9 ms·

Oil Espionage: Traders Spy on Hub With Satellites, Sensors and Infrared Cameras

83 points by marklabedz 14y ago

johnrgrace 14y ago
This isn't a new thing. One thing I did at Enron was to try and figure out the construction status of power plants being built I read a lot of small local newspapers, city council minutes, looked for job listing, and called subcontractors etc. The fun side of trading involves getting a view of the market which is beyond newspaper articles and reports.
- haliax 14y ago
  That sounds really interesting. How hard do you think it would be to automate that kind of analysis of newspapers and such? Would love to hear what you think. Email's in my profile.
  - 404error 14y ago
    A lot of newspapers have horrible websites. Aside from aesthetics, search is broken on many of these sites. Another problem is local government, city council minutes and other information is not made available in digital format. I work at a newspaper that is a controlled by a corporate office across the country. (They know best) I also live in a small town that has been slow to adopt technology.
    - ChuckMcM 14y ago
      Given the signals intelligence of small town newspapers I always wondered why there wasn't a company that gave out really cheap 'site build/management' software for these folks with a proviso buried deep deep deep inside the terms of service that gave the hosting company a right to see all the data. I'd imagine it looks a lot like WPEngine but with a more newsy flair.
      - 404error 14y ago
        This sounds like a great idea. Another possible solution would be to crowd source the data gathering. Maybe a news link aggregator with strict organization.
  - ahi 14y ago
    Sentiment analysis is quite easy given enough source material. However, this type of open source intelligence requires skilled researchers. A lot of the relevant sources are not machine accessible, and the investigative process is driven by hunches and incomplete qualitative data. Even distinguishing between relevant and irrelevant source material can be a difficult task for the most skilled researcher.
- hughw 14y ago
  I've heard of another Enron project where they installed EM devices on land adjacent to power line ROW, to measure the current. If you understand when certain lines are near capacity you can get a better price for your supply over other lines.
malandrew 14y ago
I believe GS also works with a firm to take satellite photos of a sample of Wal-mart parking lots across the country. Given that Wal-mart's performance is known to be a leading indicator of the economy, such information gives some valuable insight into lots of macroeconomic indicators.
RobotCaleb 14y ago
I kept waiting to read the content. I brushed past an initial link. The real story is http://www.businessweek.com/articles/2012-09-27/the-oil-hub-where-traders-are-making-millions http://www.businessweek.com/articles/2012-09-27/the-oil-hub-... Edit: Article on one page: http://www.businessweek.com/printer/articles/73558-the-oil-hub-where-traders-are-making-millions http://www.businessweek.com/printer/articles/73558-the-oil-h...
rayiner 14y ago
I'm not sure I get the anger directed at oil traders. Traders help implement the pricing function of the market. It's a fact that we're going to run out of oil. You can debate about peak oil, etc, but that's an argument about when we're going to run out of oil, not if. We hit peak reserves in 1980--ever since then the rate of new discovery has been less than the rate of extraction. When it sinks in that we're going to run out of oil, why wouldn't prices skyrocket? Why does anyone think the market will wait until oil production actually starts declining in order to price the eventual depletion into the price of oil?
- nradov 14y ago
  We're never going to run out of oil, just like we're never going to run out of gold or silicon or gravel or any other mineral resource. But as supply eventually declines the price may rise enough that petroleum can no longer feasibly be used as a vehicle fuel or chemical manufacturing feed stock.
  - pbhjpbhj 14y ago
    >But as supply eventually declines the price may rise enough that petroleum can no longer feasibly be used [...] // It can still feasibly be used by those who own the oil stock itself. It's not the inherent cost that is increasing only the market price. As the price rises the market should work to ensure that every last drop of oil is bled from the Earth. If the price goes to high then [in a perfect market] it will drop back to ensure maximum exploitation. It's only a falling price below the production cost that makes it infeasible to extract surely?
    - nradov 14y ago
      Not really. As oil grows scarcer it becomes more expensive to extract, regardless of whether you own the mineral rights. At some point the price will rise high enough that it's cheaper to substitute other goods for petroleum. For example liquid hydrocarbons can be manufactured using the Fischer–Tropsch process.
  - mrb 14y ago
at-fates-hands 14y ago
