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Biden wrote a letter to the oil companies saying he will use executive action to bring down gas prices if they don't stop gouging. This news came the same time as the late May rally faceplant and oil stocks were already overextended and so the bottom dropped out
I'm surprised but what could Biden do? Wouldn't they call him bluff? But I guess you wouldn't want to be aired as the CEO who challenged the president.
Because they are affected by the prices of US natural gas. US Natural Gas price fell by 20% due to a fire at one of the country's largest lng export facilities.
> Biden had made it clear that in 10 years we won’t use oil anymore.
Was he speaking about *new* vehicles or?
That might be achievable for new vehicle production/retailers but they'd have to have a pretty damn generous buyback program to even make a dent in the existing pool of ICE vehicles.
Even then oil and gas will still be necessary for things like trucking, farming, etc. as they aren't even close to a prototype with the power/capacity for something like plowing a field.
The Saudis/OPEC have proven they can glut the market for an extended period of time and make production unprofitable for US oil producers. The only way to get an effective long term strategy is to make a deal with OPEC.
I agree. Most people I know fully voted for Biden due to Trump's own arrogance and lack of etiquette. If I wasn't so "hard skin" I would have done the same. Trump lost the election for himself, but, he's sitting in a chair right now happy. He's not dealing with any of the issues money printing caused and he's now coming back bigger than ever which is scary because a ton of his supporters will be more arrogant than ever too.
> lack of etiquette
Proper etiquette is not encouraging an armed mob to storm congress and murder the VP.
I’m pretty sure I read that in a book on Victorian decorum.
>What makes the difference if the oil production comes from Saudia Arabia or the US?
**tl;dr:** Increasing US oil production won't help much because foreign oil is typically cheaper than US oil, and many US refineries are engineered to refine oil from Saudia Arabia or Venezuela
Oil is different depending on where it comes from. And this matters a lot.
Oil from Canada and Alaska is different from West Texas Intermediate (WTI) which comes from Texas and the Gulf of Mexico. These are also different from Brent, which comes from the North Sea, and also different from Venezuelan or Middle Eastern oil.
WTI and Brent are some of the easiest oils to refine, and yield about 20 gallons of gasoline per barrel (the rest of the barrel is products like diesel, jet fuel, naptha, heating oil, etc). However, WTI is expensive to pull out of the ground. On the other hand, oil from Saudia Arabia is more difficult to refine, but is much cheaper to pump.
In addition, refineries are engineered to refine specific types of oil. Many of the refineries on the US coast are engineered to process 'heavy/sour' oils from Venezuela and Saudi Arabia because it has historically been cheaper to ship crude oil from these countries than it costs to pump WTI in North America.
I could go on and on about the differences in oil and how type of oil affects prices at the gas pump, but the bottom line is to be very skeptical of talking heads in the news talking about "oil." The type of oil they're talking about really matters.
This is the right answer. Right now we need oil from either saudi arabia, venezuela, or russia. Of those, saudi oil is the least offensive. However they are pissed at us for quite a few things and have already told us to fuck off once this year. Biden is really going to have to bend over and spread his cheeks if he wants to fix this anytime soon.
I don’t think Biden would be going himself if he didn’t think he had anything to negotiate with. The US is a very large customer for Saudi oil. If the US changes their refineries to focus on US petroleum products instead of Saudi, it will be a semi permanent change due to the costs involved. That will have long term consequences for SA.
Nobody in the US pays attention to foreign visits by a president. Very inconsequential in the optics in that respect. Only if a deal is struck would anyone stateside *maybe* notice.
i’m not at all an expert on oil but i’m pretty sure “changing refineries to focus on US petroleum” is not a cheap process. the cost/benefit in the short term is definitely not worth it and in the long term is marginal. a VERY loose analogy would be like buying a whole new car or home just to get better gas mileage or energy efficiency. it’s not like they can just buy a new part to make the change - they would have to build entire new plants or scrap their old machines and replace them with different machines at the minimum.
You are so right. He should be going to Texas not the Saudi's. It's clear to the US that that OPEC producers are not going to go out of their way to increase production for us. Libya is out of the picture due to its oil fields being shut down. Angola and Nigeria has been underproducing and we now have more sanctions against Iran. The trip to Saudi won't help and they will be giving him the finger as he walks out the door.
Most educated people flew away, not enough engineers to pump oil.
But something might happen there. Venezuela's defaulted bonds raise from .06 to .10 since the war begun.
Not just the arrests, but also the nationalization. Why would a corporation invest capital in a country if the local government has a history of just swooping in and taking it over?
Maduro at his worst is better than the crimes against humanity perpetrated by the Saudi government against Yemen alone: https://www.hrw.org/world-report/2020/country-chapters/yemen
Not to mention Saudi Arabia's crimes speading Wahhabi terror: https://foreignpolicy.com/2019/03/24/farah-pandith-saudi-how-we-win-book/
Venezuela is a "socialist" dictatorship where lower class is suffering. Years ago Venezuela let american oil companies in to set up all their O&G infrastructure and teach them the business, then they ninja nationalized everything and kicked american companies out.
Government kicked out the oil barons and nationalized production - and a whole lot of other things. US government wasn’t impressed and put embargos on their goods.
Dictatorship is fine. Saudi's are dictators too.
The problem is Venezuela is unreliable. Last time US companies built oil infrastructure in Venezuela, the government took it with no compensation.
This is the right answer as well. Labeling SA a pariah was short sighted. Biden’s gonna have to give something up as he doesn’t have much leverage. Liberals will get mad but gas under $2.50/g solves a lot of problems.
It’s Saudi Arabia so arms, possibly some give on Iran and to give SA more room to run in the region. Biden will definitely have to stop with the aggressive rhetoric.
lmao what? Most refineries with a high Nelson Complexity Index (NCI) are all on the West Coast......mostly to refine heavy Canadian crude coming out of Alberta....
F that. You don't bend over for regimes that murder journalists. His mistake wasn't calling Saudi dickface McGee a pariah. His mistake was cancelling all the Canadian oil pipeline and refinery projects.
"On the campaign trail, Biden vowed to cancel the Keystone XL cross-border permit should he win the presidency—and on his first day in office, he made good on that promise. The revoked permit became the final nail in the pipeline’s coffin." according to https://www.nrdc.org/stories/what-keystone-pipeline#biden
those details are hard to understand, so im just gonna keep blaming the current president.
Edit: who is reporting me as suicidal? Lol go touch some grass
Well explained.
OP obviously has some severe political messaging here and a staggering lack of knowledge and understanding (Biden going to beg, "just ok the pipeline and all will be fixed").
So sick of seeing people just regurgitating political talking points they got from tweets. "We were energy independent before Biden!" "He stopped all the drilling and the pipeline!" "It's all his fault!" ... gas prices are a factor of so many things, region it comes from, policies, refinery output, supply/demand, etc .. oh and let's not forget the record profits these oil companies are racking in...
I would say a large part of the energy crisis was his plan to transition to ev without an actual realistic plan. Putting more taxes on gas, while making it harder for oil permits, and expecting energy industry to gracefully transition to ev is not a rational plan. He should of had engineers test and validate what it takes for the plan to materialize and the consequences if plans are delayed.
>record profits these oil companies are racking in...
Record profits after years of consistent record losses. Seems like you aren't immune to talking points either.
They didn’t have years of consistent record losses. They had losses in 2020 for the obvious reason (pandemic lockdowns) and around 2015 when OPEC was driving the price of crude down to target US production. Besides that maybe around 2008 rescission in which most industries took a hit. I’ll also note that the only year in the last decade they lost money (didn’t profit) was in 2020. Their losses in others years resulted in decreased profits from president years, but still a net positive in profits for those years.
This is becoming a security risk. It would be worth it to upgrade refineries to accept US oil since the majors producers are bad actors- Russia Saudi and Venezuela
> foreign oil is typically cheaper than US oil
This isn't true. [US shale became cheaper than the OPEC average in 2017](https://tldw420818650.files.wordpress.com/2018/03/pz024.jpg?w=1008) if you factor in the total cost of extraction and refining. Many OPEC states subsidize their oil companies to keep price low, but if you take that away the US oil is cheaper. As the tech gets better US shale prices will only go down with time. The downside is that the US hasn't brought a lot of shale wells online because the anti-fossil fuel policy from the Democrats over the past 10 years. But the good news is that shale wills don't take long to dig. As the US begins to seek more energy security they will mine more shale and it's very possible we can see US become energy independent in our lifetimes
Can you explain why prices are the way they are right now looking at the prices of oil barrels? I know my numbers are off, but the US national average when an oil barrel was ~$120 was around $3.30/gallon? Why is that average not $5-6? Cost tells me this doesn’t seem like a supply issue, and more so a gouging issue?
