The U.S. Environmental Protection Agency (EPA) and the Department of Energy (DOE) today released the 2015 Fuel Economy Guide, providing consumers with a valuable resource to help them choose the most fuel-efficient and low greenhouse gas emitting vehicles that meet their needs.
Read more at: Breaking Energy
Since the oil plunge began in June, speculation has been rampant that the Organization of the Petroleum Exporting Countries might act to cut production to keep prices from falling further.
The 12-member OPEC cartel is due to meet Nov. 27 for a regularly scheduled meeting. But some officials with the group, meeting informally this week in Vienna, told The Wall Street Journal that a per-barrel price of $70 — from the current level of about $80 — would trigger action.
The paper’s story Friday said:
“At $70 a barrel, there will be panic in OPEC. We have become used to living with $100 a barrel,” said one OPEC official, speaking on the sidelines of the meeting.
Chevron spent more than $3 million to back three candidates for city council in Richmond, Calif. But voters rejected all three, in favor of candidates who have been critical of the oil giant, which is the largest taxpayer and employer in the Northern California city.
Richmond, north of Berkely, is about 45 minutes’ drive from San Ramon, to the south, which is the headquarters for Chevron. As Al Jazeera America reports:
For years, Richmond was known in the San Francisco Bay Area simply as a hub of high crime, pollution, and poverty. Politicians here had unabashedly close ties to Chevron — until 2008, most local elected officials were sympathetic to the company, which maintained a desk in the city manager’s office through the 1990s. But city politics began to change in 2004, when McLaughlin won a city council seat and then, two years later, became mayor.
The city has since risen into the national spotlight several times, partly because of [former mayor and Green Party member Gayle] McLaughlin’s willingness to take on Chevron, which is Richmond’s largest taxpayer and employer. Last year, the city sued the refinery after a 2012 fire sent thousands to area hospitals complaining of respiratory problems. “We don’t see Chevron as the source of keeping our economy going,” McLaughlin said defiantly at the time.
In response, Chevron has gone to great lengths to try to regain public sympathy, and to oust its opponents from local office. Earlier this year, the company launched its own online news outlet, the Richmond Standard, which offers both daily stories on local events and a section called “Chevron Speaks,” where the company posts its views. In the weeks before the election, the company plastered local billboards and stuffed residents’ mailboxes with ads attacking McLaughlin and her allies and supporting candidates backed by Moving Forward, one of its Richmond-based political action committees.
The campaign tactics seemed to have backfired, because all three candidates supported by Chevron lost. Now six of the seven spots on the Richmond council belong to Chevron critics.
The CEO of Oklahoma City-based petroleum producer Continental Resources is so certain oil prices will rise again that the company announced it has eliminated its oil hedges for all of 2015 and 2016.
Harold G. Hamm, whose company is the biggest oil producer in North Dakota’s Bakken oil-shale play, is “basically betting the company on the belief that oil prices won’t sink much more than the 25 percent decline they’ve experienced since June,” Forbes reported.
In its press release, which , Continental said that by eliminating its outstanding hedges, it had boosted its fourth-quarter profit by $433 million.
In the release, Hamm said:
“We view the recent downdraft in oil prices as unsustainable given the lack of fundamental change in supply and demand. Accordingly, we have elected to monetize nearly all of our outstanding oil hedges, allowing us to fully participate in what we anticipate will be an oil price recovery. While awaiting this recovery, we have elected to maintain our current level of activity and plan to defer adding rigs in 2015.”
I began what turned out to be a highly ranked leadership program for public officials at the University of Colorado in the early ’80s, as dean of the Graduate School of Public Affairs. I did the same for private-sector folks when I moved to Irvine, Calif., to run a leadership program involving Israeli startup CEOs for the Merage Foundations. Despite the different profiles of participants, one of the compelling themes that seemed pervasive to both — for- profits in Israel and governments everywhere — was and remains building the capacity of leaders to give brief, focused oral presentations or elevator pitches (or, as one presenter once said, “how to seduce someone between the first and fifth floor”). A seduction lesson in oil economics in a thousand words or three minutes’ reading time!
