Massive Downsizing In Oil Sector Brings Acute Pain For The Holidays

NPR ^ | December 17, 2015 | ANDREW SCHNEIDER

[riri]

I remember all those articles in the past 8 years regarding the massive pain $4 a gallon gas and heating oil prices were having on American families...NOT.

[factoryrat]

Take a look at the coal industry. It’s being decimated right now. Look at who’s offering to pick up those companies for pennies on the dollar at bankruptcy auctions, especially companies in the Powder River region of Wyoming.

Also, keep an eye on natgas drillers and developers. They’ll be the next targets.

And then again, with oil, look at how much oil we have in storage vs. demand. The market adjusted to high fuel prices, and now supply has outstripped demand. Oil companies want to open up exports to bump the price up. So why are we still importing oil if we can’t burn through the glut that we’re currently sitting on?

And why are we still letting OPEC set the price if we don’t need their product, and we’re sitting on a glut of domestic oil?

[thackney]

And why are we still letting OPEC set the price if we don’t need their product, and we're sitting on a glut of domestic oil?

Letting OPEC set the price? OPEC took off their production quotas; they were not following them anyway.

The price is low do to more supply than demand at current prices. As the price stays low and drilling and investment continues to decline, the supply will drop off.

We still bring in more oil from OPEC than produced in any state except Texas.

Crude Oil Production by state
http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm

U.S. Crude Oil Imports by Country of Origin
http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm

[thackney]

Oil companies want to open up exports to bump the price up. So why are we still importing oil if we can't burn through the glut that we're currently sitting on?

All oil is not the same. The Gulf Coast Region has more expensive light sweet oil than it can use. Many of the refineries in the area are optimized to use cheaper heavy sour. This area will export a little of the expensive oil and import more of the cheaper oil.

[ColdOne]

Yep saw who was picking those up for pennies on the dollar. Horrible. We are so screwed.

[CedarDave]

Removing the oil export provision was in the omnibus budget bill (along with making some tax credits permanent), but in return the Republicans gave the Democrats just about everything else they wanted. See this thread:

http://www.freerepublic.com/focus/f-news/3373503/posts

[thackney]

Not permanent tax credits, but just kicking the can down the road for a few more years.

http://www.freerepublic.com/focus/f-chat/3373371/posts

In return, they agreed to the demand from Democrats for a five-year extension of credits for wind and solar energy producers and a renewal of a land and water conservation fund.

http://www.freerepublic.com/focus/bloggers/3373721/posts?page=2#2

Extensions for wind energy’s $0.023/kWh production tax credit (PTC) and solar energyâ€TMs 30% federal investment tax credit (ITC) were pushed by Congressional Democrats in exchange for lifting the ban on crude exports, a policy change long sought by Republicans and the oil and gas sector.

Under the tentative deal, the wind PTC would be extended through 2020 and would decline in value each year after December 2016 until it is phased out entirely. The solar ITC would be drawn down gradually through 2022.

[Dusty Road]

Went through this several times. Once demand catches up with supply things will improve in the patch. Managed to survive 98 we’ll survive this one also.

[biff]

You obviously have not been thru an oil bust.

In 1998/1999 my parents had petroleum engineers and geologists mowing their lawn. Sound crazy but when they lost their jobs they started mowing lawns. Only problem is all us ‘awl field trash’ can’t mow each other’s lawns.

[factoryrat]

I can see that scenario. Wasn’t the US looking to do a swap with mexico for their oil? Trading light sweet for heavy sour?

That would actually be a fair trade.

Also, what about Alaska production? Who’s buying that oil? And is it a grade the refineries are geared up to run?

[thackney]

I’m just over here in Midstream & Nat Gas Liquids, trying to keep my head down and not draw too much attention.

In Mont Belvieu, we are probably at the top of a 50 year cycle boom.

Busy time for a little place. The drive and traffic sucks, although...

[thackney]

Wasn't the US looking to do a swap with mexico for their oil? Trading light sweet for heavy sour? That would actually be a fair trade.

It isn't trade even money. We get a bit of cash with the heavy in trade for our light sweet.

Also, what about Alaska production? Who's buying that oil?

Mostly Washington State with the remainder going down to California. Don't believe the myths of Japan and other asia destinations:
It is 3,577 miles from Valdez, Alaska to Tokyo, Japan.
It is 1,274 miles from Valdez, Alaska to Anacortes, Washington. (largest Washington refineries)
It is 2,253 miles from Valdez, Alaska to El Segundo, California (major refinery near Los Angeles)

[Dusty Road]

The good thing about the production side is it’s much safer. While we may shut down the oil production on a few wells we never shut down the gas, it costs us nothing to produce.

[thackney]

EIA tracking tool shows light-sweet crude oil imports to Gulf Coast virtually eliminated
http://www.eia.gov/todayinenergy/detail.cfm?id=19931
FEBRUARY 10, 2015

Crude oil swaps with Mexico could provide economic and environmental benefits
https://www.eia.gov/todayinenergy/detail.cfm?id=22872
SEPTEMBER 10, 2015

[thackney]

We have over 200 million barrels in storage in the salt caverns beneath us.

[central_va]

200 million barrels = 11 day supply assuming no rationing.

[DungeonMaster]

The rules of supply and demand are pretty straight forward. Even a kid working at a taco stand can see the writing on the wall when he is surrounded by lots of other fast food restaurants and more being built.

[thackney]

~216 million barrels of Natural Gas Liquids, not oil.

[factoryrat]

That’s what I thought, makes sense. So that means that the west coast refineries are set up to run Alaskan crude? The reason that I ask is that the railroad that I work for ships some crude out to the refineries up in Washington state. Most of it comes out of Alberta, some of it from the Dakotas. How similar are they?

Sorry to pepper you with questions, just curiosity. It just goes back to a 1940’s textbook I read describing the chemical makeup of crude oil from east to west of the northern hemisphere. Heavy to the east, light to the west is what the book said, more or less.

[thackney]

top of a 50 year cycle boom

I should clarify that. It is booming here for us in construction and design as they try to prepare for the ethane crackers and other petrochem plants about to come online.

For the owners, cash flow is terrible right now.

Current Prices:
http://www.eia.gov/naturalgas/weekly/#tabs-prices-4

18 months ago:
http://www.eia.gov/naturalgas/weekly/archive/2014/06_05/index.cfm#tabs-prices-4