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Why the US stores 700M barrels of oil underground

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Re: Why the US stores 700M barrels of oil underground

#71

Post by JTon »

adventured wrote: post #57
irq-1 wrote: post #51

Earlier quoted context omitted.

I Googled this yesterday thinking the same thing, but the real increases in production came from Iraq (nearly doubling yearly output) and the extra US production. Saudi Arabia didn't seem to have any substantial change in production. Maybe I'm wrong, but that's what I found. Politically, if Saudi Arabia can't be counted on to fix prices when faced with a threat like Russia and Ukraine, then why does the US keep them…

Saudi Arabia has only added about a million barrels per day during the supposed attempt to weaken US frackers. By contrast, the US added about three million barrels per day in three years ('12,'13,'14). Most of the oil price damage was caused by the dollar. Oil had been running at significant global oversupply for years before the dollar began to crash the price back in June/July 2014. That same dollar effect threw C…

How exactly does a strong USD decrease the price of oil?

Re: Why the US stores 700M barrels of oil underground

#72

Post by BookmarkSaver »

mediumdeviation wrote: post #15
jacobolus wrote: post #8

> But there’s an important line to draw between that and using an SPR for ad hoc manipulation of the world’s markets. On this point, Martin Young is emphatic: “The oil stocks are not there for price management as such,” he explains, “they’re there to correct a shortage in the market because of a supply disruption.” Strategic reserves can absolutely also be used as an offensive economic weapon, however. As one example…

That's interesting, but how is any commodity able to have it's price pushed down by a single seller dumping from a fixed reserve? If the market notice that the extra supply is coming from a fixed reserve, then they'd rightly be able to infer that at some point the supply will run out, and prices will return to market value, which would in turn drive up prices again. It probably won't go back to the previous equilibri…

It doesn't permanently go down. But if that single seller is selling at way under the previous market price, that is what everyone is going to be paying until they run out of their supply. If this lasts long enough, it could be enough to drive entities dependent on copper production out of business or into a collapse as the price they are forced to sell at isn't profitable. Once that point is reached it doesn't matter if the price goes back up when the single seller runs out, the damage has been done.

Re: Why the US stores 700M barrels of oil underground

#73

Post by ci5er »

JTon wrote: post #71
adventured wrote: post #57

Earlier quoted context omitted.

Saudi Arabia has only added about a million barrels per day during the supposed attempt to weaken US frackers. By contrast, the US added about three million barrels per day in three years ('12,'13,'14). Most of the oil price damage was caused by the dollar. Oil had been running at significant global oversupply for years before the dollar began to crash the price back in June/July 2014. That same dollar effect threw C…

How exactly does a strong USD decrease the price of oil?

Oil contracts and futures are priced in USD. This is what the phrase "Petro-dollar" refers to. And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil. This scheme as been pretty good for the US, but other players are not quite so enamored with it.

When the dollar is strong, it takes fewer of them to buy a barrel of oil. ITT there is a lot of talk about the production side of the equation, but the effect of the strong dollar and weaker Chinese demand have played a role too.

China is talking with Russia, Saudi Arabia and Iran about RMB denominated contracts, so that'll be fun. Currency risk will have to factored into contract prices.

Re: Why the US stores 700M barrels of oil underground

#74

Post by falsestprophet »

ci5er wrote: post #73
JTon wrote: post #71

Earlier quoted context omitted.

How exactly does a strong USD decrease the price of oil?

Oil contracts and futures are priced in USD. This is what the phrase "Petro-dollar" refers to. And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil. This scheme as been pretty good for the US, but other players are not quite so enamored with it. When the dollar is strong, it takes fewer of them to buy a barrel of oil. ITT there is a lot of talk about the production side of th…

"And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil."

This petrodollar conspiracy is baffling.

Countries don't hold dollars solely to buy oil.

The oil and gas industry is only about 4.6% to 6.5% of the global economy.

Countries hold reserve currencies to manage the exchange rate of their currency. Petrodollar conspiracists would be well served by learning about foreign exchange reserves: https://en.wikipedia.org/wiki/Foreign-exchange_reserves

And in any case, only 65% of foreign currency reserves are in the USD.