Now that I got your attention! Sex always does it! During the last few days, I read some straightforward, short, informative articles on oil company and environmentalist group perceptions concerning the relationship between the price of oil per barrel and the cost of drilling. Their respective pieces could be converted into simple written or oral elevator pitches that provided strategic background information to the public and political leaders — information often not found in the news media — press, television, cable and social media — concerning oil company or environmentalist decision-making.
This is good news. Most of the academic and, until recently, media coverage of the decline of oil and gasoline prices generally focuses on the dollar or percentage drop in the price of oil and gasoline from a precise date … 3 months, 6 months, a year, many years ago, etc. And, at least by implication in many of its stories, writers assume decision-making is premised on uniform costs of drilling.
But recently, several brief articles in The Wall Street Journal, MarketWatch, OilPrice.com, etc., made it clear that the cost of drilling is not uniform. For example, there is a large variation internal to some countries depending on location and geography and an often larger variation between and among oil-producing nations. Oil hovers around $80 a barrel now, but the cost of drilling varies considerably. In Saudi Arabia, it is $30 per barrel or less on average; in the Arctic, $78; in Canada’s oil sands $74; and in the U.S, $62.
If you’re responsible for an oil company or oil nation budget, a positive cash flow and a profit, you are likely to be concerned by increasingly unfavorable opportunity cost concerning costs of drilling and returns per barrel. In light of current and possibly even lower prices, both companies and nations might begin to think about the following options: cutting back on production and waiting out the decline, pushing to expand oil exports by lowering costs in the hopes of getting a better than domestic price and/or higher market share, lessening your investment in oil and moving toward a more balanced portfolio by producing alternative fuels. If you believe the present price decline is temporary, and that technology will improve drilling cost/price per barrel ratios, you might consider continuing to explore developing wells.
Up to now, the Saudis have acted somewhat counterintuitively. They have created dual prices. Overall, they have sustained relatively high levels of production. For America, they have lowered prices to hold onto or build market share and undercut prices related to U.S. oil shale. For Asia, they have increased prices, hoping that demand, primarily from China and India, and solid production levels in the Kingdom, will not result in a visible drop in market share.
However, the Saudis know that oil revenue has to meet budget needs, including social welfare requirements resulting in part from the Arab Spring. How long they can hold onto lower prices is, in part, an internal political and budget issue, since oil provides a disproportionate share of the country’s public revenue. But, unlike the U.S. and many other nations, where drilling for tight oil is expensive, the Saudis have favorable ratio between production costs and the price of oil. Again, remember the cost of production in the U.S., on average, is about 100 percent above what it is in Saudi Arabia and some other OPEC nations. Deserts may not provide a “wow” place for all Middle East residents or some tourists looking for a place to relax and admire diverse landscapes, but, at the present time, they provide a source of relatively cheap oil. Further, they permit OPEC and the Saudis to play a more important global role in setting prices of oil and its derivative gasoline than their population numbers and their nonoil resources would predict. Lowering prices and keeping production relatively high in the Middle East is probably good for the world’s consumers. But as environmentalists have noted , both could slow oil shale development in the U.S. and with it the slowdown of fracking. Both could also interest oil companies in development of alternative fuels.
Oil-rich nations in the Middle East and OPEC, which control production, will soon think about whether to lower production to sustain revenues. In the next few months, I suspect they will decide to risk losing market share and increase per barrel oil prices. U.S policy and programs should be recalibrated to end the nation’s and West’s often metabolic response to what the Saudis do or what OPEC does. Support for alternative replacement fuels is warranted and will reduce consumer costs over the long haul and help the environment. It will also decrease America’s dependence on Middle East oil and reduce the need to “think” war as a necessary option when developing America’s foreign policy concerning the Middle East.
Will U.S. auto-makers pay more attention to the claims they make about the mileage drivers can get from their cars?
Greater scrutiny is expected now that South Korean manufacturers Hyundai and Kia have been ordered to pay a total of $100 million in fines, and $250 million in other penalties, for overstating the miles-per-gallon claims on 1.2 million vehicles.
