My biggest concern regarding the SPR is making sure the US military has all the oil it needs, especially if we find ourselves in a naval war with China.
I know its too late and no-one is going to read this, but un-killing the Keystone XL might be a easy one. Americans obviously dont care that the Canadian Government was upset, and that the Alberta Government was incandescent with rage after investing Billions to get the project going, just to get stabbed in the back by our southern "ally".
Yes, at this point it will take years still go complete, but with the Ukraine war possibly dragging on for years now, why not get that done? It can't heart. Oilsands (aka "Tar Sands") can be upgraded into synthetic crude oil, diesel fuel and other stuff.
Yes Canada is building a massive pipleline to the West Coast, it will complete in late 2023, so relief is on the way, but every bit helps.
I know the main point isn't to go into technical/financial details but lay out the case that the SPR was a publicly funded capital project and its fine and good to use it for price stability since the public and business clearly like price stability for oil products (expanding it seems like a different set of arguments tho which seems a harder sell compared to some sort of nationalization arguments). Do you have a sense for what the fight is rn? Is it should we buy oil futures at profit prices vs at cost prices?
"The idea was basically to prevent the country from running out of oil in a crisis. Of course, once it was created, the idea of using SPR releases to curb basic fluctuations in global oil prices was irresistible ...."
Then perhaps we should change the name to "Tactical Petroleum Reserve (TPR)."
I'm never sure why any president gets flack when they chide companies to lower their prices. Inflation is keyed to consumer expectations, one of the reasons why gas prices 'go up like a rocket and down like a feather'. Saying "hmm, prices are still high even though demand is down and production is up, would be a shame if we had to start looking around for collusion" is absolutely an appropriate use of the bully pulpit.
I don't get this at all. If the idea is to give US producers a subsidy during times of depressed prices so they don't cap wells and they're available during a price spike then . . . something good will happen.
But what is that good? A lower price of oil? I don't see it. We've heard to death that "oil is a global market." The world consumes 100 million barrels of oil/day. I don't see some relatively small American SPR purchases at a cost somewhere above the market price are going to have that big an impact. If then the price spikes *while US producers have kept their wells going* then that just shows how little leverage we have. Integrated global markets are going to do their global integration thing.
The flaw is captured in the post's statement "we, rather than OPEC, steer the global oil price." Neither we, nor OPEC, will steer the global oil price. The mighty, mighty market will do that.
"the climate left’s master narrative about politics requires them to be doing battle with nefarious special interests rather than with the public’s own unwillingness to make short-term economic sacrifices for the sake of the climate"
?Por que no los dos?
I'm a Democrat, and I recognize both that Big Oil spent years nefariously spreading disinformation about climate change *and* that the average American loves their big car and suburban house and does not want to curtail their fossil fuel consumption for the sake of climate change.
I also recognize that when it comes to politics (vs. policy), telling voters "Nefarious rich people have been lying to you" seems more likely to be a winning message than "You, my voters, are too shortsighted/stupid/selfish to make a short-term sacrifice for the greater good."
Alas for the CO2 tax! It would have been such a good solution, especially if coupled with building lots of nuclear power plants to provide baseload power.
Great idea, but they will never do it. Too scared of the environmental wing. And it's important to also remember that they don't just hate oil companies because of global warming. They were trying to shut big oil down long before any of them had heard about greenhouse gasses.
I'm ambivalent in refilling the SPR now, but I am a strong proponent of making the SPR bigger and refilling it soonish.
And the main reason is the potential for a major war with China that will disrupt global trade to a far higher degree than what's happening with Russia. It would primarily be a naval war that occurs in some of the busiest and most important shipping lanes on the planet. The US needs the ability to ensure supply during that kind of disruption.
I think it is nice that you are acquiring a more nuanced view of the sophistication of international oil markets. That's a good thing. I will idly ask, from a technical point of view, what kinds of oil do you think the SPR should be filled with since there are many grades and refineries are generally optimized to process specific grades of oil. And all of them have different price tags. Light Bakken, West Texas intermediate or heavy crudes. They all have their uses. And they all have different extraction costs.
