A fresh opportunity for students, California’s harmful wokeness, and Saudi’s goal to be green.
Audio Transcript
California Setbacks – Alrighty everyone, welcome back! This is Tavis Kilian with RARE PETRO bringing you another episode of Monday Madness on Oct 25, 2021. Not only are we bringing you another episode, but we are bringing you an important announcement! Any students, especially Mines Students, who are listening to this podcast are encouraged to stick around to the end to hear it. Got a great opportunity coming down the pipes and we are looking to grow our team. But that is enough for housekeeping, let’s get into the data and news stories that you typically come here for.
First, the WTI price is doing incredibly well. At the time of writing, the price is $85.06. Late Sunday we saw some activity as it sat about 84 and a half, which is up from what it closed at Friday in the high $83. At this point it is coming down to supply and demand fundamentals. Oil inventories in Cushing, Oklahoma are quickly dropping, and at this rate they could be dry in a matter of weeks. Those tanks require a minimum amount of oil to operate which is somewhere in the neighborhood of 20 million barrels. In 2 weeks, those stocks fell more than 4 million barrels all the way down to 31, so things will get tight there. The price of WTI is up about $10 in a month and shows no signs of stopping. Natural gas is finally seeing some love as it goes up to $5.702. It had dropped to $5 flat this time last week but rose slow and steady to 5 and a quarter by Friday only to shoot up on Sunday afternoon. I believe the price is wrong for natural gas as it should be reporting much higher than this, but we will just have to wait patiently for winter to come.
Next, the rig count. The bad news is that we are down 1 rig in the US. Still, we’ve seen such exceptional growth in recent weeks that it will likely be overshadowed by another significant increase very soon. As far as the major basins are concerned, the Permian sticks to business as usual and tacks on one rig. The DJ-Niobrara lost one, but other than that, there are no major changes. I think this is one of the quietest reports we have seen all year. A state perspective gets a little more exciting as New Mexico added 2 while Louisiana and California added one. Wyoming was the biggest loser at 3 with Texas and Utah following at one rig lost each. This week we are down 2 rigs targeting oil, but up one rig targeting natural gas. The rest of the data is pretty bland, so I’ll save you the pain of sifting through it. Like I mentioned, an abnormally slow week, but as far as negatives go, -1 is about the best you can do.
Lastly, the inventory report which you would have been able to read on www.RAREPETRO.com as our weekly Thirsty Thursday report. If any of you listening are fond of gin, I encourage you to go read the full report. For the rest of you:
The EIA started to realize that we’ve been seeing a few builds over the past few weeks. Their original prediction saw a build of almost 2 million barrels, but the actual numbers showed a more than 400,000 bbl draw. Not often that a draw is seen after a build of more than 1 million barrels is predicted, so this could be bullish for the future. The API’s report saw something a little bit different. After predicting a 2 and a quarter million barrel build, they witnessed a 3 and a quarter million barrel build. Not sure why there is such a range in the numbers here, but I suspect it is tied to gasoline. We will get into that a little later on in this report. Just a reminder that even though we may see a significant build here and there, the general trendline since July projects us into negative territory by the time we hit the middle of winter. Another week or 2 of little changes to the crude inventory would put us well below the 5-year historical range. Remember, just a year and a half ago, things were wildly different. But now it is time to move on to the real star of this week: gasoline. While crude inventories may have only seen a baby dip, gasoline took an absolute nosedive by almost 5.5 million barrels. This brings it into record low territory once again. This has caused gas prices to increase by another 7 cents. 2021 has shown one of the most aggressive price increases we have seen since the years following the 2008 financial crisis. Not only that, but the minimum price for regular grade fuel is the lowest in Oklahoma at $3.008. It is now unlikely you will find gas cheaper than $3 a gallon, but if you do, politely decline the home concoction that your neighbor distilled on his own. The continued draws are a result of the highest demand for gasoline since 2007. Prices are only likely to increase more before falling, so fill up sooner rather than later folks. There was a significant draw on distillate inventories, but that is expected for this time of year. If distillates were to see record lows it likely won’t happen until about late November. Propane is fighting to reach a historically normal level of inventories, but it is not too far.