The settlement, announced Monday by the EPA, was praised by environmental groups.
“Consumers deserve accurate information on emissions and fuel economy when they go to the showroom,” Luke Tonachel, a senior vehicles analyst at the Natural Resources Defense Council, told The Los Angeles Times.
EPA Administrator Gina McCarthy declined to comment on whether other auto companies, like Ford, BMW and Mercedes-Benz — all of which have restated their own fuel-economy claims — would face any punishment.
According to The Detroit News:
“This is by far the most egregious case,” McCarthy told reporters, referring to Hyundai and Kia. She said the “discrepancies” by other automakers were “not as systemic.” She called testing by the Korean automakers “systemically flawed” and not in line with “normal engineering practices and inconsistent with how any other automaker has been doing this.”
As Bloomberg notes, vehicle owners curious about whether they can collect money can visit hyundaimpginfo.com and kiampginfo.com.
The L.A. Times says EPA investigators learned that Hyundai and Kia, corporate siblings who are South Korea’s two largest auto-makers, “chose favorable results rather than average results from a large number of tests that go into the certification of the fuel economy ratings.” The companies blamed the inflated results on “procedural errors.”
Christopher Grundler, director of the EPA’s Office of Transportation and Air Quality, said: “I am quite certain that automakers will be paying attention to this announcement. They don’t want to find themselves in this same situation.”
“It’s a puzzlement,” said the King to Anna in “The King and I,” one of my favorite musicals, particularly when Yul Brynner was the King. It is reasonable to assume, in light of the lack of agreement among experts, that the Chief Economic Adviser to President Obama and the head of the Federal Reserve Bank could well copy the King’s frustrated words when asked by the president to interpret the impact that the fall in oil and gasoline prices has on “weaning the nation from oil” and on the U.S. economy. It certainly is a puzzlement!
What we believe now may not be what we know or think we know in even the near future. In this context, experts are sometimes those who opine about economic measurements the day after they happen. When they make predictions or guesses about the behavior and likely cause and effect relationships about the future economy, past experience suggests they risk significant errors and the loss or downgrading of their reputations. As Walter Cronkite used to say, “And that’s the way it is” and will be (my addition).
So here is the way it is and might be:
1. The GDP grew at a healthy rate of 3.5 percent in the third quarter, related in part to increased government spending (mostly military), the reduction of imports (including oil) and the growth of net exports and a modest increase in consumer spending.
2. Gasoline prices per gallon at the pump and per barrel oil prices have trended downward significantly. Gasoline now hovers just below $3 a gallon, the lowest price in four years. Oil prices average around $80 a barrel, decreasing by near 25 percent since June. The decline in prices of both gasoline and oil reflects the glut of oil worldwide, increased U.S. oil production, falling demand for gasoline and oil, and the likely desire of exporting nations (particularly in the Middle East) to protect global market share.
Okay, what do these numbers add up to? I don’t know precisely and neither do many so-called experts. Some have indicated that oil and gas prices at the pump will continue to fall to well under $80 per barrel, generating a decline in the production of new wells because of an increasingly unfavorable balance between costs of drilling and price of gasoline. They don’t see pressure on the demand side coming soon as EU nations and China’s economies either stagnate or slow down considerably and U.S. economic growth stays below 3 percent annually.
Other experts (do you get a diploma for being an expert?), indicate that gas and oil prices will increase soon. They assume increased tension in the Middle East, the continued friction between the West and Russia, the change of heart of the Saudis as well as OPEC concerning support of policies to limit production (from no support at the present time, to support) and a more robust U.S. economy combined with a relaxation of exports as well as improved consumer demand for gasoline,
Nothing, as the old adage suggests, is certain but death and taxes. Knowledge of economic trends and correlations combined with assumptions concerning cause and effect relationships rarely add up to much beyond clairvoyance with respect to predictions. Even Nostradamus had his problems.
