What are you guys paying for gas?

[Deleted member 28227]

I understand the demand spike, but what happened to all the excess from when demand was so low that oil was trading in negative numbers.

It was consumed, there was a delay in price increase as demand increased.

Were the oil companies smart enough to curtail production before the demand fell off

Lots of wells were shut in, but often you have contracts that have to be honored. So it's not so much turning off the well as drilling. So again a lag on the way down. A company might still produce 100,000 BOE/d but would go from 6 rigs to 1 rig during the pandemic.

Also a lot of companies just went out of business whatever you hear about profits, you have to remember the industry lost 55 Billion dollars over the course of the pandemic.

https://www.haynesboone.com/-/media/project/haynesboone/haynesboone/pdfs/energy_bankruptcy_reports/oil_patch_bankruptcy_monitor.pdf?rev=e57d3129b7504ea190df5d33dbacae44&hash=F461E4FE13446BE821B8AE9080C349E6

but didn’t have the same foresight to ramp up production as demand was coming back,

To increase production you have to add rigs and drill or complete new wells, this requires capital. A lot of drilling is financed, banks wouldn't lend at low levels. I just got a report this week from a couple of the big name banks saying they were finally upping there strip numbers.

The biggest effect this has is on borrowing base. So essentially banks use your current production and assets as collateral for a loan. At a $55 basis your production and well locations might be worth 5 Billion but at $70 oil they are worth 8 Billion.

This difference is what funds 'new' drilling. The exciting news was for the first time banks had $70 in their analysis, everything is long term so $100 oil today isn't relevant it's the outlook for 12-24 months out. So point being is just this week bankers are starting to get comfortable with the idea that oil won't just dive back down to the 50s.

Wells decline so because companies weren't running rigs a lot had production declines, their Q1 2022 budgets provide capital for 1. Maintaining current levels of production and 2. Some increases in production, say 10-20%. But they need new financing to add an additional 20% which is what I'm calling "New Drilling".

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So things are changing but it's a lot of moving parts and doesn't happen fast. I think the part that people don't quite get is how many folks are involved. It's not one guy 'pulling the trigger'

It's getting 50+ banks and investment firms to be on the same page with over 100 different EP companies, and then for them to actually drill wells.
Public Oil Companies

US oil isn't nationalized, we aren't like the Saudis who can just say yep tomorrow we turn it on.

The other component is the alignment of the banks, if you loan someone 100k and they made zero payments for 3 years in year 4 would you want to loan them another 100k with the promise of a great return or would you want them to pay back the first 100k.

 

[Deleted member 28227]

@Derek44 I'm also way over simplifying, the finance side of the industry is super complicated.

I'm not sure if it comes across but I'm not trying to argue one side or another, but rather just explain my understanding of how things work.

 

[88man]

filled the f150 this am and $155!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

[F250]

On Biden's first day in office, he and his administration, along with the glowing mainstream media, declared war on fossil fuels, just as the left had directed him to do. He stopped the XL Pipeline construction. He directed the EPA to attack and repeal all the former administrations polices that were friendlier to the oil and gas industries. Just as Hillary Clinton in 2016, said she wanted to put coal companies and coal miners out of business, Biden obviously wanted to be known as the guy who shut down the oil and gas industries. Certainly, Biden's policies and actions have not helped us regular folks buying gas and trying to get on with our lives. Biden and his administration own this mess.

 

[Derek44]

@Derek44 I'm also way over simplifying, the finance side of the industry is super complicated.

I'm not sure if it comes across but I'm not trying to argue one side or another, but rather just explain my understanding of how things work.

I didn’t take it as an argument for one side or another. I appreciate your explanation. And my pulling the trigger comment was just an overly simplified comment based more on emotion. But I did realize it’s a complicated system. Your explanation makes sense but for sake of argument, your explanation was geared towards drilling. My thinking would be that end user pricing would be based more off the refining end, which again, I have zero real knowledge of the industry aside from what I read from different avenues. So wouldn’t the release of already drilled oil from the SPR in amounts higher than our base import from Russia, negate the “Putin” explanation, and the overage, being minute at best, at least stabilize the refining market and make the increase in end user pricing less volatile?? Not attacking you by any means, I just appreciate your knowledge in the subject.