That’s all I’ve got as far as the statistics go, and it wasn’t too bad of a week. Next, our news stories starting with another story from California. It sure seems like nothing good has happened since I have arrived here, and things are only getting tougher for the industry. If you didn’t know, California doesn’t really have strict setback laws. In other states, it is not uncommon to see a rule that requires oil and gas facilities or wells to be a minimum distance from public or residential spaces. If a state hasn’t imposed a rule like that yet, it is only a matter of time like we are seeing in the state of California. Governor Newsom proposed a 3200 ft setback from homes, schools, hospitals, and other populated areas. Now, as some of you might know, there is loads of oil and gas acticity in dense and populated areas like LA. Lots of activity in commercial or industrial districts along the coast, but there are even some wells masked behind fake buildings that drown out the sound and sight of extracting oil and gas. Producers find it easier to operate this way, and it saves residents of the surrounding area from experiencing disturbances. Still, that is not why this decision is being pushed forward. The champions of legislation arguing for a setback have said that there are racial ties to oil and gas. They claim that a disproportionate amount of Black and Latino residents are affected by oil and gas activity and that some studies suggest there is a correlation between being close to oil and gas operations and health defects. Newsome has highlighted that more than 2 million residents in the state live within a half-mile of oil and gas “drilling sites” as he referenced them, and wants to put an end to the injustice. Don’t get me wrong, I do think setbacks have a place in certain situations, and yes, there are probably more people of color living close to operations than white people, but this law makes it seem like the industry is preying on the impoverished. There are many more factors at play here like socioeconomic differences, growing income disparity, and the “Not-in-my-backyard” attitude that prevents white people (and all other people) from willingly accepting oil and gas operations near their property despite their reliance on the resource. Nobody wants to live close to any form of industrial operation whether that be oil, food processing, or chemical manufacturing. That is what makes the areas that much more accessible to low-income families. I guarantee you these are all greater factors that can explain why more people of color living close to oil and gas sites, but that wouldn’t put the industry into a bad light or get any action from political leaders. I understand this is a sensitive subject to touch on as it gets into discussions of race and equality which have the right to be discussed and improved upon. All RARE PETRO is saying is that California is muddling the cause and effect of their problems and using the industry as a scapegoat which, in turn, will only increase their already significant dependence on foreign sources of energy and likely hurt those very people they were looking to benefit in the first place.
Go ahead and pinch yourself before this next story because it might come off as a bit fishy. Saudi Arabia has announced that it plans to be at net zero emissions by 2060. Counterintuitively, they also announced that they plan to expand production, likely so they can sell oil to other suckers who refuse to produce it from their own soil. To offset this growth in production they have targeted hydrogen fuel generation and announced plans for a $5 billion dollar generation facility. Honestly, these guys have some smart people working in the field of energy, so they just might be able to pull off largescale production. While the 2060 goal comes about a full decade later than most other people in the game, it seems that they attempted to appease in the short term by doubling their goals for reduction by 2030. At this point, the energy transition is at full steam and 2030 will highlight the largest winners and losers pursuing massive energy change. I for one am excited to see how it goes, especially in the case of Saudi Arabia rebranding themselves as dual oil and green energy producers. Saudi Arabia’s first renewable energy plant opened in April and its first wind farm began generating in August, but even then the non-profit Climate Action Tracker consortium gives Saudi Arabia its lowest possible ranking, “Critically insufficient.” Just goes to show that there is no pleasing everybody.
But that is all we have for this episode as I didn’t get any questions. Again, you are welcome to ask us anything! You can even ask for Halloween costume ideas, we don’t care! Well… I suppose we would like it to be within the realm of energy, but we are always happy to communicate with our audience directly. Go ahead and shoot us a message at podcast@rarepetro.com. For other content, you can go to www.RAREPETRO.com to find even more podcasts, weekly articles, and videos. Now, to get to that announcement I’ve been teasing at. Are you a Mines student who will be around for another year or two? If so, we’ve got an opportunity for you to join the media team! That’s right, we are looking for a student associate to come on board and work with the likes of myself, Kevin, Scott, and Niels working to generate content very much like this podcast and what we post to the website. There is a lot of creative freedom afforded, so if you have an idea for a podcast segment you would like to record yourself, it is entirely possible for you to use our studio to script, record, and edit your own podcast through RARE PETRO. 2 years ago I was the student who came in to fill that role as I was hungry for experience. At the time, I saw it as just a temporary gig that would hopefully get me some experience, but my expectations weren’t high. Take it from me, it’s a LOT more than that. I gained immediate exposure to aspects of the industry that were never discussed in school, and it has only made me that much better of an engineer and person. I know it sounds like I’m talking it up just to make the sale, but I cannot stress just how enriching it has been to work in that position as I learned things that any other company would not have the resources to expose me to. If you are interested in the position, please email podcast@rarepetro.com, or you can email me any questions directly at tkilian@rarepetro.com. Again, this was a great way to gain knowledge in other parts of the industry, so don’t sleep on this opportunity. Again, this has been Tavis Kilian with RARE PETRO, and until we see you next time, take care, everybody!
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