Oil's Collapse Is a Geopolitical Reset in Disguise • Hacker News Board

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#91

Post by Iv » Sun, May 03, 2020, 4:25 AM UTC

voz_ wrote: post #2

Additional detail: The author was one of the architects for major pieces of the Iraq war, including the surge. https://en.wikipedia.org/wiki/Meghan_O%27Sullivan

To me the most relevant part was this:

> She was an assistant to Paul Bremer in the Coalition Provisional Authority. She was Senior Director for Iraq at the United States National Security Council.

Around that time, Bremer decided to bar former ba'ath officer from either serving the new military or getting pension. That decision almost single-handedly created the backbone of the terrorist networks that would become ISIS.

People from that admin should be shunned from any published analysis but failing that, I am happy that forums like this allows us to augment their biographies.

On the other hand, I have yet to see a Bloomberg article not about finance that was not misinformed. Those about tech especially are pretty bad, and every time I dug a bit around their geopolitical analysis, I was pretty underwhelmed.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#92

Post by rckoepke » Sun, May 03, 2020, 4:31 AM UTC

simonh wrote: post #85

rckoepke wrote: post #58

Earlier quoted context omitted.

I don't see this. Saudi Arabia has been producing around 10.5 million barrels per day fairly consistently-ish for the last 5 years. If anything it's a bit lower over the past 12 months vs the 60 month average: https://ycharts.com/indicators/saudi_arabia_crude_oil_produc... So that theory is right out, imo. Russia has increased production only 7-8% in the last 5 years. https://ycharts.com/indicators/russia_crude_oil_p…

The disagreement between Saudi (representing OPEC) and Russia which lead them to increase production was just a few months ago, so you won’t see it’s consequences in oil production numbers for the last few years. It was widely reported in the media. https://en.m.wikipedia.org/wiki/2020_Russia–Saudi_Arabia_oil...

> which lead them to increase production was just a few months ago

https://www.eia.gov/opendata/qb.php?category=1039874&sdid=ST...

Production for the month of March is published and does not show a significant increase. Again, its likely that the sources you follow are providing misinformation - not just about this, but about other things as well.

More generally, I follow oil news quite closely (as I work in the sector, and I have worked in Saudi Arabia specifically). These types of claims are "widely report in the media" constantly every year, although it is interesting that there's a Wikipedia page about this year's events. I personally wouldn't trust that version of events, as it only narrates changes in price without addressing movements of the supply/demand curve. I consider volumes of supply and demand to be more narrative for fungible commodities than statements of price alone.

As all these price movements happened after China's enormous quarantine and reduction in road traffic in February, I'd posit that the falling prices are a result of concrete reduced demand, rather than hand-wavey price adjustments.

Saudi can't adjust price lower globally single-handedly, the next marginal sales will happen at the market price. This wikipedia article doesn't seem to see that. The only way Saudi can reduce the price for its competitors is by supplying more oil to the global market.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#93

Post by baybal2 » Sun, May 03, 2020, 4:34 AM UTC

A fresh look the news we heard on May 1st

Why do you think Trump phoned Saudis with such a strong threat when:

1. He previously showed no regard for how US oil industry fares, beside taking credit for it doing well

2. US oil industry is screwed below $40 except for the most productive wells in Texas. US shale is screwed below $60.

If his actions can't do a thing to really positively affect US oil industry, why he even tries?

Answer: https://www.dailymail.co.uk/news/article-8232865/amp/Donald-...

So, Trump does 4 phone calls with Putin, then a single one with a right away direct threat to Saudis.

You don't need to think for long what it means.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#94

Post by alextheparrot » Sun, May 03, 2020, 4:34 AM UTC

rckoepke wrote: post #81

alextheparrot wrote: post #65

Earlier quoted context omitted.

Iran had a 69% decrease in oil exports (In terms of barrels exported) between 2018 and 2019, as a result of US sanctions [1]. I don't think refined vs unrefined is the biggest issue, given that a reduction in quantity would be hard to recover in terms of quality. [1] https://fred.stlouisfed.org/series/IRNNXGOCMBD

Indeed, a 70% drop in exports would be difficult to recoup. However, for sake of understanding: currently about 4-6% of global oil and gas is used to produce plastics. This represents about $600 Billion in total market value. The total global crude oil market is about $1,800 Billion if oil is $50/bbl. So it seems that you get roughly 5x higher revenue on a barrel of oil turned into plastic than sold in its unrefined…

Plastic is pretty far away from "Refined vs Unrefined", refining adds about $10-20 of value per barrel [1]. At Iran's volume, that is billions of dollars, but not a 5x in revenue.

[1] https://www.canadianfuels.ca/website/media/PDF/Publications/...

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#95

Post by akiselev » Sun, May 03, 2020, 4:43 AM UTC

1MachineElf wrote: post #69

0xddd wrote: post #35

Earlier quoted context omitted.

And what better way to find out who wrote it than to scan the comments after reading the article? In all seriousness, I don't see how wilful ignorance on the first-read through is some ideal analytic strategy.

Not knowing who the author is is actually a component of an ideal analytic strategy. Same principle behind why double-blind tests have high efficacy.

Double blind studies help with biases during data collection, not during analysis. It doesn't matter if you have the perfect double blind clinical trial for diabetes medication if you measure efficacy using body thetans as a proxy when you get the results back.

