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Energy Expert Warns Oil Shocks Hit The Economy With Incredible Speed, Usually Within Thirty Days

Energy Expert Warns Oil Shocks Hit The Economy With Incredible Speed, Usually Within Thirty Days

The lasting damage from the weekend’s attacks on Saudi oil infrastructure is yet to be fully assessed.  Having said that, we can make some broad statements about supply outages and economic cycles.

Although we tend to forget it, almost all of the major US recessions since 1945 have been triggered by wars in the Middle East involving Persian Gulf countries and oil politics.

Specifically:

  • The 1956-1957 Suez Crisis led to the closing of the Suez canal and rapidly precipitated a recession in the advanced economies
  • The Yom Kippur War of 1973 led to an embargo on oil exports to the US and other western countries, precipitating the first US post-peak oil shock
  • The Iran-Iraq War created another price spike, triggering the Second Oil Shock, two back-to-back recessions in the US (1979-1983)
  • Price increases associated with Saddam Hussein’s preparations for the First Gulf War tipped in the US into recession in 1991
  • The Arab Spring of 2011 created supply shortages which sent oil prices back over $100/barrel, leading to a two year recession in Europe

In recent times, only the 2001 Dot.com bust and the 2008 oil price spike were not associated with supply outages related to a conflict in the Middle East. A conflict-induced recession would not be an exception to the rule, but rather the typical trigger ending a late stage expansion in the west.  

Oil shocks hit the economy with incredible speed, usually within thirty days.  

The magnitude necessary to precipitate a price spike and a resulting recession is probably less than a loss of 3 mbpd, 3% of global supply.  Over the weekend, Saudi outages totaled 5.7 mbpd.  The oil price would have to reach around $110 / barrel to push the world into recession, before taking into consideration the phase of the business cycle.  The closest parallel is 1991, when a brief oil price spike pushed an already tottering US economy into recession.

 …click on the above link to read the rest of the article…

Philly Oil Refinery Files For 2nd Bankruptcy In 2 Years After Massive Fire

Philly Oil Refinery Files For 2nd Bankruptcy In 2 Years After Massive Fire

Following a massive fire at a Philadelphia refinery that sent gas prices higher across the Northeast, Philadelphia Energy Solutions LLC has filed for bankruptcy protection as the fuel-making company grapples with the aftermath of a June explosion and fire at its oil refinery that forced it to shut operations.

Fire

Now, for the second time in two years, the company has filed a Chapter 11 petition at the US Bankruptcy Court for the District of Delaware, BBG reports. It only just emerged from Chapter 11 in August 2018. But this time, its estimated liabilities are as high as $10 billion, according to the filings.

Last month, a leak at an alkylation unit, which is used to make high-octane gasoline, triggered an explosion that started a massive fire at the refinery, which forced the halt of activity at the refinery’s Girard Point section. The Point Breeze section, which had been running at a reduced rate, has likely run out of crude.

The East Coast’s largest oil refiner said in June that it was dismissing more than 1,000 workers and shutting its plant, which could process 335,000 barrels of crude oil a day.

The company had also been been putting the finishing touches on $150 million of DIP financing from owners and existing lenders, a person with knowledge of the matter said earlier this month.

The loan will allow the refinery to shut down safely, while pursuing $1.25 billion of insurance claims, the individual said.

Watch footage of the fire below:

A unit of Dallas-based Trinity Industries Inc. holds the largest unsecured claim, of almost $4.1 million, the court filings show. Other claims are held by CSX Transportation Inc. and BNSF Railway.

Alkylation Unit At Largest East Coast Refinery “Completely Destroyed” After Inferno, Restart Unclear

Alkylation Unit At Largest East Coast Refinery “Completely Destroyed” After Inferno, Restart Unclear

Following the explosion and subsequent inferno at Philadelphia Energy Solutions’ oil refinery last week, its alkylation unit has been “completely destroyed”. After fire tore through the east coast’s largest refinery, workers are now getting a chance to finally assess some damage that will hamper the normal production of fuel going forward.

According to Reutersthe refinery could remain shut down for an extended period of time even though NBC Philadelphia reported on Sunday that the blaze had finally been extinguished and air quality testing in the area was taking place. Philadelphia Deputy Fire Commissioner Craig Murphy said that the cause of the fire remained unclear on Friday, but reports did say that “the gas valve that had been fueling the blaze was shut off and the tank involved in the explosion was isolated”.Following the plume from the explosion – NBC Philadelphia

So far, air quality testing has not found anything unsafe, according to officials. 

