Posts tagged oil
What is Clean, Abundant, Affordable and the Best Alternative Energy Source We Have?
Jan 25th
If you answered cold fusion, eeehhhhh! Your time’s run out! If you answered natural gas, have a 
cigar. Natural gas for the simple reason that it is one of the quickest ways to achieve a future in which an oil importing nation is no longer held hostage by foreign oil and carbon and other harmful emissions are sharply curtailed.
Seems like a heretical statement coming from someone who spent the last 15 years helping to develop an installed base of renewable energy projects. With 2010 Total Energy Production of 1.2% and 0.1% of wind and solar, respectively, the impact of renewable energy is a long way off. In fact, there are signs that the industry maybe softening in the U.S.
Natural gas is the cleanest burning fossil fuel. The combustion of natural gas emits significantly lower levels of carbon dioxide (CO2), nitrogen oxides, and sulfur dioxide than does the combustion of coal or oil. When used in efficient combined-cycle power plants, natural gas combustion can emit less than half as much CO2 as coal combustion, per unit of electricity output.
Are there “issues” with the extraction of natural gas from shale plays? Most certainly. Can the issues be managed? Again the answer is “Yes.”
Problems, and there were fewer than one would think, were as much a “Drill First – Figure Out Regulations Later” attitude than and real technical issues with horizontal drilling and hydraulic fracturing “Fracking.” The issues were traced to use of unproven methods buy unqualified drillers and frackers as well as misconception and perception.The fact of the matter is there were only 42 (<0.3%) documented incidents of casing failures from improper cementing out of over 15,000 shall gas wells drilled in U.S.
Another misconception is the public outrage over benzene emissions for wells. Again the facts show that there were little of no benzene emissions in the Barnett shale. Measurements ran about 0.001% or 1/1,000 of 1% benzene, compared to 0.5% to 1% in gasoline.
Environmental concerns with shale gas production are being raised throughout the global landscape where it is technically feasible to extract the natural gas. The primary driver is hydraulic fracturing’s impact on drinking water. The fracturing slurry is a mixture of 99% water and sand in combination with a proprietary mix of 1% chemical additives. The fluid is injected underground to fracture rock containing natural gas. This can impact drinking water from contaminated aquifers and wells. The other concern is the potential for water and air contamination by fugitive leakage of natural gas during extraction and delivery. Natural gas is a potent greenhouse gas with the ability to trap heat almost 21 times more effectively than carbon dioxide.
The brouhaha over water contamination arose from an unfortunate situation in Wyoming. Many news articles about the situation failed to highlight some key clauses in the EPA’s decision. First, the Agency was not definitive in blaming fracking for the water problems. Second, the EPA released the study before it had gone through the peer review process. Third, and most importantly, the Wyoming field is very different from most fracking areas. The gas-bearing rock being fractured in Wyoming was only about 1,220 feet deep and some water wells reached as far as 800 feet. By comparison, the gas-bearing rocks targeted by fracking operators in Texas and Pennsylvania are several thousand feet below any water supplies. Unlike shale formations like the Marcellus in Pennsylvania and the Barnett in Texas, the Wyoming gas was in a sandstone reservoir and did not have a geologic barrier or “cap” atop the gas-bearing layer. With so many major geologic differences between the fracked wells near Pavillion and those in shale basins, industry experts caution against extrapolating any conclusions from the Wyoming study.
Worldwide technical recoverable shale gas reserves is estimated to be about 32,500 trillion cubic feet (Tcf) U.S.’s reserves have the potential to produce 845 Tcf including “wet gas” wells that produce liquid petroleum condensate along with natural gas. The Energy Information Administration (EIA) estimates that there are 1,279.5 Trillion cubic feet (Tcf) of technically recoverable natural gas resources in the United States.
Natural gas can change the region’s economic landscape. Recently the IHS Global Insight reported:
“….. natural gas “shale gale” that began in the Barnett Shale is having “profound economic impacts” on the U.S. economy — creating jobs, reducing consumer costs for natural gas and electricity and escalating federal, state and local tax revenues,”
“….. shale gas development, after contributing $76.9 billion to the nation’s economic output in 2010, will add $118.2 billion in 2015 and $231.1 billion in 2035.”
“….. in 2010, the shale gas industry supported more than 600,000 jobs; that number will likely grow to nearly 870,000 by 2015 and 1.6 million-plus by 2035.”
“….. savings from lower natural gas prices, as well as associated lower prices for other consumer purchases, will add an average $926 in disposable income per household annually from 2012 to 2015 and more than $2,000 annually by 2035.”
“….. the shale gas industry and related jobs pay higher wages — an average $23.16 per hour — than those in manufacturing, transportation and education.”
“….. the boom in domestic gas production has held down natural gas prices and thus electric rates in Texas because gas is burned to generate much of the power.”
“….. as a transportation fuel, compressed natural gas is cleaner-burning and much cheaper than gasoline,”
The primary economic consideration is the need to boost demand of natural gas. As supplies increase, unless there is a corresponding increase in demand, the price will plummet until it becomes financially sound to stop productions.
