Looking for more Oil

[street]

Quote:

Originally Posted by Car-Guy I suspect lot's of retirees depend on those dividends. Probably true, but not unlike many/most other multi-billion dollar industries. e.g. Medical Insurance for one to start with.

Yes agree!! Again, a problem but no one wants to fix the problem because they are another one with too much power. So, the problems keep going on.

[Montecfo]

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Originally Posted by MichaelB It’s easier to just blame government, more difficult to show specific cause and effect. US oil production is close to its all time high. It suffered a sharp decline in ‘20 when the global price of oil collapsed and even went negative, which led to shale producers closing down and leaving the business. US production declined almost 10%. The OPEC+ effectively drove them out of business and has indicated they will do so again, if need be. There is very limited investment in shale right now because of this. US production has since recovered and is close to its all time high. No one is holding it back. There is an excess of investment capital in the US that is not restricted to any value statement and there has been no change in the regulatory environment for shale. The petroleum producers have plenty of cash to fund their investment, they just need to stop sending it to shareholders and use it to fund production.

Investment may not be restricted (don't think anyone said that) but it is down sharply. No shock given the posture of the government.

But shareholders have also pressured public o&g companies to send more cash flow after a terrible couple of years. And they are doing that, which means little is being done to grow supply.

[Montecfo]

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Originally Posted by MichaelB An interesting tidbit about refineries - the most recent petroleum refinery built in the US began operations in January 2022 and took 2 years to build. It was built by Texas International Terminals and processes 45,000 bpd of crude. The point is, some things are repeated so often people take them for granted. The regulatory challenge is indeed difficult, but the market environment is just as important.

Well, true as far as it goes. We have one more refinery, with tiny capacity (50k barrels/day) was added. There are 130 in the US.

But the last refinery built in the US with even 100k capacity came online in 1978.

By comparison, our refining capacity in the US is 17.9million barrels per day.

And refining capacity has declined every year since 2018.

So what most of us have heard, that refining capacity is down, is indeed the case.

[Fire2019]

Quote:

Originally Posted by MichaelB An interesting tidbit about refineries - the most recent petroleum refinery built in the US began operations in January 2022 and took 2 years to build. It was built by Texas International Terminals and processes 45,000 bpd of crude. The point is, some things are repeated so often people take them for granted. The regulatory challenge is indeed difficult, but the market environment is just as important.

And contrary to the believe that big O&G does not want to add capacity.........this link says Exxon added to a facility to produce 5 times as much as the Texas international terminals recent unit at about the same time. https://inspectioneering.com/news/2019-02-04/8232/exxonmobil-to-proceed-with-new-crude-unit-as-part-of-beaumont-re

[MichaelB]

Quote:

Originally Posted by Montecfo Investment may not be restricted (don't think anyone said that) but it is down sharply. No shock given the posture of the government. But shareholders have also pressured public o&g companies to send more cash flow after a terrible couple of years. And they are doing that, which means little is being done to grow supply.

The point is, there is plenty of capital in the US looking for investment opportunities. It has no morality and doesn’t care what anyone thinks or says. It buys things like epipen and insulin patents and hikes the price 6 fold without batting an eyelash. If they are not investing in oil production, it’s not because of some political comments.

Quote:

Originally Posted by Montecfo Well, true as far as it goes. We have one more refinery, with tiny capacity (50k barrels/day) was added. There are 130 in the US. But the last refinery built in the US with even 100k capacity came online in 1978. By comparison, our refining capacity in the US is 17.9million barrels per day. And refining capacity has declined every year since 2018. So what most of us have heard, that refining capacity is down, is indeed the case.

The point made over and again is that new refineries are not being built because of the regulatory environment. I provided an example showing a new refinery was indeed built, last year.

The more likely case is the regulatory burden is high and costly but what stops more new refineries is lack of visible demand far enough out into the future.

[Mark1]

Quote:

Originally Posted by Montecfo But the last refinery built in the US with even 100k capacity came online in 1978. By comparison, our refining capacity in the US is 17.9million barrels per day. And refining capacity has declined every year since 2018.

I suspect all three statements are true, but the following three statements are likely also true.

1) Consumption has also decline since 2018 to match supply.

2) The demand for refinery products have increased significantly since 1978, as had the supply of refinery products via existing refinery expansion.

3) Supply has equaled demand every year since 1978.

[Montecfo]

Quote:

Originally Posted by MichaelB The point is, there is plenty of capital in the US looking for investment opportunities. It has no morality and doesn’t care what anyone thinks or says. It buys things like epipen and insulin patents and hikes the price 6 fold without batting an eyelash. If they are not investing in oil production, it’s not because of some political comments. The point made over and again is that new refineries are not being built because of the regulatory environment. I provided an example showing a new refinery was indeed built, last year. The more likely case is the regulatory burden is high and costly but what stops more new refineries is lack of visible demand far enough out into the future.

Did someone say in this thread that no new refineries are being built due to regulation?

I may have missed that. But refinery capacity has declined in the US.

