Tag: crude oil
Oil price spike in January was sharper during 1981 Iran-US standoff
WASHINGTON: Oil at $110 a barrel is taking only half as big a bite out of Americans’ pocketbooks as it did in 1981, the last time Iranian shipments were disrupted. The cost of a barrel of crude in the US, adjusted for total disposable income, was $107.92 in January of this year, compared with a peak of $213.44 in the same month in 1981, according to data compiled by Bloomberg and the Energy and Commerce Departments.
Oil consumption was 4.8% of income in 2010, compared with 9.7% in 1981, the data showed. For all the concern over the fallout from sanctions against Iran and the prospect of gasoline topping $4 a gallon in a US election year, the distress caused by rising oil prices is being mitigated by improved household purchasing power, a strengthening economy and America’s growing energy independence.
“The threshold to withstand the run-up in energy prices is higher than most people think,” said Carl Riccadonna, a senior US economist at Deutsche Bank Securities in New York, in a phone interview March 6. “We can tolerate fuel at $4. Job growth is stronger and incomes are looking very decent.
The economy is on a firmer footing.” Gross domestic product grew at a 3% annual rate in the fourth quarter of 2011, the most since the second quarter of 2010, while unemployment fell to a threeyear low of 8.3% in January, raising the likelihood consumers will boost spending. Oil futures for April delivery rose 42 cents, or 0.4%, to $106.58 a barrel on Thursday on the New York Mercantile Exchange, bringing the gain this year to 7.8%.
They exceeded $110 on March 1 for the first time since May 4. When adjusted prices reached an alltime high 31 years ago, Iran had stopped crude shipments following the seizure of the US embassy in Tehran and the standoff over the fate of 52 American hostages. To fight accelerating inflation, Federal Reserve Chairman Paul Volcker allowed the federal funds rate to rise to 22% in July 1981, helping push the economy back into a recession which started that month and lasted 16 months.
Oil is rising again as Iran threatens to close the Strait of Hormuz, the transit point for about 20% of global crude cargoes , following the European Union’s January 23 pledge of an oil embargo starting July 1 to pressure the Islamic republic to not build a nuclear weapon.
While a surge in energy prices may slow growth, concern that it may push the US into a recession is premature, according to Neal Soss, chief economist at Credit Suisse in New York. “Higher gas prices don’t help, but before you get really nervous you need to see them go much higher,” he said on March 7 in a phone interview.
“The economy will continue to grow through the year.” Declining fuel use compared with past decades may also be helping Americans cope with increased prices at the pump. Household consumption of energy as a share of total spending was 5.6% this year, down from 8.9% in 1980, according to Riccadonna of Deutsche Bank.
The US has reversed a two-decade-long decline in energy independence, increasing the proportion of demand met from domestic sources over the last six years to an estimated 81% through the first 10 months of 2011, according to data compiled by Bloomberg from the Energy Department. That’s the highest level since 1992. Domestic oil output is the highest in eight years.
The US is producing so much natural gas that, where the government warned four years ago of a critical need to boost imports, it now may approve an export terminal. Retail gasoline rose to $3.793 a gallon in the week ended March 5, the highest level at this time of the year in records going back to 1990, according to the Energy Department .
How much would Keystone pipeline help US consumers?
“Millions of Americans will spend 10 to 20 cents more per gallon for gasoline and diesel fuel as tribute to our ‘friendly’ neighbors to the north,” the highly respected Dr. Verleger wrote. “The Keystone XL pipeline will move production from Canadian oil sands to a deepwater port from where it can be exported.”
But that is not merely Verleger’s opinion. It’s based on findings of the economic consultants hired by TransCanada – contained in their analyses of the pipeline’s impact on Canadian oil producers and in official testimony before Canada’s National Energy Board.
“Existing markets for Canadian heavy crude, principally [the US Midwest], are currently oversupplied, resulting in price discounting for Canadian heavy crude oil,” concludes a 2009 analysis on behalf of TransCanada by Purvin Gertz, Inc., an oil economics firm based in Houston. “Access to the [US Gulf Coast] via the Keystone XL Pipeline is expected to strengthen Canadian crude oil pricing in [the Midwest market] by removing this oversupply. This is expected to increase the price of heavy crude to the equivalent cost of imported crude.”