Reading news articles or analyses is in effect a metastudy and doing it double blind is pointless - a metastudy requires an analysis of the provenance of the information in order to weigh the results from multiple sources.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#96

Post by rckoepke » Sun, May 03, 2020, 4:45 AM UTC

alextheparrot wrote: post #94

rckoepke wrote: post #81

Earlier quoted context omitted.

Indeed, a 70% drop in exports would be difficult to recoup. However, for sake of understanding: currently about 4-6% of global oil and gas is used to produce plastics. This represents about $600 Billion in total market value. The total global crude oil market is about $1,800 Billion if oil is $50/bbl. So it seems that you get roughly 5x higher revenue on a barrel of oil turned into plastic than sold in its unrefined…

Plastic is pretty far away from "Refined vs Unrefined", refining adds about $10-20 of value per barrel [1]. At Iran's volume, that is billions of dollars, but not a 5x in revenue. [1] https://www.canadianfuels.ca/website/media/PDF/Publications/...

I was referring to my statement earlier in this thread:

> And they could be using 1960's technology to refine their oil into higher value products but they simply aren't, for reasons I don't understand.

"Refine" was used loosely, but the bulk of the plastics market are still relatively simple products that don't necessarily require extremely high technology to produce. It's still a cutthroat commodities business, but producing a little plastic has the potential to add a lot of dollars.

You can see this happen in Saudi Arabia over the past decade. They worked with Dow Chemical to produce the "Sadara" plant - a very large refinery and chemical plant. Crude oil made up over 80% of Saudi's exports from 2010-2014. The first phase of Sadara began selling product in 2015, and the final major piece (of 26) was commissioned in 2017.

When Sadara opened its first phase, crude oil dropped from ~80% of export dollars in 2014 to just 55% in 2015.

So yeah, opening a chemical plant can massively change your export profile. Now, this data includes a huge drop in oil price after 2014 so it's not entirely fair. But is is reasonably fair vecause it wasn't just oil prices that dropped - chemicals+plastics dropped up to 50% as well. Their $ value in exports stayed constant despite the price drop, indicating a large surge in export volume.

And this is largely driven by the construction of a single integrated refining facility.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#97

Post by jeffdavis » Sun, May 03, 2020, 4:46 AM UTC

Iv wrote: post #91

voz_ wrote: post #2

Additional detail: The author was one of the architects for major pieces of the Iraq war, including the surge. https://en.wikipedia.org/wiki/Meghan_O%27Sullivan

To me the most relevant part was this: > She was an assistant to Paul Bremer in the Coalition Provisional Authority. She was Senior Director for Iraq at the United States National Security Council. Around that time, Bremer decided to bar former ba'ath officer from either serving the new military or getting pension. That decision almost single-handedly created the backbone of the terrorist networks that would become I…

"People from that admin should be shunned from any published analysis"

Interestingly, it was GWB that also put a lot of effort into pandemic preparedness. See: https://georgewbush-whitehouse.archives.gov/homeland/pandemi...

History is kind of a weird place.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#98

Post by Nasrudith » Sun, May 03, 2020, 4:51 AM UTC

xxpor wrote: post #86

voz_ wrote: post #2

Additional detail: The author was one of the architects for major pieces of the Iraq war, including the surge. https://en.wikipedia.org/wiki/Meghan_O%27Sullivan

Between the Kennedy School and the law school, it seems like everyone I hear about coming out of Harvard these days is stupid and/or evil in some profound way.

That seems to be a common disease of old money institutions - caring about self perpetuating themselves with illusion of merit instead who is actually the best fit for the job. See the goalposts on rails of the Ivy League to try to keep out "model minorities" like their physicals, analogies specifically designed to not be in the high school literature canon but among New England old money, the extraciruculars requirements, and more. The game is all about blending the wheat and their chaff.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#99

Post by pm90 » Sun, May 03, 2020, 4:56 AM UTC

rckoepke wrote: post #29

xiaolingxiao wrote: post #23

Earlier quoted context omitted.

Ah, so does this mean Iran is particularly dependent on oil to finance itself?

Indeed: https://commons.wikimedia.org/wiki/File:Islamic_Republic_of_... (edited to 2017) 79% of their exports is unrefined crude oil. While exports are not always the whole story, in this case it is extremely relevant. If Iran's economy was 99% domestic and 1% trade, (essentially autarkic) then it wouldn't really matter at all what the price of oil is, as Iran makes everything it needs for itself, whether that be aut…

In addition to everything you said, the compounding factor here is that sanctions 1) Make it harder for Iran to take advantage of foreign financial markets and 2) Make it harder for them to get the best value for their exports. Sanctions may not sound very bad but they’re economic warfare on a larger time scale. I felt the world was healing somewhat when the Obama admin eased sanctions on Cuba and got the Iran nuclear deal where Iran was offered a reasonable path to becoming a part of the global economic system. The current administration has completely butchered that and I suspect most Americans don’t understand how much damage it’s done to the region which will take years to repair.

Re: Oil's Collapse Is a Geopolitical Reset in Disguise

#100

Post by nwatson » Sun, May 03, 2020, 4:58 AM UTC

ashtonkem wrote: post #60

redis_mlc wrote: post #34

Earlier quoted context omitted.

All oil and gas exporters become dependant on that revenue. It's human nature to spend it all.

Norway stands as an obvious counter example; they’ve invested a huge amount of their oil money into a sovereign fund, and have a fairly robust economy too.

... and it was an Iraqi immigrant who steered Norway on the right path to avoid over-reliance on oil exports: https://www.ft.com/content/99680a04-92a0-11de-b63b-00144feab... ... "The Iraqi who saved Norway from oil".