Oil Prices

[RiversideGator]

Looks like we will get a new oil refinery in South Dakota.  This should help gas prices in the US when it comes online.  It will process oil from the massive Bakken Formation in North Dakota - an area soon to be the American Saudi Arabia of oil:

South Dakota Voters Approve What Could Be First New U.S. Oil Refinery in Decades

Wednesday, June 04, 2008

ELK POINT, S.D. â€"  Voters in Union County on Tuesday approved rezoning for what would be the first new U.S. oil refinery in more than 30 years.

With all 13 precincts reporting, 3,932 voters, or 58 percent, endorsed their county commission's rezoning of almost 3,300 acres north of Elk Point for the $10 billion refinery while 2,855, or 42 percent, opposed it.

The ballot measure garnered solid support in the southern part of the county, with the Dakota Dunes precinct voting in favor 1,017-237 and the one containing North Sioux City approving the ordinance 492-184.

Most rural precincts strongly rejected the rezoning, but they didn't have the population numbers to overcome support in the county's largest towns.

Also backing the refinery were voters in the city of Alcester and in the city of Elk Point, which hosted several hours-long, controversial public hearings on the project.

Preston Phillips, a project executive for Texas-based Hyperion Resources, said he was ecstatic with the outcome.

"We'll continue to work with everyone in the county," he said. "We want to be a good corporate citizen. We want to be a good corporate neighbor."

Despite the approval of the rezoning, Phillips said Elk Point still is not the only site being considered and that the site selection process will continue.

"Any big project like this has to have options," he said.

Hyperion Resources had said it would leave Union County without a fight if voters rejected the rezoning.

Jason Quam of the group Citizens Opposed to Oil Pollution said late Tuesday his group will sit back and evaluate its next steps.

"It's going to be a long road before anything's done on it," he said of the refinery.

The vote was just one stop in a long process and must go through numerous environmental permitting steps, he added.

Quam also said he doubts the company has the financing to get the refinery built.

Mike Curran, who voted against the zoning change, said the company offered few specifics and instead embarked on a public relations pitch to sell the refinery. He said that when a representative called asking for his support, they couldn't give direct answers to any questions.

"As far as I see they never told as anything about it," said Curran, who lives just east of Elk Point.

Kim Hall said she was thinking about jobs when she cast her "yes" vote in downtown Jefferson Tuesday afternoon.

She said a project of that size would bring not just refinery and construction jobs but also would spawn new positions for teachers, police and other professionals. Teens graduating high school in Union County need good-paying jobs if they're going to settle in the area, she said.

"Everybody leaves, and it would be nice to have something for them to put to use their degrees and stay in the area," Hall said.

Elk Point Mayor Isabel Trobaugh said it was odd to have such a spotlight cast on her small town, but she said she was impressed with the high voter turnout.

"We're just a quiet little town," she said. "This is really exciting."

Trobaugh said the refinery would bring needed jobs to the county and that she didn't think it would harm the environment.

She said she talked to the mayors of Ponca City, Okla., and El Dorado, Kan. -- both towns with oil refineries -- and both assured her their communities had clean air and water.

The refinery is proposed for land just east of Interstate 29 between state highways 48 and 50.

Company executives said it would help the United States reduce its dependence on overseas oil. The refinery would process 400,000 barrels of thick Canadian crude a day,

The company petitioned to put the issue on the ballot after the Union County Commission approved the rezoning in March.

Supporters cited economic development benefits from the refinery. Hyperion officials said the project would mean 1,800 permanent jobs and another 4,500 construction jobs over a four-year period.

Hyperion called it a "green refinery" and said it would produce ultra-low sulfur gasoline and diesel and be among the cleanest and most environmentally friendly in the world.

Opponents raised environmental and quality-of-life concerns, but one project executive said the refinery will have the lowest emission levels of any U.S. refinery and will improve the quality of life for the area.

According to an air quality permit application filed with the state, the center each year would emit nearly 2,000 tons of carbon monoxide, 773 tons of nitrogen oxides, more than 1,000 tons of particulate matter, 863 tons of sulfur dioxide and 473 tons of volatile organic compounds. It would also generate 17.2 million metric tons of carbon dioxide each year.

The South Dakota governor's office has supported the proposal.

Opponents have noted the high-level support and the backing from economic development groups but said the local people would be the ones deciding the rezoning.

Critics of the proposal hit hard on the quality of life issue, saying an oil refinery would produce millions of pounds of toxins during its lifetime. They also said it seemed as if the state and local governments allied themselves with Hyperion and had not asked critical questions.

Plans called for construction to begin in 2010 and last about four years.

http://www.foxnews.com/story/0,2933,363121,00.html

[Driven1]

btw...WSJ had 2 articles yesterday about gasoline demand is now down 4% (for last weekcompared to 1 year ago).  said it would take oil getting back down to $100 for gas to get back down to $3.50 though...the good part of all this though is that we should not be seeing another huge, fast runup in prices of gas like we did recentl - at least for a little bit.

