Pain at the pumps: Companies brace for $100-a-barrel oil

Source: Globe & Mail, December 24, 2010

Crude oil markets are going out of 2010 like a lion – hitting two-year highs and raising predictions that prices will soon top $100 (U.S.) a barrel.

For motorists and businesses such as airlines and trucking firms, the surge in crude prices has meant a pre-Christmas crunch in fuel costs, with average Canadian pump prices now at their highest levels since October, 2008. And there is no sign they are about to ease.

“I’m not too surprised by the lift above $90 and I think we have some further gains here going forward,” Jim Ritterbusch, a veteran independent analyst based near Chicago, said in an interview Thursday.

“I’m afraid we’re going to see $100 oil in the first quarter – unfortunately.”

He said the fragile American recovery is being constrained by higher oil prices, which are driven more by higher demand in emerging markets but also buoyed by recent signs of economic growth in the U.S.



Oil hits highest level in more than two years

Source: Globe & Mail, Dec 22, 2010

Oil (CL-FT90.620.800.89%) jumped above $90 (U.S.) a barrel Wednesday to settle at that level for the first time in 26 months, as a third straight weekly drop in U.S. crude inventories and cold weather spurred pre-holiday buying.

U.S. crude stockpiles fell 5.3 million barrels last week, bringing the past three weeks’ declines to 19 million barrels, roughly equivalent to one day of U.S. fuel consumption. It marked the biggest three-week drop since 1998.

Companies have drawn down inventories for year-end accounting purposes, analysts said.

U.S. data showed the economy picked up in the third quarter, signaling a more solid pace of recovery and improving oil demand prospects.

A Reuters poll released Wednesday showed a surge in fuel demand in the fourth quarter sent 2010 demand growth to near record levels, adding support to prices in recent weeks, with further increases expected in 2011 as the economy improves.



The Geopolitics of Hoarding: Biofuels and Resource Scarcity

Source: www.biomassintel.com

In an era of increasing food, energy, land, and water insecurity, nations are increasingly turning to hoarding. Sitting at the nexus of all four, biofuels are playing a complex role in geopolitics.

Biofuels — whether grown domestically or abroad — sit at the nexus of not only food and energy, but also land and water. As all four become more scarce, developed and developing nations alike are hoarding more and more.

Combined with hoarding, biofuels can hasten land, water, and food scarcity, but the situation is far more complex than the current debate over issues like indirect land use change suggest.

Writing for the UK’s Financial Times in February 2010, Gedeon Rachman described the UK’s increasing reliance on securing food as well as energy security as, “No mere national eccentricity.”

On the contrary, he writes:

[T]he fact that even the free-trading British are worrying about food and energy supplies is indicative of a much broader global trend. Across the world, the major powers are moving to secure access to energy, food and, in some cases, water. Faith in a trade-based system of globalisation – in which nations can always buy what they need on the open, world markets – is giving ground to an effort by individual nations to secure supplies. Like survivalists, hoarding tinned food in the basement, individual nations are preparing for the worst.

The evidence is in the pudding. Increasing oil prices and fears over peak oil are driving a global push for renewable energy. Take China as an example, which is sending state-owned oil companies abroad where they are engaging in ferocious bidding wars with western energy companies as they go after access to the same oil and gas fields, particularly in Africa. Middle Eastern investors, in particular the Saudis and the Gulf Arabs, have been leasing huge tracts of land in East Africa, in an effort to grow food that is reserved for their own nations. In the US, domestic ethanol production has led to disruptions in the global food markets. In Europe, supporters of the protectionist Common Agricultural Policy are freshly emboldened.



What will 2011 bring? Triple-digit oil

Source: Globe & Mail (Dec 10, 2010)
Author: Jeff Rubin

The strongest manufacturing numbers coming out of the Chinese economy in a seven-month period, coupled with plunging oil inventories in the world’s largest energy consuming economy, have sent oil (CL-FT88.700.420.48%) prices to a 25-month high. With no let-up in China’s fuel demand, the world should be looking at triple-digit oil prices again within a quarter.

That may come as a shock to those who thought the bloated oil inventories that came in the wake of the last recession would provide a buffer against future oil price spikes. Suddenly, that buffer has literally gone up in smoke.

