Hoot of the Day: Russian Oil Gets to US Via Sanction Loophole

November 1, 2022

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7:07 pm

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The Wall Street Journal has an interesting video that describes How Russian Crude Avoids Sanctions and Ends Up in the US.

With an upfront ad, that is a free WSJ video link.

The Lukoil Connection

Sanction Avoidance Process

US sanctions are on crude oil, not refined products.
Lukoil, Russia’s second largest oil and gas company was not sanctioned by the US.
Lukoil’s refinery in Sicily is the second largest in Italy and fifth largest in Europe.
A Lukoil refinery in Italy once processed crude from multiple countries. Now it inputs are 93 percent from Russia.
After refining, the country of origin is Italy, not Russia. This is due to longstanding practice of changing the country of origin to where oil is refined.
The refined product then makes its way Exxon and Lukoil plants in New Jersey and Texas.
Lukoil still has a gas station presence in the US and it distributes products to eleven states.

Lukoil Stations in 11 US States

Note: Most of the 230 Lukoil gas stations in the US are owned by individual American franchisees, not the oil giant itself.

Understanding the Process

The US has sanction exclusions for oil “substantially transformed into a foreign-made product.”
US refiners cannot process Russian crude, but Italian refiners can, then distribute the product here.
In return, US can send its refined products to the EU, completing the round trip!

Lukoil is 6th largest refiner in Europe. It went from processing 30% Russian oil to 93%. That’s a pretty big sieve even if amounts to US are small.

Conveniently timed for the US election, European bans on Lukoil do not come into play until December 5.

Unless the EU backs down, this could lead to another surge in the price of gasoline in December.

Meanwhile, In eleven US states, people are filling up their tanks in part with Russian oil products via the above convoluted means.

The US Treasury department refused to comment on this process. Gee, I wonder why.

Biden says this is all Putin’s fault, while traipsing the globe begging Saudi Arabia and Venezuela for more oil.

Finally, after Biden told both OPEC and the US oil industry of its intent to kill the industry, the president now threatens both the US and Saudi produces with tax hikes and unspecified consequences.

For discussion, please see Biden Threatens Saudi Arabia With Unspecified Consequences for Slashing Oil Production

Consequences

“There will be consequences,” says president Biden. “It’s time to rethink our relationship with Saudi Arabia.”

Yeah, there will be consequences.

The one on the immediate horizon is an election blowout on Tuesday, November 8.

This post originated at MishTalk.Com.

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JRM

1 year ago

Did I miss it???

Where was all the purchase request by the White House for purchasing oil for the strategic reserves, when oil dropped below $80???

After all some on Mish site seem to believe they know how the White House is thinking and working!!!

Like claiming they would purchase the oil, once it dropped below $80, it did for a while and I didn’t see any purchase contracts issued!!!!

Hansa Junchun

1 year ago

There was a Lukoil station in my town in CT until 2010. That year, the company hiked its franchise fees by 35% or some obscene number. Its amazing anyone kept them. Funny thing is, our station owner switched over to BP days before the Horizon Platform exploded. He hadn’t finished putting up the BP sign — and never did. He swapped out the red Lukoil trim for the super-environmentally friendly BP green-n-flowers trim, but withheld the name. A year or two later, he stuck up a generic provider’s name and has been that ever since.

The last Lukoil station I visited is located just up the road from Ozereika and Glebovskoye, near Novorossiisk in Russia. Looked just like the one in my town, apart from the cyrillic lettering, of course.

RonJ

1 year ago

“US sanctions are on crude oil, not refined products.”

Catch the season premier of Moonshiners.

vanderlyn

1 year ago

mish, i think you are wrong about mid terms. Biden admin welcomes the house to nominate the kooks and ultra maga deniers. MTG etc will get committee chairs and start howling at the moon. impeaching etc……stopping debt ceilings………..will take HUGE heat off biden………and set him nicely to win in 2024. i have no dog in that fight as i’ll again vote libertarian for president as futile as it is. i refuse to vote D or R at the national level of president or senator………i’m an anti imperialist. not antifa. i also vote classical liberal party in EU. my party there garnered almost 20% this past election and had control for a few years…….in italia.

