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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (41767)	9/17/2005 7:28:33 AM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 110194

A few decades ago, the definition for "sweet crude" used to be less than 0.5% sulfur. We ran short of enough of this crude back in the 1976-1982 period - the last oil price run-up. Now the definition for sweet crude in less than 2.5% sulfur how do you define sweet crude? is there some universal definition? or is it just whatever Chevron refineries can handle? my impression is that you have a bunch of specific oil categories, like WTI, Brent, Arabian Light, etc. which have their own particular specifications. WTI has sulfur content less than 1/10 what you say is the definition of sweet crude (WTI is basically a paper barrel). sounds like "the peak is in" again. btw, are you suggesting that somehow you expect sweet crude supply to suddenly start exploding, relative to sour? to me, it seems there is a trend towards sour production which is unlikely to stop. thus it seems that sour refiners are positioned in a niche which is not going to disappear. What sort of cretin volunteers to refine dirty crude at a huge premium in cost, when everyone else is selling inexpensive gasoline made with "light sweet" crude? maybe the kind that likes to make money? maybe the kind that can look at a spreadsheet and realize, if they could make money when sweet/sour margins were a fraction of what they are now, they can now make multiple times what they made in the past. and the stock moves show it. btw, VLO also is not calling for new refineries. but they have all kinds of upgrade projects for existing facilities with huge IRRs. i assume this is the case throughout the industry. Only Exxon could have dreamt that one up... Now Valero is going to have to spend enough money to catch up with Chevron. Wahhh, boo hoo. if you look at the difference between CVX and VLO stock price performance, i'm not sure why you think VLO is whining. in fact, i'm not sure why you are making these jabs at XOM and VLO in the first place. most people on SI simply want to make money, and are not interested in partisan industry jabs that sound like they are coming from some PR department. i have also owned CVX and XOM over these past several years, but i came to prefer the upside leverage in more concentrated plays. to each his own. you obviously know a lot about CVX but you sound incredibly partisan (kind of the way you sound when talking about your old homebuilder employer, Pardee). my guess is there's plenty of good and plenty of crap in every company. it's great for you to share what you know, but you seem to want to present it in a way that makes your former employers seem like the only smart guys in the industry. again, just look at the performance of VLO vs. CVX. obviously VLO found a very profitable niche in sour refining that the people at CVX ignored or thought about too late. This will all sort out just like it did in 1980 that reminds me, there is still a better friend to the energy investor than even environmentalists and auto makers. it is all the guys who entered the energy industry in 1980 in the majors and supermajors and are now old men in charge of the bureaucracy. they have been predicting a return to 1980 since 2000. of course, they didn't predict a return to 1980 the first time, but now they are certain. there's one thing you can count on--generals fighting the last war. this has been the "perfect storm" for energy investors--peak oil happens and the industry claims BS about oil being "cyclical", so they can't make huge capacity additions at the "cycle peak". (of course, they thought the cycle peaked when CL hit $30. archives.econ.utah.edu ) Running out of oil is a long linear process, not some abrupt cliff. the first thing you learn about peak oil is that supply doesn't fall off a cliff.* the next thing you learn is that, because price is set at the margin, the incremental tightening of supply vs. demand means that price changes are not linear. and that has been the whole basis for investing in the energy sector these past few years. * unless you're Oman, and juiced production for a few years with high water cuts, then paid the price as production plunged unexpectedly. hopefully the same thing will not happen to the Saudis in Ghawar or we're all farked.