Gulf link to global markets
As a result of those increases in the price of heavy crude in the Midwest and sales of higher-margin refined products shipped out from Gulf Coast refineries to other markets, Canadian oil producers could be expected to reap $2 billion to $3.9 billion more each year, the analysis says.
“Shippers on the Keystone XL Pipeline have contracted for access to the [US Gulf Coast] market for their oil sands production and refining needs,” the Purvin Gertz study concludes. “Not only will this directly benefit these shippers, it will also provide a benefit to all [Western Canadian] heavy crude producers by increasing the price they receive for their crude, as well as providing significant pipeline capacity to an alternative market” on the US Gulf coast.
Video: TransCanada President on Keystone XL Pipeline
Why Canadian crude oil producers would choose Keystone XL when other pipelines to the US are running well below capacity has much to do with diversifying away from the US market to more lucrative markets in Europe, China, and other Asian countries, Verleger and others argue. Trends seem to support this thesis.
Over the past five years, exports from the US Gulf Coast have soared as refiners sitting in tax-free zones near Port Arthur, Texas, have shifted production away from gasoline and toward higher-margin diesel. Since 2007, overall US exports of diesel and other products have jumped 134 percent, the US Energy Information Administration reports. Of US exports, two-thirds is shipped abroad from Gulf Coast refineries – now more than 2 million barrels a day and up from just a quarter of today’s level a decade ago.
That trend was captured in testimony Sept. 17, 2009, before Canada’s National Energy Board. Seven Canadian companies were willing to pay higher pipeline tariff costs for using the Keystone XL pipeline, the testimony showed, in order to bypass Midwest refineries by sending 500,000 barrels per day, the lion’s share of the pipeline’s capacity, to Gulf refineries.
Valve to relieve Midwest oil “oversupply”
In addition to winning higher prices for Canadian oil in the Gulf, the pipeline would boost revenues by shuttling existing oil supplies out of the Midwest – boosting prices, the Canadian study and testimony also show.
“So seven shippers or seven producers are, in your view, pursuing this strategy in order to increase the [Midwest oil market] and Ontario prices. Do I have it right?” D. Davies, a Canadian energy board examiner asked Thomas Wise, the Purvin Gertz expert who authored the economic analysis for TransCanada.
“If a minority of the barrels were sold at the Gulf Coast at a Gulf Coast price, that would have the effect of raising the price not only in the Midwest and Ontario but in Western Canada,” Mr. Wise responded.
In hearings last May and December, TransCanada officials admitted to US legislators that the pipeline will indeed increase the price paid for Canadian oil in the Midwest – but suggested those higher crude oil prices would not necessarily mean higher gasoline prices in that region.
The pipeline would reduce the “discount on Canadian oil” currently paid by US refiners – an oil price increase for US refineries, Pourbaix said in a congressional hearing last May. Even so, “that crude will still remain the cheapest source of crude by a long shot that U.S. refineries have access to,” he testified.
“If you add significant new supply to a static demand for a product in a market, you should see the price go down,” Pourbaix explained. “So it is my absolute expectation, that over time, with incremental supplies of Canadian crude oil coming into the US market, you will see downward pressure on refined products prices, throughout US markets.”
In his e-mailed response, TransCanada’s Mr. Cunha cites a June 2011 report by IHS CERA, an energy economics firm that reached similar conclusions. “Prices at the pump will drop when America’s largest refining region (the Gulf Coast) becomes less dependent on the world’s highest priced crude (OPEC),” he wrote. “Foreign importers will have to cut their prices if they want to compete with the cheaper Canadian crude…. We would argue the overall US price per barrel will drop as refiners pay less for foreign and domestic oil competing with a higher volume of cheap Canadian oil.”
Testimony and supporting documents north of the border stating that Keystone XL would raise Canadian crude prices has set off alarm bells with several US legislators – while leaving others unmoved.
Legislators react to findings
Rep. Ed Whitfield (R) of Kentucky, who chaired two hearings into the Keystone XL, heard positive testimony about the pipeline – as well as contradicting testimony that it would do little or nothing for energy security while raising Midwest oil prices. He still likes the project, however.