[Downtown Dweller]

Well I can't wait for it to go back down...I miss Costco. I would go every other week, now once a month and recently had to join Sam's club because it is closer  and I HATE Sam's club :-(

I guess I shouldn't complain too much since my daily commute is from my bed, to the coffee pot, to the computer.

[Lunican]

Looks like that new oil refinery RG is anxiously awaiting has already started working its magic.

Gas backs off record: The national average price for a gallon of regular unleaded gas fell to $3.986 from the previous day's record of $3.989, AAA reported. Gas prices had set new records for 28 of the previous 29 days.

http://money.cnn.com/2008/06/06/markets/markets_newyork/index.htm

[Charleston native]

If the legislature in this country had any balls, they'd allow more drilling and refineries. I promise you'd be seeing more "magic" with falling gas prices afterwards.

[jaxnative]

If the legislature in this country had any balls, they'd allow more drilling and refineries.

CN, I'm afraid this present Congress and Senate is so full of hand-wringing bitches who are premising the decisions of this country's energy policy on politically acceptable, unproven scientific theories, party and special interest pressures, and emotions, that the next two years, at the least, will be one ride in hell.

[Lunican]

I was waiting for RG's daily oil price update but it hasn't happened yet so I will post...

Oil surges $11 to record $138

Crude skyrockets in largest single-day jump ever as dollar slides and a Wall Street report predicts oil will hit $150-a-barrel within a month.

NEW YORK (CNNMoney.com) -- Oil prices shot up nearly $11 a barrel and settled Friday at a record $138.54 on geopolitical jitters, a dollar decline and a forecast that oil would hit $150 by July 4.

Friday's spike in the July contract for light crude on the New York Mercantile Exchange marks the largest single-day increase in oil prices on record. The contract hit an intraday record of $139.12, breaking the previous trading record of $135.09.

http://money.cnn.com/2008/06/06/news/economy/gas_prices/index.htm?postversion=2008060621

[Charleston native]

If the legislature in this country had any balls, they'd allow more drilling and refineries.

CN, I'm afraid this present Congress and Senate is so full of hand-wringing bitches who are premising the decisions of this country's energy policy on politically acceptable, unproven scientific theories, party and special interest pressures, and emotions, that the next two years, at the least, will be one ride in hell.

Amen, man. I couldn't have said it better.

[jaxnative]

Oil prices shot up nearly $11 a barrel and settled Friday at a record $138.54 on geopolitical jitters, a dollar decline and a forecast that oil would hit $150 by July 4.

Amazing how the current supply situation, the lack of American political and econonmic willpower, and a weak and misguided Congress and Senate, can provide the opportunity for such blatant and egregious manipulation of the market.  Looks like the speculators covered all their losses of the previous days in one fell swoop down at the enery casino.

[Midway ®]

Now that $4.00 a gallon gasoline is a reality and we are almost into the third quarter of 2008, it's time for my semi annual review of prognostication from the $4.00 a gallon oil thread:

This is being partially driven by market speculation in commodities much like the net stock bubble and the real estate bubble.  All of these clowns buying gold, for example, as if it were a real investment, like stock in an actual company, drive up the price.  If you look at other commodities which are less commonly traded, there prices are not up nearly as much in percentage terms.  The dollar being weak right now is a problem but I believe that the feds should and might intervene to put an end to the currency speculation.  The same sort of speculative fever has driven the dollar down.  The fundamentals for the US economy long term are very strong so the dollar cannot stay down for long.  And, there is no shortage of the commodities in question so the run up in prices is simply not sustainable.  So, the dollar will be back and the commodity prices will also come crashing down to earth before too long too. 

Expect oil to decline to $60.00 a barrel any time now. Anyone for oil puts?

[RiversideGator]

Sorry it took me so long to respond boys but I was out of town.  I would say that I was largely correct though.  Most other commodities, excepting oil, have come back down to earth somewhat since I made that statement.  Oil has also been unhinged from fundamentals too.  Demand is decreasing now in America, the Asian countries which formerly subsidized oil consumption are raising prices or dropping the subsidy altogether and the high prices are encouraging additional exploration and pumping.  Remember the massive Bakken Formation is being drilled now and there have been other large finds recently.  It takes some time for these to start pumping but they will and you will see it as the prices come down.  In short, demand is reducing and supplies will soon be rising.  So, I look for oil to decline in the longer term to probably under $100 per barrel. 

BTW, here is a good article which makes the same point:

GET READY FOR THE OIL-PRICE DROP

By ALAN REYNOLDS

June 6, 2008 -- THE price of crude oil has jumped as high as $135 lately, up from $87 in early February. The news encouraged some Wall Street analysts to suggest oil might approach $200 before long. In fact, that's quite impossible: The world economy can't handle current energy prices, much less a big increase.

