Shorting Oil, Hedging Tesla

[TheTalkingMule]

I've made a few posts here stating the US govt should use our SPR as an acting "swing influencer". Not to set any kind of proactive pricing policy, but to counteract OPEC+ nonsense. It wouldn't be that tough.

 

[Doggydogworld]

I've made a few posts here stating the US govt should use our SPR as an acting "swing influencer". Not to set any kind of proactive pricing policy, but to counteract OPEC+ nonsense. It wouldn't be that tough.

OPEC could just cut production for a few months and bleed the SPR dry.

 

[mspohr]

OPEC could just cut production for a few months and bleed the SPR dry.

That's why we need to control the market by restricting imports and exports. We can't control the world market but we could control the US market.

 

[TheTalkingMule]

OPEC could just cut production for a few months and bleed the SPR dry.

US production ebbs and flows 9-13.5Mb/d, we could easily fill the gap if we made even mild production controls. Incentivize domestic production to respond to conditions week to week. 9r hell, just limit sales with quotas.

Saudi Arabia has little to no direct power to affect WTI, imports from them have fallen to essentially zero. People just don't realize they've been bullshitting the market for the last 5 years.

In the scenario I'm suggesting, the US and Saudis would be like 1a and 1b swing producers. With a little effort we could permanently neuter OPEC's ability to simply hold a meeting, say a few words, and move global oil pricing.

It would be a delicate operation politically, but so what. And all of this would require everyone to admit global demand for crude has peaked. And the plan would need to be part of a wider plan that aims to step down demand rapidly.

 

[TheTalkingMule]

WTI down 5.9%.
SCO up only 8.7%?

Guess definitions of "Ultra-short" can vary from one fund to the next!

Yet another indication of how tough it is for oil to "go down". I think the market for oil futures as basically been rigged to go up since the -$37 WTI day in the pandemic. Not on purpose, but I'd bet the changes put in place to make sure it couldn't go negative just gave an opening for shady players to easily drive it up.

We shall see. This China lockdown should throw some cold water on things. As covid eases across the US, this could be a nice double-whammy to knock down WTI.

 

[Oil4AsphaultOnly]

The U.S. Government Doesn’t Control Domestic Oil Production. But It Should.

The oil and gas industry won't increase production because it's enjoying the profits from high prices.

theintercept.com

There are two important things to remember about how oil and gas production work: The government doesn’t place any production limits on oil and gas companies, and there’s no such thing as an immediate production increase.

But then we get to the real reasons oil companies aren’t drilling: It’s not government intervention, it’s a combination of money, labor, and materials (shocking, I know).

But even if labor were not a concern and the government threw all its resources into solving the industry’s material shortage problem, oil and gas executives don’t want to increase production because the high prices are working for them financially at the moment. They’ve said so explicitly, out loud and in public.

Which brings us to the elephant in the room: the United States’s supposed energy independence. As a net exporter of oil and gas, that’s what the country was promised by industry. But you can’t have independence if you are ruled entirely by global commodity markets. The other big oil-exporting countries are able to use their production capabilities to protect themselves from sudden price changes because their fossil fuel industries are nationalized.

But an export ban is not a terrible long-term plan. And since the industry is accusing the government of meddling with production anyway, why not call its bluff and start a real conversation about nationalizing the industry and marching it toward a transition to renewable energy? What we’re seeing now is an entirely unmanaged transition, unfolding in real time. It’s painful, and the future is completely unclear, but none of that has to be true.

Good luck trying to get this passed. Many, including myself, oppose the idea of government controlling any means of production. The current issue through the oil market is due to war (something to be solved by the governments involved), not systemic issues (e.g fraud, grift, etc) in the system.

 

[mspohr]

Good luck trying to get this passed. Many, including myself, oppose the idea of government controlling any means of production. The current issue through the oil market is due to war (something to be solved by the governments involved), not systemic issues (e.g fraud, grift, etc) in the system.

The reality is that government already plays a large role in oil and gas production (permits, environment, large subsidies, etc.). Government plays a large role in most industries. Take a look at agriculture for an extreme example. You might want a free enterprise nirvana but that just won't exist anywhere.
The current issue with the oil market is war and before that it was Covid disruptions. These are good reasons for the government to increase regulation of this vital commodity.
The systemic issue with everything is unrestrained capitalism which has only one operating principle... greed. It needs government regulation to prevent abuse and exploitation.

 

[mspohr]

Can the west slaughter Putin’s sacred cash cow?

Yet oil is central to Putin’s war machine. Thane Gustafson, the chronicler of Russia’s energy sector, points out in his latest book, Klimat, that in 2019, the last pre-pandemic year, income from oil – worth $188bn – accounted for 44% of Russian exports in value, and gas only 12%. Hydrocarbons generate 56% of Russia’s export income and 39% of the federal budget. Kobolyev is convinced that if the EU banned Russian oil, other sources could be found. “There is a Russian proverb: a sacred place is never empty for long”, he explains.

