Oil prices & supplies – May 6

Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage.

Oil’s Plunge, Dollar’s Rise Trigger Broad Selloff
Jerry A. DiColo, Dow Jones via WSJ
A surging dollar and a collapse in oil prices roiled global markets Thursday, as fears grow that high costs for energy and raw materials are undermining the global economic recovery.

A months-long rally in commodities prices has shown cracks in recent weeks, pressured by a barrage of economic data confirming that $4 a gallon gasoline and soaring food prices are hurting businesses and straining consumers’ budgets.
(5 May 2011)

It’s Time for Obama to Spook the Oil Markets
Llewellyn King, OilPrice.com
… Today there is no actual shortage of crude oil. Supply and demand, according to those who monitor these things, is in balance. But fear stalks the trading floors because fear is good for traders; and fear is a critical part of the oil price.

Wars and rumors of wars are relished in trading pits. They raise the specter of coming shortage and introduce the instability the traders love. During the electricity shortage in California in 2001, traders, particularly at Enron, sought not only to capitalize on fears of shortage, but also to guarantee shortage by taking generating equipment off line.

… Some oil industry observers believe that the market is trading on a “fear premium” of about $1 per gallon of gasoline, spooked by the uncertainty in the Middle East and traders exploiting that fear.

Good for Obama. Time for the president to engage in a little market spookery of his own.

The nation has about eight months of supply of crude oil saved in salt domes, in what is called the Strategic Petroleum Reserve. There is more oil available in the Naval Petroleum Reserve, a set-aside of oil in the ground. Obama needs to say that we are going to start using this oil as soon as it can reach the refineries.

He has to go the whole hog – to set the machinery of using our special reserves in motion. That will counter-spook the market and humble the traders.

However, any new wars in the Middle East, and all bets are off. Poltergeists would stalk lower Manhattan.

Llewellyn King is executive producer and host of “White House Chronicle” on PB.
(4 May 2011)
Llewellyn King has been following energy and government affairs forever. I find him one of the most interesting journalists on PBS — however, with this post he reveals himself to be stuck in a pre-peak oil world, in which the main problem is to keep oil cheap so as to keep our economic juggernaut going. – BA

Michele Bachmann is wrong about oil
Rolf E. Westgard, Minneapolis Star Tribune
U.S. Rep. Michele Bachmann, our newest lawyer-turned-petroleum-geologist, is critical of the Brazil policy of another would-be geologist lawyer, President Obama (“There’s oil here at home, but Obama would go abroad,” April 26).

But Obama’s motive in offering to help Brazil “develop these oil reserves” is to gain profitable business for the U.S. oil and oil-services industries.

Brazil’s offshore Santos Basin holds the world’s largest oil discovery in more than a decade. The business opportunity for U.S. petroleum technology is substantial.

Bachmann continues to go astray discussing U.S. oil reserves. The best estimates of economically recoverable oil from Alaska’s Arctic National Wildlife Refuge range up to about 6 billion barrels.

That’s one year of U.S. usage, not 30 to 50 years, as Bachmann claimed. And ANWR oil is likely to be natural-gas-rich, like the adjacent Point Thompson discovery.

That oil can’t be produced because we have no pipeline for the gas.

We have spent decades and billions on the “vast shale deposits” in the West that Bachmann says are three times Saudi Arabia’s reserves. So far that so-called oil shale has produced nothing, because it isn’t oil.

It’s a low-grade substance called kerogen that nature never got around to cooking into oil. All attempts to complete nature’s task have required lots of water and power, and the process releases toxins. Success with oil shale has been five years away for the past 40 years.

As to Gulf Coast drilling, more leases have already been awarded than industry is prepared to drill. You don’t take a $400,000-a-day drill ship to sea to poke random holes in the ocean floor. Good seismic data will take time.

Bachmann is justified in criticizing Obama’s pie-in-the-sky statement that “80 percent of our energy” must come from clean sources. The studies she quotes from Europe show the illusory job-creation promises from subsidies to renewables like wind and solar.

There is also the scale issue. It will be difficult to get sources that currently provide 1 percent of our annual 100 quadrillion BTUs up to where they substitute for fossil fuels and nuclear.

Despite Bachmann’s pessimism, the U.S. oil industry is doing well. The Oil and Gas Journal reports that “the resurgence in oil-well completion activity that began earlier in the decade continues as an estimated 5,718 oil wells were drilled in [the] first quarter of 2011, a 51% increase from 2010 levels.”

It’s the price of oil, not politicians, that will insure exploration for domestic oil supplies.
(28 April 2011)
Rolf E. Westgard is an EB contributor. -BA