The two primary sectors that use fossil fuels are electricity generation through coal-fired power generation stations and the transportation industry through petroleum. T Converting coal-fired to natural gas-fired electricity generation plant is on a relative basis a no brainer. However, the transportation sector is somewhat more problematic in terms of converting vehicles internal combustion energy from gasoline to natural gas. The cost of conversion can range from $12,000 for light-duty to over $35,000 for heavy-duty vehicles. When gasoline retail prices fall below $3.00 a gallon, it’s a difficult proposition to justify the cost to convert vehicles to run on CNG. However, over $3.25 a gallon, conversion is a sound investment.
Natural gas can also play an essential role in the export market. An article that ran early last year in the Huffington Post points in this direction.”U.S. Becomes Net Exporter Of Fuel For First Time In Nearly 20 Years”. Diesel and other oil-based fuels led the increase.
So what can be said about natural gas can be summed up in one phrase: “A thousand workers can provide it, hundreds of countries can benefit from it, billions can use it, and one earth can be protected by it.
In closing, more than any other fuel source today and for the near future, natural gas is the only fuel that can be utilized across major fossil fuel hungry sectors. As a sustainabilist would say, it supports the triple bottom line of people, planet and profit. Renewable fuels fail to satisfy these criteria.
References:
- EIA: http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0103
- The Future of Natural Gas: An Interdisciplinary MIT Study:http://web.mit.edu/mitei/research/studies/naturalgas.html
- NaturalGas.org http://www.naturalgas.org/business/analysis.asp
- IHS Global Insight: http://www.ihs.com/info/ecc/a/shale-gas-jobs-report.aspx
- Huffington Post: http://www.huffingtonpost.com/2011/05/03/us-becomes-net-exporter-o_n_857085.html
The opinions expressed in this article are solely those of the author Dr. Barry Stevens, an accomplished business developer and entrepreneur in technology-driven enterprises. He is the founder of TBD America Inc., a global technology business development group. In this role, he is responsible for leading the development of emerging and mature technology driven enterprises in the shale gas, natural gas, renewable energy and sustainability industries. To learn more about TBD America, please visit: http://tbdamericainc.com/
Startling the Global Community, Canada Withdraws from the Kyoto Convention
Dec 16th
Canada has announced its intention to withdraw from the Kyoto treaty on greenhouse gas emissions (GGE), sandbagging the other signatories to the convention. The Kyoto protocol, initially adopted in Kyoto, Japan in 1997, was designed to combat global warming with the agreement allowing countries like China and India take voluntary, but non-binding steps to reduce their greenhouse gas carbon emissions.
International condemnation was swift.
China’s Foreign Ministry spokesman Liu Weimin said at a news briefing, “It is regrettable and flies in the face of the efforts of the international community for Canada to leave the Kyoto Protocol at a time when the Durban meeting, as everyone knows, made important progress by securing a second phase of commitment to the Protocol. We also hope that Canada will face up to its due responsibilities and duties, and continue abiding by its commitments, and take a positive, constructive attitude towards participating in international cooperation to respond to climate change.”
Xinhua, China’s state news agency, labeled Ottawa’s decision “preposterous, an excuse to shirk responsibility” and implored the Canadian government to reverse its decision so it could help reduce global emissions of GGEs.
Beijing’s comments are significant, not least because the PRC is currently the world’s biggest producer of GGEs after the U.S., but China has stalwartly insisted that the Kyoto Protocol remain the foundation of the world’s efforts to curb GGE emissions, which scientists maintain are a significant contributor to global warming. Pleading its special status as a developing nation, China at the recently concluded climate change negotiations in Durban was granted an extension of the terms of implementing the Kyoto protocol until 2017 even as it bowed to pressure to launch later talks for a new pact to succeed the Kyoto protocol that would legally oblige all the big GGE producers to act.
Japan also expressed displeasure at the Canadian decision, but in a more nuanced approach, Japanese Environment Minister Goshi Hosono urged Canada to continue to support the Kyoto agreement, which included “important elements” that could help fight climate change.
UN climate chief Christiana Figueres opined in a statement released to the press, “I regret that Canada has announced it will withdraw and am surprised over its timing. Whether or not Canada is a party to the Kyoto Protocol, it has a legal obligation under the convention to reduce its emissions, and a moral obligation to itself and future generations to lead in the global effort.”
A spokesman for France’s Foreign Ministry called Canada’s decision “bad news for the fight against climate change.”
Even plucky Southern Pacific island nation Tuvalu weighed in with its lead negotiator Ian Fry bluntly stating in an e-mail to Reuters, “For a vulnerable country like Tuvalu, it’s an act of sabotage on our future. Withdrawing from the Kyoto Protocol is a reckless and totally irresponsible act.”
The silence from Washington on the issue was significant, as the United States Bush administration refused to sign the protocol, arguing instead that China and other big emerging emitters should come under a legally binding framework that does away with the either-or distinction between advanced and developing countries.
