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Gas Prices and Supply: Various Info


MickinMD
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CNN has announced that Pres. Biden is expected announce a national ban on Russian oil, gas, and coal imports.

That probably doesn't matter much since a lot of oil companies have already announced they're ending their oil buying from Russia - Shell did just this morning.

The news media is wrongly reporting that 10% of America's oil use is from Russian imports.  That's wrong: that's the percent of imports, not the total use: 0.672 million barrels of America's 20 million barrel/day usage is Russian oil: 3.4%.

Pumping oil out of shale rock isn't cheap and I think the government is going to have to provide financial incentives in the form of price guarantees or subsidies to get wildcatters to reopen closed wells.  Right now, the oil companies pay a tax/fee of $3.90/barrel to pump oil the American People own out of the ground and sell it above $100/barrel.  But the costs for pumping shale are high enough the wildcatters won't reopen wells they closed in 2019 and 2020 because there's no guarantee the price will stay high for long.  But the 1.4 million barrels/day they could be pumping just by reopening closed well would more than replace the Russian oil imports.  Of course, many American refineries can't refine shale oil, so there's another subsidy needed.

Russia is now threatening to cut off Europe's natural gas supply - though Germany and other countries have a 9 month supply in storage.  The USA will be shipping more liquid natural gas to Europe which, of course, will push our prices higher on top of recent price increases.  I got my new high-efficiency furnace at the right time.

If Russia does cut the supply, they'll know they've permanently ended a big source of income:  Germany has already been looking for alternate sources, including building pipelines from Norwegian gas fields that Denmark previously denied permission for but now ok'd it going through its territory.

I wonder though, if that Russian oil - now being sold at a discount - will be diverted to countries still buying from Russia and they're be replaced in American ports by ships full of more expensive oil that would otherwise have gone to the foreign ports now welcoming the cheap Russian oil.

It won't have much effect on retired, don't-drive-every-day me, who only adds 7 or 8 gallons once every few weeks to my 10.6 gallon Honda Fit fuel tank (see table at bottom).

A gasbuddy.com guy on CNN said gas prices are likely to go to a national avg. of $4.50.  The $4+ we paid in 2008 is $5.22+ in today's dollars.  And the price had already gone up a lot, so it's not like the sudden doubling of gas prices in 2008.  Still, it's not cheap!

But I'm going to go back to driving the speed limit on expressways or no more than 62 mph on 55 mph limit roads. I've always done gentle accelerations and braking when possible.

Note that you're close to max. mpg anywhere from 35 to 55 mph.  So I'll still go 40 on 30 mph speed-limit, non-residential roads!

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There is a debate locally of reopening & increasing production of off shore drilling platforms.  We just had an oil spill off our waters in October due to a container ship dragging its anchor across a pipeline and there is pushback not to increase off shore drilling due to environmental concerns.

But the oil is there and at what point are we good with tapping that resource? $6, $7 a gallon or never?

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1 hour ago, MickinMD said:

The news media is wrongly reporting

That should not be a big surprise to anyone.

24 minutes ago, ChrisL said:

But the oil is there and at what point are we good with tapping that resource? $6, $7 a gallon or never?

I'm betting on never...   

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27 minutes ago, ChrisL said:

But the oil is there and at what point are we good with tapping that resource? $6, $7 a gallon or never?

It is one of those questions that will always have a "wrong" answer.  What's wrong with $1 gas or $10 gas?  And what's the "best" price for gas?

There is the principle of "get all the costs in, and all the subsidies out" to actually have a free market "real" cost for a product.  If oil is really $30/barrel - in true cost - so be it, but maybe $130/barrel is the true cost? Or more? Or less?  Or do folks just want subsidized gas because they like subsidized gas?  I'd bet folks are happier with subsidized cheap gas more than true cost gas.  

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Oil is and always has been simple supply and demand with a cartel  that throttles production for political gains.  Want lower fuel price, increase production and distribution.  Oil does not have to be where it is and current world events are a microscopic part of the increase.  

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There is so much wrong with what Mick wrote.  There is so much we lay people don't understand about the global oil market.  There is so much bad info we impose or what we think is our understanding of the global market.

Said another way - You (I) don't know what you (I) don't know.  There are people a whole lot smarter than us that struggle to keep up with this stuff on the hour.

 

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Just now, Kzoo said:

There is so much wrong with what Mick wrote.  There is so much we lay people don't understand about the global oil market.  There is so much bad info we impose or what we think is our understanding of the global market.

Said another way - You (I) don't know what you (I) don't know.  There are people a whole lot smarter than us that struggle to keep up with this stuff on the hour.

 

There are also people I fly on a regular basis that are Oil Company directors.  :)  It ain't a magical industry.  Even Texicans understand it.  

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Today I am grateful for a tiny home and a simple life.  It will really hurt some people locally who are barely scraping by and bought the biggest home they could afford.  We did the opposite.  The home is well within our means.  Our truck is a gas guzzler, but we only have that one. We are towing this week 3x.  Time to pick up some graden soil. :loveshower:

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Couple other points to ponder:  BBL prices are NOT at historic highs while gasoline prices are getting close.  American Petro company profit margins, however, are at historic highs.

OPEC cut production for global COVID consumption slowdowns, and has been reluctant to bring it back up until they know another surge won't kill demand again.

Mick's 3.4% oil from Russia is misleading w/re:gasoline pricing, as the oil we refine into gasoline is only 1% supplied by Russia.

US Crude production is near historic highs.  But we export a lot.  It's cheaper to export US oil from Texas and import OPEC oil on the East Coast for refining than it is to get Texas oil to the East Coast.

There are 9,000 drilling permits unused right now.  See:  "US Crude production is near historic highs"

The US cutting off purchases from Russia is symbolic only.  We won't miss their crude, China will step up and buy more.

Russia threatens to voluntarily give up income from natural gas production?  Seriously?  This destroys Russia  and is an addressable inconvenience for the EU.  Not gonna happen.

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And just in time, overheard a conversation:

Biden stopped Russian oil imports this morning! (he didn't, though sources say he and the UK will at some point)  Because he own land in Arkansas with oil under it (he doesn't, AMOF, during the election the claim was he owned FOREIGN oil, that's why he wants to stop drilling in the US) We're screwed, because he refuses to allow new drilling (so, how is his Arkansas land worth anything?).  Doocey is such a hero for pointing this out, (Psaki lied when she told him about the unused permits, an easily verifiable statement that they just know is a lie)

Of course, two of the guys have track only cars that still run leaded gas, so.............

Russia's propaganda is bad enough without people just refusing to think at all.

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