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.