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U.S. allows export of some oil, loosening four-decade ban

The U.S. Department of Commerce has relaxed, somewhat, the nation’s four-decade-long ban on oil exports, put in place after the 1973 oil crisis that caused widespread shortages around the United States.

The Obama administration’s move will allow the sale of up to 1 million barrels a day of ultra-light crude. The decision likely will please U.S. drillers and many politicians who have said the U.S. export ban is a relic of an outdated policy.

Reuters reported specifics:

The latest measures were wrapped in regulatory jargon and couched by some as a basic clarification of existing rules, but analysts said the message was unambiguous: a green light for any company willing and able to process their light condensate crude through a distillation tower, a simple piece of oilfield kit.

“In practice this long-awaited move can open up the floodgates to substantial increases in exports by end 2015,” Ed Morse, global head of commodities research at Citigroup in New York said in a research note.

BP will cut jobs, take $1 billion in charges amid oil slump

The plunging price of oil has taken its toll on one of the world’s largest oil companies: Britain’s BP announced Wednesday it would cuts some of its 84,000-member worldwide workforce, as well as take $1 billion in charges over the next five quarters.

The New York Times reports that most of the financial hit will come in the form of severance pay, indicating that the number of job cuts could be significant. The company didn’t say how many positions it intended to shed.

The price of Brent crude has fallen some 40 percent since June. The price per barrel dropped another 1.5 percent Wednesday, to $65.32.

Bloomberg reports that BP’s move is the latest to come amid the price squeeze:

Europe’s third-biggest oil company by market value joins larger rivals Royal Dutch Shell Plc and Total SA in restricting budgets and offloading operations as margins are squeezed by the 40 percent drop in prices since June. BP said in October that about $1 billion to $2 billion may be cut from the $24 billion to $26 billion of planned capital expenditure in 2015.

Fight oil addiction on Cyber Monday: Pre-order PUMP on iTunes

Sure, you could spend your hard-earned money on just about anything on this Cyber Monday.

But while you’re busy pointing and clicking and helping the U.S. economy, don’t miss the chance to be among the first shoppers to pre-order the Fuel Freedom-produced documentary PUMP. It’s available for presale on iTunes.

Go to this link to learn more: http://bit.ly/1yyMEMD

The cost is $9.99 for standard definition, or $12.99 for high-def. By pre-ordering, you’ll be first in line when the film is released digitally on Jan. 13, 2015.

PUMP, directed by Joshua Tickell and Rebecca Harrell Tickell, and narrated by Jason Bateman, tells the story of America’s addiction to oil, from its corporate conspiracy beginnings to its current monopoly. The film combines fascinating historical context with inspiring, practical lessons from today. The film explains clearly and simply how we can end our oil dependence, and finally win choice at the pump.

PUMP-Poster_postForcing gasoline to compete at the pump with cleaner-burning, domestically produced replacement fuels like ethanol, methanol and compressed natural gas (CNG) will:

  • keep fuel costs low for consumers, insulating them from inevitable price shocks
  • strengthen the U.S. economy by keeping more of our fuel dollars here at home
  • create millions of jobs thanks to higher demand for homegrown fuels
  • improve air quality, bringing down incidence of asthma and heart disease
  • cut carbon emissions that trap heat in the atmosphere

Visit PumpTheMovie.com to watch the trailer; learn more about the making of the film; meet some of its stars (including Tesla founder Elon Musk and former Shell Oil president John Hofmeister); and read the favorable reviews PUMP received upon its release in theaters in September. Spend a few minutes on the site and you’ll see just how crucial this issue is for Americans.

Pre-order PUMP on iTunes today!

(Photo above: Auto engineer John Brackett shows in PUMP how to optimize a gasoline-powered vehicle to run other types of fuel, including cleaner-burning, higher-octane ethanol and methanol. Credit: Submarine Deluxe)

New York Times launches series looking at N.D. oil industry

You won’t be fully up to speed on how oil production, and hydraulic fracturing, has transformed the rural communities of North Dakota unless you read Deborah Sontag’s exhaustive piece in The New York Times.

Sunday’s Part I of a series, “The Downside of the Boom,” includes video, satellite maps and other visuals to complement its reporting.

At the heart of Part I is the way land has been “sliced and diced” in North Dakota for years, and rights to the surface don’t necessarily mean the landowner has control over the resources that lie beneath.

Given that mineral rights trump surface rights, this made many residents of western North Dakota feel trampled once the boom began.

