AuthorTopic: Oil Price Crash: Who Cooda Node?  (Read 158762 times)

Offline Surly1

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Re: Oil Price Crash: Who Cooda Node?
« Reply #990 on: March 19, 2020, 10:23:38 AM »

By the way, when I told Surly that I was "ahead of" most others in grasping our situation, I did not mean most others in the Diner.  I meant folks like those I spoke with at my local grocery store yesterday, who thought this whole thing would blow over in a few weeks. That seems plain stupid to me!  Economies can't be readily "re-started" when they have been shut down for a few weeks. I suppose we all here in the Diner understand this.

I appreciate you are impatient, but remember that you at least engage the questions. The people you talk to at the grocery store don't think about stuff like this. It's. to even in their purview. Their worlds are defined by panic grocery shopping and not being able to find toilet paper, bleach or bread, not having enough cash to pay bills, and their nephew's oxycodone habit. Most people live day to day, and as we saw last year, are ill equipped to deal with a cash emergency of more than $400. Those living in  Alan Greenspan's (may he burn in the eternal torments of hell forever) "precariat" are ill equipped to consider planning for a future when they don't know they are going to survive the present.

There's also "normalcy bias" to consider. It's a pernicious trap. "OK, I'll spend the week at home, but things will clear up in a week or two. Amirite? Amirite???"

No. Deal with it.

It takes a certain kind of contrarian to find themselves here. to look beyond the official story, to see just-in-time shipping, just-in-time fulfillment and just-in-time finance as a Potemkin village of grafts and skims constructed to gull the rubes, fleece the unwary, and enrich the owners. It takes a certain kind of contrarian to be aware of the illusory notion of money, and to properly understand the central role of energy in creating wealth. And it takes a certain kind of contrarian to elucidate and identify the conduit schemes used to sieve money from the working class while controlling them perfectly.

So be kind to others who haven 't undertaken a journey that you, at least, have the good sense to have begun.

One of the things that attracted me to RE and the Diner was the espoused ethic of "save as many as you can." There is a lot embedded in that simple sentence, which is why even eight years later it continues to resonate with me. A corollary of that statement, equally embedded, is that not everybody can be saved.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #991 on: March 19, 2020, 10:44:47 AM »

By the way, when I told Surly that I was "ahead of" most others in grasping our situation, I did not mean most others in the Diner.  I meant folks like those I spoke with at my local grocery store yesterday, who thought this whole thing would blow over in a few weeks. That seems plain stupid to me!  Economies can't be readily "re-started" when they have been shut down for a few weeks. I suppose we all here in the Diner understand this.

I appreciate you are impatient, but remember that you at least engage the questions. The people you talk to at the grocery store don't think about stuff like this. It's. to even in their purview. Their worlds are defined by panic grocery shopping and not being able to find toilet paper, bleach or bread, not having enough cash to pay bills, and their nephew's oxycodone habit. Most people live day to day, and as we saw last year, are ill equipped to deal with a cash emergency of more than $400. Those living in  Alan Greenspan's (may he burn in the eternal torments of hell forever) "precariat" are ill equipped to consider planning for a future when they don't know they are going to survive the present.

There's also "normalcy bias" to consider. It's a pernicious trap. "OK, I'll spend the week at home, but things will clear up in a week or two. Amirite? Amirite???"

No. Deal with it.

It takes a certain kind of contrarian to find themselves here. to look beyond the official story, to see just-in-time shipping, just-in-time fulfillment and just-in-time finance as a Potemkin village of grafts and skims constructed to gull the rubes, fleece the unwary, and enrich the owners. It takes a certain kind of contrarian to be aware of the illusory notion of money, and to properly understand the central role of energy in creating wealth. And it takes a certain kind of contrarian to elucidate and identify the conduit schemes used to sieve money from the working class while controlling them perfectly.

So be kind to others who haven 't undertaken a journey that you, at least, have the good sense to have begun.

One of the things that attracted me to RE and the Diner was the espoused ethic of "save as many as you can." There is a lot embedded in that simple sentence, which is why even eight years later it continues to resonate with me. A corollary of that statement, equally embedded, is that not everybody can be saved.


Great response, Surly.  This space is starting to feel a little more promising. There are too few such spaces and people as we, unfortunately.

