One thing I do not think I mentioned here is the lack of new refineries. The refineries are at near full capacity 95% or so.
The newest large refinery was last built in the '70s. So there is that problem as well. There are a lot of political concerns about this. But be that as it may, it is still another reason for the exporting numbers.
I think I have shared this story before and it comes from a worker at a refinery on the east coast. A few years back I had a client who worked for a refinery on the east coast and we had many conversations on the topic of oil refining and I learned quite a bit and yet what I learned makes full sense and just cements my earlier comments.
He said that the decisions for the level of refining output were made based on the profitability that the refined products brought in. So this (and I am sure ALL) refiner had the flex to run multiple shifts if the price is right profit wise and they would expand or contract based on the refined products margins at that time. So this guy said they would run a third shift if they wanted to make more revenues and profits AND they would close shifts due to "cleaning" when margins were low. He said the capacity to run over 100% was only a decision of management and they would offer OT to workers or hire temp staff to run extra shifts when the opportunity was right.
If you do a little reading there has been multiple GOP presidents in the seat who if they really felt the need for a refinery boom (Bush lite for sure from Texas) then they could have made it happen and yet we are in a capitalistic economy and all decisions are made so that corps make as much profit as possible, that is the only factor in play with regards to refinery capacity. Corps are not interested in the BILLIONS in outlay for a 10-15 year return on investment. If refiners were chomping at the bit then they could work out a gig with Mexico like our automakers have and open refineries in that country...same goes for Canada, they complain about refineries and yet they are not willing to invest the time and money to expand either, so you can relax with the political excuses, profits are what determines decisions not DNC vs RNC/TNC
Correct. But that is a separate issue. Certainly, the timing for cleaning and maintenance is done when it is to their 'benefit'; all major production facilities do this as well. For sure, they are in the business to make a profit and to maximize them; all companies are and shuold be, or they will not last long.
@Raiders22
Nah that does not hold water the excuse that sour vs sweet because there has been sour and sweet for decades, if refiners were facing a quandry about supply of one vs the other then they DIVERSIFY their refining portfolio. Valero has multiple refineries and refiners can retool and change the process easy but it costs money to do so and they are not motivated to do this.
That client of mine mentioned that the decisions on refining came from what made the most money, so if sour was cheaper and the margins better then they went that route, if sweet was cheaper and better margins they went that route. Refiners have the ability to refine both products especially if they are of a large size and are diversified like say Sunoco or Valero, bigger players.
Its all about the profits and margins, if there was a return to be made then refiners can pivot and they DO pivot when it makes financial sense. If you were to use the logic about government regulations and that dreaded environmental liberal group blah blah blah and that was removed, you STILL face the reality that refiners will use the crude which gives the best return on investment period...the retooling has a cost but it is only to do with what gives a better return.
Sour is sold at a discount to sweet and the yield is lower plus the process is tougher on the refiner..its more process to extract from sour so why would a refiner use a product that does not maximize their return as the only factor? They of course only decide based on what makes the best return and is the most effective use of capital and cost.
If the Trump mantra held ANY water and since our production is a mix of sweet and sour not heavy, then Trump should be yapping about having refineries that process sour and sweet only not the heavy product and be strongly against ANY importing of crude, focus on domestic production and domestic refining.
Newsflash, corps dont care about sweet, sour, heavy they are in the gig to make the most profits they can...so drill baby drill is just a childish rant from an uneducated politician. Maybe Trump should go and attack the refiners for not being patriotic and refining ONLY sweet and sour...that would turn the tables.
Sure, some of it is to maximize profit. But capability, capacity, and availability all play a role in this decision.
@Raiders22
#80- Because other US corps HAVE done this, our automakers offshore, most of our corps offshore so if a refiner were following the logic flow you are making then they would offshore to Mexico and have that be their focus, of course thats just a bunch of dead end complaining it has nothing to do with the real issue. OPEC controls world pricing, that is the truth and the facts.
@wallstreetcappers
I think he would be open to it, if he could get it okayed. The issue is that is tricky to do and it would take several years to even come online.
But absolutely it should be looked at. But Biden, for sure, started out stating his intentions to get off of fossil fuels.
So, at this point it is not urgency.
Even if gas gets 'too; expensive -- folks bellyache and then adjust.
@Raiders22
The US consumer the fat gluttonous pigs we are want everything our way and no sacrifice or tough decisions. Maybe the US should have a low MPG tariff on consumers who buy vehicles below a certain rating, that is what Europe does by heavy taxes on gas...it motivates the consumer to make other decisions. If the US either slapped a tax on consumption in this way or making gas 2x as much then maybe the US consumer would shift to higher mpg rated vehicles.
Nah...the US consumer wants their 10-12mpg trucks when they dont need it because this is America and we can do whatever the crap we want.
