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Rising Gasoline Prices: 3 More Things To Know

Today’s Energy Update
(Because Energy Fuels Our Lives)

 

After the price for gasoline at the pump had risen over much of the first month of this year, I published a piece in late January detailing seven key factors that go into determining what those prices will be in the United States. Given that gas prices have gone up again in the past two weeks after the first half of February was relatively stable, now is a good time to discuss the reasons why that has taken place.

There are three main reasons for this recent uptick of 13-15 cents per gallon across the country, as follows:

The deteriorating situation in Venezuela – That late January piece in part had this to say about the possible impact on U.S. gas prices due to the looming collapse of the Maduro regime: “Venezuela has been a fairly significant exporter to the U.S. but its volumes have steadily fallen in recent years as its economy has collapsed. U.S. refiners will have to find another source of crude to replace the lost Venezuelan volumes, and to the extent they must pay higher prices to obtain that feedstock, the higher costs will be passed through to the consumer.” This appears to have impacted gas prices to some extent, although no one really seems to have a good handle on how much of the recent price climb is attributable to Venezuela.

Routine refinery maintenance season has begun. – Late February is typically the time of year when many refiners begin taking their facilities temporarily offline for routine maintenance purposes. Refineries are very complex facilities with a high number of moving parts that operate under high temperatures and pressures, in good weather and bad. All of these factors and more require require that the facilities be shut down for a few weeks once or twice each year for routine maintenance.

 

Read the Rest Here

 

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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While Politics Dominates The News, Big Oil Invests In Global Energy Reality

One of the big concerns during the depths of the oil price bust of 2014-2016 was the fact that so many big, integrated and state-run oil companies were delaying or taking a full pass on investing in major and highly-costly international projects. During the financial retrenchment of this dark period, exploration for major new resources consistently took a back seat to finding ways to pay the bills and service the company’s debt.

This lack of investment in new exploration and infrastructure projects led to concerns among many energy analysts that we could be facing a shortage of global supply early in the next decade as decline rates caused existing reserves to play out without the needed new production coming on line to replace them.  The surge in new supply from U.S. shale plays has served to alleviate those concerns for the near-term, and a new report issued by the Norwegian research firm Rystad Energy documents a similar surge in new international investments that should help avoid supply shortages further down the road.

“We expect global FID volumes in 2019 to triple over last year, and 2019’s megaproject awards could lead to billions of subcontracting dollars in coming years,” said Rystad Energy upstream research analyst Readul Islam, “The only supply segment likely to shrink this year is the oil sands, whereas deepwater, offshore shelf and other conventional onshore developments are all poised to show substantial growth. From a geographical perspective, all regions are headed for robust growth except Europe and North America, still bearing in mind that shale plays are not included in these numbers.”

That last point – that shale plays are not included in this report – is key. As I pointed out last week, the Permian Basin has become a focal point for major development not just for big independents like Pioneer Natural Resources, Noble Energy, Apache Corporation and others, but also for major, integrated companies like ExxonMobil, BP, Shell and Chevron. These U.S. shale plays are likely to sustain significant production growth for years to come, giving the big investments documented by Rystad in its report the running room they need to move from final investment decisions to first production, which can easily consume five-to-seven years.

So, if you’ve been wondering why all those stories about concerns of a looming supply crunch on the horizon have disappeared from your daily news clips, this is the reason.

Read the Rest Here

Talking Gas Prices, Venezuela and OPEC

Yesterday I appeared on BYU Radio’s “Top of Mind” program with host Julie Rose. We had a wide-ranging 20 minute discussion about gasoline prices, America’s shale revolution, the Trump sanctions on Venezuela and the ongoing influence of OPEC over crude oil prices.

Here’s the Link

Enjoy!

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Peak Oil Theory’s No Good Terrible Very Bad Week

Just when you thought continued belief in any of the various brands of “Peak Oil” theory could hardly become less sustainable, you get a week like this one. No matter whether you come at Peak Oil from the supply side or the demand side, several events this week would have had to put you in a definitively sour mood.

Starting off this “No Good Terrible Very Bad” week for the Peak Oilers, UN International Energy Agency (IEA) Executive Director Fatih Birol debunked a popular piece of the demand side of the theory.  Speaking to the World Economic Forum in Davos, Switzerland on January 22, Birol told the delegates that “To say that the electric car is the end of oil is definitely misleading.” Oh.

Birol expanded on that theme by adding emphatically that “Cars are not the driver of oil demand growth. Full stop.” Birol made things even more problematic for those who wish to dramatically accelerate the displacement of internal combustion cars with EVs via massive subsidies for environmental reasons by pointing to the fact that EVs in fact do little to reduce emissions, pointing to the fact that most of the electricity globally is still generated using coal and other fossil fuels. “Where does the electricity come from, to say that electric cars are a solution to our climate change problem? It is not,” he said.

Read the Rest Here

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The Oil And Gas Situation: Eight Predictions For 2019

Well, that all escalated – or rather, de-escalated – quickly, huh? During the course of a six-day vacation around Christmas, the WTI price for crude dropped from $50/bbl down to $42/bbl. That takes a situation on oil prices that was already troubling for most domestic producers into the potentially-calamitous range for companies saddled with heavy debt loads and high lifting costs.