KidHorn

1 year ago

Reply to vanderlyn

If so, why is Biden constantly lying about republicans getting rid of social security? Does he think people will vote republican because they want that?

MarkraD

1 year ago

Reply to KidHorn

“…republicans getting rid of social security…”

Republicans have campaigned on SS & Medicare reform, cuts, privatization or eradication for decades.

Biden’s just using the usual D campaign slogan there, it’s not new, all Dems are including it in their ads now and it’s probably a good idea where for years the GOP had sworn to leave abortion alone.

While I don’t really care that much about abortion either way, the thought did come to my mind “What else will they go after that they promised to leave alone?”

KidHorn

1 year ago

Reply to MarkraD

Can you name a single republican running on SS eradication?

MarkraD

1 year ago

Reply to KidHorn

For you to ask that, I have to ask you what country you’re in? ….and, you cherry-picked “eradication” from my statement.

Again –

“Republicans have campaigned on SS & Medicare reform, cuts, privatization or eradication for decades.

Have you been to America?.. Were you here, say, after the ’08 crisis during the GOP Austerity rants, Paul Ryan’s “Path to prosperity”?

You sound like you’re gleaning U.S. domestic policy from internet headlines. SS and Medicare have been a target of the GOP for as long as abortion has, my entire life.

KidHorn

1 year ago

Reply to MarkraD

Even the WaPo gave it four pinocchios. Their highest lie rating. One of the most liberal organizations in the nation.

MarkraD

1 year ago

Reply to KidHorn

I’m sure Wapo gave something some bad names, whatever “it” is that you’re talking about.

Here inside America, the GOP has always talked cuts to social entitlements, maybe in Russia you guys don’t see the headlines.

“Cut wasteful spending” is a GOP campaign staple, regardless what side of the aisle you’re on …here, inside America.

MarkraD

1 year ago

Reply to MarkraD

“Republicans have campaigned on SS & Medicare reform, cuts, privatization or eradication for decades.

Again –

“…it’s probably a good idea where for years the GOP had sworn to leave abortion alone.”

GruesomeHarvest

1 year ago

This whole sanction stuff is moronic. Oil is a fungible commodity. This elaborate kabuki dance with Russian oil wastes a lot of energy shuffling it along circuitous routes.

Hopefully brain dead Biden will get sanctioned good and hard Nov. 8th.

Zardoz

1 year ago

If the republicans win, it will be election fraud!!!!!

(Am I doing it right?)

vanderlyn

1 year ago

Reply to Zardoz

HA HA HA. the divide and conquer of the middlebrows is a tried and true method for ruling class. i heard some old italian guy wrote a how to do it manual about 500 years ago. something like “the prince” or some such. amerikan middlebrows are really naive. like dumbest in rich world level stuff. 1st in class. idiocracy

BDR45

1 year ago

Reply to vanderlyn

Machiavelli. Or are you just pretending to be uneducated?

RonJ

1 year ago

Reply to vanderlyn

I still see some people wearing masks, outdoors even, in L.A. County.

Zardoz

1 year ago

Reply to RonJ

There’s been a shortage of the silicone compound the lizard people use to make human looking masks. Covid was simply a lizard people

Plot to allow them to move among us without full masks.

The shortage hasn’t abated completely, so please be patient with the remaining partially masked lizard people, earthling.

KidHorn

1 year ago

Reply to Zardoz

Ask Hillary

Zardoz

1 year ago

Reply to KidHorn

Is Hillary crying about her loss to anybody she can lure into earshot?

KidHorn

1 year ago

Reply to Zardoz

yes

JRM

1 year ago

Reply to Zardoz

Yep she is still welcomed on the MSM where she still saying the 2016 election was “STOLEN” and now she is stating the Republicans are going to steal the 2024 election!!!

