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Obama mentions oil, Keystone in State of the Union

President Obama touched on several aspects of the energy debate during Tuesday night’s State of the Union Address, including:

Imported oil:

More of our kids are graduating than ever before; more of our people are insured than ever before; we are as free from the grip of foreign oil as we’ve been in almost 30 years.

Ramped-up U.S. oil production:

At this moment — with a growing economy, shrinking deficits, bustling industry, and booming energy production — we have risen from recession freer to write our own future than any other nation on Earth.

Consumers savings from cheap gasoline:

We believed we could reduce our dependence on foreign oil and protect our planet. And today, America is number one in oil and gas. America is number one in wind power. Every three weeks, we bring online as much solar power as we did in all of 2008. And thanks to lower gas prices and higher fuel standards, the typical family this year should save $750 at the pump.

The debate over the TransCanada Keystone XL pipeline:

21st century businesses need 21st century infrastructure — modern ports, stronger bridges, faster trains and the fastest internet. Democrats and Republicans used to agree on this. So let’s set our sights higher than a single oil pipeline. Let’s pass a bipartisan infrastructure plan that could create more than thirty times as many jobs per year, and make this country stronger for decades to come.

And something else about solar power:

I want Americans to win the race for the kinds of discoveries that unleash new jobs — converting sunlight into liquid fuel …

As The New Republic noted, it was the first time in his six SOTU Addresses that Obama mentioned Keystone:

It’s not surprising he’d weigh in now, given how Keystone has dominated the first few weeks of debate in the new Republican Congress. Lately, Obama has sounded skeptical of the pipeline’s economic benefits, but we still don’t have many clues as to how he will decide Keystone’s final fate in coming months.

(Photo: WhiteHouse.gov)

Oil prices surge in final half-hour of trading

January 14, 2015/in Economy, What's The Buzz staff /by Fuel Freedom Staff

Oil prices climbed took off in the final 30 minutes of Tuesday’s trading session, and analysts wondered whether the surge represented a temporary blip or the start of a comeback from a 7-month-long losing streak.

As Reuters noted, for most of the day oil was flat or slightly lower, owing to “data showing that U.S. crude oil stockpiles rose far more than expected last week.”

But Brent and U.S. crude each soared $2 late in the session. Brent, for February deliver, settled up $2.10 (4.5 percent), to $48.69 a barrel. That’s the biggest one-day advance since June 2012.

U.S. crude rose $1.01 (5.6 percent), to $48.48, the biggest one-day jump since August 2012.

Reuters added:

Most dealers saw the late-day rebound as a temporary correction in the seven-month slump that wiped more than 60 percent off of oil prices, reluctant to call the bottom of a rout that has repeatedly defied forecasts of a floor.

“(With the) velocity of the downward trend that we’ve been in, you can expect to see violent snapbacks,” said Tariq Zahir of Tyche Capital.

Even so, there were growing signs that low prices were finally beginning to slow the unrelenting growth in U.S. oil production, a key factor for markets as OPEC powerhouse Saudi Arabia refrains from cutting output despite a growing glut.

North Dakota’s chief oil regulator said he expects production to be steady until mid-year and could decline in the third quarter.

The late rally was attributed to many traders holding expiring options, leading them to scramble to square their positions. As Oliver Sloup, director of managed futures at iitrader.com LLC, put it:

“A lot of shorts are so deep into their put options, the only way to exit their position is to buy back futures.”

Does ethanol have to be hurt by falling gas prices?

January 14, 2015/in Economy, Over a Barrel Blog wtucker, newleaf /by Arctic Leaf

Jim Lane, editor and publisher of Biofuels Digest, is one person who thinks alternative fuels aren’t necessarily going to be hurt by the huge drop in the price of crude oil.

In a post on the Digest Jan. 6, Lane lays out the rather complicated case of why it doesn’t pay right now to be dumping your alternate-energy stocks. That’s been the reaction so far to anything related to the price of oil. But Lane says there are special aspects of alternatives like ethanol that will be affected in a different way.

In the first place, Lane notes that while crude oil prices have been falling, ethanol prices have been falling, too. Since last June, crude oil has fallen from $115 a barrel to under $50, a remarkable 60 percent drop. Yet ethanol has fallen as well, from $2.13 a gallon to $1.55 a gallon, a formidable 27 percent drop. This is due mainly to the falling price of corn, which has been at its lowest level in recent years. A bushel of corn fell over the same period from $4.19 a bushel to $3.78, a 10 percent drop. In this way, ethanol is only marginally dependent on the price of oil and can show its own price pattern.

