Saudi Arabian Oil (Read 8412 times)

6716J

Saudi Arabian Oil
« on: September 16, 2019, 02:38:04 PM »
My friend posted this and got me wondering... how much will this affect us in Hawaii? Probably even more than the mainland as everything comes by boat or air.

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That my facebook feed is not full of discussion about Saudi Arabia highlights how little the American public understands the global economy.

The first thing to understand is that oil markets are fully fungible. What that means, is that the market is fully global. Any one supplier going away just means there's less oil on the entirety of the market. Where the oil comes from, (Saudi exports, US exports) and where it goes (California, Toyko, France) doesn't matter. Five percent off the market affects every buyer and every seller.

Five to six percent of the market is offline now. And the way the Iranians struck was designed to take that oil off the market for a long time. They hit key processing facilities that cannot be easily and quickly rebuilt.

Five percent of the world's supply is gone, and will stay that way for up to a year.

Iran is directly threatening 15-20% more, above and beyond what they just took offline.

Make note: WESTERN ECONOMIES LIVE ON ENERGY.

Products cannot be made without it. Products cannot be shipped without it. Food cannot be grown without it. Food cannot be transported without it.

The price of exactly everything, not just gasoline, is under grave threat from Munich to Los Angeles.

And here is your non-partisan statement for the day: US Presidents do not get reelected in a downward spiraling economy with upward spiraling prices on everything from carrots to diapers.

"But we're an exporter now, it doesn't matter."

Except it does. Why on earth do you think Exxon-Mobile will sell to American refiners and distributors for $80/bbl when they can put it on a tanker and sell it internationally for $240/bbl? No major oil company, no matter where they're located, puts America first. Their bottom line is always first.

I'm not making predictions on where this will go. I really don't know. But this is perhaps the most pivotal security event we've seen since 2003.

Edit: The last time 10% of the world's oil supply was attacked militarily, me and 4000 of my closest friends boarded boats and took a little trip.

I'd rather have a bottle in front of me, than a frontal lobotomy.

drck1000

Re: Saudi Arabian Oil
« Reply #1 on: September 16, 2019, 02:52:07 PM »
I read national projections is a 10 cent per gallon increase, so probably more in HI. Also that Trump approved release of about 4 Mil barrels, or enough for something like 2 weeks supply.

Then something like SA is supposed to be able to get over 50 percent of that capacity back in about a week. I work with a bunch of POL guys, so they are all over this one.

zippz

Re: Saudi Arabian Oil
« Reply #2 on: September 16, 2019, 04:46:26 PM »
Should have less effect than the past.  The US is now a net exporter of oil.  We got the petroleum reserve.  Natural gas and renewables are making a larger portion of the market every year.  And the Saudis had to reduce production to help bring oil prices up

It'll be a small blip on the radar.  The bigger and longer term issue is Iran's influence in the region and how oil production and transport is vulnerable
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Flapp_Jackson

Re: Saudi Arabian Oil
« Reply #3 on: September 16, 2019, 04:56:30 PM »
During the height of US energy dependence on OPEC, we were approaching 80% of our oil coming from the Middle East.

As of 2015, Saudi Arabia only provided 14% of US oils imports.  Canada provided 43% (hello pipelines!). 

The 1973 oil crisis, when OPEC crippled us by severely cutting exports, caused prices to soar and supplies to be used up faster than they could be replenished. The reason for Saudis cutting exports was the US support of Israel in their fight with the Palestinians.  We were only about 30% dependent on OPEC at that time. 

Shows why we should never willfully put the nation in that position again.  Dems running for President in 2020 have said they support an end to offshore oil drilling and fracking.  They want to place us once again in a position of being dependent on foreign countries for something we can drill for ourselves.
"How can you diagnose someone with an obsessive-compulsive disorder
and then act as though I had some choice about barging in?"
-- Melvin Udall

Heavies

Re: Saudi Arabian Oil
« Reply #4 on: September 16, 2019, 09:26:14 PM »
Read Trump was going to open up our reserves to offset pricing. 

drck1000

Re: Saudi Arabian Oil
« Reply #5 on: September 16, 2019, 09:28:59 PM »
Read Trump was going to open up our reserves to offset pricing.
Yeah. Reports mentioned he released 4 mil barrels as stopgap measure (see post above  ;D )

Heavies

Re: Saudi Arabian Oil
« Reply #6 on: September 16, 2019, 09:30:48 PM »
Yeah. Reports mentioned he released 4 mil barrels as stopgap measure (see post above  ;D )
#nofocus #heads   ;D

6716J

Re: Saudi Arabian Oil
« Reply #7 on: September 17, 2019, 07:52:44 AM »
More from my friend. He's a global intel specialist so I leave it to him, but judging from his posts, this is gonna hurt.