Which in turn means that oil prices will fall.

Market analysts often claim oil prices are almost entirely determined by supply. Demand is said to be insensitive ("inelastic") to price. The standard example is that many Americans have to drive to work and most gas-guzzling SUVs will still be on the road even if the affluent few can trade theirs for a Prius. Whatever the price, we'll pay it.

This idea rests on two fallacies. The first is to exaggerate the United States' importance when it comes to ups and downs in worldwide oil demand. In fact, America is using no more oil than we did in 2004.

The second fallacy is to greatly exaggerate the importance of passenger cars in the United States. It's true that Americans are driving less and buying four-cylinder cars - but that's not where we should be looking for serious "demand destruction."

Two-thirds of petroleum in the United States is used for transportation - but half of the transportation sector's fuel flows into commercial trucks, trains, buses, airplanes and ships. As a result, only 44 percent of each barrel of oil is used to produce gasoline in this country, and some of that gasoline fuels business - delivery vans, landscapers' trucks, fishing boats, industrial and farm machinery, etc.

Most crude oil is used to produce diesel fuel for trucks, ships and trains, heavy fuel oil for industry, aviation fuel, asphalt, home heating oil, propane, wax, and innumerable petrochemical products ranging from detergents and drugs to synthetic fabrics and plastic.

In short, a huge share of crude oil is used to produce and distribute industrial products. That explains why the price of oil is extremely cyclical - that is, it tends to rise during economic booms and fall during contractions. It dropped 44 percent in the last recession (from November 2000 to November 2001), 48 percent from October 1990 to January 1992 - and 71 percent from July 1980 to July 1986.

Oil prices have a huge impact on producers' cost of production - profits and losses - not just on consumers' cost of living.

Firms that can't raise prices will find profit margins squeezed - and will have to cut back on production and jobs. Even if some producers of energy-intensive products can raise prices enough to cover higher energy costs, they'll nonetheless sell fewer of their products because of those higher prices. So they too will have to cut back on production and jobs.

Nine out of 10 previous postwar recessions began shortly after a big spike in the price of oil. Yet those recessions always slashed oil prices dramatically. People who have been predicting both a nasty US recession and $200 oil prices are contradicting themselves.

Recent news reports have expressed surprise that the US economy appears much stronger than the famously gloomy predictions at the start of the year. Indeed, the surprising endurance of US manufacturing and exports is one reason oil prices rose as long as they did.

But note that a US recession isn't required to bring down the price of oil. All that's needed is industrial stagnation or decline in many other countries.

In the United States and Britain, industrial production is nearly flat - only 0.2 percent higher than it was a year ago. In many other countries, however, industrial production has dropped over the past 12 months. It's down by 0.7 percent in Japan, 1.1 percent in Austria, 2.5 percent in Italy and Denmark, 2.9 percent in Canada, 5.4 percent in Greece, 5.7 percent in Singapore and 13.3 percent in Spain.

In April, industrial production also fell in India and China. Shrinking industry around the world shrinks demand for energy in general - and for oil in particular.

When the price of anything gets unbearably high, it discourages demand. The resulting drop in sales, in turn, causes inventories to pile up and the price to come down. That has proven true of overpriced houses - and it will likewise prove true of overpriced oil.

Alan Reynolds is a senior fellow with the Cato Institute and the author of "Income and Wealth."

http://www.nypost.com/seven/06062008/postopinion/opedcolumnists/get_ready_for_the_oil_price_drop_114188.htm

[RiversideGator]

BTW, it is a bit amusing to be lectured on this by people such as midway who subscribe to the kook fringe Peak Oil theory.  PO followers actually wish that we would run out of oil so we could be plunged into a new dark age in which they fantasize that their in depth knowledge of back yard gardening will help them to survive while the rest of us starve.   

I suggest y'all read the reports from actual experts.  The US has over a trillion barrels in oil reserves.  We have only to begin drilling them for oil to come back to reality.  And, a stong dollar policy wouldnt hurt either.   

[RiversideGator]

This map illustrates the sheer lunacy of the Democrat energy "policy":

[RiversideGator]

More on this:

Huge basins of untapped oil can be found on federal lands throughout the United States, according to a new report from the federal government. But much of it cannot -- and may never be -- recovered, because it lies under national parks and national monuments, or it is subject to environmental laws and restrictions that make drilling prohibitive.

The report, which was produced at the request of Congress by the U.S. Department of Interior's Bureau of Land Management (BLM), said there are 279 million acres under federal management where oil and gas could potentially could be extracted.

More than half of it is totally off-limits to drillers.

"The total onshore resource is 31 billion barrels," said BLM's lead scientist Richard Watson, who authored the report. "Of that, 19 billion barrels are currently inaccessible or 62 percent. A little over 2 billion barrels, or 8 percent, is accessible under what we call standard lease terms."

