Is Biden Right About Oil Companies?

[finnbow]

Originally Posted by whell

I just saw this post. Gawd you're clueless.

That agreement was against the backdrop of the Saudi's starting an oil price war with Russia, and the US domestic oil industry was in the crossfire. In short, it was an effort to support US domestic oil production, not throttle it. It also got the Saudi's and Russians back to the negotiating table to end the price war.

So, Trump's intervention in the energy market is a good thing even if the results are bad (increasing oil prices) while Biden's (e.g., opening up the Strategic Petroleum Reserve) are a bad thing even if the results are good (decreasing oil prices).

[whell]

Originally Posted by finnbow

So, Trump's intervention in the energy market is a good thing even if the results are bad (increasing oil prices) while Biden's (e.g., opening up the Strategic Petroleum Reserve) are a bad thing even if the results are good (decreasing oil prices).

If that's what you think, I can't help you.

Of course, it depends on the intervention, the goal, and if the intervention achieves to goal.

Biden's goal in releasing oil from the reserves was to have a near-term impact on gasoline prices. It had little to no impact on futures prices. Futures prices did take a dip in August, driven by reduced demand as China had another COVID lockdown. The fact that folks are driving less has helped bring down gas prices.

Back in April 2020 when Trump was involved in negotiations with Riyadh, there were days when the spot price of domestic crude was negative: producers were paying to have the product stored as they ran out of holding capacity, and crude was selling slower than it was being produced. That trend was threatening the domestic oil industry. A production pullback stabilized both domestic and global crude prices. So, yeah, that one worked.

[whell]

Oil giant Saudi Aramco makes historic $161B profit in 2022: https://www.detroitnews.com/story/bu...e/69999121007/

The Saudis ought to be sending Biden a great big thank-you card for this.

In the meantime, market conditions may force Biden to retreat on his earlier campaign pledge of "no more drilling on Federal lands. News reports describe pending approval of an Alaskan North Slope drilling project.

Better late to the party than never. But what a waste of time and money by this administration to get to this point.

[Chicks]

A Fresh, Foul Aroma Surrounds the Ties Between Jared Kushner, Donald Trump, and MBS
https://www.esquire.com/news-politic...-relationship/

[Rajoo]

Whell, as usual when you accuse President of economic mismanagement, it usually something else (I suspect its the barrage of Trump & Fox lawsuits). As you continue to blame Biden for not expanding drilling which may or may not pay out in 10 or more years, is also dependent on how aggressively the oil companies want to pursue new drilling opportunities, here is one of the reasons why our gasoline prices continue to remain high. Very simply if a manufacturer can maintain a high level of demand by choking supply and garner higher profits, why would they be dumb enough to increase supply and bring prices down? Especially after their reduced revenues during the pandemic?

U.S Oil Production Has Been Slow to Respond

Given all the geopolitical uncertainty, U.S. oil companies aren’t in a hurry to dramatically expand production. For instance, the U.S. produced 11.5 million barrels of crude oil a day in May 2022, according to the U.S. Energy Information Agency. While that’s 200,000 more than a year ago, it’s roughly half a million barrels a day less than in 2019.

Why? For one thing, major oil companies don’t want to invest heavily on new wells only to see supply increase, prices decline and their profits dwindle.

This was a major theme of the fracking boom that helped propel the U.S. to become the number one global oil-producing nation over the last decade and a half. Many companies went bankrupt as they overextended themselves building out infrastructure, only to see oil and gas prices plummet on greater and greater supply.

https://www.forbes.com/advisor/inves...tion%20Agency.

[whell]

Originally Posted by Rajoo

Very simply if a manufacturer can maintain a high level of demand by choking supply and garner higher profits, why would they be dumb enough to increase supply and bring prices down? Especially after their reduced revenues during the pandemic?

In this market, energy producers balance risk/reward on the head of a pin. On one hand, demand is there, especially with China set to come out of COVID lockdown mode. On the other hand, the cost to bring new production capacity is high: environmental review via NEPA, permitting, regulatory review and approval can take years with no guarantee or success (look at the fiascos of Anwar and Keystone just to name a couple).

Also, for reasons similar to the above, we're currently at or near maximum refining capacity. We've historically exported unrefined oil to countries that have refining capacity. If we want any of that refined product back in the US, we transport it out, have it refined, and then import it back in. If we want to keep it local, producers need to add the oil to inventory, and maintaining inventory has its own costs.

