OIL ABUNDANCE, YES OR NO?

 

Read the following articles carefully!  After you read these articles you will have a different opinion concerning oil supplies.  The oil sources/resources were created for the use of the entire human race.  These resources along with others, i.e. wood, coal, natural gas were supplied by a loving Creator for our use.  These resources however, are being controlled by evil unconverted people.  They only seek financial gain from these resources.  Price gouging is apparent as gas prices continue to escalate.  Can something be done about it?  Will something be done?  Only if the people make enough noise!


The real truth about oil prices, follow this link!

http://www.businessweek.com/print/bwdaily/dnflash/content/jun2011/db2011067_809106.htm


 

 

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 EIA Home > Petroleum > U.S. Retail Gasoline Prices

 

 

Weekly U.S. Retail Gasoline Prices, Regular Grade

 Dollars per gallon, including all taxes
     

Change from

Change from
3/21/2011 3/28/2011 4/4/2011

week ago

year ago


U.S. 3.562 3.596 3.684 0.088 0.858
Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, New Jersey, Pennsylvania, Delaware, Maryland, D.C, Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida 3.539 3.556 3.635 0.079 0.845
Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island 3.568 3.584 3.665 0.081 0.866
New York, New Jersey, Pennsylvania, Delaware, Maryland, D.C. 3.562 3.576 3.657 0.081 0.853
Virginia, West Virginia, North Carolina, South Carolina, Georgia, Florida 3.512 3.533 3.609 0.076 0.833
Ohio, Kentucky, Tennessee, Michigan, Indiana, Illinois, Wisconsin, Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Kansas, Oklahoma 3.517 3.550 3.681 0.131 0.877
Alabama, Mississippi, Arkansas, Louisiana, Texas, New Mexico 3.421 3.462 3.547 0.085 0.832
Montana, Wyoming, Colorado, Idaho, Utah 3.386 3.440 3.501 0.061 0.674
Washington, Oregon, California, Nevada, Arizona, Alaska, Hawaii 3.857 3.916 3.951 0.035 0.911
Washington, Oregon, Nevada, Arizona, Alaska, Hawaii 3.669 3.723 3.769 0.046 0.812

States          
California 3.966 4.028 4.057 0.029 0.969
Colorado 3.369 3.417 3.488 0.071 0.782
Florida 3.531 3.566 3.644 0.078 0.829
Massachusetts 3.481 3.490 3.562 0.072 0.840
Minnesota 3.476 3.487 3.598 0.111 0.807
New York State 3.731 3.755 3.838 0.083 0.903
Ohio 3.515 3.539 3.759 0.220 1.025
Texas 3.417 3.468 3.567 0.099 0.852
Washington 3.694 3.778 3.824 0.046 0.828

Cities          
Boston 3.481 3.490 3.561 0.071 0.841
Chicago 3.714 3.756 3.933 0.177 0.893
Cleveland 3.552 3.552 3.746 0.194 0.968
Denver 3.346 3.393 3.457 0.064 0.769
Houston 3.420 3.467 3.580 0.113 0.903
Los Angeles 3.993 4.060 4.092 0.032 0.981
Miami 3.642 3.701 3.786 0.085 0.869
New York City 3.591 3.605 3.676 0.071 0.897
San Francisco 3.980 4.044 4.080 0.036 0.987
Seattle 3.710 3.775 3.804 0.029 0.804

 

Detailed Formulation and Grade Reports

Gasoline Historical Data

States in each Region

Map of Reformulated Gasoline

Motor Gasoline Taxes

Definitions of Gasoline Formulations

Definitions of Gasoline Grades

Data Collection Methodology

Sampling Methodology

Coefficient of Variation of Price Report

This Week in Petroleum

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U.S. Retail Gasoline Prices - 2 1/2 years

 


 

Weekly Petroleum Status Report 3/23/2011


This Week In Petroleum - Summary Printer-Friendly Version
   

Released: March 23, 2011
Next Release: March 30, 2011

Japan and Libya: Different Impacts on World Markets

The human suffering and dislocation caused by the recent events in Libya and Japan, whether due to violent conflict or natural disaster, is both broad and widely felt. While our thoughts focus mainly on prospects for bringing resolution and relief to those affected, both Libya and Japan, each in its own way, are vital links in the global energy supply chain. The disruption to normal economic and productive activities in both countries carries worldwide consequences.

While the events in both Libya and Japan represent a continuing thread of uncertainty, there is also a clear contrast stemming from the two countries' differing roles in the global energy system. Libya's importance to world oil markets derives primarily from its role as North Africa's second largest producer of crude oil and liquids (1.8 million barrels per day (bbl/d) in 2010), and as a net exporter of high quality crude oil, mostly -- though not exclusively -- to the European market. Japan looms large mostly as a consumer of crude oil and refined products and other energy inputs. Libya is a supply story, whereas Japan is mainly about demand.

The questions in Libya are how long the fighting will last, whether the production infrastructure will suffer any lasting damage, and what type of energy landscape will emerge from the confrontation. So far, buyers of Libyan oil - for the most part, European refiners - have been able to muddle through and do without. But it is becoming increasingly clear that this is more than a passing crisis, and the market will need to make adjustments for the longer term.

Japan is an industrial behemoth and the world's third largest oil consuming economy behind the United States and China, with 2010 estimated oil consumption averaging 4.4 million bbl/d. While the earthquakes and tsunami have spared its industrial heartland, the nation's entire economy has been affected - as have been, to an extent still unclear, the many economies that depend on it for inputs or as an outlet for their own production. Initial assessments suggest the market impact will likely be two-tiered. First, the disaster will cause a temporary reduction in Japanese oil demand, partly offsetting the Libyan supply shortfall. While market attention has been focused on the nuclear power generation infrastructure, the scope of the damage is broader and includes thermal power generation, refineries, factories, ports, roads, and other transport logistics that directly affect the use and movement of oil.

In the longer term, however, market expectations are that the Japanese disaster will cause oil demand to rebound in order to support reconstruction efforts when they get underway and make up for some part of the loss in nuclear power generation. What is less clear is the timing of the transition from phase one to phase two of the quake's aftermath - i.e., the expected bottom in Japanese oil demand.

