America’s oil imports are higher than you think
It seems like every day there’s a new headline about the dominance of America’s petroleum sector. Read more →
It seems like every day there’s a new headline about the dominance of America’s petroleum sector. Read more →
UPDATED 2:21 p.m. PST Friday. Officials say it’s unclear how much ethanol has spilled into the Mississippi River following a train derailment about 10 miles north of Dubuque, Iowa. The 81-car train derailed on Wednesday morning, and 15 cars left the tracks in a remote, wooded area inaccessible by road. Crews had to build a temporary road to reach the site. Eight of the 14 cars that were carrying ethanol appeared to be leaking, and crews were working to minimize the impact on the river, and to wildlife, Canadian Pacific said. Fox Business reports:
“We have verified some ethanol has reached the water but we do not have an estimate of how much,” said CP spokesman Andy Cummings, who was at the scene Thursday. Ethanol mixes with water and, in high concentrations, can deplete the oxygen in water and kill fish, said Iowa Department of Natural Resources spokesman Kevin Baskins. He noted the impacted segment of the river was within the Upper Mississippi National Fish and Wildlife Refuge. Baskins said the primary concern is the threat to fish and other aquatic life, such as mussels, which can’t easily move away when oxygen levels dip. The DNR plans to sample fish collected from fishermen and monitor open-water areas in the largely iced-over river for signs of dead fish.
Ethanol is an alcohol fuel made primarily from corn, but it can also be processed from any other plant high in sugar content. It’s fermented in a distillery, and in the past it was commonly known as “moonshine.” The ethanol being transported was denatured, meaning it contained toxic additives to discourage human consumption. Such spills involving crude oil have tended to have more environmental impact. The Renewable Fuels Association points out in a report on the dangers and cleanup protocols for ethanol spills:
Ethanol is less toxic than gasoline. Carcinogenic compounds are not present in ethanol. … The biggest difference between ethanol and hydrocarbon fuels is the water solubility. This property changes how ethanol will react in the environment, including surface and ground water, and soils. The complete solubility of ethanol in water means that if a release reaches surface water, the ethanol will rapidly disperse and can no longer be recovered as a product. … Ethanol in surface water will rapidly biodegrade. The concentration of ethanol can create a toxic effect on aquatic organisms, though frequently the depletion of dissolved oxygen caused by biodegradation has a greater impact to fish and aquatic organisms.
As production of U.S. oil skyrocketed the past few years, much of it from large shale-rock formations in North Dakota and Texas, more oil needed to be transported through America’s rail system. There has been a series of derailments and fires, most notably the inferno in Quebec that killed 47 people 2013. Much of the spotlight has shone on the aging DOT-111 fuel-tanker rail car that’s been in use for decades. That was the model of car used on the Iowa train that derailed. Reuters reported:
The incident is likely to add to a debate about transporting flammable goods by train after a series of fiery accidents involving crude oil cargoes in recent years. The U.S. Department of Transportation has proposed new safety features for new tank cars transporting fuel and called for the phasing out of older cars considered unsafe. The U.S. ethanol industry has pushed back on the new rules, saying regulators should distinguish between corn-based biofuel and crude oil. Ethanol is less volatile than crude oil, is biodegradable and has a 99.997 percent rail safety record, according to the national Renewable Fuels Association.
It might not yet be the “snap-back” we’ve been talking about for some time — that inevitable climb back upward after a seven-month downward spiral — but the price of oil has shot up 19 percent across the last four trading sessions.
So maybe start preparing to say goodbye to those savings you’ve been pocketing at the pump every week or two.
Brent crude LCOc1, the international benchmark, rose $3.16 (about 6 percent) to $57.91, and U.S. crude CLc1, West Texas Intermediate, rose $3.48 (7 percent) to $53.05.
The four-day surge is the biggest such gain since January 2009.
As Reuters reports:
The rally began on Friday, when oil services firm Baker Hughes said the number of U.S. oil drilling rigs had its biggest weekly decline in nearly 30 years.
Of course, that could mean further job losses in the U.S. oil-production sector. Baker Hughes last month announced plans to layoff 7,000 employees, or 11 percent of its workforce, because a global oversupply of oil pushed down prices and made expensive-to-extract American oil less profitable.
Fuel Freedom has argued that American workers, as well as consumers, need cheap fuel prices for the long-term, instead of the job-killing rollercoaster of volatility that’s inherent in the oil market. The solution is to displace some of the oil we consume with cleaner-burning, cheaper fuels like ethanol and methanol.
John Hofmeister, the former president of Shell Oil and a star of the documentary PUMP, has said that the oil price plunge is an “anomaly,” and has warned of a price “snap-back” based on the reduction in U.S. drilling. Last month he told CNBC: “The more consumers enjoy the price production, the sooner we’ll be headed back to higher crude-oil prices. That’s the reality.”
