Morning Bell: Obama Will Make You Pay More at the Pump

Morning Bell: Obama Will Make You Pay More at the Pump

Posted By Rory Cooper On December 29, 2010 @ 8:45 am In Energy and Environment | 30 Comments

“What do you say to people who are losing patience with gas prices at $3 a gallon? And how much of a political price do you think you’re paying for that, right now?” This was a question asked of the president at a press conference [1] in August…of 2006. The president was George W. Bush. In fact, it was a question that was asked in one way or another regularly during the entire eight years of the Bush presidency, regardless of where energy prices stood at that moment.

In May 2004, The New York Times reported [2] that congressional Democrats “were stepping up pressure on the Bush Administration to ease gasoline prices,” when prices were still under $2/gallon. In April 2005, at another press conference, a journalist stated [3]: “Mr. President a majority of Americans disapprove of your handling of social security, gas prices…” In 2006, Senator Barbara Boxer (D-CA) exclaimed [4]: “Since George Bush and Dick Cheney took over as president and vice president, gas prices have doubled…They are too cozy with the oil industry” after she drove one less-than-energy-efficient block to a press conference at a local Exxon station.

In 2008, then-Speaker Nancy Pelosi (D-CA) “blasted [5]” the president for rising gas prices on his (and her) watch. In July 2008, ABC News asked [6] the president what was his “short term advice for Americans about gas prices?” repeating a nearly identical question asked at a February 2008 press conference. In April 2008, Senate Majority Leader Harry Reid (D-NV) said [7] gas prices were “the number one issue facing America today.” Read the rest of this entry »

Oil could give kiss of death to recovery

Oil could give kiss of death to recovery

By Gregory Meyer and Michael Mackenzie in New York

Published: April 8 2010 18:51 | Last updated: April 8 2010 18:51

Oil graphic for Markets

This week oil climbed to $87 a barrel, its highest level since October 2008 and prompted concerns that triple-digit crude was once again in the offing.

This was after a period of eight months when oil traded between $70 and $80, a narrow band that pleased oil producers without hurting consumers too much.

The latest surge seems to have been prompted by rising confidence in a global economic recovery, even if most traders and bankers are still cautious about supply and demand fundamentals.

Worries about the Greek economy have pegged prices back over the last couple of days but the more bullish Wall Street banks see prices climbing further, with Barclays Capital forecasting $97, Goldman Sachs $110 and Morgan Stanley $100 next year.

But the higher prices go, the deeper the concerns that they will stifle global growth. Jeff Rubin, a former CIBC chief economist and author of a book on oil and globalisation, says: “Triple-digit oil prices are going to threaten a world recovery.”

Pricier oil and other key commodities, notably iron ore and copper, could ripple through the economy and financial markets, potentially triggering inflation and forcing central banks to lift interest rates from ultra-low levels. This could force bond yields higher, but lower the attractions of equities.

However, higher oil prices could lift energy shares. In the S&P 500 index, the energy sector is up just 2.4 per cent this year and was barely positive in the first quarter, lagging behind the index’s 6 per cent gain for the year.

Nicholas Colas, ConvergEx Group chief market strategist, says: “With crude oil prices marching steadily higher, portfolio exposure to the energy sector could well become a key determinant of overall investment performance through the balance of 2010.”

Oil prices first hit $100 a barrel in January 2008, before continuing their rapid ascent to peak at $147 in July of that year. They fell to a low of $32 in December 2008, before recovering again. On Thursday oil traded at about $85 a barrel.

The latest rise comes as the economic recovery fuels a jump in oil demand after the first global decline in a quarter century. Supply is not a worry, as the Opec oil cartel has more than 6m b/d of capacity to spare in a pinch.

One difference from last year is that then the oil price was rising against the backdrop of a weaker dollar. This year crude and the dollar have risen together.

Policymakers seem untroubled. Energy ministers at the International Energy Forum in Mexico last week embraced less volatility, not lower prices. Lawrence Summers, director of the US National Economic Council, in remarks this week bemoaned his country’s dependence on foreign oil supplies, but did not complain about prices.