In a game of geopolitical chess with Russia, Biden is already working to find alternative oil supplies. For now he is trying to fill the shortfall through drawing on the US reserves, oil from Venezuela, the world largest oil producer, Iran and Saudi Arabia.

The more complex issue is gas. As a compromise between those that favour a ban, such as Poland and the Baltic states, the EU has produced a plan by which the EU cuts its consumption of Russian gas by two-thirds before the end of 2022. The EU would then become independent from all Russian fossil fuels by 2027 or “well before 2030”. “By the end of this year, we can replace 100bn cubic metres [bcm] of gas imports from Russia. That is two-thirds of what we import from them”, the EU commission said in a statement.

“The Russians and Putin”, he explains, “have always believed Europe can never survive without Russian oil. He thinks if he wins in Ukraine, the Kremlin will be forgiven because there is no alternative and the west is weak. That is how he thinks, it’s how Gazprom thinks and it’s how Rosneft thinks. That is how they see the world. That is why Putin personally controls the energy trade. It is his sacred cash cow.”

 

[TheTalkingMule]

I'd like to see a ban by US/EU and any global allies we can muster. Then make an agreement with China they can still import Russian oil(but not Russia originating LNG). That should keep Russian oil at a 40% discount and Europe's medium term gas supply reliable.

Then all you gotta do is see how you'll "tax" China for all the oil savings you just handed them. I'm sure something could be worked out.

 

[generalenthu]

Can the west slaughter Putin’s sacred cash cow?

Yet oil is central to Putin’s war machine. Thane Gustafson, the chronicler of Russia’s energy sector, points out in his latest book, Klimat, that in 2019, the last pre-pandemic year, income from oil – worth $188bn – accounted for 44% of Russian exports in value, and gas only 12%. Hydrocarbons generate 56% of Russia’s export income and 39% of the federal budget. Kobolyev is convinced that if the EU banned Russian oil, other sources could be found. “There is a Russian proverb: a sacred place is never empty for long”, he explains.

In a game of geopolitical chess with Russia, Biden is already working to find alternative oil supplies. For now he is trying to fill the shortfall through drawing on the US reserves, oil from Venezuela, the world largest oil producer, Iran and Saudi Arabia.

The more complex issue is gas. As a compromise between those that favour a ban, such as Poland and the Baltic states, the EU has produced a plan by which the EU cuts its consumption of Russian gas by two-thirds before the end of 2022. The EU would then become independent from all Russian fossil fuels by 2027 or “well before 2030”. “By the end of this year, we can replace 100bn cubic metres [bcm] of gas imports from Russia. That is two-thirds of what we import from them”, the EU commission said in a statement.

“The Russians and Putin”, he explains, “have always believed Europe can never survive without Russian oil. He thinks if he wins in Ukraine, the Kremlin will be forgiven because there is no alternative and the west is weak. That is how he thinks, it’s how Gazprom thinks and it’s how Rosneft thinks. That is how they see the world. That is why Putin personally controls the energy trade. It is his sacred cash cow.”

Very good interviews (in 2 parts) with Thane Gustaffson on the Energy transition show if you subscribe to it. Talks at length about Putin's mindset and the energy policy that arises from that. Very illuminating.

I am scratching my head reading this news wondering why 2/3 of Russian imports can be substituted away this year, but requires another 4 years for the remaining third.

 

[Doggydogworld]

US production ebbs and flows 9-13.5Mb/d, we could easily fill the gap if we made even mild production controls. Incentivize domestic production to respond to conditions week to week. 9r hell, just limit sales with quotas.

The Texas Railroad Commission did this back in the 50s and 60s. It'd be a lot trickier with shale due to how the wells work and the crazy decline rates.

Saudi Arabia has little to no direct power to affect WTI, imports from them have fallen to essentially zero.

Only if you wall the US off from the global market. We were briefly a net exporter of petroleum in 2019, so it's theoretically possible if we rebuild production to pre-Covid levels. But a crazy high fraction of our production is NGLs which we mostly export. We then import a lot of crude and export some products. So it's not that clean cut.

In the scenario I'm suggesting, the US and Saudis would be like 1a and 1b swing producers. With a little effort we could permanently neuter OPEC's ability to simply hold a meeting, say a few words, and move global oil pricing.

We simply aren't in OPEC's league. Back in the day they cut production from 30m to 15m bpd to support prices. That effort finally failed in early 1986, so they no longer try to hold a fixed price. But they still have 10x more ability to "swing" than us.

Can the west slaughter Putin’s sacred cash cow?

.....In a game of geopolitical chess with Russia, Biden is already working to find alternative oil supplies. For now he is trying to fill the shortfall through drawing on the US reserves, oil from Venezuela, the world largest oil producer, Iran and Saudi Arabia.

LOL. The author needs to find a more credible source of talking points than Jen Psaki.

