[evilgenius]

How many weeks can the oil supply report declare a draw down of reserves before there are major ramifications? Does the reserve situation have to reach a level close to empty in order for a threshold to have been breached or could a whole cascade of events happen at a far higher, seemingly innocuous level? You know, we could hit a situation where there is such a drain on the existing system that some depleted segments have to be regarded as permanently low level rather than potentially fillable.

[vision-master]

It's called MOL - not sure, but I think it's around 170 mb in order for the system to work.

[LoneSnark]

If there are drawdowns without price increases then we can deduce those selling off their reserves believe they will be able to replenish them later at lower prices. Otherwise they would hold their inventories and wait for prices to increase before selling.

During price spikes we often see inventories increase as traders hoard oil in hopes of selling during future scarcity at higher prices.

[Ferretlover]

Are reserves the same thing as inventories?

[pup55]

As far as the records go back, 1982, the lowest inventory on record was 263 million barrels, which occurred in September of 2004, right after Hurricane Ivan hit.

The inventory situation was quite low for most of 2003 and 2004, the crude oil inventory was less than 300 million barrels. Starting in the fall of 2004, OPEC increased production and we built the inventory back up. Throughout most of 2005, the inventory was quite high, luckily as it turned out, because we avoided any problems with the hurricanes in 2005.

As for the issue of MOL, for either crude oil or gasoline, no one really knows. A report was issued in 2001 that suggested the MOL was about 185 million for gasoline, and there was some thinking awhile back that when the crude oil got down to maybe 260 or something we would start to have problems.

With crude oil, it is no problem to tap the Strategic Petroleum Reserve, which is about 700 million barrels, so it will be a long time before the crude oil situation becomes a problem. Unleaded is much trickier. Unlike in Europe and Asia, there are no big stockpiles of gasoline around, so that system is much more vulnerable.

The average inventory is about 315 million barrels.

Also, we are entering a season of traditionally low refinery inputs, so the inventory will go down for maybe another week or two, and then start to increase between now and the end of March. So, the situation "should" turn around, if things keep going like they have been.


$this->bbcode_second_pass_quote('', '
')Are reserves the same thing as inventories?

[TheDude]

Do you have any figures for an NG MOL, Pup? Asked about it at TOD and Leanan said that the US had come close to the edge in the Eastern US in March 2003, but no one had an actual number. Link.According to the EIA's data the Western region went even lower in March 2001 (must be those Ides!) - 114 bcf, whereas March 2007 was at 224 bcf. I see how gas can be stored up in the pipelines themselves (line packing) by increasing the pressure, but they say that's a temporary measure in anticipation of high demand. Will a MOL be reached when we go below base gas in storage?

[pup55]

Web Energy Pulse

$this->bbcode_second_pass_quote('', '1'). Need to maintain certain minimum quantities of natural gas in storage in order to maintain physical pressures and ensure deliverability.

While it is possible, from a technical standpoint, to withdraw natural gas from storage even when the amount of natural gas in a particular storage facility has been drawn down to very low levels, when storage is drawn down to low levels, pressures begin to drop significantly, and withdrawing additional quantities of natural gas becomes increasingly difficult.

The operating principle that ordinarily is applied, therefore, is that, if at all possible, the amount of natural gas in storage in the aggregate nationally should not be drawn down below 500 BCf, since any reduction below this level might seriously compromise the industry’s ability to ensure physical delivery of needed supplies of natural gas.

[bodigami]

What's a MOL?!

[vision-master]

$this->bbcode_second_pass_quote('zensui', 'W')hat's a MOL?!

[LoneSnark]

The theory that there is some point of Minimum Operating Level that inventory will hit and then suddenly the system comes to a screeching halt. It is just not credible.

Think about it. If you are owner and operator a pipeline and you know if you don't keep X in inventory then your billion dollar pipeline becomes a million dollar pile of scrap metal, then what are you going to do? Will you let your inventory ever go below X? If it ever did, would you quickly recharge back up to X by any means necessary?

This is not to disparage the concept of MOL, just which sense we use it in. We can use it to figure out how much inventory draw-down might take place, but this minimum if it exists would form a solid floor below which inventories never would be, greed of staying in business would see to that.

[Twilight]

Greed is a less powerful force than the American consumer. At one end of a pipeline there is a great sucking. On the other end they are at the mercy of the shippers and refineries. If at a vulnerable moment someone fails, the system fails. Whatever financial incentive they have, it's all wishes if at a crucial moment they can't get enough.

[pup55]

$this->bbcode_second_pass_quote('', 's')uddenly the system comes to a screeching halt

[wisconsin_cur]

$this->bbcode_second_pass_quote('', 'O')n that basis, maybe the system would not break down completely but would just run badly so there were sporadic shortages and unreliable delivery.

[evilgenius]

So, if we do reach MOL, which regions of the country will get the shortages enforced upon them and which will have fuel? Will it be based on political importance or infrastructure infill or something else?

[LoneSnark]

$this->bbcode_second_pass_quote('', 'G')reed is a less powerful force than the American consumer. At one end of a pipeline there is a great sucking. On the other end they are at the mercy of the shippers and refineries.