Trump has no clue the difference between products or the difference in the process of refining and that excuse is lame since the world supply includes sweet, sour and heavy for decades. If it were important Mr.Texas should have made it happen decades ago.
I really do not expect you, or the folks, on here to understand that it is not as simple as that. If you are not involved in the industry or what is going on it can be somewhat confusing.
But yes, they are in it to make money.
Yes, the refineries are at, near, max capacity.
Yes, the imported oil is needed. Yes the capacity has been dropping for years.
Yes, they cannot handle the light oil as well, so it has to be exported to be refined.
BUT the issue is there is not a sense of urgency to really be 'independent', solely. It would be very costly and a long process.
BUT if it is 'ALL about profits' -- where is the complaints about Biden? Oil profits are at record profits under Biden.
This is far more complex and dynamic than the average person just hears on a news snippet or article online.
When you deal with this on a constant basis it becomes more evident and there is money to be made in it. That is the key thing to me.
But to the average person, they are simply used to seeing when inflation is making their fuel bill more expensive. It is an 1-1.5% cost of their yearly budget.
It is far more noticeable because it is something that constantly is seen -- on a weekly time frame, whereas something like rent is seen adjusted maybe once a year or every two years, etc.
But for sure, there are politics and money involved -- just like anything that big and complex.
The unspoken truth! 
"We have met the enemy, and he is us!" 
@wallstreetcappers
Yessir. That is very true. The average person is just happy to have what they want. They do not care about it otherwise.
I am certain he is well-advised on it.
I think a lot of that has been done to a degree -- people do look at MPG a lot more when getting a vehicle. Even pickup MPG has been streamlined a lot.
The average fuel economy for pickup trucks is 20.6 miles per gallon (MPG) and the median is 18 MPG.
But, like I said, when gas prices go up -- people bellyache and then just adjust.
But I agree if the tax doubled the price -- it would cut it down. Or it would take longer for folks to adjust. But is there really a need for it? There is enough taxing going on with it now. Some of the states dropped it during the Pandemic and I am not sure all have started them back up.
I just am not sure the incentive should be to 'force' people off of it, or to use it less -- when there really is plenty of it. In the meantime all of the newer technologies can be continuing to advance.
I think there have been great strides already made. But there are some deeper concerns with a lot of them longterm.
But it has taken a slight load of the burden.
@Raiders22
It isnt confusing at all, do we want to follow the Trump mantra and say we can produce and refine our own products and that will lower prices or do we want to allow corps to max their profits at whatever means they feel is best? Its one or the other...pick a side and go with it.
So are you for drill baby drill since per your own words that the drilling we do is product we dont refine and then we would require refining to be only the products we produce? So sour and sweet only, anything else is either tariffed or outlawed? Or are we for allowing corps to be corps and max profits at their discretion?
The profits complaint and blaming Biden is kind of wack...you realize it was not that long ago that several oils were teetering on going under and a few actually did, the commodity market is wild and the producers and refiners have good years and lousy years, I do not recall the consumer who had their 2 buck a gallon gas sending in a check to the oil corps for subsidizing their cheap gas, or maybe I missed that. When oil goes under 40 it puts most ALL leveraged frackers out of business, it puts MANY leveraged producers in peril and at risk and it destroys the profits and margins for ANY producer.
So in a way the drum beating 2 buck a gallon crew is wanting to push the oil producers to the brink to get oil down to 40..few if any will survive long under 40. If you recall (I am sure you do not but I do) the Saudi government were in serious peril when oil was under 40..lots of talk about risk of solvency of their industry if oil stayed under 40, and the fact that it did for a time pushed the frackers into BK and that started the decline of marginal production and the cycle of higher prices began. Only with oil over 60 did producers revisit projects they had scrapped and most of them still are not taking massive risks after getting stung so badly not that long ago.
@Raiders22
The higher MPG "ratings" for trucks is going to create a MASSIVE MASSIVE problem in the very near future. Ive learned a ton watching this mechanic on Youtube named Scotty Kilmer, he does videos on cars, trucks, the automotive sector and his insight and takes are very educational.
The reason why the MPG ratings are up is because truck companies (Toyota and Ford mostly) are changing the dynamic of their engine size to boost MPG, so for example Toyota Tundras were mostly all 8 cyl and the Tacoma was a 6 cyl and with that comes certain gas mileage ratings..well Toyota has swapped from an 8cyl to a 6cyl Turbo and the Tacoma went from a 6 to a 4 cyl turbo...this is done to boost gas miles and it is CHEAPER for them to make, similar deal with Ford.
The risk comes that these turbo engines put higher pressure on the engine which lead to higher failures and higher problems with the turbo system..and we are just at the infancy of these awful decisions. Had I not started following Kilmer I would not have learned about the dynamic between engine size and the higher pressure which comes with a turbo and the risks associated. Toyota has already recalled hundreds of thousands of the turbo engines for issues and it will only get worse as time goes and people keep driving these vehicles.