“If our president decides that sending aircraft carrier strike groups to the Strait of Hormuz to defend oil flow is in the national interest, then one would also think a pipeline from Canada that would help eliminate our Middle East oil imports also serves the national interest,” Mr. Whitfield said in a prepared opening statement for the hearing he chaired.
In an e-mailed statement, Whitfield’s press secretary adds that the pipeline “will help lower the price of gasoline by bringing more oil supply to the market” and says the Department of Energy “specifically states that gasoline prices in all connected markets would go down.”
But Sen. Ron Wyden, an Oregon Democrat, was alarmed enough to call last year for a Federal Trade Commission (FTC) investigation into the matter based in part on the Canadian National Energy Board testimony.
“While the full nature of the arrangements agreed upon by the Canadian shippers is unclear, there is clear indication that there is a coordinated ‘strategy’ among Canadian suppliers to gain higher prices,” Senator Wyden wrote Jonathan Liebowitz, chairman of the FTC in an April 6, 2011, letter. “This will have the effect of manipulating supply levels allowing prices of oil refined in [the Midwest oil market] to rise and ultimately benefitting the Canadian companies with higher prices.”
On Thursday, it was Wyden who put forward an amendment to the transportation bill that would have prohibited the sale of the Keystone oil overseas and imposed other regulatory requirements. His amendment was defeated 64 to 34.
Reacting to Obama’s previous decision to bar approval for Keystone XL, TransCanada made it clear it considered the project too vital to delay for long.
“Until this pipeline is constructed, the US will continue to import millions of barrels of conflict oil from the Middle East and Venezuela and other foreign countries who do not share democratic values Canadians and Americans are privileged to have,” Russ Girling, TransCanada’s president and chief executive officer said in a statement.
“This project,” he continued, “is too important to the US economy, the Canadian economy and the national interest of the United States for it not to proceed.”
This story, “Inside the Keystone pipeline: How much would it really help US consumers?,” first appeared on CSMonitor.com
© 2012 Christian Science Monitor
Gasoline prices level off this week
NEW YORK (AP) — Gasoline prices paused this week in their march toward $4 per gallon.
After 39 straight days of increases, prices fell nearly a penny from Tuesday to Thursday and held steady on Friday at $3.758 per gallon. The lull won’t last long.
Prices dipped as suppliers conducted the equivalent of a spring clearance. They are discounting winter gasoline blends to make room for different blends that are required for summer driving, said Tom Kloza, chief analyst at the Oil Price Information Service.
Prices will start to rise again once the winter gasoline has been sold off. They have to, Kloza said, since summer gasoline costs more to produce because it contains smog-fighting additives. The switch to summer gas also creates a temporary dip in supplies as wholesalers sell off winter stocks, and that can force prices higher as well.
OPIS forecasts that average gasoline prices will rise as high as $4.25 per gallon across the country by late April. That would top the record high of $4.11 set in July 2008 and keep gasoline center stage during this year’s presidential election. Republicans have blamed President Barack Obama for the high prices, while Obama has dismissed the criticism as election-year politics. Obama has asked his attorney general to look into the possibility that commodity speculators are driving prices higher.
The average price for gasoline is already more than $4 per gallon in California, Alaska and Hawaii. It’s nearly there in Connecticut, Illinois, New York, Oregon and Washington.
The price of gasoline has mostly followed the rising price of its main component, crude oil. Oil, which is traded around the world, has become more expensive this year on fears of supply shortages in the Persian Gulf due to an international standoff over Iran’s nuclear program.
Oil prices continued to rise Friday after the U.S. said its economy added 227,000 jobs in February. The U.S., the world’s largest oil consumer, has seen the strongest three months of job growth since the Great Recession. An improving economy is likely to lead to more demand for oil.
Benchmark West Texas Intermediate crude, which is used to price much of the oil produced in the U.S., rose by 82 cents to end the day at $107.40 per barrel in New York. Brent crude, which prices oil imported by U.S. refineries, rose by 54 cents to finish at $125.98 per barrel in London.
Natural gas futures rose by 5 cents to end at $2.32 per 1,000 cubic feet. Earlier in the week, natural gas dropped to the lowest level in 10 years following a relatively warm winter and a boom in U.S. production.
