so we're getting to a point where everyone but the germans are cutting russian energy out of their
equation uh and even the germans are bending over backwards to try to build alternate infrastructure
but they're the ones that have the furthest to go so it's just going to take a little bit longer
but at some point this summer assuming that the oil is still flowing the european demand for that
stuff is going to drop and there's no way that the europeans are going to keep their waterways open
in order to facilitate other people benefiting from what they're paying for so one way or the
other we are looking at the end of open seas in many areas for oil transport yeah admit at
a minimum you're talking about needing to have a replacement government for the putin regime
well the putin the russian government would need a completely new leadership cadre it's not clear
that one even exists and then they would have to hold the line and generate stability lasting at
least 10 years before you could even start the real work the russians don't see ukraine as the
end of the war but the beginning of the war and they want to push past ukraine further on until
they hit a geographic area that they feel they can defend so this isn't going to be a one-off this is
not about carving a small piece out of ukraine this is just the start of a much longer conflict
and in that sort of environment you've got to take into account how oil moves so the druza pipeline
that goes into east germany unless and until there is destruction of the pipeline either because the
russians accidentally hit it with an artillery shell or ukrainian partisans blow it up it's
fine for now it's not going to be there in three months but for now that continues to flow because
the german refineries don't have other options they're not on ports so they can't even truck in
oil from elsewhere it's the pipeline or nothing so that's going to be probably the one that goes last
no persist on the black sea is in a war zone so it's very difficult for ships to get insurance to
even sail there at all so they're operating at maybe 20 capacity on a good day and that's not
just russian crude that's also kazakh crude the the cpc project out in tangis on the caspian that
all goes to novorossiysk and the tenges project is about to shut down now because they can't get
anything out all of this is backing up pressure and uh the facility on the black sea is now not
the only one there's been about 20 others that have either slowed or even stopped runs because
they have no player to put their refining product all that leaves is primorsk on the baltic now that
is a big discharge point you're talking about 1.6 million barrels a day that's not insignificant
but it's a shallow water port so no super tankers right so it's only shuttle tankers
shuttle tankers have limited range that pretty much only goes to northern europe and if you
want to send it further you have to get six or seven of those things together and do a c to c
transfer in the territorial waters of a nato state in order to send it on and that is not a viable
long or even mid-term option so we're seeing the pressure building up already
and probably within a month or two they're going to be forced to shut in production for the long
term so i'm just spitballing here but my best guess is that the turks would manage to carve out
an exemption for themselves so that they could still get crude access and food access on the
black sea because they are a littoral state but it's really difficult to see anything beyond that
no the the 2015 bill uh is what allowed the united states to export crude in the
first place until then we had not exported crude except by executive exemption going back to 1973.
uh so in 2015 we shifted the law so that crude could be directly exported without a
presidential exemption any longer that is the part that can be reconstituted by executive
order from the president but it does not include any other energy or energy product so not lng not
natural gas not refined product not electricity so we would be entering in a world where the united
states is supply of light sweet that until now has gone worldwide that is removed but american
refiners could still export their surplus refined product and american importers could still access
international crude if they wanted to but this is going to generate such a huge price disconnect
in a post-russian oil environment that we're talking about in an environment with a functional
ceiling in the united states and probably canada of about 70 to 80 and then a functional floor
everywhere else that is at at the absolute minimum like 170. and so in that environment
if you want to import crude in the united states you have to really really want it because you're
going to pay a lot for it if you go back to february 22nd the day before the war started
i would say that the idea of getting more pipelines from alberta into
the united states was a dead letter that we had multiple administrations
that were for or against it and nothing happened and if it wasn't going to happen under donald
trump it wasn't going to happen period but now we're staring down a global energy shock
and that's going to change a lot of people's minds when it comes to energy security issues
but never forget that biden like trump like obama is a populist and so he's not going to do things
based on the economic numbers unless those economic numbers are something that directly
impacts his political standing so in the united states gasoline prices are a hot button issue
right now and because of what's going on in russia they have gone up and with what's about to happen
in russia they're going to go up substantially the oil export ban will help contain the damage but in
that environment albertan crude is being sold into a closed market and it's not available for export
so you would be stuck getting the mid-continental price for oil within the united states which will
probably never go above 80 again because of the changes that are coming i don't think this can
happen with crude now you that can change with an act of congress but congress is slow and there
are a number of factions involved and they would probably most of them would probably be thrilled
with having a cap on what oil prices in the united states can be now you're right that there will
be elasticity in other things especially refined product because if you can buy crude for 60 to 80
in north america as a refiner and then sell it into a global market where it's below or above 170
i mean that's a slam dunk business decision so we're going to see this explosion
in uh refining capacity expansion in the united states specifically along the texas coast to take
advantage of that differential the elasticity that we're likely to see is going to be in other things
for example california didn't participate in the shale revolution they're not linked into the
american oil transport grid in any appreciable way and they are the state that imports the most crude
so i can see california having a price differential that is much more similar
to what we're going to have in east asia than what it is in the rest of the united states and
so americans will have the option of an arbitrage internally that could make them a lot of money
as for canada you guys are in a super saturated market and you're selling
into a super saturated market you're actually more insulated from the global price pressures
than almost all americans now if you're an oil consumer in canada that's great
if you're an oil producer it's the other thing we know we're going to lose 4 to 5 million barrels a
day of russian crude that is going to force the europeans to go re interface with a lot
of their former colonies in africa to make sure that quote goes north instead of east which means
that you're going to have this massive shortage in the chinese market they're not going to be
able to function if they lose half their energy so in the time that it takes a new pipeline to
get stuff off to the pacific there's probably not going to be a chinese economy to sell to anymore