If you add in the 85.9 billion barrels of oil that lie offshore, as determined by the Interior Department's Minerals Management Service, there are 117 billion barrels of oil on lands owned or managed by the U.S. government.

But all expansion of offshore oil recovery is currently off-limits.

Adding in what's available on privately held land, the figure rises to 139 billion barrels of oil, according to the government - more than the known oil reserves of Iran, Iraq, Russia, Nigeria or Venezuela, respectively.

The biggest untapped land-based oil deposit in the United States lies within ANWR, the Artic National Wildlife Refuge, which is currently off-limits.

"We estimate there is something on the order of 7.7 billion barrels in that one area alone," Watson told Cybercast News Service.

But setting aside Alaska, there is untapped oil on federal lands all across the United States, the government reported, with oil pockets found in Oregon, Washington state, Montana, Wyoming, Florida -- even in the Appalachian Mountains.

"In the lower 48 states, there are about 12 billion barrels onshore," Watson noted.

In California, for instance, where oil producers have been drilling for over 100 years, there are still large amounts available -- much of it situated near scenic Santa Barbara.

"In the Ventura basin, there are 281 million barrels under federal ownership," Watson said. "Forty-eight percent of that is inaccessible. The rest of it is accessible with varying restrictions on access."

Exploration restricted

What makes much of the California oil off-limits is the fact that the bulk of it lies under a national forest.

"You've got a wilderness area, a condor sanctuary, there are a couple of islands offshore that are part of a national park," Watson said.

Watson said Congress not only wanted to know how much oil there is on federal lands, it wanted to know what laws and regulations restrict exploration. Much of the oil is off-limits because of the National Environmental Policy Act (NEPA), the Clean Water Act, the Endangered Species Act and the National Historic Preservation Act.

Oil producers, meanwhile, say that even when these laws don't forbid drilling, they are sometimes onerous, making it very difficult -- or unprofitable -- to get to the oil.

"NEPA, for instance, was originally supposed to be focused only on major federal actions," said Dan Naatz, vice president of federal resources for the Independent Petroleum Association of America.

"But now, through court cases and regulatory rulings, it is to the point where basically anytime an oil or gas well is proposed on federal land, producers either have to do an environmental impact statement, or a environmental assessment to comply with NEPA," Naatz added.

If producers don't engage in the costly and complicated studies, they will end up in court, being sued by environmental groups, he said.

The report also noted that a large amount of oil -- a little over 9 billion barrels, or 30 percent of the total -- is available for tapping, with restrictions.

"These restrictions are usually in place to mitigate possible environmental damage or to prevent destruction of wildlife migration or nesting," Watson said.

One restriction is the "no-surface occupancy stipulation,"which means drillers are not actually allowed onto the protected land.

Naatz said producers could recover more of the oil, if they were allowed to use directional drilling more often, which is frequently limited by regulations.

With directional drilling, producers obtain the rights to drill on land adjacent to the forbidden turf, drill down a short way, then drill horizontally - if they are allowed to.

"Directional drilling has revolutionized the industry," he said. "You don't ever want to tap into other areas that are not your property, but directional drilling has allowed the industry to reduce its footprint. From one well-pad, you can get a number of wells drilled."

Another obstacle the report noted is the process of obtaining drilling permits, Naatz said.

"The permitting process is very slow, very cumbersome," he said. "What happens is that the window of opportunity to operate on some lands is very limited. Usually you are talking about areas where they have winter-use restrictions, where there can be no activity, to allow for migratory birds or animals."

In many cases, Naatz said, the window for drilling narrows to as little as one month a year.

"In the oil and gas business, that makes it virtually impossible to access those areas," he added.

Environmental groups like the Sierra Club, meanwhile, are largely dismissive of the BLM report.

"It appears to be more of same kind of thing we've had all along from the Bush administration, which wants to exploit the land, rather than protect it," noted Kristina Johnson, a Sierra Club spokeswoman.

In 2000 and again in 2005, Congress passed laws requiring the Department of Interior to inventory the oil resources that could be found both onshore and offshore in U.S. territory - and any restrictions which bar their recovery.

http://www.cnsnews.com/ViewNation.asp?Page=/Nation/archive/200806/NAT20080606c.html

[Lauren]

I am just wondering why you are so willing to drill for more oil. I read the articles you posted but don't you think it would just be a short-term solution? What about future generations? Although maybe you only care about the world while you are personally living on it..  Why don't you take all your time and energy trying to research some new alternatives to using a NON-RENEWABLE resource (Non-renewable meaning "a resource which cannot be replaced once it is used up") instead of posting about how awesome it would be to destroy our coastline. You should take a minute to care about the world you live in! This Earth is not OURS for the taking - we share it with millions of other species.