Drumbeat: February 24, 2012
Posted by Leanan on February 24, 2012 - 10:34am
(Reuters) - The U.S. House of Representatives will hold a hearing on March 19 to look at how the closure of three refineries in the Philadelphia area that represent half of the refining capacity in the Northeast could impact national security.
U.S. Representative Patrick Meehan, a Republican who represents the Philadelphia area, said on Friday that the Homeland Security Subcommittee on Counterterrorism and Intelligence would examine the implications of Sunoco Inc closing two refineries and ConocoPhillips closing a third.
The Obama administration is weighing the circumstances that could warrant tapping the nation's strategic oil reserve, Treasury Secretary Timothy Geithner said on Friday as he defended sanctions on Iran.
"There is a case for the use of the reserve in some circumstances and we will continue to look at those and evaluate that carefully," Geithner said on CNBC television.
"There's no quick fix to this, no short-term fix," Geithner said. "The best strategy for the country is to continue to make some long-term investments, to expand production in the United States, to reduce our dependence on foreign oil, to encourage Americans to use more efficient clean sources of energy, to encourage Americans to be more efficient in how they use energy."
With oil prices hitting multi-year highs, in great part because of geopolitical concerns, the option of a belligerent conflict with Iran has once again been put on the table. Be it war with Israel or a preemptive strike by U.S. air forces, the reality is that a sustained conflict with Iran would tip the U.S., and possibly much of the developed world, back into recession.
Up to now, sanctions have failed in their main political objective—to persuade Iran to change course by committing itself to verifiably peaceful nuclear development. But the ratcheting up of sanctions is taking its toll on the country’s creaking economy. The Iranian rial has lost half its value since December, despite attempts by the regime to prop it up. There are reports of food shortages, hoarding and a drying up of investment.
President Obama has blamed tensions with Iran as the reason behind rising oil prices in the US causing the US to buy oil at above peak oil prices and use its reserves.
Shiite Muslim dignitaries in predominantly Sunni Saudi Arabia denounced on Wednesday the use of violence by authorities in dealing with protests in the mostly Shiite east of the country.
A resident of the besieged Syrian city of Homs said on Friday that he feared for his life, shortly before a blast cut off the conversation he was having with NBC News.
"No one can protect themselves from shelling in (the neighborhood of) Baba Amr," Abu Bakr told NBC News producer Michele Neubert via Skype as government troops pounded the area. "We just need (to) stop the shelling."
"I'm hungry from two days. I'm eating just some onions (for) two days. That's my life, that's the life in Baba Amr," he said. "Most people here eat just simple things, the plants on ground."
ABUJA, Nigeria — A lawyer for Nigeria’s antigraft body has filed fraud charges against a former governor in the oil-rich West African nation.
Festus Keyamo from the Economic and Financial Crimes Commission said in a statement Friday that Timipre Sylva, the governor of oil-rich Bayelsa state, has been charged with six counts of money laundering and attempted fraud.
As gasoline prices rise at the pump, so apparently does the brazenness of some thieves trying to steal it.
In Tampa, Fla., authorities say criminals used a minivan with a cutout floorboard, a pump and a big plastic container in an elaborate scheme to siphon gas directly from a gas station’s underground storage tank.
Peak Oil is here to stay. The Chinese are more prepared than any of us. China is now training 40,000 geologists a year to confront these challenges and they are scouring all over the globe to look for oil and joint energy partnerships. Whereas in the US, it is doing exactly the opposite, training 500 geologists and 40,000 lawyers !! So, it is obvious that both have different directions, one is training more lawyers for its Sub-Prime mess whereas the other is training more geologists to look for more energy sources!!
The U.S. Air Force has laid out a new vision for its energy science and technology needs over the next 15 years – a forecast that includes plans for space-based power stations and the prospective use of small nuclear reactors for new spacecraft.
The report, entitled "Energy Horizons: United States Air Force Energy S&T Vision 2011-2026," focuses on core Air Force missions in space, air, cyberspace and infrastructure. A series of Air Force mission-focused workshops and summits were held to shape the new strategy.
What I think is really happening is a combination of reduced refinery capacity and increased vehicle efficiency. We're in a transitional energy period right now. In the U.S., we'll need to refine less fuel for vehicle use, and so refineries are shutting down and the industry is being fragmented into smaller players who can fight over tighter profits.
