Like Banking industry, API (American Petro Inst) takes the offensive with new study/press release. Y2K dire assessments..."almost certainly wrong because they have no basis in fact." : LUSENET : TimeBomb 2000 (Y2000) : One Thread

All the sudden we are starting to see NYMEX crude and products spreads, or backwardations, widen. Pre-millenium delivery months are getting bid up relative to 2000, as they should.

Now I notice the American Petroleum Institute issues a press release on a study they commisssioned saying "Y2K Assessments that predict shortages of petroleum products are almost certainly wrong because they have no basis in fact....Dire forecasts by y2k pundits based on mistaken analogies to the 70s are way off target." Its a 22 page report. Unlike the banking industry, the higher oil prices go due to y2k concerns the higher their industry's profits will soar. Why would API try and throw water on this fire? I guess just like the 70s, their members will make a lot of money but they'll pay a high price in terms of legislative backlashes and PR hits. What do u guys think?

Being a newby, I didn't have any luck linking this in but its at:

-- Downstreamer (, September 08, 1999



To make a hotlink:


(A HREF="HTTP://WWW.THE-LINK-I-WANT.COM")the_text_you_click_on(/A)

Now, replace all parentheses with greater-than less-than signs, and it'll work.

Have fun. (And the quotation marks are REQUIRED, as in the example above)

-- Dennis (, September 08, 1999.

I can't figure the API on this, because as an employee of a multi-billion dollar oil company, I know that any suggestion that we are close to being Y2K compliant or even Y2K Ready has


-- Dog Gone (, September 08, 1999.

Dog Gone: Can you tell us more? What do you do in the oil industry and how do you know whether your company is going to be compliant or not? I have suspected for a good while that the Achilles heel of all this would be the oil industry and I'm interested in further information.

-- cody (, September 08, 1999.

I'm in upstream management. (That's the exploration side of the business, not the refining and distribution side). I'm on our Y2K committee. I'm not a programmer, although I helped design and test custom software for my department.

We keep a database (available to all employees) of our progress in Y2K fixes. We've made a lot of progress. But as of this afternoon (let me go check here...)we're up to about 160 of 210 mission-critical systems complete. If we bring one new one on every other day, we'll make it.

We started in mid-1997. Now that doesn't count the other 1700 systems that we think we might struggle by without for awhile. And it doesn't count the embedded systems in our platforms, gas plants, etc. We spot check those. I'm told that's going well, but it's outside the jurisdiction of my committee, so who knows...

Bottom line is we're falling further and further behind pace. We can't bring one system into production every other day. We're probably on pace to be done by June or July of 2000.

Let's just say we go into rollover with 35 mission-critical systems that don't work. We define mission-critical as vital to our business survival or an unacceptable safety hazard to employees and the public.

The company just decided to switch the company holiday from Friday before New Years to Monday, expressly for Y2K damage assessment reasons. I hadn't planned to be at the office Monday anyway.

-- Dog Gone (, September 08, 1999.

Dog: How much truth is there to the reports, some of them fairly lengthy and comprehensive, that the oil companies are going to fix on failure regarding embeddeded systems that are impossible or very difficult to get to? In other words, do you think such systems and chips exist in significant numbers?

-- cody (, September 08, 1999.

Thanks for the information Dog Gone. From other sources in the industry have you heard anything to indicate that any of the major producers will be close to compliance?

-- Mike Lang (, September 08, 1999.

Is the API writing sermons yet?

-- Linda (, September 08, 1999.

We're all in the same boat. There's no way to check every single embedded system. First of all, we rely on the manufacturer of most of them to tell us whether it's Y2K compatible. If it's not, we replace it. If they say it is, we will test one sample to see if we agree.

If we agree, then we check the system off. I think this is reckless. There's no guarantee that every system was built using exactly the same components over a several month or year period. In other words, even though they perform the same in 1999, they may perform the same next year.

But what are we going to do? Despite what's been posted here, there are no embedded systems at the bottom of the ocean that we can't get to. It's just not true. We can get to everything and fix it.

The problem is cost. We're not going to do a multi-million dollar retrieval to test a $1000 part over and over again on every system. We'd go belly-up trying to test everything. So it's done on sampling. Is there something we missed? Very likely. We've made the decision that we'll minimize the risk as much as we can and hope that the testing methods were sound.

