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Show HN: I simulated closing the Strait of Hormuz on real oil trade data

globaloilnetwork.staffinganalytics.io

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Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#31

Post by eliotho »

bragr wrote: post #26
eliotho wrote: post #4

Earlier quoted context omitted.

>What concrete predictions does your model make? Well, the model is less of a prediction and more of a stress testing tool. But under the hypothetical closure scenarios it shows the timing the oil reserves of distant countries exhaust, as well as the systemic effects on pricing (the France paradox). >What developments in pricing/other would indicate that your model is wrong or incomplete? The model has a stylized way…

>In practice, when countries ration their oil that's beyond the scope of the model. Does your model assume that demand is constant regardless of price? We're already seeing a reduction in demand over the last several months. https://finance.yahoo.com/energy/articles/global-oil-demand-...

There are two versions of the model: -The one rendered by default (called Endogenous), with endogenous price that affects the demands according to the price elasticity slider. Reflecting how reactive are the nodes demand wrt price -With fix price (called Fixed): that in the oil market doesn't apply, but it's an interesting baseline to consider oil purely as flow. And as a modeling tool, this allows the model to capture small supply chains that don't have price setting power.

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#32

Post by eliotho »

toomuchtodo wrote: post #30
bragr wrote: post #26

Earlier quoted context omitted.

>In practice, when countries ration their oil that's beyond the scope of the model. Does your model assume that demand is constant regardless of price? We're already seeing a reduction in demand over the last several months. https://finance.yahoo.com/energy/articles/global-oil-demand-...

> China's decrease of 1.5 million barrels per day, representing a 9% decline, was by far the largest globally, the report said. Some global demand destruction is occurring, but that of China is them switching to large internal strategic reserves. https://youtu.be/BkA0bkb6ZO0 (whole video is worth the watch)

And this is what the model price formation assumes, and in fact, the silent mechanism that makes the crisis worse. Reserves silently deplete for each country, and each epoch where they exhaust is when the price rebalancing occurs IN A SUDDEN SPIKE, affecting other nodes that are not even connected to Hormuz, which is one of the conclusions of the paper. Either directly or indirectly all countries feel the pain: the question is who can stand the game of chicken the longer before intervening

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#33

Post by toomuchtodo »

eliotho wrote: post #32
toomuchtodo wrote: post #30

Earlier quoted context omitted.

> China's decrease of 1.5 million barrels per day, representing a 9% decline, was by far the largest globally, the report said. Some global demand destruction is occurring, but that of China is them switching to large internal strategic reserves. https://youtu.be/BkA0bkb6ZO0 (whole video is worth the watch)

And this is what the model price formation assumes, and in fact, the silent mechanism that makes the crisis worse. Reserves silently deplete for each country, and each epoch where they exhaust is when the price rebalancing occurs IN A SUDDEN SPIKE, affecting other nodes that are not even connected to Hormuz, which is one of the conclusions of the paper. Either directly or indirectly all countries feel the pain: the q…

The suspense is terrible, I hope it lasts. Great work on the project!

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#34

Post by eliotho »

toomuchtodo wrote: post #33
eliotho wrote: post #32

Earlier quoted context omitted.

And this is what the model price formation assumes, and in fact, the silent mechanism that makes the crisis worse. Reserves silently deplete for each country, and each epoch where they exhaust is when the price rebalancing occurs IN A SUDDEN SPIKE, affecting other nodes that are not even connected to Hormuz, which is one of the conclusions of the paper. Either directly or indirectly all countries feel the pain: the q…

The suspense is terrible, I hope it lasts. Great work on the project!

Thank you! Much appreciated. On the suspense, we are all riding the same train :$

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#35

Post by anigbrowl »

An interesting fact to consider is that the US stockpile (the Strategic Petroleum Reserve) is reported as the total of sour (high sulfur) and sweet (low sulfur) crude oil. The sweet stock makes up about 1/3 of the reserve and hardly varies at all. This is because US refineries are virtually all configured for sour crude: due to a mistaken belief in the 1990s that sweet crude was running out, the industry bet the farm on sour crude refining, and if sour crude runs low, it's extremely economical to switch.

As a result, almost all the draw from the SPR is of sour crude (currently ~5 million barrels/week). However, you can't just use up all the reserve because as levels get lower brine must be pumped into the storage chambers to retain pumping pressure, and the more brine that is pumped, the more the output quality declines.

The weekly reports indicate a total in the SPR of about 300mbb, of which ~100 are sweet and 200 sour. But for the reasons above, output becomes unusable one the sour levels fall to ~140-150mbb, at which point there is almost certainly a severe diesel supply shock. At current drawdown rates, that would be sometime around October/November, right in the middle of harvest season when demand for diesel is highest.

There's more complexity to this than I want to type out in a HN comment, but not that much more. Draw your own conclusions.

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#36

Post by maxerickson »

HarHarVeryFunny wrote: post #3

What concrete predictions does your model make? What developments in pricing/other would indicate that your model is wrong or incomplete? Nice website regardless, but I'm a bit skeptical that the dynamics of the global oil/energy market can be accurately predicted.

It's making crude predictions.

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#37

Post by DANmode »

chairmansteve wrote: post #23
upcoming-sesame wrote: post #18

Earlier quoted context omitted.

Can't Iran be selective and only allow Chinese ships through?

The USA could block Chinese ships. Or maybe disable the loading jetties.

Ah yes, open war with a superpower.

Why haven’t the USA done that already?

It’s so obvious!

Re: Show HN: I simulated closing the Strait of Hormuz on real oil trade data

#39

Post by kccqzy »

anigbrowl wrote: post #35

An interesting fact to consider is that the US stockpile (the Strategic Petroleum Reserve) is reported as the total of sour (high sulfur) and sweet (low sulfur) crude oil. The sweet stock makes up about 1/3 of the reserve and hardly varies at all. This is because US refineries are virtually all configured for sour crude: due to a mistaken belief in the 1990s that sweet crude was running out, the industry bet the farm…

> would be sometime around October/November, right in the middle of harvest season

Right in the middle of election season.

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