This little diddy jumped off the page at me: "Goldman Sachs (GS) predicts that by 2017 the U.S. will be the world’s biggest oil producer." How accurate is this statement? Is the reason the gasoline prices here are so high ($3.89 here this weekend) is because we don't have enough refineries to convert oil into gas? *edited for grammar.
- protomyth 14y ago
  North Dakota's surge in production over the last couple of years is one part, but Texas just found the same type of reserve and will start fracking. Gasoline prices are high because of speculators, lack of refineries, and having multiple gas formulas for different regions of the US.
  - protomyth 14y ago
    here is a pdf document talking about blends in 2004: http://www.gao.gov/new.items/d05421.pdf http://www.gao.gov/new.items/d05421.pdf "There were 12 distinct gasoline blends in use in the United States during the summer of 2004: 11 special gasoline blends and the conventional gasoline used everywhere a special blend is not used. When different grades of gasoline, special blends used in winter, and other factors are considered, the number of gasoline blends rises to at least 45. New ozone standards and other factors may further increase the number or the use of special gasoline blends in the future, in part because EPA must approve any state’s application to require use of a special gasoline blend as long as the proposed fuel meets EPA’s environmental standards." and a pdf map from Exxon: http://www.exxon.com/USA-English/GFM/Files/US_Gasoline_Map.pdf http://www.exxon.com/USA-English/GFM/Files/US_Gasoline_Map.p...
    - pilom 14y ago
      This information is awesome. I had no idea this was the case. Thanks!
- kbeegle 14y ago
  Goldman Sachs statement isn't that surprising when you think about it from the perspective of countries and country size. Of the major oil producing countries, the only one larger than the U.S. is Russia (Canada's reserves are mostly natural gas). In addition to this midwest boom, the U.S. also has large reserves in Alaska and in Gulf Coast and it makes sense to deploy newer more expensive technologies to extract new oil reserves because the consumption is happening so close to the source and a stable political environment makes it worthwhile to make long term investments. Also, the difference is not as big as I first thought it was: http://en.wikipedia.org/wiki/List_of_countries_by_oil_production http://en.wikipedia.org/wiki/List_of_countries_by_oil_produc.... On the pricing, I'm speculating a bit but I don't think the refineries issue is that major an issue for gas pricing. If you remember, during Hurricane Katrina, a number of refineries were shut down or damaged and prices did bump up a bit, but not dramatically so. I think the biggest factor is there's a lot more demand for oil on the world market. We typically hear about the growing number of cars in China and India as people's income rises and car costs drop but the same is happening all over the world. This week the BBC had a good article on the 180km traffic jams in Sao Paulo, Brazil. http://www.bbc.co.uk/news/magazine-19660765 http://www.bbc.co.uk/news/magazine-19660765. Oil is a global commodity and is fairly mobile so a demand increase in one part of the world raises prices everywhere. A sustained increase in demand all over the world raises prices a lot more.
lifeisstillgood 14y ago
I really cannot see this as "spying". Its just collecting data that (in a perfect market?) should be available just for asking.
confluence 14y ago
This is brilliant - measuring power use via em sensors under power lines to get at oil production. I was just thinking last night what I could do with real-time accurate off grid data to simulate the various parts of the economy. Imagine if you knew everything and could simulate how it all relates together.
wtracy 14y ago
Reading about how much resources these companies are pouring into espionage, it makes me wonder how much Cushing realy has to gain by keeping this information proprietary. If someone is already getting that information out by flying a helicopter over my installation, I would be tempted to either a) arbitrage the situation by selling the information myself, or b) erect some tents over the tanks if it's really worth keeping it secret.
- clarkm 14y ago
  Many companies that own tank farms, carrier pipelines, and other types of oil transportation / storage infrastructure do exactly this. Production information is extremely valuable, and since producers are not restricted from participating in commodities markets, they often just do the trading themselves.
dedward 14y ago
While this lets those who are going far above and beyond to gather information, the solution is for the storage numbers to be published market-wide, to take away the edge a few have - with enough market pressure this could possibly happen. Arbitrage is valid, as is doing your research, inferring what's going on with a company and then trading on your assumption. Insiders are barred from influencing the market with their knowledge, but outsiders who infer what they think is going on, whether it's a sure thing or not, are perfectly fine.