In other energy trading, heating oil fell by less than a cent to finish at $3.26 per gallon and gasoline futures rose 2 cents to end at $3.33 per gallon.
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Copyright © 2012 The Associated Press. All rights reserved.
Oil prices climb back above $107 as gasoline costs drop
By CHRIS KAHN
The Associated Press
3/9/2012
NEW YORK — Gasoline prices are lower this week after 39 days of increases, though experts say they should rise again in the spring.
Meanwhile oil prices continued to climb.
Benchmark oil prices rose by 87 cents to $107.45 per barrel in New York. Brent crude rose by 19 cents to $125.63 per barrel in London.
The national average price of gasoline, which stayed at $3.758 per gallon on Friday, has dropped about a penny since Monday. Prices are still at the highest levels ever for this time of year.
Tom Kloza, chief analyst at the Oil Price Information Service, said prices dipped as suppliers conducted the equivalent of a spring clearance. They are discounting winter gasoline blends to make room for different blends that are required for summer driving.
Altogether, the discount probably won’t get much notice at the pump. “It’ll spread $325,000 per day in savings among 200 million or so drivers,” Kloza said. “It’s really not that much.”
Once the winter gasoline has been sold off, prices will start to rise again. They have to, Kloza said, since summer gasoline costs more to produce. The switch to summer gas also crimps supplies around the country, and that can force prices higher as well.
The average price for gasoline is already more than $4 per gallon in California, Alaska and Hawaii. It’s nearly there in Connecticut, Illinois, New York, Oregon and Washington.
OPIS forecasts that average gasoline prices will rise as high as $4.25 per gallon across the country by late April. That would top the record high of $4.11 set in July 2008 and keep gasoline center stage during this year’s presidential election. Republicans have blamed President Barack Obama for the high prices, while Obama has dismissed the criticisms as election-year politics. Obama has asked his attorney general to look into the possibility that commodity speculators are driving prices higher.
The price of gasoline has mostly followed the rising price of its main component, crude oil. Oil, which is traded around the world, has become more expensive this year on fears of supply shortages in the Persian Gulf due to an international standoff over Iran’s nuclear program.
Oil prices continued to rise Friday after the U.S. said its economy added 227,000 jobs in February. The U.S., the world’s largest oil consumer, has seen the strongest three months of job growth since the Great Recession. An improving economy is likely to lead to more demand for oil.
Natural gas futures rose by 3 cents to $2.31 per 1,000 cubic feet a day after dropping to the lowest level in 10 years.
In other energy trading, heating oil fell by 1 cents to $3.26 per gallon and gasoline futures rose less than a penny to $3.32 per gallon.
The Trucker staff can be reached for comment at editor@thetrucker.com.
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Effect of Oil Price on Income Wanes in US
Oil at $110 a barrel is taking only
half as big a bite out of Americans’ pocketbooks as it did in
1981, the last time Iranian shipments were disrupted.
The cost of a barrel of crude in the U.S., adjusted for
total disposable income, was $107.92 in January of this year,
compared with a peak of $213.44 in the same month in 1981,
according to data compiled by Bloomberg (.OILINCM) and the Energy and
Commerce Departments. Oil consumption was 4.8 percent of income
in 2010, compared with 9.7 percent in 1981, the data showed.
For all the concern over the fallout from sanctions against
Iran and the prospect of gasoline topping $4 a gallon in a U.S.
election year, the distress caused by rising oil prices is being
mitigated by improved household purchasing power, a
strengthening economy and America’s growing energy independence.
“The threshold to withstand the run-up in energy prices is
higher than most people think,” said Carl Riccadonna, a senior
U.S. economist at Deutsche Bank Securities Inc. in New York, in
a phone interview March 6. “We can tolerate fuel at $4. Job
growth is stronger and incomes are looking very decent. The
economy is on firmer footing.”
Gross domestic product grew at a 3 percent annual rate in
the fourth quarter of 2011, the most since 2010, while
unemployment held at a three-year low of 8.3 percent in
February, raising the likelihood consumers will boost spending.
Oil futures for April delivery rose 82 cents, or 0.8
percent, to settle at $107.40 a barrel on the New York
Mercantile Exchange, bringing the 2012 gain to 8.7 percent. The
price exceeded $110 on March 1 for the first time since May 4.