I did not recently begin the journey you speak of in the second to last paragraph there.  I've been on the trail for many years, all beginning more or less with my reading of Small Is Beautiful (Schumacher) and A Sand County Almanac (Leopold) when I was a precocious and wiry teenager.  Ever since these early days of my inquiry, I've been exploring systems both artificial and natural, and how they intertwine. I know how to spot a fragile (or brittle) system and how to recognize a robust and resilient one better than most -- even among many so-called "experts". Our official experts these days, the ones being promoted on Main-snooze (corporate) media, are either pretending their expertise as propaganda or are stupider than a box of rocks.

I've been taking the long view since I was a bean pole kid with pimples.  And I know the reason most folks don't, or can't, is a social and cultural deficiency, and nothing more. It cannot be attributed to "human nature". That's complete rubbish.  I'm a metacognitive thinker, which, of course, means I not only think about things but I think about my thinking of things.  But nowadays I go one layer deeper than that, and I think about how WE (as a culture and a society) "think" about things.  I'm interested in propaganda and the manufacturing of consent and the delusion of crowds.  I'm interested in why we keep replicating systems and "ideas" (rooted in pseudo-thinking) which not only harm ourselves and our human communities, but the whole of the natural world as well. I'm expert enough in this to know how farking ignorant I am about it, which makes me ten or twenty times smarter about it than most so-called "experts". I am at least a peer to anyone here, and I can rhyme on a dime. But I am not blowing my own horn here.  I'm announcing a danger and an opportunity.

From where I sit it is obvious that we need to rapidly and radically empower people with knowledge and understanding to respond to the present emergency with a longer view than the narrow "precariat" perspective you mentioned above.  If we fail to do so our brief window of opportunity will almost certainly close and the shit will hit the fan so hard we won't have any chance of a future worth living in.
« Last Edit: March 19, 2020, 10:57:40 AM by JRM »
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #992 on: March 19, 2020, 10:48:04 AM »
For some hints about what I'm thinking about these days, see:

https://www.quora.com/q/vjkvmloowqmytclb

https://www.quora.com/q/cjkzdcszahxbboxj
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline RE

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Re: Oil Price Crash: Who Cooda Node?
« Reply #993 on: March 19, 2020, 11:15:54 AM »


When Plan A fails, you go to Plan B.  When that fails, Plan C.  Then you work through the alphabet until you get to Plan Z.


What if initiating Plan B must begin before you can even KNOW if Plan A has failed or will fail, if Plan B is to succeed? As in the case of communities growing an emergency food supply in the case that Plan A fails.

Up there in Alaska you have a pretty short growing season, so I may not be making much sense to you. Also, you have abundant wildlife as a backup food supply -- but not everyone has that. And, in any case, folks will be needing to eat greens and such. Meat is not a complete diet.

You can live on meat & fish, the Inuit, Aleuts did for 10s of 1000s of years before the European invasion.  In any event I have an enormous supply of Vitamins.

If you watch my food vids, you would know I use mainly locally grown produce.  Alaska Potatoes and Carrots are the best in the world.  We grow the biggest cabbages in the world also.  The growing season is short but the days are long.  We have good Hothouse tomatoes also.

Alaska is also one of the lowest population density locations in the world, beat out probably only by parts of Siberia for places tat will support human life.  Antarctica doesn't count.

RE
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Offline JRM

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Re: Oil Price Crash: Who Cooda Node?
« Reply #994 on: March 19, 2020, 11:34:12 AM »
Quote

Alaska is also one of the lowest population density locations in the world, beat out probably only by parts of Siberia for places tat will support human life.  Antarctica doesn't count.


We have some vast wilderness areas here in NM, too.  I had hoped to have found and stocked a cave in one of these by now, but never got around to it -- yet.  That cave is my Plan C.

Speaking of Plans A, B, C.... One could hypothetically work out a fairly universalizable classification system with which to develop a flow chart for various contingency plans around the coronavirus pandemic and economic crisis.

I've noted that many Plan B schemes are extremely individualistic, others more family-centric and yet others more community oriented.  Those of us who are more sociable tend to favor the latter while the more isolated tend to favor the former.  But, of course, it's a bit more complicated than that, as all things are.  Schemas never fully match the actual world and no map is adequate to the territory.

I'm the type that considers these matters in community terms, since I'm part of a web of community -- with those I love connected with others I don't even know, whom they love.
My "avatar" graphic is Japanese calligraphy (shodō) forming the word shoshin, meaning "beginner's mind". --  http://en.wikipedia.org/wiki/Shoshin -- It is with shoshin that I am now and always "meeting my breath" for the first time. Try it!

