Archive for the ‘Oil & Energy’ Category

Biden promises “an incredible transition” from fossil fuels…

May 25, 2022

Translation: Suck it up and pay at the pumps.
=============

Let’s go to the verbatim:

When it comes to the gas prices, we’re going through an incredible transition that is taking place that, God willing, when it’s over, we’ll be stronger and the world will be stronger and less reliant on fossil fuels when this is over.

Here’s the video:

image

Gotta love it when Biden goes off the teleprompter and blurts the truth.

> What most people surmised: not only does he not care about the spike in energy costs, his handlers have convinced him that it’s a good thing since it’ll force people to buy $60k EVs, ride “safe” subways, and lace-up their walking shoes.

> The cost is certain and immediate — especially to lower and middle-class Americans — and the hypothetical benefits are disputable and, at best, decades off.

See 16 Reasons why I’m lukewarm on climate change … and Greater threat to the planet: Putin or climate change?

> But, it’s worth the certain pain since “we’ll be stronger and less reliant on fossil fuels when this is over.”

> Biden’s caveat: “GOD WILLING”

================

That makes me feel a lot better, Joe.

Biden channels Meatloaf (again)…

April 14, 2022

He did it again in this week’s Iowa speech

image

Shades of the late, great Meatloaf…

=============

Everybody remembers the Meatloaf classic, right?

The tease:” I would do anything for love”

The punch line”: “But I won’t do that !”

If you need a a refresher or just want to kick back and
listen to an all- time great song, clock here

image
click to listen

==============

Biden (and Psaki) have appropriated a variant of the Meatloaf classic.

Now, every time Joe steps behind the podium, he squints and reads a version of:

Gas prices are high and are going to go higher because of Putin.

I feel your pain and, rest assured, I will use all the tools available to minimize the prices at the pump.

Anything” in Biden-speak includes plays at the margin like temporarily waiving the 18.4 cents per gallon Federal gas tax, releasing some of the strategic oil reserves and diluting gas with corn mash (aka ethanol).

Reading between the lines is the punch line “But I won’t do that.”

What are the won’t-do-thats?

Well, for openers there are:

  • Buildout the Keystone XL pipeline
  • Enable aggressive fracking (again)
  • Re-open drilling in the Alaskan ANWR Region
  • Fast track off-shore licensing
  • Permanently disable the Nord Stream pipelines (both the NS1 that’s in operation and the NS2 that’s awaiting for final approval)

Those are moves that stand a chance of moderating inflation pressures in the U.S., slowing the flow of oil profits to Putin, providing some oil & LNG to Russian-dependent European countries and restoring. U.S. energy independence.

But, of course, Biden “… won’t do that”

The AOC “squad” and the climate control zealots won’t let him.

Too bad…

Oh no, not more ethanol…

April 12, 2022

Biden’s energy solutions go from dumb to dumber.
=============

OK, I’ve got a personal ax to grind in this one.

Instead of encouraging a restoration of U.S. based oil & gas production, Biden has decided to “temporarily” increase the allowable ethanol content in gasoline from 10% to 15%.

Note: “Temporarily” is a synonym for “transient” … as in “transient inflation”.

Ostensibly, the move is intended to stretch U.S. oil supplies by, in effect, diluting the oil content in gas … as a means of curbing inflation at the pumps.

Oil industry execs oppose the move, arguing that it will shave, at most, one thin dime off a gallon of gas … and may have a net zero effect since gas refiners will incur higher costs shifting over to the 15% mix.

Greenies oppose the move since vehicle smog emissions increase as more ethanol is added to the gas blend.

Legal eagles point out that “A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit has already ruled that the EPA had improperly reinterpreted legal language in the Clean Air Act long understood as limiting ethanol to 10% of the content of gasoline.” Source

But, Biden administration lawyers say that Biden’s decision is based on a “different authority”.

You know, that wormy “We’ll do as we please with executive orders … and you can try to stop us.”

=============

And, what’s my beef?

Anybody with a car, a lawn mower or a boat knows that that ethanol literally gums up engines … hurting engine performance and often damaging engines.

I know that firsthand … having spent mucho buckos to “remediate” the ethanol effects on my boat’s engine.

The latter is a well known, wide spread and costly problem as evidenced by the springing up of ethanol-free gas pumps at marinas.

In effect, Biden’s move shift costs from the pumps to repair shops.

That said, I expect Psaki to throw shade for Biden with a variant of her “Boo-hoo your Peloton is trapped in the supply chain” wise crack.

==============

P.S. Corn farmers love the move to increase the ethanol content in gas.

Why?

It increases the demand for and price of corn.

In economics, it’s called “trading nickels”.

In strategic analysis, it’s called “going for the capillaries instead of the jugular.”

Bloomberg: Biden’s SPR move may be less than it seems … and risky!

April 4, 2022

SPR: Strategic Petroleum Reserve
============

I had an interesting experience at the Costco gas pumps on Friday …

Note: I always try to fill-up at Costco since their prices tend to be at least a half-a-buck per gallon cheaper than other local stations.

The guy in the pump next to me — dressed in camo-accented working duds, filling his MAGA-stickered pick-up truck — says to me: “Finally, Biden has done something right.”

I say; “What’s that?”

He says; “Releasing oil from the reserves.”

I say: “Won’t help much.”

He says: “At least it’s something.”

Score one for Joe.

We quick-fill and get on with our days.

The convo prompted me to do some digging…

=============

First, it helps to put the numbers in perspective…

Biden authorized the release of 1 million barrels per day (BPD) for 180 days.

Total: 180 million barrels of oil coming out of the U.S. SPR.

Is that a little or a lot?

We Americans consume about 20 million barrels of oil per day … so, it’s about a 9-day supply of oil.

Worldwide, oil consumption is just under 100 million barrels per day … so, a million BPD potentially increases the global supply of oil by 1%.

The Strategic Petroleum Reserve — which was conceived in 1975 after the infamously disruptive Arab oil embargo — has a capacity to hold about 725 million barrels of oil.

It’s designed to protect the U.S. energy needs if foreign nasties cut-off our dependent supplies.

From 2000 to 2020, the SPR was essential full to it’s practical capacity … hovering between 600 and 700 million barrels.

Note: It’s not clear to me why the level “hovered” instead of staying fixed near 700 million barrels.

Last fall (i.e pre-Ukraine), Biden released 50 million barrels from the SPR … drawing the inventory level down to about 550 million barrels.

OK, with that as background…

The one certainty is that the SPR will be drawn down to under 400 million barrels … about half of the previously defined “strategic need”.

That means that the tanks will eventually need to be re-filled — increasing future demand for oil … which will likely increase future oil prices during the replenishment period.

Hmm

Or, Team Biden can let the SPR linger with the tanks half-full and hope that there isn’t a catastrophic disruption to oil supplies.

Frame of reference: That would be kinda like allowing our strategic reserve of medical supplies and medicines dwindle and and hope that an epidemic doesn’t happen.

How did that work out?

Bottom line: Net long term effect is just a shifting of 180 million barrels of oil demand down-the-road.

=============

What about the near-term price effect?

Bloomberg points out that: SPR ”interventions have a spotty record. It’s as common for them to be followed by increases in prices as reductions.”

For example:

Even before Russian tanks rolled into Ukraine in late February, West Texas Intermediate crude increased 18% since Nov. 23, when 50 million barrels were released to calm oil markets.

How can that be?

Bloomberg’s simple answer: The SPR doesn’t produce any oil … it’s just an unusually large pile of inventory, and in commodity markets, shrinking inventories are almost always bullish for prices.

Ouch.

Plus, The Russian oil sanctions may eventually cut oil supply by a million barrels per day if they’re ever really enacted … or non-Russian oil suppliers (think OPEC) may just dial back their production to keep prices high.

Again, the certainty is that the SPR will be drawn down and need to eventually be replenished … the uncertainty is what will happen to gas prices at the pump.

Bloomberg’s conclusion:

The U.S.’s dominance of energy markets could be in jeopardy in a way it hasn’t been since the 1970s.

With Biden’s oil reserve weapon heading toward half-full levels, he risks looking like a naked emperor.

Whatever, I’ll still be pumping at Costco…

Greater threat to the planet: Putin or climate change?

March 24, 2022

Putin is the clear & present danger … so, unleash our oil & gas industry, Joe.
=============

Business leaders are now pushing Biden for an “Energy Marshall Plan” … to mobilize U.S. oil & gas companies for energy independence and export capacity.

Here’s what they’re thinking…

Analytically speaking, risk assessment boils down to a couple of decision criteria:

> How immediate is the threat?

> How severe are the potential consequences?

> How likely are the consequences?

> How might mitigation change the odds?

Applying these risk assessment criteria, the answer to the headlined question is pretty clear (to me).

Putin is demonstrably a clear, present, proven and potentially nuclear danger.

Just turn on your TV to watch the slaughter of innocent people and the destruction of a nation and a culture.

Putin is maniacal (and probably crazy), determined and has planet-destroying nuclear weapons that he might use if he’s cornered.

The climate change threat is murky (sorry, but the science is even more unsettled than it is on Covid) and prospective (decades off) … with asserted and uncertain long-term consequences.

Bottom line: If the choice is binary, Putin must be stopped ASAP.

If the Putin and climate threats need to be “balanced”, then the scale should be tilted to stopping Putin.

Putin is clearly the more immediate threat.

Climate control can wait.

Let’s go through the decision criteria…

=============

THREAT ASSESSMENT

Immediacy 

The Putin threat is happening now.  Just turn on your TV right and watch the slaughter of innocent people and the destruction of a nation and a culture.

Even climate control zealots concede that its potential “existential threat” from climate change is decades away.

=============

Severity

Climate control zealots say that, unchecked by draconian mitigation, the planet will be a degree or two warmer in 50 years … and that’s enough to end life as we know it.

Let’s assume that’s true.

Some might argue that the Putin threat is localized and contained.

The Ukraine invasion is tragic and sad, but c’mon man, it’s just Ukraine.

Once Putin gets to the Polish border, the U.N. and NATO will stop him in his tracks.

Might be true.

But, what if Putin is, in fact, crazy and, when cornered, he starts lobbing nukes.

Suddenly, we’re looking at a level of global destruction that gives climate change a run for its money.

==============

Likelihood

So, what is the likelihood that climate change puts planetary existence at risk?

Sure, clean energy beats dirty energy and a green mindset makes sense.

But, the case for climate change ending the planet’s existence is a reach.

