Developments this week
So far it has been an unusually volatile week with oil prices rising $2 a barrel on Monday, falling $2 on Tuesday and rising again by $2.64 on Wednesday to close at $86.75. In London Brent Crude settled at $88.87. On Monday the Irish bailout was seen as the key impetus for the move coupled with colder weather in Europe. By Tuesday Europe’s debt crisis seemed to have worsened so that fears the EU would have to bail out more members sent the euro lower taking oil prices with it. Gasoline in NY increased by 11 cents a gallon on Wednesday suggesting that a $3 average nationwide gasoline price is not far away.
A new factor entered the picture when it was announced on Wednesday that, contrary to market fears two weeks ago, the Chinese economy still continued to boom in November. When a US jobs report was released showing a higher-than-expected increase in US employment and the euro rebounded, US equity markets took off taking oil prices with them. Lost in the euphoria were the reports that unemployment benefits just expired for 2 million Americans who are now without any source of income and concerns that the European debt crisis seems to be spreading.
The weekly stocks report showed total US commercial petroleum inventories basically unchanged from last week. Total product demand in the US is still running 2.4 percent higher than last year with gasoline and jet fuel demand down and distillate demand up by nearly 9 percent. Goldman Sachs is now forecasting that oil will average $110 a barrel in 2012, up from $100 a barrel average in 2011.
Cancun
The global climate talks opened on Monday with little expectation of much progress on any of the key issues surrounding emissions controls. Following the chaos at Copenhagen last December, the failure of the US Congress to pass a comprehensive climate bill and the changes in the Congress last month, there is little hope of a treaty in the foreseeable future. While China, now the largest emitter of greenhouse gases, is taking steps to reduce its emissions, it still refused to be bound by a treaty until larger, verified cuts are made by the US and other developed nations.
In the meantime, new studies of rising world temperatures, released to coincide with the conference, suggest that an increase of 4oC in the next 50 years — increasing sea levels by 0.5 to 2 meters — is not out of the question.
Hydraulic Fracturing
The New York State Assembly joined the state Senate in passing a bill that would place a moratorium on the issuance of new shale gas drilling permits until May 15th of next year. The measure is intended to allow more time to assess the risks of drinking water contamination by the chemicals used in the fracking process. New York has already adopted tough rules for drilling in the New York City and Syracuse watersheds which have led several major drillers to suspend operations in the state.