Offline RE

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Re: Oil Price Crash: Who Cooda Node?
« Reply #995 on: March 19, 2020, 12:10:02 PM »

I'm the type that considers these matters in community terms, since I'm part of a web of community -- with those I love connected with others I don't even know, whom they love.

I have a built in community.  The other residents of my complex.  It's all old, poor and crippled people.

If you watched my videos from last summer, you would know I ran a Food Giveaway program for the residents in the parking lot.  Here is one of of the vids.

<a href="http://www.youtube.com/v/opq8ISybBsk?list=PLwZcL5fTVOw7E2Th3-edLyyhL0_YuGImG" target="_blank" class="new_win">http://www.youtube.com/v/opq8ISybBsk?list=PLwZcL5fTVOw7E2Th3-edLyyhL0_YuGImG</a>

RE
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Offline Surly1

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Re: Oil Price Crash: Who Cooda Node?
« Reply #996 on: March 19, 2020, 12:39:38 PM »
For some hints about what I'm thinking about these days, see:

https://www.quora.com/q/vjkvmloowqmytclb

https://www.quora.com/q/cjkzdcszahxbboxj

Well done. I didn't even know Quora did forums like this.
"Do not be daunted by the enormity of the world's grief. Do justly now, love mercy now, walk humbly now. You are not obligated to complete the work, but neither are you free to abandon it."

Offline RE

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🛢️ What Happens If Oil Prices Go Negative?
« Reply #997 on: March 22, 2020, 12:45:31 AM »
https://oilprice.com/Energy/Energy-General/What-Happens-If-Oil-Prices-Go-Negative.html

What Happens If Oil Prices Go Negative?

By Stuart Burns - Mar 21, 2020, 12:00 PM CDT


Various reports hit the news feeds today quoting a deliberately headline-grabbing statement by Paul Sankey, managing director at Mizuho Securities, in which he is reported as saying, “Oil prices can go negative.” That is, they could as a combination of Saudi Arabia (and Russia) flooding the market with increased oil and the market running headlong into COVID-19-induced curtailment of activity that is suppressing consumption, which combined will create the perfect storm of excess supply.

In reality, inventory levels are already rising.

CNN quotes Sankey, who said global oil demand is only around 100 million barrels per day.

However, the economic fallout from the coronavirus pandemic could crash demand by up to 20 percent.

This would create a 20 million barrel-per-day surplus of oil in the market that would rapidly exceed storage capacity, forcing oil producers to pay customers to buy the commodity – hence, in effect, negative oil prices.

The American government plans to purchase a total of 77 million barrels of oil starting within weeks the article states, but according to Sankey, this can only be done at a rate of 2 million barrels per day, leaving a massive excess that will be looking for a home.

Brent oil prices have already fallen to the lowest level for 17 years. The consequences for the U.S. oil industry if a coronavirus-induced recession drives down demand could be catastrophic.

West Texas Intermediate crude (WTI) collapsed by a staggering 19.2 percent to $22 while the Mexican Basket is down 22.4 percent.

For a short while, hedges will protect producers and they will continue to pump oil. While that will protect producers for a while, it encourages counter-cyclical practices; producers should be cutting back but instead will probably continue to pump and ship into store.

Francisco Blanch, a commodity strategist at Bank of America, warns in a Fox Business report that the demand destruction caused by the COVID-19 virus and the price war between Saudi Arabia and Russia could cause inventories to swell by 900 million barrels in the second quarter alone. He estimates the world currently has about 1.5 billion barrels of available storage.

Storage, however, is regional and may not match neatly with excess supply.

China continues to build storage capacity, having traditionally been short of space, but is now in a better position to take advantage of ultra-low prices.

“In a severe scenario, if the market struggles to find a home for surplus barrels, then oil prices might have to trade down into the teens,” Blanch suggests. That would leave U.S. and Canadian producers deeply in the red when hedges run out. Weaker OPEC countries, like Iraq, Iran, Venezuela, and Nigeria, could see their economies collapse, while all offshore production would be loss-making if oil prices remain suppressed into the teens over the long term.

Related: How Chevron Could Win Big On “The Worst Oil Deal Ever”

Having laid out the worst-case scenarios, it should be said even Saudi Arabia and Russia will burn through their reserves at a clip if prices fall into the teens. As such, some form of truce, one that would support prices and reduce output, is possible.

In addition, our focus has naturally been on the direst of outcomes from the current pandemic: a combination of short, sharp lockdown shock and the acceleration of new vaccines could see us in a much more optimistic situation two months from now.