 

[Derek44]

On Biden's first day in office, he and his administration, along with the glowing mainstream media, declared war on fossil fuels, just as the left had directed him to do. He stopped the XL Pipeline construction. He directed the EPA to attack and repeal all the former administrations polices that were friendlier to the oil and gas industries. Just as Hillary Clinton in 2016, said she wanted to put coal companies and coal miners out of business, Biden obviously wanted to be known as the guy who shut down the oil and gas industries. Certainly, Biden's policies and actions have not helped us regular folks buying gas and trying to get on with our lives. Biden and his administration own this mess.

While I recognize and understand that argument, I still understand it that the XL pipeline wasn’t even supplying oil and wasn’t poised to do so for at least another year. So I can’t see that affecting supply and demand today. Definitely plays into the “futures” and speculation part of it for the lending purposes that @wllm1313 explained, and I can’t say that I agree with the policies put forth, I just have a hard time placing the blame there. My thoughts are the blame is better placed on the oil companies greed, and capitalizing on an opportunity. Who’s to say that a portion of this crisis isn’t intentionally manufactured by oil and gas companies to place a terrible storm cloud over the current administration.

 

[Addicting]

4.77 regular 5.57 for diesel at the Truck stop in IN this morning.

 

[Deleted member 28227]

I didn’t take it as an argument for one side or another. I appreciate your explanation. And my pulling the trigger comment was just an overly simplified comment based more on emotion. But I did realize it’s a complicated system. Your explanation makes sense but for sake of argument, your explanation was geared towards drilling. My thinking would be that end user pricing would be based more off the refining end, which again, I have zero real knowledge of the industry aside from what I read from different avenues. So wouldn’t the release of already drilled oil from the SPR in amounts higher than our base import from Russia, negate the “Putin” explanation, and the overage, being minute at best, at least stabilize the refining market and make the increase in end user pricing less volatile?? Not attacking you by any means, I just appreciate your knowledge in the subject.

18.1 Million is what we use,1 Million is the release. So it's a lot, but it's also about 5.5% of daily usage.

I think the Putin explanation is less about the real barrels we get as much as the global market. Lots of us companies have ended partnership with Russian companies to the tune of billions, I have no idea of the short term or long term implications of all of those moves.

The Saudi's are arguing that there is "enough" production and that the prices spike is essentially the toilet paper shortage. On the one hand adding too much production could cause a dramatic crash, but on the other hand they do love $100 oil and they are nationalized. Definitely a huge bias.

If Ukraine ends, and Russia is able to sell it's oil we could end up with a huge glut. So not over leveraging the US industry is definitely an important consideration.

My thoughts are the blame is better placed on the oil companies greed, and capitalizing on an opportunity. Who’s to say that a portion of this crisis isn’t intentionally manufactured by oil and gas companies to place a terrible storm cloud over the current administration.

OG is definitely capitalizing... though IMHO it's a windfall more than anything manufactured. Pretty hard to get 10,000 people in on a scheme.

The Russia/Saudi price war in 2020 on the other hand 100% a scheme to kill US oil that mostly worked (in those countries a couple of people can dictate the course of the industry), hence where we are today.

On Biden's first day in office, he and his administration, along with the glowing mainstream media, declared war on fossil fuels, just as the left had directed him to do. He stopped the XL Pipeline construction. He directed the EPA to attack and repeal all the former administrations polices that were friendlier to the oil and gas industries. Just as Hillary Clinton in 2016, said she wanted to put coal companies and coal miners out of business, Biden obviously wanted to be known as the guy who shut down the oil and gas industries. Certainly, Biden's policies and actions have not helped us regular folks buying gas and trying to get on with our lives. Biden and his administration own this mess.

Sure.