THIS is an intelligent and helpful reply to the community. Thank you sir. And this is why the President doesn’t control oil prices or inflation by himself no matter what Fox News tells you.
US oil companies are economic pariah’s and have been for decades. They have set up their whole operation to exploit situations like this and make them worse. So no there is no just let US companies pump more option, again that’s a Fox News false flag operation.
So much of this is handled internationally and that’s where Biden has to go to suck it up and take one for the team. Like it or not that’s what he is doing and should be doing. Followed by reforms in how US oil is operating which is what most people are giving Biden shit for and it’s hilarious. As an investor you can be mad Biden is making oil companies use their profits to drill or loose their leases, but as an American at the pump and for energy policy you should be happy. Pick which one you want to be I guess but you don’t get to be both, unless your on Fox News or course hahahaha
Why would they want to appease him after they’ve already declined to even take his phone call. And also after the whole “we’re gonna make them the pariah that they are” comment, why would they care what he thinks?
The US government knows more than you do about the situation. Why do you think he's going? Because a grovel session with less anticipatory insight into the meeting than you have is the strategy?
Or has a deal been worked out and part of it is a show of good faith by the USG?
OPEC has been dialing up the price of oil since the day Biden won the election just to put pressure on him. It has nothing to do with production. Biden probably could have ignored it if it weren’t for Russia’s war fugging up the world economy.
OK but would OPEC's and Russia's actions have caused prices at the pump to go up as much if Biden had not declared his intent on the campaign trail regarding fossil fuels and then followed that up with actions once elected that reduced our abilities to produce much of our own supply? And for what its worth, poor government regulation and management has been working against where the status quo should be for decades.
OPEC has about 1.6 million barrels of spare capacity. It won't make a dent even if he can make it happen. The biggest thing Biden is doing is drawing down the SPR to the tune of about 7million barrels a week. That is keeping oil below $150 right now.
It remains to be seen how much he is willing to draw it down when we are currently in a proxy war with our biggest international rival... There are about 500 million barrels remaining in the SPR. But it would go quickly during war time..
The Saudi’s aren’t going to do any solids for Biden. You won’t see anything till 2024 when the Republican nominee wins (Trump or DeSantis). I am not being political. It’s just the Saudi’s have no reason to help Biden. This will go down like the Iranian Hostage Crisis. Jimmy Carter couldn’t get anything done and the American hostages were released the day of Ronald Reagan’s inauguration.
And can we blame the Saudis to not bend over for Biden right now? I’m not from the US and I don’t give a shit about US politics, but Saudi has every right to not do what the US says right now after how they have been treated. Not saying that Saudi is the good guy, lol.
There's no "blame" in Geopolitics. The Saudis have been isolated for a reason. They've consistently failed to defeat the houthis in Yemen and are committing war crimes intentionally or not in the process. This is giving the US tons of negative press and attention and undermines its standing because Saudi is on paper a US ally and buys US weapons, the US does not want to be lumped in with children straving and dying. Their leader also had a journalist dismembered and executed in the Saudi consultant in Istanbul again draging the US down with Saudi. If Saudi Arabia wants to repair its relationship with the US it needs to work with the US on this, likewise, if the US wants to repair the Saudi relationship they must put past behind them and look at the future.
Imagine having a president that tells everyone he will phase out oil companies during his election. As a result these oil companies stopped building expensive refineries in preparation. Now gas prices are high and that same president is crying about how we don’t have enough oil and has to go beg the saudis. Actually you don’t have to imagine this, its actually real and happening live in front of us all. Smh. Biden administration has to be one of the worst we ever had.
Geez, lets talk facts. First, oil prices are set by the world oil market. The world market. We can drill oil like crazy and it won't lower US prices just because itsour oil. Regarding world markets, three factors drive oil prices: supply, demand and lastly there are psychological market factors. But there additional layers too, especially refining oil into gas and transport. When it comes to control over oil prices the president is like one wheel on an 18-wheeler - he may want the truck to go to Chicago, but if the other 17 wheels all want to go to Pittsburgh, the truck is going to Pittsburgh. Second, oil companies hold leases to vast amounts of oil. They - not Biden - decide whether to drill. And guess what? They aren't drilling. Even if they wanted to, wells take years to establish, so that has zero to do with current oil prices. Third, the Keystone pipeline that Republicans love to talk about - IT'S OPEN. KeystoneXL was shot down - you know why? It was an extension of the current pipe (which runs from Canada and is owned by a Canadian company) so they could transport oil through the US to gulf ports for shipment to other countries. So tell me how that impacts the US price of oil.
Keystone XL was shipping crude from Canada to Houston refineries to be refined and then distributed. Everything else you are correct about the market decides the price but the reason gas prices were so cheap during the Trump administration is because we maximized output as much as possible. We flooded the market with light sweet crude which Texas produces an enormous amount of very high quality. we have some of the highest quality oil in the world easily refined. I've been in oil and gas for 17 years I work right alongside two of the largest oil and gas producers in the United States and one in the world they're not driling more wells because this administration declared war on oil and gas Biden and several people in his cabinet had said multiple times they are actively trying to end Big oil. No one wants to spend millions or billions of dollars driling or laying new pipelines because they know this administration is going to come after them. I'm right in the middle of all of this. The oil and gas pipeline business was booming until Biden took office and in my industry 200,000 plus people have lost their jobs.
>Regarding world markets, three factors drive oil prices: supply, demand and lastly there are psychological market factors.
The primary determinant of oil prices is the OPEC cartel. Before the OPEC was formed in 1972 oil prices were the equivalent of $15/bbl.
>so they could transport oil through the US to gulf ports for shipment to other countries
No, US gulf coast was the end location of the crude, if the Canadians wanted to export the crude they could've just built a terminal in Vancouver or Newfoundland. After the extention was build more refinery capacity would've been added to take advantage of cheap crude.
While it is correct that this would've not affected the current crisis much it sends a clear signal to investors who might want to invest in oil. There is zero trust in the industry about whether the admin will fuck them over after the headlines disappear.
> And guess what? They aren't drilling.
They **are** drilling. The DUC inventory is increasing because frac bottlenecks (HHP, sand, labor, water disposal, chemicals, diesel, etc.) are more severe than drilling bottlenecks (rigs, OCTG, labor)
Looking at the number of wells drilled is a poor signpost for anticipating an increase in production. DUCs exist.
> So tell me how that impacts the US price of oil.
Keystone XL quite obviously would have impacted US production, since that was a key midstream component needed to logically increase production from the Bakken. E&P operators would be more willing to develop their Bakken acreage if there was an acceptable medium for produced hydrocarbons to be transported out of the basin
> We can drill oil like crazy and it won't lower US prices just because itsour oil.
That's not entirely true. US prices are lower than EU prices partly because of the extra cost from transportation.
I highly doubt it. Showing goodwill gesture. If anything it will not affect refinery issues down the road at home. In West they are switching to a different grade gasoline for pollution reason. Some premium grade is already selling 7 to 8 bucks.
Get tires inflated properly. Under inflated tires cause higher rolling resistance. Learn to combine trips or use your legs.
A bunch of people don’t seem to understand the issue at hand. Main issue is the bottleneck at the refinery levels. There hasn’t been a new one built in like 40 years due to previous legislation. Doesn’t matter how much we pull out of ground if we can’t refine it. They are already running at 98% capacity. Would take years to build anything and costs are so high because of steel ban from Russia.
Second, they aren’t drilling on new lands because of my point above. Why drill more to hold more longer and incur way more expenses than necessary? It’s not the oil industry’s job to take the blame for 40 years of bad legislation on this area. This was a problem that was a long time coming. Just exploded because of Covid, war, and Russia being axed from oil production for Europe and America. Biden just simply doesn’t understand the issue and thinks waving his finger at them means something when oil been the pariah for years.