Driving this is the anticipation that cars are going to go longer between fill-ups in the future. This expectation is being driven by advances in internal combustion engines, as well as by hybrids and plug-in hybrids — cars that run on combinations of electricity and gas.
Oil advanced a seventh day, the longest winning streak since January 2010, on signs of economic recovery from the U.S. to Germany and concern escalating tension with Iran threatens crude supplies.
Futures climbed from the highest close in more than nine months and headed for a third weekly gain. U.S. jobless claims held at the fewest since March 2008, while South Korean consumer confidence increased to the highest level in three months and Germany’s gross domestic product grew 1.5 percent from a year ago, an eighth quarter of expansion. Oil may rise next week as sanctions on Iran tighten, according to a Bloomberg News survey.
More drivers than ever could soon be paying $5 for a gallon of gasoline. And the national average, up sharply in recent weeks, is likely to top out at about $4.
Rising oil prices, lower refining capacity, Middle East tension and speculators are propelling prices. The spike in crude, now at nine-month highs, has driven regular gas to a record February high of $3.61 a gallon — up 42 cents over a year ago.
Gas prices keep rising nationwide. But how much you actually pay is affected by your income and local economy. Mississippi residents spend a whopping 11.8% of their income on gas.
NEW YORK (CNNMoney) -- Tensions with Iran are adding at least 30 cents to a gallon of gasoline in the United States, and experts say gas prices have only just begun to rise.
Gasoline prices have surged over 10% in the last two months, largely tracking the runup in oil prices, which have increased by a similar amount and are now at a 9-month high.
(MoneyWatch) Record-high gas prices have been blamed on unrest in the Middle East, a pickup in the economy and rising demand from China and India. President Barack Obama is confronting Americans' anxiety over rising gasoline prices by drawing attention to his energy policies and taking credit for increased oil and gas production, a greater mix of energy sources and decreased consumption.
But it appears rising gas prices are mostly due to the work of Wall Street speculators and traders -- not any increase in demand, according to a new report from Yardeni Research.
Last year, when the price of crude oil surged above $114 a barrel and the average cost for a gallon of regular gas nearly pierced $4, there were hoots and hollers about evil speculators, as if commodities futures traders were part of some illegal syndicate that's rigging the game against consumers. That's not exactly how the markets work.
The highest U.S. oil production in nine years is failing to dissuade Goldman Sachs Group Inc. (GS) from predicting that the price of the country’s most-traded crude will keep climbing.
The New York-based bank says West Texas Intermediate will gain 7 percent by August to trade within $5 a barrel of North Sea Brent, even as rising output swells the nation’s inventories. Citigroup Inc. (C) takes the opposite view, forecasting that WTI’s discount to Brent may widen to $20 a barrel this year, from about $15.79 yesterday.
If this is giving you flashbacks to 2008, when Goldman Sachs stampeded their sheep into $140 oil contracts on the promise that the same conditions would lead to $200 oil - you're half right. The reality is that it's even more asinine now to make these statements than it was then as we had a much more robust economy in 2008 and we had far less production capacity in 2008 and we had far less of an inventory surplus in 2008 but don't let that stop David Greely from destroying America to enrich his masters - just like Arjun Murti, who came out with Goldman's last massive pump job - Greely will soon be a disgraced footnote in investor history while his superiors decide what color Ferrari to buy this year with their bonus money.
Dubai – In its top 10 predictions for the Middle East and Africa oil and gas industry in 2012, international market research and advisory company IDC forecasts that oil prices will grow steadily this year, reaching about $130 per barrel. This will encourage entities in the oil and gas sector to increasingly invest into unconventional resources, including oil sands, extra heavy oil, biofuels, and shale oils, the production of which grew 4.5% year on year in 2011.
"Reserves are finite, the commodity is becoming scarcer, and the peak oil theory is gaining more supporters within the industry," says Senior Research Analyst Lamia Lafdil, IDC Energy Insights. "In addition, countries like China and India are creating more demand as they develop extremely rapidly. Even though renewable energy has enjoyed solid growth, most countries will still rely on oil for their energy needs."