One thing worth noting is that there is a certain amount of elasticity in American driving. People tend to increase their driving range when the price of gasoline goes down. This is particularly true when it comes to taking vacations, which tend to be a long-term planning effort. If the price of gasoline stays down through next summer, people are more likely to increase gas consumption. The fact is that gasoline demand has actually reached its highest point in the last few months since the price of oil began to fall, as the following graph indicates:

Now drivers are required to include 10 percent ethanol in each gallon of gas. Therefore, ethanol has a fixed market. Driving has been declining in recent years, which is one reason that the Renewable Fuel Standard has been under fire – because the absolute amount of ethanol required has exceeded the 10 percent requirement in relation to the amount of gasoline consumed. Refiners and oil companies must buy this amount of ethanol. This is the reason the Environmental Protection Agency has been holding back on setting an RFS for 2014 — because the original amount prescribed was going to exceed the 10 percent figure. If people start taking advantage of lower gas prices and start consuming more gasoline, the amount of ethanol required will grow. “(W)e should be seeing a 2+% increase in gasoline demand, and that will take some pressure off the ethanol blend wall,” Lane writes. It might make EPA’s decision easier, if it ever gets around to setting a number.

Just to emphasize this point, an RIN — Renewable Index Number — is required by the EPA to prove that a refinery has been adding ethanol up to the 10 percent mark. The price of RINs has actually been rising as gas prices have fallen. As Lane writes: “Part of the reason that the ethanol market is holding up relatively well in tough times is the impact of the Renewable Fuel Standard, and its traded RIN system. RIN prices have jumped as oil prices have slumped — and a $0.76 increase in the RIN value of a gallon of fuel is a striking increase in value.”

So all is not dark for the future of alternatives. Ethanol’s place is secure, despite the fall in gasoline prices. Remember, it’s not that demand for gas is falling, but people are spending less for what they get. If methanol is given a chance, it might turn out to be more invulnerable, since it’s not tied to corn prices but to natural gas, which we seem to have in even greater abundance than oil. Electric cars also don’t lose their appeal, since much of their appeal is getting off gas entirely and unbuckling from the oil companies. It may not be time to abandon your stock in alternative energies quite yet.

Oil dips again amid signs that export ban might be relaxed

January 13, 2015/in Economy, What's The Buzz staff /by Fuel Freedom Staff

American crude and the international benchmark, Brent crude, met at the same price point Tuesday: about $46. West Texas Intermediate crude, the U.S. benchmark, briefly traded below Brent, the first time that’s happened in a year and a half.

Brent closed down 84 cents, to $46.59 a barrel. U.S. crude closed down 18 cents to $45.19. Read more in the Reuters story.

On average, Brent traded at $6.64 higher than WTI last year.

Bloomberg offers a reason why U.S. crude might be on the upswing: The news agency reports that the United States might be edging closer to relaxing the ban on oil exports.

The 40-year-old ban on most U.S. crude exports is set to be loosened after Petroleos Mexicanos, Mexico’s state-owned oil company, asked to import 100,000 barrels a day of light crude. Senator Ted Cruz, a Texas Republican, plans to propose an amendment to a bill approving the Keystone XL pipeline that would lift the export restrictions.

“WTI is relatively strong because it looks like exports will be rising,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “The Mexican request could be the first of many.”

Cruz must know something the rest of Washington doesn’t yet know, since President Obama already has promised to veto the Keystone XL bill if Congress passes it.

Yossie to Hannity: ‘We can bankrupt terrorism’

January 13, 2015/2 Comments/in FFF in the News, Updates from Fuel Freedom staff /by Fuel Freedom Staff

Fuel Freedom Foundation co-founder and chairman Yossie Hollander was interviewed on Sean Hannity’s radio show on Jan. 13 about oil money and how it funds extremist groups and terrorism. Read more →

Oil closes down again, lands just above $50 mark

January 9, 2015/in Economy, What's The Buzz staff /by Fuel Freedom Staff

Whatever the floor is for oil, $50 doesn’t seem to be it.

Brent crude closed just a few barrel-drops within that threshold Friday, down 85 cents to $50.11. U.S. crude fell 43 cents to $48.36. The marks are the lowest for crude since April 2009, and represented the seventh straight week of losses.

However, prices recovered from even steeper losses during the day after Baker Hughes, the U.S. oilfield-services company, announced that the number of rigs drilling for oil domestically had fallen by 61 this week, the most during a week since 1991.

