Crude Remains Strong Despite Inventory Build
Light Crude Oil (CL, NYMEX)
Daily Commodity Futures Price Chart: July, 2007
chart courtesy of TFC Commodity Charts
>
Crude closed at $68.86 (August 2007) today -- down 68 cents -- and the new futures contract starts tomorrow.
Since I have been ranting today -- I remain firmly convinced that:
- Energy is not only a matter of economics, but a matter of National Security;
- Subsidies for Oil and Ethanol need to be replaced with subsidies for Solar;
- CAFE standards need to be raised;
- Expedited processing for Nuclear Power plant permits should be issued
I own a V8 (automatic), a straight 6 (6 speed), and a 4 cylinder (5 speed) -- so I am the last person to preach we all need to shift to Vespas and biofuels. But its pretty apparent to even a gas hog like me that we need to do something other than send billions of dollars to terrorist nations each and every single month.
Source: Pat Oliphant via Yahoo!
Wednesday, June 20, 2007 | 03:30 PM | Permalink
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Good points. Unlike previous oil shocks which were politicaly induced we're facing a long-term demand/supply imbalance with the preponderance of sources offshore and in increasingly unstable localities. It'll take 20-30 years to migrate away from the current infrastructure (think $Ts of investment to changeover). Aside of national security and exponentially increasing exposure we could continue to reduce the costs and shock risks. In particular one thing left off is increased conservation - which could reduce energy/oil demand by 30% or better VERY quickly (cf SciAm or Amory Lovins work). Another s.t. ameliorative would be expedited processes for refinery development. But a concerted national effort (think Manhattan project jr.) to get clean-coal and nuclear would provide workable and affordable alternatives inside the 20 year horizon, lower total costs if done properly and reduce the security risks. If you wanted to look for a political cause to support an effort like the early space program for energy alternatives wouldn't be out of place. And it could be made viable and workable via a carbon tax where the funds were ear-marked for R&D and infrastructure development.
p.s. - a rapid increase in mileage would add another potential 20%+ to oil demand decreases.
Posted by: dblwyo | Jun 20, 2007 3:45:05 PM
If you feel that sending money to terrorist nations is wrong, why do you continue to own your V8 and straight six cars?
Posted by: zack | Jun 20, 2007 3:57:28 PM
I don't understand the fear of ethanol. Solar is great, but I don't see solar powering 18 wheelers anytime soon.
Couldn't we be an energy exporter via ethanol?
Posted by: Aaron | Jun 20, 2007 4:14:16 PM
As long as we're ranting...
You call for subsidies etc., but nowhere in your rant to I see where YOU are going to pay. Put your money where your mouth is, and call for increased gas taxes.
The entire problem is encompassed in the externalization of costs, and can be addressed through taxation.
Nope. You'll ask for (and get) your politicians to subsidize, regulate, and crank up the printing press to pay for it.
In the end, it won't only be oil that's a security threat. But that'll be the stupid politician's fault. Not yours.
Posted by: Estragon | Jun 20, 2007 4:18:51 PM
I live near the homr of the Big Three. The lack of ingenuity and the intertia I percieve is disapointing.
Now Barry just can't help himself for being a gas hog. It's in his jeans!
If Detroit was creating things like this little hybrid then I would have hope and BR would be tearing up the asphalt sans guilt!
I want one too.
http://www.treehugger.com/files/2006/08/the_hybrid_mini.php
Posted by: alexd | Jun 20, 2007 4:19:23 PM
Couldn't we be an energy exporter via ethanol?
I think the most recent studies have shown that ethanol costs as much to produce in terms of labor, fuel and transportation as it produces. Ethanol also produces less energy than regular gasoline.
I still say we need to focus on technology in the short term to solve our energy problems.