We have been saying it for weeks, and today even the WSJ jumped on the bandwagon: the sole reason why crude prices are surging (RIP European profit margins: with EUR Brent at a record, we can only assume the ECB will pull a 2011 and hike rates in 3-4 months even as it pumps trillions in PIIGS, banks bailout liquidity) is because global liquidity has risen by $2 trillion in a few short months, on the most epic shadow liquidity tsunami launched in history in lieu of QE3 (discussed extensively here in our words, but here are JPM's).
PERTH (Reuters) - Asian liquefied natural gas spot prices rose to over $15 per million British thermal units (mmBtu) LNG-AS as Japanese demand for the fuel increased.
Japan, the world's largest LNG consumer, was seen back in the market for LNG cargoes for April delivery as it struggles to meet electricity demands with more than 95 percent of its nuclear reactors offline.
Danny Esposito, co-editor for financial newsletter and web site Penny Stock Detectives, believes that we could see peak oil in the near future. According to Esposito, nations understand the fact of peak oil (the end of the line for oil extraction) and are pushing forward with investments in green energy, which is why investment in the area was up 30% in 2011 and is ready to move even higher in 2012.
Your investment portfolio isn't going to help you save on gasoline, unless you've discovered a way to make your car run on stock certificates. But if you want to profit from rising gas prices, you might want to wait a bit.
So forget what the Bank of England says about inflation. That 2% target is history. The Bank will say whatever it takes to justify more money–printing, but those forecasts for falling inflation mean nothing.
If you don’t believe me, consider this one statistic – the sterling price of oil is now higher than it’s ever been. That spells stagflation.
President Barack Obama confronted Americans' anxiety over rising gasoline prices by drawing attention to his energy policies and taking credit for rising oil production in a speech Thursday to students and faculty at the University of Miami.
Newt Gingrich recently presented an ad, featuring himself talking about energy for 29 minutes. Yes, that’s right. Just him, talking about energy, for 29 minutes. According to Wall Street Journal, his campaign is planning to run the full ad in “key cities” until Super Tuesday March, 6.
A half-hour infomercial.
It’s unconventional, but it’s pure Newt.
NEW YORK (CNNMoney) -- Gas prices are on the rise, and so like clockwork, politicians are now selling the promise of lower prices at the pump.
Newt Gingrich, struggling to regain momentum in the Republican presidential primary, is leading the way, promising to get prices down to $2.50 per gallon.
Gasoline is back over $4 a gallon here in California and U.S. crude is holding firm over $100 a barrel, even though domestic demand is off more than 8 percent from the 2005 peak on an annual basis, and a whopping 16 percent on a monthly peak-to-trough basis. And that can only mean one thing: We’re entering the silly season in oil punditry.
In recent years it has been remarkable how much Russian physical and verbal aggression has coincided with oil prices. For example, its invasion of Georgia in August of 2008 coincided almost perfectly with the peak oil price of $147/barrel. Russia typically lobbies for the maximum price for oil on the world market. Although it is not a member of OPEC, its interests often coincide with those members, such as Iran, who also seek to maximize oil prices.
Russia’s vulnerability to oil (and gas) price competition stems from the fact that its production costs are high and it is rapidly depleting its reserves. Costs are high because of weather, geology, great distances that must be traversed, and the deteriorating nature of much of its infrastructure. Consequently the Saudis, who can lift oil for a fraction of Russia’s cost, are much less vulnerable to price declines. If oil drops to $50/barrel the Saudis may feel a bit strapped, but the Russians are devastated: their major source of income is trashed.
(Reuters) - China's oil and commodities firms are set to tread more carefully in Africa after being stung by kidnappings, seizures of cargo and, most recently, the expulsion of a chief executive.
But they won't pull back.
If anything, China will broaden its exposure to the region, home to some of the world's most resource-rich but unstable countries, as it scours the globe for resources needed by the factories and businesses of the world's fastest-growing economy.
The race to open a $40 billion coal region in Australia is being led by billionaires Gina Rinehart and Clive Palmer. Victory depends on who wins approval to build a 500-kilometer (310-mile) railroad to the coast.
“They’re returning to market and trying to get more money for their budget,” Ed Kuczma, who helps manage $35 billion at Van Eck Associates in New York, said by phone.
