Russia/Ukraine conflict

[Tiger]

I am incredibly disappointed in how Democracy Now! have been, and are covering Putler's Genocide and Crime against Humanity in Ukraine. They are basically parrotting the LIES straight out of the Kremlin(!)...

I don't listen to them as much I used to. I think they've lost it in various degrees regarding other topics as well – but that is a very long discussion that I (of course) won't go into here...

I cannot recommend Channel Blocker enough, there's just so much cow dung out there.

 

[petit_bateau]

and more stuff still to come

https://twitter.com/x/status/1546827403367964674

 

[X Fan]

 

[Doggydogworld]

How is restricting supply going to keep pricing low?

Rationing reduces consumption. You do get this.... right?

And how is the invasion which caused this price increase not Putin's fault,

The invasion did not cause the price increase. Our boneheaded response did. As I've said repeatedly, we had two choices:

1) Reduce consumption via rationing --> Putin sells far fewer bbls at lower prices
2) Maintain consumption but beat our chests and "refuse to buy from Russia" --> Putin sells slightly fewer bbls at much higher prices

The reason prices rise under scenario 2 should be obvious, disrupting finely tuned supply chains causes huge dislocations and inefficiencies. Refineries set up for one grade of oil suddenly find their supply shut off. They either run less efficiently with a different grade or retool which means going offline and spending money which they must recoup through higher crack spreads. Tankers which used to take Russian oil to Europe 4 days away get re-routed to China 40 days away. That cuts their throughput 90%!!!! Traders and arbitrageurs jump in to exploit these disruptions, just like semiconductor brokers buying up and warehousing automotive chips or moms buying up extra baby formula and selling it on eBay.

and how is the higher price per gallon vs price per barrel than at other times not oil company gouging?

Every time the Q clowns claim Tesla is greedily jacking up prices to inflate margins in violation of "accelerating the transition" Tesla bulls rightly explain that Tesla is production constrained. Lower prices would not generate a single additional sale, in fact the fat margins allow Tesla to commit more cash to expansion.

Where does this clear-headed thinking go when the subject turns to oil? Supply dropped after COVID crashed demand and sent prices below zero. Some of that supply went away for good. As demand came back the oil markets became tight. Then our politicians added artificial supply chain disruptions on top of that. Margins increase as participants react to these disruptions. These higher margins spur more drilling, refinery retooling, etc. needed to bring things back into balance.

 

[STS-134]

Rationing reduces consumption. You do get this.... right?

No, it doesn't. Giving everyone a daily allocation encourages hoarding. People will buy out their daily allocation, regardless of whether or not they need it, because they know that if they actually need more than they're allocated later on, they won't be able to get it.

You can't manipulate this stuff. Want to do it by even/odd last license plate digit? Then I'll buy 2 or 3 or 4 cars with different last digits, and transfer the gas from one vehicle to another.

Simpler solution: supply and demand need to be matched. Economics 101.

The invasion did not cause the price increase. Our boneheaded response did. As I've said repeatedly, we had two choices:

1) Reduce consumption via rationing --> Putin sells far fewer bbls at lower prices
2) Maintain consumption but beat our chests and "refuse to buy from Russia" --> Putin sells slightly fewer bbls at much higher prices

3) Cut off all supply from Russia. Cut off all countries that buy from Russia. Either they are with NATO, or they are with Russia. Any country on Russia's side does not trade with NATO. Then let market pricing determine the cost of gas.

 

[wdolson]

View attachment 828054

I was just about to post the same image...

Rationing reduces consumption. You do get this.... right?


