$20 oil and $40 meat, how in the world can a poor man eat?

[Bronzeage]

No room at the inn.

If you want to make money in the oil business, don't buy an oil well. Buy an oil tank. Better yet, buy a tank farm.

For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country's main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.

If this keeps up, storage tanks could approach their operational limits, known in the industry as "tank tops," by mid-April and send the price of crude — and probably gasoline, too — plummeting.

This puts a new spin on the old "Drill, baby, drill" mantra which was so popular a few years ago. Imagine how many hedge funds would be on oxygen right now if they had financed the ANWAR oil exploration project. We'd all be sitting on billions of barrels of $100 oil, wondering where we might put it.

Morse has suggested oil could fall all the way to $20 a barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting losses, would stop pumping oil until the glut eased. Gasoline prices would fall along with crude, though lower refinery production, because of seasonal factors and unexpected outages, could prevent a sharp decline.

To top it all off, oil companies can't export most of the oil, even if they had a foreign buyer, because of export restriction put in place back when we were slaves to OPEC.

 

[NobleSavage]

Is the market in contango? I'm too tired to look it up.

 

[dismal]

Yes.

And it's not particularly difficult to build an oil tank so no one has any excuse not to be rich anymore I guess.

 

[Bronzeage]

Yes.

And it's not particularly difficult to build an oil tank so no one has any excuse not to be rich anymore I guess.

We can all hum a few bars of "If I were a rich man," but the sad fact is, rich men are losing a lot of money because they own expensive oil well in places where it's expensive to extract the oil. They can't sit on the oil and wait for a better day, because there's no where to put it.

Unlike an ordinary financial crisis which mostly effects poor people, this crisis hurts rich people, which is kind of weird.

 

[dismal]

Yes.

And it's not particularly difficult to build an oil tank so no one has any excuse not to be rich anymore I guess.

We can all hum a few bars of "If I were a rich man," but the sad fact is, rich men are losing a lot of money because they own expensive oil well in places where it's expensive to extract the oil. They can't sit on the oil and wait for a better day, because there's no where to put it.

Unlike an ordinary financial crisis which mostly effects poor people, this crisis hurts rich people, which is kind of weird.

Hmmm, my comment was about the claim it's easy to make money owning an oil tank.

Your response doesn't seem to have much to do with that.

But in any case, I don't think most of us consider it "a crisis" when the value of a rich guy's oil well gets cut in half or wiped out.

On the other hand, thousands of oil field workers are already being laid off and this will probably create large amount of general economic suckage in the places where they live in high concentrations.

 

[Bronzeage]

We can all hum a few bars of "If I were a rich man," but the sad fact is, rich men are losing a lot of money because they own expensive oil well in places where it's expensive to extract the oil. They can't sit on the oil and wait for a better day, because there's no where to put it.

Unlike an ordinary financial crisis which mostly effects poor people, this crisis hurts rich people, which is kind of weird.

Hmmm, my comment was about the claim it's easy to make money owning an oil tank.

Your response doesn't seem to have much to do with that.

But in any case, I don't think most of us consider it "a crisis" when the value of a rich guy's oil well gets cut in half or wiped out.

On the other hand, thousands of oil field workers are already being laid off and this will probably create large amount of general economic suckage in the places where they live in high concentrations.

Please understand, the remark about buying an oil tank was a sarcastic aside to the the actual topic. I did not claim it was easy to own an oil tank. I do appreciate that you took time to address it as if it were the actual matter of discussion.

In my neighborhood, a very large portion of the state's revenue comes from oil and gas royalties, derived from wells on state land. The recent drop in oil prices has created a deficit of around $300 million.

We are in the midst of the Farmer's Dilemma. The rain and sun which produces the farmer's crop, also falls on all the surrounding farms. When he has a good year, so does his neighbors. An abundant crop means low prices at the market. In previous years, there has been great political pressure to allow oil exploration in expensive areas, such as ANWAR and the deeper parts of the Gulf of Mexico. The BP rig explosion which killed 11 oil workers was for exploration only. BP had no intention of putting a production well in place. The oil would have cost far too much to bring to shore. As it was, quite a bit of oil made it on its own(more sarcasm, there.)

 

[dismal]

Hmmm, my comment was about the claim it's easy to make money owning an oil tank.

Your response doesn't seem to have much to do with that.

But in any case, I don't think most of us consider it "a crisis" when the value of a rich guy's oil well gets cut in half or wiped out.

On the other hand, thousands of oil field workers are already being laid off and this will probably create large amount of general economic suckage in the places where they live in high concentrations.

Please understand, the remark about buying an oil tank was a sarcastic aside to the the actual topic. I did not claim it was easy to own an oil tank. I do appreciate that you took time to address it as if it were the actual matter of discussion.

In my neighborhood, a very large portion of the state's revenue comes from oil and gas royalties, derived from wells on state land. The recent drop in oil prices has created a deficit of around $300 million.

We are in the midst of the Farmer's Dilemma. The rain and sun which produces the farmer's crop, also falls on all the surrounding farms. When he has a good year, so does his neighbors. An abundant crop means low prices at the market. In previous years, there has been great political pressure to allow oil exploration in expensive areas, such as ANWAR and the deeper parts of the Gulf of Mexico. The BP rig explosion which killed 11 oil workers was for exploration only. BP had no intention of putting a production well in place. The oil would have cost far too much to bring to shore. As it was, quite a bit of oil made it on its own(more sarcasm, there.)