The government is seeking to raise 10 billion zloty this year from state-asset sales, compared with 13.1 billion zloty in 2011, to help fund spending after posting a deficit equal to about 5.6 percent of gross domestic product last year. Poland sold 10 percent of the utility for 4 billion zloty in 2010, part of an effort to raise 25 billion zloty.
China's Sinopec has said it has found oil in shale rocks in the central Henan basin, the site of pioneering explorations for the unconventional fuel in the country.
For the nation, a huge energy source near where tens of millions of Americans live is a once-in-a-lifetime development. For the region, the dream is even grander: that cheap energy will make manufacturing competitive again and restore industrial might that's been slipping away for generations.
But the new boom has the states struggling to figure out how to tax and regulate the drilling so the new-found wealth isn't just shipped via pipeline to Louisiana, Oklahoma and Texas.
In the most obvious example: Pennsylvania and New York have no severance tax on oil and gas. Ohio has a tiny one that covers only the cost of regulating the industry.
By contrast, all veteran energy states tax their energy resources heavily and use the money to keep other taxes low.
Anything as big and as promising as shale gas is bound to be complicated. This energy source has much to recommend it. To begin with, the U.S. has a lot of it, enough to meet current natural gas consumption for 35 years.
The increase in hydraulic fracturing, or fracking, the technique used to tap natural gas from shale, brought down the fuel’s price by 32 percent last year, to less than $3 per million Btu. Expanding the practice -- to New York State, for example, which now has a moratorium on it -- could help lessen American use of coal and oil to generate electricity and heat. That would reduce U.S. dependence on Mideast crude and lower greenhouse-gas emissions and acid rain.
A state judge’s decision this week supporting the rights of individual towns to determine whether to allow hydraulic fracturing has added a new wrinkle to the fight over the natural gas drilling process in New York.
Parties on all sides are trying to figure out what the ruling will mean, but a consensus emerged on Wednesday that there will be further court challenges and delays over when, how and where the process, known as hydrofracking, will be allowed in the state, and by whom.
(Reuters) - British households are in danger of overpaying for their energy bills as government policy has ignored the potential emergence of cheap shale gas, a report by the Policy Exchange think-tank said on Friday.
Given recent developments in the shale gas sector, which have sharply reduced household energy bills in the United States, the report said gas prices could also fall in Britain.
BP will start one of the biggest fights in its 104-year history next week as the US Government sues the oil giant for the devastation caused by the Gulf of Mexico disaster.
The group will be in the dock alongside contractors Halliburton and Transocean as a single judge decides who was to blame for what happened when the Deepwater Horizon rig exploded, claiming the lives of 11 men and triggering the biggest oil spill in US history.
Louisiana oysterman Terrance M. Shelley was struggling to keep up with demand by New Orleans restaurants before BP Plc (BP/)’s Macondo well blew out in April 2010, crippling the processing plant he opened six months earlier.
“Demand was exploding” until then, said Shelley, 60, whose family has 18,000 acres of oyster reefs.
The state closed the reefs because of contamination from the Gulf of Mexico spill. Shelley’s business dried up as customers and wholesalers shunned Gulf seafood.
With the start of the high-profile trial set for next Monday, and the specter of potential liability that some experts have estimated at $40 billion, BP and other defendants are stepping up negotiations to end the litigation before Judge Carl J. Barbier of Federal District Court picks up his gavel.
“We are ready to settle, if we can do so on fair and reasonable terms,” Robert Dudley, BP’s chief executive, said this month during a conference call about the company’s earnings. “But we are preparing vigorously for trial.”
The town of Dryden in upstate New York doesn’t have foundries or auto manufacturing plants. Its residents say they cherish their trees, meadows and farms and local officials said they wanted to preserve what one called “our country way of life” when they passed zoning laws to keep heavy industry away.
So it was not surprising when the town board last year passed a ban on hydrofracking. But Dryden’s town lawyer for more than 30 years, Mahlon R. Perkins, said the court victory this week upholding the ban was more about land use rights than natural gas drilling.
(Reuters) - Brazil's state-controlled oil company Petrobras produced an average 2.73 million barrels equivalent of oil and gas per day in January, a 0.5 percent increase from the previous month, the company said on Friday.
Excluding Petrobras operations abroad, output was 2.49 million barrels-per-day equivalent, a 1 percent increase from December. The company attributed the rise in production to the coming on-stream of new wells.