Fighting Inflation
When adjusted prices reached an all-time high 31 years ago,
Iran had stopped crude shipments following the seizure of the
U.S. embassy in Tehran and the standoff over the fate of 52
American hostages. To fight accelerating inflation, Federal
Reserve Chairman Paul Volcker allowed the federal funds rate to
rise to 22 percent in July 1981, helping push the economy back
into a recession which started that month and lasted 16 months.
Oil is rising again as Iran threatens to close the Strait
of Hormuz, the transit point for about 20 percent of global
crude cargoes, following the European Union’s Jan. 23 pledge of
an oil embargo starting July 1 to pressure the Islamic republic
to not build a nuclear weapon.
Concern that a surge in energy prices will push the U.S.
into a recession is premature, according to Neal Soss, chief
economist at Credit Suisse in New York.
Less Usage
“Higher gas prices don’t help, but before you get really
nervous you need to see them go much higher,” he said on March
7 in a phone interview. “The economy will continue to grow
through the year.”
Declining fuel use compared with past decades may also be
helping Americans cope with increased prices at the pump.
Household consumption of energy as a share of total spending was
5.6 percent this year, down from 8.9 percent in 1980, according
to Riccadonna of Deutsche Bank.
The U.S. has reversed a two-decade-long decline in energy
independence, increasing the proportion of demand met from
domestic sources over the last six years to an estimated 81
percent through the first 10 months of 2011, according to data
compiled by Bloomberg from the Energy Department. That’s the
highest level since 1992.
Domestic oil output is the highest in eight years. The U.S.
is producing so much natural gas that, where the government
warned four years ago of a critical need to boost imports, it
now may approve an export terminal.
Gasoline Prices
Retail gasoline rose to $3.793 a gallon in the week ended
March 5, the highest level at this time of the year in records
going back to 1990, according to the Energy Department. Futures
on the Nymex have advanced 23 percent this year, settling at
$3.314 a gallon yesterday. Prices may average $4 a gallon this
summer and as much as $5 in some East Coast areas, Stephen Schork, president of the Schork Group, an energy-consulting firm
in Villanova, Pennsylvania, said in an interview.
Confidence as measured by the Bloomberg Consumer Comfort
Index (COMFCOMF) was minus 36.7 in the week ended March 4, the highest
since April 2008, up from minus 38.8 in the prior period,
according to figures released yesterday. Auto sales in February
accelerated to a 15.03 million annual rate, the fastest in four
years, from 14.13 million in January, according to Ward’s
Automotive Group.
Payrolls Grow
The U.S. has added more than 200,000 jobs for three
consecutive months. A report today showed payrolls rose by
227,000 in February, exceeding the median forecast of economists
surveyed by Bloomberg News and following a 284,000 gain the
prior month.
A modest increase in the hours worked and payroll growth at
the recent pace would mean nominal disposable income grows by
almost $500 billion this year, according to Soss of Credit
Suisse.
While employment and the economy have dominated the
presidential election campaign, exit polls show fuel bills are
an increasing concern for voters. In Ohio’s March 6 presidential
primary, 93 percent of Republican primary voters said gasoline
prices were “a factor” in their vote, with 74 percent saying
they were “an important factor.”
‘No Quick Fixes’
“Higher gas prices are like a tax straight out of your
paycheck,” President Barack Obama told an audience at a Daimler
Trucks North America plant in Mount Holly, North Carolina March
7. “You and I both know there are no quick fixes to this.”
Former House Speaker Newt Gingrich of Georgia promised in a
Feb. 22 Republican presidential debate that as president he
would pursue an energy program including drilling in the Arctic
National Wildlife Refuge so “every American can look forward to
$2.50 per gallon gasoline.” Fellow candidate Mitt Romney said
Obama “has tried to slow the growth of oil and gas production
in this country, and coal production” in a March 1 speech in
Fargo, North Dakota.
Bloomberg’s numbers use the Energy Department’s monthly
average price that refineries pay for imported oil, adjusted to
reflect data on disposable income from the Commerce Department’s
Bureau of Economic Analysis.
Even taking into account population growth, oil is cheaper
today than it was three decades ago. Adjusted for per capita
disposable income, prices peaked at $156 in January 1981.