It is disputable whether the “data is clear” and that “the science is settled” on the consequences of climate change.

For details, see 16 Reasons why I’m lukewarm on climate change

Personally, I’d score the likelihood of Putin unleashing planet-destroying nukes higher than a climate existential threat.

Update: Yesterday, Ukrainian President Volodymyr Zelensky issued a dire appeal for help as Russia’s attacks across the country intensified and the Russians set afire the largest nuclear power plant in Europe.

In Zelensky’s words: “The end of the world has arrived.” 

=============

Mitigation

This is where things get dicey.

I’m confident that the U.S. will become increasingly green.

That’s a good thing.

I believe that American ingenuity and technology will — sometime and somehow over the next 50 years — provide game-changing climate control remedies.

But, as Igor Sechin, CEO of Russia’s state-owned Rosneft, has warned

Some ecologists and politicians urge for a hasty energy transition, yet it requires an unrealistically fast launch of renewable energy sources and faces issues with storage, ensuring reliability and stability of power generation. WSJ

And, to this point, climate control initiatives in the U.S. and Europe have largely been virtue signaling … outsourcing fossil fuel production to other countries (most notably Russia!) … putting the U.S. and Europe in a vulnerable security position.

Question: Is Russian oil cleaner than U.S. or Canadian oil?

Answer: Nope!

So, the pivotal question is how to “mitigate” the Putin threat.

Well, maybe Putin can be jawboned and shunned … and will come to his senses and rein in  his destructive tendencies.

My opinion: Odds of that are essentially zero.

Maybe the rational Russian people will rise up and take him out.

I’m betting the under on that one, too

Let’s try diplomacy.

How’s then been working out?

Not to worry, NATO will ultimately use military force to contain the Putin risk at the Polish border.

English translation: NATO nations will encourage the U.S. to kick Putin’s ass when the time comes

Military containment might be doable … but, at a high cost with the incumbent risk that a crazy Putin starts a nuclear war.

=============

So what to do?

Oh yeah, there are other Putin-mitigating options.

How about draining his war-mongering financial resources with sanctions?

In logic-speak: necessary but not sufficient … especially since the current sanctions explicitly rule out any transactions related to the flow of Russian oil.

According to Biden’s Deputy National Security Advisor Daleep Singh:

“To be clear, our sanctions are not designed to cause any disruption to the current flow of energy from Russia to the world” Source

Say, what?

Bottom line: The only non-military way to cripple Putin’s war mongering is to use U.S. oil & gas production as a geo-political strategic tool … the geo-political strategic tool!

As one right-leaning pundit puts it:

Putin’s power comes from money, most of Putin’s money comes from oil and gas.

It stands to reason that if you’re trying to punish him, hitting him in the wallet is the most effective way to do it.

So why would our President specifically exempt what is the best, most effective, and really only significant way to hurt Putin in way that might impact his behavior?

Of course, there’s an explanation…

Biden is boxed by his party’s far left climate control zealots.

Nonetheless, as we’ve said before:

It’s time to reprioritize energy security and independence by unleashing U.S. oil & gas production!

He has to do an objective risk assessment (see above), stiff-arm his parity’s uber-left loons, restore U.S. energy superiority by unleashing our oil & gas industry.

It’s as simple as that!

 

Is Europe toast?

March 22, 2022

Putin’s Ukraine invasion has forced a long overdue realization that reality bites.
=============

Western European NATO nations have dug themselves into two very deep holes.

First, they have green-thought themselves into energy dependence on Russia … largely by declaring nuclear and non-Russian fossil fuels to be existential threats.

Second, they have de-prioritized security and grossly underspent on their own defense … apparently assuming that Putin’s Russia and China were just misunderstood nice guys … and that, worst case, the U.S. would swoop in and save them (again).

Brings to mind an old saying regarding the French: “We’ve saved their asses twice and they still haven’t forgiven us.”

=============

Let’s take first things first…

Regarding the European energy hole, Kimberly Strassel wrote in the WSJ:

The Europeans have embraced the climate religion with a fervor to rival Bernie Sanders.

Yet Mr. Putin’s shocking violence in Ukraine — his willingness to wield energy as a weapon — sobered the Continent overnight.

No one is giving up on renewables, but nobody is any longer pretending they are the basis of energy reliability or security.

Fossil fuels will remain for decades a currency of global power, and Russia’s invasion highlights the stupidity of being broke.

Strassel offers evidence that European nations seem to have gotten the message:

Germany’s is stockpiling coal and expediting terminals for liquefied natural gas.

Europe is working to get more gas through pipelines from Norway and Azerbaijan.

Poland plans new nuclear plants.

The U.K. may restart onshore fracking and ramp up North Sea drilling.

Norway plans to expand Arctic exploration.

Of course, Europe would now be willing to replace all of their Russian oil & gas with U.S. produced oil & gas … but, Joe says “no”

Apparently, he still hasn’t gotten the message … .

See: Greater threat to the planet: Putin or climate change?

But, Biden does seem to eventually follow Europe’s leads — albeit with a frustratingly long time-delay — so there’s still faint hope.

Most oil production: U.S. or Russia?

March 21, 2022

The question came up in casual(?) conversation over the weekend.

Of course, it prompted me to do some digging.

Here’s the latest top 10 list according to the U.S. Energy Information Administration database.

The volumes in the table represent crude oil and “lease condensate” (aka natural gas), the hydrocarbon liquids collected at or near the wellhead.

image

> The U.S. tops the list, followed closely by Russia and Saudi Arabia

> Canada and Iraq hold the #4 and #5 positions.

> China is only produces about 40% of the the U.S. and Russian totals

Editorial note: Tell me again why the XL pipeline is a bad idea. Canada is a friendly, proximate ally, right?

==============

Most interesting (to me) are the historical trend lines.

image

> Note that US oil production (the blue line)  declined during the Bush years  … but turned upward in the Obama years … took the top spot under Trump … and has fallen under you-know-who

> Also note that the old USSR led the league when it existed … Russia accounted for a majority of the USSR production before the USSR dissolved …. and has steadily increased its production to now produce roughly the same quantity of oil as the entire USSR was producing in its final years.

> Finally, note that if Russia controlled the former USSR republics, it would be at the top of the list … e.g. Kazakhstan alone produces 1.75 million barrels per day

Think that last point is a motivator for Putin?

Biden’s “big lie” re: domestic oil production …

March 15, 2022

… and, what he can do to prove that he’s not lying through his dentures.
=============

Last week, Biden defiantly read from his teleprompter:

“It’s simply not true that my administration or my policies are holding back domestic energy production.”

Oh, really?

Apparently, Biden’s handlers and his teleprompter scribes aren’t aware of the technology known as video recording.

Here — from Biden’s own lips — is his pledge to contain (and ultimately kill) the U.S. oil & gas industry:

click to view (18 seconds)
image

Biden’s pledge:

To ensure “no ability for the oil industry to continue to drill. Period. End.”

Q.E.D.

=============

So, how can Biden prove that he’s not lying when he says that he’s not handcuffing domestic oil production?

image

According to Bloomberg:

Senate Energy Chairman Joe Manchin called on the Biden administration to use the Defense Production Act  to rush completion of a stalled pipeline through his state to help Europe replace Russian natural gas supplies.

The pipeline is more than 90% complete but has been challenged by environmentalists, and a federal court in January rejected its permit to cross a national forest.

Manchin said the 303-mile Mountain Valley Pipeline, which crosses his home state of West Virginia into Virginia, could transport two billion cubic feet a day and be up and running in four to six months.

The Defense Production Act would be justified to expedite it so the gas can be quickly converted to liquid form and shipped to Europe.

Manchin also has urged the administration to repeal his inauguration day executive orders that imposed constraining regulations on the oil and gas industry.

================

Bottom line: If you’re really pro-domestic energy production, Joe, repeal your energy-throttling EO’s and use the Defense Production Action Act to “make” the  evil-minded, supply-withholding, profit-motivated oil companies start cranking out more oil & gas ASAP.

Or, just admit that you’re lying like a rug…

===============

P.S. The WSJ suggests that this question be posed to Biden the next time that his handlers allow him to unplug his teleprompter:

Mr. President, will you do everything in your regulatory power to make it easier for American companies to produce more oil and gas to make the U.S. and its allies in Europe and elsewhere less dependent on Russian energy?

Don’t hold your breath for the question or a truthful answer…

 

It’s time to reprioritize energy security and independence by unleashing U.S. oil & gas production!

March 4, 2022

Objectives: (1) Stop funding Putin’s aggression with Russian oil & gas revenues (2) Replace U.S. and European countries’ Russian purchases with U.S. oil & gas (3) Support the Canadian oil industry (4) Dampen domestic (and world markets) inflation rates

==============
A prior version of this post was published on February 22, 2022

Some necessary background …

Remember when Trump made the U.S. a net exporter of oil products?

image

Focus on the dark line on the above chart … it depicts the U.S. trade deficit (or surplus) in crude oil & liquid fuels (mostly natural gas condensate, LNG).

Biden inherited a trade surplus … exports of crude oil & oil products exceeded the total imports of those goods. (Note that the dark line dipped below zero on the y-axis in 2020).

But, in 2021, imports of crude oil turned upward and the trade surplus evaporated.

Said differently, the U.S. was net energy independent in at the end of the Trump administration … but, thanks to Biden’s policies, we’re net energy dependent again.

How did Biden do it?

By signing executive orders aimed at crippling (and ultimately killing the domestic U.S. oil industry) by essentially stopping new oil exploration and shackling oil production and transport (e.g. the XL Canada to U.S. pipeline)

=============

Bottom line, Biden’s decision to curb U.S. oil drilling, production and transport has literally fueled inflation (<=pun intended) and, to a large extent, funded Putin’s war chest.

On the latter point, let’s run the numbers…

image

In 2020, the U.S. produced 11.3 million barrels per day (MBPD) of crude oil and liquified natural gas (LNG).

But, the U.S. consumed 17.2  MBPD … and had to import 5.9 MPD (the red number above).

Note that Russia was the 2nd largest producer in the world @ 10.1 MBPD … and exported 70% of its production (6.9 MBPD).

==============

Let’s dissect the U.S. imports…

In 2021, U.S. oil imports increased to 8.5 MBPD.

Where is that oil coming from?

image

About 1/2 comes from Canada … an ally that is close to the U.S. geographically and politically.

So what did Biden do to cause this unfortunate turnaround?

For openers, killing the XL pipeline project.