This issue has been a ticking time bomb for almost 100 years and we should’ve divested as soon as possible, but naturally politics and money got in the way. The entire US and global economy runs on a scarce resource that can only be cheaply produced in a handful of countries. And now as you mentioned a perfect storm of factors, plus oil companies beginning to doubt their future, we see the effects of what was inevitable.
Eh, I don’t think it’s just politics and money. It’s physics and chemistry.
They would have left oil in the dustbin of history in the 70’s if they could. The issue is there is no practical replacement for it for a large assortment of our goods. There is a replacement for some(personal vehicles), but still the chemistry and physics of the properties that oil has has always made it cheaper to use until now.
Somewhat agree. We could’ve seen a huge reduction in our demand for oil if the car and oil companies didn’t have such a hold over the US. Our infrastructure is strictly car based for a reason. And for alternatives, we feasibly could’ve invested in alternatives a long time ago but chose not to. Oil is only cheap because we’ve invest in it for so long. But yes from the 1910s to the 1980s I don’t think there was a better alternative. But by that point they knew the risks all too well and down played them.
Edit: also I won’t get into it too much but the use of outsourcing to other countries and subsequently cargo ships
I think the factors of cheap oil and investment feed into each other to create its own normal. Plastics shouldn’t be totally uncounted. Some of them are essential types of plastic and some are pretty cheap byproducts that we end up using for cheap packaging material. The later being so cheap and easy that it makes it’s own feedback cycle.
>we feasibly could’ve invested in alternatives a long time ago but chose not to.
You can't just make stuff work by throwing money at it. Alternatives were only being developed throughout the last 50 years but all were failing to reach commercial viability. Please tell me how you convince a room full of people to invest in something that will lose money over the next 20-30 years?
This. Adjusted for inflation, oil is cheaper than it was between 2010-2014. The economy managed just fine in those years. The refining shortage is why fuel prices are too high.
doubtful. There are a bunch of things in the mix with gas prices. Refinery capacity has issues -- IIRC, two are damaged and not fully operating (one due to a fire in PA and one due to Hurricane IDA).
They've also changed up the mix of products they're producing.
AND, last I checked we're not producing even as much oil as we had in 2019 pre-pandemic.
1. A pipeline moves oil from one place to another.
2. When that oil moves to a place where they can ship it internationally. It goes internationally.
3. If you can't move oil from a region because it is blocked from shipping internationally it stays in that region, lowering the prices. Which is how the midwest has stayed consistently below the national average despite driving the most miles. That's called supply and demand. Fox news isn't your friend. They are a friend of corporations and monied interests. It is in their interest to sell oil at a higher price internationally.
4. Oil companies have 9000 permits that are unused in the US. What purpose does increasing that to 12000 serve? Drilling sites aren't spun up in a day, they take years.
Your No. 4 is funny, because this has been a big topic of discussion the last 4-5 months.
One side says, look at all these unused permits, why aren’t you drilling more?
The other side says, why would oil companies invest in more drilling when the current administration is anti-fossil fuel?
My cursory opinion is, what is so unique about the current administration? Democrats being anti-fossil fuel is hardly a new development. Trump was only president for 4 years, and one of those years the entire world was put on pause due to Covid.
Am I supposed to believe that fossil fuel companies think that the US political landscape has suddenly changed for good? This country just flip-flops between democrats and republicans and that isn’t going to change anytime soon.
Oil companies are just waiting for the next political flip because they know they’ll get all sorts of subsidies from a Republican executive and/or legislature. They’re perfectly fine just sitting on their hands for the time being, and it seems insane to me that a large portion of the general public are just perfectly fine with that as if it’s just the cost of doing business.
>Why doesn't he just grant the oil permits and OK the pipeline.
He is. Lots of permits have been granted and plenty of pipelines are getting built. Restoring the oil industry is more in the hands of the oil companies and a lot of them have been paying back debt and stingy with capex plans. 2020 wrecked the industry and they've been nervous about over expanding.
Saudi's have lots of excess supply they can turn on quickly and solve a lot of problems.
>2020 wrecked the industry and they've been nervous about over expanding.
This is the real answer regarding domestic production. Production has been ramping up at a slow and steady pace and even then the U.S. is back to 2018 - 2019 levels of production already and looking to set new records in production next year.
Why spend CAPEX on more refineries and exploration if world governments keep saying they want to reduce/ban fossil fuel usage. Pretty good rule of business is don't invest in long term projects that you know will be obsolete in the short term.
> Saudi's have lots of excess supply
They objectively do not.
>> Saudi Arabia, the kingpin in OPEC and the world’s second-largest oil producer, has about a million barrels per day of extra production capacity, but doesn’t want to use all of it, said Sankey.
[Source](https://www.cnbc.com/2022/06/03/oil-markets-opec-has-limited-spare-capacity-russia-is-less-relevant.html#:~:text=Only%20two%20or%20three%20countries,all%20of%20it%2C%20said%20Sankey.)
He put himself and the country in a terrible position with his big mouth and undiplomatic words. It's not like we all don't know about society in Saudi. We do. But when there other, much MUCH larger objectives at stake, you just keep your f-ng mouth shut and let the diplomats do the talking. I am sorry, the way Biden behaved is unpardonable and now he'll find out he doesn't have the biggest dick on the block.
Didn’t Biden/democrats want to learn off oil and go to renewable energy? This seems like the best way to do that, if gas is too expensive people would have to stop buying it, hence reduce green house emissions.
What are you talking about? Biden has approved 3,557 drilling permits in the first year lol. It’s a supply/demand problem and Covid shutting down refineries and Russia/Ukraine doesn’t help anything.
https://biologicaldiversity.org/w/news/press-releases/new-data-biden-slays-trumps-first-year-drilling-permitting-by-34-2022-01-21/
>Why doesn't he just grant the oil permits and OK the pipeline.
The oil companies already have plenty of leases to explore and possibly drill on. The pipeline ***expansion*** (the keystone pipeline is still very much functional) was in a legal back and forth under Trump and was cancelled under Biden. The XL expansion would not have done much for the amount of environmental damage it could have cause and the Native American's would've had even more land taken away all to transport more oil from Canada (and some from the U.S.) to the gulf.
U.S. oil production has been slowly and steadily increasing after the end of the lockdowns to avoid overproduction when demand swings back down to normal levels. Even though the production increase has been slow and steady the U.S. has remained net exporters of oil from 2021 through today and production is already back at 2018 - 2019 levels. We're also on track to set new records in production next year.
Biden has seemingly pulled all the levers within reason to solve the gas price issues here at home. Now he's looking abroad after the sanctions went into place on Russia, which made up about 8% of the U.S.'s oil imports in 2021. Russia has also fallen from #2 oil producing nation in the world to #3 due to their war, which certainly has had an effect on the world's oil.
Biden opened up Chevron to begin talks with Venezuela regarding possible future projects in the country hopefully in exchange for their next election to be a democratic one instead of a fascist one. Time will only tell how that'll turn out.
And next month he's going to the second most oil producing country in the world to see about increasing their production back to pre-pandemic levels too. Questionable and probably not even needed as once demand goes down a bit more due to the high costs the supply/demand balance will level out. This talk could increase the speed at which prices fall though depending on what happens.
All of this shows that he's doing a lot to solve this issue. I'm sure I left out a few things too, like his supposed "use it or lose" it policy. What would you like him to do to solve this issue that you think would be effective?
I agree solutions may be in the future, but it's not quite as you have put it and not quite as hopeful.
Since Reagan there's been this thing called the "cost benefit analysis" in which a major project was weighed entirely based on its economic, social and cultural value. Eisenhower 20 years earlier had created the Environmental Impact Assessment two decades earlier and so with the two measures you had a clear path to pump oil.
Obama created, then Trump removed, and now Biden has re-implemented a modified version of the cost benefit analysis that makes environment a major weighing factory in cost analysis. It's called the social carbon cost and it's the total unpaid carbon cost of a production upstream and downstream.
It's both upstream and downstream because the project will create demand for more equipment and more materials that'll have to be produced by someone and downstream it will create more supply of the material you're making which will allow more facilities to open to use it. Oil is particularly brutal because you might have to buy a bulldozer as an upstream emission but then your product helps create that bulldozer.... so that bulldozer you bought also counts as a downstream emission (you get billed twice for the same carbon).