Some economists do not view $80 oil as a threat to global growth, which the International Monetary Fund projects at 4 per cent this year. James Hamilton, an economist at the University of California, San Diego, is author of a paper that found oil’s 2008 surge to $147 a barrel helped tip a housing-led slowdown into a recession. This time, the relatively steady nature of the price rebound has allowed consumers to adjust.

“The shock value is gone now,” Prof Hamilton says.

Hussein Allidina, commodity strategist at Morgan Stanley, says the $100 oil he predicts next year would increase the “oil burden” – a function of demand, prices and global output – to about 4 per cent from 2.8 per cent late last year. This would hurt developed economies more than emerging ones, as the latter are powering global growth and can afford fuel subsidies, he says. The IMF estimates consumer petroleum subsidies will reach almost $250bn this year.

“If we were to move to $100 a barrel, economic growth would start to slow, but ‘derail’ is likely too strong a word,” Mr Allidina says.

A move to higher oil prices would not necessarily generate corresponding gains in retail fuel prices, as new refining capacity has made petrol markets more competitive. In the US, filling stations in most states still sell petrol for less than $3 a gallon, well below the peak of 2008. In the UK, however, petrol prices are close to record highs, even though crude is well below its peak.

In any case, prices are as much an effect of the economic expansion as a threat to it. China, the fastest-growing economy, is alone expected to consume 520,000 b/d more this year than last, contributing a third of global demand growth, according to International Energy Agency estimates.

“You can’t have a global recovery without the oil price recovering as well,” says Lutz Kilian, a University of Michigan economist who has studied the effects of oil shocks. Because demand is fuelling prices, “the only way to keep oil prices down is to remain in a recession, which hardly sounds attractive”.

The prospect of higher prices is still alarming to many observers. Olivier Jakob, of Swiss consultant Petromatrix, said in a note that the “recovery of 2009 was fuelled with crude oil at $62 a barrel, not at $90 a barrel or $100 a barrel. We fear that the latest run on WTI will be the kiss of death for a global economy that was trying to avoid the possibility of a double-dip recession.”

When oil prices last surged to $100 a barrel in late 2007, US and other rich-country consumers blunted the impact by drawing on home-equity loans and credit cards to finance petrol purchases, says David Greely, energy economist at Goldman Sachs.

“It does raise the issue if we’re in a much more credit constrained world going forward, are consumers able to do that or will they be more sensitive?” he asks.

Americans more interested in energy than environment

Americans more interested in energy than environment

posted at 8:48 am on April 6, 2010 by Ed Morrissey
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Maybe it took an extended economic collapse for Americans to get practical about energy production.  It could also have some relation to the Climategate scandals and the collapse of credibility for anthropogenic global-warming advocates.  Either way, Gallup’s latest survey shows Americans prioritizing energy production over environmental concerns for the first time since Gallup began polling on the issue in 2001:

Americans are more likely to say the U.S. should prioritize development of energy supplies than to say it should prioritize protecting the environment, the first time more have favored energy production over environmental protection in this question’s 10-year history. …

The current data represent a continuing shift in opinion toward energy production. Since 2007, when Americans’ preferences for environmental protection were the greatest (58% to 34%), Americans’ opinions have shown significant movement each year in the direction of prioritizing energy production. This change has been evident among nearly every major demographic subgroup, although self-identified liberals have remained relatively steadfast in saying the environment should be a higher priority.

At the same time, Americans continue to advocate greater energy conservation by consumers (52%) over greater production of oil, gas, and coal supplies (36%) as a means of solving the nation’s energy problems. Americans have always come out in favor of greater consumer conservation, though this year marks the highest percentage favoring production (by a percentage point) in the last 10 years.

Interestingly, the change doesn’t come from crisis-mode thinking, at least not on energy supplies.  Two years ago, spiking gasoline prices inspired the “Drill Here, Drill Now” movement.  Today, though, only 34% of respondents think the energy-production situation in the US is “very serious,” a decline of eight points in a year.