Yet she is still allowed on GOOGLE/Facebook/META as their hero!!!

vanderlyn

1 year ago

i’m 99.99% certain, from discussions with “friends” that work the black ops side of amerikan empire, there are already back channel negotiations, that the biden admin, will be doing a peace negotiation with putin by election of 2024. to put russia back on the petro dollar…………take it or don’t. the black ops guys love to talk. they are off the books and roam the globe……….

MPO45

1 year ago

My hoot of the day is huge options volume on GDX. There is a ridiculous 6% return for OTM call options for January 2023. There is also HUGE open interest like I’ve never seen before, is WW3 going to start in January?

Where are all the gold bugs to explain?

link to finance.yahoo.com

MarkraD

1 year ago

Reply to MPO45

Miners vs gold, cross reference – link to finance.yahoo.com

MPO45

1 year ago

Reply to MarkraD

Implied volatility on GLD is half of GDX. I may do a covered call on GDX to collect that 6% but I’ll wait till JPOW kicks the market in the jewels.

MarkraD

1 year ago

Reply to MPO45

GDX always trades like a leveraged gold ETF, long term it evaporates value like one too, I figured it a good idea to compare volumes/open interest between the two, I’m not a big gold guy myself, doesn’t seem to perform as predictably over the dollar or Fed as the bugs suggest.

PapaDave

1 year ago

This relates to an earlier discussion on whether the US or China will be the winner in the race to renewable energy independence. We are definitely behind China in this race. But it’s a multi-decade marathon and we still have time to catch up and pass them.

link to oilprice.com

TexasTim65

1 year ago

Reply to PapaDave

I saw the same article this morning. The numbers they quote (100ish billion each for the US and Europe) by 2030 is actually quite cheap if that’s all it takes.

I’m still not convinced Solar is going to be a major player in renewable energy in the long run. Too much material needed for manufacturing panels, they aren’t recyclable or fixable to they have to be constantly replaced, lots of space needed to put them up en-mass and plenty of places (Canada, northern Europe) don’t get enough sun to supply enough energy at a reasonable rate per panel.

I think Solar will be like hydro electric. It will supply a small percentage of the needed power and be prevalent in areas that it works for (similar to how hydro electric is great in areas where dams can be built and water flows regularly) but not the major supplier of electricity.

MarkraD

1 year ago

Reply to TexasTim65

I don’t think anyone expects solar to be a 100% solution, just a supply supplement to keep prices in check.

For large scale projects they don’t use panels, but mirrors that concentrate the light to a central point to create steam for turbines, the heated material can also be stored over night.

You’re right about northern climates, as well as the lifespan of traditional panels.

I have a friend that lives in a northern state who has panels, in the Summer he often sells back to the grid, to him they’re worth it.

hmk

1 year ago

Reply to TexasTim65

You can check out the research from Goehring and Rozencwajg on how enery efficient these renewables are, basically the same as wood. They claim the energy ouput on enegry invested by nuclear powere is about 100 to 1 vs 5 to 1 for wood. Again idiotic politicians demagogues trying to stay in power to continue feeding like parasites fail to point out the obvious for political reasons only. Pathetic

MarkraD

1 year ago

Reply to hmk

In the case of solar, 18% of zero cost fuel is still zero.

A side by side breakdown of the physical costs & maintenance over time (gas piping, burner assemblies, steam turbines vs panels…etc) would be the better argument.

PapaDave

1 year ago

A good article on the diesel shortage, the many factors at play, and how complicated the world market is for fossil fuels and refinery outputs. Nothing is ever as simple as people think.

link to rbnenergy.com

MarkraD

1 year ago

Reply to PapaDave

Interesting, most informational towards the end, comes down to the E.U. using Diesel to offset Nat gas shortages.

FromBrussels2

1 year ago

BTW, for your information , according to RT ‘Japan goes around G7 russia energy ban to secure own economy ‘ LOL … Yeah Russia is losing out ….Time for diplomacy to take over unless we want to destroy EVERYTHING !