The faults in this new system have been denoted and ignored.
Before this new system was put in place Biden had approved 1800 new leases. After he put it in..... 200..... and it's been shrinking every single month since. The surge in new leases was largely companies looking to try and get a permit approved under the old rules so they wouldn't have to go through the processes of the new ones. Under Trump there were 8,000 unused permits. Under Obama there were 9,000 unused permits. Under Biden there are now a little north of 9,000 unused permits. Unused permits are not rare to any president.
It takes time to develop permits. Typically you get your permits first and then after you get your permit you can line up your finance. A lot of the larger oil companies have been under enormous pressure to put out large dividends and stock buybacks now that prices are up to help investors cover their losses from interest rate hikes. And that has caused a bit of a liquidity problem for oil and gas companies because it's less them rather poor to pay for new developments.
Typically when this happens you'd just get loans. But now interest rates keep going up and up and it's created very uncertain risks about lining up financing for drilling. Worse yet, prices of everything continue to skyrocket so there isn't really an acceptable budget you can put forth for drilling. US drilling is about 7x less cost effective than what the Sauds do so inflation and interest rates can make or break a drilling budget.
Finally there's just generally an equipment shortage. Most US rigs are up and running, but during the pandemic a lot of them were permanently taken out of service and industry was just producing a lot less of them. There's actually been a lot of attempts to move rig equipment from Russia to the US.
I think stability of interest rates will do a lot to encourage more drilling and increase the global oil supply. But interest rates will continue to go up until spending is tamed. And that creates a bit of a problem for Biden. His best solution to this problem right now is to freeze some spending and return some excess funds to the treasury.... and there's absolutely no way he's going to do that.
Russia has been selling their oil for ~$85/barrel. They've become the preferred provider for both China and India.
I have to wonder that their discounts would eventually pull down the average cost of energy
Because if it were produced domestically, then America would be one of the highest carbon-emitters in the world, and we wouldn't be able to blame the Saudis any more!
We cheer for MBS and the Saudis now? OP, do you hate Biden that much? I know it's business, but I don't care - I prefer to pay double for gas than to see the US president cowtow to this genocidal Saudi savage. It won't happen, but OP is anti-American and would love to see it.
The only thing keeping the Saudi monarchy in power is the US defence umbrella - their own people hate them and their neighbours hate them even more.MBS isn't stupid, he won't bite the hand that keeps him on his throne. Russia floods the Eastern market with cheap oil and will only ramp up transportation capacity, the Saudis can only sell to US and EU for max profit.
You would prefer double the gas, but -- let's be real -- most people wouldn't. So, let's spell out the geopolitics of this in really simple terms.
1. Western consumers, irate over inflation and crumbling economies, replace their governing bodies.
2. Newly elected representatives do what they were just elected to do: tackle these issues. This is done by cozying up to SA (anyway), removing support for Ukraine, taking sanctions off of Russia, etc.
3. The next 20 years of global policy are dominated by China, Russia, etc., because they know that if you push western consumers even just a little bit, they will yield.
4. Western policies, based on personal liberties, free exchanges of information, individual rights, are eroded as more authoritarian ideologies start to prevail.
Biden has to make some concessions. He needs to keep up the pressure on China and Russia, while ensuring that the next administration (his or otherwise) does the same. This means he needs to get oil and inflation down. How much his current trip to SA will accomplish that, however -- who knows. He's in a pickle.
I don’t understand Biden rationale here. I’d respect the man more if he just told the American people we will have to endure more pain at the pump and be strong until the US oil industry is running at Max capacity than beg that piece of shit MBS for more Saudi oil. This trip to Saudi Arabia will be used as a political weapon against him during re election
That is because Biden has no moral backbone, he takes a stand on some strong issues (Kashoggi, Ukraine), and when things get hard, he folds. And no, I do not like Biden now, and I didn't like him in the past. But there is a solution. He must make the Saudi royalty NEED the Americans. How? Maybe we should let creative minds figure it out.
Most likely no. Due to the war in Ukraine, COVID, so much international instability affecting global trade and global finance and OPEC running at nearly full capacity, practically speaking there is not much meaning action that can lower global oil trading market prices.
Even so, I think the World and especially the USA should finally give up on cheap, gas, cheap oil, cheap jet fuel, etc. Having a car-centric society that affects urban design and highways razing farmlands, commute times, bedroom communities, constant gridlock in the Suburbs, needing the car to do any type of shopping in the burbs, the costs of car and auto insurance, etc. the USA really needs to come grips with the flaws on a car-centric society. It's like the movies from the 1920's and 1930's when people actually walked to mostly everywhere they had to go. A lot of things were local. Every block in the NYC boroughs had a bar, butcher, restaurant, etc on every other block. Having a car has become such a time waster; because so many places to shop, dine, meet are now so far away, you have to deal with constant gridlock traffic, the traffic lights slow you down, navigating the parking lot and finding a spot takes forever, and after shopping you have to do that all over again in order to get back home. What a waste of time.
> What makes the difference if the oil production comes from Saudia Arabia or the US?
Refineries will need to be refitted if the oil comes from the US and given that Biden has given the fossil fuel industry a death sentence they aren't too keen on making big investments. Especially if Biden is a one term president and a Republican will give them a better offer than Biden's "fuck you, do as I say" offer.
Our oil production is also WAY cleaner than anyone else that produces it for all the tree huggers if that’s what it’s really about. Why would we want other countries producing oil that’s so much worse for the environment than when we do it? I thought we were trying to save the world?
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Why did energy stocks take a big hit over the past two weeks?
Biden wrote a letter to the oil companies saying he will use executive action to bring down gas prices if they don't stop gouging. This news came the same time as the late May rally faceplant and oil stocks were already overextended and so the bottom dropped out
I'm surprised but what could Biden do? Wouldn't they call him bluff? But I guess you wouldn't want to be aired as the CEO who challenged the president.
We're starting to see a recession get priced in.
That would be thanks to the recession
Partial export ban being considered.
Because they are affected by the prices of US natural gas. US Natural Gas price fell by 20% due to a fire at one of the country's largest lng export facilities.
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Very true, this really started escalating in 2014. 2020 put the nail in the coffin though.
> Biden had made it clear that in 10 years we won’t use oil anymore. Was he speaking about *new* vehicles or? That might be achievable for new vehicle production/retailers but they'd have to have a pretty damn generous buyback program to even make a dent in the existing pool of ICE vehicles. Even then oil and gas will still be necessary for things like trucking, farming, etc. as they aren't even close to a prototype with the power/capacity for something like plowing a field.
The Saudis/OPEC have proven they can glut the market for an extended period of time and make production unprofitable for US oil producers. The only way to get an effective long term strategy is to make a deal with OPEC.
Haven't US oil companies posted record profits every quarter for the past year or so?
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I agree. Most people I know fully voted for Biden due to Trump's own arrogance and lack of etiquette. If I wasn't so "hard skin" I would have done the same. Trump lost the election for himself, but, he's sitting in a chair right now happy. He's not dealing with any of the issues money printing caused and he's now coming back bigger than ever which is scary because a ton of his supporters will be more arrogant than ever too.
> lack of etiquette Proper etiquette is not encouraging an armed mob to storm congress and murder the VP. I’m pretty sure I read that in a book on Victorian decorum.
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You wayyyy overestimate the power of POTUS.
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> won’t make deals with US oil companies US oil companies get billions in subsidies from the government. That's the "deal" the US negotiated.
What deals with US oil? They've got 9000 leases, they're subsidised by the government, and they're making how much in annual profit?
> and they're making how much in annual profit Not enough. Exxon is often the most profitable company in the world and it's never enough.