The invasion did not cause the price increase. Our boneheaded response did. As I've said repeatedly, we had two choices:

1) Reduce consumption via rationing --> Putin sells far fewer bbls at lower prices
2) Maintain consumption but beat our chests and "refuse to buy from Russia" --> Putin sells slightly fewer bbls at much higher prices

The reason prices rise under scenario 2 should be obvious, disrupting finely tuned supply chains causes huge dislocations and inefficiencies. Refineries set up for one grade of oil suddenly find their supply shut off. They either run less efficiently with a different grade or retool which means going offline and spending money which they must recoup through higher crack spreads. Tankers which used to take Russian oil to Europe 4 days away get re-routed to China 40 days away. That cuts their throughput 90%!!!! Traders and arbitrageurs jump in to exploit these disruptions, just like semiconductor brokers buying up and warehousing automotive chips or moms buying up extra baby formula and selling it on eBay.


Every time the Q clowns claim Tesla is greedily jacking up prices to inflate margins in violation of "accelerating the transition" Tesla bulls rightly explain that Tesla is production constrained. Lower prices would not generate a single additional sale, in fact the fat margins allow Tesla to commit more cash to expansion.

Where does this clear-headed thinking go when the subject turns to oil? Supply dropped after COVID crashed demand and sent prices below zero. Some of that supply went away for good. As demand came back the oil markets became tight. Then our politicians added artificial supply chain disruptions on top of that. Margins increase as participants react to these disruptions. These higher margins spur more drilling, refinery retooling, etc. needed to bring things back into balance.

But higher margins have not spurred more drilling because the ability to drill more wells has been degraded. The oil companies have lost a lot of ability due to the old hands retiring and not being replaced.

Every industry has what's called institutional knowledge. It's knowledge of things that are passed down from the old hands to the new recruits verbally and is never written down anywhere. I worked in a lab at Boeing that had lots of institutional knowledge. The old hands who had built the lab were all nearing retirement when I was there. I left just as the company started laying off people. Shortly after I left the company came up with a brilliant plan to encourage retirement with some incentives and all the old hands retired en masse. It left the lab with a shortage of institutional knowledge and they really struggled to get anything done. They were talking about hiring me back as a contractor because I knew how some of the old systems worked, however this was in August of 2001. When those planes flew into the towers Boeing didn't hire anybody for a long time.

At one time all the navies of the world had skills of how to fight a sailing ship. What you need to do with a sailing ship battle is very different from more modern ships. When propulsion went from sail to engines and guns went from cannon broadsides to guns in turrets, the old hands left the navies and while the art of sailing was preserved the art of how to fight those ships was lost. We have writings from the age of sail about how those ships were fought, but nobody knows the specifics of how to maneuver those ships in close quarters and how to do damage control on a wooden vessel under fire. There are some things that can be figured out from basic principles, but modern people trying to maneuver a sailing vessel in a fight against even an average crew from the age of sail would lose badly.

The oil business has lost a lot of institutional knowledge about how to find oil and how to bring new oil on line. It can be relearned with a new generation of oil professionals, but it won't happen overnight.

And gasoline rationing on the back of the pandemic would have been political suicide in many countries. It would have likely resulted in anti-war or even pro-Putin candidates winning in many countries and support for Ukraine would have dried up. Macron just hung on in France against Marie LaPen. The US midterms are this fall and they could go either way. Boris Johnson's government in the UK just fell and we don't know who will be the next PM (though it looks like all the likely candidates are going to support the war, though if Britain was rationing gas some opportunist could go the other way and win).

 

[petit_bateau]

More info on the canal exits to the Black Sea for grain in the Snake Islan area

More than 130 grain ships stuck in Black Sea as talks start in Istanbul

Negotiators from Russia, Ukraine, the UN and Turkey seek deal to enable exports to pass on to the Danube

www.theguardian.com

 

[JRP3]

Every time the Q clowns claim Tesla is greedily jacking up prices to inflate margins in violation of "accelerating the transition" Tesla bulls rightly explain that Tesla is production constrained. Lower prices would not generate a single additional sale, in fact the fat margins allow Tesla to commit more cash to expansion.

Where does this clear-headed thinking go when the subject turns to oil? Supply dropped after COVID crashed demand and sent prices below zero. Some of that supply went away for good. As demand came back the oil markets became tight. Then our politicians added artificial supply chain disruptions on top of that. Margins increase as participants react to these disruptions. These higher margins spur more drilling, refinery retooling, etc. needed to bring things back into balance.