Most likely, this comes from economic concerns.  The chart Gallup has on its site shows that support for prioritizing environmental restrictions over energy production peaked in 2007, just before the start of the recession.  Another poll earlier this month showed that respondents also prioritized economic expansion over environmental protection for the first time, and today’s chart shows that energy production has become more important as the economy worsened.  People understand that high energy prices retards growth, and that we need cheap energy to expand.

With this in mind, Barack Obama’s decision to drill in certain areas might be seen as a pre-emptive move to get ahead of this curve.  The poll also shows, though, that Republicans don’t need to support cap-and-trade in order to get better energy-production policies.  The public has grown up a bit in the last few years, something that adversity usually accomplishes.

Endless oil–Russian research has shown that the Earth doesn’t need dinosaurs to produce oil.

Endless oilCreated 09/14/2009 – 13:13

Lawrence Solomon
12 Sep 2009
Financial Post

Russian research has shown that the Earth doesn’t need dinosaurs to produce oil.

Do dead dinosaurs fuel our cars? The assumption that they do, along with other dead matter thought to have formed what are known as fossil fuels, has been an article of faith for centuries. Our geologists are taught fossil fuel theory in our schools; our energy companies search for fossil fuels by divining where the dinosaurs lay down and died. Sooner or later, we will run out of liquefied dinosaurs and be forced to turn to either nuclear or renewable fuels, virtually everyone believes.

Except in Russia and Ukraine. What is to us a matter of scientific certainty is by no means accepted there. Many Russians and Ukrainians — no slouches in the hard sciences — have since the 1950s held that oil does not come exclusively, or even partly, from dinosaurs but is formed below the Earth’s 25-mile deep crust. This theory — first espoused in 1877 by Dmitri Mendeleev, who also developed the periodic table — was rejected by geologists of the day because he postulated that the Earth’s crust had deep faults, an idea then considered absurd. Mendeleev wouldn’t be vindicated by his countrymen until after the Second World War when the then-Soviet Union, shut out of the Middle East and with scant petroleum reserves of its own, embarked on a crash program to develop a petroleum industry that would allow it to fend off the military and economic challenges posed by the West.

Today, Russians laugh at our peak oil theories as they explore, and find, the bounty in the bowels of the Earth. Russia’s reserves have been climbing steadily — according to BP’s annual survey, they stood at 45 billion barrels in 2001, 69 billion barrels in 2004, and 80 billion barrels of late, making Russia an oil superpower that this year produced more oil than Saudi Arabia. Some oil auditing firms estimate Russia’s reserves at up to 200 billion barrels. Despite Russia’s success in exploration, most of those in the west who have known about the Russian-Ukrainian theories have dismissed them as beyond the Pale. This week, the Russian Pale can be found awfully close to home.

In a study published in Nature Geoscience, researchers from the Royal Institute of Technology (KTH) in Sweden and the Geophysical Laboratory of the Carnegie Institution of Washington joined colleagues at the Lomonosov Moscow State Academy of Fine Chemical Technology in publishing evidence that hydrocarbons can be produced 40 to 95 miles beneath the surface of the Earth. At these depths — in what’s known as Earth’s Upper Mantle — high temperatures and intense pressures combine to generate hydrocarbons. The hydrocarbons then migrate toward the surface of the Earth through fissures in the Earth’s crust, sometimes feeding existing pools of oil, sometimes creating entirely new ones. According to Sweden’s Royal Institute, “fossils of animals and plants are not necessary to generate raw oil and natural gas. This result is extremely radical as it means that it will be much easier to find these energy sources and that they may be located all over the world.”

