Energy Discussion

[Flash]

At the 25 minute mark, he discusses the 2015 omnibus bill whereby the President can stop oil exports - and possibly refined petroleum products. Here is an explanation:

The President retains the power to restrict exports of crude oil through the imposition of sanctions under the International Emergency Economic Powers Act (50 U.S.C. 1701 et seq.) or regulations issued under that Act (other than section 754.2 of the Export Administration Regulations), the National Emergencies Act (50 U.S.C. 1601 et seq.), part B of title II of the Energy Policy and Conservation Act (42 U.S.C. 6271 et seq.), the Trading With the Enemy Act (50 U.S.C. App. 1 et seq.), or any other provision of law that imposes sanctions on a foreign person or foreign government, including foreign governments designated as state sponsors of terrorism.

Then what? Many of our refineries are built to process foreign oil and not domestic, while much of our domestic production is shipped overseas to foreign refiners. Converting our domestic refineries would take a lot of money and time, neither of which we don't have.

Then there is the question of who pays for the gas? As it is an internationally traded commodity (@Griz882) who will make up the difference if domestic oil producers have to sell it for less than the traded price domestically? In other countries that do that the government subsidizes the price of gas, are we really prepared to do that?

 

[Randy Daytona]

As I have said previously, most US refineries are setup to process heavy, sour crude (Venezuela, Alberta) although the first new refinery in the US in decades is scheduled to start construction this year, specifically designed to process shale oil. Exceptions to an oil export ban would probably be made to individual nations that have refining capacity.

I doubt if the American public would tolerate gasoline going through the roof (ie, $10 a gallon) and would demand politicians find a solution.

Note: saw today that gasoline is now $35 per gallon in Cuba.

Late edit: it looks like Israel just hit a processing facility on the Pars natural gas field, knocking offline 20% of the gas Iran uses for domestic power generation.

 

[Flash]

As I have said previously, most US refineries are setup to process heavy, sour crude (Venezuela, Alberta) although the first new refinery in the US in decades is scheduled to start construction this year, specifically designed to process shale oil. Exceptions to an oil export ban would probably be made to individual nations that have refining capacity.

Again, how do you get that past the 'bright idea stage' and actually implement something like that? You can't, it is frankly nothing but rhetoric at this point.

 

[Randy Daytona]

Looks like some nations in the interest of their national security are beginning to control exports of energy and fuels, prioritizing domestic consumption:

China Halts Fuel Exports as Hormuz Crisis Tightens Global Supply | OilPrice.com

China has moved to halt fuel exports to protect domestic supply as the Strait of Hormuz crisis tightens Asian energy markets.

oilprice.com

South Korea Caps Gasoline, Diesel and Heating Kerosene Exports at 2025 Volumes -- OPIS

www.marketwatch.com

 

[taxi1]

Trump appears to have done more to reduce greenhouse generation than any President in memory.

 

[ChuckMK23]

Trump appears to have done more to reduce greenhouse generation than any President in memory.

You may actually not be wrong!

 

[sevenhelmet]

Trump appears to have done more to reduce greenhouse generation than any President in memory.

I was thinking along the same lines this week. Kind of like how Obama sold more guns than any president before him- politics seems to evoke the opposite of its stated intent.

 

[Randy Daytona]

Looks like Ukraine hit Russian energy infrastructure very hard:

Russia's Vital Baltic Oil Hubs Crippled by Ukrainian Drone Campaign | OilPrice.com

A large-scale Ukrainian drone attack hit the Ust-Luga oil port, marking the second strike this week on a critical Baltic Sea export hub, which is contributing to global oil supply concerns and market volatility.

oilprice.com

 

[taxi1]

Trump appears to have done more to reduce greenhouse generation than any President in memory.

Lol at the unintended consequences. You wonder if they are aware of sound travels around corners.