83 points by marklabedz 14y ago

This isn't a new thing. One thing I did at Enron was to try and figure out the construction status of power plants being built I read a lot of small local newspapers, city council minutes, looked for job listing, and called subcontractors etc. The fun side of trading involves getting a view of the market which is beyond newspaper articles and reports.

haliax 14y ago
That sounds really interesting. How hard do you think it would be to automate that kind of analysis of newspapers and such? Would love to hear what you think. Email's in my profile.
- 404error 14y ago
  A lot of newspapers have horrible websites. Aside from aesthetics, search is broken on many of these sites. Another problem is local government, city council minutes and other information is not made available in digital format. I work at a newspaper that is a controlled by a corporate office across the country. (They know best) I also live in a small town that has been slow to adopt technology.
  - ChuckMcM 14y ago
    Given the signals intelligence of small town newspapers I always wondered why there wasn't a company that gave out really cheap 'site build/management' software for these folks with a proviso buried deep deep deep inside the terms of service that gave the hosting company a right to see all the data. I'd imagine it looks a lot like WPEngine but with a more newsy flair.
    - 404error 14y ago
      This sounds like a great idea. Another possible solution would be to crowd source the data gathering. Maybe a news link aggregator with strict organization.
- ahi 14y ago
  Sentiment analysis is quite easy given enough source material. However, this type of open source intelligence requires skilled researchers. A lot of the relevant sources are not machine accessible, and the investigative process is driven by hunches and incomplete qualitative data. Even distinguishing between relevant and irrelevant source material can be a difficult task for the most skilled researcher.
hughw 14y ago
I've heard of another Enron project where they installed EM devices on land adjacent to power line ROW, to measure the current. If you understand when certain lines are near capacity you can get a better price for your supply over other lines.

malandrew 14y ago

I believe GS also works with a firm to take satellite photos of a sample of Wal-mart parking lots across the country. Given that Wal-mart's performance is known to be a leading indicator of the economy, such information gives some valuable insight into lots of macroeconomic indicators.

RobotCaleb 14y ago

I kept waiting to read the content. I brushed past an initial link. The real story is http://www.businessweek.com/articles/2012-09-27/the-oil-hub-where-traders-are-making-millions http://www.businessweek.com/articles/2012-09-27/the-oil-hub-... Edit: Article on one page: http://www.businessweek.com/printer/articles/73558-the-oil-hub-where-traders-are-making-millions http://www.businessweek.com/printer/articles/73558-the-oil-h...

rayiner 14y ago

I'm not sure I get the anger directed at oil traders. Traders help implement the pricing function of the market. It's a fact that we're going to run out of oil. You can debate about peak oil, etc, but that's an argument about when we're going to run out of oil, not if. We hit peak reserves in 1980--ever since then the rate of new discovery has been less than the rate of extraction. When it sinks in that we're going to run out of oil, why wouldn't prices skyrocket? Why does anyone think the market will wait until oil production actually starts declining in order to price the eventual depletion into the price of oil?

nradov 14y ago
We're never going to run out of oil, just like we're never going to run out of gold or silicon or gravel or any other mineral resource. But as supply eventually declines the price may rise enough that petroleum can no longer feasibly be used as a vehicle fuel or chemical manufacturing feed stock.
- pbhjpbhj 14y ago
  >But as supply eventually declines the price may rise enough that petroleum can no longer feasibly be used [...] // It can still feasibly be used by those who own the oil stock itself. It's not the inherent cost that is increasing only the market price. As the price rises the market should work to ensure that every last drop of oil is bled from the Earth. If the price goes to high then [in a perfect market] it will drop back to ensure maximum exploitation. It's only a falling price below the production cost that makes it infeasible to extract surely?
  - nradov 14y ago
    Not really. As oil grows scarcer it becomes more expensive to extract, regardless of whether you own the mineral rights. At some point the price will rise high enough that it's cheaper to substitute other goods for petroleum. For example liquid hydrocarbons can be manufactured using the Fischer–Tropsch process.
- mrb 14y ago

at-fates-hands 14y ago

This little diddy jumped off the page at me: "Goldman Sachs (GS) predicts that by 2017 the U.S. will be the world’s biggest oil producer." How accurate is this statement? Is the reason the gasoline prices here are so high ($3.89 here this weekend) is because we don't have enough refineries to convert oil into gas? *edited for grammar.