In 2006, a land man for Marathon Oil offered to lease the Schwalbe siblings’ 480 acres of minerals for $100 an acre plus royalties on every sixth barrel of oil.

“Within a few years, people were getting 20, 30 times that and every fifth barrel,” Mr. Schwalbe said. But the Schwalbes did not expect “to see any oil come up out of that ground in our lifetime.”

Oil companies were just starting to combine horizontal drilling with hydraulic fracturing to tap into the mother lode of Bakken oil. “We didn’t really know yet about fracking,” he said.

The Schwalbes’ first well was drilled in 2008, their second the next year. Powerless to block the development, Mr. Schwalbe and his wife, nearing retirement, took some comfort in the extra income, the few thousand dollars a month.

Then that was threatened, too.

Can a carbon tax capture oil’s emissions?

One of the knottiest problems for people who want to reduce carbon emissions with cap-and-trade and command-and-control regulation is that it is impossible to include motor vehicles in these schemes.

The Obama administration is now concentrating on coal plants and other stationary sources. This affects coal and possibly gas plants, but the oil industry gets off scot-free. And cars and other moving sources constitute almost half the carbon we’re putting into the atmosphere.

The idea that keeps popping up, which would deal with these difficulties and perhaps make climate issues less partisan, is a flat tax on carbon products. The tax would fall on coal, gas and oil and be collected at the mine or wellhead. $20 per ton is the number most often mentioned. Coal would pay the largest share, oil second-most and natural gas the least, since they differ in carbon content. But everything else is equal across the board. It doesn’t matter what people do with the fuel once they’ve claimed it. If you conserve energy, you burn less fuel, if you switch from high-carbon coal to natural gas. And if you discover a true alternative that doesn’t rely on fossil fuels, you pay nothing.

In theory, it’s an ideal solution. Adele Morris of the Brookings Institution has calculated that a modest carbon tax of $20 per ton would allow us to lower the corporate tax to 25 percent, just below the world average, and still leave $199 billion for deficit reduction over the 10 years. Most important, though, is that a carbon tax would capture non-stationary sources, which is the Achilles’ heel of cap-and-trade. When it comes to mobile sources of carbon, regulators just throw up their hands. “You can’t measure emissions from individual vehicles,” they say. But a carbon tax captures everyone, including cars and trucks, which are impossible to monitor as individual vehicles. In the end, it is a much better system than that now being pursued by the EPA.

So what would this mean for alternative vehicles?

Corn ethanol would be a big winner. It is not derived from fossil fuels, and it’s already in 10 percent of gasoline that is dispensed at the pump. Morris estimates that a tax of $20 per ton on carbon would mean a 4-to-5 cents per gallon increase in gasoline. E85 now undersells gasoline in the Midwest by that same amount, and a carbon tax would make it even more attractive. Other parts of the country might start taking notes as well, since E85 can be sold anywhere; it just hasn’t caught on yet.

Methanol would not have the same advantages, since it is currently made from natural gas. But gas has only about two-thirds of the carbon content of oil, and a carbon tax would work in its favor. In addition, methanol can be derived from other sources: It’s the simplest alcohol and can be distilled from municipal waste, forest wastes and any number of the other sources that now go unused.

CNG and LNG do not stand up quite as well. Both would have to pay the carbon tax but would enjoy a small advantage over diesel, became the carbon content of gas is lower. Still, they would see their own price go up, because they are fossil fuels.

Electric cars, on the other hand, would be the big winner. Their cost advantage would widen, and they would have a leg up on gasoline and diesel. Of course, electricity must come from somewhere. It is now generated largely from coal and natural gas, and prices would rise. But the tax would encourage a shift from coal to gas, or non-fossil sources, and prices would eventually come down again. Morris calculates that revenues from the tax will eventually taper off from $160 billion to $60 billion by 2030 because of adjustments in the economy.

The carbon tax has a long and curious history. Conservatives often claim credit for it under Milton Friedman’s dictum, “I you want more of something, subsidize it. If you want less of something, tax it.” The Heritage Foundation actually backed a carbon tax in the early days, when the Obama administration was trying to impose cap-and-trade on the entire economy. But other factions of the conservative movement became convinced that the Democrats would just spend the money on renewable energy projects, so Heritage backed away.