Posted by: OkieLawyer | Jun 20, 2007 4:22:59 PM
A few facts: Who is the fourth largest producer of oil in the world? Why, the US. Who is the largest consumer? Well, naturally, the US (25% of total). Where do you US imports come from? Of the top fifteen, Canada is number one, followed by Mexico, Saudi Arabia, Venezuela. Of Mid-East countries aside from S. Arabia, Iraq is number seven and Kuwait is number 14. As one might expect, the largest percentage of what the US consumers is produced in the US. (Source: WSJ, January 25, 2007, 'over a Barrel: the Global Scramble for Energy Security'.
As for imports, US dependence on Mid-East oil has for several decades been overplayed, one might argue, since the percent imported from the M. East, while signficant, is a relatively speaking small amout compared to the total consumed by the US? So why the importance on ending US dependence on imports from those 'terrorist' countries? Why, price, of course.
Controlling the spigot has a bearing on controlling the price. This might explain the US propensity to exercise military control over global sea lanes (something China is deeply concerned with), as well as give insight to why the US has three aircraft carriers and assorted battle and support ships patrolling waters just off Iran's shores.
Be alert to the facts, folks, and don't fall to simplistic language that takes one down the trap of fear of terrorism.
Posted by: don | Jun 20, 2007 4:24:15 PM
Aaron - In a very real sense, ethanol IS solar power captured and released in a carbon cycle.
Posted by: Estragon | Jun 20, 2007 4:24:31 PM
I agree with all your points. I also think that as the economic consequences of burning food in our cars start to become apparent there will be huge changes in a big hurry because suddenly the political pressure will get really intense.
Posted by: wally | Jun 20, 2007 4:25:59 PM
Don - it's also worth keeping in mind that China has the means (USD reserves) to buy preferential access to Canadian and Mexican oil reserves. Barry got his "cheap" big screen TV though right?
Posted by: Estragon | Jun 20, 2007 4:35:34 PM
Ethanol is not viable. It makes a nice political sound bite but unfortunately it has a few problems.
http://www1.umn.edu/umnnews/Feature_Stories/Ethanol_fuel_presents_a_cornundrum.html
The first problem is that if we turned every single US bushel of corn into ethanol it would meet only about 12% of US gasoline demand and food price inflation would be rampant if we did that. Currently about 15% of corn is turned into ethanol and that replaces less than 2% of US gasoline consumption. This number alone is already a factor in food inflation. Corn is a major component of many foods and is by far the largest component in all beef, pork and chicken products. When the price of corn doubles (as it has) the costs buy the feed to raise cattle doubles. Anyone notice a big jump in beef prices on the shelves in the last few years. Ethanol is not a small contributor in that effect.
Secondly is that the net gain in energy is debatable and negligible if it exists. Some claim a 25% boost in energy (not all agree with those numbers) over what is used to produce it (which is fossil fuel). So if that number is correct it takes 3/4 gallon of gas to produce 1 gallon of ethanol. But the catch is they count the by products of ethanol refinement in their calculations which are left over feed by products. So it may actually take closer to a gallon of gasoline to produce a gallon of ethanol but then you get left over feed by product which has an energy value that can be counted.
Thus there is little chance that ethanol will result in any reasonable reduction of gasoline usage for both of these reasons.
There may be alternatives that are viable via switch grass, etc, but it all is very theoretical right now as there is no real production of ethanol from that.
Ethanol is only viable economically because the government promotes it and subsidizes it. If they did not use it as a political tool against global warming and pollution it would probably not get much market demand. And given all the gasoline it takes to produce it, its not clear it reduces CO2 emissions to any meaningful measure anyway. Solar and Nuclear are much more likely to have an impact if we could make them economically feasible.
Posted by: Red Ocean | Jun 20, 2007 4:35:39 PM
The government is not the place to go to look for answers to an energy "crisis". Someone can and will come up with the solution and they will make a lot of money, also they will do a better and more effecient job of producing whatever the solution ends up being.
Also this talk of "earmarking" money is ridiculous, that money never goes to what it is set aside for.
Posted by: Kyle | Jun 20, 2007 4:38:30 PM
Isn't it TRUE that ethanol production actually uses MORE oil to produce a LESS amount of usable ethanol product?
