6 ms·

Enjoy it while it lasts, they're going to start refilling the strategic oil reserve in October IIRC and that's going to get interesting with prices again. If y

Enjoy it while it lasts, they're going to start refilling the strategic oil reserve in October IIRC and that's going to get interesting with prices again. If you didn't know, the US has been emptying its oil reserve at an enormous rate (I think fully 1/3 of it is gone now) to try to keep prices low.

paulpauper 4y ago
if we assume efficient markets, then this is priced in
- qbasic_forever 4y ago
  We'll see what happens. The timing is terrible with Europe going into an enormous energy crunch as winter nears too. The fact that multiple countries (Germany, UK) are warning citizens and preparing them for loss of power and heating, steps to reduce power usage, etc. this winter is concerning.
  - benj111 4y ago
    That's an issue of gas, not oil. Oil tends to be transported by tanker so it can be moved where needed. Europe's gas tends to come in via pipeline. Although it is now transported as LNG. Here in the UK petrol prices are dropping while gas prices are still predicted to increase. Also the govt here hasn't been warning about loss of power and heating. We were already importing gas via LNG. And are currently exporting that to the mainland via pipeline aswell as exporting electricity. Short term contracts for gas are (were?) Incredibly cheap because we're receiving more LNG than we can actually pump to the rest of Europe. Unfortunately retail rates depend on longer term contracts.
    - qbasic_forever 4y ago
      Your government is warning you of a power crunch this winter: https://www.bloomberg.com/news/articles/2022-08-09/uk-braces-for-blackouts-gas-cuts-in-january-in-emergency-plan https://www.bloomberg.com/news/articles/2022-08-09/uk-braces...
- simonh 4y ago
  If we assumed efficient markets the price of oil would never change.
  - endisneigh 4y ago
    How so?
    - simonh 4y ago
      Because all future risks, including the ones under discussion, would already be priced in. Obviously that can’t be true because not all risks can be anticipated accurately in advance, but that includes things like government strategic reserve changes that may or may not happen depending on all sorts of other factors.
      - endisneigh 4y ago
        Future risks being priced in doesn’t mean the price never changes though.
  - benj111 4y ago
    so if a new ic car is built and sold the price wouldnt change? if a new ev is built and sold the price wouldnt change? if a new oil reserve is found the price wouldnt change? if a storm happens and knocks a refinery out of action the price wouldnt change? efficient markets != perfect foresight.
    - simonh 4y ago
      Of course, it’s absurd. That’s what I was pointing out. Prices do change, so obviously markets are not perfectly efficient, and in fact can’t be including for the reasons you give.
      - sixstringtheory 4y ago
        You can ignore everything else parent said and focus on this: > efficient markets != perfect foresight “Efficient market” refers to the speed and proportion of the reaction to new information as it is discovered.
maxwell_smart 4y ago
They'll start refilling it a month before the mid-term elections?
- notyourwork 4y ago
  I don't think strategy around managing oil reserves factors in elections with respect to when and how much they maintain in the reserve.
  - ThunderSizzle 4y ago
    I don't think I would've seen this comment when Trump was president...
JumpCrisscross 4y ago
> the US has been emptying its oil reserve at an enormous rate (I think fully 1/3 of it is gone now) to try to keep prices low Markets barely priced it in on the way up. I doubt they’ll react going down. What those reserves may have done is keep supply steady.
- t-3 4y ago
  Prices being sticky against increases to supply is to be expected. It's not like these are mechanical processes that happen automatically, people set those prices. Of course they won't price in information that makes the price drop.
- vidanay 4y ago
  Strategic Oil Capacitor
xapata 4y ago
As if the US oil reserve has any effect on international oil prices.
- shiftpgdn 4y ago
  Yes? If I take a gallon out of one bucket and put it in another I’ve altered the total amount of gallons in the second bucket.
  - xapata 4y ago
    Sorry, I should have said, "practically significant effect."
- qbasic_forever 4y ago
  When the US has to start buying millions and millions of barrels to refill the reserve (as obligated by congress/the law), then yes it will definitely affect everyone's oil price.
missedthecue 4y ago
Relative to daily US/global petroleum demand, the stategic oil reserve really isn't that big. I don't think it will cause a noticeable impact in prices.
- eloff 4y ago
  With an inelastic good like oil, small changes in supply can cause big price swings. The reason is people don't curtail their use much as the price rises.
- rwcarlsen 4y ago
  It's not the magnitude of demand that affects price - it's the price elasticity - the demand and supply curves matter. Demand for petroleum (e.g. gas, etc.) is very stiff - so small changes in supply can have large impacts on price.
advisedwang 4y ago
> I think fully 1/3 of it is gone now 28% since the 2011 peak: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EP00_SAS_NUS_MBBL&f=M https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...
bilsbie 4y ago