This latest collapse in crude prices comes on the heels of a longer-term drop that lasted throughout October and November. From October 2 through November 30, WTI fell from $76.41/bbl to $50.93, a decline of about 33%, as it became obvious to traders and investors that the market had become significantly over-supplied despite the re-implementation of U.S. sanctions on Iran by the Trump Administration.

This overall 45% drop in the domestic benchmark price for crude took place during the same period when producers were setting their capital drilling budgets for 2019. While one might think that reality would cause a significant curtailment of drilling activity during the first half of 2019, consider that only about a third of that price drop had come about by November 1, by which time most of these companies were finalizing those budgets. With WTI sitting at $63/bbl at that time, few were anticipating a further drop of this magnitude by the end of December.

Here’s the thing: Thousands of domestic drilling projects that are economic to drill at $63/bbl are uneconomic to drill at $42/bbl. So right now we are already beginning to see reports that some companies are going back and reconsidering some budgeting decisions that were made just a month ago. Others are likely still in wait-and-see mode as they try to assess whether the December price drop is a temporary result of panic-selling or a more long-term phenomenon related to a weakening global economy.

Given all of this, my first prediction is that we will see a gradual fall in the domestic U.S. rig count throughout the first half of 2019.

 

Read the Rest Here

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The Oil And Gas Situation: A Time For Setting Records

They say numbers don’t lie, and the last two weeks for the U.S. oil and gas industry have seen the announcements of some pretty amazing numbers. These are numbers that demonstrate exactly how productive and efficient the business has become, and numbers that must be put into some context to understand how extraordinary they really are.

So, as we move into mid-December 2018, let’s give it a shot:

The U.S became a “net exporter” of petroleum liquids for the first time 75 years. – That’s right, the week of November 30 through December 5 saw the United States of America actually export more crude oil and other oil-derived liquids than it imported from other countries. The key part of that sentence is “other oil-derived liquids,” which include gasoline, diesel and other refined products. Rolling all of those products into the equation, the U.S. exported about 211,000 barrels per day more than it imported for the week, as reported by Bloomberg.

The U.S. did not become a net exporter of “crude oil,” as some others in the energy news media mistakenly reported. As Robert Rapier reported at Forbes.com over the weekend, our country is still a sizable net importer of crude alone, an equation that will not be reversed anytime soon.

Regardless, the fact that the U.S. had higher volumes of oil-derived liquids moving out of its various ports than it had coming for a full week is an extraordinary change of circumstance from just a decade ago, a true sea change delivered by the ability to extract oil from the nation’s shale formations.

Read the Rest Here

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Trump Tweets, OPEC Blinks

The Evening Campaign Update

(Because The Campaign Never Ends)

Tired of all this Winning yet? – If you’ve been irritated by how much it’s cost you lately to fill your car with gasoline, well, cheer up.  President Trump is on the case.

In fact, if you believe the folks at Bloomberg, he’s already caused the Saudis to blink and start working to get up to another 800,000 barrels of oil per day onto the global market in an effort to stabilize the price for crude oil at current or slightly lower levels.  Given that crude is the raw material from which gasoline is refined, a halt to the rapid rise in that commodity’s prices that has taken place in the last year will also stop the rise of the price at the pump.  Crude prices dropped more than $3.00/barrel (roughly 5%) on Friday in response to the Saudi/OPEC announcement of their intention.

So, how did President Trump accomplish all of this?  Optically at least, he did it with a single tweet.  On April 20, the POTUS took to his famous Twitter feed to slam OPEC for the rapidly rising price of gasoline as Americans headed into the summer driving season:

As Bloomberg reports, the Trump tweet produced an immediate reaction among the various OPEC ministers:

OPEC officials were in a meeting at the opulent Ritz-Carlton hotel in Jeddah on Saudi Arabia’s Red Sea coast when Trump tweeted his views and they immediately saw it as a significant intervention.

“We were in the meeting in Jeddah, when we read the tweet,” OPEC Secretary General Mohammad Barkindo said on Friday. “I think I was prodded by his excellency Khalid Al-Falih that probably there was a need for us to respond,” he said. “We in OPEC always pride ourselves as friends of the United States.”

Given that, unlike his immediate four predecessors in office, President Trump does not hesitate to lever negotiations over seemingly unrelated matters into one another, using all of the influence of the United States to obtain positive results, these OPEC countries also have developed a new-found sense of respect – likely bordering on fear – for expressions of concern coming from the U.S., even when they come from a Presidential tweet.  Perhaps even especially when they come from a Presidential tweet, come to think of it.

Now, probably there was more to this new attitude suddenly being expressed by OPEC countries.  The Bloomberg story cites a recent congressional hearing covering proposed legislation that would attempt to make OPEC and other commodity cartels subject to the U.S. Sherman Anti-Trust Act, and there have likely been negotiations between U.S. and officials from Saudi Arabia and other OPEC nations taking place behind the scenes since April 20.   But there is no doubt at all the President’s tweet got this ball rolling.