Income Factor
“The income factor does play a role” in absorbing rising
oil prices, said Sander Cohan, a principal at Energy Security
Analysis Inc. in Wakefield, Massachusetts. “The reaction to
higher energy prices is always a move toward efficiency.”
Unadjusted nominal import prices started to rise in 1979 to
peak at $39 a barrel in February 1981, more than doubling from
the $14.9 level of December 1978.
The Iranian Revolution, which began in late 1978, resulted
in a drop in Iran’s oil production of 3.9 million barrels per
day from 1978 to 1981, according to the Energy Department.
That’s about 6.4 percent of 1981’s world oil production,
standing at 60.6 million barrels a day, department data showed.
Production dropped further during the Iran-Iraq War, which
started in 1980. By the following year output from the
Organization of Petroleum Exporting Countries declined to 22.8
million barrels per day, 7 million barrels below its level for
1978, according to the department.
This year’s rise in global oil costs “is likely to push up
inflation temporarily while reducing consumers’ purchasing
power,” Fed Chairman Ben S. Bernanke said in semi-annual
testimony to Congress on March 1. He also said policy makers
expect inflation will remain “subdued.”
Gasoline’s gains are pinching Americans’ pockets just as
the economy is gaining momentum, according to Neil Dutta, an
economist at Bank of America Corp. in New York. The increase in
fuel costs may trim as much as half a percentage point from U.S.
economic growth, he said.
“The gas price story is damping growth prospects,” he
said. “The economy is in a better place than last year, but it
isn’t materially better. The increase in energy prices is a
significant headwind.”
– With assistance from Mike Dorning, Roger Runningen, Craig
Torres and Carlos Torres in Washington and Edward Klump in
Houston. Editors: Philip Revzin, Justin Carrigan
To contact the reporters on this story:
Moming Zhou in New York at
mzhou29@bloomberg.net;
Shobhana Chandra in Washington at
schandra1@bloomberg.net
To contact the editor responsible for this story:
Dan Stets at
dstets@bloomberg.net
Increasing Oil Prices could Trigger Renewable Energy Growth
Commentary, Home Page Featured
COMMENTARY-ProspectingJournal.com-In a world that continues to see oil prices propel we are beginning to realize vast 
changes in the energy climate of North America. Low natural gas prices, growing international insecurity about the supply of crude oil, and breakthroughs in fracturing and drilling technologies have played their part in forcing a North American energy industry to rapidly begin exploring domestic oil reserves. Alberta’s oil sands and North Dakota’s Bakken field have quickly grown into the spotlight, with both regions boasting massive reserves. The two zones currently account for about 2.1 million barrels of oil production per day, but the combined figure is expected to grow to about 5.4 million by 2020. There can be little doubt that domestic oil producers are preparing to take advantage of higher anticipated prices. But with rising oil prices we are also setting the stage for renewable energy consumption, an industry that currently sits in anonymity but remains on the cusp of enormous growth.
At a speech at an automotive plant in North Carolina on Wednesday, Obama revealed his clean vehicle initiative. He exclaimed, “if you make a commitment to buy more advanced vehicles…we’ll help you cut through the red tape and build fueling stations nearby…and we’ll offer tax breaks to families that buy these cars [and] companies that buy the alternative fuel trucks”. He continued by proposing to increase tax credits to up to $10,000 for those who produced such vehicles. It might be election rhetoric, but his stance on projects such as Keystone XL send a strong indication into a desire to change domestic demands’ reliance on oil. The Energy Information Agency recently released its “Annual Energy Outlook 2012”. It reported that renewable energy production was set to double by 2035 even if all government tax breaks had expired. Electricity demand is expected to grow by just under 1 percent each year, with the outlook also suggesting a growing reliance on renewable sources in electricity consumption. California has set a precedent, with regulators issuing rules that will require 1 in 7 cars produced in 2025 to contain either zero-emission or plug-in hybrid technologies. Many analysts are bullish other markets will follow suit.