(Reuters) - The launch of Russia's new Ust-Luga Baltic oil terminal, undergoing repairs after damage caused by multiple landslides, is again postponed to an unspecified time, trading sources told Reuters on Friday.
(Bloomberg) -- Chinese and Japanese groups that insure ships against risks including oil spills said European Union sanctions will constrict their ability to cover tankers carrying Iran’s crude, a sign of the reach of Europe’s embargo.
Turkiye Halk Bankasi AS (HALKB), the Turkish bank that handles payments for Iranian oil, will stop processing transactions for supplies into Turkish refineries from July amid tightening Western sanctions against the Persian Gulf state.
The U.S. government has offered to help India get alternative supplies for Iranian crude as it looks to squeeze the Persian Gulf producer’s oil revenue, according to three people with knowledge of the matter.
The U.S. may help broker deals with suppliers such as Iraq and Saudi Arabia, the people said, declining to be identified because the information is confidential. Saudi Arabia has already offered to replace Iranian oil supplies if needed, two of the people said. The U.S. is in talks with countries around the world on reducing their dependence on Iranian oil, Victoria Nuland, a spokeswoman at the State Department in Washington, said in an e-mail yesterday.
Angolan state-owned oil giant Sonangol has pulled out of Iran due to stringent new sanctions imposed on the Middle Eastern state, a report has claimed.
Iran has asked to import a million tonnes of wheat from Pakistan in a barter deal, a senior official in Islamabad said today, as Tehran faces disruption to its food imports because of U.S. and European Union sanctions. Iran would export iron ore and fertiliser to Pakistan in exchange for wheat, said Syed Naveed Qamar, Pakistan's minister for water and power, according to the state news agency.
TUNIS, Tunisia (AP) – The United States, Europe and Arab countries were set Friday to back a proposal for Syria's president to step aside and allow in humanitarian assistance to end a brutal crackdown against opponents.
KABUL, Afghanistan (AP) – Thousands of Afghan protesters are out on the streets in two eastern provinces in new rallies over the burning of Qurans at a U.S. military base in Afghanistan.
For years Kurdish villagers have brought their sheep here to graze, sometimes also filling a jerrycan or two with oil. But this picturesque land of soft green and yellow hills edged by slate-blue mountains has now become the centre of a race for resources between the world's oil majors, which believe Iraqi Kurdistan could hold as much as Libya's 45 billion barrels of reserves in massive reservoirs like the Tawke field.
LONDON (Reuters) - Genel Energy Plc dropped plans to buy oil explorers in Kurdistan after U.S. major Exxon Mobil arrived in the region, pushing valuations up, and is looking to spend its $1.9 billion cash pile elsewhere in the Middle East and in Africa.
The London-listed firm was formed three months ago when former BP Chief Executive Tony Hayward and financier Nathaniel Rothschild's bid vehicle bought Genel Enerji, a Turkish company focused on the semi-autonomous Kurdistan region of Iraq.
PARIS – Royal Dutch Shell PLC has signed a contract to hire the French refinery owned by insolvent Swiss-based refiner Petroplus Holdings AG to process crude oil for six months, French President Nicolas Sarkozy Friday said.
"This contract isn't a definite answer," Sarkozy said. "But without this contract, the refinery was over."
Thackara’s writing and speaking portrays a global society on the verge of catabolic collapse, past the point where it has the ability to repair itself--yet, politicians continue spouting rhetoric about economic growth. Arguing against growth as the solution, Thackara points to various industrial complexes (health, education, energy, real estate) that have turned individuals into users who benefit least in the services provided to them.
Instead, he poses the “gift economy,” where people rely on available social capital, instead of trying to create financial capital, as a mitigation tactic for the global recession and environmental crisis. “We are all in the gift economy, we have no choice,” Thackara told Dowser.
The company is offering free insulation to the poor and elderly, yet is relying on the telephone to market this worthy message.
The number of families living on $2 or less per person per day for at least a month in the USA has more than doubled in 15 years to 1.46 million.
That's up from 636,000 households in 1996, says a new study released by researchers at the University of Michigan and Harvard University.