Now the ball is being carried by a group of moderates who have a reputation for viewing things with a level head. The Brookings Institution has been at the forefront, arguing that a carbon tax promises to save billions. “By providing simple, transparent, but powerful market-based incentives to reduce damaging greenhouse gas (GHG) emissions, this levy could supersede the array of costly regulatory command-and-control approaches and expensive subsidies aimed at reducing dependence on fossil fuels and promoting clean energy,” writes Morris for Resources for the Future, another non-partisan group. Environmental Defense Fund, another moderate group that takes sensible positions, has said a carbon tax would bring everyone “simplicity and happiness.”

The carbon tax does have its problems. It comes down particularly heavy on the poor, who pay a much larger portion of their income for things that require oil and gas. Morris suggests putting 20 percent of the tax aside and earmarking it for the poor. This undoes some of the benefits of the tax and, in practice, is very difficult to do, and it creates a new distribution problem. It also hurts the middle class and especially Middle America.

Carbon taxes have been tried in other countries, with mixed results. Australia tried to impose a blanket tax a few years ago, but by the time it stopped awarding special exemptions and dispensations, the program was such a mess that oil refineries and others were making out better than before. The tax fell particularly heavily on farmers, whose operations, it turns out, are heavily dependent on fossil fuels. On the other hand, a tax in the United States might push more of agriculture into ethanol, since E85 is already widely available in the Midwest and would substitute nicely for gasoline.

Special pleading by individual parties is always the problem. France tried a carbon tax a few years ago, but by the time they were through, the law was so loaded down with exceptions and exemptions that it was practically meaningless. Sweden, on the other hand, has a flat $200 per ton carbon tax – four times the highest rate being suggested by the U.S – and no one seems to mind. The Swedes eliminated all special exemptions and used the revenue to lower personal income and estate taxes. True, the Swedes pay a higher price for gasoline – close to $4 per gallon – but they are happy with the simplicity of the system and accept the higher price as a fact of life. Of course, Sweden is a much more egalitarian country, with few truly poor people, but the population is happy and no one complains.

And the main problem is that the amount of tax will really not introduce any behavioral change. Five cents a gallon is just a tax – it will not create any real incentive to change to alternative fuels. What is blocking off alternative fuels today is not price, as they are already cheaper. It is the monopolistic structure of the car and distribution market. Even if gas prices were a dollar higher, the market first needs to be opened to competition so people could actually choose a fuel.

A carbon tax would cross political lines and maybe prove to be one of those rare instances where we can all agree. Conservatives would show that they take climate change seriously, and liberals would have to give up on their complex regulatory schemes and admit that simplest sometimes works best. Most of all, it would show the public that things can get done in Washington. However, a prerequisite for any tax or other solution is to open the market for competition by other fuels. Otherwise, the consumer will not have any option, and it will be just a new government tax.

Hollander: Oil is a ‘burden for the American people’

Fuel Freedom co-founder and Chairman Yossie Hollander guided PUMP the movie to a successful weekend in Atlanta, hosting two Q&As after Friday night’s and Saturday night’s showings at the historic Plaza Theatre.

He also promoted the film and its message on radio, appearing on both WMLB-AM1690 (“The Voice of the Arts”) and its sister station, WCFO-AM1160 (“The Talk of the Town”). You can listen to the first interview below:

During the segment, Hollander was asked how he got involved with PUMP, a project more than two years in the making.

He answered: “We realized long ago that oil is one of the toughest problems we have. We are funding our enemies, but it’s mainly a burden for the American people. It’s the air we breathe. The brown cloud you see above Atlanta is not from coal, it’s from oil.

“And mostly it’s the burden on our pockets. Families really suffer, and we figured out this is the biggest problem that we can solve. If we can do it with cheaper American fuels, we can actually change America.”

Here’s the second interview, on WCFO, which aired Saturday and Sunday:

PUMP premiered in September and continues to play in theaters around the country. This week it debuts in Tucson, Anchorage and Brunswick, Maine. Visit PumpTheMovie.com for theaters and times, and to buy tickets.

Will U.S. take steps to keep the ‘Shale Revolution’ going?

At least one observer wonders whether it’s time to start protecting up the burgeoning U.S. oil industry. Chip Register, managing director of Sapient Global Markets, writes in Forbes:

“One possibility would be for the government to level the playing field with OPEC and others by introducing tariffs on cheap foreign oil imports, with the goal of driving separation between the North American energy economy and the chaos of the international markets. While this may seem extreme, it may be necessary to protect this young yet highly strategic industry from going extinct.”