Terrible analogy and ignores my entire point that in the past when oil hit similar pricing gasoline did not go as high. Also, how is your rationing plan not an "artificial supply chain disruption"? You would be artificially limiting the supply. However since most driving is not discretionary any rationing that didn't crash the economy would be minimal at best. It's a ridiculous proposal.

 

[Doggydogworld]

But higher margins have not spurred more drilling because the ability to drill more wells has been degraded. The oil companies have lost a lot of ability due to the old hands retiring and not being replaced.

Baker Hughes rig count is up 50% y/y.

Terrible analogy and ignores my entire point that in the past when oil hit similar pricing gasoline did not go as high.

Different disruptions cause different results. I mentioned capacity lost to COVID plus the sudden loss of certain crude grades. But the sanctions created a new stress on refinery capacity. Europeans historically bought a lot of refined products (gas, diesel) from Russia because they preferred dirty refineries to be built in Russia vs. their own backyard. IIRC Russia exported 2.5-3.0m bpd of refined products, almost all to Europe.

When Europe "stopped funding Putin's war" (by increasing his funding, lol) they started buying more from other sources such as the Middle East. But those guys export crude, not refined products. Meanwhile Russia's replacement customers (e.g. China, India) want crude instead of products, because they want to keep their refinery workers employed.

So the world now has excess refinery capacity in Russia, which they're having to shut down, and a severe shortage of capacity in the west. That has never happened before, thus crack spreads have hit historic highs. Especially diesel crack, because Europe's mix disproportionately favors diesel.

Also, how is your rationing plan not an "artificial supply chain disruption"?

It's obviously artificial, but it's not a supply chain disruption. And if it's so impossible to reduce consumption, just admit it and keep buying from Russia. Don't make matters three times worse by severely disrupting supply chains and boosting Putin's revenue while crushing the poor and especially the rural poor with $5 gas.

I never said rationing is the only option. I said it's the only way to dramatically reduce Putin's oil revenue. It's perfectly OK to say rationing is too messy so we'll just keep the oil flowing the same way as before. What our politicians actually did was 100% pure posturing and caused huge economic damage to western economies while helping Putin. It's beyond insane.

 

[Sandor]

More info on the canal exits to the Black Sea for grain in the Snake Islan area

More than 130 grain ships stuck in Black Sea as talks start in Istanbul

Negotiators from Russia, Ukraine, the UN and Turkey seek deal to enable exports to pass on to the Danube

www.theguardian.com

I'm not sure what this shipping glut at the Danube delta is about. Bystre estuary canal is really shallow, less than 15ft draft and limited to speeds less than 15knots. From there you'll only get to the Romanian Danube ports from where you do what? Same applies to the Sulina branch traffic, where are those ships are going? Normal grain traffic would have been from Mariupol, Kherson, Odessa, etc. to Mediterranean Sea thru the Dardanelles Strait and from there either thru the Suez canal or to the North African and Middle Eastern Mediterranean ports.

It looks that if the Guardian info is right (which is not always the case with theguardian.com) that the ships are loading from Izmail, Bilhorod, Olekasandrivka/Chornomorsk, Odessa, Pivdennyi and Mykolaiv and unload I'd imagine in Braila, Galati and God only knows where else as there are absolutely no other ports further south in Romania (where the "River Danube" callout is).