As Reuters explained, oil didn’t just spike in a vacuum. Tuesday’s jump came after the dollar fell about 1 percent against other currencies, the dollar’s biggest one-day drop since October 2013. This had the effect of elevating the value of oil and other commodities.
Despite the four-day rally, some traders doubt that the selloff in oil was over, citing last week’s build in U.S. crude stockpiles as evidence. A U.S. refineries strike also stretched into its third day on Tuesday, weakening the picture for crude.
The Wall Street Journal reported that “few investors and analysts are willing to call a bottom to a downdraft that began in July, the magnitude of which caught many market experts by surprise.”
U.S. refiners will refrain from buying more Kurdish crude oil until a long-running dispute between Baghdad and Iraqi Kurdistan is settled, while Washington urges both sides to set aside their differences and helps them tackle Sunni militants.
Biofuels Power Corporation (OTCBB:BFLS) announced today that it has signed a letter of intent with ThyssenKrupp Industrial Solutions (Africa) (Pty) Ltd (“ThyssenKrupp”) and Liberty GTL, Inc. (“Liberty”) to build a small-scale gas-to-liquid demonstration facility in Houston, Texas (“GTL Pilot Plant”). The parties have established a non-binding target date to complete installation and commissioning of the GTL Pilot Plant on or before December 31, 2014. The purpose of the GTL Pilot Plant is to commercially demonstrate converting stranded natural gas resources to synthetic crude oil.
“USA, USA, USA, USA.” No, I didn’t just come from watching the U.S. playing in the 2014 FIFA World Cup. But after reading the glowing, cheerleading, overly enthusiastic, often-nationalistic media accounts of the U.S. overtaking the Saudis in oil production, the win-lose aspects of the soccer chant somehow became embedded in my persona (like counting sheep or gas pumps at night when I can’t sleep). We beat the Saudis at their own game — oil. We’re number one…wow! Next, will we emulate the Saudis and place onerous and discriminatory restrictions on women drivers and, unlike the Saudis, argue that it’s a conservation measure? Of course not! We don’t have to be number one in everything. But oil does make strange bedfellows, and equally strange behavior, as well as policies.
Unfortunately, most of the media stories avoid analysis of what the new oil prominence of the U.S. means to the nation and world. Yes, increased production likely means less dependence on the Middle East, particularly Saudi oil. Indeed, we now import about 33% of oil needs, the lowest percentage in years.
But oil independence remains a myth. Oil interests are pushing for a reduction of regulations concerning exports of U.S. crude oil and have always exported considerable refined oil products allowed by the law. Their motives, despite frequent public comments to the contrary, are generally to sell to the price, which means to the buyer who offers the most return. He, she or it frequently is a global purchaser. Independence is a slogan that often blurs motive and reflects good politics but bad substance and contrary to reality.
The U.S., as the most powerful western nation, irrespective of any mathematical domestic surplus, will continue to extend its role as defender of the global supply chain from the Middle East or elsewhere. While we may be less dependent on foreign oil, U.S. leaders have, in the past, and likely will in the future, use a combination of diplomacy and military threats and action to defend and sustain the flow of foreign oil to allies or assumed allies. In this context, the role we play in the world extends our dependency. Unfortunately, wars will be fought and U.S. soldiers will die because of this felt dependency.
Most of the “USA, USA, USA” chants in the media coverage of our new oil prowess, implicitly neglects the difficult juxtaposition between increased oil production and supplies and higher gas prices. Less dependence hasn’t brought the reduction, or even stabilization, of gas prices promised by the oil industry. Gasoline in California is now generally well over $4 a gallon for regular, and averages over $3.60 a gallon across the nation. Why? We have a surplus, don’t we? Oil companies want to export more, and it appears that they will be able to do just that, soon. As Dr. Pangloss asked in “Candide,” is this the “best of all possible worlds” (let me add, for the U.S.)?
Clearly, the cost of oil at the pump is not strongly linked (at the present time) to the amount of U.S. oil that shows up on EIA calculations and projections. Both price and supply are going up simultaneously. Yes, there is uncertainty, given events in the Middle East and yes, uneven growth around the world has increased demand in some areas and suppressed it in others. The link between high prices and the Middle East is difficult to measure precisely. Consumer costs per gallon are likely affected more by investors, as well as speculation on Wall Street, than the actual numbers concerning increased production of U.S. oil.
So, apart from prayer and penitence, what can we do to get a better deal for consumers, and to prevent gasoline from becoming a negative factor concerning U.S. GDP growth and the environment? How can we help assure that being number one means robust economic growth, more income in the wallets of Americans (particularly low-income Americans), increased security and fewer dirty emissions?
