FromThe Oil Drum: Another price spike in the pipeline?

[pscot]

Professor Goose posted this today. The implications are not good. To get the full flavor of it you need to go to the Oil Drum. The comments, as always, are worth their weight in oil.



http://www.theoildrum.com/node/40 more


Building on prior work by many people, including Matt Simmons and Kenneth Deffeyes, and largely based on great technical work by Khebab, I have been intensively studying the Net Oil Export issue for more than two years.

The simple mathematical model I have been using to talk about our export situation is called the Export Land Model (ELM). Recently, data and media reports have shown that the concerns I have expressed about our export situation are growing more valid each day.

Venezuela and Mexico are critically important to the US because of their proximity to the refineries on the Gulf Coast. From what I have been able to discern, it takes an average of about five days for a tanker to get to the US from Venezuela and Mexico versus about 30 days from the Persian Gulf. Based on recent news reports, it certainly appears that the overall net export decline from Venezuela and Mexico is continuing into 2008.

So, what has happened to net oil exports from Venezuela & Mexico to the US and what effect has had this had on Gulf Coast crude oil inventories, and why am I concerned?



The data show that combined net oil exports from Venezuela & Mexico to the US have dropped by 414,000 bpd from 10/07 to 3/08, an astounding annual decline rate of -32%/year. This decline was at least partially offset by increases in imports from the Persian Gulf.

However, as the decline in net oil exports from Venezuela & Mexico (and elsewhere) has increased, it’s quite likely that the Persian Gulf has not been able to sufficiently offset the decline.

The EIA has recently reported a large drop in US oil imports and fairly large crude oil inventory declines, with almost all of the decline concentrated in the Gulf Coast area. Gulf Coast crude oil inventories have dropped by 15.6 million barrels (9%) in two weeks.

The last four weeks (ending May 23rd) of crude oil imports from all sources into the US Gulf Coast are as follows:

6.683 mbpd
6.130
5.173
4.996

So, in looking at those numbers it seems quite possible that we are seeing some real, tangible near term effects from the ongoing net export declines from Venezuela and Mexico, and it's possible that we could see some problems with refined product deliveries in the Gulf Coast area in the very near future, perhaps in a matter of weeks if the trend were to continue, and there seems no reason to expect it not to.

[bill for obama]

1. Uh-huh.

It is a world market - based on refinable grade - doesn't account for canada or russia or non-opec members. doesn't account for reduced demand and refining is running at near capacity - this addresses only raw product.

In short - it is seriously, seriously flawed.

[bananas]

2. That link is dated "Posted by Prof. Goose on April 8, 2005 - 1:20pm"

[pscot]

3. Sorry about that

I have no idea what happened Here's the correct link

http://www.theoildrum.com/tag/export_land_model

[bhikkhu]

4. Some info, and thanks for the heads-up

On the Export Land Model: "The Export Land Model, or Export-Land Model, refers to work done by Dallas geologist Jeffrey Brown, building on the work of others, and discussed widely on The Oil Drum. It models the effects of the decline in oil exports as a result of the peak in oil production in oil exporting countries while at the same time domestic consumption increases in those same countries. This combination of declining production and increasing domestic consumption leads oil exports to decline at a far faster percentage rate than oil production itself is falling."

http://en.wikipedia.org/wiki/Export_Land_Model

And as you say, what might be called the "enhanced decline" of Venezuelan and Mexican exports in keeping with the Export Land Model is particularly pertinent to our situation, as we have apparently an immediate inventory problem and the nearest alternative suppliers are 30 days away. Going into the very busy summer season. I know I have some driving to do this summer which could be opted out of, but only with great disappointment.

Not to cry wolf, but looking at this sort of thing I only hope there are competent and well informed people in charge.

[pscot]

5. One of the ideas developed in the thread

is that with the longer supply line, it will take 4 tankers to provide the amount of oil that one tanker could move over the shorter distance. A hurricane in the shipping lanes would have a more disruptive and longer lasting effect on output from Gulf Coast refineries, because it will take longer to get the "pipeline" up to capacity afterwards. Reference having "competent and well informed people in charge" you're obviously not thinking about the Bushies.

I thought the production numbers from Mexico and Venezuela for the last six months were a real stunner.