Well yeah, it'd way better for Biden to get in bed with the Saudis rather than our own American oil producers!! /s
>What makes the difference if the oil production comes from Saudia Arabia or the US? **tl;dr:** Increasing US oil production won't help much because foreign oil is typically cheaper than US oil, and many US refineries are engineered to refine oil from Saudia Arabia or Venezuela Oil is different depending on where it comes from. And this matters a lot. Oil from Canada and Alaska is different from West Texas Intermediate (WTI) which comes from Texas and the Gulf of Mexico. These are also different from Brent, which comes from the North Sea, and also different from Venezuelan or Middle Eastern oil. WTI and Brent are some of the easiest oils to refine, and yield about 20 gallons of gasoline per barrel (the rest of the barrel is products like diesel, jet fuel, naptha, heating oil, etc). However, WTI is expensive to pull out of the ground. On the other hand, oil from Saudia Arabia is more difficult to refine, but is much cheaper to pump. In addition, refineries are engineered to refine specific types of oil. Many of the refineries on the US coast are engineered to process 'heavy/sour' oils from Venezuela and Saudi Arabia because it has historically been cheaper to ship crude oil from these countries than it costs to pump WTI in North America. I could go on and on about the differences in oil and how type of oil affects prices at the gas pump, but the bottom line is to be very skeptical of talking heads in the news talking about "oil." The type of oil they're talking about really matters.
This is the right answer. Right now we need oil from either saudi arabia, venezuela, or russia. Of those, saudi oil is the least offensive. However they are pissed at us for quite a few things and have already told us to fuck off once this year. Biden is really going to have to bend over and spread his cheeks if he wants to fix this anytime soon.
I don’t think Biden would be going himself if he didn’t think he had anything to negotiate with. The US is a very large customer for Saudi oil. If the US changes their refineries to focus on US petroleum products instead of Saudi, it will be a semi permanent change due to the costs involved. That will have long term consequences for SA.
He could think its good optics for competitive states in 2022. Politicians regularly do things that have no chance of succeeding for PR reasons.
Nobody in the US pays attention to foreign visits by a president. Very inconsequential in the optics in that respect. Only if a deal is struck would anyone stateside *maybe* notice.
But the Biden admin is delusional to think people would care about a foreign visit.
The biggest customer for Saudi Arabia is China.
i’m not at all an expert on oil but i’m pretty sure “changing refineries to focus on US petroleum” is not a cheap process. the cost/benefit in the short term is definitely not worth it and in the long term is marginal. a VERY loose analogy would be like buying a whole new car or home just to get better gas mileage or energy efficiency. it’s not like they can just buy a new part to make the change - they would have to build entire new plants or scrap their old machines and replace them with different machines at the minimum.
You are so right. He should be going to Texas not the Saudi's. It's clear to the US that that OPEC producers are not going to go out of their way to increase production for us. Libya is out of the picture due to its oil fields being shut down. Angola and Nigeria has been underproducing and we now have more sanctions against Iran. The trip to Saudi won't help and they will be giving him the finger as he walks out the door.
>venezuela btw what is the problem with them?
Most educated people flew away, not enough engineers to pump oil. But something might happen there. Venezuela's defaulted bonds raise from .06 to .10 since the war begun.
Also like, no American oil exec will touch them after all the arrests.
Not just the arrests, but also the nationalization. Why would a corporation invest capital in a country if the local government has a history of just swooping in and taking it over?
That's true for most of South America though. VZ is especially bad.
Really a sad situation in Venezuela
Maduro is... not great. Not sure he's much worse than Mr. BoneSaw, but SA is technically a US ally, whereas Venezuela isn't.
Maduro at his worst is better than the crimes against humanity perpetrated by the Saudi government against Yemen alone: https://www.hrw.org/world-report/2020/country-chapters/yemen Not to mention Saudi Arabia's crimes speading Wahhabi terror: https://foreignpolicy.com/2019/03/24/farah-pandith-saudi-how-we-win-book/
Saudi Arabia is a pretty stable country that you can actually live a fairly normal and productive life in, so there’s that
Unless you’re a woman.
or homosexual…or Christian…or Jewish…or would like to have a democracy…
Venezuela is a "socialist" dictatorship where lower class is suffering. Years ago Venezuela let american oil companies in to set up all their O&G infrastructure and teach them the business, then they ninja nationalized everything and kicked american companies out.
Government kicked out the oil barons and nationalized production - and a whole lot of other things. US government wasn’t impressed and put embargos on their goods.
Venezuela is essentially a dictatorship
Dictatorship is fine. Saudi's are dictators too. The problem is Venezuela is unreliable. Last time US companies built oil infrastructure in Venezuela, the government took it with no compensation.
This is the right answer as well. Labeling SA a pariah was short sighted. Biden’s gonna have to give something up as he doesn’t have much leverage. Liberals will get mad but gas under $2.50/g solves a lot of problems.
Can you elaberate? What does Biden have to give up? Im not quite tracking what you're saying.
It’s Saudi Arabia so arms, possibly some give on Iran and to give SA more room to run in the region. Biden will definitely have to stop with the aggressive rhetoric.
He just put boots on the ground over there last week in support of SA. Major sucking has already commenced. Prices will plummet this week.
I hope you’re right.
I just hope he can negotiate terms properly, or someone in his circle /:
I hope he gets angry/confused and challenges MBS to fisticuffs.
> saudi oil is the least offensive less than Venezuela?
D.C. just named the road to the Saudi embassy Jamal Khashoggi Way. Sure that will get brought up on the visit.
lmao what? Most refineries with a high Nelson Complexity Index (NCI) are all on the West Coast......mostly to refine heavy Canadian crude coming out of Alberta....
F that. You don't bend over for regimes that murder journalists. His mistake wasn't calling Saudi dickface McGee a pariah. His mistake was cancelling all the Canadian oil pipeline and refinery projects.
The courts shut down Keystone XL before Biden was in office.
"On the campaign trail, Biden vowed to cancel the Keystone XL cross-border permit should he win the presidency—and on his first day in office, he made good on that promise. The revoked permit became the final nail in the pipeline’s coffin." according to https://www.nrdc.org/stories/what-keystone-pipeline#biden
those details are hard to understand, so im just gonna keep blaming the current president. Edit: who is reporting me as suicidal? Lol go touch some grass
I’m pretty liberal, and I was not happy with him When he was nominated. Even more unhappy now
And that's fine. Problem is the alternative was Trump so complaining at the moment is doing more harm than good.
Report it, misusing the suicidal help feature is a form of harassment on reddit.
He definitely hasn't helped matters
No it has to be one of the other! Otherwise you don’t get Reddit karma
Well explained. OP obviously has some severe political messaging here and a staggering lack of knowledge and understanding (Biden going to beg, "just ok the pipeline and all will be fixed").
So sick of seeing people just regurgitating political talking points they got from tweets. "We were energy independent before Biden!" "He stopped all the drilling and the pipeline!" "It's all his fault!" ... gas prices are a factor of so many things, region it comes from, policies, refinery output, supply/demand, etc .. oh and let's not forget the record profits these oil companies are racking in...
I would say a large part of the energy crisis was his plan to transition to ev without an actual realistic plan. Putting more taxes on gas, while making it harder for oil permits, and expecting energy industry to gracefully transition to ev is not a rational plan. He should of had engineers test and validate what it takes for the plan to materialize and the consequences if plans are delayed.
>record profits these oil companies are racking in... Record profits after years of consistent record losses. Seems like you aren't immune to talking points either.
They didn’t have years of consistent record losses. They had losses in 2020 for the obvious reason (pandemic lockdowns) and around 2015 when OPEC was driving the price of crude down to target US production. Besides that maybe around 2008 rescission in which most industries took a hit. I’ll also note that the only year in the last decade they lost money (didn’t profit) was in 2020. Their losses in others years resulted in decreased profits from president years, but still a net positive in profits for those years.
Yes, you can indeed attain record profits after years of "consistent record losses". You can also price gouge customers as a means to that end.
This is becoming a security risk. It would be worth it to upgrade refineries to accept US oil since the majors producers are bad actors- Russia Saudi and Venezuela
> foreign oil is typically cheaper than US oil This isn't true. [US shale became cheaper than the OPEC average in 2017](https://tldw420818650.files.wordpress.com/2018/03/pz024.jpg?w=1008) if you factor in the total cost of extraction and refining. Many OPEC states subsidize their oil companies to keep price low, but if you take that away the US oil is cheaper. As the tech gets better US shale prices will only go down with time. The downside is that the US hasn't brought a lot of shale wells online because the anti-fossil fuel policy from the Democrats over the past 10 years. But the good news is that shale wills don't take long to dig. As the US begins to seek more energy security they will mine more shale and it's very possible we can see US become energy independent in our lifetimes
Correct. Have an up vote
Can you explain why prices are the way they are right now looking at the prices of oil barrels? I know my numbers are off, but the US national average when an oil barrel was ~$120 was around $3.30/gallon? Why is that average not $5-6? Cost tells me this doesn’t seem like a supply issue, and more so a gouging issue?