Re: Why the US stores 700M barrels of oil underground

#75

Post by ci5er »

falsestprophet wrote: post #74
ci5er wrote: post #73

Earlier quoted context omitted.

Oil contracts and futures are priced in USD. This is what the phrase "Petro-dollar" refers to. And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil. This scheme as been pretty good for the US, but other players are not quite so enamored with it. When the dollar is strong, it takes fewer of them to buy a barrel of oil. ITT there is a lot of talk about the production side of th…

"And this is why everyone needs a big slug of dollars in their respective reserves - to buy oil." This petrodollar conspiracy is baffling. Countries don't hold dollars solely to buy oil. The oil and gas industry is only about 4.6% to 6.5% of the global economy. Countries hold reserve currencies to manage the exchange rate of their currency. Petrodollar conspiracists would be well served by learning about foreign exch…

OK. So let's just truncate all of that and directly answer the question by saying that when the dollar is strong it takes fewer of them to buy any particular amount of a commodity that is priced in dollars.

Re: Why the US stores 700M barrels of oil underground

#76

Post by samstave »

jacobolus wrote: post #8

> But there’s an important line to draw between that and using an SPR for ad hoc manipulation of the world’s markets. On this point, Martin Young is emphatic: “The oil stocks are not there for price management as such,” he explains, “they’re there to correct a shortage in the market because of a supply disruption.” Strategic reserves can absolutely also be used as an offensive economic weapon, however. As one example…

I'm sure that the Plan A was also advised very closely by the CIA...

It's basically CIA jackles all the way down... (still is, Ahem Bush)

Re: Why the US stores 700M barrels of oil underground

#77

Post by lukeschlather »

TheCowboy wrote: post #44
lukeschlather wrote: post #27

Earlier quoted context omitted.

The disingenous (or ignorant) thing about that sort of thing is that it makes no mention of alternative fuel prices. Coal and natural gas can be refined into gasoline. This is obviously not a great idea from an environmental standpoint, but from a cost standpoint it becomes economically viable when oil hits about $70/barrel. Electrolysis-refined hydrogen becomes economical when oil hits $200/barrel, and that has a lo…

It seems more than optimistic to put the cost at $70/barrel for coal liquefaction, and it makes me question the validity of the source. It's an energy intensive process that is usually seen as much higher than $70, and the alternative economic uses of the energy used in production are usually going to be better. Not only do you still have to spend energy mining and transporting coal, but the energy spent refining the…

$70/barrel is just the figure for natural gas, I couldn't find a figure for coal. In any case, it sounds like $150/barrel is a pretty solid ceiling.

Re: Why the US stores 700M barrels of oil underground

#78

Post by rancur »

Lawtonfogle wrote: post #67
retube wrote: post #21

Earlier quoted context omitted.

Sorry but that's nonsense. It's a well known and indeed publically admitted strategy by the Saudi's to drive US shale producers out of business. Google "saudia arabia united states oil price" for many authoritive hits on the subject. Russia was collateral damage.

Why not both? Gives a better reason for the Saudi's to go along with the plan. They help the US political side and get paid in political good will and getting to damage the US competitors.

because we don't care that much about Russia. This isn't the 80's.

OPEC got greedy, that created room for shale, and Russia got hurt.

Re: Why the US stores 700M barrels of oil underground

#79

Post by [deleted] »

JoeAltmaier wrote: post #59
drzaiusapelord wrote: post #56

Earlier quoted context omitted.

Maybe leadership in those countries should take that into account before proudly declaring themselves against US interests, nationalizing US wealth, blocking US ships, kidnapping US citizens, proxy warring against US allies, exporting terrorism, spreading anti-US propaganda, radicalizing its citizens to be anti-West, etc. Jesus man, the US isn't some charity, its a nation with its own self-interests and it will move…

Criticizing the USA isn't the same thing as being its enemy. Blocking unfair USA policies in their sphere is the right of any nation. The alternative? Rolling over whenever the USA says Boo!? The USA, for its part, needs to then be very circumspect in who it steamrollers and when. Not because it can't get away with it; because its wrong.

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