With the price of oil going up, Tennesee has become the happy hunting ground for a gusher of Tennesee tea. 386 new drilling permits issued in 2006. The state is pumping out more than 300,000 barrels of oil a year!

A former hairdresser from KY, Anthony Young, hit one of the biggest oil wells in recent state history - he might get as much as 100,000 barrels from the Richard Norrod No. 1.
Old-timers are not surprised, and tell stories about the seepage they used to see, and guys finding oil just like Jed.

Oil drilling has been going on in TN since 1866, but the state’s modern day oil industry really started with the 1969 discovery of a large field in Scott Co. - produced more than a million and a half barrels.

A word of caution. Oil people have a saying:

If you can’t afford to lose your money without it affecting your lifestyle, you shouldn’t get in an oil deal.

….with the onset of summer. Driving season and hurricane season impend.

Often the trends are reflected in a crunch at refineries. Supply is supposed to grow when there is evident demand, but the refinery situation involves other factors. Steve Hargreaves of CNN covered this in an excellent recent story.

…stringent environmental laws and effective community organizing have made it very difficult to build a new refinery in the U.S.

“Everyone is quick to say “look at these refiners, they’re driving up the price,’” said Phil Flynn Flynn, senior market analyst at Alaron Trading in Chicago. “But if I wanted to build a refinery tomorrow, I couldn’t do it.”

And then there’s the public’s newfound concern over global warming and its supposed commitment to do something about it. President Bush himself has called for a 20 percent reduction in gasoline use over the next 10 years.

“What refining executive in their right fiscal mind would say, gee, we need to add refining capacity right now,” said Drevna at the refiners’ association.

With gasoline prices already at old highs, the risk seems tilted to the upside. Let’s hope for good weather.

Here is the prognosis from Bill O’Connor, an analyst at Street Insight, TheStreet.com’s site for professional investors. We could not say it better.

One should be struck by the absolutely astounding 30 million barrel-decline in gasoline in the last 10 weeks. It’s unprecedented. We are already lower in gasoline this year than at any time in 2006 or 2004 and we’re not even into summer-driving season yet! Keep in mind that refineries in the U.S. are already pushing the envelope and at 90% capacity are only assuring that some will break down/blow up.

But here’s what’s even more amazing: The weather over the last 10 weeks in much of the U.S. has been horrible. Blizzards, tornados, massive rains and floods, and one of the coldest Februarys on record and an April that is right up there (today’s natural-gas drawdown is also unprecedented for this point of the year). Lastly, on top of the horrible weather overlaid on the huge gasoline drawdown, gasoline prices have soared and are over $3 in much of U.S. already, and it still hasn’t dented demand. Yet consumers are still out there filling up their tanks.

Everybody talks about it, but California is actually doing it. According to the CA Board of Equalization (they collect taxes on it), Californians used less gasoline in Apr. - Dec. 2006 than they did in the year-earlier period. 112 million gallons fewer. First drop since 1992

Reasons suggested: Shorter, fewer trips, more hybrids (gas at $2.96 ?)

For the full year consumption was up. Let’s check back in 3 mos. and see what that full year comparison says.

The EPA got hands slapped by the Supreme Court for not clamping down on tailpipe emissions. EPA saw it outside their jurisdiction.

The Supremes, in a case re: states and environmental groups looking for stricter Fed emmissions standards, ruled that the EPA has the authority to regulate carbon emissions from vehicles. Furthermore, the EPA must give a good reason if it decides not to impose tougher restrictions.

CA, of course, is way out ahead of the curve here proposing their own strict regulations on vehicle emissions. With some nice positive reinforcement, the EPA is blocking CA regs, and the automakers are suing.