Toughing it out, Canadian Minister of the Environment Peter Kent stated that the protocol “does not represent a way forward,” adding that meeting Canada’s obligations under the Kyoto convention would cost $13.6 billion, asserting, “That’s $1,546 from every Canadian family – that’s the Kyoto cost to Canadians, that was the legacy of an incompetent Liberal government.”
Canada’s decision nevertheless has garnered a few supporters. Australian Minister of Climate Change Greg Combet has defended Canada’s decision, remarking, “The Canadian decision to withdraw from the protocol should not be used to suggest Canada does not intend to play its part in global efforts to tackle climate change.” One might note here that coal is Australia’s third largest export.
So, why the abrupt Canadian volte-face? Canada has the world’s third-largest oil reserves, more than 170 billion barrels and is the largest supplier of oil and natural gas to the U.S.
The answer may lie in Canada’s far north, in Alberta’s massive bitumen tar sands deposits, a resource that Ottawa has been desperate to develop. Since 1997 some of the world’s biggest energy producers have spent $120 billion in developing Canada’s oil tar sands, which would be at risk if Ottawa went green in sporting the Kyoto accords.
According to the Canadian Association of Petroleum Producers, more than 170 billion barrels of oil sands reserves now are considered economically viable for recovery using current technology. Current Canadian daily oil sands production is 1.5 million barrels per day (bpd), but Canadian boosters are optimistic that production can be ramped up to 3.7 million bpd by 2025.
So, what’s the problem?
Extracting oil from tar sands is an environmentally dirty process and the resultant fuel has a larger carbon footprint than petroleum derived from traditional fossil fuels, producing from 8 to 14 percent more CO2 emissions, depending on which scientific study you read.
So, Canada acceding to the Kyoto Treaty terms would effectively kill the burgeoning Canadian tar sands extraction industry. The Canadian tar sands already suffered a massive setback earlier this year when the Obama administration effectively sidelined the Keystone XL pipeline, which was due to transport tar oil production across the U.S. to refineries on the Gulf Coast.
So, Ottawa on the Kyoto convention has effectively drawn its line in the sand(s.)
Where things go from here is anyone’s guess.
Written by. Dr. John C.K. Daly for OilPrice.com. The opinions expressed in this article are solely those of the author, Dr. John C.K. Daly. For more information on oil prices and other commodity related topics please visit http://oilprice.com
Oil Hypocrisy Exposed on Capitol Hill!
Nov 21st
Almost every U.S. politician over the last 40 years pledged unwavering support to reduce our reliance on fossil fuels and imported oil for reasons of national security, energy security, economic prosperity and environmental stewardship. With all this flag waving, talk of renewable, clean and sustainable energy, and furor over foreign oil, what has actually been achieved?
The U.S. Energy Information Association (“EIA”) , Short-Term Outlook Report, September 7, 2011 concludes:
U.S. Liquid Fuels Consumption.
Total consumption of liquid fuels in 2010 grew 410 thousand bbl/d, or 2.2 percent, the highest rate of growth since 2004. In contrast, projected total U.S. liquid fuels consumption in 2011 falls by 170 thousand bbl/d (0.9 percent). Motor gasoline consumption accounts for almost all the projected decline for the year.
EIA expects total liquid fuels consumption to increase by 80 thousand bbl/d (0.4 percent) to 19.1 million bbl/d in 2012, down from the 170 thousand bbl/d increase projected in the previous Outlook because of the downward revisions to the U.S. economic growth forecast. Projected motor gasoline consumption rises by 40 thousand bbl/d (0.5 percent) as highway travel increases modestly, and distillate fuel consumption increases by 30 thousand bbl/d (0.9 percent) as growth in industrial activity and non-petroleum imports continues to slow as a result of continuing weak economic growth in 2012.
U.S. Liquid Fuels Supply and Imports.
Domestic crude oil production, which increased by 110 thousand bbl/d in 2010 to 5.5 million bbl/d, increases by a further 140 thousand bbl/d in 2011 and by 60 thousand bbl/d in 2012 (U.S. Crude Oil Production Chart), driven by increased oil-directed drilling activity, particularly in unconventional shale formations.
Liquid fuel net imports (including both crude oil and refined products) fell from 57 percent of total U.S. consumption in 2008 to 49 percent in 2010 because of rising domestic production and the decline in consumption during the economic downturn. EIA forecasts that liquid fuel net imports’ share of total consumption will decline further to 47 percent in both 2011 and 2012.
In simple terms, the report states:
- U.S. consumption of crude oil jumped in 2010, may decline slightly in 2011 and should rise again in 2012 for a total net increase of 1.7% from 2010.
- Domestic production of crude oil is projected to show an increase from 2010 to 2012.
- The percent contribution of imported oil to domestic consumption is projected to continue to decline through 2012.
However, a review of “U.S. Annual Crude Oil Net Imports,” shows a horse of a different color. In fact, the decline in crude oil imports is not really a decline at all. According to EIA data (see following graph):
- Oil imports increased 51% from 1992 to 2012 (projected).