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This explains how severe the Saudi attacks are from a technical perspective, in lay terms.

https://twitter.com/AmyJaffeenergy/status/1173211181441568769?fbclid=IwAR09qEK1otDxxv7ZfxpiDzaLpv9rHQeOP2n6F3AlezmCkCN1fS7TrtOO4hQ

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An additional, and often overlooked point regarding Saudi. Half of Saudi's production was destroyed (for six months to a year) by highly precise strikes, that hit individual processing components within a massive processing facility.

What is NOT BEING SAID IN MEDIA: This was not "a crippling blow." This was a demonstration of capability.

Read that again. This was a demonstration of Iranian capability.

The OTHER half of Saudi Arabian production (plus reserves) remains under direct threat of devastating destruction. Iran has demonstrated they can END Saudi Arabia economically.

This threat remains as I type.

If that threat comes to fruition, 10-12% of global oil production goes away. Price will skyrocket. There will be shortages globally. Cascading economic impacts will find your wallet with a quickness.

This blow to global production is unprecedented, and Iran can double it at any moment. Our CiC had better act wisely.
I'd rather have a bottle in front of me, than a frontal lobotomy.

drck1000

Re: Saudi Arabian Oil
« Reply #8 on: September 17, 2019, 08:42:21 AM »
Other speculation is that the impact of global oil production/supply impacts China just as hard, and at a time that they are particularly vulnerable with impacts from tariffs. Yeah, China gets most of their oil from Russia, but everyone who mostly imports (China) will hurt more.

Flapp_Jackson

Re: Saudi Arabian Oil
« Reply #9 on: September 17, 2019, 11:03:39 AM »
Other speculation is that the impact of global oil production/supply impacts China just as hard, and at a time that they are particularly vulnerable with impacts from tariffs. Yeah, China gets most of their oil from Russia, but everyone who mostly imports (China) will hurt more.

Where a country imports from is not the issue.  When the world's supply drops as much as is being projected, the prices rise among all other producers.

Supply and demand.  Basic economics, no matter capitalist, socialist, or whatever.
"How can you diagnose someone with an obsessive-compulsive disorder
and then act as though I had some choice about barging in?"
-- Melvin Udall

drck1000

Re: Saudi Arabian Oil
« Reply #10 on: September 17, 2019, 11:13:04 AM »
Where a country imports from is not the issue.  When the world's supply drops as much as is being projected, the prices rise among all other producers.

Supply and demand.  Basic economics, no matter capitalist, socialist, or whatever.
Yes, maybe I wasn’t clear. All countries are gonna feel the hurt, just varying degrees. Even despite China getting most of their oil from Russia. At least IMO.

6716J

Re: Saudi Arabian Oil
« Reply #11 on: September 17, 2019, 01:37:18 PM »
More from my intel guy

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All messaging signalling indicates a Chamberlain-esque response from the whitehouse.

Sources report Trump is searching for the "Goldilocks" response from the pentagon. Let me break down that concept.

Too hot: A response that is severe enough that it leads to a severe escalation.

Too cold: A response that does not deter future aggression,

Just right (Goldilocks): Severe enough that Iran is deterred from future attacks, but not so severe that they go batshit, and severely escalate.

The problem is that with Iran, there is no goldilocks response. The only response that doesn't result in escalation is blowing up Iranians in Syria. And that will not deter them in the slightest.

Persians are fiercely nationalistic. The first bomb that hits Iranian soil results in full on, no-holds-barred, batshit response, to include (literally as step 1) activating Hamas and Hezbollah, drawing Israel into the conflict.

Right now, it appears Trump will aim for the "too cold" option. First, leaks are coming out of the Whitehouse that specifically mention attacking Iranian Republican Guard Corps (IRGC) assets. The leaks do not say where, but combined with the other bit of messaging should be taken to mean "in Syria." US strikes on Iranians in Syria happen because it's Tuesday. This is not a deterrent at all.

The other bit of message, is that the Kingdom of Saudi Arabia, as well as US sources, are touting that the Saudi oil supply is now back to normal levels.

"No problem. Nothing to see here, folks. Move along to Kavanaugh or the next shiny thing."

