Looking for more Oil

[Montecfo]

No, not at all. In fact, it is the epitome of capitalism in its purest form - maximize profits. My point in highlighting it was as a counter to all of the rhetoric about government restrictions being the cause of high gas prices. I'll concede that the government plays a role, but I'd submit that the oil and gas industry has much more control over pricing and is often overlooked. While there are ample opportunities for more drilling right now, including on federal land, energy companies choose not to do so, which is their prerogative. And the comments regarding refinery capacity are duly noted.

Well, permitting on federal lands has been slow or stopped. So there are hurdles.

And the government's dangerous anti-carbon posture chills new investment, keeping prices high.

If the head of government vowed to end your industry, and had signed numerous orders intended to reduce output, would rushing to invest in new wells be wise?

 

[Car-Guy]

If the head of government vowed to end your industry, and had signed numerous orders intended to reduce output, would rushing to invest in new wells be wise?

Not if you had any business sense.

 

[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.

 

[street]

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.

MichaelB, do you have data/true facts to show those statements. There is data when looking that shows different date. Just wondering where and from who you got your data from?

I do agree with your assessment on shareholders wanting more and stop producing more. There again the point I'm trying to make is OIL can make their own market of supply/demand. When you havesomething that no one else has I can tell you there is dishonesty involved. Nothing new about dishonesty in big oil. There have been many attempts to fix it but when you are on top it is hard to make headway.
Thanks, MichaelB.

 

[Fire2019]

MichaelB, do you have data/true facts to show those statements. There is data when looking that shows different date. Just wondering where and from who you got your data from?

I do agree with your assessment on shareholders wanting more and stop producing more. There again the point I'm trying to make is OIL can make their own market of supply/demand. When you havesomething that no one else has I can tell you there is dishonesty involved. Nothing new about dishonesty in big oil. There have been many attempts to fix it but when you are on top it is hard to make headway.
Thanks, MichaelB.

Interesting all the comments and anti O&G. Earlier someone said "would you invest if the government said they were trying to shoot you down?" Would you?
And yes O&G has a lot of power, but what about the power and not so above board things Google, Apple, and Facebook do to control what you see and read. And these companies make a lot of money. Not sure why there is not more outrage against them. The price of a new iPhone is more than double the price an additional $1/gallon of gas costs most people in a year. This is obviously a made up number at 12,500 miles/yr at 20 mph. Point is the American people are not smart and can be easily manipulated by what they see daily as opposed to what they don't really see. Gas price compared to cell phone cost. Crazy, but also why most will never FIRE.

 

[MichaelB]

MichaelB, do you have data/true facts to show those statements. There is data when looking that shows different date. Just wondering where and from who you got your data from?

Sure. Total production is tracked and published by the EIA here Production figures were:
2019 12.9 million barrels per day
2020 11.2 MBPD
2021 11.6 MBPD
2022 is running about 500k BPD ahead of 2021

Shale oil production here
It’s a graph, not table, so the numbers are approximate, but
2019 exceeded 8 MBPD
2020 fell to around 6 MBPD
2021 grew to around 7 MBPD.

The decline in oil production was the result of losing 2 mbpd of shale. The biggest obstacle to increasing production is not regulatory but the concern over the response by OPEC+. Who wants to invest in a business which requires a long term to pay out but has a fierce competitor willing to lose money to maintain share. Shale has a shorter payout, and as can be seen in the link, it growing again. This time, however, more slowly and carefully.

I do agree with your assessment on shareholders wanting more and stop producing more. There again the point I'm trying to make is OIL can make their own market of supply/demand. When you havesomething that no one else has I can tell you there is dishonesty involved. Nothing new about dishonesty in big oil. There have been many attempts to fix it but when you are on top it is hard to make headway.

One of the creators and founding members of OPEC was Venezuelan Juan Pablo Perez Alfonso. He called petroleum “The devil’s excrement” and often said it was a “corrupting resource”. It’s no surprise that of all the countries that rely on petroleum exports for a significant share of GDP, only one is fully developed and has a reputation untainted by petro-corruption - a claim no OPEC+ member can make. Norway.

 

[street]

Interesting all the comments and anti O&G. Earlier someone said "would you invest if the government said they were trying to shoot you down?" Would you?
And yes O&G has a lot of power, but what about the power and not so above board things Google, Apple, and Facebook do to control what you see and read. And these companies make a lot of money. Not sure why there is not more outrage against them. The price of a new iPhone is more than double the price an additional $1/gallon of gas costs most people in a year. This is obviously a made up number at 12,500 miles/yr at 20 mph. Point is the American people are not smart and can be easily manipulated by what they see daily as opposed to what they don't really see. Gas price compared to cell phone cost. Crazy, but also why most will never FIRE.

The other powers you mentioned should be another thread. I believe O&G is what the topic is about. If you add them then we aren't talking apples to apples are we. There issues are completely different problems. Oil and oil products we need to live we need them to survive so oil is on a completely different level to begin with. Life can go on without Apple/Facebook. Maybe not for you but for most it wouldn't hurt, effect or change if they left tomorrow of one's lifestyle.

 

[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.

 

[Car-Guy]

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.

I suspect lot's of retirees depend on those dividends.

When you havesomething that no one else has I can tell you there is dishonesty involved. Nothing new about dishonesty in big oil. There have been many attempts to fix it but when you are on top it is hard to make headway.

Could be true, I don't know, but not unlike many other multi-billion dollar industries. e.g. Medical Insurance for one to start with that I feel are much worse.

After working for one of the majors for almost 30 years I didn't see the dishonestly you mention and I worked my way up to a respectable level within the company. Did it happen at higher levels, maybe, but I saw a number (not a lot) of pretty high level folks above me get canned for stepping over the line.

 

[street]

MichaelB, thank you.

Interesting when you search topic questions you get many contradicting data. There again there is always two sides to every story, and everyone has a story to tell. There again which data do you believe. Like someone said above even if the information comes from a trusted account are they really showing you the true data/info. A person just has to pick a side if they want.

 

[street]

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]

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]

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]

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]

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.

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]

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]

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]

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]

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]

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-General/The-Diesel-Crisis-Is-Going-Global.html

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]

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.