The implication: less oil from Canada … and higher costs (and environmental risk) by trucking the crude oil that is supplied to the U.S. by Canada.

Why screw our allied neighbors?

Even more important, the U.S. has been importing almost 600,000 barrels per day of oil from Russia.

Annualized at current rates, that’s 217 million barrels of oil bought from Russia each year.

What’s the dollar value of those purchases?

Let’s look at oil prices …

image

Rounding up a bit to simplify the arithmetic, crude oil prices are now at about $100 per barrel.

So, 217 million barrels has a market value of over $21 billion each year. That’s money flowing into Putin’s coffers.

Note: That’s about $9 billion more than the oil would have been market valued on Biden’s inauguration day.

How’s Putin using that windfall?

It’s reasonable conjecture that a fair chunk of it is funding Russia’s aggression against Ukraine.

So, what to do?

If Biden wants to send a clear signal to Putin, he should “follow the data” and rescind his oil-crushing executive orders … TODAY.

While not immediate, that move can cut the flow of funds to Putin by reducing our direct oil purchases from Russia … and by, perhaps, depressing global oil prices.

It’s time for another Operation Warp Speed … one that unleashes the U.S. oil & gas industry.

There aren’t a lot of options, Joe.

=============

If you think that climate control should trump energy security, read Greater threat to the planet: Putin or climate change?

Greater threat to the planet: Putin or climate change?

March 4, 2022

Putin is the clear & present danger … so, unleash our oil & gas industry, Joe.
=============

Analytically speaking, risk assessment boils down to a couple of decision criteria:

> How immediate is the threat?

> How severe are the potential consequences?

> How likely are the consequences?

> How might mitigation change the odds?

Applying these risk assessment criteria, the answer to the headlined question is pretty clear (to me).

Putin is demonstrably a clear, present, proven and potentially nuclear danger.

Just turn on your TV to watch the slaughter of innocent people and the destruction of a nation and a culture.

Putin is maniacal (and probably crazy), determined and has planet-destroying nuclear weapons that he might use if he’s cornered.

The climate change threat is murky (sorry, but the science is even more unsettled than it is on Covid) and prospective (decades off) … with asserted and uncertain long-term consequences.

Bottom line: If the choice is binary, Putin must be stopped ASAP.

If the Putin and climate threats need to be “balanced”, then the scale should be tilted to stopping Putin.

Putin is clearly the more immediate threat.

Climate control can wait.

Let’s go through the decision criteria…

=============

THREAT ASSESSMENT

Immediacy 

The Putin threat is happening now.  Just turn on your TV right and watch the slaughter of innocent people and the destruction of a nation and a culture.

Even climate control zealots concede that its potential “existential threat” from climate change is decades away.

=============

Severity

Climate control zealots say that, unchecked by draconian mitigation, the planet will be a degree or two warmer in 50 years … and that’s enough to end life as we know it.

Let’s assume that’s true.

Some might argue that the Putin threat is localized and contained.

The Ukraine invasion is tragic and sad, but c’mon man, it’s just Ukraine.

Once Putin gets to the Polish border, the U.N. and NATO will stop him in his tracks.

Might be true.

But, what if Putin is, in fact, crazy and, when cornered, he starts lobbing nukes.

Suddenly, we’re looking at a level of global destruction that gives climate change a run for its money.

==============

Likelihood

So, what is the likelihood that climate change puts planetary existence at risk?

Sure, clean energy beats dirty energy and a green mindset makes sense.

But, the case for climate change ending the planet’s existence is a reach.

It is disputable whether the “data is clear” and that “the science is settled” on the consequences of climate change.

For details, see 16 Reasons why I’m lukewarm on climate change

Personally, I’d score the likelihood of Putin unleashing planet-destroying nukes higher than a climate existential threat.

Update: Yesterday, Ukrainian President Volodymyr Zelensky issued a dire appeal for help as Russia’s attacks across the country intensified and the Russians set afire the largest nuclear power plant in Europe.

In Zelensky’s words: “The end of the world has arrived.” 

=============

Mitigation

This is where things get dicey.

I’m confident that the U.S. will become increasingly green.

That’s a good thing.

I believe that American ingenuity and technology will — sometime and somehow over the next 50 years — provide game-changing climate control remedies.

But, as Igor Sechin, CEO of Russia’s state-owned Rosneft, has warned

Some ecologists and politicians urge for a hasty energy transition, yet it requires an unrealistically fast launch of renewable energy sources and faces issues with storage, ensuring reliability and stability of power generation. WSJ

And, to this point, climate control initiatives in the U.S. and Europe have largely been virtue signaling … outsourcing fossil fuel production to other countries (most notably Russia!) … putting the U.S. and Europe in a vulnerable security position.

Question: Is Russian oil cleaner than U.S. or Canadian oil?

Answer: Nope!

So, the pivotal question is how to “mitigate” the Putin threat.

Well, maybe Putin can be jawboned and shunned … and will come to his senses and rein in  his destructive tendencies.

My opinion: Odds of that are essentially zero.

Maybe the rational Russian people will rise up and take him out.

I’m betting the under on that one, too

Let’s try diplomacy.

How’s then been working out?

Not to worry, NATO will ultimately use military force to contain the Putin risk at the Polish border.

English translation: NATO nations will encourage the U.S. to kick Putin’s ass when the time comes

Military containment might be doable … but, at a high cost with the incumbent risk that a crazy Putin starts a nuclear war.

=============

So what to do?

Oh yeah, there are other Putin-mitigating options.

How about draining his war-mongering financial resources with sanctions?

In logic-speak: necessary but not sufficient … especially since the current sanctions explicitly rule out any transactions related to the flow of Russian oil.

According to Biden’s Deputy National Security Advisor Daleep Singh:

“To be clear, our sanctions are not designed to cause any disruption to the current flow of energy from Russia to the world” Source

Say, what?

Bottom line: The only non-military way to cripple Putin’s war mongering is to use U.S. oil & gas production as a geo-political strategic tool … the geo-political strategic tool!

As one right-leaning pundit puts it:

Putin’s power comes from money, most of Putin’s money comes from oil and gas.

It stands to reason that if you’re trying to punish him, hitting him in the wallet is the most effective way to do it.

So why would our President specifically exempt what is the best, most effective, and really only significant way to hurt Putin in way that might impact his behavior?

Of course, there’s an explanation…

Biden is boxed by his party’s far left climate control zealots.

Nonetheless, as we’ve said before:

It’s time to reprioritize energy security and independence by unleashing U.S. oil & gas production!

He has to do an objective risk assessment (see above), stiff-arm his parity’s uber-left loons, restore U.S. energy superiority by unleashing our oil & gas industry.

It’s as simple as that!

 

Greater threat to the planet: Putin or climate change?

February 28, 2022

Putin is the clear & present danger … so, unleash our oil & gas industry, Joe.
=============

Analytically speaking, risk assessment boils down to a couple of decision criteria:

> How immediate is the threat?

> How severe are the potential consequences?

> How likely are the consequences?

> How might mitigation change the odds?

Applying these risk assessment criteria, the answer to the headlined question is pretty clear (to me).

Putin is demonstrably a clear, present, proven and potentially nuclear danger.

Just turn on your TV to watch the slaughter of innocent people and the destruction of a nation and a culture.

He’s maniacal (and probably crazy), determined and has planet-destroying nuclear weapons that he might use if he’s cornered.

The climate change threat is murky and prospective (decades off) … with uncertain but potentially severe consequences.

Bottom line: If the choice is binary, Putin must be stopped ASAP.

If the threats need to be “balanced”, then the scale should be tilted to stopping Putin.

Putin is clearly the more immediate threat.

Climate control can wait.

Let’s go through the decision criteria…

=============

THREAT ASSESSMENT

Immediacy 

The Putin threat is happening now.  Just turn on your TV right now and watch the slaughter of innocent people and the destruction of a nation and a culture.

Even climate control zealots concede that its potential “existential threat” is decades away.

=============

Severity

Climate control zealots say that, unchecked by draconian mitigation, the planet will be a degree or two warmer in 50 years … and that’s enough to end life as we know it.

Let’s assume that’s true.

Some might argue that the Putin threat is localized and contained..

The Ukraine invasion is tragic and sad, but c’mon man, it’s just Ukraine.

Once Putin gets to the Polish border, the U.N. and NATO will stop him in his tracks.

Might be true.

But, what if Putin is, in fact, crazy and, when cornered, he starts lobbing nukes.

Suddenly, we’re looking at a level of global destruction that gives climate change a run for its money.

==============

Likelihood

So, what is the likelihood that planetary existence at risk?

Sure, clean energy beats dirty energy and a green mindset makes sense.

But, the case for climate change ending the planet’s existence is a reach.

It is disputable whether the “data is clear” and  “the science is settled” on the consequences of climate change.

For details, see 16 Reasons why I’m lukewarm on climate change

Personally, I’d score the likelihood of Putin unleashing planet-destroying nukes higher than a climate existential threat.

=============

Mitigation

This is where things get dicey.

I’m confident that the U.S. will become increasing green.

That’s a good thing.

I believe that American ingenuity and technology will — sometime and somehow over the next 50 years — provide game-changing climate control remedies.

But, as Igor Sechin, CEO of Russia’s state-owned Rosneft, has warned

Some ecologists and politicians urge for a hasty energy transition, yet it requires an unrealistically fast launch of renewable energy sources and faces issues with storage, ensuring reliability and stability of power generation. WSJ

And, to this point, climate control initiatives in the U.S. and Europe have largely been virtue signaling … outsourcing fossil fuel production to other countries (including Russia!) … leaving the U.S. and Europe vulnerable.

So, the pivotal question is how to “mitigate” the Putin threat.

Well, maybe Putin will come to his senses and self-control his destructive tendencies.

Odds of that are essentially zero,

Maybe the rational Russian people will rise up and take him out.

I’m betting the under on that one, too

Let’s try diplomacy.

How’s then been working out?

Not to worry, NATO will ultimately use military force to contain the Putin risk.

English translation: NATO nations will encourage the U.S. to kick Putin’s ass.

Military containment might be doable … but, at a high cost with the incumbent risk that a crazy Putin starts a nuclear war.

=============

So what to do?

Oh yeah, there are other Putin-mitigating options.

How about draining his war-mongering financial resources with sanctions?

In logic-speak: necessary but not sufficient … especially since the current sanctions explicitly rule out any transactions related to the flow of Russian oil.