Why didn’t we fill the reserves in 2020 when oil prices were negative?
- babypuncher 4y ago
  Were they not already full?
- TAForObvReasons 4y ago
  Because it was near max capacity in 2020? https://upload.wikimedia.org/wikipedia/commons/f/f4/US_Strategic_Petroleum_Reserve.webp https://upload.wikimedia.org/wikipedia/commons/f/f4/US_Strat...
- rglover 4y ago
  > Drillers, meanwhile, say they are balking at the government’s offer to take their oil because it is hard for them to move it from inland fields to the SPR delivery sites on the Gulf Coast, and because they worry placing it in the reserve could compromise the oil’s quality. See: https://www.reuters.com/article/us-global-oil-usa-reserves/drowning-in-crude-u-s-drillers-say-trump-strategic-reserve-plan-is-no-lifeline-idUSKCN2251QU https://www.reuters.com/article/us-global-oil-usa-reserves/d... --- Oil transport barges were making bank around that time (I made a decent rip selling calls on co's in that industry) selling tank space on ships at a premium to handle the overflow.
- koolba 4y ago
  Because the Democrats filibustered to remove it from the March 2020 stimulus bill: https://rollcall.com/2020/03/25/oil-purchase-to-fill-strategic-reserve-dropped-from-stimulus/ https://rollcall.com/2020/03/25/oil-purchase-to-fill-strateg... It wouldn’t have been negative, but closer to $25/barrel. Still quite a bit smarter than buying it $100/barrel now.
- imtringued 4y ago
  Because storing oil costs money.
fiat_fandango 4y ago
Curious where this kind of federal oil and gas strategy is shared publicly? I'm just a tech bro, but it's always interesting to talk to my friends in private equity who work on energy (although supposedly this is a lackluster division of PE). It sounds like the current presidential admin has absolutely hammered the ability for oil extractors to finance exploration / development to extract new oil?
- 0000011111 4y ago
  Ya thats another misconception: 1. Most oil and gas production is on private land within the United States 2. Oil and Gas firms have leases to drill on public land that they are choosing not to produce. In short, they make more money with the price oil is high. Just look up their old profits and compare those to oil prices. 3. The Federal Government has many tax breaks and handouts for oil and gas firms. its in the billions per year : https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subs...
  - ThunderSizzle 4y ago
    To be fair, if a president got elected that was vowing for the destruction of your industry, I doubt you'd spend a couple million investing in continuing that industry. Might as well take your profits and run elsewhere since the prospects of long term oil usage is currently up in political turmoil. Political turmoil makes people think twice about investing in anything that could be taken away in a moments notice.
    - 0000011111 4y ago
      The industry is having is best year fiscally speaking in decades. ######## 1. https://g.co/kgs/zMQTbf https://g.co/kgs/zMQTbf 2. https://g.co/kgs/d8oRQ8 https://g.co/kgs/d8oRQ8 ##### If I had invested 2 million in the day Biden was elected 11/20/2022 in Chevron Stock: November 9, 2020 $79.40 per share. Today the stock is trading at $155 per share. So if I bought those 25,316 shares for two million the day Biden was elected. And sold today I for $155 per share. I would net $1,924,050 million $! It looks like the president is failing at his mission to destruct the oil and gas industry.
0000011111 4y ago
Ya I think the there is a big misconception on this size of this reserve compared to this size of US demand. The reserve holds about 714 million barrels. The USA uses about 19 million barres per day. 714/19 = 36 day supply of oil the US. Further more the oil in the reserve needs to be pumped out, refined and moved to fueling stations. Perhaps is fair to say the the strategic oil reserve helped keep gas below $10 per gallon but not below $7
- qbasic_forever 4y ago
  Yes that's exactly what it did, it kept us from seeing $10/gallon gas at the pump which would be immediately catastrophic to the entire American way of life. Even with $5/gallon gas like now and earlier in the summer we have seen pretty dramatic inflation in food and goods--diesel is enormously expensive and increased trucking costs just push up the prices of goods higher. So now imagine what's going to happen when that is turned off, and even worse when the oil market sees pressure from the US buying millions and millions of barrels to take them off the market and throw them back into the reserve...
  - 0000011111 4y ago
    Good point. Additionally, the US did not stop the exports of oil though any federal trade policy when prices went from ~2 - $7 per gallon. Exports continued at a in the ~3,500 barrels per day. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=wcrexus2&f=4 https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=w... In 2021 imports were slightly higher the exports: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:text=Crude%20oil%20imports%20of%20about,countries%20and%204%20U.S.%20territories https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:text=Cr.... In short, another tool the fed could use to lower prices would be to ban or reduce exports of US oil when prices are high.
gnicholas 4y ago
I understand they will stop depleting the strategic oil reserve this fall. Have they announced that they're going to start refilling it at that time, or will they do so strategically over some period of time?