Posted by: UrbanDigs | Jun 20, 2007 4:42:44 PM
As a country, we can't afford to re-invest in our schools and infrastructure, we sure can't make progress on bio-fuels. I say we outsource it to the Chinese. They already are putting mandates on using non-food sources for ethanol.
Solar, wind, tide, & ocean current turbines can help take demand from other energy sources. Of course nuclear too. The Chinese are already on that one too.
Posted by: A-Mack | Jun 20, 2007 4:43:58 PM
(quote)
Crude oil stocks rose 6.9 mln barrels to 349.3 mln barrels in the week to June 15, said the US Energy Information Administration (EIA). Analysts had expected a rise of just 600,000 barrels.(end quote)
Those darn analysts, off by a factor of 11. A convenient day for the big up-side surprise, esspecially as trouble rises in Nigeria.
Posted by: Neal | Jun 20, 2007 4:48:53 PM
"Energy is not only a matter of economics, but a matter of National Security"
In more ways than most realize. The Pentagon uses 340,000 barrels a day, more than Sweden or Switzerland. A recent study conducted by a consultant to the Pentagon concluded that the present structure and force projection of the Pentagon will soon become unsustainable under increasing costs and shortages.
Posted by: Neal | Jun 20, 2007 4:53:05 PM
"Energy is not only a matter of economics, but a matter of National Security"
In more ways than most realize. The Pentagon uses 340,000 barrels a day, more than Sweden or Switzerland. A recent study conducted by a consultant to the Pentagon concluded that the present structure and force projection of the Pentagon will soon become unsustainable under increasing costs and shortages.
Posted by: Neal | Jun 20, 2007 4:53:10 PM
In the early 1900s many were saying why drive one of those smelly inconvenient automobiles when I have a perfectly good horse. Of course, America can thank it's later prosperity (relative to other nations) partially on its decision to embrace the automobile. The same can be said about embracing renewables today. If we don't hurry up, we'll be playing catch-up like the second-world nations of today. Do we really want to be the "China/India" of 40 years from now?
We need plug in hybrids now. We need to renew our rail infrastructure and get trucks off the roads. We need to invest in new rail instead of new roads. What few trucks remain should be powered by bio-diesel (along with airline travel). And we need to forget about increasing ethanol production beyond today's level; it's not going to solve our problems, it's already starting to create more (see the price of corn). Trading food for fuel isn't a good policy, nor is trying to embrace coal, which is just a way to trade one problem for another.
We need to power our cars at night by charging the batteries with nuclear and wind, and out homes and businesses during the day with a combination of nuclear, wind and solar. We need to wean ourselves off of nuclear eventually, but I have to believe it's a reasonable interim solution, so long as there is a lot more regulation on it than there is today, unlike the privately controlled accident-waiting-to-happen about 50 miles from my house... but I digress.
Posted by: Brendan | Jun 20, 2007 5:01:59 PM
Nuclear is a waste. A (very) long lived, super toxic, unstorable mess.
Nuclear is like eating the perfect meal which then proceeds to give you gas for the rest of your life...
it's just not worth it.
You get Billion$ worth of energy followed (swallowed?) by Billion$ worth of costs and NOBODY wants to be in that corner of the world written off as uninhabitable for ETERNITY.
Barry. Read this...
http://magma.nationalgeographic.com/ngm/0207/feature1/index.html
it might amend your warm fuzzy's for "Nukular" energy.
Posted by: brion | Jun 20, 2007 5:17:55 PM
The real future rests in capturing the immense energy nature produces everyday. Hydrogen, although it has supply issues (currently), will be the fuel of the future. This planet is made of at least 70% water... and when you're done with it (hydrogen), you get water again...
http://www.bmwworld.com/hydrogen/
Hydrogen research has been up and coming and in need of some funding.
National Security... I can only imagine what would happen here if the middle east and/or other US "friendly" nations decided to pull the plug on oil exports to this country.
