panacea that they are represented to be, and will most likely fail in the marketplace outside of niche areas.
Additionally, I suspect that EVs will be a financial disaster for purchasers. After paying a premium to purchase one, what will you do with a seven year old EV facing a $25k battery replacement?
And what will be the resale value of a seven year old EV if you want to sell it or trade it in? Especially considering the challenges of using one for primary transportation. How much would you pay for a used EV? Really, me neither. But if we no longer have internal combustion vehicles or access to gasoline, what will be our other choice?
It is pretty well documented that renewable energy causes significantly increased costs for electricity plus many homes will need expensive modifications to go all electric.
And if that will not dampen enthusiasm for it, then the rolling blackouts and threats to health and welfare will do it in, to say nothing of not having access to your appliances, AC, or EV chargers during times of peak usage.
Renewable energy will be a predictable nuisance and inconvenience that we get to pay top dollar for. Wind and solar will not be perceived by consumers as being a good value.
So yes, I definitely agree that there needs to be changes made. And they must go far beyond GSPE and Tau 2, although that is an excellent starting point.
What can we do about these future impacts to our standard of living? There are limited options. But if we have a chance to save our domestic energy industry, prevent our financial and stock markets from further decline, and protect our jobs and lifestyle, I am all in.
I will meet you there at the scheduled time. And we can begin making the changes we need.
Mrs. Smith
I appreciate your advice, but if things work out as I expect them to in November, I will not only start buying more GSPE stock, but I will jump in with both feet, and I will not need a dirt bid.
Mrs. Smith
As reported, natural gas supplies 37% of the power to the nation’s electrical grid, and it supplies 33% of the power to the industrial sector. It is also used as a backup for wind and solar. And 15% of the U.S. population relies on natural gas in their homes. Studies have estimated that it would cost approximately $30,000 per home to require electrification on those homeowners if forced to forgo gas usage. No problem, I have that laying in the bottom of my purse, or maybe I can get on the list for the rebates or credits. So, can we agree that it should be considered vital that the nation continue providing energy from natural gas? I think we might miss it if it goes away. A lot.
Yet, eight weeks ago, when natural gas was shooting to $8, FERC and the D’s were proposing changes to make it more difficult to get approval for new gas projects and pipelines. Those proposed changes were ultimately rejected, for now, by the oil and gas industry and the ‘R’ members of Congress. But, the intent to obstruct pipelines and gas transmission projects was clear. Evidently this is to prevent natural gas from being able to continue to provide over 1/3 of this nations electricity. Makes me wonder why that is so important to Ds and what do they have up there sleeves. Any ideas?
FERC has not fully approved the proposals from the regional transmission organizations (RTOs) to include roof top solar collectors and home batteries into their power makets. That means green energy will be long in the making, and it will not be cheap. So, to assist the residents in certain states to afford those green energy costs, there are programs that reduce the energy rates, but only if the customer gives the energy supplier the ability to control the customer’s electricity usage. At this time, the price reduction program is still voluntary, but it reflects the ‘Big Brother’ mentality of the government.
You will also wish to know that, in order to finance these new green projects, FERC is proposing to add ‘socialized costs’ to be passed on to all consumers, most of whom will not benefit at all, but will still be required to pay for it. Kind of like forcing a taxpayer that does not have a student loan to pay the loans of others. Doubt this will be a popular proposal, especially considering that all the cost increases necessary to replace gas with renewables are predicted to raise electricity rates by 50-100%, depending on where you live (plus the costs of converting to electricity, of course). I cannot wait. You?
So, from the very beginning, it appears ‘the plan’ is to restrict the consumer’s ability to use electricity as they need to, or want to, or see fit to. All in an effort to force consumers in to compliance with the government’s political goals. Yes indeed, if you live in certain states (not named to protect the guilty), ‘Big Brother’ is coming to a home near you. Very near. And you have heard it said that California is the trendsetter for the rest of the country. So, ‘Heads Up’ consumers of electricity!
I am anxious and interested to see how many of the Inflation Reduction Act’s green projects can stay viable and avoid bankruptcy without government subsidies, which could be withdrawn if Republicans gain the Presidency in 2024 or at least one chamber of Congress in 2022. This is still the best bet to curtail these plans. These elections matter, and right now they matter a great deal. Please vote.
Mrs. Smith