So, when you next go to fill up your car and notice that the price of unleaded has dropped a dime a gallon in response to Friday’s 5% drop in the price for crude oil, you know who to thank.

Isn’t it nice to have a President who’s looking out for our interests instead of the interests of some nebulous “international community?”

That is all.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

Here’s Why Gas Prices go up Every Year at This Time

If you’re wondering why gas prices go up a this time of year, I explain it all with host Julie Rose on @BYUradio here.

Every year at this time, gas prices seem to go up. Or maybe it’s just that we notice it a bit more, because we’re making vacation plans? You’re not imagining things: the price for regular unleaded gas is at its highest level in three years. Americans are paying an average of $2.74 per gallon of regular unleaded right now, which is 30-cents higher than it was at the start of the year.

https://www.byuradio.org/episode/bd967e47-688e-456e-a4df-b34a80821876?playhead=62&autoplay=true

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On This Earth Day, Thank Mother Earth for the Gift of Fossil Fuels

Today’s Campaign Update

(Because The Campaign Never Ends)

Today is Earth Day, and it is the perfect time to celebrate the natural resources like oil, natural gas and coal, which are gifts to humanity from Mother Earth herself.  These indispensable drivers of modern society will no doubt be demonized today amid all the frightful doom and gloom predictions that will be launched by environmental activists and repeated by various media outlets.

All the vitriol directed at these fossil fuels by the environmental community notwithstanding, it is a simple fact that our prosperous, modern, energy-hungry society was made possible by the existence of these fuels.  Without the discovery of and ability to produce fossil fuels, it is likely that mankind would still be mired in a primitive form of existence, reliant on burning wood for heat, horses for transportation, and still living largely in the dark after nightfall.

Without the miracle of the petroleum-fueled internal combustion engine, there would be no automobiles – or primitive ones at best – dirigibles would probably still be our main mode of air transportation, there would have been no space program to drive all the technological advancement of the second half of the 20th century.  Without those things, there would be no high tech industry to speak of, no Internet, and thus no ability to read what I’m writing here.

But what about wind, solar and nuclear?  The production of modern wind turbines, solar panels and nuclear power plants is extremely energy-intensive enterprises, and is by and large powered by the burning of fossil fuels.  In other words, without the massive energy levels generated by the fossil fuel chicken, the “green” energy eggs would not have been possible.  Few of those gigantic wind turbines you see dotting landscapes across America will, in their entire useful lifetime, generate as much power as was required to fabricate them, transport them to their locations, and erect them.

And on this particular day we should all be doubly thankful for the recent discovery of the means – hydraulic fracturing, combined with horizontal drilling – of producing oil and natural gas from shale rock formations.  Because while Europe continues to struggle with failing “cap and trade” carbon trading schemes that haven’t reduced that continent’s greenhouse gas emissions, those same emissions have been reduced in the US to pre-1994 levels through increased use of natural gas in the power generation sector.  Thus, while radicals in the “green” community have done everything they can to turn “fracking” into their cause du jour for limiting or banning, the product of their boogeyman has done more to clean the air through the free market than any of the myriad command and control regulations issued by the Environmental Protection Agency.

So on this 49th celebration of Earth Day, let’s all try to remember that one of the greatest gifts Mother Earth has ever given us is the fossil fuels that make such worldwide celebrations possible.

Meanwhile, as you will no doubt be assaulted all day today with all manner of frightful scenarios about our future environmental challenges, you might find it edifying to review similar pronouncements made by the environmental luminaries of the day at the inaugural Earth Day celebration:

“Demographers agree almost unanimously on the following grim timetable: by 1975 widespread famines will begin in India; these will spread by 1990 to include all of India, PakistanChina and the Near East, Africa. By the year 2000, or conceivably sooner, South and Central America will exist under famine conditions….By the year 2000, thirty years from now, the entire world, with the exception of Western Europe, North America, and Australia, will be in famine.” – Peter Gunter, professor, North Texas State University

“It is already too late to avoid mass starvation.”  – Denis Hayes, chief organizer for Earth Day

“Population will inevitably and completely outstrip whatever small increases in food supplies we make. The death rate will increase until at least 100-200 million people per year will be starving to death during the next ten years.” — Stanford University biologist Paul Ehrlich

“Most of the people who are going to die in the greatest cataclysm in the history of man have already been born… [By 1975] some experts feel that food shortages will have escalated the present level of world hunger and starvation into famines of unbelievable proportions. Other experts, more optimistic, think the ultimate food-population collision will not occur until the decade of the 1980s.” — Paul Ehrlich

And my very favorite of them all:

“By the year 2000, if present trends continue, we will be using up crude oil at such a rate…that there won’t be any more crude oil. You’ll drive up to the pump and say, `Fill ‘er up, buddy,’ and he’ll say, `I am very sorry, there isn’t any.’” – Kenneth Watt, Ecologist

Have a great Earth Day today.

Just another day in fossil-fueled America.

That is all.

Follow me on Twitter at @GDBlackmon

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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