After a leak in an alkylation unit, an explosion sent the complex ablaze, forcing the Girard Point section of the refinery to shut down. The Point Breeze section had already been under repair due to a fire earlier this month. Due to the fact that it is a chemical fire, officials said last week that it could burn for a lengthy amount of time.

Embedded video

@6abc @CBSPhilly @FOX29philly Philadelphia energy Solutions Refining Complex at about 4:15 am

Four staff members are reported to have suffered minor injuries as a result of the explosion.  Mayor Jim Kenney said: “My initial reaction was ‘Damn, this is bad. It was a frightening scene. I’m thankful that no one got killed or seriously injured.”

“We will see what the federal and state authorities say, if that’s what is called for that’s what we will do,” Kenney continued.

 …click on the above link to read the rest of the article…

Negative Oil Prices Arrive: Koch Brothers’ Refinery “Pays” -$0.50 For North Dakota Crude

Negative Oil Prices Arrive: Koch Brothers’ Refinery “Pays” -$0.50 For North Dakota Crude

Do you have some extra space in your garage or attic? Or perhaps you own an oil tanker you aren’t currently using. Or maybe you have a storage unit that’s got a little extra room next to an old mattress and box springs.

If so, you may want to call up oil producers in North Dakota and ask if they’d care to send you some free oil, because the crude glut is now so acute that the Koch brothers are actually charging $0.50/bbl to take low grade oil at their Flint Hills Resources refining arm.


North Dakota Sour is a high-sulfur grade of crude and “is a small portion of the state’s production, with less than 15,000 barrels a day coming out of the ground,” Bloomberg notes, citing John Auers, executive vice president at Turner Mason & Co. in Dallas. “The output has been dwarfed by low-sulfur crude from the Bakken shale formation in the western part of the state, which has grown to 1.1 million barrels a day in the past 10 years.”

High-sulfur grades are more expensive to refine and thus fetch lower prices at market. As Bloomberg goes on to note, “Enbridge stopped allowing high-sulfur crudes on its pipeline out of North Dakota in 2011, forcing North Dakota Sour producers to rely on more expensive transport such as trucks and trains [and] the price for Canadian bitumen — the thick, sticky substance at the center of the heated debate over TransCanada Corp.’s Keystone XL pipeline — fell to $8.35 last week, down from as much as $80 less than two years ago.”

So there you have it. The global deflationary supply glut has now reached the point that the market is effectively forcing producers to pay to give their oil away or else see it sit in bloated storage facilities until Riyadh decides enough is enough and until the world comes to terms with the return of Iranian supply.

…click on the above link to read the rest of the article…

Erasing Mossville: How Pollution Killed a Louisiana Town

Erasing Mossville: How Pollution Killed a Louisiana Town

ALLEN LEBLANC LED A VIGOROUS LIFE as a young man growing up in Mossville, Louisiana. He had a sheet-rocking business, drove trucks, and worked at the Conoco oil refinery. He helped his mother and stepfather run their nightclub, where Tina Turner and James Brown used to play. He also helped out at home with his five children, and he would paint, fix broken windows, and mow lawns for neighbors who couldn’t afford to maintain their houses. Now, at 71, LeBlanc is on disability, and for most of the last decade he has refused to leave his house. Seizures, liver problems, a stroke, tremors, insomnia, fatigue, and depression plague him. He can no longer drive, and he can’t walk from his front door to the sidewalk without collapsing.

Allen LeBlanc sits on his front porch in Mossville, La., Oct. 22, 2015.

Allen LeBlanc sits on his front porch in Mossville, La., Oct. 22, 2015.

LeBlanc attributes his debilitation not to heredity or unhealthy habits but to the toxic emissions from industrial plants that have proliferated in the neighboring town of Westlake. Just beyond the curtain of pines and cypress trees surrounding Mossville sits an oil refinery, several petrochemical plants, and one of the country’s largest concentrations of manufacturers of vinyl chloride, a main ingredient in polyvinyl chloride, the plastic known as PVC. As a matter of course — and most often within permitted levels — these facilities emit millions of pounds of toxins into the air, water, and soil each year. “Living here has messed me up,” LeBlanc said. Although his appearance was disheveled, he spoke clearly and coherently, upright in his chair. “If I could have another life, I’d take it. This one ain’t worth 10 cents to me,” he said in his thick Louisiana drawl. “I’d like to do things for myself again — I’d give everything I’ve got for that.”

…click on the above link to read the rest of the article…

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