These are not easy questions, and they do not lend themselves to simple ideological responses. Clearly, as renewable fuels and vehicles that meet the incomes and desires of most Americans become available, both will play a vital role in America’s future. But reliance on coal-fired utilities for power in some areas of the nation, battery costs, mileage limitations from single battery charges, and lack of infrastructure impede their ability to have a significant positive impact at the present. The market for renewable fuels and vehicles is relatively small and will remain so until technological advances catch up with potential demand.
Where is the Greek philosopher Diogenes when we need him? We have a path in front of us that would buy time toward a better American future, one that could offer competition to gasoline — competition that would be good for the economy, the consumer and the environment. Increased availability of replacement fuels, particularly natural gas-based ethanol, combined with large-scale conversion of older cars to flex-fuel vehicles (FFVs) and increased production of new FFVs by Detroit, would give gasoline a run for the money, if gas-only stations become fuel stations and provide consumers with a choice. According to the Renewable Fuels Association, less than one percent of all gas stations in the U.S. that are branded by the big oil companies offer E15 or E85.
I remain an optimist that more freedom will reign soon at the pump. The noted people’s philosopher, Charles M. Schulz, creator of “Peanuts” comic strips, lessened my fears about the future when he said, “Stop worrying about the world ending today. It’s already tomorrow in Australia.” USA, USA, USA. Fuel choice, fuel choice, fuel choice!
My favorite automobile service group — the AAA — has once again treaded without fear or trepidation into analysis. Remember earlier, when it suggested that E15 harms engines, based on what looked like an oil-industry-generated study? The AAA’s methodology was weak and its conclusions suspect, a judgment supported by the EPA’s response. According to the agency, AAA’s conclusions were erroneous and based on a limited sample. EPA’s own findings were generated from a relatively large sample of cars, indicating that E15 is safe for most engine types and reaffirmed the wisdom of its approval of E15 usage.
I was surprised to find an article in Oil Price by blogger Daniel Graeber, based to a large degree on comments from AAA’s Michael Green suggesting that the oil shale boom has prevented gas prices from going higher than they are now. Graeber approvingly quoted Green, who said, “Sadly, the days of cheap gasoline may never return for most American drivers despite the recent boom in North American crude oil production.” Assumedly, Green meant that the cost of drilling tight oil will remain high and the costs per barrel of oil will follow suit.
Green apparently went on to indicate that political leaders, particularly, members of Congress who argue for a drill-baby-drill policy, are wrong to link more wells to significant price relief for folks who find gas costs a real problem.
The AAA is right when it suggests that, despite the oil shale boom and signs of increasing demand in America, refineries are sending increased amounts of oil-based products overseas. Understandably, their patriotism doesn’t extend to accepting a lower price for oil in the U.S. when they can get higher prices overseas.
The article appears inconsistent, when at one point it mentions that crude oil inventories are running above average, and later blames current exports for low supplies and low supplies for preventing a drop in prices at the pumps.
Both are correct in indicating sales of oil products abroad probably do have an effect on costs-up to now probably marginal. Certainly, if Washington extends export privileges, increased sales of oil abroad may have a more significant impact on consumer costs. More relevant, however, concerning gasoline costs at the pump, will be economic recovery in the U.S., investor speculation and the oil sector’s ability to manage prices.
Cheap oil has been, recently, and likely will be in the future, a fantasy. The cost of oil per barrel has hovered at around $100 and upward for an extended period, and drilling in shale is relatively expensive. Continuous exogenous and existential (don’t you like those words — they create great passion and emotion) threats from the Middle East and Eastern Europe, also, will likely tilt oil prices upward in the near future.
I would commend the AAA, assumed by many to be the leading advocate for automobile owners in the nation, for grasping the fact that the behavior of producers is likely to lead to higher gas costs and create burdens, particularly for low and moderate-income groups. Now with this knowledge, shouldn’t the AAA argue for breaking oil’s near monopoly on fuel? If the AAA was really interested in helping vehicle owners lower their cost of fuel, it might take the lead in arguing for choice at the pump. Wouldn’t it be great if they really stood up for more open fuel markets as well as alcohol-based transitional fuels, such as ethanol and methanol? Competition at the pump from flex-fuel vehicles, combined with conversion of older vehicles to flex-fuel cars would, over time, mute increases in gas prices and, at the same, time generate environmental benefits for a better America. Support for alcohol-based fuels is consistent with support for renewable fuels, if one is concerned about the environment and GHG emissions. Let’s bring them on as fast as we can. But let’s acknowledge that renewable fuels are not really ready yet for prime time. They are too expensive for many Americans and their technical limitations, particularly concerning electric batteries, are not yet coincident with the desires of most Americans.