The Institute’s lead author, Vladimir Kutcherov, Professor at the KTH Department of Energy Technology, is even more brash at the implications of his findings: “With the help of our research we even know where oil could be found in Sweden!” he delights. Kutcherov’s technique involves dividing the world into a fine-meshed grid that maps cracks (or migration channels) under the Earth’s crust, through which the hydrocarbons can bubble up to the surface. His advice: Drill where the cracks meet. Doing this, he predicts, will dramatically reduce the likelihood of dry wells. Kutcherov expects the success rate of drillers to more than triple, from 20% to 70%, saving billions in exploration costs while opening up vast new areas of the planet — most of which has never been deemed to have promise — to exploration.

The Nature study follows Kutcherov’s previous work, published in the Proceedings of the National Academy of Sciences, that created hydrocarbons out of water, calcium carbonate and iron — products in the Earth’s mantle. By superheating his ingredients in a pressure chamber at 30,000 times atmospheric pressure, simulating the conditions in the Earth’s mantle, Kutcherov’s alchemy converted 1.5% of his concoction into hydrocarbons — gases such as methane as well as components of heavier oils. The implication of this research, which suggests that hydrocarbons are continuously generated through natural processes? Petroleum is a sustainable resource that will last as long as Planet Earth.

lawrencesolomon@nextcity.com

Lawrence Solomon is executive director of Energy Probe and Urban Renaissance Institute and author of The Deniers: The world-renowned scientists who stood up against global warming [1] hysteria, political persecution, and fraud.

Read the sources for this column.  [2]

Had Enough Of Eco-Lobby’s Energy Prices?

Petrol Procrastination

Petrol Procrastination

By Lt. Col. Gordon Cucullu
FrontPageMagazine.com | 7/17/2008

 

The old saw we often heard from our parents about “Never put off till tomorrow what you can do today,” has never been more applicable. Since September 11 Americans have procrastinated about serious national security issues; now they have reached crisis level. High on the list – but by no means exhausting it – are energy, military strength levels, threat identification, and proliferation issues. As are most things in life, these are intertwined, so that delaying decisive action in one adversely affects the others.

It has taken a sharp spike in gasoline prices to convince most Americans that a business as usual approach to petroleum products has not worked. Many now perceive the dangers of reliance on offshore oil producers – several of which have interests inimical to the U.S. One would think that this key lesson had been learned in the 1970s oil crisis, but sometimes it takes more than one hit on the head with a 2×4 to get the point home.

For decades – perhaps dating from popular acceptance of the flawed science in Rachel Carson’s Silent Spring – Americans have permitted energy policy to be driven by agenda-driven environmental interest groups. While a series of hysteric predictions of disaster have proven wrong over the past decades (e.g., utter depletion of the Earth’s resources by 1980, mass starvation due to overpopulation by 1987, and a return of the ice age at any moment in the 1970s, to name but a few) the proponents of such bizarre theories are rarely held accountable.

To the contrary, their influence has grown with each new dire prediction. Books predicting impending disaster sell well, but with an erroneous track record ought to be reclassified to the fiction category. Hysterical forecasts have been lucratively promoted by gullible media and compliant Hollywood actors and film makers. As a consequence, rational decision making on key components of energy independence such as increased oil exploration and extraction from known reservoirs off-shore and in Colorado or ANWR have been stymied.

The repeated arguments that such resources would have limited value or would not be available for decades have been refuted. In simple point of fact, had oil extraction begun in ANWR, to cite a single example, when the original Congressional release was killed by President Clinton, that oil would be flowing today. While not in itself a long-term solution it would certainly contribute to the overall energy independence of America and would buy time for longer-horizon R&D to provide improved alternatives.

Furthermore, despite a litany of warnings about the ultimate depletion of petroleum sources we continue to learn of new discoveries like the recently disclosed enormous pools in the deep Gulf of Mexico and offshore Brazil. More exist and could be successfully tapped.

Reliance on free market initiatives – rather than self-perpetuating government projects – would be sufficient to encourage auto manufacturers and alternative energy developers to become decisively engaged in solving this issue. Already we see the rapid emergence of alternatives in many fields. This trend will accelerate.

