Posted on 05/08/2012 11:12:13 AM PDT by thackney
Most freepers wouldn’t touch this thread with 10 foot pole
Uh, oh. Big Oil making a profit, how dare they! I demand we outlaw this! [end sarcasm]
YOU _ YES YOU - da man. What a great bit of insight. I wonder how many tree hugers in Calif. know that 29% of their oil comes from the dreaded Saudi not the more evil terrible West Tx. or even the friends to the south Mexico ? They have no problem importing workers in their homes, but not oil - what’s up with that?
Time to buy railroad company stock.
It appears Jerry Brown and the nitwits will have to
implement a massive train tax to slow this down.
Complications from a series of state-ordered well closures have disabled some of Berry Petroleum Co.’s operations in the Taft area and forced the company to lower its 2012 production target.
http://www.bakersfield.com/news/business/economy/x1942474163/Berry-loses-oil-production-at-Midway-Sunset
California to draft regulations for oil and gas fracking
http://latimesblogs.latimes.com/california-politics/2012/05/california-to-draft-fracking-regulations.html
“Time to buy railroad company stock.”
Hold off on that until Obama announces the October Suprise!
What’s that you ask? Obama will announce the approval of Keystone and the creation of 5,000,000 jobs of course.
This post leads to the question of why more oil pipelines don’t run east to west?
I have a pipeline map and considering the population centers on the coast you would think major pipelines to both
coasts would be a matter of economics.
Your thoughts would be appreciated.
Multiple reasons include the Rocky Mountains.
I think that the West Coast was self sufficient for a significantly long time. By the time they needed imports on the West side of the Rockies, they already needed them on east side as well.
There is not much incentive to transport imported oil from one coastline to another. They can just import their own.
As to heading east I recently read that the east coast refineries were closing as much due to antiquated facilities as to the high cost of imports. If they could ship oil out of Houston it would be cheaper than the middle east oil they now use. (they can't due to the Jones Act) That begs the point why not a pipeline running either east from Chicago or the gulf.
Your insight is always appreciated.
Houston is net importer of oil. There is not a surplus to ship out.
You need to keep in mind that much of the Gulf Coast Refineries run on imported oil.
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRIPP32&f=M
The link above shows the Gulf Coast region of the US has imported oil for a long time. Although we have a lot (relatively speaking) of oil production, we have even more refineries. So we have no surplus to pipe west.
The glut in Cushing OK is a very new development and the biggest demand is the Gulf. It is more cost effective to add pipelines to the closer Gulf which is what has already started.
I did some research and found the following explanation...
US crude production is at its highest in eight years, helping reduce imports. But the US petroleum market is at once global and regional, underscoring how simplistic ideas of energy independence can be in internationally traded commodity markets. The Gulf of Mexico coast, home to 43 per cent of refining capacity and able to consume cheaper crudes, has turned the US into a net exporter of petroleum products for the first time since at least 1949. The inland US, enjoying a surfeit of fresh crude supplies, has been selling discounted petrol into landlocked markets. The west coast is isolated from the rest of the country, while the east coast has historically relied on imported fuel. “The US is really four markets when it comes to products,” says Ed Morse, head of commodities research at Citigroup and a former US oil official.
As big eastern US cities search for replacement fuel sources, Gujarat in India may even hold the advantage over the Gulf of Mexico. The reasons are part infrastructural, part legal.
The Colonial Pipeline, the main petroleum products line running from Houston to the north-east, is nearly full. A planned expansion will add less capacity than that of the Philadelphia refinery destined to close. This leaves tankers, which the Jones Act of 1920 requires to fly the US flag and employ American crews if they are ferrying products between US ports. A debate is raging over whether there are enough, or at least cheap enough, vessels to ship fuel eastwards.
The EIA says a limited number of Jones Act tankers are free to carry refined products from the Gulf to the east coast, while Jones Act barges can cost three times more than hiring a tanker from Europe. Morten Arntzen, chief executive of OSG, a tanker company, counters: “Transportation is a really minuscule part of the delivery cost of gasoline.”
Please understand that is a very recent development. In 2008, that oil was a premium price over imports due to demand greater than supply (at market prices).
This leaves tankers, which the Jones Act of 1920 requires to fly the US flag and employ American crews if they are ferrying products between US ports.
I disagree with this claim as there is not a US port with a surplus of domestic crude oil. All that have facilities for handling crude are importing crude, they do not have a surplus to ship to another port.
This leaves tankers, which the Jones Act of 1920 requires to fly the US flag and employ American crews if they are ferrying products between US ports.
I would think this might be more feasible when the XL is up and running.
Why would oil companies import oil to Houston from a foreign port to then load on a US tanker to move it to another port?
They will simply continue to import the foreign oil to the different ports. I must be missing what point you are trying to make. What US port do you believe has a surplus of crude oil that could move it by US tankers to another US port?
I would think this might be more feasible when the XL is up and running.
The Keystone XL Gulf Coast Project would deliver an additional 700,000 BPD to the Gulf Coast. Later it will be upgraded to 830,000 BPD.
Gulf Coast Pipeline Project
http://www.transcanada.com/gulf-coast-pipeline-project.html
But the Gulf Coast already is importing 4.5~5 million bpd.
Gulf Coast (PADD 3) Imports by PADD of Processing of Crude Oil
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRIPP32&f=M
With this expansion they are still going to be importing ~4 million bpd. They don't have a surplus to ship crude to another US port.
About two weeks ago I read an article on how the east coast refineries would improve their profitibility if they could get tankers from the gulf with WTI, rather then getting their crude from the middle east. But due to the Jones Act could not even if they wanted to.
I’ve looked through all my sites but as of yet can’t find it. If I do I’ll pass it along.
I am sorry but that was written by someone not understanding the market.
WTI is significantly cheaper than imported crude ONLY because it is mostly land-locked AWAY from the coast. The same grade oil, or even the same oil, at the coast is worth essentially the same as the sweet, light imported oil.
It is not cheaper for any other reason. If it was not bottlenecked in relation to supply versus coastal demand, there would be no discount. That was the case just 4 years ago before the Bakken and other West Texas supplies started to really climb.
But due to the Jones Act could not even if they wanted to.
Jones Act doesn't matter when there is no surplus supply on the coast.
Look at the price difference between WTI and LLS (Louisiana Light, Sweet at St. James, Gulf Coast).
Today the LLS is a premium over WTI ~$16.
http://online.wsj.com/mdc/public/page/2_3023-cashprices.html?mod=topnav_2_3000
Four years ago, prior to the over-supply to Cushing, the price difference was less than $4.
http://online.wsj.com/mdc/public/page/2_3023-cashprices-20080509.html?mod=mdc_pastcalendar
WTI is only discounted because it is bottlednecked to the coast. The condition will not last; there are multiple pipeline projects underway to take more oil from Cushing to the Coast. At the time the bottleneck is eliminated, there will not be any significant discount.
But far more important, there is no surplus of supply to ship to another area. 100% of WTI is already being used and is still ~5 million barrels a day short of meeting the area demand. It is not going to get shipped anywhere else.
Please remember, by definition, WTI trading is not only a grade of oil, but also a location, Cushing Oklahoma. The same oil at the coast has a different value.
Thank you for your patience, I’m trying to really understand the industry and all its aspects. By reading everything I can I’m trying to self educate.
As you can tell from your readings, many of the people writing about it don’t understand the industry.
I think I have a good understanding of the industry. I have learned that is not the same as understanding (and predicting) the corresponding market.
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