paulpauper 4y ago

if we assume efficient markets, then this is priced in

qbasic_forever 4y ago
We'll see what happens. The timing is terrible with Europe going into an enormous energy crunch as winter nears too. The fact that multiple countries (Germany, UK) are warning citizens and preparing them for loss of power and heating, steps to reduce power usage, etc. this winter is concerning.
- benj111 4y ago
  That's an issue of gas, not oil. Oil tends to be transported by tanker so it can be moved where needed. Europe's gas tends to come in via pipeline. Although it is now transported as LNG. Here in the UK petrol prices are dropping while gas prices are still predicted to increase. Also the govt here hasn't been warning about loss of power and heating. We were already importing gas via LNG. And are currently exporting that to the mainland via pipeline aswell as exporting electricity. Short term contracts for gas are (were?) Incredibly cheap because we're receiving more LNG than we can actually pump to the rest of Europe. Unfortunately retail rates depend on longer term contracts.
  - qbasic_forever 4y ago
    Your government is warning you of a power crunch this winter: https://www.bloomberg.com/news/articles/2022-08-09/uk-braces-for-blackouts-gas-cuts-in-january-in-emergency-plan https://www.bloomberg.com/news/articles/2022-08-09/uk-braces...
simonh 4y ago
If we assumed efficient markets the price of oil would never change.
- endisneigh 4y ago
  How so?
  - simonh 4y ago
    Because all future risks, including the ones under discussion, would already be priced in. Obviously that can’t be true because not all risks can be anticipated accurately in advance, but that includes things like government strategic reserve changes that may or may not happen depending on all sorts of other factors.
    - endisneigh 4y ago
      Future risks being priced in doesn’t mean the price never changes though.
- benj111 4y ago
  so if a new ic car is built and sold the price wouldnt change? if a new ev is built and sold the price wouldnt change? if a new oil reserve is found the price wouldnt change? if a storm happens and knocks a refinery out of action the price wouldnt change? efficient markets != perfect foresight.
  - simonh 4y ago
    Of course, it’s absurd. That’s what I was pointing out. Prices do change, so obviously markets are not perfectly efficient, and in fact can’t be including for the reasons you give.
    - sixstringtheory 4y ago
      You can ignore everything else parent said and focus on this: > efficient markets != perfect foresight “Efficient market” refers to the speed and proportion of the reaction to new information as it is discovered.

maxwell_smart 4y ago

They'll start refilling it a month before the mid-term elections?

notyourwork 4y ago
I don't think strategy around managing oil reserves factors in elections with respect to when and how much they maintain in the reserve.
- ThunderSizzle 4y ago
  I don't think I would've seen this comment when Trump was president...

JumpCrisscross 4y ago

> the US has been emptying its oil reserve at an enormous rate (I think fully 1/3 of it is gone now) to try to keep prices low Markets barely priced it in on the way up. I doubt they’ll react going down. What those reserves may have done is keep supply steady.

t-3 4y ago
Prices being sticky against increases to supply is to be expected. It's not like these are mechanical processes that happen automatically, people set those prices. Of course they won't price in information that makes the price drop.
vidanay 4y ago
Strategic Oil Capacitor

xapata 4y ago

As if the US oil reserve has any effect on international oil prices.

shiftpgdn 4y ago
Yes? If I take a gallon out of one bucket and put it in another I’ve altered the total amount of gallons in the second bucket.
- xapata 4y ago
  Sorry, I should have said, "practically significant effect."
qbasic_forever 4y ago
When the US has to start buying millions and millions of barrels to refill the reserve (as obligated by congress/the law), then yes it will definitely affect everyone's oil price.

missedthecue 4y ago

Relative to daily US/global petroleum demand, the stategic oil reserve really isn't that big. I don't think it will cause a noticeable impact in prices.

eloff 4y ago
With an inelastic good like oil, small changes in supply can cause big price swings. The reason is people don't curtail their use much as the price rises.
rwcarlsen 4y ago
It's not the magnitude of demand that affects price - it's the price elasticity - the demand and supply curves matter. Demand for petroleum (e.g. gas, etc.) is very stiff - so small changes in supply can have large impacts on price.

advisedwang 4y ago

> I think fully 1/3 of it is gone now 28% since the 2011 peak: https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M_EP00_SAS_NUS_MBBL&f=M https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=M...

bilsbie 4y ago

Why didn’t we fill the reserves in 2020 when oil prices were negative?

