This is a refining capacity problem, not an crude oil supply problem. The various wars have taken out refining capacity and transport capacity.
On the crude oil side, the US strategic petroleum reserve is declining rapidly.[1]
That took a hit during COVID and the early Ukraine war because production was down. Refilling started afterward, but didn't take it up to normal levels. There's still maybe a year of oil left.
Doubt there’s a year. They’re currently draining it down to like 270-280ish million barrels. Which is breaking the integrity of the caverns and they can’t actually drain it completely it needs something like 100ish million barrels at minimum capacity to not fuck up the pipes.
On the integrity side. The caverns were only designed for a lifetime of 5 full drawdowns[1]. The caverns the oil is stored in and the pillars supporting them are made of salt. They get the oil out by pumping water in which floats the oil up.
Salt has certain integrity problems when submerged in water or so I’ve been told.
This current admin doesn’t appear to accept the idea of negative consequences for their actions so I would not be surprised if they destroy the caverns because they think they can suck every last drop out.
It's very annoying that the cost of fixing all this and replenishing the stockpile is going to most likely fall on people who had little to nothing to do with it becoming such a big problem.
Shouldn't it be profitable? Buying low and selling high. Like, the current oil in there was bought at below $60/barrel or so and sold at 50% higher price or whatever. The oil is always sold at a much higher price (otherwise it wouldn't be available in the first place).
But the person who is president when it incurs the cost, is probably not going to be the president when it makes the profit. That is one of the problems with things like this where you can get the blame for doing the irresponsible thing.
The upside is that some diesel engines could run on alt fuels via transesterification, but given the supply chain isn't there I would gather electrification would happen faster. Curious how far they could push blends in a modern diesel if needed. Modern fuel rails (at 30k+ ft lbs) require the lower viscosity of refined diesel unlike older motors.
> A couple of years ago I made the observation that the West would start to copy what China is doing. Ofcourse its only wrong when China does it...
There's no point in seeing anything coming or being right about anything, because the vast majority of people will ridicule you and tell you you're wrong until well after it's too late to change the situation for the better. The tiny handful of us who actually care about a future are a microscopic minority and basically powerless to change it. Best to just live our lives the best we can and to hell with what the rest of the world is doing at this point.
When you say “never repair the damage,” do you mean that the practicality of refilling the stores is impossible due to demand requirements, or something else I’m missing?
The caverns the oil are stored in are old salt mines that were repurposed but that means the walls and pillars are made of salt. They pump water into the caverns to float the oil to the top when they extract it.
The water itself already dissolves the salt but if you get down to 70 million barrels then you start getting salt water touching on the plumbing which corrodes it, as well as the last bits of oil are sludgy and can also foul the pipes.
The strategic oil reserves were not built with an expectation of being used perpetually, they had a lifetime expectation of 5 full drawdowns and we’ve repeatedly done fractional drawdowns.
I only learned this a year ago and felt like we as the public have been mislead as growing up and as an adult the government always presented drawdowns as something that wouldn’t be a problem, we could always just top it back up later. And although I hate ever doing both sides arguments that’s been the impression I got from every admin since Clinton.
It is just amazing watching how markets are working to build prosperity for the rich.
With scarcity a thing of the past, bombing choke points is proving to be wildly profitable and as capital never sits still it can be wherever conditions are nicer.
whoooeee $2.40 a gallon of pure profit, but when you strip away the rest of the scam, pumping, production, shipping and distribution are still only $1/gal, so full profits not counting interest lending to people to buy the car and the fuel in the first place are more than 75% right now.
And with NOWHERE left to put the money, AI.
This should help with transition to electric vehicles.
On the other hand, batteries for EVs are produced in even smaller number of countries (mostly China) then oil is pumped (Middle east, US, Russia, Canada).
"However, more than 90% of battery storage applications rely on LFP batteries that are almost exclusively supplied from China, which accounts for almost all global manufacturing capacity and the associated technical expertise. Korean producers are investing to scale up LFP battery production that can offer an alternative, but they face intense competition from established, lower-cost Chinese producers in an oversupplied market."
Doesn't change anything. If oil stops flowing you're out of energy. If batteries stop flowing, you continue using the batteries you already have and your own manufacturing suddenly doesn't struggle to compete. We've already talked about this several times.
Can't be soon enough. I'm currently in a country with lots of old diesel vehicles from Western Europe. I was just walking to pick up my EV with HEPA filters from cleaning. The amount of fumes around street makes it unbearable to walk alongside road.
The refining bottleneck is the part people miss. Crude supply headlines get all the attention but margins blow up when you can't process what you have.
37 comments
[ 1.6 ms ] story [ 39.8 ms ] threadOn the crude oil side, the US strategic petroleum reserve is declining rapidly.[1] That took a hit during COVID and the early Ukraine war because production was down. Refilling started afterward, but didn't take it up to normal levels. There's still maybe a year of oil left.
[1] https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=W...
On the integrity side. The caverns were only designed for a lifetime of 5 full drawdowns[1]. The caverns the oil is stored in and the pillars supporting them are made of salt. They get the oil out by pumping water in which floats the oil up.
Salt has certain integrity problems when submerged in water or so I’ve been told.
This current admin doesn’t appear to accept the idea of negative consequences for their actions so I would not be surprised if they destroy the caverns because they think they can suck every last drop out.
[1] https://www.msn.com/en-us/money/markets/frequent-oil-draws-f...
The US had nine nuclear cruisers, but retired the last one, the USS South Carolina in 1999.
<https://en.wikipedia.org/wiki/Nuclear-powered_cruisers_of_th...>
Currently the US only operates nuclear-powered aircraft carriers (11 active, two under construction), and submarines (69 active).
There's no point in seeing anything coming or being right about anything, because the vast majority of people will ridicule you and tell you you're wrong until well after it's too late to change the situation for the better. The tiny handful of us who actually care about a future are a microscopic minority and basically powerless to change it. Best to just live our lives the best we can and to hell with what the rest of the world is doing at this point.
we are most certainly going to break that by the end of the year (it's $5.47 average today)
they are trying to use Strategic Oil Reserve (and maybe Venezuela) as a piggy bank
but all that's about to break badly, permanently
if this administration lets it go down to 70 million barrels despite the warnings by experts at 300 million, they'll never repair the damage
The water itself already dissolves the salt but if you get down to 70 million barrels then you start getting salt water touching on the plumbing which corrodes it, as well as the last bits of oil are sludgy and can also foul the pipes.
The strategic oil reserves were not built with an expectation of being used perpetually, they had a lifetime expectation of 5 full drawdowns and we’ve repeatedly done fractional drawdowns.
I only learned this a year ago and felt like we as the public have been mislead as growing up and as an adult the government always presented drawdowns as something that wouldn’t be a problem, we could always just top it back up later. And although I hate ever doing both sides arguments that’s been the impression I got from every admin since Clinton.
I really was not expecting anything like this. Thank you.
On the other hand, batteries for EVs are produced in even smaller number of countries (mostly China) then oil is pumped (Middle east, US, Russia, Canada).
https://www.iea.org/commentaries/global-battery-markets-are-...
https://en.wikipedia.org/wiki/List_of_countries_by_oil_extra...
Batteries. Are. Not. Oil. They are oil tanks.
https://www.iea.org/commentaries/global-battery-markets-are-...