A recession? Yes, inevitably, but for how long? The first half of the year, maybe, before some form of stability reasserts itself.

Still, who can blame them? “Negative oil” has a ring to it.

Just don’t expect to get a credit to your card when you fill up your tank — it ain’t going to happen.

By Stuart Burns via AG Metal Miner
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Offline RE

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🛢️ Oil Majors Are Preparing For $10 Oil
« Reply #998 on: March 24, 2020, 12:30:15 AM »
Boy, did I NAIL this one or WHAT?   :icon_sunny: :icon_sunny:

"Usually right, and never in doubt".   ;D

RE

https://oilprice.com/Energy/Energy-General/Oil-Majors-Are-Preparing-For-10-Oil.html

Oil Majors Are Preparing For $10 Oil
By Nick Cunningham - Mar 23, 2020, 8:00 PM CDT


The wave of oil industry spending cuts continues, with the majors now announcing significant reductions to spending as oil remains stuck in the $20s.  Royal Dutch Shell said on Monday that it would cut spending by 20 percent, or about $5 billion, and also suspend its share buyback plan. French oil giant Total SA and Norway’s Equinor announced similar moves.

ExxonMobil and Chevron have suggested they too would be axing their budgets, with Exxon under particular pressure. Goldman Sachs estimates that Chevron needs $50 per barrel in order to cover spending and its dividend. ExxonMobil, on the other hand, needs something like $70.

The majors are relatively more insulated from the downturn than small and medium-sized shale drillers because they have downstream refining and petrochemical assets that have typically performed somewhat better than upstream units when prices fall. Refineries, for instance, spend less on oil during the downturn, and low prices also translate into a boost in sales of refined products.

But the majors do not have that cushion this time around. We are in the midst of a historic meltdown – a supply crisis and a demand event with no precedent. Estimates vary, but oil consumption could be off by 10 million barrels per day (mb/d), or more. It doesn’t matter how cheap crude is, if people are not driving, flying or consuming anything aside from the bare essentials, there is no demand boost from low prices.

On Monday, Exxon announced that it was cutting production at its Baton Rouge refinery, the company’s second largest in the U.S., because poor demand has filled up storage tanks. Exxon also cut 1,800 contractors from the site. In another example, a major closely-watched petrochemical project in Appalachia may not go forward as the market sours.

The first round of spending cuts from the oil industry is now visible, but a second round is beginning, according to a report from Goldman Sachs.

Related: Canada Braces For Oil Cuts As Storage Nears Limit

“We see US oil production falling almost 1.4 mn bpd over five quarters post 2Q20 based on reduced drilling (i.e., before considering shut-ins of existing wells that are likely to be needed) with covered company capex down 35% [year-on-year] in 2020,” Goldman Sachs wrote in a note.

However, budget revisions are not over. The slide in spending, drilling and ultimately in output could deepen as capex cuts grow more pronounced. “There is no sugar coating it, U.S. oilfield activity will collapse with oil prices well below $30 WTI,” Raymond James said on Monday. The initial round of cuts put spending at about 45 percent below 2019 levels, the bank said. “However, the declines will be far more dramatic than these initial cuts and we stress that these announcements skew towards larger cap, better hedged and capitalized operators.”

“Total U.S. capex is likely to fall in excess of 65% with a WTI price persisting in the $20s,” the investment bank concluded.

Rystad Energy put out a similar estimate on Monday. E&Ps are likely to cut project sanctioning by up to $131 billion, or about 68% year-on-year, according to the Oslo-based firm. “Upstream players will have to take a close look at their cost levels and investment plans to counter the financial impact of lower prices and demand. Companies have already started reducing their annual capital spending for 2020,” says Audun Martinsen, Rystad Energy’s Head of Energy Service Research.

It's anybody’s guess how low WTI and Brent go. But more than a few analysts have pointed to the potential for storage to max out as a reason why prices have more room to fall. “[N]o one can exactly be sure that production will be shut-in fast enough to not overwhelm our ability to store oil,” JBC Energy said in a note. The firm pointed to refineries cutting processing because they are running out of storage, such as Exxon’s Baton Rouge. “In such an environment, it is as possible for Brent prices to briefly go to $10 per barrel as it was back in 1986 or 1998,” JBC concluded.

By Nick Cunningham of Oilprice.com
« Last Edit: March 24, 2020, 02:35:17 AM by RE »
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