It's actually very easy to own an oil tank. I can set you up with some people who will make you one if you want one. The part I objected to was the idea it's easy to make money with oil tanks.

And as has been pointed out the oil tanks are filling up because the market is in contango, which actually is a time where it's easy to make money if you have a tank, but is a pretty uncommon occurrence.

Right now we still import a lot of oil. People are importing more than we need for current use because they want to stick some in a tank and sell it forward.

 

[Nice Squirrel]

The part I objected to was the idea it's easy to make money with oil tanks.

https://www.google.com/finance?cid=8994227
Nonsense!

 

[NobleSavage]

http://www.wsj.com/articles/worlds-largest-traders-use-offshore-supertankers-to-store-oil-1421689744

World’s Largest Traders Use Offshore Supertankers to Store Oil

If someone else wants to log in an bring back the highlights, that would be awesome. If I get time I might do it later tonight.

 

[dismal]

http://www.wsj.com/articles/worlds-largest-traders-use-offshore-supertankers-to-store-oil-1421689744

World’s Largest Traders Use Offshore Supertankers to Store Oil

If someone else wants to log in an bring back the highlights, that would be awesome. If I get time I might do it later tonight.

Tip: You can go through google to get WSJ articles without a login.

https://www.google.com/#q=world’s largest traders use offshore supertankers to store oil

But the headline basically says it all.

 

[NobleSavage]

http://www.wsj.com/articles/worlds-largest-traders-use-offshore-supertankers-to-store-oil-1421689744

World’s Largest Traders Use Offshore Supertankers to Store Oil

If someone else wants to log in an bring back the highlights, that would be awesome. If I get time I might do it later tonight.

Tip: You can go through google to get WSJ articles without a login.

https://www.google.com/#q=world’s largest traders use offshore supertankers to store oil

But the headline basically says it all.

Yeah, I always try that trick first, but for some reason it wasn't working.

 

[Derec]

If you want to make money in the oil business, don't buy an oil well. Buy an oil tank. Better yet, buy a tank farm.

Buy couple of those fuel tanker trucks and park them in your driveway.

This puts a new spin on the old "Drill, baby, drill" mantra which was so popular a few years ago. Imagine how many hedge funds would be on oxygen right now if they had financed the ANWAR oil exploration project. We'd all be sitting on billions of barrels of $100 oil, wondering where we might put it.

The basic idea is still sound, and the oil price of about $50 was considered very high as recently as 10-15 years ago.
Since ANWR would be a new conventional oil field its production cost per barrel would be less than what we have with fracking tight formations.
But don't kid yourself, the prices will go higher. Otherwise storing oil to sell at a profit later would not make sense.

Morse has suggested oil could fall all the way to $20 a barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting losses, would stop pumping oil until the glut eased. Gasoline prices would fall along with crude, though lower refinery production, because of seasonal factors and unexpected outages, could prevent a sharp decline.

Refinery shutdowns (from strikes and explosions as well as regular maintenance) are clearly a factor for domestic demand, as consumers do not buy oil directly.
Still, I do not think the oil price will go much lower than it already is, although that would be of great pleasure to semiopen.

To top it all off, oil companies can't export most of the oil, even if they had a foreign buyer, because of export restriction put in place back when we were slaves to OPEC.

Easy short term fix - allow such exports. Another fix - use Bakken light crude to dilute the Athabasca oil sands. I do not know if, and to what extent that already happens.
Longer term fix - build up domestic capacity for refining light crude oil.

What does any of this have to do with $40 meat though?

 

[Derec]

Hmmm, my comment was about the claim it's easy to make money owning an oil tank.
Your response doesn't seem to have much to do with that.

Well it may be easy in principle but still costly. I joked previously about small-time investors buying a couple of tanker trucks and park them in the driveway. Aside from the obvious difficulty with the neighbors/HOA there is also capital cost of the trucks as well as difficulty actually finding somebody to sell crude to you as an individual.
However, I would not be surprised if more storage tanks are being built around Cushing as we speak.

But in any case, I don't think most of us consider it "a crisis" when the value of a rich guy's oil well gets cut in half or wiped out.

I do not worry much about the rich guy. He can afford to close the spigots and wait it out if he can't find a buyer or doesn't want to sell at $50.
A smaller guy owning a well or two who got into debt to finance it may not have a choice but to produce the hell out of his well just to stay afloat as long as he is making some profit.

On the other hand, thousands of oil field workers are already being laid off and this will probably create large amount of general economic suckage in the places where they live in high concentrations.

That too.

 

[Derec]

Right now we still import a lot of oil. People are importing more than we need for current use because they want to stick some in a tank and sell it forward.

Maybe that's all orchestrated by the US government in preparation for an attack on Iran. After all, they have threatened to mine the Straight of Hormuz in the event of an attack, which would cause short-term disruptions to Middle East oil exports. Could Obama be the best poker player ever? Could his snub of Bibi be a long con perpetrated with the help of Bibi and Boehner? </CONSPIRACY THEORY>