Regardless, oil prices are likely to remain the decisive factor in advocating such changes. With global reliance on oil growing there is little reason to believe prices will decrease in the near future. On top of that Europe and Iran have alarmed us of the very real 
possibility of seeing further cuts to global supply, making prices alarmingly susceptible to uncertainty. Jim Ritterbusch, president of Ritterbusch and Associates, said the possibility of $130 a barrel of crude is “easily attainable within about a two-week frame”. As it stands there is already concern over the increasing costs of driving a vehicle. A recent Gallup poll suggests that between 42 and 45 percent of Americans will be forced to make significant lifestyle changes should gas prices cross into the $4 per gallon range. Francisco Blanch of Bank of America Merrill Lynch, stated, “we believe the global economy cannot afford oil prices above $130 a barrel”. There is every indication to believe that many live precariously close to their financial limits.
The suddenness with which forecasts regard such price jumps as a possibility provide the notion that higher prices may be realized very rapidly. If that were the case, we are likely on the brink of compelling many to restructure their consumption habits in favor of renewable energy sources. And history tells us that there will be more oil shocks to come.
-
Jason Staeck
ProspectingJournal.com
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As oil prices increase, US oil rig count rises
If one looks carefully at the graph above it indicates that the number of rigs drilling for oil has been increasing almost since the day President Obama took office.
A record number of rigs are now drilling for oil in the U.S., the most in 25 years. SEARCH: ‘Baker Hughes Rig Count Hits Record’
More rigs are now drilling in the deepwater Gulf than before the BP Deepwater Horizon explosion in 2010. SEARCH: ‘More Oil Drilling Rigs In Gulf’
The U.S. consumes about 19 million barrels of oil per day of which about 9 mbd is imported, most from the Western Hemisphere. There is plenty of oil available to meet our needs, in fact the U.S. is now a net exporter of over 400,000 barrels of refinery products per day. SEARCH: ‘U.S Exports Refined Fuels’
The U.S. has about 1.5% of the world’s known reserves of crude oil, this simply is not enough to effect the price of oil on the world market. SEARCH: ‘Drill Baby Drill Won’t Lower Gas Prices’
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Exxon’s CEO Tillerson: I don’t see gas prices topping $5
Despite rising crude oil prices and threats to stability in the Middle East, the price of gas is unlikely to reach a national average as high as $5 per gallon in the near term, ExxonMobil’s Chief Executive Rex Tillerson told TODAY’s Matt Lauer Friday.
“As I look at just the supply and demand fundamentals, I would not expect prices to reach that level,” Tillerson told TODAY.
“Again, the unknown in here is the market’s view of the political risk; if the rhetoric gets more heated, if a problem flares up anywhere else in the world, then certainly it could drive these prices up further,” he said.
With the busy summer driving period approaching, many observers are fearful that the price for a gallon of gas, which AAA says is now $3.76 on average across the U.S., could move up to the dreaded $5 mark and derail the economic recovery.
Ongoing conflict in Syria, political tensions between Iran and the West and rising demand for oil from emerging economies such as China are also threatening to push up gas prices.
One source of tension in the Middle East has been concerns over Iran’s nuclear program, which Israel sees as a threat to its existence. If Israel were to attack Iran’s nuclear facilities the impact on gas prices would be “fairly immediate and highly volatile,” Tillerson said.
“It would be largely driven too by what the response was, and whether that resulted in an actual physical disruption of oil to the market.”
Faced with trade embargoes and the possibility of an attack, Iran has threatened to close the Strait of Hormuz — a strategic shipping channel through which a majority of the Middle East’s oil-producing countries supply the world’s economies with crude oil.
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Oil rises to near $107 ahead of key US jobs report
Oil prices rose slightly to near $107 a barrel Friday on positive news about Greece’s debt crisis and ahead of a key U.S. employment report that will give an insight into the strength of the world’s No. 1 economy.
By early afternoon in Europe, benchmark oil for April delivery was up 31 cents to $106.89 in electronic trading on the New York Mercantile Exchange. The contract rose 42 cents to settle at $106.58 per barrel in New York on Thursday.
In London, Brent crude was down 29 cents at $125.15 per barrel on the ICE Futures exchange.
Greece’s debt swap, accepted by at least 83 percent of its private bondholders, should clear the way for the country’s second international bailout, but analysts remained cautious.
“Greece successfully closed a bond swap offer aimed at reducing its debt, easing the threat of an immediate default, but prolonging Europe’s struggle to find ways out of its debt dilemma,” said a report from JBC Energy in Vienna.