Though I think it's more Biden has a lot of constituents that want to kill OG, and do so by voting, lobbying, and also pressuring financial institutions. This has been 8+ years in the making so giving Biden credit for his 2021 actions which were very limited is inaccurate. It's only just one aspect to the story.

 

[Derek44]

OG is definitely capitalizing... though IMHO it's a windfall more than anything manufactured. Pretty hard to get 10,000 people in on a scheme.

Hahaha. Yes, it’s definitely a far fetched conspiracy theory from a fairly uneducated individual (me) hahaha. Doesn’t seem it would take 10,000 people though. Just a percentage of the controlling CEOs that are unhappy with the new policies coming forward and would like to see the pendulum swing back to OG friendly policy quickly, let’s “capitalize” this windfall to the best of our abilities to put a hurt on the voter base.

And with all that said, I actually support the market based capitalist structure. I own a business and work towards profit so I’m not condemning capitalism.

It’s a complicated situation that has the capabilities of creating very detrimental snowball consequences. I just hope that it’s a bubble we can all bear through and come out the other side.

 

[hank4elk]

Blaming bygone is like me blaming nixon for nam.
Pure profit taking for profit with no investment in infrastructure for 40 years and tax free with bennies is not a winning deal for US.

More market speak mumbo jumbo is cute.

 

[Deleted member 28227]

Hahaha. Yes, it’s definitely a far fetched conspiracy theory from a fairly uneducated individual (me) hahaha. Doesn’t seem it would take 10,000 people though. Just a percentage of the controlling CEOs that are unhappy with the new policies coming forward and would like to see the pendulum swing back to OG friendly policy quickly, let’s “capitalize” this windfall to the best of our abilities to put a hurt on the voter base.

And with all that said, I actually support the market based capitalist structure. I own a business and work towards profit so I’m not condemning capitalism.

It’s a complicated situation that has the capabilities of creating very detrimental snowball consequences. I just hope that it’s a bubble we can all bear through and come out the other side.

10,000 is a WAG at the total number of Oil and Gas producers in the US.

What does "capitalize" mean in your mind?

 

[BuzzH]

Shell reports record $9.1 billion profit as oil prices soar in first-quarter

Shell is the latest energy giant to report record profits as fighting rages in Ukraine. Shell reported first quarter earnings rose to $9.1 billion

www.usatoday.com

ExxonMobil took a $3.4 billion hit for exiting Russia. Its profit still soared

ExxonMobil took at $3.4 billion charge for exiting its business in Russia in the first quarter, but it still posted sharply higher profits on high oil prices

www.cnn.com

These poor oil companies...not sure how they keep the doors open and wolves off the porch?

 

[Deleted member 28227]

These poor oil companies...not sure how they keep the doors open and wolves off the porch?

Shell loses $21.7 billion in 2020, Q4 losses led by upstream segment​

ExxonMobil Caps Year From Hell With $22 Billion Loss, As Activists Demand Big Change

It is fair to criticize Exxon; for more than a decade it has heralded itself as the oil industry’s low-cost leader with mega-scale assets all but immune to any commodity price downturn.

www.forbes.com

Never said anyone should feel bad... them's just the facts

 

[BuzzH]

Shell loses $21.7 billion in 2020, Q4 losses led by upstream segment​

ExxonMobil Caps Year From Hell With $22 Billion Loss, As Activists Demand Big Change

It is fair to criticize Exxon; for more than a decade it has heralded itself as the oil industry’s low-cost leader with mega-scale assets all but immune to any commodity price downturn.

www.forbes.com

Never said anyone should feel bad... them's just the facts

They sure are making hay now...2020 is ancient history. So they "lost" 22 billion in one year, they have made that back in profit in 2 quarters.

I wish I had a violin...I feel so sorry for their one year "loss".