 

[Oil4AsphaultOnly]

The reality is that government already plays a large role in oil and gas production (permits, environment, large subsidies, etc.). Government plays a large role in most industries. Take a look at agriculture for an extreme example. You might want a free enterprise nirvana but that just won't exist anywhere.
The current issue with the oil market is war and before that it was Covid disruptions. These are good reasons for the government to increase regulation of this vital commodity.
The systemic issue with everything is unrestrained capitalism which has only one operating principle... greed. It needs government regulation to prevent abuse and exploitation.

There's a HUGE difference between regulating an industry and nationalizing that industry. And we're a pretty far cry away from unrestrained capitalism as well. There's quite a lot of gray area between the two extremes, let's not polarize it.

 

[mspohr]

There's a HUGE difference between regulating an industry and nationalizing that industry. And we're a pretty far cry away from unrestrained capitalism as well. There's quite a lot of gray area between the two extremes, let's not polarize it.

My point was that we are a long way from unrestrained capitalism.
We could do with a lot more regulation including things like forbidding exports (which we have done in the recent past).
Your assumption that I favor nationalization of the oil industry is also far from the mark. I don't know anyone who is advocating that.
We are in the middle grey area and there is lots of room for action there.

 

[mspohr]

LOL. The author needs to find a more credible source of talking points than Jen Psaki.

What does Jen Psaki have to do with it? She's not quoted anywhere.

 

[Oil4AsphaultOnly]

My point was that we are a long way from unrestrained capitalism.
We could do with a lot more regulation including things like forbidding exports (which we have done in the recent past).
Your assumption that I favor nationalization of the oil industry is also far from the mark. I don't know anyone who is advocating that.
We are in the middle grey area and there is lots of room for action there.

From the article you quoted: "And since the industry is accusing the government of meddling with production anyway, why not call its bluff and start a real conversation about nationalizing the industry"

I know my reading comprehension isn't 100%, but that sure seems to be exactly what's being advocated doesn't it? Unless you think calling a bluff with an obvious bluff is somehow effective? You won't win many poker hands that way.

Edit: My point is the source material you're using. Some of it seems to come from flights of fancy and no care towards plausibility.

 

[mspohr]

From the article you quoted: "And since the industry is accusing the government of meddling with production anyway, why not call its bluff and start a real conversation about nationalizing the industry"

I know my reading comprehension isn't 100%, but that sure seems to be exactly what's being advocated doesn't it? Unless you think calling a bluff with an obvious bluff is somehow effective? You won't win many poker hands that way.

Edit: My point is the source material you're using. Some of it seems to come from flights of fancy and no care towards plausibility.

Yes, that is what it says
However, it may be a surprise to you that I don't necessarily agree with everything anyone says in articles I post. I post them for discussion.

 

[TheTalkingMule]

We simply aren't in OPEC's league. Back in the day they cut production from 30m to 15m bpd to support prices. That effort finally failed in early 1986, so they no longer try to hold a fixed price. But they still have 10x more ability to "swing" than us.

That's the thing, OPEC doesn't have 1/10th the power they had just a decade ago, they have just enough to get the job done. I would even argue they needed Wall Street's help starting in 2017 to manipulate pricing effectively at the global scale.

Fracking has broken Saudi Arabia's ability to swing pricing reliably. But just like renewables, fracking(inside an open US market) needs to utilize a buffer to be effective.

Not to mention, we have literally zero strategic need for the SPR now that frackable reserves are known and production can be ramped to 20mb/d+ in a wartime emergency.

We'll see what happens with fracking production once the pandemic impact is gone.

 

[Oil4AsphaultOnly]

Yes, that is what it says
However, it may be a surprise to you that I don't necessarily agree with everything anyone says in articles I post. I post them for discussion.

Okay. So what's the discussion point? The article advocated for government control of oil production. You quoted directly from the article without further commentary. If you didn't agree with the article, then a quick comment would've helped wouldn't it? Otherwise, you can't fault me for assuming that you agreed with the article.

 

[TheTalkingMule]

Well this is an interesting one. Smells to me like the new owners of Limetree refinery in STX are insisting the island go 100% solar so they can reopen the refinery economically. I bet the DoE is kicking in tons of money too. Yet MORE fossil fuel subsidies!

Bryan Announces Plan to Make St. Croix 100 Percent Solar-Powered in Months, Saying Rising Cost of Fuel Threatens Economy

In what would amount to one of the boldest moves in USVI government history with far-reaching impact...

viconsortium.com

 

[mspohr]

Well this is an interesting one. Smells to me like the new owners of Limetree refinery in STX are insisting the island go 100% solar so they can reopen the refinery economically. I bet the DoE is kicking in tons of money too. Yet MORE fossil fuel subsidies!

Bryan Announces Plan to Make St. Croix 100 Percent Solar-Powered in Months, Saying Rising Cost of Fuel Threatens Economy

In what would amount to one of the boldest moves in USVI government history with far-reaching impact...

viconsortium.com

I read TFA twice and saw no mention of the refinery. Is there something I'm missing?
Looks like a good project (without the refinery)