Opinion | This Energy Crisis Is Going to Change the World

Higher oil prices and limited supply will accelerate a turn toward cleaner technologies, especially in Asia and Europe.

www.nytimes.com

Sri Lanka and Myanmar are rationing fuel. The Philippines has instituted four-day workweeks to conserve gasoline and electricity. Bangladesh briefly closed its universities to reserve power for homes and businesses. Across India, families and restaurants are cooking over wood fires for want of gas. Airlines are canceling flights.

As painful as the first phase of the energy crisis set off by the war with Iran has been, what comes next will be worse. This week, the final deliveries of oil and liquefied natural gas to Asia that passed through the Strait of Hormuz before it was closed are expected to arrive. The last tanker shipments to Europe should land by mid-April. After that, many countries’ reserves of gasoline, diesel, liquid petroleum gas and natural gas will dwindle. The price of oil could soar as high as $200 a barrel if the war drags on.
…

If there’s irony here, it’s the tragic kind. The administration’s war of choice has made energy dangerously expensive in nearly every corner of the globe, causing needless suffering. The most fossil fuel-friendly government in recent U.S. history has shown us all just how risky reliance on oil and gas can be — and taught the world that true energy security lies in accelerating toward a cleaner, electrified future.

 

[Randy Daytona]

Lol at the unintended consequences. You wonder if they are aware of sound travels around corners.

Opinion | This Energy Crisis Is Going to Change the World

Higher oil prices and limited supply will accelerate a turn toward cleaner technologies, especially in Asia and Europe.

www.nytimes.com

Sri Lanka and Myanmar are rationing fuel. The Philippines has instituted four-day workweeks to conserve gasoline and electricity. Bangladesh briefly closed its universities to reserve power for homes and businesses. Across India, families and restaurants are cooking over wood fires for want of gas. Airlines are canceling flights.

As painful as the first phase of the energy crisis set off by the war with Iran has been, what comes next will be worse. This week, the final deliveries of oil and liquefied natural gas to Asia that passed through the Strait of Hormuz before it was closed are expected to arrive. The last tanker shipments to Europe should land by mid-April. After that, many countries’ reserves of gasoline, diesel, liquid petroleum gas and natural gas will dwindle. The price of oil could soar as high as $200 a barrel if the war drags on.
…

If there’s irony here, it’s the tragic kind. The administration’s war of choice has made energy dangerously expensive in nearly every corner of the globe, causing needless suffering. The most fossil fuel-friendly government in recent U.S. history has shown us all just how risky reliance on oil and gas can be — and taught the world that true energy security lies in accelerating toward a cleaner, electrified future.

Interesting article from Foreign Policy:

Electrostates vs. Petrostates

China is building a new green bloc, while the United States is doubling down on oil.

foreignpolicy.com

Couple of data points and observations:
the price oil peaked at $147 a barrell in 2008 - equivalent to about $230 today

electric cars are a viable option and sustained high oil prices could cause demand destruction for oil.

the shortage of petroleum and natural gas for fertilizer feedstocks is going to cause pain in agriculture

 

[ChuckMK23]

Interesting article from Foreign Policy:

Electrostates vs. Petrostates

China is building a new green bloc, while the United States is doubling down on oil.

foreignpolicy.com

Couple of data points and observations:
the price oil peaked at $147 a barrell in 2008 - equivalent to about $230 today

electric cars are a viable option and sustained high oil prices could cause demand destruction for oil.

the shortage of petroleum and natural gas for fertilizer feedstocks is going to cause pain in agriculture

Not liking this but I do believe your reasoning here is sound

 

[Spekkio]

the shortage of petroleum and natural gas for fertilizer feedstocks is going to cause pain in agriculture

The most significant part of Trump's way-too-long-and-self-aggrandizing press conference is that he does not care about opening or providing security through the Strait of Hormuz. It's someone else's problem.

What will be interesting to see is whether this is rhetoric to bring Iran to the negotiating table, or an actual promise he'll follow to shrug and ignore the blockade. It's easy to dismiss Trump and think he has no clue how energy and manufacturing are globally connected, which makes a lot of his boasting about energy independence irrelevant... but he does have economic advisors and generally understands money.

I do think that Trump is serious and willing to play chicken with the economy in order to compel allies to assist.