 

[88man]

Shell reports record $9.1 billion profit as oil prices soar in first-quarter

Shell is the latest energy giant to report record profits as fighting rages in Ukraine. Shell reported first quarter earnings rose to $9.1 billion

www.usatoday.com

ExxonMobil took a $3.4 billion hit for exiting Russia. Its profit still soared

ExxonMobil took at $3.4 billion charge for exiting its business in Russia in the first quarter, but it still posted sharply higher profits on high oil prices

www.cnn.com

These poor oil companies...not sure how they keep the doors open and wolves off the porch?

3.4 billion in net income on 90+ billion of revenue doesn't seem to profitable to me. Then doubled from 2.7B the year previously seems like a risky endeavor.

 

[BuzzH]

3.4 billion in net income on 90+ billion of revenue doesn't seem to profitable to me. Then doubled from 2.7B the year previously seems like a risky endeavor.

ExxonMobil announces first-quarter 2022 results

IRVING, Texas – April 29, 2022 – Exxon Mobil Corporation today announced estimated first-quarter 2022 earnings of $5.5 billion, or $1.28 per share assuming dilution. First-quarter results included an unfavorable identified item of $3.4 billion associated with our planned exit from Russia...

corporate.exxonmobil.com

 

[Derek44]

10,000 is a WAG at the total number of Oil and Gas producers in the US.

What does "capitalize" mean in your mind?

Different meanings. In the context of my comment, the quotes should have been left off. In that context, I meant take advantage of. My bad

 

[PrairieHunter]

Only problem there is when it crashes. Eventually, it will cost more to move the product then what it is actually worth, and then it just won’t ship. Wait till that happens to groceries. When it costs 5K to truck 4.5K worth of groceries, the suppliers will just sit on it. They too aren’t in the game to operate at a loss. And when they decide it’s to expensive to ship, or when the end users can’t afford to absorb the cost anymore, then it’ll turn to gridlock. Empty grocery shelves, empty parts shelves, empty lumber yards, and eventually, empty fuel pumps. Just my opinion, but I think we all should be paying close attention

Whoa, that seems a bit extreme.

When what crashes? fuel, lumber?

I guess what you describe could happen but I see that as highly unlikely.
Suppliers and manufacturers don't make $ sitting on product so it's more likely they simply increase the price of a bag of chips, loaf of bread, can of coke, 2x4, etc.. and keep shipping.
High shipping costs will limit the distance some products can be shipped economically but there will still be a food at the grocery store.

At the end of the day consumers will pay for it all. They will keep paying the increases as we have seen in cars, lumber, fuel, etc..

I certainly do not see lumber being an issue as construction will slow down due to high interest rates which should bring down lumber costs, With demand dropping there will be more supply than usual.

 

[Derek44]

Whoa, that seems a bit extreme.

When what crashes? fuel, lumber?

I guess what you describe could happen but I see that as highly unlikely.
Suppliers and manufacturers don't make $ sitting on product so it's more likely they simply increase the price of a bag of chips, loaf of bread, can of coke, 2x4, etc.. and keep shipping.
High shipping costs will limit the distance some products can be shipped economically but there will still be a food at the grocery store.

At the end of the day consumers will pay for it all. They will keep paying the increases as we have seen in cars, lumber, fuel, etc..

I certainly do not see lumber being an issue as construction will slow down due to high interest rates which should bring down lumber costs, With demand dropping there will be more supply than usual.

Definitely extreme, but realistic none the less. There is definitely a breaking point, which we haven’t reached yet, but there is a line where it is just not sustainable or affordable anymore. Easy to say that people will just keep paying for it but what about when they absolutely can’t afford it.

I guess the question is where will the added money come from for people in general to keep purchasing said products with the continued increases?
We just print more and hand it out??

 

[BigHornRam]

Definitely extreme, but realistic none the less. There is definitely a breaking point, which we haven’t reached yet, but there is a line where it is just not sustainable or affordable anymore. Easy to say that people will just keep paying for it but what about when they absolutely can’t afford it.

I guess the question is where will the added money come from for people in general to keep purchasing said products with the continued increases?
We just print more and hand it out??

The breaking point is called demand destruction. Diesel prices are there.