Refined oil stocks held by China’s two largest oil companies have fallen for eight consecutive months, while diesel stocks in the country fell 14 per cent in October. And the tightening oil market won’t just be felt in China. The 140 million barrels of international oil inventories sloshing around in floating storage on the high seas is also all but gone.

With oil prices within striking distance of triple-digit levels, don’t look for any price relief at the upcoming OPEC meeting in Ecuador. Venezuelan energy and oil minister Rafael Ramirez was recently quoted as saying that $100 (U.S.) per barrel was a fair price for both consumers and producers. (But not for cab drivers in Caracas, who will continue to be able to purchase their fuel at 20 cents per gallon, the equivalent of a little over $8 per barrel). Meanwhile, King Abdullah of Saudi Arabia has already served notice that, without triple-digit prices, there is little incentive for new oil exploration in his kingdom.



Beyond Fossil Fuels - Swedish City Cuts Its Fossil Fuel Use

Source: NY Times, Dec 10, 2010

When this city vowed a decade ago to wean itself from fossil fuels, it was a lofty aspiration, like zero deaths from traffic accidents or the elimination of childhood obesity.

But Kristianstad has already crossed a crucial threshold: the city and surrounding county, with a population of 80,000, essentially use no oil, natural gas or coal to heat homes and businesses, even during the long frigid winters. It is a complete reversal from 20 years ago, when all of their heat came from fossil fuels.

But this area in southern Sweden, best known as the home of Absolut vodka, has not generally substituted solar panels or wind turbines for the traditional fuels it has forsaken. Instead, as befits a region that is an epicenter of farming and food processing, it generates energy from a motley assortment of ingredients like potato peels, manure, used cooking oil, stale cookies and pig intestines.

A hulking 10-year-old plant on the outskirts of Kristianstad uses a biological process to transform the detritus into biogas, a form of methane. That gas is burned to create heat and electricity, or is refined as a fuel for cars.

Full article


Branson Says Oil Might Hit $200 a Barrel Without New Policies

Source: Bloomberg - Dec 7, 2010

Oil prices may soar to $200 a barrel if the world doesn’t move more rapidly to a clean-energy economy, Richard Branson, founder of Virgin Atlantic Airways Ltd., said in an interview.

“It’s certainly conceivable unless we can start to conserve energy quickly and come up with alternative fuels,” Branson said yesterday in Cancun, Mexico, where countries are meeting to negotiate a new accord to combat climate change.

Branson predicts an “unbelievably painful” economic slump if governments don’t do more to encourage renewable energy as an alternative to fossil fuels such as oil. In the U.S., where efforts to cap carbon-dioxide emissions failed in the Senate earlier this year, unemployment could reach record highs, the British billionaire said.

Read more

L'éthanol a perdu de son lustre aux États-Unis

Source: La Presse, 7 décembre 2010

L'éthanol, jadis considéré comme la panacée en matière énergétique, a perdu de son lustre aux États-Unis, au moment où le Congrès doit décider s'il maintient ou non les subventions qui soutiennent la production de ce biocarburant.

Les parlementaires ont jusqu'au 31 décembre pour décider de prolonger ou non une subvention qui coûte bon an mal an 6 milliards de dollars au contribuable.

Mais l'éthanol, produit à partir du maïs, est attaqué sur sa droite par les milieux ultra-conservateurs, qui lui reprochent de coûter trop cher à l'État, et sur sa gauche par des écologistes qui l'accusent de faire flamber les prix agricoles et de ne guère atténuer les émissions de gaz à effet de serre.

Au moment où la communauté internationale est réunie à Cancun, au Mexique, pour tenter de parvenir à un accord de réduction des gaz à effet de serre, une coalition inattendue de ces différents détracteurs, allant de l'Union conservatrice américaine aux Amis de la Terre, a appelé à mettre fin aux subventions.

Article complet


Mounting State Debts Stoke Fears of a Looming Crisis

Source: NY Times, December 4, 2010
By Michael Cooper and Mary Williams Walsh

(Post Carbon GM editorial note: Read this article carefully and consider how triple-digit oil prices might trigger a cascading financial disaster in the US. How might this affect Canada, New Brunswick and Greater Moncton?