My takeaway- rebalance my portfolio out of the stock market, things are about to get ugly starting next week. The last unimpeded shipments through the Strait are arriving within the next few days. This is where the G-fund is clutch because the U.S. treasury market is also going to take a hit. The rebound on Mar 31 was due to a lot of end-of-quarter automatic buying activity.

It's also a good time to do a Costco run for non-perishable and frozen food items.

I know that sounds doomer-ish, but to suggest otherwise is to argue that Iran's grand strategy is completely ineffective and will have a negligible impact on western commerce from the onset.

I think he ultimately will have to follow through on ratcheting up pressure vis a vis attacks on Iran's critical infrastructure, unless he shifts strategy altogether. Iran seems completely unwilling to negotiate at this point. Our allies' navies are in no condition to actually provide sustained security for free and open shipping through the Strait of Hormuz. A looming crash to U.S. treasuries will force the latter, it's one of the only things that gets Trump to shift gears.

 

[Griz882]

Interesting article from Foreign Policy:

Electrostates vs. Petrostates

China is building a new green bloc, while the United States is doubling down on oil.

foreignpolicy.com

Couple of data points and observations:
the price oil peaked at $147 a barrell in 2008 - equivalent to about $230 today

electric cars are a viable option and sustained high oil prices could cause demand destruction for oil.

the shortage of petroleum and natural gas for fertilizer feedstocks is going to cause pain in agriculture

Yeah…I’m calling BS on the article. Nils Gilman is a well-known “futurist” (odd because he studied as an historian) and pro-China type who’s had a bit of a crush on China’s state communism/public capitalism model that we here jokingly call CHICAP. He broadly overstates China’s “control” of rare earth minerals and entirely dismisses China’s yearly climb as the world’s worse producer of carbon pollution. Like all breathless commentators mentioning Trump he assumes Trump is forever, not a guy facing 24 months of lame duck power.

On the U.S. side, Trump’s embrace of “oil” is more about preserving legacy jobs for blue collar voters than any kind of cohesive energy policy. America’s problem is that we approach energy as a political act, not an infrastructure issue. Trump did end subsidies for electric cars and solar panels but I’ve never been a fan of direct-to-consumer subsidies to boost participation; if its important, regulate it. On the other hand, our top petrostate, Texas, is also our top wind energy producer (CA leads in solar). Ten U.S. states create more than 40% (some more than 50%) of their energy via renewables because they are “energy” states, meaning they want to keep their economic spot as energy producers, not just oil pumpers. That’s where we need to be.

At the same time much of the east coast has so many zoning issues that building a solar farm that can generate any meaningful power is practically impossible and even the hardest greenies are now booing wind energy since the Cape Wind farm lost a few blades during a storm causing some beach pollution. Where I live some areas allow solar home panel arrays on the owners yard while others won’t even allow them on your roof. I’m not sure which political party is looking to shake up zoning issues, but it is a good indicator that broader American clean energy production is, at its heart, a NIMBY issue - political over practical.

My entirely yeoman outlook is that we need much more nuclear and geothermal with wind and solar as a plus up (and yes, petrochemical products as well). In the end, the whole premise of the article, especially as it references the U.S. is entirely overblown.

 

[Spekkio]

America’s problem is that we approach energy as a political act, not an infrastructure issue... My entirely yeoman outlook is that we need much more nuclear and geothermal with wind and solar as a plus up (and yes, petrochemical products as well). In the end, the whole premise of the article, especially as it references the U.S. is entirely overblown.

I don't think the first statement is an accurate assessment. It's both.

If we were to turn to nuclear, that creates its own national-security vulnerabilities vis a vis high value strategic targets. That's besides the fact that it's one of the most expensive ways to generate electricity, which consumers will have to pay for.

 

[Griz882]

I don't think the first statement is an accurate assessment. It's both.

If we were to turn to nuclear, that creates its own national-security vulnerabilities vis a vis high value strategic targets. That's besides the fact that it's one of the most expensive ways to generate electricity, which consumers will have to pay for.

Fair enough…your suggestions?