babypuncher 4y ago
Were they not already full?
TAForObvReasons 4y ago
Because it was near max capacity in 2020? https://upload.wikimedia.org/wikipedia/commons/f/f4/US_Strategic_Petroleum_Reserve.webp https://upload.wikimedia.org/wikipedia/commons/f/f4/US_Strat...
rglover 4y ago
> Drillers, meanwhile, say they are balking at the government’s offer to take their oil because it is hard for them to move it from inland fields to the SPR delivery sites on the Gulf Coast, and because they worry placing it in the reserve could compromise the oil’s quality. See: https://www.reuters.com/article/us-global-oil-usa-reserves/drowning-in-crude-u-s-drillers-say-trump-strategic-reserve-plan-is-no-lifeline-idUSKCN2251QU https://www.reuters.com/article/us-global-oil-usa-reserves/d... --- Oil transport barges were making bank around that time (I made a decent rip selling calls on co's in that industry) selling tank space on ships at a premium to handle the overflow.
koolba 4y ago
Because the Democrats filibustered to remove it from the March 2020 stimulus bill: https://rollcall.com/2020/03/25/oil-purchase-to-fill-strategic-reserve-dropped-from-stimulus/ https://rollcall.com/2020/03/25/oil-purchase-to-fill-strateg... It wouldn’t have been negative, but closer to $25/barrel. Still quite a bit smarter than buying it $100/barrel now.
imtringued 4y ago
Because storing oil costs money.

fiat_fandango 4y ago

Curious where this kind of federal oil and gas strategy is shared publicly? I'm just a tech bro, but it's always interesting to talk to my friends in private equity who work on energy (although supposedly this is a lackluster division of PE). It sounds like the current presidential admin has absolutely hammered the ability for oil extractors to finance exploration / development to extract new oil?

0000011111 4y ago
Ya thats another misconception: 1. Most oil and gas production is on private land within the United States 2. Oil and Gas firms have leases to drill on public land that they are choosing not to produce. In short, they make more money with the price oil is high. Just look up their old profits and compare those to oil prices. 3. The Federal Government has many tax breaks and handouts for oil and gas firms. its in the billions per year : https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subsidies-a-closer-look-at-tax-breaks-and-societal-costs https://www.eesi.org/papers/view/fact-sheet-fossil-fuel-subs...
- ThunderSizzle 4y ago
  To be fair, if a president got elected that was vowing for the destruction of your industry, I doubt you'd spend a couple million investing in continuing that industry. Might as well take your profits and run elsewhere since the prospects of long term oil usage is currently up in political turmoil. Political turmoil makes people think twice about investing in anything that could be taken away in a moments notice.
  - 0000011111 4y ago
    The industry is having is best year fiscally speaking in decades. ######## 1. https://g.co/kgs/zMQTbf https://g.co/kgs/zMQTbf 2. https://g.co/kgs/d8oRQ8 https://g.co/kgs/d8oRQ8 ##### If I had invested 2 million in the day Biden was elected 11/20/2022 in Chevron Stock: November 9, 2020 $79.40 per share. Today the stock is trading at $155 per share. So if I bought those 25,316 shares for two million the day Biden was elected. And sold today I for $155 per share. I would net $1,924,050 million $! It looks like the president is failing at his mission to destruct the oil and gas industry.

0000011111 4y ago

Ya I think the there is a big misconception on this size of this reserve compared to this size of US demand. The reserve holds about 714 million barrels. The USA uses about 19 million barres per day. 714/19 = 36 day supply of oil the US. Further more the oil in the reserve needs to be pumped out, refined and moved to fueling stations. Perhaps is fair to say the the strategic oil reserve helped keep gas below $10 per gallon but not below $7

qbasic_forever 4y ago
Yes that's exactly what it did, it kept us from seeing $10/gallon gas at the pump which would be immediately catastrophic to the entire American way of life. Even with $5/gallon gas like now and earlier in the summer we have seen pretty dramatic inflation in food and goods--diesel is enormously expensive and increased trucking costs just push up the prices of goods higher. So now imagine what's going to happen when that is turned off, and even worse when the oil market sees pressure from the US buying millions and millions of barrels to take them off the market and throw them back into the reserve...
- 0000011111 4y ago
  Good point. Additionally, the US did not stop the exports of oil though any federal trade policy when prices went from ~2 - $7 per gallon. Exports continued at a in the ~3,500 barrels per day. https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=wcrexus2&f=4 https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=pet&s=w... In 2021 imports were slightly higher the exports: https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:text=Crude%20oil%20imports%20of%20about,countries%20and%204%20U.S.%20territories https://www.eia.gov/tools/faqs/faq.php?id=727&t=6#:~:text=Cr.... In short, another tool the fed could use to lower prices would be to ban or reduce exports of US oil when prices are high.

gnicholas 4y ago

I understand they will stop depleting the strategic oil reserve this fall. Have they announced that they're going to start refilling it at that time, or will they do so strategically over some period of time?