According to Biden’s Deputy National Security Advisor Daleep Singh:

“To be clear, our sanctions are not designed to cause any disruption to the current flow of energy from Russia to the world” Source

Say, what?

Bottom line: The only non-lethal way  to cripple Putin’s war mongering is to use U.S. oil & gas production as a geo-political strategic tool … the geo-political strategic tool!

As one right-leaning pundit puts it:

Putin’s power comes from money, most of Putin’s money comes from oil and gas.

It stands to reason that if you’re trying to punish him, hitting him in the wallet is the most effective way to do it.

So why would our President specifically exempt what is the best, most effective, and really only significant way to hurt Putin in way that might impact his behavior?

Of course, there’s an explanation…

Biden is boxed by his party’s far left climate control zealots.

Nonetheless, as we’ve said before:

Biden’s only realistic option is to reverse his dumbest decisions.

He has to do an objective risk assessment (see above), stiff-arm his parity’s uber-left loons, restore U.S. energy superiority by unleashing our oil & gas industry.

It’s as simple as that!

News flash: Putin puts his nuclear forces “on alert”.

February 27, 2022

Russian President Vladimir Putin said in a televised statement today that he was ordering Russia’s nuclear  forces on alert.

According to Axios:

  • This is the second time Putin has alluded to Russia’s nuclear arsenal while effectively warning the West to back off.
  • In a statement at the onset of the invasion, Putin said anyone who tried to “hinder us” would face “such consequences that you have never encountered in your history.”
  • Fear of a standoff between nuclear powers is a large part of the reason the U.S. and its NATO allies have been so adamant that they will not send troops to Ukraine.

C’mon, Joe. It’s “game on”.

Unleash our oil & gas industry to stop funding Putin’s aggression (and slow the rate of inflation here at home).

For background (and data), see:

Biden’s only realistic option: reverse his dumbest decisions and…

Biden channels Meatloaf: He will do anything to curb inflation (but he won’t pump oil)

Biden channels Meatloaf …

February 24, 2022

… and I wish he’d stop doing it!
=============

Everybody remembers the Meatloaf classic, right?

The tease:” I would do anything for love”

The punch line”: “But I won’t do that !”

If you need a a refresher or just want to kick back and
listen to an all- time great song, clock here

image
click to listen

==============

Biden (and Psaki) have appropriated a variant of the Meatloaf classic.

Now, every time Joe steps behind the podium, he squints and reads a version of:

Gas prices are high and are going to go higher because of Putin.

I feel your pain and, rest assured, I will use all the tools available to minimize the prices at the pump.

Anything” in Biden-speak includes plays at the margin like temporarily waiving the 18.4 cents per gallon Federal gas tax … and releasing some of the strategic oil reserves.

Reading between the lines is the punch line “But I won’t do that.”

What are the won’t-do-thats?

Well, for openers there are:

  • Buildout the Keystone XL pipeline
  • Enable aggressive fracking (again)
  • Re-open drilling in the Alaskan ANWR Region
  • Fast track off-shore licensing
  • Permanently disable the Nord Stream pipelines (both the NS1 that’s in operation and the NS2 that’s awaiting for final approval)

Those are moves that stand a chance of moderating inflation pressures in the U.S., slowing the flow of oil profits to Putin, providing some oil & LNG to Russian-dependent European countries and restoring. U.S. energy independence.

But, of course, Biden “… won’t do that”

The AOC “squad” and the climate control zealots won’t let him.

Too bad…

Biden’s only realistic option: reverse his dumbest decision.

February 22, 2022

Stop funding Russia’s aggression and slow the rate of inflation.
==============

Yep, we’re talking about oil …

Remember when Trump got the U.S. to energy independence?

image

Focus on the dark line on the above chart … it depicts the U.S. trade deficit (or surplus) in crude oil & liquid fuels (mostly natural gas condensate).

Biden inherited a trade surplus … exports of crude oil & oil products exceeded the total imports of those goods. (note that the dark line dipped below zero on the y-axis in 2020).

But, in 2021, imports of crude oil turned upward and the trade surplus evaporated.

Said differently, the U.S. was net energy independent in at the end of the Trump administration … but, thanks to Joe’s policies, we’re net energy dependent again.

How did he do it?

By signing executive orders aimed at crippling (or killing the domestic oil industry) by essentially stopping new oil exploration and transport pipelines (e.g. the XL Canada to U.S. pipeline)

=============

Bottom line, Biden’s decision to curb U.S. oil drilling & production has literally fueled inflation (<=pun intended) and, to a large extent, funded Putin’s war chest.

On the latter point, let’s run the numbers…

image

In 2020, the U.S. produced 11.3 million barrels per day (MBPD) of crude oil and liquified natural gas (LNG).

But, the U.S. consumed 17.2  MBPD … and had to import 5.9 MPD (the red number above).

Note that Russia was the 2nd largest producer in the world @ 10.1 MBPD … and exported 6.9 MBPD.

==============

Let’s dissect the U.S. imports…

In 2021, U.S. oil imports increased to 8.5 MBPD.

Where is that oil coming from?

image

About 1/2 comes from Canada … an ally, close to the U.S. geographically and politically.

So what did Joe do?

Kill the XL pipeline project.

The implication: less oil from Canada … and higher costs (and environmental risk) by trucking that is supplied.

Even more important, the U.S. is now importing almost 600,000 barrels per day of oil from Russia.

At current rates, that’s 217 million barrels of oil bought from Russia each year.

What’s the dollar value of those purchases?

Let’s look at oil prices …

image

Rounding up a bit to simplify the arithmetic, crude oil prices are now at about $100 per barrel.

So, 217 million barrels has a market value of over $21 billion each year. That’s money flowing into Putin’s coffers.

Note: That’s about $9 billion more than the oil would have been market valued on Joe’s inauguration day.

How’s Putin using that windfall?

It’s reasonable conjecture that a fair chunk of it is funding Russia’s aggression against Ukraine.

So, what to do?

If Biden wants to send a clear signal to Putin, he should “follow the data” and rescind his oil-crushing executive orders … TODAY.

While not immediate, that move can cut the flow of funds to Putin by reducing our direct oil purchases from Russia … and by, perhaps, depressing global oil prices.

There aren’t a lot of options, Joe.

Biden: “Say goodbye to your cars”

October 22, 2021

Shades of Hillary’s promise to “put coal miners out of business”
=============

First, some history…

In her book, “What Happened“, Hillary Clinton wrote that her biggest regret from her ill-fated presidential campaign was saying she would “put coal miners out of business.”

Clinton made the remark during a town hall in March 2016 when she touted her plan to replace fossil-fuel-based energy production with renewable alternatives.

The remark sparked a backlash against Clinton and haunted her throughout the campaign when it was widely interpreted as her being  non-empathetic to  the suffering of white working-class Americans with a particular focus on struggling coal miners.

She later lost every county in West Virginia — the country’s premier coal-mining state.  Source

Will history repeat?

=============

In a speech this week in Scranton, Biden tried to rally support for his Build Back Better Human Infrastructure Plan.

Included in the proposed $3.5 trillion  bill are climate change provisions intended to curtail fossil-fuel-based energy usage.

Sound familiar?

As part of that program, Biden told the audience: “Here’s the deal”…

“We will take, literally, millions of automobiles off the road. Off the road.”

image

No joke, not kidding, the God’s truth, etc.

That may resonate among elite urbanites and folks in the Acela corridor… but, I’m not so sure that the idea (threat?) will play well in Middle America, rural communities (or even Scranton) … or among suburban soccer parents and people whose livelihood  depends on their cars & trucks.

Of course, Joe doesn’t have to worry about re-election but, with his job approval dipping below 40%, I wouldn’t think that poking folks in the eye is a way to win back love…

Is Russia really “an oil and gas company masquerading as a country”?

July 19, 2018

That’s the characterization usually attributed to Se. Lindsey Graham.

Let’s drill down on that, starting with some GDP stats.

Russia’s GDP is only about $1.5 trillion.

image

============

Let’s out that number in perspective…

(more…)

The elephant in NATO’s room…

July 11, 2018

Heavy dependence on Russian oil.
============

NATO’s primary mission is to keep it’s member countries safe … mostly from Russia, right?

But, as we posted yesterday, key NATO nations (think: Germany) are hesitant to spend 2% of their GDP on defense … and are largely dependent on U.S. troops to protect NATO’s eastern flank and police the rest of the world.

Given that Russia is a lot closer to Europe than to the U.S. … why aren’t European nations more energized to defend themselves more aggressively and more visibly against the Russians?

image

===========

The answer can be summed up in one word…

(more…)

Flashback: ANWR in Pictures (and Words)

December 5, 2017

To win Alaskan Senator Lisa Murkowski’s vote on the tax reform bill, a provision was slipped in to open part of the Artic National Wildlife Refuge. Source

Though the provision hasn’t got much coverage, I suspect that it will eventually cause an uproar.

To prep HomaFiles readers, we thought it would be a good time time to reprise a HomaFiles blast-from-the-past …

=====

According to Jonah Goldberg, writing in the National Review Online:

Both the New York Times and Washington Post editorial boards enthusiastically supported drilling in ANWR in the late 1980s.

The Post noted that the area “is one of the bleakest, most remote places on this continent, and there is hardly any other where drilling would have less impact on surrounding life. . . . ”

ANWR is roughly the size of South Carolina …

However, the area where, according to Department of Interior estimates, some 5.7 billion to 16 billion barrels of recoverable oil reside is much smaller and …  would amount to the size of Dulles airport.

clip_image002

 

Tempted to vacation there?  Keep reading …

(more…)

The economics of oil … continued.

April 1, 2016

A couple of week’s ago, I posted The economics of oil …  suggesting that countries such as Saudi Arabia were operating below breakeven with oil @ $40 per barrel.

 

image

=====

While technically correct, several loyal readers schooled me on the difference between “economic breakeven” and “fiscal breakeven”.

(more…)

The economics of oil …

March 10, 2016

In light of the oil glut, Exxon has announced that it’s moth-balling some rigs and cutting capital expenditures.

That fits a bigger trend … supply high, demand slow, prices down, production down.

 

image

========

From a supply side, the economics of the business raise some interesting questions …

(more…)

What’s up (or down) with oil prices?

December 22, 2015

I’m sure you’ve noticed that gas prices have come down at the pump.

If you follow the economy or the stock market, you’ve certainly noticed that oil prices have come down … a couple of years ago it was selling for over $130 per barrel … now it’s selling for under $35.