But at present America has lost precious time. While the country has 104 active nuclear plants producing electricity the need is far greater and the technology increasingly safe. Countries like France and Japan – ironically the only country to suffer actual nuclear attack – rely almost exclusively upon nuclear produced electricity for their needs. Yet Americans, still befuddled by the old anti-nuclear film The China Syndrome, approach the subject as if every nuclear plant is a potential Chernobyl.

In Frank Gaffney’s excellent book, War Footing, an entire section is devoted to means to make America energy-independent. Newt Gingrich has a large part of his organization devoted to similar efforts. We have watched a failed policy of reliance on outside energy sources gut our economy and shake our force projection capabilities. Americans need to get educated quickly on these issues so that we can direct our elected leadership – unduly influenced by far too long by extreme environmental special interest groups – to make the necessary changes to policy.

With an economy weakened by the price of imported oil, our military capabilities have diminished. At the moment we are engaged in global war. Two fronts on that war – Iraq and Afghanistan – draw most attention, but the conflict is indeed global, with definite domestic implications. That our military, boots-on-the-ground capability has been stretched thin is no longer debatable.

America desperately needs military reform that produces more of what this type of warfare demands: light infantry, special operations units, and units that can operate in the civil-military plane such as military police and engineers. Instead, we continue to pour billions into showy but unnecessary, high-ticket, high-tech weapons systems that are useful for Cold War applications but lack utility to defeat today’s enemies.

Furthermore, we as a nation lack realistic threat identification. We are still shy about naming our foe. Historically we began to see a reluctance to name the real enemy emerge in Korea. While fighting Chinese forces we hesitated to call the Peoples Republic our enemy. In Vietnam the legend persists to present day that we fought “ragged guerrilla” forces when in fact the unnamed enemy of North Vietnam send tanks, infantry divisions, and sophisticated anti-aircraft weapons to fight in the South.

Today we continue to dither, hamstrung by political correctness, moral equivalency, and cultural relativism. Unless we ultimately face the reality that we are engaged in a confrontation with elements of radical Islam, we will be unable to prevail. Instead, we have so convoluted the debate that we are at the point that we castigate anyone who actually points this out and tie our courts in knots fighting for civil rights for enemy combatants.

In addition, we treat enemies, such as Saudi Arabia, as allies, and ignore or excuse aberrant dictators like Hugo Chavez, Bashar Assad, Mahmoud Ahmadinejad, and Kim Jong Il. We issue platitudes about the sanctity of “peace processes” and bless rigged elections and reassure ourselves that notorious terrorist organizations are in fact changing their spots.

Meanwhile, we ignore the ominous gathering storm of America’s enemies banding together against us. We overlook the deadly connections that link North Korean scientists and engineers to missile proliferation in rogue states like Syria, Iran, and Venezuela. Major research programs in these countries float under the collective radar while we watch fatalistically as incremental improvements continue unchecked in their biological, nuclear, and chemical warfare capabilities.

Perhaps it will take something as mundane yet impactful as the price of a gallon of gasoline to be the catalyst that will provoke America’s wake-up call. Certainly energy reform – and concomitant energy independence – will be a good first start to correcting the imbalance. Nevertheless, ignoring the ever-ticking clock allows our enemies time to aggregate and build strength.

At some point very soon an awakening must occur. We must recognize collective threats and identify responses necessary to deal with them. Otherwise we will – as we have been warned from youth – pay the high price of endless procrastination.

 


Lt. Col. Gordon Cucullu has been an Army Green Beret lieutenant colonel, as well as a writer, popular speaker, business executive and farmer. His most recent book is Separated at Birth, about North and South Korea.

The Drive for More Domestic Drilling

The Drive for More Domestic Drilling

By Ben Lieberman
Fox News | 7/14/2008

One good effect of high gasoline prices? Some in Washington are finally talking sense about what to do about them. The president has endorsed long-overdue congressional efforts to open up American waters to oil exploration and drilling. In a June 18 speech, President Bush announced that “we should expand American oil production by increasing access to the Outer Continental Shelf.”