The recent supply disruption in Libya and the subsequent near-term disruption of oil demand in Japan have sent crude oil prices on a roller coaster. On February 14, just before major demonstrations began in Libya, the spot price of Brent stood at $103 per barrel. In the wake of the Libyan uprising, by March 2, Brent increased almost $14 per barrel, before retreating almost $6 per barrel on the back of the Japanese earthquake and tsunami, only to regain some of the lost ground more recently as the Libyan confrontation intensified.

But the impact on U.S. retail product prices has been more subdued and nuanced. Gasoline prices generally reflect movements in crude oil prices, but over the last two weeks, national gasoline retail prices have remained relatively flat. This is because it takes some time for the full effect of crude oil price changes to be reflected in retail gasoline prices. Typically, a $10 increase in the price of a barrel of crude oil translates into an increase of about 24 cents in the retail price of a gallon of gasoline over the course of about eight weeks. About half of that increase generally takes place within two weeks. Thus, a portion of the sharp crude oil price increase that happened weeks ago in the wake of the first Middle East headlines is still working its way through retail prices.

Thanks to that lag, the remaining upward price effect of the Middle East news has been largely offset by the more recent downward impact of the Japanese disaster and expectations of reduced demand, resulting in flat retail prices. If there were no significant changes in current crude oil prices, our gasoline pricing pass-through analysis suggests that over the next several weeks, we would see no further pressure from crude oil prices. However, we would expect to see price increases due to seasonal changes such as the shift from winter to more expensive summer-grade gasoline.

Price pressures resulting from events in Libya and elsewhere are occurring in the context of a recent recovery in U.S. gasoline fundamentals. Monthly data show gasoline product supplied increased year-on-year in eight of the last nine months of 2010, averaging 93,600 barrels per day higher than 2009 over that period. While severe winter weather may have temporarily affected gasoline demand this winter (for additional discussion of this point, see the February 24 installment of Today in Energy), this may not signal a reversal of the recent trend.

The Short-Term Energy Outlook to be released on April 12 will present a detailed summer fuel outlook including an in-depth assessment of the U.S. gasoline market for the peak driving season.

Retail diesel price logs first decrease of 2011
The U.S. average retail price of regular gasoline decreased half of a cent versus last week, the first decline since January 31, 2011. At $3.56 per gallon, gasoline is $0.74 per gallon higher than last year at this time. The biggest decrease was on the Gulf Coast, where the gasoline price fell almost two cents. The gasoline average on the East Coast lost a penny on the week and the Midwest price was down just under a cent. Moving in the other direction, the West Coast average moved up about two cents. In the Rocky Mountains, the price was almost three cents higher than last week. Despite this increase, the gasoline price in the Rocky Mountains remained the lowest in the country at $3.39 per gallon. The most expensive gasoline among the major regions is on the West Coast, where the average retail price is $3.86 per gallon.

Diesel prices fell for the first time in sixteen weeks, albeit a small decrease, with the national average down just a tenth of a cent from last week. At $3.91 per gallon, the diesel price is $0.96 per gallon higher than last year at this time. Diesel prices were mixed across the country, with prices falling less than a penny on the East Coast, Gulf Coast, and in the Midwest. Prices in the Rocky Mountains were up almost four cents. The average on the West Coast was also up on the week, adding over a penny to last week's price.

Propane stocks draw down slightly
Total U.S. inventories of propane took a slight draw of inventories last week, falling 0.4 million barrels to end at 27.0 million barrels. The East Coast regional stocks dropped by 0.2 million barrels. The Midwest and Rocky Mountain/West Coast regional stocks were both down by 0.1 million barrels. The Gulf Coast regional inventories fell slightly. Propylene non-fuel use inventories represented 7.8 percent of total propane inventories.

Text from the previous editions of This Week In Petroleum is accessible through a link at the top right-hand corner of this page.



 
Retail Prices (Dollars per Gallon)
Conventional Regular Gasoline Prices Graph. On-Highway Diesel Fuel Prices Graph.
Retail Data Changes From Retail Data Changes From
03/21/11 Week Year 03/21/11 Week Year
Gasoline 3.562 values are down-0.005 values are up0.743 Diesel Fuel 3.907 values are down-0.001 values are up0.961
Futures Prices (Dollars per Gallon*)
Crude Oil Futures Price Graph. RBOB Regular Gasoline Futures Price Graph.
Spot Data Changes From
03/18/11 Week Year
Crude Oil 101.07 values are down-0.09 values are up20.39
Gasoline 2.949 values are down-0.039 values are up0.693
Heating Oil 3.024 values are down-0.005 values are up0.947
Heating Oil Futures Price Graph.
*Note: Crude Oil Price in Dollars per Barrel.
Stocks (Million Barrels)
U.S. Crude Oil Stocks Graph. U.S. Distillate Stocks Graph.
U.S. Gasoline Stocks Graph. U.S. Propane Stocks Graph.
Stocks Data Changes From Stocks Data Changes From
03/18/11 Week Year 03/18/11 Week Year
Crude Oil 352.8 values are up2.1 values are up1.5 Distillate 152.6 values are up0.0 values are up6.9
Gasoline 219.7 values are down-5.3 values are down-4.8 Propane 27.001 values are down-0.361 values are up1.858
   

 


 

Weekly Petroleum Status Report 3/2/2011

 
   

Released: March 2, 2011
Next Release: March 9, 2011

The ABCs of crude supply disruptions

For the people of Libya, with life, death, and the future of their country in the balance, the price of oil probably doesn't rank as a top concern at present. However, recent price movements suggest that the oil markets are closely following events in Libya and elsewhere in North Africa and the Middle East. Oil prices have risen from the first signs of disquiet in Tunisia to the fall of Egyptian President Mubarak to the violence and power shift in Libya, which has significantly disrupted that country's field production and exports. Libya produced about 1.65 million barrels per day (bbl/d) of crude oil in 2010, or approximately 2 percent of global supply, while net exports (including all liquids) were roughly 1.5 million bbl/d. The incomplete information coming from Libya has not spared the oil sector, and the market grasp of the scope of disruption has been less than precise, with estimates of production declines in the middle of last week ranging from 500,000 to 700,000 bbl/d to a near total shutdown. But even an exact measurement of the crude oil, product, and natural gas shortfall in Libya would, at best, provide a partial sense of its significance. The market impact of such a supply disruption goes beyond volumetric loss and entails many different factors, which we begin to sort out below.