And oil companies need only look at the fate of coal miners and coal fired plants to see what government can do, simply by promulgating new regulations. No act of Congress needed. By the time courts address the overreach, it is too late.

So I think when government says they are shutting down fossil fuels, o&g execs are wise to take heed given the recent history. The policy is catastrophic for US consumers, but look what Europe did to itself voluntarily and the shape they put themselves in. They were warned.

[Montecfo]

Quote:

Originally Posted by Mark1 I suspect all three statements are true, but the following three statements are likely also true. 1) Consumption has also decline since 2018 to match supply. 2) The demand for refinery products have increased significantly since 1978, as had the supply of refinery products via existing refinery expansion. 3) Supply has equaled demand every year since 1978.[emoji23]

US consumption of gasoline fell with the pandemic, but otherwise has grown virtually every year.

Demand generally equals supply. But price is the variable.

At lower prices demand would be higher of course.

[CardsFan]

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Originally Posted by Montecfo US consumption of gasoline fell with the pandemic, but otherwise has grown virtually every year. Demand generally equals supply. But price is the variable. At lower prices demand would be higher of course.

What an economic concept You mean there is a supply/demand curve?

Not picking on you for stating the obvious, but it amazing how many people do not grasp that concept.

[Koolau]

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Originally Posted by CardsFan What an economic concept You mean there is a supply/demand curve? Not picking on you for stating the obvious, but it amazing how many people do not grasp that concept.

Not only do folks ignore the fact of supply and demand, they also ignore the perturbations of this otherwise immutable law when gummint intervenes. Oddly enough, gummint can get away with it for so-long and then, eventually, "reality" kicks in and "immutable" laws once again apply. If anyone doubts this look at Germany getting ready to use coal for electricity again. Look at emptying our SPR to make up for gummint oil restrictions. You can't fool mother nature though you can piss her off. YMMV

[NW-Bound]

The title of this thread is "Looking for more oil".

It appears that we have enough oil at the moment, because Brent crude price is reasonable at $81/barrel.

However, there's a serious shortage of diesel fuel, and that's because of lack of refinery capacity. And the only way the price will drop is if the global economy crashes.

Source: https://oilprice.com/Energy/Energy-G...ng-Global.html

Quote:

The Diesel Crisis Is Going Global By ZeroHedge - Nov 26, 2022, 10:00 AM CST Prices for diesel — used to power trucks, fuel machinery and heat homes — have surged about 50% amid shrinking inventories and a strained export market. ... The diesel crunch has been "damaging to the global economy," said Amrita Sen, the head of research at Energy Aspects Ltd. She said the only way to "resolve diesel tightness ultimately needs new refining capacity." And the bad news is that Chevron CEO Mike Wirth told Bloomberg TV this past summer that no new refineries will ever be built in the US.

[audreyh1]

We picked up our diesel pusher motorhome April of 2005. Diesel was cheaper than gasoline. It took a few months to get moved in and sell our house. We finally hit the road full-time in August 2005 right about the time when Hurricane Katrina hit. Fuel prices went up, especially diesel. Diesel was never cheaper than gasoline again.

[Koolau]

^^^^^^

No one would currently invest in building a new refinery as there are too many hoops to jump through and dead ends that could cost money abound. I think the diesel/fuel oil issue will be with us for a while. Of course, we could get lucky and have a deep recession. That would bring the prices down quite a bit. Wait! Forget what I said.

[Ronstar]

The government's stance on fossil fuels is making the oil companies skittish. Who would want to invest billions of dollars in something that the government says that they want to eliminate?

And too many regulatory hoops to jump through and regulatory costs in building a new refinery. Companies can't build a refinery for the amount of money that they need to make a profit.

Demand had been steadily on the rise before Covid and then took a nose dive. After Covid, demand went up rapidly, but supply couldn't keep pace, so prices went up.

The customers see the writing on the wall - high gas prices and a gov't that wants to eliminate fossil fuels, so they start buying EV's. EV's are only 1% of US autos, but EV sales are increasing as a pct of overall sales. This should result in reduced oil demand and reduced oil price in the long run.

But in the mean time, the oil companies are going to sit back and wait to see what happens. So I don't think there will be much looking for more oil for a while.

[Koolau]

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Originally Posted by Ronstar But in the mean time, the oil companies are going to sit back and wait to see what happens.

Kinda sweet for them right now as demand exceeds supply and prices are high enough to make good profits. Ultimately, they need to drill more, frack more and refine more. But as you point out, they are waiting for the dust to settle - all the while they have a wry smile on their faces since they're making money. I don't blame them though YMMV.

[Car-Guy]

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Originally Posted by Montecfo And oil companies need only look at the fate of coal miners and coal fired plants to see what government can do, simply by promulgating new regulations. No act of Congress needed. By the time courts address the overreach, it is too late. So I think when government says they are shutting down fossil fuels, o&g execs are wise to take heed given the recent history. The policy is catastrophic for US consumers, but look what Europe did to itself voluntarily and the shape they put themselves in. They were warned.

+1