- Oil imports shall remain relatively stable over the next few years.
Source: U.S. Energy Information Administration
So if what we hear is not exactly true, then what is at play? The underpinnings of U.S.’s energy policy rests with The Department of Energy (“DoE”), which is mandated to ensure America’s security and prosperity by addressing its energy, environmental and nuclear challenges through transformative science and technology solutions.
In a dramatic demonstration of the difference between actual and perceived, the DoE’s FY2012 Budget stipulated that the request of $29.5 billion “reflects increases for priority areas such as clean energy, nuclear security, and research and development. Savings are achieved through cuts to inefficient fossil energy programs.” True, allocations towards renewable energy projects increased to 3.9% of DoE’s entire budget from 2.2% in their FY2000 budget. But to think a paltry $1.16 billion in renewable energy expenditures in 2012 will have a major impact on achieving energy security and independence is unrealistic and downright nonsense.
If the DoE’ is nothing more than a political subterfuge then what programs and initiatives, if any, are driving changes to free us from oil based economy. The answer is obviously nothing. In reality it’s not a clean energy economy or freedom from foreign oil our lawmakers are actually striving for.
The final test of our government’s interest in these lofty goals will be in what Congress does with the issue of tax subsidies to the oil industry. Reflected in the International Center for Technology Assessment’s (“CTA”) 2003 Progress Report, “What Gasoline Really Costs Us,” and New York Times’ July 2010 article “As Oil Industry Fights a Tax, It Reaps Subsidies,” “oil production is among the most heavily subsidized businesses.”
CTA cites the reason “the federal government provides the oil industry with numerous tax breaks is to ensure that domestic companies can compete with international producers and that gasoline remains cheap for American consumers.” In addition to direct tax subsidies to the oil industry, other federal handouts and hidden costs lie in Government Program Subsidies; Protection Costs Involved in Oil Shipment and Motor Vehicle Services; Environmental, Health, and Social Costs of Gasoline Usage; and Other Important Externalities of Motor Vehicle Use. In total, these programs keep the price of petroleum artificially low, encourage its use and discourage use of other forms of clean energy.
In closing, after knowing the facts, it’s easy to deduce, that our elected officials on Capitol Hill are less than sincere in their efforts to adopt alternate sources of energy and reduce oil imports. If they are, then this is a supreme example of incompetency. If they are not inherently interested in getting us off oil, which seems to be the case, then deceit is the only remaining option. Additionally, with all the economic uncertainties in our economy, it would seem to be a no brainer and a win-win situation, to remove these subsidies.
Seems our trusted lawmakers are playing a most dangerous game.
The opinions expressed in this article are solely those of the author Dr. Barry Stevens, an accomplished business developer and entrepreneur in technology-driven enterprises. He is the founder of TBD America Inc., a technology business development group. In this role, he is responsible for leading technology driven enterprises through ideation, development and commercialization. To read his other discussions, please visit: http://barryonenergy.wordpress.com
U.S. Support for Renewables is Miniscule…and Erratic
Nov 7th
It’s time to ponder a rational comparison of historical U.S. energy incentives. In a thoughtful analysis called “What Would Jefferson Do?” authors Nancy Pfund and Ben Healey of DBL Investors offer some revealing insight to inform the debate.
There is no free market in energy … and calls to action for renewables “to stand up to competition without any government support” would be better informed by a look at historical efforts to promote energy transitions in the U.S.
Coal, oil, gas and nuclear energy did not emerge as fully matured, low cost energy sources. Instead, they were the beneficiaries of decades of permanent and significant federal government incentives and supportive regulation. As part of a larger push to create jobs, support expansion, and fuel economic growth, the U.S. government has used a variety of financial and regulatory incentives to support energy innovation for over 200 years. Here are some of my favorites:
• In 1789, to promote the nascent domestic coal mining industry, the federal government enacted a tariff on imported coal, insuring that domestically produced coal would have a major cost advantage. The goal? To incentivize development of this strategic and emerging energy resource. The result? Higher short term prices for consumers.
• Throughout the 19th century, timber and coal interests benefitted from below market land grants, state sponsored geological surveys identifying resources, federal support to build out railway and waterway transportation systems to enable the extraction of these energy resources as well as a host of policies to spur growth.
• In 1950, Congress passed a subsidy that allowed owners of coal mining rights to reclassify income traditionally subject to income tax as royalty payment, for which a lower capital gains tax rate is paid. This special tax treatment is still available to members of the coal industry today and totaled well over $1.3B in forgone tax revenue between 2000 and 2009.
• And the nuclear industry got a huge boost when Congress passed the Price-Anderson Act in 1957, which provided federal indemnification of utilities in the event of nuclear accidents. At the time, the Edison Electric Institute testified that without such immunization from the risk, “no utility company … will build or operate a reactor.”
So how do those incentives compare to current investments in renewables?