Crude volume versus crude quality
Although oil is generally seen as a fungible, in fact, crude comes in many different grades of varying qualities and product yields. Libya's importance to the oil market stems not only from its substantial production, but also from the light, sweet quality of its crude grades. Es Sider, its largest stream, has a slightly lower gravity than benchmark grades Brent and West Texas Intermediate (WTI), (meaning that it is a slightly heavier grade of crude) but a slightly lower sulfur content (meaning that it is sweeter). Another Libyan grade, Sirtica, is lighter than Brent and WTI. Light crudes are, generally speaking, the easiest to process and can be run by relatively "simple" refineries that may not be able to handle heavier or sourer substitutes. A loss of light, sweet crude volumes is, as a rule of thumb, more difficult to deal with than a loss of heavier and sourer ones. This is not only because the refineries that run light, sweet grades have limited feedstock flexibility, but also because most of the spare crude production capacity tends to be at the heavy, sour end of the barrel. Fortunately, current utilization rates for U.S. refineries suggest that there is a significant margin of spare capacity at "complex" refineries that could be used to process heavy, sour crude oil.

Market outlet and destination
Although the majority of Libya's oil output and most of its natural gas production goes to Europe, its crude market reach is wider, extending all the way to China. But the ultimate impact of any crude disruption goes beyond the immediate buyers of that specific oil. As buyers find substitute supplies for the disrupted oil, those replacement barrels, in turn, are diverted from their original use or destination, causing secondary impacts. Should it be prolonged, a disruption in Libyan exports could have a larger effect on U.S. oil supply sources than the relatively small volumes of Libyan crude actually imported into the United States would suggest. Unlike Libyan production, more than a third of Algeria's light, sweet crude (a possible substitute from fields relatively close to Libya's) is shipped to U.S. refiners, which sometimes use it as a blending stock to lighten heavier crude grades. Should those volumes find a stronger market in Europe, U.S. end-users would have to look for alternate supplies. Light, sweet Nigerian crude, which depending on market conditions can wind up in the United States, Europe or Asia, is another case in point. Global crude oil flows will tend to adjust to best match demand needs with available supply sources.

Short haul versus long haul
Location is another important factor affecting the impact of a disruption. The closer the fields where a disruption is occurring are to their market outlet, the more immediate the disruption's impact on oil inventories and prices is likely to be, unless an alternate supply source equally close to market can be found. In December 2002 and early 2003, a worker strike that curtailed Venezuelan production was immediately felt in the United States, a short-haul destination. Substitute imports from distant Saudi Arabia took weeks to arrive. The rerouting of supplies increased shipping distances, tying up tankers for longer voyages and further tightening a shipping market that had already been firming even before the event. In contrast, while there can be indirect effects on long haul markets from localized substitution, those long haul effects would be comparatively subdued.

Crude versus products
Another way in which a disruption in one market sends ripples through others is via the product markets. Much of the Libyan crude oil refined in Mediterranean refineries is re-exported as product after processing by export-oriented refineries. Italy is Libya's top crude oil customer, with Libyan crude oil accounting for roughly a quarter of Italy's total crude imports. But the volume of its refined product exports exceeded that of its Libyan crude imports. Should the disruption force Italian and other refiners to decrease their runs, a sustained disruption in Libyan exports could result in decreased Italian product exports to other markets, tightening product markets well beyond the Mediterranean basin. At this time, however, Italian refinery runs have not been visibly affected by the current disruption.

Market conditions
The impact of a supply disruption is greatly affected by underlying market conditions, such as supply and demand balances, commercial and strategic stock inventory levels, and spare production, transportation and refining capacity. In 1973, the Arab oil embargo had an acute market impact because demand had been growing steeply and the market was already tight even before the event. But in 1967, an earlier Arab oil embargo ended in failure because the market was much more slack. The current disruption is occurring against a context of relatively comfortable spare capacity. Oil inventory levels are generally high by historical standards. But they are not evenly distributed throughout the world and are markedly tighter in Europe, the primary market for Libyan crude, than in North America. The European Brent market had been tightening before the start of unrest. In contrast, spare capacity in both transportation and refining remains abundant, which makes it possible to carry substitute barrels at a relatively low cost over long haul routes and to process barrels of a lesser quality than Libyan crude.

Seasonality
Because demand and supply are both subject to seasonal cycles, the time of year of a supply disruption affects its impact. The current disruption is occurring in a relatively low-demand season. Should it be prolonged, it could conflict with a seasonal ramp up in refinery production ahead of the peak summer driving season. Crude maintenance in the North Sea and elsewhere is also relatively low in the first quarter.

Strategic reserves
Countries with strategic reserves of crude oil and/or petroleum products must decide whether or not to release them in response to a disruption. The decision is a complex one whose potential benefits must be weighed against costs that include a reduction in pressure on suppliers with spare capacity to increase output, and a lower amount of reserves available for use in the future. Most of Europe's strategic oil reserves are held in products at refinery sites. The United States also holds its strategic reserves in both sweet and sour crudes which can meet a variety of market needs.

Transit corridors
A supply disruption does not necessarily come in the form of a loss at the wellhead, but can result from a transit blockage. Although Egypt is not a large exporting country, it is important to the oil markets as a transit corridor. Earlier this year, as unrest mounted in Egypt, the market grew concerned that oil traffic though the Suez Canal and the SUMED pipeline might be halted. A significant amount of internationally traded oil moves through a number of chokepoints, such as the Strait of Hormuz, the Strait of Aden, the Strait of Gibraltar, the Bosporus and the Malacca Strait, to name a few of the most well known, where it is vulnerable to bottleneck and transit risks. Unrest in Yemen might raise market worries about disruption in the Strait of Aden; although repeated attacks by Somali pirates have already taken a toll on local traffic, oil has continued to flow. In the past, Iran has occasionally raised the threat of retaliating by disrupting tanker traffic in the Persian Gulf if it came under attack. However, even during the Iran-Iraq war, oil continued to flow through Hormuz.

