Supplies and prices – May 14

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Iran report pushes oil to new record, gas jumps above $3.73
John Wilen, Associated Press
Oil prices shot to a new record near $127 a barrel Tuesday on concerns that Iran may consider cutting crude oil production.

… In later news reports, Iranian officials denied that production cuts were imminent, but said a reduction has been discussed. Cordier doubts Iran will actually cut oil production. The nation’s economy is in bad shape, Cordier said: “They need all the petrodollars they can get.”
(13 May 2008)

Iran ‘reviewing’ crude output cut
AKM/DT, Iran Press TV
Iranian President Mahmoud Ahmadinejad has said the Islamic Republic is reviewing a proposal to decrease its crude oil production.

“Such a proposal has been put forward and is currently under expert review,” Ahmadinejad said in a Tuesday press conference in Tehran when asked about the possibility of reducing oil production.

Iran’s Oil Minister Gholam-Hossein Nozari had earlier denied media reports that the oil-rich country was planning to cut its crude output by 400,000 to one million barrels per day starting next month.

Refiners in Asia, customer for around 60 percent of Iranian crude, said they have not been informed of any output cuts.

Meanwhile, US oil futures hit a record $126.98 a barrel on Tuesday following the Iranian president’s remarks.
(13 May 2008)
Earlier on May 13, Iran Press TV had posted: Iran denies plans to cut oil output

Related from Reuters-Africa: Iran reviews proposal to cut oil output

Senate votes to halt strategic oil stockpiling
Richard Simon, Los Angeles Times
Bush wants to keep filling the underground petroleum reserve, but legislators take the near-unanimous action in reaction to record gas prices. The House is expected to concur.
—
The Senate, jittery about a political backlash over the rising price of gasoline, voted by a veto-proof majority today to halt deliveries to the Strategic Petroleum Reserve over President Bush’s objections.

The House is expected to follow suit later today.

The action, supported by the Democratic and Republican presidential candidates, comes as high fuel costs have contributed to the nation’s economic woes and become a hot issue on the campaign trail. It could be the only legislation that Congress passes this year in response to public angst at the fuel pump because of the parties’ differences over energy issues.

The Senate measure passed 97 to 1, with Sens. Barack Obama of Illinois and Hillary Rodham Clinton of New York breaking off from their campaigns to return to the Capitol to vote for the measure. Sen. John McCain of Arizona, the presumptive GOP presidential nominee, supported the measure but was absent for the vote, continuing his campaigning in the Pacific Northwest.

“Why on earth should we be putting oil underground at a time of record high prices?” Sen. Byron Dorgan (D-N.D.), the measure’s chief sponsor, argued.
(13 May 2008)
In answer to Sen. Dorgan’s question about why continue fillling the SPR:

• No one can predict what oil prices will do.
• There’s a good chance oil prices will continue to rise. In the event of conflict, prices may rise very high.
• Oil is a critical resource.
• The measure plays to the delusion that the U.S. government can control oil prices, and avoids dealing with the reality of peak oil.

Congressman Bartlett said,
“Congress can not wave a magic wand and suspend the laws of supply and demand. Forty months of stagnant world oil production and rising demand are the primary reason why prices for oil, gasoline and diesel have risen so high. There are no silver bullet solutions, but one thing that the federal government can do to help reduce demand, and hopefully prices, is to temporarily suspend deposits into the Strategic Petroleum Reserve.”

Congress Should Not Tamper with the Strategic Petroleum Reserve
Ariel Cohen, Ph.D., The Heritage Foundation
Congress is about to legislate that the U.S. government stop purchasing oil for the Strategic Petroleum Reserve (SPR). Some believe that this would bring gasoline prices down; in reality, however, shutting down the oil supply to the SPR would jeopardize the security of the United States, and infringe upon the executive authority of the President to ensure the nation’s defense, while having no appreciate effect on gas prices. Congress should leave the SPR alone.

The SPR is a 700 million-barrel emergency store of oil maintained by the national government for a very rainy day: a war or a sudden interruption of the oil supply from one or more of the unstable countries-Venezuela, Nigeria, and the Persian Gulf states-from which the U.S. buys fuel. Established in the aftermath of the 1973-1974 oil embargo, the SPR gives the President a powerful response option should a disruption in commercial oil supplies threaten the U.S. economy.

… The Strategic Petroleum Reserve is, first and foremost, a tool of national security policy. It was never intended that the SPR would be used to tamper with the market or to play politics, that its oil would be released in order to bring prices down, or that we would stop filling the SPR to accommodate either the market or short-term electoral interests in the campaign season.
(12 May 2008)
President Bush and The Heritage Foundation are not my political heros, but I think they are right about the SPR. -BA

Senators threaten Saudi arms deal over oil prices
AFP
A group of Democratic Senators Tuesday threatened to block a multi-million dollar US arms deal with Saudi Arabia, unless the kingdom ups oil production and helps cut soaring gasoline prices.

The Senators introduced a resolution of disapproval on the arms sale, as President George W. Bush prepared to head for Saudi Arabia, partly on a mission to contain runaway oil prices.

“We are saying to the Saudis that, if you don’t help us, why should we be helping you?” said New York Democratic Senator Chuck Schumer.
(13 May 2008)