Most pundits chalk it up to slowing economic growth in China.

But, that sounded too simple to me, so I started asking some questions … why’s it happening? who’s getting helped or hurt?

 

image

======

Here’s my current theory of the case …

(more…)

Why is gas cheaper in New Jersey?

March 12, 2015

I’ve always wondered that … especially since NJ is the only place on Planet Earth that won’t let you self-pump your own gas.

Nope.

Gotta wait for the attendant to notice you’re there and do it for you.

 

image

Of course, the attendants don’t look like the guy in the picture.

Nope.

They all look like folks who should be reported to Homeland Security.

My point: having attendants should push gas prices up, right?

A common hypothesis is that there are a lot of gas storage facilities along I-95.

Cheaper supply?

That doesn’t square since there isn’t much gas drilled in the local area.

OK, so what is it?

I may have stumbled on the answer …

(more…)

Flashback: ANWR in Pictures (and Words)

January 27, 2015

Since President Obama has returned ANWR to the front-burner, we thought it would be time to reprise a HomaFiles balst-from-the-past …

=====

According to Jonah Goldberg, writing in the National Review Online:

Both the New York Times and Washington Post editorial boards enthusiastically supported drilling in ANWR in the late 1980s.

The Post noted that the area “is one of the bleakest, most remote places on this continent, and there is hardly any other where drilling would have less impact on surrounding life. . . . ”

ANWR is roughly the size of South Carolina …

However, the area where, according to Department of Interior estimates, some 5.7 billion to 16 billion barrels of recoverable oil reside is much smaller and …  would amount to the size of Dulles airport.

clip_image002

 

Tempted to vacation there?  Keep reading …

(more…)

A celeb that walks the energy talk … no Gulfstream for this dude.

March 22, 2012

Apparently, President Obama’s recent energy speech gained at least one influential endorsement.

I usually don’t put much stock in celebrity endorsements.

But in marketing parlance — this one, from a star who was way ahead oh his time — might have “legs” …

* * * * *
Questions:

1. Wouldn’t it be faster for Fred to leave the car at home and just walk to work ?

2. Are rock hard wheels more energy efficient than fully inflated tires ?

>> Latest Posts

Flat-earthers vs. Obama’s pipe dreams …

March 19, 2012

OK, so anybody who wants to keep using fossil fuels, to drill for oil and gas in the U.S., and to buy gas for a couple of bucks per gallon is a member of the flat earth society, lacking the the President’s vision.

Why Obama wants to insult the vast majority of Americans is beyond me, but that’s his tactical choice.

So far, the GOP has simply thrown back softballs: Solyndra, the Volt and the many other alternative energy busts.

Given my lack of tact, if I were a Romney adviser, here’s the line I’d offer up to Mitt:

“President Obama and I both have pipe dreams … mine in the Keystone Pipeline bringing oil from Canada … his goes back to his college days, I guess.”

Two for the price of one.

Keeps focus on the money wasted and lack of results from the President’s alternative energy gambles … and dregs up some old stuff re: Obama’s drug use that got wiped under the carpet in 2008.

Not rumors… straight from the horse’s mouth.

Obama first told of his early drug use in his 1995 memoir, “Dreams from My Father: A Story of Race and Inheritance” … published audaciously just after he became president of the Harvard Law Review.

He wrote re: his personal experience:

“Pot had helped, and booze; maybe a little blow when you could afford it.”

image

Picture source:  Coed Magazine,
“10 Most Influential Pot Smokers”

Hmmm.

I guess that I hadn’t thought of the full range of hardships inflicted by the bad economy …

>> Latest Posts

Whew! A Presidential task force to ponder high gas prices …

March 15, 2012

In a TV interview, President Obama responded boldly re: rising gas prices:

“The only way to stabilize gas prices is to reduce our dependency on foreign oil …  In the meantime, because I know people are hurting right now and it feels like a tax out of their paychecks, what we’re doing is looking at every single area that can affect gas prices …  we’ve set up a task force.”

image

I assume it’ll be modeled after the Jeffrey Immelt-led Jobs Task Force.

That’ll let us all sleep a little easier, right?

>> Latest Posts

Flashback: Why do gas prices move up and down ?

March 13, 2012

Another piece from my oil & energy archives.  Chris Hairel — an MSB alum — recaps the the oil-to-gas value chain.

Good background reading as gas prices soar.

* * * * *
Originally posted Aug. 27, 2008

In an earlier post “Thinking about $4 per gallon gas”, I wondered why oil companies waited so long to push prices up to $4 — the apparent price that the market will bear — and why they don’t just let the price stick at $4 now that it has been tested.

Chris Hairel , MSB MBA alum, sent me a nice recap of the oil to gas value chain.

Bottom line: cost-plus pricing in a very competitive market.

Worth reading …

* * * * *

The downstream refined products value chain — from crude oil to retail gasoline and other oil-based products — has six segments, each with its own unique industry structure, pricing levers and regulation:

* * * * *

Refineries – the key asset in the business where the object is to maximize the economic value added of the refined products.

Refineries are basically price takers since their company trading group supplies them with crude oil and the projected prices for refined products.

Working with the trading group, the refinery is charged with turning that crude oil into the most profitable collection of products given the quality of the crude and the capabilities of the refinery.

* * * * *

Bulk Markets – The trading group assumes title of the product as it leaves the refinery and arranges transportation to the terminals based on projected demand in the rack (or wholesale market).

Along the way the traders seek to increase the realized price for their products, react to supply disruptions or unexpected demand.

Bulk is a relatively efficient market with good price transparency based on key trading hubs like New York Harbor, Houston and Chicago.

The NYMEX futures market provides a facility for hedging and for paper speculation. Trading parties include oil companies, major users of petroleum products, independent pipeline companies and speculators.

Pricing is market-based and profit-optimized by the traders.

* * * * *

Pipelines – Interstate pipelines with multiple customers are regulated by the Federal Energy Regulatory Commission .

Their tariffs (i.e. prices) are set based on a government sanctioned rate of return. So. pricing is essentially a cost-plus process.

Pipeline owners are not permitted to share information about who else is using the pipeline with their affiliated companies, nor can they give (or take) preferential treatment with respect to supply allocation or delivery scheduling.

* * * * *

Rack Markets and Terminals – Rack markets cover the wholesale market for a city.

Prices in rack markets are set daily for the next day. The marketing group for an oil company looks at demand by channel of trade (i.e. branded, unbranded, spot), recent price history in the area and the supply situation.

The pricing mechanism itself may be based on an index, a cost plus or other model, but there’s some leeway on the decision under certain circumstances. For example, pricing is actually used as a key demand management lever since companies can purposefully price themselves out of the spot or unbranded channel in order to save product for branded customers.

Despite what the pricers do, most transaction pricing is determined by long term contracts. These contracts usually allow customers to “swing” their volumes. A customer may commit to buying an average of 5,000 gal a day, but the contract management process will look at the monthly volume and divide by 30 – the customer can usually manage their buying pattern to buy more on days when gas is cheap and less when it’s more expensive. .

* * * * *

Secondary Transportation – These are the tanker trucks that move product from the terminal to the retail station. The logistics are typically handled by jobbers or independent marketers that almost always price on a cost-plus basis.

* * * * *

Retail – Retail gas stations typically price on a cost-plus basis with a slim retail margin added on.

The bulk oil stations’ profits isn’t from the gasoline ! Gas is simply the “leader” product that attracts traffic (literally) which often loads up with high margin coffee, soda, cigarettes, etc.

* * * * *

Retail gasoline prices

Retail gasoline prices tend to respond quickly to market forces for 3 reasons: (1) cost-plus pricing, (2) retail competition, and (3) fear of government intervention.

* * * * *

(1) Cost-plus pricing

Since cost-plus pricing is prevalent at all stages of the value chain, refined products’ prices and crude oil prices tend to move together.

Refiners’ margins are often forecasted using what’s called the 3-2-1 spread. Take the price difference between three WTI NYMEX contracts and the sum of two NYMEX gasoline contracts plus one heating oil contract – then trade accordingly.

When crude falls. the entire complex floats down with it since the bulk market is fairly efficient and the downstream segments all use a cost-plus pricing model.

If domestic bulk markets fail to react to lower crude prices, several large players can bring product in from Europe to capture the arbitrage.

Since the vast majority of transactions are priced on a cost-plus basis, companies compete on their ability to “buy right”, on the efficiency of their operations, and their opportunity for more profitable ancillary sales. .

* * * * *

(2) Retail CompetitionFew prices are signaled to potential customers more visibly than gasoline prices.

There are often 2 or 3 gas stations on a corner, so consumers are tempted to chose the cheapest one even if it’s only a cent or two cheaper per gallon. The conventional wisdom is that brand loyalty is low.

The same price pressures evident in the wholesale rack markets since unbranded retailers have the option of buying from multiple terminals. If Shell is less expensive than Exxon on a particular day, Shell gets the sale in the unbranded and spot channels of trade.

* * * * *

(3) Threat of Regulation

A third force is the threat of government action.Pricing through the entire oil value chain is very transparent. Timely price data available from multiple sources for every segment of the market (DOE data, NYMEX, bulletin board exchanges, broker quotes, daily PLATT and OPUS surveys, AAA retail surveys, etc.).Oil companies generate two-thirds of their profits from crude oil production and refining. The wholesale and retail marketing and distribution parts of the business is generally considered mote of a cost of going business (i.e. overhead) than a profits source. So, oil companies would rather play it safe (from government regulators) than try to eek out an extra half percentage point of profit at the wholesale or retail level.

>> Latest Posts

Flashback: Thinking about $4 per gallon gas …

March 6, 2012

Since gas prices are on many people’s minds these days, I pulled the following post out of the archives.  Originally posted August 22, 2008, it’s strikingly current today.

* * * * *.

Most folks wonder why the pump price of gas is surging this year.

I ask a different question: why didn’t the oil companies — branded by most folks as evil profit grubbers — push the price up into the $4 /gallon range a year or two ago?

In my pricing course, I harp on a basic point: marketers should be respectful of costs (i.e. never sell stuff below “fully-loaded cost” plus an acceptable profit), but they MUST price to the market. That is, they should determine the price that the market will bear, and then adjust accordingly to maximize profits — taking into account downward sloping demand curves and volume-related cost functions.

It’s starting to look like $4 per gallon gasoline is about what the market will bear. That’s the price point where folks started to cutback in gas consumption the past couple of months.