Problems with that:
1. Izmail seaport is small and pretty much unconnected to most Ukrainian territory. You can get to Romania easy enough, but first you need to pass thru a corner of Moldova, so more fun... Not to mention that the railways change gauge at the Moldova-Romania border...
2. Bilhorod is impossible to connect to any high bandwidth cargo traffic; there are just minor roads and that's the reason why Bilhorod's port is really small, not intended for shipping bulk cargo - Google maps for example shows zero ships docked there. The Dniester estuary opening to Black Sea is crossed by the Zatoka Bridge (Pidyomnyy Mist) which is not very tall too.
3. Odessa's marine approaches are thoroughly mined by Ukraine.
4. Pivdennyi (former Yuzhnyi) is mostly an oil terminal and trans-container facility, not a grain seaport.
5. Mykolaiv traffic has to go thru the Dniprovs'ka Gulf, as in right in front of Kherson which right now is an active battle zone and easily in range of russian tube and missile artillery.
6. Braila and Galati may be main traffic ports for Romania but from there you have to trans-ship to rail to get the grains anywhere else... I guess you can keep going further west and north on Danube River, but you're going the wrong way towards the middle of Europe further away from your destination... And if you want to trans-board in Romania, the Constanta seaport, south of the Danube delta is a way better choice-bigger, better connected.

So I'd like to believe that you have 130 ships of Danube estuary loaded with Ukraine wheat for export thru Romania, but I don't see the logic in it. If you want to ship to Europe (and not to North Africa and Middle East where the traditional clients were) wouldn't make more sense to use rail and trans-board at the Romanian or Polish western and northern borders and from there you can use the EU rail system towards whatever destination? Still not going SW where it should...

Scratching my head on this...

 

[petit_bateau]

I'm not sure what this shipping glut at the Danube delta is about.

Scratching my head on this...

Thanks Sandor. Very thorough.

From various other announcements there would seem to be plans to increase some of the port handling and storage facilities, both rail-side and river/sea-side. That would both increase daily capacity and increase duration over which tha capacity can be utilised (i.e. the increased storage).

It seems logical that an increased number of river & coastal barges will move into the region. I had previously only considered that these might be for canal use. However it now occurs to me that they may be hoping to do some barge traffic close to the shoreline as far up as Odessa. This might be achievable if Ukraine were to de-mine its immediate coast, just leaving a further out minefield. This was certainly a typical European tactic in WW1 and WW2 by both Axis and Allies. That might bring Odessa's handling capacity into play, however without knowing the extent and placement of Ukraine minefields vs barge draughts and available routings that is just speculation on my part.

Here in UK there was a Ukraine MP from the southern area on BBC Radio 4 this morning. He too was unsure of why Russia might co-operate in any attempt to get Ukraine grain moving, i.e. what's in it for Russia. my interpretation of his comments were that a) maybe the EU's partial land blockade of Kaliningrad is a lever; b) Russia may be worried about Ukraine etc seeking to block Black Sea use for oil tanker traffic to Russian ports; c) heading off attempts to block Russian grain (or stolen Ukraine grain) out of Black Sea ports.

 

[petit_bateau]

This may interest some

Russian Oil’s Achilles Heel

A new paper by Craig Kennedy proposes ways to enhance the economic impact of oil sanctions while mitigating their harmful effects on the world economy.

daviscenter.fas.harvard.edu

 

[JRP3]

It's obviously artificial, but it's not a supply chain disruption. And if it's so impossible to reduce consumption, just admit it and keep buying from Russia. Don't make matters three times worse by severely disrupting supply chains and boosting Putin's revenue while crushing the poor and especially the rural poor with $5 gas.

I never said rationing is the only option. I said it's the only way to dramatically reduce Putin's oil revenue. It's perfectly OK to say rationing is too messy so we'll just keep the oil flowing the same way as before. What our politicians actually did was 100% pure posturing and caused huge economic damage to western economies while helping Putin. It's beyond insane.

Weird how gas prices were increasing sharply before the executive order on March 8 and then dropped immediately after, remaining down for over a month

Also note the difference in peak of the oil price chart

 

[petit_bateau]

Weird how gas prices were increasing sharply before the executive order on March 8 and then dropped immediately after, remaining down for over a month

If you wish to debate this with each other - I seem to recall the US release from the US's Strategic Petroleum Reserve also included the release of some refined products. At least that is my memory. It is also perhaps worth checking whether non-US releases may have included refined products.