FromBrussels2

1 year ago

SO, what exactly is wrong with Russia delivering its indIspensable resources within the context of YET another US provoked war ? ! If I may ask ….

Esclaro

1 year ago

There should have been consequences for the dirty Saudis after 9/11. We should have nuked those worthless scum.

vanderlyn

1 year ago

Reply to Esclaro

they paid a huge price. W the dumber walked the King of Arabia in the rose garden and they spirited the bin laden family on jets…….when rest of country was grounded. the bush crime family welcomed 9.11.01. not a doubt about it. of course the Ds loved it too.

PapaDave

1 year ago

We live in an interesting world. So many combinations and permutations. Good story Mish.

Meanwhile, we don’t seem to be importing Russian diesel now. We used to import quite a bit. And there is a big shortage of diesel in the US northeast. Even though the northeast refineries there are operating at 102% capacity. They can’t keep doing that. Somethings going to break. The US does not have enough refining capacity to meet demand.

And with the Mississippi reduced to minimal transport now, we need more trains and trucks that use more diesel fuel.

Now winter is coming and Russian oil production is going to suffer. In freezing cold weather, oil freezes and does not easily flow. Same for all the water being used in the fields. Winter energy production requires a lot more effort and a lot more people to keep things going. But western oil field workers are long gone. And many of the Russian oil field workers have been conscripted to act as cannon fodder in Ukraine. It will be interesting to see how this will affect Russian oil production in the next 6 months. A big drop in production is possible.

8dots

1 year ago

Reply to PapaDave

We lost our oil assets in Russia. Most western oil production co are gone, but not all…a big drop in production is possible. A big drop in

western oil co assets and ==> Russian & Chinese coalition against US dollar.

PapaDave

1 year ago

Reply to 8dots

Yes. A decline in Russian oil production is inevitable. They just don’t have the manpower and equipment to manage it by themselves. For comparison, look at Venezuela. Venezuelan production dropped from 3.2 Mbpd to 0.5 Mbpd after western oil companies left the country.

Lisa_Hooker

1 year ago

Reply to PapaDave

Venezuelan production dropped from 3.2 Mbpd to 0.5 Mbpd after the US proclaimed loudly that they strongly disapproved of any “allies” buying Venezuelan oil.

MPO45

1 year ago

Reply to PapaDave

My canadian oil & gas stocks are paying off nicely. BP reported a profit of 8 billion today and more profits on the way. Very possible XOM and BP shoot to the moon as we’re in the early stages of shortages. Choo! Choo! Money train is leaving the station again…

PapaDave

1 year ago

Reply to MPO45

Yes. Every day that WTI oil is above $80 is a very good day for Canadian oil and gas companies. They continue to use their huge free cash flow to pay down debt, buyback shares and increase dividends. Almost all of them will reach debt free, or targeted low debt levels within the next year. Many are already there.

Once debt targets are reached, they are committing to return 50% to 100% of that FCF to shareholders through share buybacks, dividend increases or some combination of the two.

I expect oil to average $100 next year, which means an average 30% FCF from these companies.

And if a supply crunch hits, oil could soar much higher than $100.

FromBrussels2

1 year ago

Reply to MPO45

MPO45 and PapaDave are talking to THEMSELVES …..LOL !

vanderlyn

1 year ago

Reply to FromBrussels2

the smart girls and boys are reading along……..their electronic banter. i wish it was discussions……..be fun.

vanderlyn

1 year ago

Reply to PapaDave

YOU the best PAPA. hat tip to your analysis

8dots

1 year ago

Iran attacked Irbil during Amos Hochstein negotiations between Lebanon, Hezbollah and Israel. Now Iran might attack oil assets

in the Gulf or Israel as diversion from their internal turmoil. If that happen. the last thing US & Europe need is to sanction Lukoil, during this winter, while the ME is blowing up…

hmk

1 year ago

Its hard to believe one persone can be that dumb.

StukiMoi

1 year ago

Reply to hmk

It’s seemingly 95+% by now.