* * * * *

Question: Why did the oil companies wait for the cost of crude to push up gas prices? To me, it seems that the oil companies have actually showed restraint over the past couple of years.

* * * * *

Here’s a crude analysis (pun intended):

Simply divide the price of a barrel of crude over the past couple of years by 42 (since the are 42 gallons per barrel), and compare the result to the retail price of gasoline (which is usually expressed per gallon).

The difference — gasoline’s “back of the envelope” mark-up over crude prices — is plotted below.

Note that for the past 9 months, or so, the crude mark-up been about $1 per gallon — at the low end of the historical range.

image

* * * * *

Since the cost of a barrel of crude has skyrocketed over the past couple of years, the percentage mark-up has trended down. Hmmm.

image

* * * * *
Bottom Line:

It certainly looks like the oil companies price gasoline using some sort of “cost plus” formula.

I think the oil companies left a lot of profits on the table during the past couple of years — the retail gas market would probably have borne higher prices.

Now, I’m betting that retail gases will be “sticky” — there will be a “ratchet effect” and gas prices will come down proportionately slower than crude oil prices.

And, I predict that if the oil companies get hit with a windfall profits tax, they’ll just pass the tax along into retail gas prices. Just watch.

* * * * *

Analytical note:

The “real” calculations re: the economics of converting crude oil into gasoline are way more complicated than the above simple analysis (e.g. only about 1/2 of a barrel of crude is made into gasoline, there are refining and distribution costs, the 1/2 barrel that doesn’t go into gas earns other profits).

My bet: the conclusions drawn from a more precise analysis would be directionally the same, and probably pretty close to the $1 per gallon — which has a certain memorable ring to it.

>> Latest Posts

Obama says “Drill, baby, drill” … wanna bet?

May 16, 2011

Big week in oil …

On Tuesday, the  U.S. Interior Department issued a permit for Exxon Mobil to drill in the deep waters of the Gulf of Mexico.  That’s only the fourth deepwater permit issued since the BP oil spill.

On Thursday, the CEO’s were guests at a kangaroo court conducted by some press-preening Senators who seemed to think that raising taxes on oil companies would cut the price of gasoline at the pump. Apparently Econ 101 isn’t a prerequisite for the Senatorial junket.

Then, the best of the week came in Obama’s radio address when he reiterated his long-standing support for domestic oil drilling.

Say what?

To be more specific, the president, in his address, said he supported increased domestic oil and gas development, if done safely and responsibly.

English translation: not while he and rapster Common are hangin’ at the White House.

He further clarified his position: “(Let me be clear) … Under the plan, the coastline from New Jersey northward would remain closed to all oil and gas activity. So would the Pacific Coast, from Mexico to the Canadian border.  Further, The environmentally sensitive Bristol Bay in southwestern Alaska would be protected and no drilling would be allowed under the plan.“

As Mavis Johnson* would say: “Anything between the radio and the bicentennial mugs … not including the erasers or the Chiclets … everything in the 3” area right here.”

My bet: no noticeable change in the rate of deepwater licenses granted.

Even the mass media didn’t go for this head fake.  Coverage ranged from slim to none.

Which raises another question: why does the President give a Saturday morning radio address?

Does anybody ever listen to it?

* * * * *

*  Just in case you forgot, Mavis Johnson was Steve Martin’s character in “The Jerk”.

Section 199 – Domestic Production Activities Deduction … a loophole for big oil … huh?

May 12, 2011

An editorial by former Congressman Harold Ford aroused my curiosity …

The subject was President Obama’s opposition to domestic oil drilling.

The part that caught my eye had to do with the “tax loopholes” that Obama was repealed because oil company profits – and gas prices — are rising.

Ford says:

“Why, when gas prices are climbing, would any elected official call for new taxes on energy? And characterizing legitimate tax credits as “subsidies” or “loopholes” only distracts from substantive treatment of these issues.

Lawmakers misrepresent the facts when they call the manufacturing deduction known as Section 199—passed by Congress in 2004 to spur domestic job growth—a “subsidy” for oil and gas firms.

The truth is that all U.S. manufacturers, from software producers to filmmakers and coffee roasters, are eligible for this deduction.

WSJ, Washington vs. Energy Security, MAY 11, 2011

What’s the loophole”?

Sec. 199 is officially the Domestic Production Activities Deduction.

It says that a business engaged in a qualifying production activity is eligible to take a tax deduction of  9%.

What’s a qualifying production activity?

Qualified domestic production activities include: “the production of electricity, natural gas or potable water in the U.S. and the manufacture, production, growth or extraction of tangible personal property, computer software,, including the development of video games, or sound recordings or qualified films “

Hmmm.

Why isn’t the President talking about the tax loopholes for CDs, films and video games?

Take the tax advantage away from oil companies, but preserve it for video game makers.

You just can’t make this stuff up …

Highest level of domestic oil production in history … (just kidding)

May 11, 2011

The Campaigner-in-Chief has been at it again, claiming that (thanks to him) domestic oil production is at a historic high.

Au contraire, mon friere …

According to the Dept. of Energy, U.S. oil production is about half of what it was in the 1970’s.

Yes, there has been a turn upward in the past year or so, as wells approved by the Bush administration come on line.

Hmmm.

Is the President misinformed or misleading?

image

Re: gas prices … President mocks (other) politicians and their 3-point plans … and offers up his 4-point plan

April 25, 2011

In his weekly radio address, speaking on fast rising gas prices, Obama said:

“Whenever gas prices shoot up, like clockwork, you see politicians racing to the cameras, waving three-point plans for two dollar gas.”

Literally in the next paragraph, he offered up his 4-point plan.

  • Safe and responsible production of oil at home
  • Rooting out cases of fraud or manipulation in the oil markets
  • Ending the subsidies given to oil and gas companies
  • Investing in tomorrow’s clean, renewable energy sources: hybrids and electric cars

Whew!

Finally a game-changing 4-point plan … albeit with a couple of holes:

  • Domestic production … Obama has capitalized on the BP blowout to stop practically all new US domestic oil production
  • Fraud & abuse … just like the fraud & abuse being rooted out of the healthcare system.  I’ll take the under bet.
  • Oil company subsidies … strip the oil companies of subsidies and they’ll lower prices at the pump …  hmmm, so that’s how business works
  • Electric cars … birth to date, about 1,000 Chevy Volts have been sold.  Not exactly the iPad adoption rate.

Ken’s Plan: Start drilling, release strategic reserves and, most important, stop devaluing the dollar.

U.S. boot on BP’s throat lifted … by Russia.

January 20, 2011

Remember when Obama’s crack Secretary of the Interior — Cowboy Ken Salazar – said he was putting his boot on BP’s throat and keeping it there “until” they paid up?  Then, he and Obama demanded that BP set up a $20 billion account to fund recovery efforts. 

  • Side track: whatever happened to the recovery?  Haven’t heard much about it lately, have you?

Well, I guess the boot can be lifted from BP’s throat now … thanks to the Russians.

The NY Times reports:

Russian companies are talking to BP about buying billions of dollars in oil fields and other assets to help it pay its gulf cleanup and compensation costs.

Along with a partner, BP is planning to explore the rich oil fields in Russia’s Arctic waters, a region that is off limits in the United States and Canada.

And BP’s chief executive, Tony Hayward, who is turning over the reins this Friday to Robert Dudley, is being welcomed onto the board of TNK-BP, the company’s 50-50 joint venture in Russia.

NY Times, In Russia, BP Sees a Second Act, September 29, 2010

Though BP seems doomed to years of hostile regulation and lawsuits in the United States, in Russia, the second-most important country for the company’s operations, BP’s fortunes are brighter than ever.

Guess we showed them.

Where to invest: United States, Russia, Venezuela ? … or, none of the above?

September 17, 2010

Punch line: Washington’s shakedown of BP may cause other multinationals to flee to a more hospitable haven: Canada.

Side note:  I’ve often said that the discarding of established bankruptcy / contract law to pay off the UAW before GM’s secured creditors was a defining moment for US commerce.  So, the BP action shouldn’t have surprised anyone.

* * * * *

Excerpted from The Globe: The great drain, August 26, 2010          

Assume you are a big-name international resource producer, maybe an oil company.

From the following selection, choose two countries where you would most want to operate:  Canada, United States, Russia, Venezuela, Bolivia and Ecuador.       

That’s easy.

You’d pick the first two, because the others have had scant regard for  the rule of law.

At one point or another, each has been accused of expropriation or other  acts of aggression toward foreign investors.

Since you are accountable to your shareholders,  you strike those countries off your list.                            

Today, however, you might want to strike the United States off the list, too.

The  response of the Obama White House and Congress to the BP oil leak in the Gulf of Mexico is  sure to have foreign investors trembling.

As the damage claims roll in like a hurricane, BP  has become the world’s biggest ATM.

BP never expected to pay the ultimate price for the sub-sea blowout.

That’s because of the 1990 Oil Pollution Act  placed a $75-million liability cap on monetary damages payable to public and private
parties (except where negligence was proven).                        

In BP’s case, that cap was quickly deemed null and void.

In short, the U.S. government dictated financial responsibility in a politically  driven way well before blame for the leak had been determined in a court of law.

BP’s now massive liability may downgrade the world’s view that the United States is  an investment haven.

America’s loss could be Canada’s gain.

Full article:
http://www.theglobeandmail.com/report-on-business/rob-magazine/the-great-drain/article1683458/

Thanks to JWC for feeding the lead

Back to the Future: BP distributors consider “retro-branding”

August 1, 2010

BP  bought Amoco in 1998 and many current BP distributors used to be Amoco distributors.

Those distributors began a campaign soon after the spill started, emphasizing that BP fuel stations are locally owned and operated.

Now, some BP gas station owners in the United States want to drop the BP name and return to the Amoco brand to recover business hit by public anger over the Gulf of Mexico oil spill disaster.

Note: there’s a major complication: the Amoco brand name is owned by BP, not by the distributors.

* * * * *

Source: Reuters, US BP distributors consider reverting to Amoco brand, Aug 1, 2010 
http://www.alertnet.org/thenews/newsdesk/N01235110.htm

Why are gas prices artificially high on the the East Coast ?

July 1, 2010

This was a reply to our post on the Super Skimmer that’s been kept out of the Gulf clean-up.

A different twist on the now famous Jones Act that I thought was pretty interesting.

The Jones Act also plays a part in higher gasoline and diesel prices on the East Coast.