The "America First (in oil production)" chart looks VERY wrong -- the US is pumping ~11 million barrels of oil a day, not 20 million.
Is that chart supposed to be "million of barrels of oil equivalent" ie including natural gas? [But then if so, Russia should be higher since it also produces natural gas]
I got the data from the EIA[1], specifically I used the first row under "Production" for each country which is "Total petroleum and other liquids (Mb/d)." I believe the subcategory NGPL refers to natural gas, but you can see that the data says that as of May 2022 (most recent date) the US is pumping ~20M barrels/day compared to ~10.4M b/d for Russia and ~11.9M b/d for Saudi Arabia.
If I got something wrong please let me know and I will fix the chart.
I'm 80% confident that the chart should be remade using the "Crude oil including lease condensate (Mb/d)" row instead of the "Total petroleum and other liquids (Mb/d)" row, because the "Crude oil including lease condensate (Mb/d)" row seems to line up with the EIA's own graph on another page:
I don't work in the fossil fuel industry so I can't tell you *why* everyone seems to be using "Crude oil including lease condensate (Mb/d)" instead of "Total petroleum and other liquids (Mb/d)", only that it appears to be the case that they are.
Further research would be needed to work out what "NGPL (Mb/d)" are and why the US has so much more of it than Saudi Arabia or Russia. EIA defines it as:
We have more ngpl because it often “shows up” in higher quantities in wells producing lots of natural gas depending on the field, particularly if fracked (or alongside a mostly oil well as associated gas) - and we produce lots of that, so this is a product of the natural gas processing plant when you separate out the methane/nat gas. Plus we make sure we capture it for both regulatory and economic reasons and have the petrochemical facilities to use it so there is incentive there.
Russias number is surprisingly low given their NG production even though they are producing more out of traditional gas fields than the US is, which makes me believe they are probably venting and flaring a lot of it at their processing plants…especially since they already vent/flare/leak at about the highest rates in the world.
Basically as far as I can tell the US gets more liquids from natural gas than Russia or Saudi Arabia does, so reporting crude oil + NGPL shows a very different figure from just reporting NGPL.
Huh, you're right in that basically every source I checked shows crude production at ~11 million barrels per day, but my (admittedly quick and perhaps incorrect) attempt at converting our natural gas production from cubic feet to OBEs looked like it would add another 21 million barrels, so that doesn't seem to be the source of the disconnect. Hopefully Milan can chime in and clarify sources!
>>And since the administration seems undecided on what to do with the now nearly empty SPR<<
Nearly empty? That sounds quite dire, actually, I had zero idea it was so depleted. I'd always pictured virtually inexhaustible oceans of the stuff lying deep in, uh, was it salt caverns or something in Louisiana?
Apologies if my rapid skim glossed over this (nearly 10:30pm here and it's been a long day), but, do I understand correctly that Biden doesn't need congressional approval to refill the SPR, but does need approval to expand its capacity?
It's historically low right now at about 430 million barrels, with a capacity of around 720 million barrels. Biden drew down somewhat under 200 million barrels, so we were around 630 million barrels before the drawdown.
This is not a bad idea, and it would work somewhat like the hedging deals all oil companies already use with the big banks. Set up properly, it could be a win-win for the companies when prices go too low. I’d rather see the public profit from price volatility than the banks (the house always wins).
The problem with this scheme is that there are many points between the wellhead and the pump that would need to be controlled to ensure these discounts (or premiums when crude prices are low) are reflected properly. It would be pretty complicated to regulate and ripe for corruption.
I mean, China historically had a strategic rice reserve, going back at least as far back as the Tang Dynasty (IIRC). The government would buy excess grain (generally rice) during good harvests and sell it (or outright give it out) during bad ones, keeping the price stable.