Just tally up supporters of both orange and senile parties.

8dots

1 year ago

US and Europe cannot sanction Lukoil, because Iran might cont to attack as they did Iraq in Sept. Iran might expand it, perhaps to Saudi Arabia or Israel.

Jack

1 year ago

Reply to 8dots

We should bring back privateering – similar to Sir Francis Drake.

Can pick up all the Saudi and Russian oil shipments as required.

Doug78

1 year ago

Seaborne oil from Russia will be banned in the the US and the EU starting December 5th and some companies are filling up before the cutoff date so it is not unexpected that Russian oil and distillates are still being bought into the US because the date has not yet passed. After that date Russian oil will no longer be imported into the US and the EU and then we will see.

JRM

1 year ago

Reply to Doug78

It seems you “SELECTIVE READ”!!!

It is not Russian oil once it goes into another country and I assume the same when it goes into another countries oil tanker!!!

India will not join the WEST oil/gas cap price MAFIA!!!

Now EU have been notified by Qatar that they will not deliver Natural Gas to the EU, in punishment for putting a cap on oil/gas on Russia..China stopped all exports of NG!!

Doug78

1 year ago

Reply to JRM

You forgot that along with the Russian oil ban comes a shipping and insurance ban as well so it will be impossible for Russia to ship the same amount of oil and the oil that does get out will have to sail longer distances in smaller, older ships raising their costs. Additionally the discount Russia has to offer is still there and will widen. Qatar wants Europe to pay a ridiculous price for a long-term contract. Europe refused and now Qatar is complaining that the price cap ignores free market principals. This is coming from a member of Opec so I had to laugh when they talk about free market principles. Europe’s gas tank is full much to the chagrin of Russia. It should be clear to even you that Putin did not think this through before invading Ukraine.

JRM

1 year ago

Reply to Doug78

IF it was full then prices would be going “DOWN” not “UP”!!

They wouldn’t be shutting down factories, if it was “FULL”!!!

But don’t allow the “FACT’s” get in the way of what you want to see!!!

Doug78

1 year ago

Reply to JRM

Spot gas in Europe is one-third of the peak price. That means it is down considerably.

MarkraD

1 year ago

I’d wager this is/was known in D.C., but with it hitting headlines, good bye Lukoil.

Meanwhile, necessity is the mother of invention, the U.S. now supplants a majority of Russian Gas to the E.U., countries are beefing up legislation on Nukes, solar, wind, E.V.’s and oil supply alternatives.

None of the above is a cure-all, but collectively they hurt Russian, and OPEC oil sales permanently.

In related news, that could be huge for the EV market, there’s a new patent filed for the artificial manufacture of the iron-nickel alloy “tetrataenite” for rare earth magnets, this alloy usually takes millions of years to form naturally in meteorites and apparently can now be made in seconds by adding phosphorus during smelting.

China’s breaking it’s back to control it’s 81% market share of rare earth minerals and there may be no market soon.

Google the subject – “tetrataenite”, it’s interesting and near shocking how simple the process is, apparently scientists may have been accidentally making the stuff all along, but not realizing it.

The tetrataenite and the fabrication process is real, just waiting for whatever bad news there may be (maybe a lesser isotope?), it’s not unusual for Universities to “forget” details that might undermine short term publicity.

StukiMoi

1 year ago

Reply to MarkraD

“now supplants a majority of Russian Gas to the E.U.,”

At a cost rendering even Merkel’s pacemaker too expensive to keep powered up without intermittent outages……

As on display in any Western city; even sanctions as strict as those on heroin, doesn’t strictly prevent people from obtaining some. But unless Europeans are content to all live like indigent junkies, they need competitively priced supply. Not just “supply”, period.