The level of support in the early days of the coal, oil, gas and nuclear industries, as a percentage of the overall federal budget, dwarfs what is being spent to promote renewables. The report concludes that nuclear subsidies accounted for more than 1% of the federal budget over the industry’s first 15 years (as a percentage of inflation-adjusted federal spending). Oil and gas subsidies comprised 0.5% of the federal budget from 1918-1933. Meanwhile, support for renewables constituted only 0.1% of the federal budget since 1994. As you can see on the chart below, in inflation adjusted dollars, nuclear spending averaged $3.3B over the first 15 years of the subsidy life, oil and gas averaged $1.8 and renewables clocked in at less than $0.4B.
What’s even more surprising is that 50% of the Department of Energy’s research and development spending from 1948-2010 supported the nuclear industry. During that same period, 25% was spent on fossil fuels, 12% on renewables and 9% on energy efficiency.
Equally important is the fact that support for oil, gas, coal and nuclear has made its way in the permanent tax code, whereas tax incentives for renewables have traditionally been short term and renewed or not renewed on a sporadic basis. That causes a boom/bust market where investors fear making long term bets.
So what’s the take-away?
Energy policy is intricately related to government strategy for economic development. In the 1800s, the U.S. favored expansion and development of coal resources. In the 1900s, it promoted development of oil and gas resources in the first half of the century and hydro-electrical and nuclear energy sources in the second half.
If we want to insure leadership in the transition to the next predominant energy source – a transition underway in every major economy in the world – we need to use rational policy and sound regulation to steer us in that direction.
Written by Cathy Boone. Cathy defines and articulates the voice of Applied Materials’ solar business, while advocating for the widespread adoption of solar PV around the world. As the senior director for solar and government relations, Cathy also ensures that Applied Materials and its technology, equipment and service products are recognized as providing the premier solar solutions.
Source: http://blog.appliedmaterials.com/us-support-renewables-miniscule-and-erratic
Apocalypse Redux? U.S. Natural Gas Find off Vietnam Could Raise Tensions with China
Nov 4th
First, the good news…
U.S. oil company ExxonMobil is reporting a “potentially significant” gas discovery off the coast of Vietnam, stating in a press release, “We can confirm ExxonMobil Exploration and Production Vietnam Limited drilled its second exploration well offshore Danang in August 2011 and encountered hydrocarbons.”
ExxonMobil is the world’s largest publicly traded oil company by market value. While Vietnam, an oil exporter and the third-largest oil producer in South Asia, began offshore exploration of its reserves in the 1970s, Hanoi only started in 2004 awarding offshore exploration concessions to a plethora of foreign companies, including those from the U.S., Canada and India with ExxonMobil receiving concessions from the Vietnamese government allowing it to explore blocks 117, 118 and 119 off Danang, an area that Vietnam insists is well within its 200-mile exclusive economic zone under international maritime law.
The bad news?
The South China Sea’s offshore resources are currently claimed by six countries – China, Vietnam, Taiwan, Malaysia, Brunei and the Philippines, with competing claims overlapping in a crazy quilt pattern. Given the billions of dollars at stake for exploiting the undersea energy resources, it is unlikely that the contradictory claims will be resolved anytime soon, making Southeast Asian waters a potential flash point for conflict.
The devil is in the details and in this case the United Nations unwittingly played the role of Lucifer when in 1982, the United Nations Convention on the Law of the Sea Part V, Article 55 defined an “exclusive economic zone” (EEZ) for countries with maritime frontiers as extending 200 nautical miles from a nation’s coastline. Needless to say, in congested waters this clause was a subject of dispute, as nations raced to define their new offshore parameters, a contest only heightened by the world’s increasing addiction to hydrocarbons.
Like Pontius Pilate, the UN washed its hands of bilateral and regional disputes arising from the convention and devolved negotiations to the parties involved, which account for the current impasse in the South China Sea, as the 1982 UNCLOS agreement did not establish any adjudication mechanism for resolving disputes.
According to Hanoi, Vietnam’s exploration efforts in what it maintains are incontestably within its EEZ waters have come under increasing harassment from Chinese naval units. In May, Vietnam’s state oil and gas monopoly PetroVietnam claimed that Chinese ships had harassed and damaged its oil exploration ships.
As ExxonMobil has a license from the Vietnamese government to explore blocks 117, 118 and 119 off the coast of Danang, an area that Hanoi claims falls well within its 200-mile exclusive economic zone under international maritime law, will/can ExxonMobil apply its influence in Washington to safeguard its interests?
The future?
The founder of the modern Vietnamese state, Ho Chi Minh, reportedly said before his death in 1969, “Colonialism is dying. The white man is finished in Asia. But if the Chinese stay now, they will never go. As for me, I prefer to sniff French shit for five years than to eat Chinese shit for the rest of my life.”
It is essential that China shut down Vietnam’s uppity attitude now, as a number of other international companies besides ExxonMobil have recently found oil in the region, including Malaysia’s Petroliam Nasional Bhd., Britain’s Premier Oil PLC, Russia’s state-owned Gazprom OAO and France’s Total SA, and Beijing will hardly want to take on the governments behind them.