Note éditoriale GM Post Carbone: Lisez cet article attentivement et considérez l'effet dévastateur possible d'une hausse marquée des prix du pétrole sur les finances des gouvernements étatiques et municipaux aux É-U. Quelles seront les conséquences pour le Canada, le Nouveau-Brunswick et le Grand Moncton?)

The State of Illinois is still paying off billions in bills that it got from schools and social service providers last year. Arizona recently stopped paying for certain organ transplants for people in its Medicaid program. States are releasing prisoners early, more to cut expenses than to reward good behavior. And in Newark, the city laid off 13 percent of its police officers last week.

While next year could be even worse, there are bigger, longer-term risks, financial analysts say. Their fear is that even when the economy recovers, the shortfalls will not disappear, because many state and local governments have so much debt — several trillion dollars’ worth, with much of it off the books and largely hidden from view — that it could overwhelm them in the next few years.

“It seems to me that crying wolf is probably a good thing to do at this point,” said Felix Rohatyn, the financier who helped save New York City from bankruptcy in the 1970s.

Some of the same people who warned of the looming subprime crisis two years ago are ringing alarm bells again. Their message: Not just small towns or dying Rust Belt cities, but also large states like Illinois and California are increasingly at risk.



Oil rally continues despite discouraging jobs data

Source: The Associated Press, Dec 3, 2010

A surprising increase in the number of unemployed Americans wasn't enough to stall oil's momentum Friday as it cruised to a 26-month high.

Benchmark oil (CL-FT89.441.441.64%) settled up $1.19 at $89.19 a barrel on the New York Mercantile Exchange. It's the second time in less than a month that oil has reached the level where it was in the fall of 2008. There are widespread expectations that the price will hit $90 a barrel by year's end and head toward $100 a barrel by next spring when traders begin looking ahead to the summer driving season.

Oil's increase already has appeared at the pump, where prices are approaching the high for the year. The national average for a gallon of unleaded regular gasoline was $2.90 on Friday, according to AAA, Wright Express and Oil Price Information Service. That's 3.7 cents higher than a week ago and nearly 27 cents more than a year ago.


Canada's Two New Solitudes

By Jeff Rubin

Fortunately for Canada, our first encounter with peak oil did not exact the same toll as it did in the U.S. or elsewhere. We can thank our oil resources, not our chartered banks, for that. Even so, unemployment jumped to over 9 per cent and in the process dramatically changed the fiscal landscape in the country.

But that oil blessing may soon become a double-edged sword. The very oil reserves that will soon make Canada an energy superpower are making the loonie a petro-currency. Already around parity with the greenback, the Canadian dollar will soar to unprecedented heights against the U.S. dollar as triple-digit oil prices pull more and more daily oil production from the tar sands. And a strong dollar means one thing to hockey fans: NHL franchises leaving Dixie and the desert, and moving to Canada.

Sounds great, until you start to do the math and realize that the more oil Canada produces, and the higher the loonie goes, the less steel, machinery and even cars the rest of the economy will produce. We’ll see how Canadians come to like their economy being at the other end of Americans’ gas nozzle.



Peak oil and the end of growth: we need to start planning now

Published in Times and Transcript, December 2, 2010
By Michel Desjardins, Post Carbon Greater Moncton

A few weeks ago, the International Energy Agency (IEA) released its World Energy Outlook 2010. The IEA is an organization established by the Organization for Economic Co-operation and Development (OECD) in 1974.

For the first time in its history, the IEA admitted that crude oil production (conventional oil) peaked in 2006 and will never ever grow again.

It also projected that the bulk of any new crude production needed just to compensate for the depletion of existing fields will come from fields "not yet discovered." That's the good news!

The bad news is that the IEA is notorious for overstating its energy resource projections, often bowing to pressure from some of its members who fear market panic.

What cannot be overstated, however, are the massive implications of this peak in oil extraction.

First, you can expect sky-high oil prices in the not too distant future. Of course, that will be painful at the pump. But it's just the tip of the iceberg. Think about it. Most food we eat today traveled from far away on fuel-propelled machines.
Petroleum products are used in the production of everything we wear, from our sunglasses to our shoelaces.

More expensive energy will make it harder to run our hospitals and our schools, heat our homes, let alone enjoy our yearly winter vacation in sunny Varadero.