Domino effects
Unrest in one country can raise concerns about potential disruptions in another through a perceived risk of "contagion." Unrest and upheaval in economies that are non-critical to global oil supply might nevertheless rattle the markets by causing worries that they might spread to neighboring or politically- or culturally-related countries that may be of greater importance to energy market participants.

Market impact
Just as many factors may shape the market impact of a disruption, that impact may manifest itself through a variety of channels. Changes in prompt crude prices are just the most visible and immediate one. Other effects have to do with changes in the relative value of prompt oil supplies across the quality and grade spectrum, changes in the crack spread (the difference between crude prices and product prices) and in the time spreads, or shape of the futures curve. A loss of crude volumes with a high distillate yield will cause distillate prices, not just crude prices, to rise. A supply disruption can cause the price of prompt barrels to rise relative to that of barrels for later delivery - thus pushing the futures curve into backwardation, as opposed to contango (when futures prices are higher further into the future). Changes in the futures curve, in turn, carry implications for inventories and oil trade flows.

Retail gasoline and diesel prices surge
The U.S. average retail price of regular gasoline gained 19 cents versus last week, marking the second largest weekly increase since the EIA began tracking weekly retail price data in 1990. The only week posting a larger increase was in September 2005 when retail prices rose sharply due to Hurricane Katrina. At $3.38 per gallon, gasoline is now $0.68 per gallon higher than last year at this time. Prices in the Midwest jumped almost 23 cents, the biggest increase in the country. The Gulf Coast followed closely behind, with gasoline prices in the region gaining 22 cents on the week. The East Coast saw an increase of over 18 cents, while the West Coast gasoline price advanced 14 cents. The smallest increase this week was in the Rocky Mountain region, where the price rose 11 cents, making gasoline in the Rocky Mountains the lowest in the country at $3.18 per gallon. The most expensive gasoline among the major regions is on the West Coast, where the average retail price is $3.62 per gallon.

Diesel prices rose for the thirteenth consecutive week with the U.S. average retail price adding more than 14 cents to last week's price. At $3.72 per gallon, diesel is $0.86 per gallon higher than last year at this time. Diesel was up across the country, with the biggest increase coming on the West Coast where prices jumped 16 cents over last week. Diesel on the East Coast and Midwest increased more than 14 cents, in line with the national per gallon average increase. The Gulf Coast diesel price registered a gain of over 13 cents while the Rocky Mountains saw diesel increase an even 13 cents.

Residential heating oil prices increase sharply
Residential heating oil prices continued to rise during the period ending February 28, 2011. The average residential heating oil price increased to $3.76 per gallon, nearly a $0.14 per gallon over last week and $0.86 per gallon more than last year at this time. Wholesale heating oil prices increased by $0.21 per gallon last week, reaching a price shy of $3.05 per gallon. This is $0.93 per gallon higher than last year's price.

The average residential propane price increased by more than $0.04 per gallon to reach a price just under $2.86 per gallon. This was an increase of $0.18 per gallon compared to the $2.68 per gallon average from the same period last year. Wholesale propane prices jumped nearly $0.29 with the overall price at $1.69 per gallon. This was an increase of $0.34 per gallon compared to the March 1, 2010 price of $1.35 per gallon.

Propane stocks fall as heating season nears an end
Total U.S. inventories of propane declined 1.0 million barrels last week to end at 28.5 million as heating season in the U.S. winds down. The Midwest region had the largest stock draw of 1.3 million barrels of propane. The Rocky Mountain/West Coast region also had a draw of 0.1 million barrels. Meanwhile, the East Coast and Gulf Coast regions each added 0.2 million barrels of propane inventory. Propylene non-fuel use inventories represented 9.1 percent of total propane inventories.

Text from the previous editions of This Week In Petroleum is accessible through a link at the top right-hand corner of this page.



 
Retail Prices (Dollars per Gallon)
   
   
Retail Data Changes From Retail Data Changes From
02/28/11 Week Year 02/28/11 Week Year
Gasoline 3.383 values are up0.194 values are up0.681 Heating Oil 3.755 values are up0.138 values are up0.855
Diesel Fuel 3.716 values are up0.143 values are up0.855 Propane 2.857 values are up0.042 values are up0.182
Futures Prices (Dollars per Gallon*)
   
Spot Data Changes From
02/25/11 Week Year
Crude Oil 97.88 values are up11.68 values are up18.22
Gasoline 2.740 values are up0.189 values are up0.661
Heating Oil 2.931 values are up0.218 values are up0.906
 
*Note: Crude Oil Price in Dollars per Barrel.
Stocks (Million Barrels)
   
   
Stocks Data Changes From Stocks Data Changes From
02/25/11 Week Year 02/25/11 Week Year
Crude Oil 346.4 values are down-0.4 values are up4.8 Distillate 159.2 values are down-0.8 values are up7.4
Gasoline 234.7 values are down-3.6 values are up2.8 Propane 28.469 values are down-1.012 values are up1.638
 

 


 

Weekly Petroleum Status Report 2/4/2011

Weekly Petroleum Status Report-PDF


 

NEW INFORMATION!

UPDATE February 2011

Lifestyle December 30, 2010, 1:23PM EST

Blame High Gas Prices on Laziness and Greed

Just as the U.S. economy seems about to recover, oil speculators are again ratcheting up gas prices. Don't let them get away with it, says Ed Wallace

 

When John Gambling recently invited me to appear on his popular radio show on WOR-AM in New York City, he had one question: Why had the price of gasoline again topped the $3 mark in America, setting an all-time record high for December?

We agreed that most of the media seem to be rerunning the excuses used in 2008. Those controlling the crude futures market were again blaming the same old suspects: incredible growth in Chinese oil demand, the weakness of the dollar, falling crude oil supplies in the U.S., and so on. To me, however, the most important fact about high gas prices is exactly how much additional money gasoline costs are taking from our nationjust as we're showing the first real signs of a broad-based recovery.

