larry johnson and his friend educate us all on the facts of oil;

 

 Let me introduce you to my friend, Karl Miller. Karl Miller is a US energy-sector figure known primarily as a trader, investor, and distressed-asset specialist rather than a sell-side or think-tank “analyst” in the narrow sense. Per his own professional materials and a Risk.net profile: his career began on Wall Street in 1989 at Dean Witter Reynolds, then moved into futures and options trading at Copia in New York; he later worked in the energy arm of Électricité de France (EDF) and became a partner at NEAH Energy (sometimes styled NEAH Power/Global Energy).

Karl has played a key role in educating me about the complexity of the oil industry and he had some comments on my last article. So here is his take:

Larry,

I enjoyed reading your article on sour crude refining because it highlights an issue that is often overlooked in discussions of energy security: not all crude oil is interchangeable, and not all refineries are capable of processing every crude grade. Too many commentators reduce oil markets to barrels per day, ignoring sulfur content, density, refinery complexity, and conversion capacity. Your explanation of why heavy sour crude requires extensive hydrotreating, hydrogen production, sulfur recovery, upgraded metallurgy, and deep-conversion equipment is technically sound and provides useful context for understanding why refinery configuration is as important as crude supply.

Your central thesis—that refinery configuration constrains the world’s ability to absorb the loss of Gulf heavy sour crude—is fundamentally correct.

Where I believe the analysis becomes less convincing is in its strategic conclusions, particularly regarding the degree to which the U.S. Gulf Coast would be insulated from a prolonged disruption of Middle Eastern heavy sour crude supplies.

The distinction is an important one............more.......