As for Hanoi’s obstreperous attitude, those with an historical memory might recall that China and Vietnam fought a brief but bloody border war in 1979, four years after the country was unified. The Chinese Global Times newspaper recently editorialized that nations involved in territorial disputes with Beijing in the South China Seas should “mentally prepare for the sounds of cannons” if they remain in conflict with Chinese policy.
At present ExxonMobil is adopting a low profile approach. ExxonMobil Upstream Media Relations official Patrick McGinn said only of the discovery, “Data from the well are being analyzed. Our first well offshore Vietnam did not encounter hydrocarbons.”
The issue is not minor for Vietnam, as its fossil-fuel production and exports have recently declined.
The final wild card if diplomacy fails is power projection, and China’s recent commissioning of its first aircraft carrier, the Soviet-era Varyag bought from the Ukraine, began sea trials in July. Chinese sources have said Beijing is also building two indigenous carriers.
For those interested in history, which has rather more resonance in Asia than the West, it might be noted that the Varyag has been renamed the Shi Lang.
Shi Lang was a Chinese admiral who served the Ming and Qing dynasties, revered for leading the amphibious assault and conquest of the Kingdom of Tungning in 1681. Tungning is now known as Taiwan.
So, given the competing claims in the South China Sea, will international law or force prevail?
Place your bets, but remember your history – and hold your nose..
Written by. Dr. John C.K. Daly for OilPrice.com. The opinions expressed in this article are solely those of the author, Dr. John C.K. Daly. For more information on oil prices and other commodity related topics please visit www.oilprice.com
Exxon Mobil and Shell Report Soaring Profits
May 16th
Here we go again, petroleum retail have been surging throughout our nation. A painful case of déjà vu reminiscent of the early 70′! History dictates prices will soon enough drop to tolerable levels. So why worry? And what became of our National goals of energy security, economic viability and environmental stewardship?
Today’s rollercoaster ride in petroleum prices presents a dilemma on several counts. When prices are high there is a mad rush to adopt alternative fuels, when prices are low complacency sets in and all is soon forgotten. Market stability promotes collective long-term planning.
The erratic market behavior of petroleum retail prices is clearly shown in the following chart. The chart is derived from 1193 fill-ups made in Fort Worth and Houston over a 30-year period. The lower curve shows the actual price paid for each gallon. The upper curve is the data adjusted for inflation.
Source: web1@randomuseless.info; http://www.randomuseless.info/gasprice/gasprice.html
Purportedly, the current rise is in response to the Mideast rebellions, which threaten the flow of oil to the U.S. Superficially this seems to make sense. But below the surface, there seems to be something wrong with this reasoning.
According to the Energy Information Administration, of 62 oil-importing countries, only eight are major oil importers to the U.S., i.e., Canada (22.6%), Mexico (12.3%), Saudi Arabia (10.3%), Venezuela (8.5%), Nigeria (7.8%), Algeria (5.2%), Russia (5%) and Columbia (4.4%). Libya and Egypt constitute less than 0.8% of U.S.’s oil imports. It’s unclear how this unrest can impact the oil markets so hard and so fast. Even if Saudi Arabia completely shuts off its pipeline, is the U.S. too naive to consider fulfilling this 10% shortfall by increasing imports from the other seven major oil importers and the 54 lesser oil importing countries.
Other traditional excuses for increasing gasoline prices are also hard pressed to justify recent and possibly past price adjustments, such as:
- OPEC supply shortages
- Decreases in U.S. crude oil production
- Strong consumer demand
- Disruptions in the supply chain.
There are no reported cases of decreased domestic production; actually the opposite is at play. Since 2008, consumer demand for petroleum has shown a slight drop. And other than the BP oil spill there has been no significant insurgent attacks on oil pipelines in the Middle East and refinery explosions that can disrupt the supply chain.
A few weeks ago, Exxon Mobil reported quarterly earnings of $11 billion. We are a capitalistic society, so the ultimate role of any corporation is to boost sales, improve profit margins and make money for shareholders. For this, Exxon Mobil must be applauded. But there is one unnerving point with this report.
In April 2011, against a backdrop of $4.00 petroleum prices across the country, Exxon reported:
- “…net income of $10.65 billion in the first quarter was its highest since it made $14.83 billion in the third quarter of 2008…”
- “…it had no control over high oil prices.”
- “…it doesn’t even make that much money selling gasoline.”
“They feel they (Washington) have to demonize our industry,” said Ken Cohen, Exxon’s vice-president for public affairs. What’s more, the company argued, it doesn’t even make that much money selling gasoline.
Flashback to February 2008, and again with a backdrop of $4.00 petroleum prices across the country, Exxon reported:
- “…net income of $14.83 billion and sets a national record for quarterly profit.”