On the morning of Gambling's show, the futures market for gasoline was sitting at $2.41 a gallon, or 58 higher than at the end of the summer driving season. And that reverses the historical trend: Over the past decade, gasoline prices on the futures market have consistently dropped by approximately 20 per gallon during that period. So that's a 78-per-gallon turnaround. (Note: On Aug. 25, Bloomberg covered a story on technical analysis that suggested gasoline futures could fall to $1.34 a gallon by yearend.)

Multiply that 78-per-gallon turnaround by the average 344 million gallons of gasoline American drivers buy each day, and you come up with $268 million more per day that's being diverted from consumer spending into higher gasoline costsor almost $100 billion a year.

Passing (and Intercepting) the Buck

Of course the oil punditswhether industry analysts, commentators, lobbyists, or executivesvalidate the high price of oil. They usually do, saying as always that either gasoline supplies or crude oil on hand is in short supply, hence the increased prices. But that hasn't been true. Gasoline inventories on Dec. 17 were 217 million barrels, slightly more than gasoline inventories in the last week of February 2009when the price of crude neared $33 a barrel in the wake of the previous fall's financial meltdown.

Likewise on Dec. 17, oil inventories in the U.S. stood at 340.6 million barrels. That's only 10 million barrels less than we had in the last week of February 2009again, when oil had fallen back to $33.

Fact is, we have more oil on hand today (13 million barrels) and just three million barrels of gasoline less than we did at the end of January 1999, a period when gasoline prices were down near the $1 mark. As for strong economic growth dictating higher oil and gas prices, it should be noted that our GDP grew 5.4 percent in late 1998and growth would improve to 7.1 percent at the start of 1999. Yet gasoline was a buck a gallon.

It's not just U.S. oil inventories that are considered at the high end of the five-year average. Mohammed bin Dha'en al-Hamili, energy minister for the United Arab Emirates, told the Gulf News on Dec. 25 that "global oil inventories are really high, and the current crude oil prices do not reflect market fundamentals."

Reversing the Law of Supply and Demand

A few days before my appearance with Gambling, an Associated Press story discussed how U.S. gasoline demand has fallen for four straight years. It's down 8 percent from our peak use in 2006, and the story further reported that government officials and the head of Exxon Mobil (XOM) believe that gasoline use in America has peaked for good this time, never to return to 2006 consumption levels.

The very next day CNN Money published a report from the Oil Price Information Service, which concluded, "Based on the current high price of crude oil and historical trends, gasoline prices in the $3.75 range could be a reality by spring."

Yes, it's 2008 redux: Energy prices are rising in the face of four-year weakened U.S. demand and high inventories worldwide.

At this rate, it won't take long until skyrocketing oil and gasoline prices drag the current economic recovery to a halt. Worse, if oil and gasoline prices go up for consumers and business in 2011 by a substantial amount, reducing the unemployment numbers may not be possible.

The fun doesn't stop there. On Dec. 26, John Hofmeister, former president of Royal Dutch Shell's (RDSA) U.S. subsidiary Shell Oil, appeared on Platt's Energy Week television program and suggested we could well be paying $5 a gallon for gasoline by 2012. This time, the Oil Price Information Service's Tom Kloza disputed Hofmeister's time frame but said that $5 gas would definitely become a reality over the next decade. Note to Tom: If your company is forecasting up to $3.75 a gallon in just a few months, Hofmeister's prediction of another $1.25 jump a year later does not sound unreasonable.

The China Excuse Syndrome

We're being bombarded again with PR spin about why oil prices are rising, yet a legitimate reason could exist for higher oil pricesan improvement in the world's economy. But constantly falling back on blaming China's unquenchable demand for rising oil doesn't hold up, because our demand has fallen so much.

In 2008, China was importing 3.671 million barrels of oil per day, and that figure jumped to 4.096 million barrels in 2009. Through the first 10 months of 2010, China imported 4.74 million barrels per day. U.S. importation of oil, on the other hand, dropped from 10.1 million bpd in 2005 to just 9.1 million bpd in 2010. And in the last 90 days, we've imported only an average 8.55 million bpd. True, Chinese demand for oil is up by 1 million barrels per day, but U.S. demand for imported oil has fallen nearly an identical amount over a slightly longer period of time. That would be considered a wash.

More important, it looks like China is getting serious about putting the brakes on its economic growth. The country has posted two interest rate increases in the past few months, and a week ago Beijing said that license plates for new car purchases would be limited to only 240,000 in 2011. That would have the effect of cutting new car sales in that city by two-thirds, or almost 500,000 vehicles, in the coming year.

The Chinese Automobile Manufacturers Assn. is not happy with that decision. Its members rightly fear that such imposed reductions in car selling could spread to other major cities.

Then China announced that the tax credits to promote sales of small engine vehicles would not be renewed.

Irrational Rationalization

Something that's still grimly amusing is how, on days when the dollar falls against other currencies, oil traders claim that's the reason oil prices have jumped. But they are remarkably silent when the dollar rises in value, yet oil prices jump on those days too.

Anyone can look at the Dollar Index Spot (DXY:IND) and verify that on Aug. 6 its high trade was 80.94 and on Dec. 27 it was 80.64, or virtually neutral in relation to a basket of currencies. In the same period, however, benchmark West Texas Intermediate crude has gone from around $75.00 to $91.20.

There is also a reasonable explanation why oil should be priced higher than the Energy Information Administration's average-price figure of $33.53 per barrel since 1983: Most of the easily accessible oil (except maybe in Iraq) has been found and is being pumped at a voracious rate.

From now on, new oil will come from deep water, shale, oil sands, or other places equally expensive to extract it from. The days of sticking a pipe into Saudi Arabia's deserts and watching oil gush out under its own pressure are ending. No, the higher costs of these alternative oil discovery and production methods justify to some extent the rationale for higher crude prices. They're necessary to make exploiting that oil possible.

Too Much Money

At the moment, however, oil's high premiums are more likely the result of far too much liquidity in the financial system, available at too little interest. Capital always looks for maximum yield, and paper profits on commodities seem again to be the year's winning ticket.