Posted by: lauteus | Jun 20, 2007 5:38:52 PM
One day soon the Middle East is going to light up and alot of oil will go up in smoke. There will be a surge of patriotic screaming in Congress and bills for all of the above will be passed whether they work or not. Desperation will be the mother of invention and this will be the Mother of all desperations.
Posted by: zell | Jun 20, 2007 5:45:40 PM
Some random thoughts:
* "Clean coal" is only a theory for now and at least several more decades away, if at all
* Nuclear is a nonstarter
* Big Oil intentionally shut down more than 200 gasoline refineries in this country to intentionally drive up both prices and profits. In 2000, there were about 350 gasoline refineries, and as of 2003, there were only about 140 gasoline refineries.
* Every couple of months, the Saudi Oil Minister holds a press conference and reports that they have HUGE inventories of crude oil and that there is a worldwide GLUT of crude oil.
* Ethanol produces more energy than it takes to make (for every one unit of energy used to produce ethanol and its accompanying co-products, 1.67 units of energy results):
http://tinyurl.com/295nnc – (Dept of Agriculture PDF)
Gasoline takes more energy to make than it produces (for every unit of energy expended in gasoline production results in only 0.79 units of energy in the form of gasoline):
http://tinyurl.com/2cg4go – (Dept of Energy PDF)
Those that claim that we cannot grow enough crops to make ethanol viable overlook the fact that we are currently paying farmers NOT to grow crops on some 40 million acres, not to mention that we are exporting corn, wheat, soybeans and other crops that can be used to make ethanol.
* And of course:
"Let us rid ourselves of the fiction that low oil prices are somehow good for the United States."
Rep. Dick Cheney (R-Wyoming)
October 1996
.
Posted by: VJ | Jun 20, 2007 5:47:08 PM
I recommend the oil drum for all the energy discussion and info-porn you can handle.
I have been visiting it for a while now and it's depressing but pertinent reading.
Energy and more specifically our overgrown dependence on unsustainable sources of energy is without a doubt the biggest challenge mankind has/is/will ever face.
Interesting times....they are-a-comin.
Posted by: KP | Jun 20, 2007 5:48:57 PM
Of course its always the US's is fault and its the fault of their congress for not doing anything about it. I drive a V12 big honking SUV that runs on endangered owls. Look at how ugly of an american I can be. It's not my fault. Its my congress that is to blame for letting me do this.
The reality of it is that even if the US cut its oil demand growth to zero. We don't get demand any more than what we are currently using. Maybe we figure out how to conserve the energy, recycle it or get it from alternative means we amount ot 25% of the worlds demand but the world amounts to 75% of demand and their growth in demand is as veracious as the US and then some.
http://www.theoildrum.com/uploads/244/annualworldoil_demand_growth.JPG
No one bring up the point that the US population is still growing and technology is still advancing. Both put more pressure on growth of an economy. More people means more vehicles, more houses, more gadgets more jobs, more employers. We are still going to demand more energy. We don't really care where the energy comes from. If its endanged owls in our gas tanks or a giant dung factory, as long as I can charge the battery on my iPod and it doesn't cost me more than I am paying now.
The sad fact is that we are going to pay more a lot more in oil before solar becomes feasible. It current prices you will pay out 2 to 3 times as much as coal to get energy from a solar plant. Which means that in order for it to be effective energy resource need to cost 2 to 3 times what they do now. If and when that happens you better believe that Exxon, BP and all the "terrorist" countries as you so eloquently put it are going to ramp up production. Exiting rigs and refineries will be highly profitable and drilling deeper and in more remote locations will be worth the cost with prices so high. Over production breeds price drops and will put alternatives further out of reach. We'll have more alternative, they will be more efficient, and saturate more of the market but they will not be the main infrastructural source. There is far too much petroleum based product still in the crust of this rockball.
Posted by: anderl | Jun 20, 2007 5:52:04 PM
Estragon - I hadn't thought of it like that, very cool.
As for ethanol being inefficient or too expensive; I though Brazil has already converted to an ethanol based economy?
Posted by: Aaron | Jun 20, 2007 6:05:26 PM