protomyth 14y ago
North Dakota's surge in production over the last couple of years is one part, but Texas just found the same type of reserve and will start fracking. Gasoline prices are high because of speculators, lack of refineries, and having multiple gas formulas for different regions of the US.
- protomyth 14y ago
  here is a pdf document talking about blends in 2004: http://www.gao.gov/new.items/d05421.pdf http://www.gao.gov/new.items/d05421.pdf "There were 12 distinct gasoline blends in use in the United States during the summer of 2004: 11 special gasoline blends and the conventional gasoline used everywhere a special blend is not used. When different grades of gasoline, special blends used in winter, and other factors are considered, the number of gasoline blends rises to at least 45. New ozone standards and other factors may further increase the number or the use of special gasoline blends in the future, in part because EPA must approve any state’s application to require use of a special gasoline blend as long as the proposed fuel meets EPA’s environmental standards." and a pdf map from Exxon: http://www.exxon.com/USA-English/GFM/Files/US_Gasoline_Map.pdf http://www.exxon.com/USA-English/GFM/Files/US_Gasoline_Map.p...
  - pilom 14y ago
    This information is awesome. I had no idea this was the case. Thanks!
kbeegle 14y ago
Goldman Sachs statement isn't that surprising when you think about it from the perspective of countries and country size. Of the major oil producing countries, the only one larger than the U.S. is Russia (Canada's reserves are mostly natural gas). In addition to this midwest boom, the U.S. also has large reserves in Alaska and in Gulf Coast and it makes sense to deploy newer more expensive technologies to extract new oil reserves because the consumption is happening so close to the source and a stable political environment makes it worthwhile to make long term investments. Also, the difference is not as big as I first thought it was: http://en.wikipedia.org/wiki/List_of_countries_by_oil_production http://en.wikipedia.org/wiki/List_of_countries_by_oil_produc.... On the pricing, I'm speculating a bit but I don't think the refineries issue is that major an issue for gas pricing. If you remember, during Hurricane Katrina, a number of refineries were shut down or damaged and prices did bump up a bit, but not dramatically so. I think the biggest factor is there's a lot more demand for oil on the world market. We typically hear about the growing number of cars in China and India as people's income rises and car costs drop but the same is happening all over the world. This week the BBC had a good article on the 180km traffic jams in Sao Paulo, Brazil. http://www.bbc.co.uk/news/magazine-19660765 http://www.bbc.co.uk/news/magazine-19660765. Oil is a global commodity and is fairly mobile so a demand increase in one part of the world raises prices everywhere. A sustained increase in demand all over the world raises prices a lot more.

lifeisstillgood 14y ago

I really cannot see this as "spying". Its just collecting data that (in a perfect market?) should be available just for asking.

confluence 14y ago

This is brilliant - measuring power use via em sensors under power lines to get at oil production. I was just thinking last night what I could do with real-time accurate off grid data to simulate the various parts of the economy. Imagine if you knew everything and could simulate how it all relates together.

wtracy 14y ago

Reading about how much resources these companies are pouring into espionage, it makes me wonder how much Cushing realy has to gain by keeping this information proprietary. If someone is already getting that information out by flying a helicopter over my installation, I would be tempted to either a) arbitrage the situation by selling the information myself, or b) erect some tents over the tanks if it's really worth keeping it secret.

clarkm 14y ago
Many companies that own tank farms, carrier pipelines, and other types of oil transportation / storage infrastructure do exactly this. Production information is extremely valuable, and since producers are not restricted from participating in commodities markets, they often just do the trading themselves.

dedward 14y ago

While this lets those who are going far above and beyond to gather information, the solution is for the storage numbers to be published market-wide, to take away the edge a few have - with enough market pressure this could possibly happen. Arbitrage is valid, as is doing your research, inferring what's going on with a company and then trading on your assumption. Insiders are barred from influencing the market with their knowledge, but outsiders who infer what they think is going on, whether it's a sure thing or not, are perfectly fine.