(I read this many years ago in a book that is now at my parents' place in another state and now I can't find any good online resources. So it might've been a different dynasty. But still!)
In addition to refilling the SPR or purchasing oil futures, the Biden administration should also pressure House Democrats to pass Manchin's permitting bill. If more pipelines get built as a result of that bill, that would also help stabilize prices because it would give oil companies more places to sell oil and natural gas to.
My biggest concern regarding the SPR is making sure the US military has all the oil it needs, especially if we find ourselves in a naval war with China.
I know its too late and no-one is going to read this, but un-killing the Keystone XL might be a easy one. Americans obviously dont care that the Canadian Government was upset, and that the Alberta Government was incandescent with rage after investing Billions to get the project going, just to get stabbed in the back by our southern "ally".
Yes, at this point it will take years still go complete, but with the Ukraine war possibly dragging on for years now, why not get that done? It can't heart. Oilsands (aka "Tar Sands") can be upgraded into synthetic crude oil, diesel fuel and other stuff.
Yes Canada is building a massive pipleline to the West Coast, it will complete in late 2023, so relief is on the way, but every bit helps.
I know the main point isn't to go into technical/financial details but lay out the case that the SPR was a publicly funded capital project and its fine and good to use it for price stability since the public and business clearly like price stability for oil products (expanding it seems like a different set of arguments tho which seems a harder sell compared to some sort of nationalization arguments). Do you have a sense for what the fight is rn? Is it should we buy oil futures at profit prices vs at cost prices?
Hadn't thought about the SPR like this. Makes sense. Thanks.
"The idea was basically to prevent the country from running out of oil in a crisis. Of course, once it was created, the idea of using SPR releases to curb basic fluctuations in global oil prices was irresistible ...."
Then perhaps we should change the name to "Tactical Petroleum Reserve (TPR)."
I'm never sure why any president gets flack when they chide companies to lower their prices. Inflation is keyed to consumer expectations, one of the reasons why gas prices 'go up like a rocket and down like a feather'. Saying "hmm, prices are still high even though demand is down and production is up, would be a shame if we had to start looking around for collusion" is absolutely an appropriate use of the bully pulpit.
“I'm never sure why any president gets flack when they chide companies to lower their prices”
Maybe because it’s none of their business and they speak ignorantly about it?
I don't get this at all. If the idea is to give US producers a subsidy during times of depressed prices so they don't cap wells and they're available during a price spike then . . . something good will happen.
But what is that good? A lower price of oil? I don't see it. We've heard to death that "oil is a global market." The world consumes 100 million barrels of oil/day. I don't see some relatively small American SPR purchases at a cost somewhere above the market price are going to have that big an impact. If then the price spikes *while US producers have kept their wells going* then that just shows how little leverage we have. Integrated global markets are going to do their global integration thing.
The flaw is captured in the post's statement "we, rather than OPEC, steer the global oil price." Neither we, nor OPEC, will steer the global oil price. The mighty, mighty market will do that.
Who is the market? The mighty mighty market! We are the market, the mighty mighty market! (...Part of a balanced economic view.)
Everywhere we go, people want to know, who we are, so we tell them.
"the climate left’s master narrative about politics requires them to be doing battle with nefarious special interests rather than with the public’s own unwillingness to make short-term economic sacrifices for the sake of the climate"
?Por que no los dos?
I'm a Democrat, and I recognize both that Big Oil spent years nefariously spreading disinformation about climate change *and* that the average American loves their big car and suburban house and does not want to curtail their fossil fuel consumption for the sake of climate change.
I also recognize that when it comes to politics (vs. policy), telling voters "Nefarious rich people have been lying to you" seems more likely to be a winning message than "You, my voters, are too shortsighted/stupid/selfish to make a short-term sacrifice for the greater good."
Alas for the CO2 tax! It would have been such a good solution, especially if coupled with building lots of nuclear power plants to provide baseload power.
Great idea, but they will never do it. Too scared of the environmental wing. And it's important to also remember that they don't just hate oil companies because of global warming. They were trying to shut big oil down long before any of them had heard about greenhouse gasses.
