Calvin Profile picture
Jun 17 11 tweets 4 min read
Here's some reality on the prospect of a US international export ban. First, let's consider what the main US exports are:

Diesel, gasoline, propane, and other oils (like lubricants and additives).

If the US blocks exports, it will *devastate* the world economy.

#OOTT
We send a lot of diesel and gasoline to Mexico, Canada, Netherlands, Brazil, Venezuela...

We send a lot of Naphtha to Japan and Europe. Below is a visualization of clean tanker charters headed to other countries, from my shipping data production Marhelm:
On balance, most US exports (including crude) are going to Europe and Asia (figures below, again, are from my product, which bases stats on fixture data obtained from ship brokers, ship owners, and charterers).

Basically, we supply both crude and product to everyone.
Now imagine we do an export ban. The US makes up nearly 20% of the world's export capacity. That's a massive hit to the developing world, especially, but to our allies and neighbors most of all.

Russia and China have the next most refining capacity of all the rest of the world.
So what happens? The US loses its market share, devastates its domestic refining industry, and forces our allies and neighbors to purchase refined products from our stated enemies - Russia and China - who collectively control more refining capacity.

A huge net loss for the US.
An export ban would mean our domestic refining industry would get absolutely destroyed.

Refiners would idle production again. It would probably be bearish for crude (refineries are the #1 consumer of crude).

And the world would see fuel shortages like you wouldn't believe...
Once refining capacity gets shut down, it doesn't come back super easily. Despite record high (in the history of mankind) refining margins, the United States still has idled refinery capacity that was shut down during covid.

Would take YEARS to recover from this policy blunder.
One other thing it's important to be clear on... a refinery yields a wide range of products from a barrel of crude. The range of outputs differs on the crude slate, but the same type of crude doesn't allow for much variability in products produced.
Why do refinery crude slates and product outputs matter?

Because the economics around each product output are constantly changing. In a *free market* i.e. no export limits, refineries can choose to sell internationally or domestically based on the market pricing for each.
Now imagine some government official decided quotas for each product. Perhaps they could export gasoline, but not diesel. The domestic margins on diesel are poor. So what happens? They export all the gasoline allowed to make up for losses on diesel.

Even more imbalances!
The market works best when producers can respond based on economics.

If we replace our market economy with a command economy, the result will be less capacity and a less efficient response to market conditions.

And of course alienating our friends and helping our enemies.

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More from @calvinfroedge

Jun 18
If we go on Q1 numbers ($101 Brent), $PBR is at 1.2x EBITDA, 2.15x GAAP EPS. They've paid out 23% in dividends in the past 90 days. Div policy is 60% of FFO-Capex.

That's just silly dude. ImageImageImageImage
Main investments going forward are in refining and gas, which are the relatively weaker segments. Exporting crude production is the big money maker and what's driving the massive dividends. ImageImageImageImage
In regard to "what the politicians are doing", the bottom line is that regardless of what Bolsonaro and other Brazilian politicians say they want, $PBR is sticking to market pricing policies established 6 years ago.

It appears state oil company is the true deep state in Brazil. ImageImage
Read 5 tweets
Jun 16
A few of the world's largest cities. Where is the demand destruction, again?

#OOTT
Flight stats...2022 is tracking ahead of 2019 levels for total flights. Commercial flights are behind 2019, assuming the balance is being made up by mostly increased military activity (which btw, fighter jets burn a LOT ton of fuel - which $INT sells)
Rotterdam bunker sales 16% higher in Q1-22 than Q1-21
Read 6 tweets
Jun 16
At what net worth would you consider spending 100k on a car you use for just getting around?
At what net worth would you not give a second thought to spending $1000 on a single meal?
What percentage of one's net worth do you believe should be in a primary residence?
Read 10 tweets
Jun 13
Running Venezuelan crude through American/European refineries fixes some big problems politically - namely gasoline price and providing fuel oil for electricity.

Diesel and naptha will suffer, but peak diesel season is spring planting, so it's a good trade off.
Venezuela's Merey crude has one of the lowest APIs in the world - meaning extremely high residual and gasoline yields - in the neighborhood of 40% / 40% vs Brent around 12% / 26%.

Think "black sludge"...perfect if you need to run a power plant.
Just another reason to bet on South American crude oil...refinery economics.
Read 4 tweets
Jun 13
You heard it here weeks ago, folks. I am for objective analysis, not swallowing propaganda just because it originates from my side.

NYT: "Live Updates: Russia Could Soon Encircle Ukrainian Troops in Sievierodonetsk"

nytimes.com/live/2022/06/1…
Read 4 tweets
Jun 13
I'm going to make a prediction and I invite all of the experts out there to fight me on this.

The world will burn *an extra* 2-3M bpd of oil for electricity this winter due to natural gas shortages, under performance of renewables, and nuclear shut downs.
Anyone doubting this prediction, I'd like to refer to a few facts:

1) Germany nuclear shutdowns
2) French nuclear maintenance
3) Gas storage in Europe is currently not enough to supply base load demand

Can I please get someone to say I don't know what I'm talking about?
Come on @NachoTrust @NextWaveEFT @TwainsMustache, come tell me how Europe doesn't burn oil for electricity and I don't know what I'm talking about.

Need the smart guys to weigh in on this.
Read 9 tweets

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