It’s time we stemmed the crude flow
For me, someone going up the down staircase means that he or she either can’t read, just refuses to go with the conventional or conversational flow, or is being chased by the police.
We are sort of in that figurative mindset right now, but more in line with the guy who defies science and tries to run up a fast moving downward bound escalator.
With the recent agreement (well, ya know, sort of agreement) by the oil producing fraternities, namely the Russians and Saudis, that — yes indeed — maybe it is time we stemmed the crude flow because it’s not making much sense or… wait for it… dollars for us. So, what about say a 10-million bpd cut and we’ll tell the hangers-on like the Americans and Canadians to kick in a couple of million as well?
Whew! that was easy.
Not so fast.
Let’s see, a 12-million bpd production drawback should increase crude prices, keep Vladimir (Chuckles) Putin happy, OPEC will be delighted, and those shale farmers in Texas will be giddy.
But then someone pointed out that the latest U.S. EIA supply, demand numbers demanded some immediate attention. Crude oil inventories jumped by the highest on record while demand fell to levels not seen in 25 years.
These paled in comparison to demand levels for refined products most notably gasoline, which is down 31% and jet fuel down 39%. Refinery runs give the impression that some are being powered by a box of AA batteries with facilities in the east, for example, barely ticking over at 39% capacity.
This all points to a driving/traveling season that will never be, at least not this year. The end product of an economy that will be imaginary as long as cars are in the driveway and planes are hanging out in hangars.
The only bright-ish spot on the demand side is diesel. The taken-for-granted trucking industry is finally getting the credit and respect it has earned in the past, but without notoriety. The consumer is taking note now as the heavy haul transportation sector is the frontline stalwart battling to keep the shelves full as the war against Covid-19 rages on.
This is not without cost as diesel prices are now well in excess of gasoline. This, at a time when diesel is normally lower than the, “let’s go on holiday” gasoline prices.
To add insult to injury, on April 1, the federal government saw fit to penalize the efforts of the trucking industry by increasing the carbon tax portion of their already higher diesel costs. The arrogance and lack of sensitivity of this move is beyond the realm of reason to me. The attempted economic kickstart with the crude oil production cut is much too little and much too late.
Even if, and that’s a big IF, all parties agree and implement a crude oil supply cut of 12 million bpd, there will still be 20 million bpd looking for somewhere to hide. We are weeks, not months, away from all storage facilities on land and sea being at capacity. This will mean that crude oil will have to stay in the ground and refineries will have to grind to a halt.
One solution will be to cut production by 32 million barrels per day.
From the political maneuvering I’ve been witness to, just to get a 12-million bpd cut in place, it is apparent that the de facto leader in control of the oil supply part of the equation is none other than president Donald J. Trump — and he will do all in his power to protect the U.S. shale industry and jobs.
A cut to balance supply and demand is out of the question.
The supply side can, and should be controlled. It’s demand that can’t. It will stay that way and we’ll be stuck on the down escalator until we catch that lightning in a bottle called Covid-19.
~ The Grouch
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Just a question,why not an energy east west corridor?
Hydro electricity from the east ( Quebec and the Labrador white elephant hydro dam) and oil and gas from the west ( Alberta and Saskatchewan)
Maybe throw in a water pipe in case the pairise need water during a drought.I am sure Manitoba could send a gallon or two west when the Red River valley floods.
This would make Canada self sufficient and we could determine our own energy pricing,not gouging but if pricing a little high more tax money for federal gov. and provincial gov.and what is extra could be sold south of the border USA or Mexico.
Seem simple to me,yes yes who will pay,the provinces backed by the federal govt.
Now Canadians don’t care what the rest of the world does price wise,this would stabilize Canadian energy prices.