Is something going to blow up somewhere? In refineries and chemical factories, almost certainly. On actual oilfield equipment, probably not. It's a more interdependent system than you might think, and the failure of another company's compressor station may prevent us from bringing our oil onshore, even though we're fine.

Here's my bottom line perspective from my position. Most of the actual field equipment domestically is either not date sensitive or has been fixed. But there will be failures, because we can't test everything. But the headquarters will be in disarray, and the payroll system is FUBAR. How long will I work for free?

I've got a friend who was recently rushed off to Saudi Arabia to assess and help repair critical Y2K sensitive oil facilities. His bottom line was that the desalinization facilities would make it, but the oil loading ports won't. No Saudi oil can leave port.

Venezuela is in the same situation.

We'll have some crude oil here next year for sure. The refining capacity that works may just about fit the supply. We're in much better shape with natural gas, but that's no help to Mr. Commuter. Either it is amazingly high prices or rationing for gasoline. But if I can't get paid, I'm not going to work. All our competitors are in the same situation. Some are in much worse shape, actually. But don't expect business as normal next year. It's simply not possible. And, believe me, we've done as much as we can to stay in business. We gave it our best shot. We might limp through and come out fine eventually. But from my side of the desk, I see too many mission-critical systems that can't be fixed in time.

-- Dog Gone (, September 08, 1999.

Dog Gone, thank you very much for posting this info -- stuff from the people in the trenches, fighting the battles, is often more detailed and accurate than what makes it upstream to the media for public consumption. Thanks again.

-- Anita Evangelista (, September 08, 1999.

Dog Gone, many thanks for sharing this informationn with us. I'm a bit taken aback by your frankness.

Has your company given approval to release this kind of information??


-- Ray (, September 08, 1999.

Dog Gone,

That's dog gone good info. I've contended in another thread that this Saudi loading port problem can't be that big of a deal. i.e. look at the Iranians and Iraqis during their war in the 80s. They were bombing each other's loading ports on a daily basis and they'd improvise a system that could get oil from tanks to tankers. Plus the Saudis crude pumping capacity is way above current output levels. As G Geko has pointed out, they could, and prob are, stockpiling 30 or 40 mil barrels (which wouldn't violate OPEC quotas) to work off for rollover probs. They've stockpiled as much as twice this vol in the past. I'll contend the Saudis are gonna ramp it up late in the year. They're gonna love the late '99 crude economics.

To the extent non-compliant data will corrupt good systems, how's the Bank of International Settlements and world wire transfer systems going to operate freely unless the participants can prove they're compliant? That'll be the sleeper issue. There's too many 'daisy chains', wire transfers and long term off exchange derivates in the oil biz. But if you're an oil producer who ya gonna cut off? Answer: all the third world backwaters and shaky deals. Who ya gonna sell to??? Answer: The countries that are in the best economic and y2k shape (US). With biz sputtering, we could be swimming in oil next year.

-- Downstreamer (, September 08, 1999.

Come on Ray..... You know the answer to that. Done Gone would really be in the dog house if he did....

-- Downstreamer (, September 08, 1999.

Downstreamer, I guess I'm still reeling from the frankness of "Dog Gone's" post. These are the kind of DETAILS that we have been denied by every government and corporate entity that has ever repoeted on y2k.

I have read many threads here but consider this to be ONE of the MOST important. I am assuming that Dog Gone has presented us with accurate information.


-- Ray (, September 08, 1999.

First let me say that the bullshit article put forth by API is as blatant a piece of meaningless fluff as you're ever gonna find. I've been to a few of their meetings dealing with this issue and I find the public doublespeak quite troubling. You should take this as a clear sign that all is not well in the oil patch, at the dock, by the platform and at the refinery gate.

I will back Dog's assessment of the "vendor compliance statement" strategy. This is clearly industry consensus, although there are a few who are actually using testing tools.

I think the fact that the Funds are up to their eyeballs in contracts speaks very loudly to the situation at hand. They know they're gonna continue to make paper gains with crude etc. And meantime, the market has priced in an all's well scenario with the over the year spreads. My take on this is that the market has only recently begun to understand the implications and is now paying attention, however the majority are subscribing to the popular groupthink which sees very little disruption after new years, even less after FEB and none by Mar. Duh. Duh. Duh. Duh. I just can't say it enough, these people never understood the problem, from what I saw at API they were very concerned with image, panic and making certain no one pissed off their host country in the press. You won't see an honest assessment from these shills in this lifetime. God I can't believe they put that crap out there...