With still a month before the start of the spring, wholesale meat buyers have indeed got off to a flying start in securing supplies because a devastating drought in the southern Plains has shrunk the cattle herd to its smallest in 60 years.
The absence of pasture combined with record-high feed costs last year forced most ranchers, especially in the top cattle state of Texas where the drought was one of the worst since the Dust Bowl in the 1930s, to send their calves to feedyards months earlier.
As Japan approaches the anniversary of the March 11 quake, the nuclear power industry, which just over a year ago supplied a third of its power, is virtually paralyzed. All but two of the country's 54 reactors are offline.
The anniversary of the Japan earthquake, which killed over 16,000 people and caused the disaster at the Fukushima Daiichi nuclear power plant, is only two weeks away. Immediately after the disaster, several European nations decided to significantly trim their use of nuclear power. Similarly, the Obama Administration decided to partially pull back from a previous move aimed at gaining more U.S. energy independence through the use of nuclear reactors. Despite these decisions, nuclear energy remains the world’s most used source of emission-free energy. This is particularly true in regions which are densely populated, although it is not entirely clear why.
The megaquake that shook the east coast of Japan in March 2011 reactivated dormant faults near Fukushima's beleaguered nuclear reactors, geologists warn.
"A strong quake may occur in the Futaba fault, only 5 to 6 kilometres away," says Dapeng Zhao of Tohoku University. The fault runs parallel to the coast, right past both of Fukushima's nuclear plants.
Germany, the world’s biggest market for solar power, plans record reductions in subsidies for the industry as part of a program to rein in a boom in installations.
Environment Minister Norbert Roettgen said he plans to cut premium rates for solar power by between 20.2 percent and 29 percent from March 9 and decrease them further each month beginning in May. Plants larger than 10 megawatts won’t get support after July 1.
A Canadian folk music icon has added her voice to the storm of controversy surrounding a proposed Nova Scotia wind farm.
Anne Murray, who is from the province and spends her summers in Pugwash, N.S., told CTV's Canada AM she is opposed to the plan to put 12 turbines on land located about two kilometres from what she said is a "beautiful, quaint, fishing village" surrounded by cottages.
Construction is to begin in March on Mongolia’s first wind farm, and its backers hope it will be the beginning of a renewable energy boom.
Mongolia’s first wind installation is a $120 million project that will provide 5 percent of the country’s electricity demand. Transmission lines were installed last year, while turbine construction waited out the fierce Mongolian winter. It is scheduled to begin in March.
The Bill and Melinda Gates Foundation has brought a distinctive approach to problems of global development: a sense of urgency, a willingness to make big investments in pursuit of ambitious targets, and — above all — a hard-nosed insistence on results that can be counted and documented. The Gateses, who are heavily involved in managing the foundation that bears their name, take the view that setting explicit numerical targets and holding people to them is one key to progress.
Now Mr. Gates is calling for a stringent application of that approach in the field of global agriculture. In a speech Thursday morning in Rome, he called on the United Nations agencies that deal with world food supply to set a global target for the productivity growth of agriculture.
Lawless and other Greenpeace volunteers climbed the Noble Discoverer's 174-foot oil derrick to stop it from sailing to Alaska.
It was the two-headed baby trout that got everyone’s attention.
Photographs of variously mutated brown trout were relegated to an appendix of a scientific study commissioned by the J. R. Simplot Company, whose mining operations have polluted nearby creeks in southern Idaho. The trout were the offspring of local fish caught in the wild that had been spawned in the laboratory. Some had two heads; others had facial, fin and egg deformities.
BRUSSELS — Years of lobbying over European Union rules that would label fuel from tar sands as more polluting than fuels from other sources reached a stalemate Thursday when a committee of technical experts failed to agree on the draft.
One revelation from the recent Heartland Institute document leak is that the group is crafting a K-12 curriculum to teach kids that global warming is “controversial.” Heartland officials have confirmed this. So is climate change set to join evolution as the next big classroom controversy?
MOSCOW — Countries opposed to a European Union law forcing the world's airlines to pay for greenhouse gas emissions have agreed on a basket of retaliatory measures, adding to a series of threats that have raised the prospect of the globe's first carbon trade war.
But the EU dismissed the threats as "hypothetical" and Russia's deputy transport minister also said the countries — which include China, India and the United States — were free to choose which of them they would actually carry out.