But be warned: When the day comes that everyone holding an oil contract demands actual delivery of the physical crude on the contract's due date, we'll know we're about to have a real energy crisis. And the day of that legitimate reckoning is comingjust not today or tomorrow.

The fact is that modern societies run on energy, and lots of it. Moreover, the lower the cost of that energy, the better the odds that the world's economies will be doing extremely well. Yet Americans continue to have a major problem with our government's position on liquid energyit's just one more issue with which Washington is incapable of dealing. Validating that statement is the fact that in the middle of December, the Commodities Futures Trading Commission delayed until 2011 the vote on installing position limits on speculators involved in commodities.

According to Reuters, some of the commissioners felt that moving too fast could damage the commodities market. Really? Here in the real world, everyone paying $3 a gallon for gasoline has been hoping someone would damage the oil futures market.

A Switch to Electric Vehicles?

The continued forward weakness in U.S. oil demand has a lot going for it. First, when the price of gasoline passed the $3 level for the first time in the fall of 2005when multiple refineries accounting for 25 percent of the nation's refining capacity were taken offline by hurricanes Katrina and Ritathat started a slow and apparently permanent decline in our gasoline use. And now that the first baby boomers have started hitting 65, it would be reasonable to assume that their annual driving mileage will fall when they retire.

Further, if the Oil Price Information Service is correct in predicting that gasoline might hit $3.75 early next year, that fact will reduce our demand for oil and gasoline even more. But it is highly unlikely that the government's new fuel efficiency standards of 36 mpg for the 2016 new-car fleet will do anything to change our overall gasoline demand.

Why? Even when the economy is ticking along fine, it will take decades to replace the 240 million vehicles on the road with more fuel-efficient ones. Besides, the new fuel efficiency standards are only for "gasoline"-powered automobiles.

I believe electric cars will sell better than anticipated (and if gas hits $5 a gallon, they'll fly off dealers' lots) but still in numbers far too low to make much of a difference. Despite the economic incentive, American drivers still cling to the notion they can have both big cars and cheap gas. Look at what happened earlier this year when gas prices fell: Sales of SUVs and pickup trucks began to climb again.

An Abundance of Natural Gas

Here's the prediction. It's time to start the long migration out of the Oil Age, and Chrysler's Sergio Marchionne may have the best plan of all. No, it's not the Fiat 500 coming to a small group of dealers next month. It's the fact that Fiat (FIA) is heavily invested in vehicles powered by natural gas.

According to Robert Bryce, author of numerous books about America's energy needs (and the foolishness of many energy programs): "In 1989, the U.S. had about 168 trillion cubic feet of proved gas reserves. By the end of 2009, proved gas reserves had increased by 41 percent, to some 237 trillion cubic feet. But here's the amazing thing: Over that 20-year period, U.S. gas wells produced more than 370 trillion cubic feet of gasmore than two times as much gas as was foreseen in the proved reserves estimate put forward back in 1989.

"Indeed, despite the enormous amount of gas that the U.S. has produced and burned over the past few decades, the country's proved natural gas reserves are now larger than they've ever been."

That's right, we have a growing glut of natural gas in this country, and we could easily sell more vehicles capable of running on natural gas.

It's not the perfect scenario. We'd need thousands more stations pumping the highest PSI pressures to extend the range of these vehicles. (The Honda Civic GX natural gas vehicle I drove a decade ago had a horrendously low range when I filled it up at a lower PSI filling station.) But, unlike the false promise of hydrogen, this situation is easily corrected at a reasonable cost.

Electric and Gas Combined

The second stage would be to create more series hybrid electrics, such as the General Motors' (GM) new Chevrolet Volt. It uses battery power for short city trips, but instead of its onboard generator being powered by gasoline, that too could run on natural gasyielding a hybrid electric that uses no gasoline whatsoever.

Obviously, some engineering work would be needed to design a car capable of carrying both the battery pack and a natural gas tank that could deliver what consumers would consider a reasonable range at an appealing price. Yet just as obviously, the technology is here today to do just that.

If the government's new fuel economy standards moved in all three directions at onceelectric cars, improved gas mileage, and natural gas-powered vehiclesthe impact on the futures market for oil and gas would happen faster and likely be more significant. Then again, just making the announcement that we intend to reduce our demand for crude oil dramatically would likely sink its price back to a legitimate discovery level.

Go After Speculators' Leverage

Peter Drucker, easily the most brilliant predictor of future trends, made his predictions simply by looking at today's reality and moving the trend line into the future to see how it would alter our society. If oil production continues to be constrained against demand, that allows the speculators and volatility to control the market. After all, speculators who never intend to take delivery of one drop of oil continue to plow more cheap capital into those contracts, thereby distorting the real discovery price.

After five years of this costly behavior, it has become clear that they're not going to change if they don't have to. The government could fix this problem quickly by severely reducing the amount of leverage or borrowing permitted to purchase commodity contracts and by raising interest rates. But neither move seems likely.

Natural gas reserves are abundant, though, and we continue to find more of that fuel than we're currently using. And because we own the natural gas reserves, using it to fuel cars offers the very real benefit of shrinking our foreign trade deficit appreciably in the near term.

Alternatively, we could do nothing and continue our present course. And we could look forward every two years to our economy being held hostagewhich, when oil markets move past a logical discovery price and consumers divert $250 million and $500 million a day of their earnings from consumerism to fuel needs, does tangible economic damage.

We can keep it up, that is, until the day that oil becomes legitimately worth $250 plus per barrel. By then it will be too late to do anything but extend unemployment benefits for another decade or so.

 

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Assn. He reviews new cars every Friday morning at 7:15 on Fox Four's Good Day, contributes articles to Businessweek.com, and hosts the top-rated daytime talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF AM. E-mail: wheels570@sbcglobal.net, and read all of Ed's work at his news site, www.insideautomotive.com.


