Stalin
Well-Known Member
- Joined
- Apr 4, 2008
- Messages
- 4,392
The economic genius frump does not understand how the oil market works..
"..The presumption, of course, is that because the US imports virtually no petroleum from the Persian Gulf the new Hormuz toll booth is Europe’s and Asia’s problem, not Washington’s. And that’s technically true but here’s the spoiler alert: What matters is not the geography of where the barrels of hydrocarbon molecules are moving from and to at any given point in time, but the level of hydrocarbon prices embedded in the digital bits coursing through the global futures and cash markets all the time and everywhere.
That’s because the latter reflects the markets’ judgement about the state of global supply, demand and inventories in totality. Unlike the Donald, traders on the exchanges are fully familiar with the potent process of market arbitrage. In this case, it means that when the same hydrocarbon molecule has radically different prices around the planet, then some enterprising traders will buy them where the price is low and ship them to where it’s high, and pocket the profit, net of shipping costs, insurance, interest carry cost and other nits and nats of market operation.
The consequence, of course, is the “law of one price” worldwide. Rather than zero exposure to the Persian Gulf’s slow-steaming barrels of hydrocarbon molecules, the US has 100% exposure to Gulf-impacted digital price bits being digitally transmitted instantaneously around the planet on a 24/7 basis.
Accordingly, if the Donald thinks the oil price is going to be high in Europe and Asia because they get their hydrocarbon molecules from the Persian Gulf and low in the USA because we are 100% self-sufficient in oil and gas, he is sadly and utterly mistaken. The digital networks of the paper and cash markets will quickly equilibriate the price of hydrocarbons on a worldwide basis, and the physical barrels will not be far behind.
So lets start with the home team that the Donald thinks somehow operates as an economic island all by its lonesome, unconnected to the global markets. But for this purpose we must look at the entire oil and natural gas complex because under the law of one market petroleum and nat gas molecules are highly interchangeable. And we also measure everything in BOE (barrels of oil equivalent) in order to avoid apples and oranges on the price quotations.
Thus, if we look at just the domestic energy patch, the massive output of the US natural gas industry – heavily driven by fracking – towers well above conventional US crude oil production, including fracked crude. To wit, in 2025 field production of natural gas (i.e. “wet gas”) was 26.5 million BOE/day while crude oil and condensate from the field was 13.6 million BOE/day.
In terms of physical molecules and pricing, however, upwards of 30% of field production (7.9 million BOEs/day) of so-called “wet gas” consists of NGLs (natural gas liquids), mainly ethane, propane, butane and natural gasoline. All of these go into the same end markets – heating, cooking, petrochemicals and transportation – as similar liquids obtained from refinery runs of crude oil. The common molecules from both streams, therefore, are subject to the law of one market.
more at https://original.antiwar.com/david_...e-how-the-donald-bombed-energy-consumers-too/
comrade stalin
moscow
"..The presumption, of course, is that because the US imports virtually no petroleum from the Persian Gulf the new Hormuz toll booth is Europe’s and Asia’s problem, not Washington’s. And that’s technically true but here’s the spoiler alert: What matters is not the geography of where the barrels of hydrocarbon molecules are moving from and to at any given point in time, but the level of hydrocarbon prices embedded in the digital bits coursing through the global futures and cash markets all the time and everywhere.
That’s because the latter reflects the markets’ judgement about the state of global supply, demand and inventories in totality. Unlike the Donald, traders on the exchanges are fully familiar with the potent process of market arbitrage. In this case, it means that when the same hydrocarbon molecule has radically different prices around the planet, then some enterprising traders will buy them where the price is low and ship them to where it’s high, and pocket the profit, net of shipping costs, insurance, interest carry cost and other nits and nats of market operation.
The consequence, of course, is the “law of one price” worldwide. Rather than zero exposure to the Persian Gulf’s slow-steaming barrels of hydrocarbon molecules, the US has 100% exposure to Gulf-impacted digital price bits being digitally transmitted instantaneously around the planet on a 24/7 basis.
Accordingly, if the Donald thinks the oil price is going to be high in Europe and Asia because they get their hydrocarbon molecules from the Persian Gulf and low in the USA because we are 100% self-sufficient in oil and gas, he is sadly and utterly mistaken. The digital networks of the paper and cash markets will quickly equilibriate the price of hydrocarbons on a worldwide basis, and the physical barrels will not be far behind.
So lets start with the home team that the Donald thinks somehow operates as an economic island all by its lonesome, unconnected to the global markets. But for this purpose we must look at the entire oil and natural gas complex because under the law of one market petroleum and nat gas molecules are highly interchangeable. And we also measure everything in BOE (barrels of oil equivalent) in order to avoid apples and oranges on the price quotations.
Thus, if we look at just the domestic energy patch, the massive output of the US natural gas industry – heavily driven by fracking – towers well above conventional US crude oil production, including fracked crude. To wit, in 2025 field production of natural gas (i.e. “wet gas”) was 26.5 million BOE/day while crude oil and condensate from the field was 13.6 million BOE/day.
In terms of physical molecules and pricing, however, upwards of 30% of field production (7.9 million BOEs/day) of so-called “wet gas” consists of NGLs (natural gas liquids), mainly ethane, propane, butane and natural gasoline. All of these go into the same end markets – heating, cooking, petrochemicals and transportation – as similar liquids obtained from refinery runs of crude oil. The common molecules from both streams, therefore, are subject to the law of one market.
more at https://original.antiwar.com/david_...e-how-the-donald-bombed-energy-consumers-too/
comrade stalin
moscow
