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Mick Harper
Site Admin
In: London
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| Mick Harper wrote: | | Is winter over? I can usually tell because it's that time of the year when I've managed to get my central heating to work properly. |
This is relevant to the Iran War & Big Oil. Not me specially but the northern hemisphere requiring less oil in the summer months. It diminishes the chances of Iran's capacity to place a boot on the world's oil throat, the Hormuz Strait, being decisive for the way the war unfolds. But there are one or two things to consider besides.
* It is fanciful for the Americans to declare, in their nowadays customarily blowhard way, that they can 'escort' tankers through the Strait. The Houthis have demonstrated it only takes one man and his pick-up truck to bring traffic to a halt through a littoral pinch point. There was absolutely nothing the combined forces of the USA, the UK and Israel could do about that.
* Oil-consuming states and the oil industry have about a year's worth of oil in reserve/in transit before pinch gets to shove. It is inconceivable the Iran War will last that long.
* When three of the chief oil exporting countries--Russia, Venezuela and Iran--have all been subject to draconian restrictions without affecting the oil price, it is unlikely restrictions through the Hormuz Strait will do so.
* The oil price is always subject to hysterical reactions (upwards). This is because it is a very 'political' market, where supply and demand are not necessarily the operative factors.
* What is the best price for America is not clear. They need a high price because they are a high-cost producer, but a low price to keep gas-guzzling voters happy.
* What is the best price for oil-producing countries generally is not clear. They benefit from high prices but if prices go too high it encourages consuming countries to switch away from carbon-based energy entirely.
* What is the best price for oil-consuming countries generally is not clear. They benefit from low prices but if prices go too low the dislocation of world trade is severe as demand for their exports from oil-consuming countries collapses and their own internal debates about 'going green' are exacerbated.
* The Ukraine War will be greatly affected. It would be disastrous for the West if the world--and themselves--went through another oil price-induced inflation, so it would pay them to allow Russian oil exports to resume at full strength just when they have taken effective measures to curtail them.
Good luck!
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Mick Harper
Site Admin
In: London
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Forget the Hormuz Strait
The really big transit bottleneck is the Panama Canal. Not only are too many ships having to be crammed into the Canal's pint pot but not enough rain is falling into the reservoirs to get those waiting (sometimes for weeks) through the existing canal.
| What to do? Someone's had a bright idea. |
Since a goodly proportion of the ships are carrying crude oil, naphtha, LNG and all those things that can be transported by pipeline... build a pipeline from sea to shining sea. (Plus unloading and loading facilities at each end.)
Then you can have one ship on one side of the Canal and another on the other, always the twain will meet, and the ships can return whence they came without bothering the Panama Canal at all. Leaving everyone else to surge through it to their heart's content.
As the ships concerned are almost all carrying US energy from east coast ports to Asia, America and China will stump up the cost (and build it fast). Just to name two. And we'll all reap the dividends.
What can go wrong? Well, they've already started on the project so only time will tell.
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Mick Harper
Site Admin
In: London
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Spot The Shift in Emphasis
1. 'Oil prices surge' (BBC Business News headline)
2. "With no end of the blockade in Hormuz in sight there is no sign of oil prices coming down." (BBC Business News voice over headline)
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Mick Harper
Site Admin
In: London
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| Cubans have been hit by island-wide power cuts due to the US-imposed blockade. BBC Business News |
This is not strictly true. Cubans have been experiencing island-wide power cuts for years due to the fact they haven't kept their power infrastructure up to snuff. But, yes, the current American blockade is making everything a lot worse. On the other hand
1. Cuba can meet half its needs from its own oil deposits so, if it really wanted to, it could... um... run a skeleton service indefinitely.
2. Cuba has just received 700,000 barrels of Russian oil on a Russian-flagged tanker the Americans were obliged to let through, and another one is reported to be on the way.
3. Cuba cannot afford to buy oil at the market price (even at pre-Hormuz prices) so these Russian cargoes are presumably, like the Venezuelan ones before them, being supplied buckshee (o.n.o.).
4. Which raises a problem for Trump and Putin to mull over. Can Russia afford to keep Cuba supplied with oil indefinitely and can America allow Cuba off this particular hook indefinitely? This can't be fixed with a Ukraine-style cosying up.
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Mick Harper
Site Admin
In: London
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The Panama Pipeline (What Can Go Wrong?)
It has just occurred to me there is one thing.
* The cost of pumping out a tanker full of oil, pumping the contents fifty miles in a pipeline and pumping it aboard a different tanker is undeniably more than the cost of a single tanker passing through the Panama Canal.
* It is undeniably less if the tanker has to be hanging around a given number of days awaiting its turn to use the Canal.
* But when the pipeline is up and running there won't be a queue.
* So tankers will start sailing through without using the pipeline.
* Until there are so many doing this there will be a queue.
* So someone will have to say, "You, you and you... not you..."
* Technically, that someone is the State of Panama.
Good luck, guys, rather you than me.
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Grant
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Presumably every tanker owner with a ship stuck outside Hormuz has made more money from the increased oil price than if they had actually delivered the stuff?
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Mick Harper
Site Admin
In: London
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You haven't been a tanker-owner long, have you, Grant? You've either sold the oil already based on the forward market when you set out (c $60 a barrel at that time) and hence lost a bucket load or you're going to get the spot price when you arrive (back down to c $60 a barrel by that time) and hence lost a bucket load. It's not all marrying dead president's wives being a tanker-owner.
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Wile E. Coyote
In: Arizona
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Pre war price of oil= $50.00 per barel
Hope the ceasefire will last in the future =$100.00.
Real spot price =$140.00
Get real It is Bibi, Trump and the IRGC mediated by Pakistan... price = $150.00 +
Still no tankers moving out of the Strait.......
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Mick Harper
Site Admin
In: London
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None of your figures apply apart from the first one. If Joe Tanker reaches his destination with a ship load of oil it is presumed the Strait is open for business otherwise he'd still be stuck in the Gulf. If the Strait is open for business the price of oil will be back to the status quo ante.
Plus or minus other factors which have come into play meanwhile which I will detail if asked but none that I know of will take it up to the realms of scarcity.
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Wile E. Coyote
In: Arizona
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Wiley disagrees the dated physical brent crude at $144 per barrel, is the important price not the Brent futures. (the latter is now a sort of "holding gamble position" based on wishful thinking that we are going swiftly back to an open strait and go back to $50.00).
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Mick Harper
Site Admin
In: London
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| Wiley disagrees the dated physical brent crude at $144 per barrel, is the important price not the Brent futures. (the latter is now a sort of "holding gamble position" based on wishful thinking that we are going swiftly back to an open strait and go back to $50.00). |
They're all the same people so I really don't think you can go in for this kind of price prognostication wizardry. The present price, after the collapse of the Islamabad talks, the theoretical end of the ceasefire and the presumed resumption of the war and the continuation of the blockade is $95. All the futures are showing much the same figure.
This is the price of oil when the Hormuz Strait is blocked but before the rest of the world has girded its oil loins i.e. at the top end of normal. If the blockade is withdrawn, the price will revert to normal/normal which is $50-60 but nearer fifty than sixty. If the blockade is turned into a toll then it will be $50-60 but nearer sixty than fifty.
This is not prognostication-wizardry on my part, just what the market says is the price when oil is flowing normally--or as normal as it ever gets.
The interesting thing will be if the blockade is kept up and everyone starts beavering around for alternative supplies and routes. Then the blockade is lifted and the oil price sinks like a stone. Remember, there's plenty of production around the world that can glug out barrels at $20-30 dollars profitably (if not ecstatically).
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