This ignores a critical distinction. Saudi is back to 100% supply. But that comes via a triad that ignores production capacity.

1) 5 million barrels per day remaining production after the attack.
2) 2.5-ish million bpd of "reserve capacity" brought online in the wake of the attacks.
3) An unknown rate of release from an unknown volume of Saudi's strategic reserve. (Lots of oil sitting in tanks.)

Saudi's "production capacity" remains severely degraded, with the remainder (totaling about 7 Mbpd including reserve capacity currently in use) under severe and imminent threat.

In the face of this threat, Saudi and the US are downplaying the impact, while Trump searches for the non-existent Goldilocks Response.
I'd rather have a bottle in front of me, than a frontal lobotomy.

Rocky

Re: Saudi Arabian Oil
« Reply #12 on: September 17, 2019, 03:25:32 PM »
Did they bomb US territories or SA territory ?  ???

Have we not sold BILION$ of dollar$ of military equipment to SA in the last couple of years ?   :P

   Let them respond directly themselves and leave "The big Bad Wolf" out of the story.  ::)
JMHO
“I ask you to judge me by the enemies I have made.”
                                                           Franklin D. Roosevelt

Heavies

Re: Saudi Arabian Oil
« Reply #13 on: September 17, 2019, 04:04:50 PM »
Makes me wonder how Irans nuclear weapons capability is coming along, and if they are provoking a fight so they can try it out...  serious sht going on here, IMO...

Kuleana

Re: Saudi Arabian Oil
« Reply #14 on: September 17, 2019, 04:15:04 PM »
Makes me wonder how Irans nuclear weapons capability is coming along, and if they are provoking a fight so they can try it out...  serious sht going on here, IMO...

If any country is provoking a Middle East war, there are a number of other countries that are guilty.  For example, the US and Israel are also guilty of provoking Iran as well.

ren

Re: Saudi Arabian Oil
« Reply #15 on: September 17, 2019, 04:39:55 PM »
If any country is provoking a Middle East war, there are a number of other countries that are guilty.  For example, the US and Israel are also guilty of provoking Iran as well.

no. provocation is not part of  US foreign policy.containment is.
Deeds Not Words

Flapp_Jackson

Re: Saudi Arabian Oil
« Reply #16 on: September 17, 2019, 05:21:02 PM »
Did they bomb US territories or SA territory ?  ???

Have we not sold BILION$ of dollar$ of military equipment to SA in the last couple of years ?   :P

   Let them respond directly themselves and leave "The big Bad Wolf" out of the story.  ::)
JMHO

Since the US abandoned the Gold Standard, our currency had to be backed by something tangible to maintain its value.

The US negotiated with the Saudis to provide for their military security via selling them hardware, technology and training.  In return, they required everyone buying oil from them do so using US dollars.

I don't think the US is going to abandon our allies there in their time of need.  We have too much to lose with regard to our currency.

So, while the Saudis do have the means to make war, we also have a decades old agreement to give them military assistance.  They were instrumental in the war against Iraq, as that was the logistics and staging area for US and coalition troops.
"How can you diagnose someone with an obsessive-compulsive disorder
and then act as though I had some choice about barging in?"
-- Melvin Udall

Flapp_Jackson

Re: Saudi Arabian Oil
« Reply #17 on: September 17, 2019, 05:23:09 PM »
Didn't do much fact checking on this, so take time yourself if you want to use this information as a basis for your opinion.

Lots of good backstory on the US-Saudi relations.

"How can you diagnose someone with an obsessive-compulsive disorder
and then act as though I had some choice about barging in?"
-- Melvin Udall

changemyoil66

Re: Saudi Arabian Oil
« Reply #18 on: September 17, 2019, 08:03:00 PM »
4d chess? Prices will rise and for a while. So trump does away with lots of oil drilling/fraking regs.

Boom more US oil and tree huggers upset.

Sent from my SM-G950U using Tapatalk

drck1000

Re: Saudi Arabian Oil
« Reply #19 on: September 17, 2019, 08:08:14 PM »
4d chess? Prices will rise and for a while. So trump does away with lots of oil drilling/fraking regs.

Boom more US oil and tree huggers upset.

Sent from my SM-G950U using Tapatalk
Push to get more pipelines approved. Supposedly thousands of wells read to produce, but lacking efficient distribution infrastructure.

Wait, so Trump made Iranians bomb SA? Trump was working with Houthi rebels. Damn, that’s some man on the grassy knoll stuff.