- “…earnings were buoyed by oil prices, which reached record highs in the quarter…”
- “…the fourth quarter (is not expected) to be nearly as good as the third because of lower oil prices…”
Taking this one step further, in 2006, Exxon reported:
- “…$36.1 billion in profits, highest in U.S. history.”
- “On the strength of energy prices that hit all-time highs last year, Exxon
Mobil earned $36.1 billion…”
- “…Exxon and other oil companies have benefited from unusually high market prices for crude oil, gasoline and natural gas – the result of tight supplies and high demand.”
For some reason, Exxon’s rationale of high oil prices contributing to the record profits in 2008 and 2006 does not apply for 2011. The current report includes a litany of financial mumbo jumbo to defuse the issue of record earnings and surging gas prices.
Now, in a knee jerk reaction to the backlash of soaring oil profits, oil prices took a steep plunge the first week in May, dropping nearly 13 percent. On Tuesday, the spot price for Texas crude was $110.60 a barrel. By Friday, it was selling for less than $98 a barrel.
When oil prices started to rise in February 2011, demand for gasoline was on the decline. Supply was essentially unaffected by the unrest in the Mideast. Geo-political conditions have not significantly changed from February to May. In fact, unrest in the Mideast, which was never a real reason anyway, may be intensifying rather than easing; especially on the heels of Osama bin Laden’s death.
If supply, demand and global conditions are not contributing factors, why then is the market so erratic. Rather it seems that petroleum prices have more to do with control: the prospect of heavy profits leveraged in times of “crisis” layered on top of a flawed U.S. energy policy. Like the Emperor’s New Clothes, the oil companies finally show their true colors and the government’s lack of wisdom and trust.
While it is clear that market trends benefit the oil companies and not the consumers, the U.S. must develop a cohesive energy policy that stays the course. Long-term initiatives must cover not only energy security but also environmental benefits and economic competitiveness. Use of domestic resources such as oil and coal will keep dollars in the U.S. but will not benefit the environment and our long-term needs for non-carbon based fuels.
Article by Barry Stevens. Barry Stevens PhD is the President of TBD America, Inc, a technology business developement group specializing in utltiltiy scale solar, wind and biomass projects.
Obama’s Weekly Address Calls For More Domestic Oil Production
May 16th
Obama’s Weekly Address Calls For More Domestic Oil Production
President Obama, in his weekly address, discussed steps his Administration is taking to curb American concern about rising gas prices. He first discussed the development of a task force, led by Attorney General Eric Holder, that will be responsible for rooting out cases of fraud or manipulation in the gas markets that might impact prices, including any suspicious or illegal activity by traders and speculators. He also outlined plans to have Department of Interior begin conducting annual lease sales in Alaska’s National Petroleum Reserve, and speed up their evaluation of oil and gas resources in the mid and south Atlantic and the Gulf of Mexico. Finally, President Obama discussed the importance of eliminating taxpayer subsidies for oil and gas companies. The biggest oil companies have recently reported profits of around $4 billion and yet, they receive $4 billion in taxpayer subsidies each year.
New Study Shows How Gas Prices Will Affect Summer Travel
TripAdvisor®, has announced the results of its annual summer travel survey which showed that 39% of the more than 2,000 people surveyed say that increasing fuel costs will affect their travel plans this summer. Because of the rising gas prices, 18% plan to take less car trips, 12% are going to be mindful about the length of the trip and 5% have made plans to not travel at all this summer. 26% predict gas will reach $5.00 per gallon, and 20% surveyed say that they will avoid road trips all together if prices exceed $5 per gallon.
New Mexico Green Chamber of Commerce Partners with SunPower to Offer Rebates on Residential and Commercial Solar Systems
The New Mexico Green Chamber of Commerce (NMGCC) has partnered with SunPower Corp. (NASDAQ: SPWRA, SPWRB) to offer rebates to all regular chamber members on purchases of new SunPower solar systems for their homes and businesses. In addition to the discounts on high-efficiency SunPower solar systems, the company will offer free, comprehensive solar workshops, including information on available state and local financial incentives, via its authorized dealers, NMGCC members Positive Energy and Consolidated Solar Technologies. These workshops will be scheduled throughout the summer months in the Albuquerque, Santa Fe and Las Cruces areas. The program offers residential customers rebates up to $2,000 in addition to any federal and local incentives and up to$10,000 for commercial solar projects.
Duke Energy & ENN Group EcoPartnership Agreement Materializes
May 11th
EcoPartnership Established Between Duke Energy & ENN Group
Duke Energy and China’s ENN Group have teamed up to create an EcoPartnership with the city of Charlotte, N.C., and the Chinese city of Langfang in Hebei Province. Duke Energy and ENN’s initial EcoPartnership projects will involve testing of solar power generation, substation and community battery storage capabilities, grid management optimization and energy efficiency initiatives. With Secretary of State Hilary Clinton in attendance, the signing took place at the U.S. State Department yesterday. Secretary Clinton was very pleased that the EcoPartnership was coming to fruition. Others may join this EcoPartnership in the future, including universities, additional companies and other public entities.
