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Saturday, June 9, 2018

What's up with oil?



A Forbes article covers the fact that Venezuela's oil exports are heading towards zero. That's pretty dramatic for a country that once was one of the world's major exporters. So how will that affect the price of gas at the pump?

I have no idea. You'd think that taking a major player out of the equation would cause a spike, but I won't bet on it. I'm just some regular Joe who reads too much. What do the experts really know? Best I can tell, they don't really know for sure either. There are a number of reasons for that.

The big one is that it's nearly impossible to get hard numbers on things like production, storage, and even national consumption rates. A lot of oil is controlled by nationalized companies and they play their cards close to the vest. For that matter, the state of oil controlled by private companies is considered a company secret and they aren't honest either.

A couple of years ago my lovely wife and I were in the Bahamas. Did you know there are extensive storage facilities, oil ship terminals, and refinery capacity in the Bahamas? I didn't until I saw it with my own eyes. Talking to one of the locals he informed me that the tanks were full to the brim. They were holding back oil in the hope that prices would go up. As soon as they did they'd release their stockpiles and make a killing. The problem was that pries weren't going up fast enough and the cost of storage was starting to become significant. Somebody gambled wrong.

Governments will lie about supply for its own purposes. For example, once the pipeline that supplies most of oil for the East was knocked out. There almost was a major shortage that would have shut down sizable parts of the country. The extent of the problem was kept secret until much later, after things were normal again. To be fair, an announcement would have caused a run on the gas stations that would have wiped out supplies and caused shortages.

Most people don't realize how delicately supply and demand are balanced. Locally, one time a snowstorm prevented fuel tankers from delivering for a day. All but one gas station in the local area ran out of fuel. That was just from one day's disruption. Most people just shrugged and filled up the next day. Now imagine if the trucks could not come for a week? A month? How would things look then?

Modern civilization needs oil. It's a little disconcerting to realize that few people, if any, really knows the state of world supply. We could be swimming the stuff or about to run short. One thing you can pretty much count on, you won't know there is a crisis until it happens. There are too many vested interests keeping secrets.

-Sixbears

12 comments:

  1. That is why we keep around a hundred gallons stored. Always stabilized and rotated through the vehicles. Never allowing either truck to get below 3/4 tank.

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    1. I was set up with WVO for the veggie van. Also had a tank of #2 diesel for the furnace that works in diesels. Now I'm looking to putting a little gas aside for my lovely wife's car.

      Good to hear from you Spud.

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  2. Back in the 80's when there was a "shortage" I had a friend staying with me who was a deckhand on one of the ships. There was no real shortage, the ships just lay at anchor for days.

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    1. That just illustrates my point on how difficult it is to know what's really going on. It does not surprise me that they were looking to make a buck on people's suffering.

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  3. In Houston, when I worked there in 1980, I had just bought a very cheap '75 Caddy Coupe. Odd-even gas rationing. An hour in a gas line was common. And everyone was orderly and patient.

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    1. I had a Chevy with a V-8 that got about 18 mph. I called it my economy car. Since I only paid $50 for the car, I could afford buying the gas for it. Nobody was buying big cars there for a while.

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  4. Dad started out as rough neck on the oil derricks on lake Maracaibo in 1953. He worked for 35 years for Creole, Esso, Exxon, Lagoven, all the same rebranded and eventually nationalized Venezuelan oil company. He rose thru the ranks and by the early 70s became head of human resources, building the workforce for what was at the time the biggest oil producer in the world. He saw the writing on the wall even back then and finally gave it up in the mid 80s when corruption was the only possible end result of nationalization. We got out just in time. In the 90s with the advent of Chavez and Cuban control the place was doomed. Chavez's demise and replacement by the groomed imbecile puppet that is Maduro was orchestrated by Cuba because the Obumer's gave tacit approval in compensation for "past American transgressions". At this point Venezuela is at less than one quarter of its capacity for oil production. Employees from top to bottom are no being paid to the point of 80% absenteeism rate and those that do show up pass out on the job for lack of nutrition. Even on the rare occasion they receive any payment it devalues precipitously before they can even cash the check and then there is no food available to be bough. Otherwise honest people have resorted to criminal activity just to survive. Venezuelan oil tankers can't pay port, pilot, and docking fees as not even the Chinese will extend them credit any longer as Venezuela has defaulted on its shipments of oil to pay its 600 billion $ debt to them. So oil tankers sit off shore in limbo. External contractors needed to operate are not paid either. Refineries are paralyzed for lack of parts and supplies to operate for the same reason. Simply put the largest oil reserve in the world is now paralyzed due to the now total implementation of communist totalitarian doctrine and consequent corruption.