(Personally I'm trying not to get involved in the debate over the effectiveness and/or motivations re oil sanctions, simply trying to point to a relevant 'fact', or at least fuzzy memory)

 

[JRP3]

I seem to recall the US release from the US's Strategic Petroleum Reserve also included the release of some refined products. At least that is my memory. It is also perhaps worth checking whether non-US releases may have included refined products.

I'm not clear on the implications of your statement but this release only mentions crude oil

DOE Announces Additional Notice of Sale of Crude Oil From The Strategic Petroleum Reserve

Biden Administration Continues Actions to Provide Relief for American Consumers and Businesses Due to Putin’s Energy Price Hike

www.energy.gov

 

[petit_bateau]

I'm not clear on the implications of your statement but this release only mentions crude oil

DOE Announces Additional Notice of Sale of Crude Oil From The Strategic Petroleum Reserve

Biden Administration Continues Actions to Provide Relief for American Consumers and Businesses Due to Putin’s Energy Price Hike

www.energy.gov

The implication is/was to do with whether there is a refinery bottleneck (due to a refinery suitability mismatch) rather than a (crude) supply constraint.

However given your comment I have just had a quick look re the US SPR releases, and indeed they were just crude oil. There is a nuance in that there is a split between sweet and sour, which will be to align with US refinery capacities, but it seems I was wrong re my memory of there being some refined product inclusion. Sorry if I have misled the debate.

I don't know whether this holds true for RoW SPR releases - perhaps a delve into IEA data may be required for anyone into detail.

DOE Announces Additional Notice of Sale of Crude Oil From The Strategic Petroleum Reserve

Biden Administration Continues Actions to Provide Relief for American Consumers and Businesses Due to Putin’s Energy Price Hike

www.energy.gov

DOE Announces Sales From Strategic Petroleum Reserve to Combat Putin's Price Hike

DOE Issues Contract Awards For 30 Million Barrels of Crude Oil, Announces Plan For Third Emergency Sale to Address Continued Market and Supply Disruptions Related to President Putin’s War on Ukraine

www.energy.gov

 

[[email protected]]

Andrei Martyanov on the potential admission of Turkey, Egypt and KSA to BRICS....https://www.youtube.com/watch?v=aRULWkO4ZZU

 

[TheTalkingMule]

This doesn't seem like a nation getting ready to limit oil exports.

Russia Aims to Take Control of Oil Pricing by Creating Benchmark​

• Oil-trading on national platform to start in October: document
• G-7 price cap plan reinforced need for Russian benchmark
  

Bloomberg - Are you a robot?

Russia’s government has made a plan to create a national oil benchmark next year, as it seeks to protect itself from efforts by the West to restrict the flow of petrodollars to the country.

Key Russian ministries, domestic oil producers and the central bank plan to launch oil trading on a national platform in October, according to a document seen by Bloomberg News. Russia will work to attract foreign partners to buy oil, with the aim of achieving sufficient trading volumes to establish a pricing benchmark between March and July of 2023, according to the plan.

Two Russian officials, who spoke on condition of anonymity, confirmed that work is ongoing on a national benchmark, saying the country seeks to ensure it can sell its oil without any external pressure or restrictions. The G-7 proposal only further proved the necessity of an independent Russian benchmark, said one official.

 

[[email protected]]

Andrei Martyanov on the potential admission of Turkey, Egypt and KSA to BRICS....https://www.youtube.com/watch?v=aRULWkO4ZZU

Mr. Moderator: an educated opinion about the implications of KSA's admission to BRICS must be more relevant than all the opinions about releases from the SPR, etc. Martyanov ic highly qualified. What gives with the failure to approve this for publication?

 

[wdolson]

The poor state of Russian ammunition
Thread by @TrentTelenko on Thread Reader App

Those pictures are from 2010, but it gives us an idea of how the Russians are "storing" their ammunition and the condition of it. Look at the corrosion on some of the shells.