The US East Coast doesn’t have enough refining capacity to meet in sitsu needs and must bring in fuel from the Gulf Coast or foreign markets. The pipelines from Texas and Louisiana are full and Jones Act ships are fairly small and carry higher per cargo unit operating costs compared to internationally flagged vessels.

Therefore ~25% of the gasoline sold along the East Coast is imported from Europe and the Caribbean.

Seems like changes in the Jones Act on this issue could create more jobs for refiners and longshoremen in the US, reduce the total carbon footprint of a gallon of gasoline and reduce fuel prices by a few cents per gallon.

Thanks to MSB MBA alum Chris H.

Alibi Ike … and other great lines from George Will.

June 24, 2010

Conservative columnist George Will offered up his review of Obama’s oval office oil spill speech.

The link is below … here are some of my favorite lines:

  • The news about his speech is that it is no longer news that he often gives bad speeches. This one, however, was almost magnificently awful.
  • There were trite war metaphors about “the battle” against oil “assaulting” our shores, for which “siege” he has a “battle plan.” (Our government declares war promiscuously — on drugs, poverty, cancer, environmental problems, etc. — but never when actually going to war.)
  • As usual, he attacked George W. Bush. (Chicagoan Obama resembles the fictional baseball player invented by Chicago’s Ring Lardner — Alibi Ike.)
  • He introduced a weird lament about a problem he has aggravated: “We’re running out of places to drill on land and in shallow water.” He and his party oppose drilling in the tundra of ANWR and in shallower coastal waters.
  • “The one answer I will not settle for is the idea that this challenge is somehow too big and too difficult to meet. You see, the same thing was said about our ability to produce enough planes and tanks in World War II.” Was it really? By whom? Most Americans then were too busy producing—and flying and driving—planes and tanks to entertain the thought Obama imagines was prevalent.
  • Advisers should explain to our Demosthenes that the correlation between the quantity of his speaking and the fortunes of the things for which he speaks is inverse.
  • Diminishing returns from his rhetoric may reflect the public’s recoil from wretched excess everywhere. The unceasing torrent of his ill-chosen words is analogous to the unstoppable oil spill, which itself resembles his and his party’s incontinent spending.

Newsweek, Word Spill – Our Demosthenes is also Alibi Ike, June 20, 2010
http://www.newsweek.com/2010/06/20/word-spill.html

‘Ridiculous finger-pointing’ or ‘systemic failure’ … it’s in the eye of the beholder, I guess.

May 18, 2010

Last week, President Obama lambasted BP, TransOcean and Halliburton for “ridiculous finger-pointing” that he “didn’t appreciate”.

Ridiculous finger-pointing ? 

Hmmm.

So, the President points his finger at, well, finger-pointers.  That in itself is funny, isn’t it ?

From a guy who then went to a fundraising event where he proceeded to point his finger (again) at Pres. Bush for everything except the Bubonic Plague.

From a guy whose department heads in State, Homeland Security, NSA, CIA, FBI all pointed their fingers at the others – to duck blame for the Xmas underwear bomber.

In that case, the finger pointing was legitimized as characterizing a “systemic failure”. 

Translation: it was nobody’s responsibility – certainly not the President’s.

Why didn’t BP, TransOcean and Halliburton just claim the oil well blast & leak was simply a systemic failure ?  Then, maybe, the President wouldn’t have pointed his finger at them for finger pointing !

BP’s brand equity … it’s leaking, too.

May 5, 2010

Some Homa family members avoided Exxon stations like the plague after the Valdez accident.  My bet: they weren’t alone.

Same fate for BP (nee British Petroleum} ?

Early data says yes — BP has gone from being No. 1 in its category in a brand-loyalty index maintained by research company Brand Keys — to dead last.

Next question for BP: how to restore its brand equity ?

Good news for BP: no signifcant retail competitors except , well, Exxon.

Excerpted from BrandChannel: BP’s Brand: Is the Damage Done?, May 3, 2010

BP’s brand equity has exploded almost as quickly as its faulty well mechanism at the bottom of the Gulf. Reportedly, BP has gone from being No. 1 in its category in the brand-loyalty index maintained by Brand Keys — to dead last.

Part of BP’s long-term problem will be that the company has gone so far out of its way over the last several years to position itself as the “green” oil company, with a sunny new logo composed of green and yellow; a new slogan, “Beyond Petroleum,” and the playing up of the BP acronym instead of its name; and its boasts about alternative-energy initiatives such as wind farms.

All of that seems laughably hollow now as BP is unmasked as – gasp! – basically an oil company — drilling the world’s deepest wells in the Gulf of Mexico, scouring for oil in the Arctic, squeezing natural gas from the rocks of Oman.

British Petroleum must fight to not join the ranks of all-time corporate villains, a list that includes fellow oil giant Exxon Mobil, which achieved infamy for Alaska’s Valdez disaster in 1989.

While BP is adamant that it will clean up this spill — the bigger challenge may very well be cleaning up and restoring the BP brand.

Full article:
http://www.brandchannel.com/home/post/2010/05/03/BP-Brand-Damage.aspx

The "spill" will be a problem for Obama … here’s why.

May 4, 2010

Lots of chatter on the right-leaning talk shows along two points:

(1) Obama was slow to respond to the crisis … no better than Bush on Katrina.

(2) There goes off-shore drilling as a source of oil for the U.S.

I can’t take the slow response criticism seriously.  I didn’t think Bush deserved it (should he have declared the LA Governor and N.O. Mayor to be grossly inept and Federalized the state ?)  … so I can’t criticize Obama on this one.

Interestingly, Obama got boxed by some bad timing.  Just a couple of weeks ago he announced expansion of off-shore drilling. While the announcement had no substance to it (actually cut back on authorized areas), it did provide some pro-drilling sound bites.  If he hadn’t said it, he would be in the catbird seat now: “See, I told you offshore drilling was bad.”  But, now he’s rhetorically in the offshore canoe.  We’ll see on that one.

My take: There will be a ‘discontinuity’ in offshore production.  This well is gone, and others will be shut or slowed by government inspections and reviews.

So what? 

I expect gas prices to be over $4 by the end of the summer … and maybe as high as $5 … due to curtailed supply and the oil companies costs of clean-up and mandatory rig upgrading.

The impact? Uh-oh for the economy. Oil is a major cost component of many products.  So, if oil prices spike, a broad range of prices to go up, demand will falter, and the expected recovery will sputter.

That means that unemployment stays high going into the November elections.

That’s a problem for the President.

High-speed trains: Faster than a car … and just about as profitable.

April 27, 2009

Business Week says:

“By committing $13 billion to high-speed train travel, the Obama Administration is giving long-dormant projects a boost

A priority is a line that would whiz passengers 520 miles from Anaheim to San Francisco in less than three hours and upgrades of Amtrak service in New England and the Midwest to reach speeds of up to 150 mph.”

* * * * * 

The article also notes:

(1) U.S. government analysts concede that it’s impossible to run these hugely expensive networks profitably.

(2) Among the interested investors: Japan Railway, Bombardier, Kawasaki, and Siemens. (Notice anything “interesting” about the list?)

The article glosses over our national success running Amtrak.

That sucking sound you hear is more of money leaving your wallet (assuming that you’re in the half of Americans who pay income taxes)

* * * * *

Full article: Business Week, “U.S. High-Speed Train Projects Get a Push”, April 23, 2009
http://www.businessweek.com/print/magazine/content/09_18/b4129029604145.htm

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Japan Jumps Ahead: The Honda/Toyota Hybrid War Leaves Detroit Playing Catch-Up

April 7, 2009

Excerpted from BusinessWeek, “Toyota, Honda Heat Up the Hybrid War”, by Ian Rowley, March 27, 2009

* * * * *

Honda and Toyota are launching hybrid cars in quick succession—and neither one is skimping when it comes to generating hype. The Honda Insight boasts a sub-$20,000 sticker price, fuel economy of 40 miles per gallon in the city and 43 mpg on the highway, and is arguably more fun to drive. The latest Toyota Prius is larger than its Honda rival, gets better mileage, and (unlike the Insight) has an EV mode, where the driver instructs the car via the touch of a button to run solely on battery power. However, the soon-to-be-released Prius is expected to be more expensive, with a U.S. sticker price starting at around $23,000.

Toyota is also planning a smaller, cheaper hybrid based on its Yaris platform to take on the Insight. “We are going to compete by expanding our hybrid vehicle lineup to smaller hybrids.”

Toyota is also taking the unusual step of selling a cheaper version of the current Prius alongside the new one. “There will be demand for the two to co-exist,” Toyota said at the unveiling of the new car for the Japanese market. This cheaper Prius, like the Insight, will go on sale in Japan for less than $20,000.

* * * * *

Analysts question, however, the impact of launching a cheap version of the old Prius alongside the new one. They worry the older Prius may eat into sales of the new Prius and similar-sized models such as the Corolla, or that it might force Toyota to cut prices of nonhybrid models.

The new Prius may go on sale in Japan for as little as $20,900, which would be $3,000 cheaper than the current model—even though the new Prius has a larger engine and is more luxurious.

* * * * *

It is feasible, though, that both companies can win the hybrid war. For one thing, the rivalry is helping to bring the “hybrid premium”—the incremental cost of making hybrids compared with regular vehicles—down to levels where owning is as much about economic sense as sending an “I’m green” message.

Improved production efficiency is just as important. Honda can now make 250,000 hybrid cars a year at its Suzuka plant. Increased scale is making it easier to bring down costs. The company increased the number of workers assembling battery modules from 20 to 54. But by increasing automation, Honda now has the capacity to produce 1,000 packs a day, vs. about 250 before the Insight went into production.

At Toyota, engineers didn’t quite manage to reduce the size and cost of the Prius’ new-generation hybrid system by half, but both have been reduced by 25% to 35%, compared with the current second-generation model.

* * * * *

In a deep recession, meeting sales targets will be tough for both companies. Still, even if sales disappoint, the new models will help the two Japanese companies maintain their dominant market share in hybrids. Although rivals are launching more gas-electric vehicles, no other automaker is yet close to producing hybrids in the hundreds of thousands.