Currently, 85 percent of American-controlled waters — the Pacific and Atlantic coasts, the eastern Gulf of Mexico and parts of offshore Alaska — are off limits to energy production. John McCain has also endorsed opening these areas, thereby injecting the issue into the presidential debate.

Several pro-drilling bills have been introduced in Congress. Perhaps the most promising approach is found in the Deep Ocean Energy Resources Act, which would allow each coastal state to decide if it wants to allow drilling off its shores.

The DOER Act and similar bills, however, are Republican-sponsored measures with little or no support from the Democratic majority, which will decide if they even come to a vote.

That’s too bad, since these offshore restrictions are a relic of the past. They were put in place in the 1980s and 1990s when gasoline was little above $1 a gallon and the need for additional domestic oil was low.

At the time, the political path of least resistance was to give in to environmentalists and coastal developers and put vast areas out of reach. Even with the quadrupling of energy prices since then, the law has yet to be seriously challenged.

How much oil is out there? According to the Department of the Interior, these restricted deepwater areas contain 19 billion barrels of oil, about 30 years’ worth of imports from Saudi Arabia. And these initial energy estimates have a track record for being low.

Consider the Central and Western Gulf of Mexico, the only area where offshore American drilling isn’t severely limited, which has produced several times more oil and natural gas than originally predicted.

The excuses not to drill are amazingly weak. The most common one is that there’s not enough oil out there to make much difference. But these “drop in the bucket” arguments would come true only in the unlikely event that the amount of oil found falls well short of the estimates.

In any event, the worst thing critics can say about the economics of expanded drilling is that it might reduce the pain at the pump only a little. But that’s hardly a reason not to go ahead.

Also overblown are the environmental concerns. Advances in technology have greatly reduced the risk of oil spills, as was amply proven in late August 2005 when Hurricane Katrina ripped through the Gulf but didn’t cause a single offshore mishap of any significance.

Plus, any new drilling would be subject to the world’s strictest safety and environmental standards. Even the aesthetic concerns from coastal property owners have little merit, as production can easily be limited to platforms so far offshore that they can’t be seen from it.

Polling shows that a clear majority of Americans support more domestic oil, which is making congressional opponents really desperate. Their latest and perhaps silliest excuse is that new leases are unnecessary because the energy companies aren’t acting on the ones they already have. They point out the number of leased acres without wells, but that’s because most of those areas don’t have any oil.

That’s the problem. The limited waters where drilling is allowed are beginning to show signs of being picked over; many explored tracts don’t contain oil and others that do have long been dotted with wells that are in their declining phases. All the more reason to explore the vast expanses of new territory.

Our anti-domestic oil policy made little sense at $2 a gallon, but even less at $3 and less still now at $4. Congressional opponents may try to stall, but as long as gasoline prices stay high, the pressure to take this obvious and useful step won’t go away.

Ben Lieberman is Senior Policy Analyst in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

How much has the drilling moratorium cost you?

How much has the drilling moratorium cost you?

Thomas Lifson
Much of the most promising American oil lands have been declared off limits for oil drilling and production for many years. This has cost us all lots of money at the gasoline pump, but the effects elsewhere may be even bigger. The office of US Rep. John E. Peterson has prepared an estimate of the royalties (which means government revenues that wouldn’t come from individuals’ taxes) that could be realized, and arrives at the astonishing figure of 2.5 trillion dollars.

This figure may be too high (and few details are on offer about the study), but even if the study doubles what would be realized, it would amount to a staggering sum. Not to mention the spin-off wealth and tax revenues from increased domestic economic activity, when drilling and production is done here instead of overseas. Plus the effects on retail prices of enhanced oil supplies from offshore, ANWR, and federal lands int he West.

 

Meanwhile, the Democrats in Congress remain committed to impoverishing oridinary Americans through restricting oil supplies. This is a natural issue for the GOP to use, if it has the wit and organizational ability to do so.

 

Hat tip: Nancy Coppock

McCain Calls U.S. Dependence On Foreign Oil Dangerous

You Can’t Fuel All of the People All of the Time

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