 


 

UPDATE SEPTEMBER 2006

Tuesday, September 5, 2006


Massive oil field
found under Gulf

Reserves south of New Orleans could rival
North Slope, boosting U.S. supplies by 50%


Posted: September 5, 2006
11:57 a.m. Eastern


 2006 WorldNetDaily.com

 


Oil-drilling platform in Gulf of Mexico
Chevron and two oil exploration companies announced the discovery of a giant oil reserve in the Gulf of Mexico that could boost the nation's supplies by as much as 50 percent and provide compelling evidence oil is a plentiful deep-earth product made naturally on a continuous basis.

Known as the Jack Field, the reserve some 270 miles southwest of New Orleans is estimated to hold as much as 15 billion barrels of oil.

Authors Jerome R. Corsi and Craig R. Smith say the giant find validates the key thesis of their book, "Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil," that oil did not come from the remains of ancient plant and animal life but is made naturally by the Earth.

"We have always rejected the theories that oil and natural gas are biological products," Corsi told WND. "Chevron's find in the Gulf of Mexico validates our argument that the Gulf is a huge resource for finding oil and natural gas."

The Wall Street Journal reports today the find could boost the nation's current reserves of 29.3 billion barrels by as much as 50 percent.

Chevron discovered the field by drilling the deepest to date in the Gulf of Mexico, down 28,175 feet in waters nearly 7,000 feet deep, some seven miles below the surface of the Earth.

The second biggest source of oil in the world is Mexico's giant Cantarell field in the Gulf of Mexico near the Yucatan Peninsula. It was discovered in 1976, supposedly after a fisherman named Cantarell reported an oil seep in Campeche Bay.

In March, Mexico announced the discovery of a field that could be larger than Cantarell, the Noxal field in the Gulf of Mexico off Veracruz.

In "Black Gold Stranglehold," Corsi and Smith argued the theory developed in the Soviet Union in the 1950s by Prof. Nikolai Kudryavtsev that oil is a deep-earth, abiotic product. The theory, the authors wrote, "rejected the contention that oil was formed from the remains of ancient plant and animal life that died millions of years ago. According to Kudryavtsev, oil had nothing to do with the unproved concept of a boggy primeval forest rotting into petroleum. The Soviet scientist ridiculed the idea that an ancient primeval morass of plant and animal remains was covered by sedimentary deposits over millions of years, compressed by millions of more years of heat and pressure."

Instead, the abiotic theory argued "oil should be seen as a primordial material that the earth forms and exudes on a continual basis."

Corsi and Smith directly challenge the "peak oil" theory advanced in 1956 by Shell Oil's M. King Hubbert.

In an interview with WND, Smith posed the following question: "If U.S. proven oil reserves can be increased by 50 percent with one deep-earth oil find in the Gulf of Mexico, who knows how much oil might be found as the technology of deep-water drilling advances and becomes even more economically feasible?"

In "Black Gold Stranglehold," Corsi and Smith note the importance of the abiotic theory:

 

The thought that oil might be naturally produced on a regular basis, that oil itself might be a renewable resource, is very threatening to those who have invested their minds into believing that oil is fossil fuel. The logical consequence of the fossil fuel theory of oil has always been that we will run out of oil. After all, there could only be a finite number of ancient forests available to rot into oil. Ancient forests, even if once plentiful, are a finite resource that by definition will become exhausted after they are fully explored and their oil harvested. The logic of the fossil fuel theory is that inevitably we will run out of oil.

Corsi and Smith note the power of the abiotic theory: "Could it be that oil is abundant, nearly an inexhaustible resource, if only we drill deep enough?"

Prior to the Jack Field discovery, the largest U.S. oil find in the Gulf of Mexico has been the Thunder Horse, about 125 miles southeast of New Orleans. British Petroleum holds a 75-percent interest with ExxonMobil to develop the Thunder Horse. This field, too, is deep-earth oil, with BP and ExxonMobil finding oil under one mile of water and five miles below the seabed.

Scientists believe Mexico's richest oil field complex was created when the prehistoric, massive Chicxulub meteor impacted the Earth.

"Could it be that the Chicxulub meteor deeply fractured the entire bedrock under the Gulf of Mexico?" Corsi asked in a WND interview. "If so, we might find abundant oil wherever we look as we begin to explore the deeper waters of the Gulf."

Earlier this year, Cuba announced plans to hire the communist Chinese to drill for oil some 45 miles off the shores of Florida. This move was made possible by the 1977 agreement under President Jimmy Carter that created for Cuba an "Exclusive Economic Zone" extending from the country's western tip to the north, virtually to Key West, Fla.

"If Cuba and communist China believe they too can find oil in the Gulf, we should pull out all stops," argues Smith. "We may be able to bring the price of gasoline down under two dollars a gallon if oil can be found in these huge quantities within our territorial waters. It's crazy to think we should be dependent on foreign oil when we've made Mexico our number two supplier of oil with the reserves Mexico has found in the Gulf."

"Thomas Gold should feel vindicated today," Corsi added, referring to the Cornell University astronomer who in 1998 published "The Deep Hot Biosphere: The Myth of Fossil Fuels," a book that also challenged the conventional wisdom on the origin of oil.

"As an astronomer reading spectrographs," Corsi noted, "Gold knew that hydrocarbon products such as methane are abundant in our solar system. Gold knew that the abundant methane on Titan, the giant moon of Saturn, did not get formed by little dinosaurs up on Titan, or by any other kind of biological material. So far as we know, nothing living has ever been found on Titan."

 


 

UPDATE JULY 2006

 

 

Wednesday, July 19, 2006
 


A Minority View Walter Williams


Running out of oil?
 


Posted: July 19, 2006
1:00 a.m. Eastern


by Walter Williams
 


 2006 Creators Syndicate Inc.

"Proven" oil reserves, oil that's economically and technologically recoverable, are estimated to be more than 1.1 trillion barrels. That's enough oil, at current usage rates, to fuel the world's economy for 38 years, according to Leonardo Maugeri, vice president for the Italian energy company ENI. Mr. Maugeri provides a wealth of information about energy in "Two Cheers for Expensive Oil," published by Foreign Affairs (March/April 2006) and reprinted on the same date in Current.