Edit by DAF

* * * * *

Full article:
http://www.businessweek.com/print/globalbiz/content/mar2009/gb20090327_626019.htm

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* * * * *

Cap & Trade … and you think mortgage-backed derivatives were risky

April 6, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

The essence of cap and trade:

Congress puts a ceiling on emissions, and then allows businesses to sell any of its extra allowances that stand for the right to emit, it is essentially creating the world’s largest commodity market — in carbon-backed securities. These will be extremely valuable, and everything comes down to how the government chooses to distribute them. ”

Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

* * * * *

Ken’s Take: Think about it … a financial derivative tied to the amount of carbon that an energy generating facility doesn’t emit.  At least mortgage backed securities were, well, backed by mortgages — albeit risky ones.  These derivatives would be backed by, well, nothing, except a Congressional definition that could change at Barney Frank’s whim.  You’d think that Enron and the current financial mess would have soured folks on those sorts of financial instruments.

* * * * *
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Cap & Trade … if it smells like a tax …

April 3, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009 

Ken’s Take: The Bushers were clever rebranding the estate tax as the more pejorative sounding “death tax”.  Team Obama is similarly clever calling their energy tax “cap and trade”.  Doesn’t change the essence — it’s a tax.

* * * * *

On pure economic grounds, a straight carbon tax, would be simpler and more efficient than cap and trade.

But “the political will to go the tax route . . . is just not there. Nonexistent” — namely because the use of the word “tax.”

The cap & trade approach is to design a  program that will “simulate the same thing a tax would do.”

That is, to achieve the increased energy prices essential to the success of cap and trade.

* * * * *
Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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Cap & Trade … the Chinese dilemma

April 2, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

With breakneck construction of conventional coal plants, China has already surpassed U.S. coal capacity and is on pace to double it sometime in the middle of the next decade.

The U.S.,could close down every single coal plant immediately … but that wouldn’t do much good in the scheme of things,” because atmospheric CO2 concentrations would continue to rise as China continues to expand.

“We go to zero emissions in this country, and if China doesn’t follow us, we’re nowhere. . . . We’ve just ruined our economy, and we’re nowhere,”

China’s not going to follow us because we’re the United States. . . . You say, ‘Shut down your plants’ — well, that’s going to be a short conversation. China has $2 trillion invested in their plants.” 

Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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Cap & Trade … the Nuclear Dilemma

April 1, 2009

Factoid: 79% of France’s electricity is nuclear generated.

* * * * *
Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

On the one hand, environmentalists claim that climate change is a “planetary emergency,” perhaps the greatest threat ever to face humanity. On the other, nuclear energy is still verboten in the green catechism — despite the fact that it provides roughly one-fifth of U.S. electricity, all of it free of carbon emissions. Without more nuclear power, it is nearly impossible to see even the glimmers of any low-emission future.

* * * * *
A lot of companies stand to make a bundle off cap and trade.

Ironically, the nuclear industry stands to benefit as much as any “green” business from a carbon crackdown.

So, if Congress does create cap and trade, expect the next populist outcry to be for a windfall profits tax on nuclear.

* * * * *
Ken’s Take: … and don’t expect any more nuclear power plants to be brought on line.

* * * * *
Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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California Dreamin’ … Weed, yes … Oil, no.

March 5, 2009

Recent press reports say Golden Staters are considering the legalization of maijuana as a means of increasing state revenues to offset CA’s huge budget deficit.

But, no reported consideration for off-shore oil drilling.  Hmmmm.

According to  a recent study by the American Energy Alliance, an industry research group, developing our offshore energy resources would create in the coming years:

$8.2 trillion in additional GDP.

$2.2 trillion in total new state and federal tax revenues.

1.2 million new jobs at high wages.

$70 billion in added wages (all taxable) to the economy each year.

The much maligned Gov Palin proved that eco-sensitive drilling can bulge state coffers … and cut citizens tax bills.

Pro-weed, anti-oil … that says it all, doesn’t it …

* * * * *
Source of AEA info:
http://www.ibdeditorials.com/IBDArticles.aspx?id=320544753372991

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Is lithium the oil of the future? … If so, one foreign dependency gets replaced by another.

December 23, 2008

Electric hybrid cars are the secret sauce that will save the planet and free the U.S. from its dependency on foreign oil, right?

Well, the environmental benefits are apparent, but we’ve got a problem.  Batteries are the major cost component of hybrid electric cars (running from $3,000 to $5,000 each).  Right now, industrial strength rechargeable batteries are made mostly in Japan and China — not in the U.S.  A consortium of U.S. companies is soliciting government money to develop and build batteries here.  That’s good.  But, there’s another problem: Lithium — the major element that goes into the current battery of choice — is only minimally available in the U.S.  Uh oh.

* * * * *

Excerpted from “The Trouble with Lithium”, Meridian International Research, Dec. 2006

The world is embracing the Lithium Ion battery as its answer to mobile electrical energy storage needs (translation:  for use in cars).

All other technologies are being more or less swept aside by the attraction of the potentially high energy density of Lithium based batteries.

The most well known alternative to LiIon is the NiMH battery. It is rugged, proven, has high cycle life and has many years development behind it. However, it is heavier than LiIon, very Nickel intensive. (and poses an environmental disposal challenge).

Analysis of Lithium’s geological resource base shows that there is insufficient Lithium available in the Earth’s crust to sustain Electric Vehicle manufacture in the volumes required, based solely on LiIon batteries.

Depletion rates would exceed current oil depletion rates and switch dependency from one diminishing resource to another.

Analysis shows that a world dependent on Lithium for its vehicles could soon face even tighter resource constraints than we face today with oil.

Concentration of supply would create new geopolitical tensions, not reduce them.

Exclusive dependency on Lithium Ion batteries, where the Lithium will overwhelmingly come from South America, would be like being dependent on South America for 100% of our oil supply.

image

Full technical article:
http://www.evworld.com/library/lithium_shortage.pdf

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High "Volt"-age? Can Their New Hybrid Jump Start GM?

December 2, 2008

Excerpted from the New York Times, “G.M.’s Latest Great Green Hope Is a Tall Order”, by Micheline Maynard, November 22, 2008

* * * * *

The Chevrolet Volt, a plug-in hybrid, will not arrive in showrooms until late 2010. But it is already straining under the weight of an entire company.

Executives at GM are using the Volt as the centerpiece of their case to a skeptical Congress that their business plan for a turnaround is strong, and that a federal bailout would be a good investment in G.M.’s future.

But whether the Volt can live up to its billing is already a matter of debate. And some industry analysts note that GM has a poor track record of introducing green technology to the market.

* * * * *

The Volt is a big long-term bet. New vehicles typically cost $1 billion to develop, and the Volt requires new technology that probably inflated that price tag even more.

G.M. says the car, which is scheduled to arrive in showrooms two years from now, will be able to travel 40 miles on a charge, but it will also have a small gas engine to extend the range to as much as 640 miles using both the battery and gasoline. It is expected to cost about $40,000.

To some, the Volt will remain a niche vehicle until its cost drops sharply and its range rises dramatically.

“If you’re the affluent individual who wants to make a statement, it’s one thing.”  “If you’re Joe the Commuter, you’re not going to spend $40,000 on an electric car. It’s insane.”

* * * * *

Once it arrives, GM believes, customers will adjust more rapidly to the Volt than they did to the Prius, Toyota’s hybrid gas-electric car. “I don’t think that’s going to be that big a deal for most people to get their heads around.”

“We’ve turned into a plug-in society. We’ve got cellphones, PDAs, you name it, that are all plugged in. To a certain extent, it’s not much more complicated conceptually than coming in and plugging in your cellphone.”

* * * * *

The Volt is not General Motors’ first electric vehicle. In 1996, G.M. started leasing the EV1, an electric car, to customers in California. Although its few hundred owners loved it, the EV1 was discontinued just three years later.

G.M. reportedly spent about $1 billion in the 1990s to develop the EV1, which it dropped after saying it could not make money on the cars. The EV1, which was available only in lease deals, sold for the equivalent of up to $44,000 but cost G.M. about $80,000 apiece to make.

Other efforts to earn green bragging rights have missed the mark, too. Only two years ago, G.M. promoted flexible fuel cars that run on E85, a blend of ethanol and gasoline, as the way to wean Americans off gasoline. But interest in ethanol has waned amid concerns about the environmental impact of using corn for fuel rather than food.

The company is building its largest sport utility vehicles with hybrid gas-electric power trains as well, but they have sold poorly.

Edit by DAF

* * * * *

Full article:
http://www.nytimes.com/2008/11/22/business/22volt.html?pagewanted=print

* * * * *

From Business Week, a compendium of articles re: Hybrid Cars
http://bx.businessweek.com/hybrid-cars/

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* * * * *

In the new political economy, smart lobbyists will be arriving in hybrids …

December 1, 2008

Excerpted from IBD, “Job One: Wean The Economy Off Of Politics”,  Krauthammer,  November 28, 2008

* * * * * 

We have gone from a market economy to a political economy.

In the old days, if you wanted to get rich, you did it the Warren Buffett way: You learned to read income statements and balance sheets. Today you learn to read political tea leaves.

Today’s extreme stock market volatility is largely a reaction to meta-economic events: political decisions that have vast economic effects. You don’t anticipate Intel’s third-quarter earnings; instead, you guess what side of the bed Henry Paulson will wake up on tomorrow.

We may one day go back to a market economy. Meanwhile,  the two most important implications of our newly politicized economy are the vastly increased importance of lobbying and the massive market inefficiencies that political directives will introduce.

Lobbying used to be about advantages at the margin — a regulatory break here, a subsidy there. Now lobbying is about life and death.

You used to go to New York for capital. Now Wall Street, broke, is coming to Washington. With unimaginably large sums of money being given out, Washington will be subject to the most intense, most frenzied lobbying in American history.

The other kind of economic distortion will come from the political directives issued by newly empowered politicians.

For example, bank presidents are gravely warned by one senator after another about “hoarding” their bailout money. But hoarding is another word for recapitalizing to shore up your balance sheet to ensure solvency. Isn’t pushing money out the window with too little capital precisely the lending laxity that produced this crisis in the first place?

Even more egregious will be the directives to a nationalized Detroit. Sen. Schumer, the noted automotive engineer, has declared “a business model based on gas” to be completely unacceptable. He says,  “We need a business model based on cars of the future: the plug-in hybrid electric car.”

The Chevy Volt, for example? It has huge remaining technological hurdles, gets 40 miles on a charge and will sell for about $40,000, necessitating a $7,500 outright government subsidy. Who but the rich and politically correct will choose that over a $12,000 gas-powered Hyundai?

The new Detroit churning out Schumer-mobiles will make the steel mills of the Soviet Union look the model of efficiency.

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Full article:
http://www.ibdeditorials.com/IBDArticles.aspx?id=312760589983880 

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