We need to increase both refining capacity and supply, and we keep shooting ourselves in the foot, seemingly able to do neither very well.

[Rajoo]

Originally Posted by whell

We need to increase both refining capacity and supply, and we keep shooting ourselves in the foot, seemingly able to do neither very well.

Who is the we? Aren't they private companies, the epitome of Republican capitalism?

Its already clear that oil producing countries have no desire to increase supply. The US alone cannot do it since we are faced with future decrease in consumption of oil for both power generation and ICE powered vehicles. Most of the new power generation is solar and the car manufacturers are quickly migrating to EV technology. One of the iconic muscle cars built in the US since the 60's, The Dodge Charger is going EV next year, Mustang is already Mach-E with Camaro soon to follow. I am betting that within the next decade, most local delivery trucks, buses and vans (if not the semis) will be electric. So demand for oil is going to plummet.

So where is the increase in demand? Without that, supply cannot increase.

PS: Last I read, our refineries are still operating below capacity.

[whell]

Originally Posted by Rajoo

Who is the we? Aren't they private companies, the epitome of Republican capitalism?

You really aren't that naive, are you?

Here's a bit of info for you: https://www.eia.gov/tools/faqs/faq.php?id=29&t=6

As of January 1, 2022, there were 130 operable petroleum refineries in the United States.

The newest refinery in the United States is the Texas International Terminals 45,000 b/cd refinery in Channelview, Texas, which was operable on January 1, 2022, but actually started operating in February, 2022.

However, the newest refinery with significant downstream unit capacity is Marathon's facility in Garyville, Louisiana. That facility came online in 1977 with an initial atmospheric distillation unit capacity of 200,000 b/cd, and as of January 1, 2022, it had a capacity of 585,000 b/cd.

Capitalism isn't "Republican". It is the most efficient method for converting capital, however. Since most energy producers are public companies, they also have shareholders to answer to.

I've written about this before, so I'll point you to this article:

Chevron CEO Mike Wirth does not expect another oil refinery to be built in the United States ever again, due to federal government policies. The last significant refinery built in the United States was in 1976. (A small refinery came online in 2020 in North Dakota). Over the last two years, due to reduced demand from the pandemic and Presidnt Biden’s stated policy to reduce the demand for petroleum products, U.S. refineries have been shut down or repurposed to become biofuel refineries. In a business where investments have a payout period of a decade or more, it is unlikely for investment to be spent on policies where the demand is to be reduced. Wirth stated rhetorically, “How do you go to your board, how do you go to your shareholders and say ‘we’re going to spend billions of dollars on new capacity in a market that is, you know, the policy is taking you in the other direction.”

That's the crux of it. You're not going to get additional domestic refining capacity unless a lot of things change. Those things include letting the market decide when to move away from petroleum and toward alternative fuels, making environmental regulations more realistic for the refining industry, and public policy that encourages energy sources from ALL alternatives rather than singling out and making the production of oil and petroleum products more challenging, while subsidizing other energy sources.

[Rajoo]

^^I already implied that in my previous post, no new refineries are going to be built in the US, certainly not in the next decade. As for oil companies carping about environmental restrictions, what is new? As a Chem E, I do not know what the middle ground is, but in general I will say that Chemical companies are not to be trusted when it comes to protecting the environment. There are way too many loopholes and lobbyists that can get waivers locally. My advisor used to say that the only solution to pollution is "don't do it".

In my opinion, nuclear energy is a hell of a lot easier than dealing with fossil fuels. But we as a country are addicted to fossil fuels.

[Pio1980]

Originally Posted by Rajoo

^^I already implied that in my previous post, no new refineries are going to be built in the US, certainly not in the next decade. As for oil companies carping about environmental restrictions, what is new? As a Chem E, I do not know what the middle ground is, but in general I will say that Chemical companies are not to be trusted when it comes to protecting the environment. There are way too many loopholes and lobbyists that can get waivers locally. My advisor used to say that the only solution to pollution is "don't do it".

In my opinion, nuclear energy is a hell of a lot easier than dealing with fossil fuels. But we as a country are addicted to fossil fuels.

Petrofuels still have their appropriate applications where direct electrical power isn't practical or efficient.
It's not just energy addiction, it's also petroleum derivatives for chemicals and plastics making petro a global industry in the broadest sense, I expect an additional tech, rather than a total conversion from petro to electric in the foreseeable future.