Higher MPG only can come from schemes like smaller engine size or hybrid setups that add complexities and nuances AND higher repair costs also lower engine life.
@wallstreetcappers
Yessir. I have heard this from some truck guys. Do not remember all of the details they were complaining about. But for sure, they always have an 'agenda'.
Haha! They always seem to be always-Ford guy -- or always Dodge Ram guy.
But I am sure there are some concerns.
Just as I mentioned with the new technologies. There will always be kinks to work out and perfect.
Like they say -- "necessity is..."
If the companies make an effective, cheaper and dependable car/truck -- the folks will gravitate to it.
But it is somewhat amazing how much more fuel-efficient the vehicles actually are compared to way back when.
Always good to have steady improvements.
@wallstreetcappers
It isnt confusing at all, do we want to follow the Trump mantra and say we can produce and refine our own products and that will lower prices or do we want to allow corps to max their profits at whatever means they feel is best? Its one or the other...pick a side and go with it.
For folks that do not know the intricacies of it all it is --and frustrating. But, again, the premise is not bifurcated along only those lines.
So are you for drill baby drill since per your own words that the drilling we do is product we dont refine and then we would require refining to be only the products we produce? So sour and sweet only, anything else is either tariffed or outlawed? Or are we for allowing corps to be corps and max profits at their discretion?
It would be very longterm plan and goal. I do not see how you could get it done in today's political and environmental atmosphere. Do you retrofit and build new refineries and isolate yourself to only sweet and light? Or do you simply keep the mix of import/export set up the way it is. Yes, you can try to do it to become 'more' truly independent. But wow, that is a decades long goal. Not everyone would be on board with that. Or keep it the way it is and offset shipping costs, etc. with more drilling instead of new infrastructure.
The profits complaint and blaming Biden is kind of wack...you realize it was not that long ago that several oils were teetering on going under and a few actually did, the commodity market is wild and the producers and refiners have good years and lousy years, I do not recall the consumer who had their 2 buck a gallon gas sending in a check to the oil corps for subsidizing their cheap gas, or maybe I missed that. When oil goes under 40 it puts most ALL leveraged frackers out of business, it puts MANY leveraged producers in peril and at risk and it destroys the profits and margins for ANY producer.
Of course it is. But if it were Trump the media would be ceaseless about it; but, now, rarely mentioned by them. For sure, it is boom or bust on the fringes.
So in a way the drum beating 2 buck a gallon crew is wanting to push the oil producers to the brink to get oil down to 40..few if any will survive long under 40. If you recall (I am sure you do not but I do) the Saudi government were in serious peril when oil was under 40..lots of talk about risk of solvency of their industry if oil stayed under 40, and the fact that it did for a time pushed the frackers into BK and that started the decline of marginal production and the cycle of higher prices began. Only with oil over 60 did producers revisit projects they had scrapped and most of them still are not taking massive risks after getting stung so badly not that long ago.
Sure. You can take this back to the late '50s and early '60s and see the changes that they made. Absolutely, they have to have it in a certain area. A couple of the things that saved them are actually looking to weaken somewhat now with China and even India.
The bigger question is how the markets are reacting right now to the USA with the concerns of how much deeper the recession will go. There is a growing concern about weakening demand a lot right now!
someone check on Mid.....haven't heard back from him and I think the Feds might have raided his stash house 
@Raiders22
The bigger question is how the markets are reacting right now to the USA with the concerns of how much deeper the recession will go. There is a growing concern about weakening demand a lot right now!
We are still seeing growing concerns on this. Price since this post has dropped from above $77 to near $65, basically a 15% drop.
At this point I am still in a decent-sized short position. I have not added to it but simply put a lot of stops in place to lock in profits. I am waiting on a few reports to confirm what we are seeing before building an even larger portion.
This is a decent summary of what we are seeing right now:
https://www.fxstreet.com/news/oil-slowing-demand-weighs-on-prices-tds-202409111431
Crude oil prices at $70/bbl may well feel overdone, but there are no signs of a turnaround in the demand sentiment just yet
“The cross-section of commodities returns tells a bleaker picture of commodity demand, with no signs of a recovery despite the strength implied by risk markets. For energy markets, however, the risk is two-fold as slowing demand not only weighs on prices through its traditional implications, but also implies that the substantial amount of supply risk premia embedded into prices should be eroded further.”
I think a lot of the numbers that indicate the recession we are in seem to be more indicative of it deepening. It will be an interesting next several weeks/months to see how these things play out and if the situation with the economy worsens or not. There are very many, more detailed numbers here that indicate a bigger drop can be coming.
Just passing on information to anyone that might be interested in considering an opportunity in this.
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