The global price of oil is off about 25 percent since June, and it’s already having an impact on U.S. drilling operations. As Real Clear Energy’s Nick Cunningham noted in a post Wednesday, there are now 1,590 active oil rigs in the country, the lowest level in six weeks.

Drilling in shale-oil formations, largely using hydraulic fracturing, helped the U.S. reach 8.95 million barrels of oil per day this month, the highest level in 29 years. But as a story in Bloomberg points out, that growth trajectory is difficult to maintain:

“Oil production from shale drilling, which bores horizontally through hard rock, declines more than 80 percent in four years, more than three times faster than conventional, vertical wells, according to the IEA [International Energy Agency].”

Shale-oil production is relatively expensive compared with imported oil, so it won’t take much of a drop in global prices to make some domestic operations unprofitable. The Bloomberg story quotes Philip Verleger (an economic adviser to President Ford and director of energy policy for President Carter), who says that if oil falls to $70 a barrel, production in the Bakken shale formation could plummet 28 percent to 800,000 barrels a day; in July the production level was 1.1 million barrels a day.

The notion Register raised isn’t new: In early October, Ed Hirs, a lecturer in energy economics at the University of Houston, touted a paper he’d written suggesting that the U.S. government intervene to restrict oil imports and protect U.S. producers.

“We need to act in our own best interest,” Hirs said at an energy symposium, according to Forbes. America’s oil growth is so strong “that we can de-link from the global market.”

LAT: Chevron spending big to sway election in Richmond, Calif.

Los Angeles Times consumer-affairs columnist Michael Hiltzik writes about the lengths to which Chevron is going to influence city elections in the city of Richmond, Calif. And it seems that only a student-run newspaper is reporting on Chevron’s spending. ” … leaving coverage of the election to Chevron’s PR organ, the Richmond Standard, could be disastrous for Richmond’s residents. For example, you won’t find a peep about Chevron’s political spending in the Richmond Standard. That’s par for the course: The website’s entire staff, an employee of Chevron’s PR firm named Mike Aldax, told me last month that ‘if you’re looking for a story that’s critical of Chevron, you’re not going to find it in the Richmond Standard.’ “

Yossie to Frank Gaffney: Fuel choice will de-fund terrorism

Hollander-GaffneyAmong the many benefits of giving consumers fuel choice at the pump, this one might be the most valuable for the security of the United States: Reducing our dependence on oil by using other types of fuel to power our vehicles will cut off the revenue stream for terrorists that threaten the U.S. and its allies.

That’s one of important messages Fuel Freedom Foundation co-founder and chairman Yossie Hollander shared with talk-show host Frank Gaffney in a wide-ranging hourlong interview broadcast Thursday.

During the interview on Gaffney’s Secure Freedom Radio program, Hollander said diverting oil money away from extremists will reduce their ability to carry out attacks. As a parallel, he cited the fall of communism in 1989.

For decades, Hollander said, “we faced a threat from the communist side of the world. And we kind of fought all kinds of small skirmishes around the world. Some of them were larger, like in Vietnam. But overall, different local wars around the world. And we never actually won anything until we … decided we want to de-fund them.

“And we won, actually, against communism by de-funding communism. … starting a race which they couldn’t compete, for new weapons.”

Gaffney noted that the “de-funding” strategy that worked against communism then could also work “another totalitarian ideology bent on our destruction.”

Hear the full program:

Gaffney said he was going to check out “PUMP,” which is playing in Washington and other cities around the country this weekend. Visit www.PumpTheMovie.com for theaters and showtimes.

Hollander said the film, like Fuel Freedom, is a non-partisan endeavor. Ending our reliance on oil for transportation fuel, and moving toward a system that allows replacement fuels like ethanol, methanol and natural gas to compete on an even footing with gasoline, will take the efforts people from across the political spectrum.

“I don’t think I’ve ever seen a pump in the U.S. that says Republican or Democrat on it,” Hollander said. “We all pay the same price. … the point is, we’re presenting options. This is about choice.”

How Big Oil could grease invisible hand

The U.S. energy problem is very much due to a breakdown of the free market, contends the new documentary, “Pump.” Married co-directors Josh Tickell and Rebecca Harrell Tickell show how Big Oil’s monopoly on transportation fuels hurts Americans more than they realize. If drivers had options when filling up their tanks, both country and consumers would benefit.

Read more at: Reuters [Blog]