Statoil Announces A New Discovery In The North Sea
A new oil field has been discovered on the North Sea Krafla prospect by Statoil and its partners. The successful well was drilled at block 30/11 around 16 miles south of the Statoil’s Oseberg South field. Initial analysis calculates the discovery between 12.5 and 56.5 million barrels of recoverable oil equivalent.
DOE Awards $90.6M Conditional Loan Guarantee Offer To Increase Colorado Solar Capacity
In an effort to increase solar production in Colorado, U.S. Energy Secretary Steven Chu has offered a conditional loan commitment to Cogentrix of Alamosa in the amount of $90.6 million. The loan guarantee will help build a 30MW High Concentration Solar Photovoltaic (HCPV) generation project near Alamosa, Colorado. When used in areas with high amounts of direct sunlight, multi-junction solar cells are nearly 40 percent more efficient than more traditional PV panels. It is expected that the Public Service Company of Colorado will purchase all of the approximately 75,000 megawatt hours of clean renewable energy that will be generated each year.
Energy Is the Lifeblood of Any Economic Unit
Apr 28th
Energy is the basic driver of all major economies. Nothing happens without an energy cost. That is virtually as basic as the laws of physics. Nothing is made, nothing is grown, nothing moves, without an energy cost. The lower the real cost of its energy, the more productive any economic unit will be. This holds true regardless of the size of the unit, whether it is a small company, or an entire nation.
The three value factors of energy include its cost in money per unit of energy, the cost of minimizing environmental damage, and the cost for transport from where it is to where it is used. These three factors affect the sum total cost of energy to any user in many ways. Since the cost of energy directly affects the value and profitability of any economic unit, it is important that every person, every organization, do what they can to lower overall energy costs. There are only two ways to do this, reduce energy consumption, and/or reduce energy costs.
Reducing energy consumption—conserving energy—is important only where energy efficiency can be increased, something that may not be practical in many cases. Also, this must be done without increasing environmental or transportation costs. While it is quite easy to assess direct costs, even that of transport, calculating the real cost of environmental damage is much more difficult.
An example of one very successful effort at a major change was that undertaken by the port of Long Beach and the Port of Los Angeles started in 2006. This change was undertaken principally to reduce air pollution, a major environment cost to the area. It had to be done in a manner that was as cost effective as practical. The following is a direct quote from the book Energy, Convenient Solutions.
“California set forth a ballot initiative that would free up $5 billion for deployment of a million LNG vehicles on state roads. In 2006, the ports of Long Beach and Los Angeles adopted a plan to reduce drastically pollution from more than 16,800 Class-8 tractor trailers. The basis of the plan was promoting the massive conversion of diesel trucks to LNG, Liquid natural gas. These big trucks, the only trucks strong enough to transport the heavy containers in and out of the ports, were contributing considerable amounts of pollution to the air in the LA basin.. The ports chose LNG for many reasons including safety and cost. Even with the expense of replacing diesel engines with LNG engines the ports look to save around $350 million each year. The ports have announced the approval of a new $1.6 billion Clean Truck Superfund. Wal-Mart, which operates one of the largest truck fleets in America, is testing four trucks to measure the possible money saved by the switch. I am certain other truck users are carefully watching the results.”
The ambitious Clean Trucks Program has reduced air pollution from harbor trucks by nearly 80 percent as of January 1, 2010. The Port banned trucks with 1993 and older engines, and almost all trucks with 1994-2003 engines. The program will also ban all trucks that don’t meet 2007 emission standards by 2012. With the industry replacing vehicles much sooner than expected, the result is a major reduction in air pollution two years ahead of the original schedule.
This is but a single instance of successful efforts to change one energy system and simultaneously reduce both environmental and operating costs. Currently, there are many other such efforts underway throughout the country. These range from hybrid and pure electric vehicles now coming to market to new systems for generating electricity, to new non fossil fuels.
There is no one answer to our energy problems. Whether or not we are running out of cheap petroleum is actually irrelevant. No matter how you look at it, it is quite obvious that petroleum products are continuing to rise in price. This can make alternative energy systems more attractive to buyers. There are countless technologies that could not compete successfully when oil was at $20 a barrel that would be very competitive with oil at $100 a barrel. Electric cars that were at a per mile cost disadvantage when gasoline was $1.50 per gallon now cost a third of cars powered by $4 per gallon gasoline.
Many new and different technologies will compete for the energy buyer’s dollar. This competition will gradually weed out poor performers and expand those that show the lowest cost. Then there is always the specter of catastrophic global warming driven by increasing atmospheric carbon dioxide. Whether real or not, there are enough believers to make it necessary to at least consider it
Increasingly, environmental costs are being considered in the overall equation. Many times these types of improvements have been found to pay back the investment in less time than anticipated. That is an everybody wins scenario. There is a major change underway. It will be quite some time before the marketplace determines the winners and losers.
Written by Howard Johnson, engineer/author. The opinions expressed in this article are solely those of Howard Johnson.
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