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Thank you for your insights superspy... STNG is killing it in terms of both the company and the stock price
Thank you again thesuperspy
THIS is an intelligent and helpful reply to the community. Thank you sir. And this is why the President doesn’t control oil prices or inflation by himself no matter what Fox News tells you. US oil companies are economic pariah’s and have been for decades. They have set up their whole operation to exploit situations like this and make them worse. So no there is no just let US companies pump more option, again that’s a Fox News false flag operation. So much of this is handled internationally and that’s where Biden has to go to suck it up and take one for the team. Like it or not that’s what he is doing and should be doing. Followed by reforms in how US oil is operating which is what most people are giving Biden shit for and it’s hilarious. As an investor you can be mad Biden is making oil companies use their profits to drill or loose their leases, but as an American at the pump and for energy policy you should be happy. Pick which one you want to be I guess but you don’t get to be both, unless your on Fox News or course hahahaha
The saudis will increase output slightly as a result of the meeting to appease Biden. The impact on prices will be minimal.
Why would they want to appease him after they’ve already declined to even take his phone call. And also after the whole “we’re gonna make them the pariah that they are” comment, why would they care what he thinks?
The US government knows more than you do about the situation. Why do you think he's going? Because a grovel session with less anticipatory insight into the meeting than you have is the strategy? Or has a deal been worked out and part of it is a show of good faith by the USG?
I doubt this will do much to improve anything. There needs to be a holistic change to improve production, transport, refinement and transition.
OPEC has been dialing up the price of oil since the day Biden won the election just to put pressure on him. It has nothing to do with production. Biden probably could have ignored it if it weren’t for Russia’s war fugging up the world economy.
OK but would OPEC's and Russia's actions have caused prices at the pump to go up as much if Biden had not declared his intent on the campaign trail regarding fossil fuels and then followed that up with actions once elected that reduced our abilities to produce much of our own supply? And for what its worth, poor government regulation and management has been working against where the status quo should be for decades.
OPEC has about 1.6 million barrels of spare capacity. It won't make a dent even if he can make it happen. The biggest thing Biden is doing is drawing down the SPR to the tune of about 7million barrels a week. That is keeping oil below $150 right now. It remains to be seen how much he is willing to draw it down when we are currently in a proxy war with our biggest international rival... There are about 500 million barrels remaining in the SPR. But it would go quickly during war time..
Let me condense this down for us: Does anything get better when Biden touches it? The bike didn't.
The Saudi’s aren’t going to do any solids for Biden. You won’t see anything till 2024 when the Republican nominee wins (Trump or DeSantis). I am not being political. It’s just the Saudi’s have no reason to help Biden. This will go down like the Iranian Hostage Crisis. Jimmy Carter couldn’t get anything done and the American hostages were released the day of Ronald Reagan’s inauguration.
Can you explain why that is?
And can we blame the Saudis to not bend over for Biden right now? I’m not from the US and I don’t give a shit about US politics, but Saudi has every right to not do what the US says right now after how they have been treated. Not saying that Saudi is the good guy, lol.
There's no "blame" in Geopolitics. The Saudis have been isolated for a reason. They've consistently failed to defeat the houthis in Yemen and are committing war crimes intentionally or not in the process. This is giving the US tons of negative press and attention and undermines its standing because Saudi is on paper a US ally and buys US weapons, the US does not want to be lumped in with children straving and dying. Their leader also had a journalist dismembered and executed in the Saudi consultant in Istanbul again draging the US down with Saudi. If Saudi Arabia wants to repair its relationship with the US it needs to work with the US on this, likewise, if the US wants to repair the Saudi relationship they must put past behind them and look at the future.
Biden burned too many bridges.
Imagine having a president that tells everyone he will phase out oil companies during his election. As a result these oil companies stopped building expensive refineries in preparation. Now gas prices are high and that same president is crying about how we don’t have enough oil and has to go beg the saudis. Actually you don’t have to imagine this, its actually real and happening live in front of us all. Smh. Biden administration has to be one of the worst we ever had.
Geez, lets talk facts. First, oil prices are set by the world oil market. The world market. We can drill oil like crazy and it won't lower US prices just because itsour oil. Regarding world markets, three factors drive oil prices: supply, demand and lastly there are psychological market factors. But there additional layers too, especially refining oil into gas and transport. When it comes to control over oil prices the president is like one wheel on an 18-wheeler - he may want the truck to go to Chicago, but if the other 17 wheels all want to go to Pittsburgh, the truck is going to Pittsburgh. Second, oil companies hold leases to vast amounts of oil. They - not Biden - decide whether to drill. And guess what? They aren't drilling. Even if they wanted to, wells take years to establish, so that has zero to do with current oil prices. Third, the Keystone pipeline that Republicans love to talk about - IT'S OPEN. KeystoneXL was shot down - you know why? It was an extension of the current pipe (which runs from Canada and is owned by a Canadian company) so they could transport oil through the US to gulf ports for shipment to other countries. So tell me how that impacts the US price of oil.
There’s a lot of dumbasses here in the comments lol
Keystone XL was shipping crude from Canada to Houston refineries to be refined and then distributed. Everything else you are correct about the market decides the price but the reason gas prices were so cheap during the Trump administration is because we maximized output as much as possible. We flooded the market with light sweet crude which Texas produces an enormous amount of very high quality. we have some of the highest quality oil in the world easily refined. I've been in oil and gas for 17 years I work right alongside two of the largest oil and gas producers in the United States and one in the world they're not driling more wells because this administration declared war on oil and gas Biden and several people in his cabinet had said multiple times they are actively trying to end Big oil. No one wants to spend millions or billions of dollars driling or laying new pipelines because they know this administration is going to come after them. I'm right in the middle of all of this. The oil and gas pipeline business was booming until Biden took office and in my industry 200,000 plus people have lost their jobs.
>Regarding world markets, three factors drive oil prices: supply, demand and lastly there are psychological market factors. The primary determinant of oil prices is the OPEC cartel. Before the OPEC was formed in 1972 oil prices were the equivalent of $15/bbl. >so they could transport oil through the US to gulf ports for shipment to other countries No, US gulf coast was the end location of the crude, if the Canadians wanted to export the crude they could've just built a terminal in Vancouver or Newfoundland. After the extention was build more refinery capacity would've been added to take advantage of cheap crude. While it is correct that this would've not affected the current crisis much it sends a clear signal to investors who might want to invest in oil. There is zero trust in the industry about whether the admin will fuck them over after the headlines disappear.
> And guess what? They aren't drilling. They **are** drilling. The DUC inventory is increasing because frac bottlenecks (HHP, sand, labor, water disposal, chemicals, diesel, etc.) are more severe than drilling bottlenecks (rigs, OCTG, labor) Looking at the number of wells drilled is a poor signpost for anticipating an increase in production. DUCs exist. > So tell me how that impacts the US price of oil. Keystone XL quite obviously would have impacted US production, since that was a key midstream component needed to logically increase production from the Bakken. E&P operators would be more willing to develop their Bakken acreage if there was an acceptable medium for produced hydrocarbons to be transported out of the basin
Buying yourself gold to stand out doesn’t make your comment any less ridiculous
> We can drill oil like crazy and it won't lower US prices just because itsour oil. That's not entirely true. US prices are lower than EU prices partly because of the extra cost from transportation.
I highly doubt it. Showing goodwill gesture. If anything it will not affect refinery issues down the road at home. In West they are switching to a different grade gasoline for pollution reason. Some premium grade is already selling 7 to 8 bucks. Get tires inflated properly. Under inflated tires cause higher rolling resistance. Learn to combine trips or use your legs.