-- Gordon (, September 08, 1999.

Thanks Gordon, this has the potential to be an exceptional thread!!


-- Ray (, September 08, 1999.

My comments in [brackets]. Selected excerpts from API Fluff Report.

Almost all American petroleum firms - and key foreign suppliers like the national oil company of Venezuela, known as PDVSA - are on or ahead of schedule to be Y2K compliant.

[Should read Almost all American petroleum firms and key foreign suppliers are relying on vendor statements for embedded systems and third parties to remediate their code. One major petroleum company actually tested it's testers by injecting known bad code into some applications and then submitting it to the bozo's they'd hired to do the work. Fifty percent of them (the bozo's) missed blatant non compliant code. Wonder how many firms were that smart, from what I saw, not many.]

If there are non-compliant petroleum firms on January 1, either they will promptly fix their problems or they can expect to lose customers and market share to the great majority of compliant firms.

[If this were a successful remediation strategy, players wouldn't get waxed in the market when their refinery blows up. It doesn't stop em from having accidents today, why should this prevent Y2K failures?]

and if a foreign supplier were to remain non-compliant it would be replaced by a compliant supplier.

[and at the very reasonable price of 50 bucks a barrel]

In their place is a system of prices and contracts, most visibly illustrated by the New York Mercantile Exchange, that precludes shortages.

[Now that's truly a rich one, the MERC prevent's physical shortages? This guy's beyond reality! That ranks as one of the dumbest statements I've ever heard. Yeah, ok I'm sure that any oil company would be willing to take paper if there's little chance of physical delivery, duh. Hey, maybe they can run the paper through the refinery where this dolt lives.]

Y2K problems pose threats no worse than those confronted every day by American petroleum firms.

[Complete and total bullshit. The industry has never faced a greater risk. Never.]

For example, the Persian Gulf crisis and war probably was the worst energy crisis in recent memory.

[more bullshit, remember that little Arab thingy a few years back? Or maybe this guy's to young.]

Products like gasoline commonly travel hundreds or thousands of miles from manufacturing center to retail outlets, with pipelines the principal mode. However, all other modes of surface transport also are used,

[no, dork for landlocked locations pipelines are it. if they don't work, the people in those area's are hosed. yeah, i know, maybe we could truck it in or take it by railcar....fat chance... i've seen supply shortages where refineries had to truck bbls. it sucks as a long term solution and trains, fuggehdaboutit, they don't run now.]

In aggregate petroleum firms can respond to sudden and large increments in specific product demands through use of large inventory stockpiles, surge production, and reallocation from areas of surplus to areas of deficit.

[you guys should try the truth once in a while. there is NO WAY that we can supply Joe Consumer with enough gasoline if there is a run on product. the physical capabilities of the distribution systems WILL NOT handle that type of volume. we know that and they know that. the industry is also planning on it happening (panic that is)]

Sorry, I got pissed reading this stuff. It bothers me that you're being told a bunch of half truth's about this.

-- Gordon (, September 08, 1999.

I have been following DOG GONE's posts on various fora and now have an appreciation that his views are informed by being in the trenches.

Based on my experience with the money center banks, there are contingency plans to 'handle' the cross default situation. I was there during some of the more dangerous bank failures in the 1960's and 1970's...they will handle any breakdowns in the payments mechanisms as extensions of "credit."

But to return to Dog Gone's post...if Chemical Plants and Refineries blow, the supply of refined product becomes critical!! Expect rationing next year!

-- K. Stevens (kstevens@ It's ALL going away in, September 08, 1999.

We can live with rationing. Rationing would be great. That means a structure and industry. Hooray.

-- Mara Wayne (, September 09, 1999.


Don't you live either in or around New York City?? Seems that you have access to mass transit. It would be a HUGE hardship if rationing were imposed in the Southwest. My daughter has a 50 mile commute to a part time job after school.

Interesting that Dog Gone indicated 210 mission critical systems, 1700 so called non critical...that is about 10% of the total, just as the FEDS. Our city government focused on payroll FIRST, systems for the bureaucrats second, and won't be done with water, sewer, or traffic 'till next year (will run them manually). The 'do nothing' mayor was just reelected yesterday...go figure!

-- K. Stevens (kstevens@ It's ALL going away in, September 09, 1999.