There are an additional 2 trillion barrels of "recoverable" reserves. Mr. Maugeri says these oil reserves will probably meet the "proven" standard in a few years as technological improvement and increased sub-soil knowledge come online. Estimates of recoverable oil don't include the huge deposits of "unconventional" oil such as Canadian tar sands and U.S. shale oil; plus there are vast areas of our planet yet to be fully explored. For decades, alarmists have claimed we're running out of oil. In 1919, the U.S. Geological Survey predicted that world oil production would peak in nine years. During the 1970s, the Club of Rome report, "The Limits to Growth," said that, assuming no rise in consumption, all known oil reserves would be entirely consumed in just 31 years.

There are several factors that explain today's high prices. There has been a huge surge in demand for oil as a result of rapid economic growth in China and India, as well as in the United States. Another factor is the under-exploration. Maugeri says Saudi Arabia has 260 billion barrels of proven reserves, accounting for 25 percent of the world's total, but only one-third of the oil known to lie below its surface. Russia's reserves are three times its proven reserves of 50 billion barrels. While high prices are beginning to stimulate investments in oil exploration, they've lagged for several decades out of fear of oil gluts and low prices. It's going to be 2010 before today's investments yield fruit.

A substantial increase in oil production alone cannot ease today's high prices because of weak refining capacity. Not a single refinery has been built in the United States for 30 years. Improvements to existing refineries failed to keep up with growing demand and tougher environmental regulations. We're the world's only industrialized country with a net deficit in refining capacity that comes to 20 percent of domestic demand. That makes us highly vulnerable to disasters like last year's hurricanes. Exacerbating weak refining capacity are regulations whereby gasoline produced for one state may not be sold in another. There are 18 mandated different types of gasoline sold in the United States.

The long-term outlook for oil is good. There's an increase in oil-drilling technology and exploration. Oil as a source of energy has been in decline. In 1980, oil was 45 percent of energy consumption; today, it's 34 percent, yielding ground to natural gas, coal and nuclear energy. Recently, the House of Representatives passed "The Deep Ocean Energy Resources Act of 2006," which now awaits a Senate vote. Offshore oil exploration has been banned since 1982, despite Department of the Interior estimates that suggest the presence of 19 billion barrels of oil and 84 trillion cubic feet of natural gas. The House of Representatives also passed the "Refinery Permit Process Schedule Act of 2006." Should these measures become law, our energy capacity will be enhanced significantly.

America stands alone in the world as the only nation that has placed a substantial amount of its domestic oil and natural gas potential off-limits. That reflects the awesome control that radical environmentalists have over Congress. With high fuel prices, Americans might be ready to put an end to that control.

 

Dr. Walter E. Williams is the John M. Olin Distinguished Professor of Economics at George Mason University in Fairfax, Va.

 



Sustainable oil?
 


Posted: May 25, 2004
1:00 a.m. Eastern

by Chris Bennett


 2004 WorldNetDaily.com

 

About 80 miles off of the coast of Louisiana lies a mostly submerged mountain, the top of which is known as Eugene Island. The portion underwater is an eerie-looking, sloping tower jutting up from the depths of the Gulf of Mexico, with deep fissures and perpendicular faults which spontaneously spew natural gas. A significant reservoir of crude oil was discovered nearby in the late '60s, and by 1970, a platform named Eugene 330 was busily producing about 15,000 barrels a day of high-quality crude oil.

By the late '80s, the platform's production had slipped to less than 4,000 barrels per day, and was considered pumped out. Done. Suddenly, in 1990, production soared back to 15,000 barrels a day, and the reserves which had been estimated at 60 million barrels in the '70s, were recalculated at 400 million barrels. Interestingly, the measured geological age of the new oil was quantifiably different than the oil pumped in the '70s.

Analysis of seismic recordings revealed the presence of a "deep fault" at the base of the Eugene Island reservoir which was gushing up a river of oil from some deeper and previously unknown source.

Similar results were seen at other Gulf of Mexico oil wells. Similar results were found in the Cook Inlet oil fields in Alaska. Similar results were found in oil fields in Uzbekistan. Similarly in the Middle East, where oil exploration and extraction have been underway for at least the last 20 years, known reserves have doubled. Currently there are somewhere in the neighborhood of 680 billion barrels of Middle East reserve oil.

Creating that much oil would take a big pile of dead dinosaurs and fermenting prehistoric plants. Could there be another source for crude oil?

An intriguing theory now permeating oil company research staffs suggests that crude oil may actually be a natural inorganic product, not a stepchild of unfathomable time and organic degradation. The theory suggests there may be huge, yet-to-be-discovered reserves of oil at depths that dwarf current world estimates.

The theory is simple: Crude oil forms as a natural inorganic process which occurs between the mantle and the crust, somewhere between 5 and 20 miles deep. The proposed mechanism is as follows:

  • Methane (CH4) is a common molecule found in quantity throughout our solar system huge concentrations exist at great depth in the Earth.

     

  • At the mantle-crust interface, roughly 20,000 feet beneath the surface, rapidly rising streams of compressed methane-based gasses hit pockets of high temperature causing the condensation of heavier hydrocarbons. The product of this condensation is commonly known as crude oil.

     

  • Some compressed methane-based gasses migrate into pockets and reservoirs we extract as "natural gas."

     

  • In the geologically "cooler," more tectonically stable regions around the globe, the crude oil pools into reservoirs.

     

  • In the "hotter," more volcanic and tectonically active areas, the oil and natural gas continue to condense and eventually to oxidize, producing carbon dioxide and steam, which exits from active volcanoes.

     

  • Periodically, depending on variations of geology and Earth movement, oil seeps to the surface in quantity, creating the vast oil-sand deposits of Canada and Venezuela, or the continual seeps found beneath the Gulf of Mexico and Uzbekistan.

     

  • Periodically, depending on variations of geology, the vast, deep pools of oil break free and replenish existing known reserves of oil.

     

There are a number of observations across the oil-producing regions of the globe that support this theory, and the list of proponents begins with Mendelev (who created the periodic table of elements) and includes Dr.Thomas Gold (founding director of Cornell University Center for Radiophysics and Space Research) and Dr. J.F. Kenney of Gas Resources Corporations, Houston, Texas.

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