LNG from the US, or anywhere, is a very, very poor substitute for piped in gas from Russia, as far as price is concerned. Europe was sucking Russia dry at well below open-market costs, due to the the overhang of already-built infrastructure, along with the pain and cost of building infrastructure to anywhere else from remote, frozen Russian fields. Russia then turned around and bought higher-value products competitively produced in Europe as a result of Europe having access to such cheap and reliable energy. Now, it’s cheaper for the Russians to instead move that production home. With the help of Chinese machinery and tech where needed to build up said industries. Hence, the Chinese “mittelstand” will be the ones delivering subcomponents. To Russian final producers. Rather than German suppliers to German final producers. Brilliant move there, Hans and Franz… Pump me Up!

In any competitive market; all silly grandstanding achieves, is rendering you irrelevant. There may be enough inertia in previously built up institutions to afford the utter retards championing such nonsense to pretend they are being mean and tough and cheer-for-me “we” are causing the designated “bad” guy some hurt until next election or news cycle. But the endgame is they will be routed around. And then, not only instant reality, but also even inertia, will have switched sides.

dtj

1 year ago

Meanwhile, CIA Narrative Network (CNN) is pushing the “news” that Iran is selling Russia missiles that Ukraine can not defend itself against.

U.S. to the rescue with more money and weapons?

MarkraD

1 year ago

Reply to dtj

Cell phone bystanders sharing footage of Iranian parts from demolished drones, notwithstanding….but I’m sure they’re “CIA plants” too.

In fact, any news that doesn’t comport with Putin’s narrative is “fake news” and “CIA”.

JRM

1 year ago

Reply to MarkraD

How is this any different in what we in the West is doing???

Another “DOUBLE STANDARD”!!!

My stance is that as long as the WEST does something than other countries have the “RIGHT” to do the same!!!

We no longer hold the “MORAL GROUND”!!!

HippyDippy

1 year ago

Boy, this government just kills me with its ability to do pretty much the opposite of whatever needs to be done. Forget recession; with geniuses in government like we have, I bet we could make one heck of a depression without even trying.

hmk

1 year ago

Reply to HippyDippy

And WW3

Jack

1 year ago

Reply to hmk

If there would have been WW3 it would have happened by now.

Putin red line bluster is simply just hot air.

My bet he now knows his nuclear arsenal works as poorly as the rest of the Russian military and would cause more damage within Russia than outside.

JRM

1 year ago

Reply to Jack

We already had WW3 it was called “KOREAN WAR”!!!!

WW4 was “VIETNAM”!!!

whirlaway

1 year ago

Reply to Jack

This is the reason why the DONORcrat Party has to be defeated and its Dumbocrat voters have to be shown the corner in this year’s elections. Irresponsible and stupid statements that are an admixture of sheer arrogance and complete ignorance.

Rbm

1 year ago

just went down the rabbit hole. Looks like a large percent comes from a Phillips 66 refinery in linden new jersey.

Complex issue in a global economy.

KidHorn

1 year ago

Banning Russian oil is like banning Canadian air from entering the US using giant fans.

randocalrissian

1 year ago

In 2021 the US imported fewer than 20,000 bbl from Italy. I won’t bother with the math on what portion of our annual usage that represents, too many leading zeroes on the decimal.

Does anyone have intel on what percentage of Lukoil fuel sold in the USA in 2022 originated in Russia? Not “shipped from,” rather “drilled in.” Where else does the Russian gas go other than Italy? Did Italian imports to the US spike by millions of percent in 2022?

There’s seemingly a lot more to this story than “ha ha Russia got one over.”

Mish

1 year ago

Reply to randocalrissian

Lukoil is 6th largest refiner in Europe

It went from processing 30% Russian oil to 93%

That’s a pretty big sieve even if amounts to US are small

Doug78

1 year ago

Reply to Mish

And after December 5th it will go to zero in Europe. That is a problem for employment so some countries like Italy are planning to nationalize Lukoil’s assets on their territories. Lukoil has three refineries in the EU with the one in Italy the biggest.

JRM

1 year ago

Reply to Doug78

Italy will not go along with the sanctions!!!

Hoot of the Day: Russian Oil Gets to US Via Sanction Loophole

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