I'm ambivalent in refilling the SPR now, but I am a strong proponent of making the SPR bigger and refilling it soonish.
And the main reason is the potential for a major war with China that will disrupt global trade to a far higher degree than what's happening with Russia. It would primarily be a naval war that occurs in some of the busiest and most important shipping lanes on the planet. The US needs the ability to ensure supply during that kind of disruption.
I think it is nice that you are acquiring a more nuanced view of the sophistication of international oil markets. That's a good thing. I will idly ask, from a technical point of view, what kinds of oil do you think the SPR should be filled with since there are many grades and refineries are generally optimized to process specific grades of oil. And all of them have different price tags. Light Bakken, West Texas intermediate or heavy crudes. They all have their uses. And they all have different extraction costs.
The "America First (in oil production)" chart looks VERY wrong -- the US is pumping ~11 million barrels of oil a day, not 20 million.
Is that chart supposed to be "million of barrels of oil equivalent" ie including natural gas? [But then if so, Russia should be higher since it also produces natural gas]
I got the data from the EIA[1], specifically I used the first row under "Production" for each country which is "Total petroleum and other liquids (Mb/d)." I believe the subcategory NGPL refers to natural gas, but you can see that the data says that as of May 2022 (most recent date) the US is pumping ~20M barrels/day compared to ~10.4M b/d for Russia and ~11.9M b/d for Saudi Arabia.
If I got something wrong please let me know and I will fix the chart.
[1] https://www.eia.gov/international/data/world/petroleum-and-other-liquids/monthly-petroleum-and-other-liquids-production?pd=5&p=0000000000000000000000000000000000vg&u=0&f=M&v=line&a=-&i=none&vo=value&t=C&g=none&l=249-000000000000000000000000000000000000000500000002&s=94694400000&e=1651363200000&
Yeah the chart is way off - you want crude oil, either weekly or monthly ( you labeled as monthly, avg mbd so go with this one)
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm
I'm 80% confident that the chart should be remade using the "Crude oil including lease condensate (Mb/d)" row instead of the "Total petroleum and other liquids (Mb/d)" row, because the "Crude oil including lease condensate (Mb/d)" row seems to line up with the EIA's own graph on another page:
https://www.eia.gov/energyexplained/oil-and-petroleum-products/where-our-oil-comes-from.php
And also the ~11 million barrels of oil per day figure for the US is something that pops up in a lot of other sources:
https://www.macrotrends.net/2562/us-crude-oil-production-historical-chart
https://www.reuters.com/markets/commodities/us-oil-output-rises-17-june-highest-since-april-2020-eia-2022-08-31/
https://www.forbes.com/sites/daneberhart/2022/09/19/why-us-shale-producers-arent-riding-to-the-rescue-despite-tight-oil-supplies/?sh=6d5f6a236456
I don't work in the fossil fuel industry so I can't tell you *why* everyone seems to be using "Crude oil including lease condensate (Mb/d)" instead of "Total petroleum and other liquids (Mb/d)", only that it appears to be the case that they are.
Further research would be needed to work out what "NGPL (Mb/d)" are and why the US has so much more of it than Saudi Arabia or Russia. EIA defines it as:
https://www.eia.gov/tools/glossary/index.php?id=Natural%20gas%20plant%20liquids
But that doesn't tell me enough for me to understand those charts.
We have more ngpl because it often “shows up” in higher quantities in wells producing lots of natural gas depending on the field, particularly if fracked (or alongside a mostly oil well as associated gas) - and we produce lots of that, so this is a product of the natural gas processing plant when you separate out the methane/nat gas. Plus we make sure we capture it for both regulatory and economic reasons and have the petrochemical facilities to use it so there is incentive there.
Russias number is surprisingly low given their NG production even though they are producing more out of traditional gas fields than the US is, which makes me believe they are probably venting and flaring a lot of it at their processing plants…especially since they already vent/flare/leak at about the highest rates in the world.