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    1. I love getting detailed insider info like this. Thanks. It really reveals what's going on. More confirmation of things I've heard.

      My lovely wife's uncle was big in the oil services industry. He always played his cards close to the vest, even with family. He was well paid and definitely part of the club.

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    2. A couple mistakes in that article. Top oil production in the early 80s was touching six million barrels per day. The article also states that today Vzla daily oil production is one million barrels per day. Yes, those are the official government figures. Truth is, it is well bellow 300 thousand BPD currently. And what little revenue that produces goes right in to the pockets of Nicolas Maduro and Diosdado Cabello. Same scenario takes place in the steel mining industry. Venezuela actually buys oil on the international market, purportedly because the heavy Orinoco crude needs to be cut with Sweet Brent in order to refine it. The oil they buy on the international marked gets diverted and "gifted" to Cuba purportedly as compensation for the "Cuban Medics"(read uneducated slave trade) they send to Vzla. Cuba in turn instead of using this oil for its national needs resells it on the world market. Thus draining Venezuela of what ever little revenue it can produce. Any refined fuel that is actually produced is sold by the military running the refineries to "bachaqueros" who smuggle it across to Colombia on trucks filled with hundreds of 55 gallon drums and turn a big profit. So you ask, how long before people revolt? Some hope that the military stage a coup and off Maduro and his goons like people in Romania did with Ceacescu. Trouble is that the military has over 10K Cuban embeds top to bottom in the military and different branches of police, and the second anyone steps out of line or merely gets careless and hints at an opposing opinion on his cell phone to his family, he is rushed of on a plane to a Cuban torture cell and never heard of again.

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    3. More:
      Back when dad was working there much of the staff in the company was US educated. They knew sound business practices and industry standards. They all had grad degrees from the top US universities. Dad had hired them all as top Venezuelan university graduates, and had arranged for them study abroad and obtain their graduate degrees top ranked US universities. PDVSA (Petroleos de Venezuela Sociedad Anonima) was the model of envy of OPEC. Even after it was nationalized in the 1970 by then president Carlos "El Gocho" Andres Peres. After Chavez took over and those US employees voiced opposition to the "socialist" plans because it was financially nonviable, Chavez got rid of them and replaced him with uneducated party goons that marched to his tune and wore the red beret. The serious blood letting started then. Chavez ran PDVSA like his personal bank account. Today his daughter has more accumulated wealth than Bill Gates.
      Maduro comes from those ranks of red beret goons. He was a Colombian born kid when the Cubans in the 80s got hold of him running around Caracas causing trouble, shipped him off to Cuba and schooled him on how to goose step just right. Then sent him back to Caracas to find himself a spot and settle in. He got a job as a bus driver and became union boss. When Chavez staged his coup, Maduro gets a call from Cuba and is told make all public buses available to help mobilize Chavez's people as needed and ensure success. Chavez coup fails but he never forgot this loyalty. The fish hook was planted and the Cuban communist have his ear. After a brief stint in prison, Chavez is rescued by military colleagues and runs for president and wins. Chavez assigns Maduro to a number of posts where he proves his loyalty and is appointed Venezuelan ambassador to the UN and then Vice President.
      Chavez comes down with cancer, some suspect induced by a radioactive pill fed him on one of his previous visits to cuba. He seeks treatment in Cuba and dies, except no one is told and his rotting corpse is kept on ice for four months. See, the prize is too close at hand. Presidential elections are up and Chavez name is on the ticket. He runs and wins again... but surprise surprise, suddenly after he wins without even a campaign appearance they announce he suddenly died while undergoing treatment. So that is how a Colombian born imbecile bus driver is the Cuban puppet effigy that gives orders in Venezuela.

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  5. A friend of a friend worked the oil barges on the Ohio River during the "oil crisis" of the 1970's. He said every barge and every storage facility was brim full, waiting for the price to go up.

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    1. Yeah. Part of that was so certain Middle Eastern countries could make a lot of money to buy US military hardware. Pretty twisted world.

      On the flip side, they won't let us know if storage was almost empty. Lots of secrets in the industry.

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