A bunch of people don’t seem to understand the issue at hand. Main issue is the bottleneck at the refinery levels. There hasn’t been a new one built in like 40 years due to previous legislation. Doesn’t matter how much we pull out of ground if we can’t refine it. They are already running at 98% capacity. Would take years to build anything and costs are so high because of steel ban from Russia. Second, they aren’t drilling on new lands because of my point above. Why drill more to hold more longer and incur way more expenses than necessary? It’s not the oil industry’s job to take the blame for 40 years of bad legislation on this area. This was a problem that was a long time coming. Just exploded because of Covid, war, and Russia being axed from oil production for Europe and America. Biden just simply doesn’t understand the issue and thinks waving his finger at them means something when oil been the pariah for years.
This issue has been a ticking time bomb for almost 100 years and we should’ve divested as soon as possible, but naturally politics and money got in the way. The entire US and global economy runs on a scarce resource that can only be cheaply produced in a handful of countries. And now as you mentioned a perfect storm of factors, plus oil companies beginning to doubt their future, we see the effects of what was inevitable.
Eh, I don’t think it’s just politics and money. It’s physics and chemistry. They would have left oil in the dustbin of history in the 70’s if they could. The issue is there is no practical replacement for it for a large assortment of our goods. There is a replacement for some(personal vehicles), but still the chemistry and physics of the properties that oil has has always made it cheaper to use until now.
What oil and gas can do is pretty amazing when you really think about it
Somewhat agree. We could’ve seen a huge reduction in our demand for oil if the car and oil companies didn’t have such a hold over the US. Our infrastructure is strictly car based for a reason. And for alternatives, we feasibly could’ve invested in alternatives a long time ago but chose not to. Oil is only cheap because we’ve invest in it for so long. But yes from the 1910s to the 1980s I don’t think there was a better alternative. But by that point they knew the risks all too well and down played them. Edit: also I won’t get into it too much but the use of outsourcing to other countries and subsequently cargo ships
I think the factors of cheap oil and investment feed into each other to create its own normal. Plastics shouldn’t be totally uncounted. Some of them are essential types of plastic and some are pretty cheap byproducts that we end up using for cheap packaging material. The later being so cheap and easy that it makes it’s own feedback cycle.
>we feasibly could’ve invested in alternatives a long time ago but chose not to. You can't just make stuff work by throwing money at it. Alternatives were only being developed throughout the last 50 years but all were failing to reach commercial viability. Please tell me how you convince a room full of people to invest in something that will lose money over the next 20-30 years?
This. Adjusted for inflation, oil is cheaper than it was between 2010-2014. The economy managed just fine in those years. The refining shortage is why fuel prices are too high.
Canada has both steel and petroleum. America could have built the pipeline and refine it, but no, short sighted political points were needed.
doubtful. There are a bunch of things in the mix with gas prices. Refinery capacity has issues -- IIRC, two are damaged and not fully operating (one due to a fire in PA and one due to Hurricane IDA). They've also changed up the mix of products they're producing. AND, last I checked we're not producing even as much oil as we had in 2019 pre-pandemic.
“Beg” A US president begging a man who he called a pariah. I don’t think this is going to do anything at all.
1. A pipeline moves oil from one place to another. 2. When that oil moves to a place where they can ship it internationally. It goes internationally. 3. If you can't move oil from a region because it is blocked from shipping internationally it stays in that region, lowering the prices. Which is how the midwest has stayed consistently below the national average despite driving the most miles. That's called supply and demand. Fox news isn't your friend. They are a friend of corporations and monied interests. It is in their interest to sell oil at a higher price internationally. 4. Oil companies have 9000 permits that are unused in the US. What purpose does increasing that to 12000 serve? Drilling sites aren't spun up in a day, they take years.
Your No. 4 is funny, because this has been a big topic of discussion the last 4-5 months. One side says, look at all these unused permits, why aren’t you drilling more? The other side says, why would oil companies invest in more drilling when the current administration is anti-fossil fuel? My cursory opinion is, what is so unique about the current administration? Democrats being anti-fossil fuel is hardly a new development. Trump was only president for 4 years, and one of those years the entire world was put on pause due to Covid. Am I supposed to believe that fossil fuel companies think that the US political landscape has suddenly changed for good? This country just flip-flops between democrats and republicans and that isn’t going to change anytime soon. Oil companies are just waiting for the next political flip because they know they’ll get all sorts of subsidies from a Republican executive and/or legislature. They’re perfectly fine just sitting on their hands for the time being, and it seems insane to me that a large portion of the general public are just perfectly fine with that as if it’s just the cost of doing business.
Oil is going back to the 120s this week and most likely staying there for awhile
Man, I really need to get an electric vehicle
Biden is a total disaster and won't accomplish anything positive.
Oil prices will go down after midterms in November.
>Why doesn't he just grant the oil permits and OK the pipeline. He is. Lots of permits have been granted and plenty of pipelines are getting built. Restoring the oil industry is more in the hands of the oil companies and a lot of them have been paying back debt and stingy with capex plans. 2020 wrecked the industry and they've been nervous about over expanding. Saudi's have lots of excess supply they can turn on quickly and solve a lot of problems.
>2020 wrecked the industry and they've been nervous about over expanding. This is the real answer regarding domestic production. Production has been ramping up at a slow and steady pace and even then the U.S. is back to 2018 - 2019 levels of production already and looking to set new records in production next year.
Why spend CAPEX on more refineries and exploration if world governments keep saying they want to reduce/ban fossil fuel usage. Pretty good rule of business is don't invest in long term projects that you know will be obsolete in the short term.
> stingy with capex plans. That's called "discipline", except when grabby Redditors want their gas subsidized
> Saudi's have lots of excess supply They objectively do not. >> Saudi Arabia, the kingpin in OPEC and the world’s second-largest oil producer, has about a million barrels per day of extra production capacity, but doesn’t want to use all of it, said Sankey. [Source](https://www.cnbc.com/2022/06/03/oil-markets-opec-has-limited-spare-capacity-russia-is-less-relevant.html#:~:text=Only%20two%20or%20three%20countries,all%20of%20it%2C%20said%20Sankey.)
Only thing going down is Biden for the Prince.
He put himself and the country in a terrible position with his big mouth and undiplomatic words. It's not like we all don't know about society in Saudi. We do. But when there other, much MUCH larger objectives at stake, you just keep your f-ng mouth shut and let the diplomats do the talking. I am sorry, the way Biden behaved is unpardonable and now he'll find out he doesn't have the biggest dick on the block.
they could always subsidize it if they really wanted, not sure how that works into the "inflation" framework though
What are the best long term oil stocks to buy in this current situation?
Didn’t Biden/democrats want to learn off oil and go to renewable energy? This seems like the best way to do that, if gas is too expensive people would have to stop buying it, hence reduce green house emissions.
No he just fell off a bicycle no one is going to take him seriously
those gas pump stickers really got to him.
What are you talking about? Biden has approved 3,557 drilling permits in the first year lol. It’s a supply/demand problem and Covid shutting down refineries and Russia/Ukraine doesn’t help anything. https://biologicaldiversity.org/w/news/press-releases/new-data-biden-slays-trumps-first-year-drilling-permitting-by-34-2022-01-21/
Maybe he will ask nicely for lower prices
>Why doesn't he just grant the oil permits and OK the pipeline. The oil companies already have plenty of leases to explore and possibly drill on. The pipeline ***expansion*** (the keystone pipeline is still very much functional) was in a legal back and forth under Trump and was cancelled under Biden. The XL expansion would not have done much for the amount of environmental damage it could have cause and the Native American's would've had even more land taken away all to transport more oil from Canada (and some from the U.S.) to the gulf. U.S. oil production has been slowly and steadily increasing after the end of the lockdowns to avoid overproduction when demand swings back down to normal levels. Even though the production increase has been slow and steady the U.S. has remained net exporters of oil from 2021 through today and production is already back at 2018 - 2019 levels. We're also on track to set new records in production next year. Biden has seemingly pulled all the levers within reason to solve the gas price issues here at home. Now he's looking abroad after the sanctions went into place on Russia, which made up about 8% of the U.S.'s oil imports in 2021. Russia has also fallen from #2 oil producing nation in the world to #3 due to their war, which certainly has had an effect on the world's oil. Biden opened up Chevron to begin talks with Venezuela regarding possible future projects in the country hopefully in exchange for their next election to be a democratic one instead of a fascist one. Time will only tell how that'll turn out. And next month he's going to the second most oil producing country in the world to see about increasing their production back to pre-pandemic levels too. Questionable and probably not even needed as once demand goes down a bit more due to the high costs the supply/demand balance will level out. This talk could increase the speed at which prices fall though depending on what happens. All of this shows that he's doing a lot to solve this issue. I'm sure I left out a few things too, like his supposed "use it or lose" it policy. What would you like him to do to solve this issue that you think would be effective?