Thanks for the info!
Alternatively, the chart could be left as is but relabelled "Total petroleum and other liquids production, as reported by the EIA"
I'm no expert, but the EIA also has this: https://www.eia.gov/energyexplained/oil-and-petroleum-products/where-our-oil-comes-from.php
Still shows the US as the highest producer, but basically tied with Russia and Saudi Arabia.
That is a big difference. Wonder if the chart that Milan was using includes Ethanol production.
The gap isn't due to (corn) ethanol production, but rather mostly due to "NGPL":
https://www.eia.gov/international/data/world/petroleum-and-other-liquids/monthly-petroleum-and-other-liquids-production?pd=5&p=0000000000000000000000000000000000vg&u=0&f=M&v=line&a=-&i=none&vo=value&t=C&g=none&l=249-000000000000000000000000000000000000000500000002&s=94694400000&e=1651363200000&
Which are "Natural Gas Plant Liquids":
https://www.eia.gov/tools/glossary/index.php?id=Natural%20gas%20plant%20liquids
Basically as far as I can tell the US gets more liquids from natural gas than Russia or Saudi Arabia does, so reporting crude oil + NGPL shows a very different figure from just reporting NGPL.
Thanks! Somehow I couldn’t find a page like this on the EIA site when I poked around, this is exactly what I was looking for.
Huh, you're right in that basically every source I checked shows crude production at ~11 million barrels per day, but my (admittedly quick and perhaps incorrect) attempt at converting our natural gas production from cubic feet to OBEs looked like it would add another 21 million barrels, so that doesn't seem to be the source of the disconnect. Hopefully Milan can chime in and clarify sources!
The link from Milan seems to show that the disconnect is due to NGPL which are "Natural Gas Plant Liquids"
https://www.eia.gov/tools/glossary/index.php?id=Natural%20gas%20plant%20liquids
I'm quite fuzzy on why we have so much more of them than Russia or Saudi Arabia though.
>>And since the administration seems undecided on what to do with the now nearly empty SPR<<
Nearly empty? That sounds quite dire, actually, I had zero idea it was so depleted. I'd always pictured virtually inexhaustible oceans of the stuff lying deep in, uh, was it salt caverns or something in Louisiana?
Apologies if my rapid skim glossed over this (nearly 10:30pm here and it's been a long day), but, do I understand correctly that Biden doesn't need congressional approval to refill the SPR, but does need approval to expand its capacity?
It's historically low right now at about 430 million barrels, with a capacity of around 720 million barrels. Biden drew down somewhat under 200 million barrels, so we were around 630 million barrels before the drawdown.
The average cost paid for the oil in the SPR was $30. Nice! https://www.energy.gov/ceser/spr-quick-facts
This is not a bad idea, and it would work somewhat like the hedging deals all oil companies already use with the big banks. Set up properly, it could be a win-win for the companies when prices go too low. I’d rather see the public profit from price volatility than the banks (the house always wins).
The problem with this scheme is that there are many points between the wellhead and the pump that would need to be controlled to ensure these discounts (or premiums when crude prices are low) are reflected properly. It would be pretty complicated to regulate and ripe for corruption.
China has a strategic pork reserve:
https://www.nytimes.com/2019/10/07/business/china-strategic-pork-reserve.html
* The more you know
I mean, China historically had a strategic rice reserve, going back at least as far back as the Tang Dynasty (IIRC). The government would buy excess grain (generally rice) during good harvests and sell it (or outright give it out) during bad ones, keeping the price stable.
(I read this many years ago in a book that is now at my parents' place in another state and now I can't find any good online resources. So it might've been a different dynasty. But still!)
In addition to refilling the SPR or purchasing oil futures, the Biden administration should also pressure House Democrats to pass Manchin's permitting bill. If more pipelines get built as a result of that bill, that would also help stabilize prices because it would give oil companies more places to sell oil and natural gas to.