If I had to place a bet I would tilt toward gas and oil prices rising again relatively soon, but it is only a tilt and I wouldn’t put a lot of money on the table. I do believe the Saudis and OPEC will move to put a cap on production and try to increase prices in the relatively near future. They plainly need the revenue. They will risk losing market share. Russia’s oil production will move downward because of lack of drilling materials and capital generated by western sanctions. The U.S. economy has shown resilience and growth…perhaps not as robust as we would like, but growth just the same. While current low gas prices may temporarily impede sales of electric cars and replacement fuels, the future for replacement fuels, such as ethanol, in general looks reasonable, if the gap between gas prices and E85 remains over 20 percent — a percentage that will lead to increased use of E85. Estimates of larger cost differentials between electric cars, natural gas and cellulosic-based ethanol based on technological innovations and gasoline suggest an extremely competitive fuel market with larger market shares allocated to gasoline alternatives. This outcome depends on the weakening or end of monopolistic oil company franchise agreements limiting the sale of replacement fuels, capital investment in blenders and infrastructure and cheaper production and distribution costs for replacement fuels. Competition, if my tilt is correct, will offer lower fuel prices to consumers, and probably lend a degree of stability to fuel markets as well as provide a cleaner environment with less greenhouse gas emissions. It will buy time until renewables provide a significant percentage of in-use automobiles and overall demand.
Methanol is a bit of a mystery. It is the simplest form of hydrocarbon, one oxygen atom attached to a simple methane molecule. Therefore it burns. It is manufactured in small quantities, but production could be ramped up at any time.
Read more at: Real Clear Politics
Nebraska is the nation’s third-leading corn producer (behind Iowa and Illinois), and it’s also fertile ground for the ethanol industry.
As the state Department of Agriculture notes, Nebraska has 25 operating ethanol plants that produce more than 1.2 billion gallons of ethanol a year. These operations employ about 3,000 people.
So it’s no surprise that Nebraskans are ahead of much of the nation when it comes to adopting ethanol as a transportation fuel. There are 67 stations in the state where E85 (a blend of up to 85 percent ethanol and the rest traditional gasoline) is available, according to the Alternative Fuels Data Center.
About 10 percent of Nebraskans drive a vehicle that is branded flex-fuel, with the tell-tale badge on the rear or a yellow gas cap, meaning it can run any ethanol concentration (including E85) or gasoline or any blend of the two. The benefits of running E85 in a flex-fuel vehicle are numerous: It’s often cheaper than regular gas, even when you account for the roughly 30 percent reduction in fuel economy compared with gas; ethanol produces less toxic pollutants that harm health, and fewer greenhouse-gas emissions that harm the environment. The vehicle’s engine also has more power and better performance on ethanol.
In a story in the Grand Island Independent by Robert Pore this week, Gov. Dave Heineman encouraged Nebraskans who own flex-fuel vehicles to support the state’s ethanol industry, and take advantage of a renewable resource grown locally, by filling up with E85. “E85 continues to gain popularity across our state and country – allowing us to continue to reduce our dependence on foreign oil,” Heineman said.
Nebraskans will have the opportunity to learn more about ethanol and other replacement fuels during a free screening of the Fuel Freedom Foundation-produced documentary “PUMP” on Nov. 12 on the University of Nebraska campus in Lincoln. The film will be shown at 7 p.m. at the Mary Riepma Ross Media Arts Center, 313 N. 13th Street. As this calendar notice on the Lincoln Journal Star website notes, the screening will be hosted by the Nebraska Ethanol Board, the Urban Air Initiative and the Association of Nebraska Ethanol Producers. After the film, Doug Durante, executive director of the Clean Fuels Development Coalition, will lead a brief panel discussion and take questions from the audience.
“PUMP” is playing in theaters in several other cities, including Anchorage and Tucson. Visit PUMPTheMovie.com for more information.
Four years after the EPA approved E15 for use in cars and light trucks model 2001 and newer, members of the Travelers Motor Club and Association Motor Club Marketing have reported no problems as a result of using E15, said Gene Hammond and Mark Muncey, co-owners of these organizations. In a press conference hosted by the American Coalition for Ethanol (ACE) this morning, Hammond and Muncey said that they support E-15 (15 percent ethanol and 85 percent petroleum in motor gasoline).
Read more at: Farm Industry News
Image property of: Wikimedia