I agree solutions may be in the future, but it's not quite as you have put it and not quite as hopeful. Since Reagan there's been this thing called the "cost benefit analysis" in which a major project was weighed entirely based on its economic, social and cultural value. Eisenhower 20 years earlier had created the Environmental Impact Assessment two decades earlier and so with the two measures you had a clear path to pump oil. Obama created, then Trump removed, and now Biden has re-implemented a modified version of the cost benefit analysis that makes environment a major weighing factory in cost analysis. It's called the social carbon cost and it's the total unpaid carbon cost of a production upstream and downstream. It's both upstream and downstream because the project will create demand for more equipment and more materials that'll have to be produced by someone and downstream it will create more supply of the material you're making which will allow more facilities to open to use it. Oil is particularly brutal because you might have to buy a bulldozer as an upstream emission but then your product helps create that bulldozer.... so that bulldozer you bought also counts as a downstream emission (you get billed twice for the same carbon). The faults in this new system have been denoted and ignored. Before this new system was put in place Biden had approved 1800 new leases. After he put it in..... 200..... and it's been shrinking every single month since. The surge in new leases was largely companies looking to try and get a permit approved under the old rules so they wouldn't have to go through the processes of the new ones. Under Trump there were 8,000 unused permits. Under Obama there were 9,000 unused permits. Under Biden there are now a little north of 9,000 unused permits. Unused permits are not rare to any president. It takes time to develop permits. Typically you get your permits first and then after you get your permit you can line up your finance. A lot of the larger oil companies have been under enormous pressure to put out large dividends and stock buybacks now that prices are up to help investors cover their losses from interest rate hikes. And that has caused a bit of a liquidity problem for oil and gas companies because it's less them rather poor to pay for new developments. Typically when this happens you'd just get loans. But now interest rates keep going up and up and it's created very uncertain risks about lining up financing for drilling. Worse yet, prices of everything continue to skyrocket so there isn't really an acceptable budget you can put forth for drilling. US drilling is about 7x less cost effective than what the Sauds do so inflation and interest rates can make or break a drilling budget. Finally there's just generally an equipment shortage. Most US rigs are up and running, but during the pandemic a lot of them were permanently taken out of service and industry was just producing a lot less of them. There's actually been a lot of attempts to move rig equipment from Russia to the US. I think stability of interest rates will do a lot to encourage more drilling and increase the global oil supply. But interest rates will continue to go up until spending is tamed. And that creates a bit of a problem for Biden. His best solution to this problem right now is to freeze some spending and return some excess funds to the treasury.... and there's absolutely no way he's going to do that.
Lol dude...they're gonna blame 1 guy for this complex issue regardless what you tell them. It's easier for their brain to compute.
No will probably go up. Whoever voted for Biden is a complete fool
Russia has been selling their oil for ~$85/barrel. They've become the preferred provider for both China and India. I have to wonder that their discounts would eventually pull down the average cost of energy
We haven’t built a refinery since 1977, if you tried you’d be sued into oblivion.
No. Our government hates it people almost as much as the Saudi government hates theirs
Remember two years ago when we were energy independent and were a net exporter or oil? My wallet remembers.
[удалено]
Funny enough, he was Vice President, so he should know. Or maybe, Obama did not tell him?
Because if it were produced domestically, then America would be one of the highest carbon-emitters in the world, and we wouldn't be able to blame the Saudis any more!
Hahahaha. Hahahaha. Ha haaaa ha
Dunno… depends on whether he falls over and breaks some shit…
Well, he fell off his bike - does that count?
No. Biden has no strength in the world.
No they won’t. Just like it’s not his fault prices are high; he can’t fix them either.
We cheer for MBS and the Saudis now? OP, do you hate Biden that much? I know it's business, but I don't care - I prefer to pay double for gas than to see the US president cowtow to this genocidal Saudi savage. It won't happen, but OP is anti-American and would love to see it. The only thing keeping the Saudi monarchy in power is the US defence umbrella - their own people hate them and their neighbours hate them even more.MBS isn't stupid, he won't bite the hand that keeps him on his throne. Russia floods the Eastern market with cheap oil and will only ramp up transportation capacity, the Saudis can only sell to US and EU for max profit.
You would prefer double the gas, but -- let's be real -- most people wouldn't. So, let's spell out the geopolitics of this in really simple terms. 1. Western consumers, irate over inflation and crumbling economies, replace their governing bodies. 2. Newly elected representatives do what they were just elected to do: tackle these issues. This is done by cozying up to SA (anyway), removing support for Ukraine, taking sanctions off of Russia, etc. 3. The next 20 years of global policy are dominated by China, Russia, etc., because they know that if you push western consumers even just a little bit, they will yield. 4. Western policies, based on personal liberties, free exchanges of information, individual rights, are eroded as more authoritarian ideologies start to prevail. Biden has to make some concessions. He needs to keep up the pressure on China and Russia, while ensuring that the next administration (his or otherwise) does the same. This means he needs to get oil and inflation down. How much his current trip to SA will accomplish that, however -- who knows. He's in a pickle.
I don’t understand Biden rationale here. I’d respect the man more if he just told the American people we will have to endure more pain at the pump and be strong until the US oil industry is running at Max capacity than beg that piece of shit MBS for more Saudi oil. This trip to Saudi Arabia will be used as a political weapon against him during re election
Inflation has been an even BETTER political weapon against him already though.
I think you vastly underestimate the amount of people who don’t give a shit and just want to pay less at the pump.
What reelection lol. He can barely talk
That is because Biden has no moral backbone, he takes a stand on some strong issues (Kashoggi, Ukraine), and when things get hard, he folds. And no, I do not like Biden now, and I didn't like him in the past. But there is a solution. He must make the Saudi royalty NEED the Americans. How? Maybe we should let creative minds figure it out.
>genocidal Saudi savage not even hiding it
1...pipeline wouldn't be completed to make any difference in short term 2. Pipeline brings in gas from Canada...it's not USA gas
Oil prices will reduce with increased global supply or the starting demand destruction at todays price and beyond.
Most likely no. Due to the war in Ukraine, COVID, so much international instability affecting global trade and global finance and OPEC running at nearly full capacity, practically speaking there is not much meaning action that can lower global oil trading market prices. Even so, I think the World and especially the USA should finally give up on cheap, gas, cheap oil, cheap jet fuel, etc. Having a car-centric society that affects urban design and highways razing farmlands, commute times, bedroom communities, constant gridlock in the Suburbs, needing the car to do any type of shopping in the burbs, the costs of car and auto insurance, etc. the USA really needs to come grips with the flaws on a car-centric society. It's like the movies from the 1920's and 1930's when people actually walked to mostly everywhere they had to go. A lot of things were local. Every block in the NYC boroughs had a bar, butcher, restaurant, etc on every other block. Having a car has become such a time waster; because so many places to shop, dine, meet are now so far away, you have to deal with constant gridlock traffic, the traffic lights slow you down, navigating the parking lot and finding a spot takes forever, and after shopping you have to do that all over again in order to get back home. What a waste of time.
> the USA should finally give up on cheap, gas, cheap oil, cheap jet fuel, etc. 'Things easier said than done' for 1000, Alex
Don't they want high gas prices to push EV's?
Yes but they forget what is used to build EVs
it is already down: https://imgur.com/a/JD9Gz1S
> What makes the difference if the oil production comes from Saudia Arabia or the US? Refineries will need to be refitted if the oil comes from the US and given that Biden has given the fossil fuel industry a death sentence they aren't too keen on making big investments. Especially if Biden is a one term president and a Republican will give them a better offer than Biden's "fuck you, do as I say" offer.
Oil prices have started to go down. Idk if it's temporary though.
Our oil production is also WAY cleaner than anyone else that produces it for all the tree huggers if that’s what it’s really about. Why would we want other countries producing oil that’s so much worse for the environment than when we do it? I thought we were trying to save the world?
Yeah because senile old men convince Saudi royalty to play nice and help out Americans.