Posts Tagged ‘Oil Prices’


Washington Sleeps As Oil Prices Stir

June 18, 2009

Washington Sleeps As Oil Prices Stir

IBD: 12 June 09

Energy: Will oil hit $250 a barrel? The Russians think so, as crude prices climb to an eight-month high. Meantime, House Republicans advance a plan to help the administration keep a domestic energy promise.

The cost of July deliveries of crude bounced over $73 Thursday as the American Petroleum Institute reported shrinking U.S. inventories as the dollar weakens against the euro.

Alexei Miller, chairman of the Russian energy giant Gazprom, is repeating his prediction of a year ago that oil may eventually reach the $250 mark. That may be wishful thinking on his part, seeing how the Russian economy and military are dependent on oil revenues.

But one thing is certain — a recovering global economy is going to need ever more energy, and it can’t wait for switch grass. A wobbly U.S. economy overburdened by current and future debt is likely to face ever-rising energy prices.

House Republicans hope to lower those prices and make a change in our listless domestic energy policy with the American Energy Act. The measure provides incentives for increased oil and gas production on public and private lands and authorizes drilling in a tiny portion of the frozen tundra of the Arctic National Wildlife Refuge.

Rather than planting trees in a Third World backwater, the plan’s “carbon offsets” involve building 100 new nuclear power plants over the next 20 years.

With 31 announced reactor applications already in the pipeline, this is a doable goal. It will lower domestic energy prices and clean the air more effectively than an administration cap-and-tax plan that would cause electricity prices to “necessarily skyrocket.”

Reprocessing of spent fuel rods, already done by France and other countries, makes nuclear power a renewable resource, one that emits no greenhouse gases. The administration gives nuclear energy lip service while stopping a storage depository for these rods in Yucca Mountain, Nev.

The House GOP is actually trying to help President Obama keep a promise. “In the short term,” he said in April, “as we transition to renewable energy we can and should increase our domestic production of oil … We still need more oil, and we still need more gas.” The House GOP wants to help him do just that.

But in a classic case of the doubletalk we’ve all become familiar with, the administration is moving in exactly the opposite direction. Its cap-and-trade plan punishes those who produce and use domestic energy. It has proposed eliminating all tax incentives to produce oil and gas, and has slapped a 13% excise tax on all energy coming from the Gulf of Mexico.

Interior Secretary Ken Salazar has canceled 77 oil and gas leases that were assigned to Utah. He stopped plans to lease oil shale rights in five Western states estimated to hold between 1 trillion and 2 trillion (with a “t”) barrels of recoverable oil. The Obama administration has decided not to issue leases for gas well drilling on the Roan Plateau in Colorado.

Exploration in the Chukchi Sea off Alaska has been impeded by such developments as the listing of the yellow-billed loon as an endangered species.

Science magazine reports that the U.S. Geological Survey now finds it holds more than anyone thought — 1.6 trillion cubic feet of undiscovered gas, or 30% of the world’s supply and 83 billion barrels of undiscovered oil, 4% of the global conventional resources.

We are being denied this by a bunch of loons.

“It’s a very nonsensical position we’re in right now,” Alaska Gov. Sarah Palin told IBD in an interview. “(We) ask the Saudis to ramp up production of crude oil so that hungry markets in America can be fed, (and) your sister state in Alaska has those resources.”

The really sad part is that in a nation starved for energy and jobs, we continue to keep our heads in the sand and our energy in the ground.


The Next Oil Shock

May 26, 2009

The Next Oil Shock


Energy Policy: A top expert tells Congress that oil will be around for a long time and high inventories and low prices are no excuse not to find more. Oil shock? How about a no-oil shock?

Be careful what you wish for, goes the old proverb. Well, as we all had hoped, energy prices have fallen — but only as part of the global decline in economic activity. This has been used as an excuse to further discourage exploration for and development of domestic oil resources. But if the economy does recover, that policy could provoke another recession.

Daniel Yergin, chairman of HIS-CERA, testified before the Joint Economic Committee of Congress last week that we have already experienced a “demand shock” with very high prices driven by rising global demand led by the economies of China and India.

We’ve also experienced what he calls a “recession shock” with flat or falling demand and low prices. But there might be another “long aftershock” in our future with high demand returning with a vengeance along with a global economic recovery, leaving those who buried their heads in the oil sands in the economic lurch.

The current recession has wiped out demand growth for the last four years. Oil prices have tumbled $100 a barrel or more from their high point. Spare production capacity is expected to be 6.5 million barrels per day through 2009. Anticipating a robust future, other countries such as China and Brazil have continued to look for oil while we continue to research . . . switch grass.

Interestingly, as Yergin notes, current spare capacity is equal to the combined total output of Iran and Venezuela — or the combined exports of Iran, Venezuela and Nigeria.

These are three of the most unstable nations on the earth, and two of them are implacably hostile to the U.S. This does not bode well for our economic and energy security.

While low prices and excess capacity sound good, they could vanish like the morning dew. The long lead times, up to a decade for a new field, needed to expand capacity and replenish supplies should compel us to drill like there’s no tomorrow — for there might not be.

Oil will continue to be a big player in our energy mix no matter how many windmills we tilt at or how many clown cars we place in front of 18-wheelers on our interstates.

“Today,” Yergin notes, “fossil fuels — oil, natural gas, and coal — supply over 80% of our total energy. Oil by itself is about 40%. That alone makes clear the importance of oil — and the evolution of the oil market — to our economy and security in the decade ahead.”

America’s oil and natural gas energy needs will grow. A study by ICF International, commissioned by the American Petroleum Institute, finds that our domestic energy resources placed off limits by Congress in ANWR, in Rocky Mountain shale and in the Outer Continental Shelf could generate more than $1.7 trillion in government revenue and create thousands of new jobs.

The irony is that in North America we have enough oil to ensure our energy and economic security. The U.S. and Canada together hold 15% of the world’s proven reserves, and that’s not even including the potential of American oil shale and Canadian oil sands — which are massive.

The current decline in demand has also sparked a decline in investment and added further justification for its deliberate policy of thwarting any expansion in domestic supply.

“As the economy picks up, spare capacity will start to erode, and the oil market could tighten again in the first half of the next decade,” Yergin said. “The result could be another adverse shock to the U.S. economy and global energy security.”

The result could be another recession where we drive to the unemployment office in our government-designed clown cars.