Oil prices have dropped nearly 10 percent in two days

January 6, 2015/in Economy, What's The Buzz staff /by Fuel Freedom Staff

Oil analysts must be asking, Where’s the bottom of the oil-price plunge?

Crude dropped again Tuesday, as Brent was off $2.01, to $51.10 a barrel. In the first two trading sessions of the week, it’s down $5.32, or almost 10 percent.

Brent crude off 48 percent for the year, worst drubbing since ’08

December 31, 2014/in Economy, What's The Buzz staff /by Fuel Freedom Staff

Hey, did you hear oil prices fell in 2014?

Now that the year in oil trading is officially over, traders are counting the damage, and it’s like monitoring the progress of a boulder rolling down a mountain:

Brent crude, the international benchmark, fell another 57 cents Wednesday to close the calendar at $57.33 a barrel. Brent, as well as gasoline futures, fell 48 percent during the course of the year, making them the worst-performing commodities among the 22 markets tracked by the Bloomberg Commodity Index.

U.S. oil futures were off 85 cents Wednesday, to $53.27, and were down 46 percent for the year.

Not even a Libyan oil fire can stop price slide

December 29, 2014/in Economy, What's The Buzz staff /by Fuel Freedom Staff

Oil prices briefly spiked Monday, in apparent reaction to a fire at the Libyan oil port of Es Sider the past few days.

But prices settled down again, to their lowest levels since May 2009, after the blaze was put out in three of the six oil tanks, Bloomberg reported.

Libya was pumping about 352,000 barrels of crude a day until a rocket attack at the port on Christmas Day reduced production to 128,000 barrels a day. In 2010, Libya was pumping about 1.6 million barrels a day, but that was before the overthrow and killing of longtime ruler Muammar Gaddafi in October 2011, an event that unleashed a civil war.

The attack at Es Sider was enough to prompt an early rally in the commodity Monday, but by the end of the trading session Brent crude was down $1.57, to $57.88. The U.S. benchmark, WTI, fell $1.12, to $53.61. That’s the lowest level since May 1, 2009.

Reuters reported:

The rally followed by the steep drop showed the market’s fears about oversupply are not going away, said Gene McGillian, senior analyst at Tradition Energy in Stamford, Connecticut. “Every time the market tries to pick itself up, it’s just another wave of selling,” he said.

Tim Evans, an energy analyst at Citi Futures Perspective in New York, told Bloomberg that neither the violence in Libya, nor the reduction in the growth rate of U.S. drilling, was enough to make a dent in the worldwide glut of oil. “We’re looking at a significant supply-demand surplus through the first half of 2015,” Evans said.

Bloomberg added:

“The loss of a couple hundred thousand barrels from Libya will have a minimal impact on the global supply balance,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “There’s about 2 million barrels a day of excess production right now, so this will just tighten things a little.”

Explaining all the nutty conspiracy theories about oil

December 26, 2014/in National Security, What's The Buzz staff /by Fuel Freedom Staff

The Washington Post has a good explanation why so many leaders — including Vladimir Putin — might believe that other players are conspiring to set oil prices low, putting pressure on nations like Russia that rely so much on the high price of oil to balance their budgets.

To understand this particular conspiracy theory, one must look at the nature of conspiracy theorists, and here WaPo cites some knowledgeable experts on the subject:

… the psychological research suggests that conspiracists don’t just believe one conspiracy theory. They often believe lots of them. And many of the conspiracies have similar structures — suggesting there are deeply powerful but unseen players working behind the scenes to shape world events.

“A lot of conspiracy theories take as their premise that there’s a small group of people who are plotting to control something, to control the government, the banking system, or the main energy source, and they are doing this to the disadvantage of everybody else,” says University of California-Davis historian Kathy Olmsted, author of “Real Enemies: Conspiracy Theories and American Democracy, World War I to 9/11.”

It might be natural for some people to believe in oil conspiracies, because oil itself is so vital a commodity around the world, and oil producers — notably OPEC — do, in fact, collude to keep their prices at a certain level. That’s the reason they formed the cartel in the first place.

But another motivator is that “struggling leaders need somebody to blame.”

In Putin’s case, finally, we must recognize that a conspiracy theory like the one above is politically expedient — especially in newly perilous economic times. “Governments use conspiracy theories in order to convince their people to support them,” says [University of Utah history professor Robert Alan] Goldberg. There’s no better way to rally support than to suggest to your people that outside forces — not supply and demand, but malicious schemers — are out to get them.