The U.S. Labor Department is scheduled to announce February employment figures later Friday. Analysts expect the economy added about 210,000 jobs last month. Strong jobs growth in December and January has bolstered confidence that economic growth and demand for oil is improving.
Crude has jumped from $75 in October and $96 last month as the U.S. economic recovery gathers momentum and Europe’s debt crisis shows signs of stabilizing.
“It’s obvious that speculators are investing in the market and creating a push higher on prices, but the fact remains that we are still dealing with tight crude supply in the U.S.,” said Carl Larry of Oil Opinions and Outlooks. “Oil prices, if they do come off, won’t see much lower than $100.”
“We’re on the road to recovery and despite the move to more fuel efficient vehicles, it’s not going to stop the increase in demand,” he said.
Simmering tensions over Iran’s nuclear program have kept crude near 10-month highs. On Thursday, an Israeli official said satellite images back Israel’s contention that Iran is developing a nuclear weapon. Iran says its nuclear capabilities are for peaceful purposes.
The U.S. and Europe have imposed sanctions while Iran has threatened to halt crude tankers passing through the Persian Gulf’s Strait of Hormuz
Any new aggressive rhetoric from Iran or others over the nuclear issue could easily push oil up by $2 to $3 a barrel, Energy consultant and trader Ritterbusch and Associates said in a report.
Speculation that the U.S. Federal Reserve is considering a third round of Treasury bond purchases, known as quantitative easing, has also boosted crude prices since it would weaken the dollar, making crude cheaper for holders of other currencies. The program would be designed to increase the money supply and lending to spur economic growth.
Underpinning concerns about global economic growth, the Organization of the Petroleum Exporting Countries kept its monthly forecast of world oil demand unchanged, saying it expected it to grow by 900,000 barrels a day this year.
OPEC said Friday that “the weak pace of growth in the OECD economies is negatively affecting oil demand.”
While the U.S. economy has improved, Europe’s debt crisis “along with higher oil prices has resulted in considerable uncertainties for future oil demand for the rest of the year,” OPEC said.
In other energy trading, heating oil fell 0.80 cent to $3.2615 per gallon and gasoline futures fell 0.21 cent at $3.3119 per gallon. Natural gas advanced 2.7 cents to $2.299 per 1,000 cubic feet.
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Alex Kennedy in Singapore and George Jahn in Vienna contributed to this report.
Naira Heads for Two-Week High on Investor Inflows, Oil Prices
Nigeria’s naira headed for the
highest in two weeks against the dollar after foreign investors
bought the nation’s debt and on support from high oil prices.
The currency of Africa’s biggest oil producer advanced 0.3
percent to 157.2 per dollar, the strongest on a closing basis
since Feb. 23, at 12:20 p.m. in Lagos, heading for a second
weekly gain.
Oil rose for a third day in New York on speculation that
rising U.S. payroll numbers and an easing European debt crisis
will spur demand for crude. A Central Bank of Nigeria sale of
150.1 billion naira ($955 million) of treasury bills on March 8
was oversubscribed, bids totaling 328.8 billion naira, with
yields on 364-day notes at 15.57 percent.
“We’ve experienced foreign investors coming into” bonds
and treasury bills, Edgar Ebinum, an analyst at Lagos-based
Cowry Asset Management Ltd., said by phone today. “The oil
price has been upbeat and it has a way of strengthening our
external reserves and we expect the CBN to maintain their
intervention strategy over time.”
High borrowing costs have fueled demand from foreign
investors seeking better returns, central bank Governor Lamido Sanusi said Feb. 28. An auction last week for 35 billion naira
of 2022 bonds sold at a yield of 15.893 percent was 2.35 times
subscribed.
The central bank has sold $300 million to lenders at two
foreign-exchange auctions this week. The regulator, based in the
capital Abuja, offers dollars at auctions on Mondays and
Wednesdays to maintain exchange rate stability.
Ghana’s cedi climbed 0.2 percent to 1.7102 per dollar in
Accra.
To contact the reporter on this story:
Chris Kay in Abuja at
ckay5@bloomberg.net
To contact the editor responsible for this story:
Gavin Serkin at
gserkin@bloomberg.net