Feel free to take my remark about the Saudi ports with a grain of salt. I've never been there. I have no idea what the mechanics of the oil loading operation are. I think it's safe to assume that it's more complicated than pulling a hose up to a ship and turning a valve.

All I can say is that a man who I trust, who has never misled me, went to Saudi Arabia a couple of weeks ago to assist in the last-ditch effort for Y2K. He told me that things were better than he expected in almost every area, but was shocked to discover that the ports were hopeless. I was stunned. That makes everything else irrelevant.

It's hearsay. Not admissible in court. But I think you should ignore it at your own peril.

-- Dog Gone (, September 09, 1999.

Dog One, You're an Upstreamer. I'm the Downstreamer. Its always amazed me how segregated the 2 ends of the oil biz are.

I find your posts credible and worthy of concern. I do want to temper things a little, though. Based on your valuable input on how oil companies are deeming systems to be compliant, maybe not all the embedded chip systems will function on rollover as contended but 1) throughout all this extended testing only a very small % of chips will cause system failure type problems (I think mostly internationally, like Venz.), and 2) I think its a stretch to contend we'll see refinery explosions. Hot and cold shutdowns -yes, but not outa control dangerous blasts. Oil personel will be staffed up and they'll watching te rollover processes like bird dogs.

-- Downstreamer (, September 09, 1999.

Further, where-as crude markets are starting to reflect some y2k concerns, with a nice move up past $23 today for NYMEX WTI, the refiner's margins derived via spot and futures markets are still reflecting 'no prob, biz as usual' economics. i.e. Dec heat cracks (the margins oil companies make by refining crude into heating oil and diesel) are still sub $3 / barrel. On average over the last 15 years this Dec heating / Dec crude oil spread relationship has averaged $4.55 /bl in early Sept. Of course this spread relationship reflects a lot of other things beyond rollover concerns (ie high stock levels, current demand, etc) but either we're hyping up refining threats well past reality or there's a huge market disparity/opportunity begging to be played. Although its not the case with gasoline cracks (a much more complex cracking and production operation), I was surprised to see we currently have the cheapest December heat cracks for early Sept in 15 years! I guess the big money is bidding up crude prices and the heating oil isn't adequately tagging along.

-- Downstreamer (, September 09, 1999.


I'm not qualified to firmly predict refinery or chemical plant explosions. I have followed the embedded chip discussions here and elsewhere, but the topic is pretty much out of my league. My concern is because only a sample are being tested. I know this, because I personally placed a call to one of our plants and discussed it it with the head man.

The chemical industry association (the ICEE?) also recently sent letters to each state governor and its members pointing out the lack of progress in the plants in achieving Y2K compliance.

So will their be explosions? I don't know, but I wouldn't be surprised. If the workers are vigilant, I'm sure they can handle most anything that could start to go wrong. However, you could not pay me a million dollars to be in a refinery or chemical plant at rollover.

I hope all goes well, and I didn't mean to frighten anyone here. But it's not all rosy in the industry and anybody who says so is either misinformed or is outright lying. The business is risky enough when all systems are running properly. It is a rare year when we don't have a work-related fatality. At rollover we will have a significant number of mission-critical systems that aren't ready, and we will conduct a real life test on countless of embedded systems scattered all around the country for the first time. We'll see.

-- Dog Gone (, September 09, 1999.

One small correction: We have the SECOND cheapest Dec heat cracks in 15 years (in early Sept), not THE cheapest. Last year we had this heating oil/crude oil spread relationship at $2.50 / barrel. The highest was pre Gulf War in '90 with early Sept #s at about $7.40 / barrel. We've now crept up to $3.14 / barrel on current Dec heat cracks.

Notice another nice 50 cent rally on the NYMEX crude today with a settle at $23.19 vs summer 2000 crude values below $20. North Sea Brent has actually been leading our crude futures- They saw a nice 77 cent crude rally today...

-- Downstreamer (, September 09, 1999.

Strong move on the crude is right. We were looking for culprits on the Brent/TI spread which came in to a nickle at one point today. Sheesh!

As I said before, the commercials are just waking up to this, and I think they're reading it wrong. There will be at least some explosions.

My next concern is the pipes. I now know of two companies (major pipe players) that have tested their pipes Y2K systems and they completely failed. Yeehaa...

-- Gordon (, September 09, 1999.

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