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June 11, 2013

Earth May Have More Oil Than Previously Thought…

 

…The problem is more a matter of what it will take for us to access it. According to a new report by the Energy Information Administration, previous US government projections underestimated global oil reserves by as much as 10 percent:

“…estimates in the updated reporttaken in conjunction with EIA’s own assessment of
resources within theUnited States indicate technically recoverable resources of 345 billion barrels of
world shale oil resources and 7,299 trillion cubic feet of world shale ga sresources. The new global shale
gas resource estimate is 10 percent higher than the estimate in the 2011 report…
…Although the shale resource estimates presented in this report will likely change overtime as additional
information becomes available, it is evident that shale resources that were until recently not included in
technically recoverable resources constitute a substantial share of overall global technically recoverable
oil and natural gas resources. The shale oil resources assessed in this report, combined with EIA’s prior
estimate of U.S. tight oil resources that are predominantly in shales, add approximately 11 percent to
the 3,012 billion barrels of proved and unproved technically recoverable nonshale oil resources
identified in recent assessments.”

Trouble is, simply having more oil on the planet does little to alleviate pricing concerns in the short term. As MSN Money observes:

“…Oil sands just beneath Edmonton in Canada’s Alberta province hold an estimated 175 billion barrels, making it the third-largest oil reserve in the world. But it’s going to spend much of the near future untapped.

The problem is that even extraction methods like fracking are in their crudest stages and don’t come close to being adequate for most oil sand extraction. The oil in those shales isn’t easy to separate from the sand and water surrounding it and leaves huge waste pools in its wake. That mess costs money, and it’s only going to get messier as those oil numbers surge.”

Unfortunately for consumers, the peak oil problem ultimately still poses a number of challenges – particularly as long term trends in third-world development continue to drive demand higher. It is a troubling thought indeed that even today’s high prices may seem like a bargain in comparison to the not-so-distant future.

Filed under:Fuel Price Trends | by Eyes on Energy @ 9:23 pm | 

June 10, 2013

Manipulation Suspected in Highly Variable Gas Prices

 

Regulators from the European Union are nearly a month into their investigation of major companies including BP and Shell over suspicion of manipulating prices on an international index. CNBC reported on the initial launching of the investigation:

“Officials carried out unannounced inspections at the premises of several companies active in and providing services to the crude oil, refined oil products and biofuels sectors,” the commission said. The inspections took place in two European Union member states and one non-EU country, it said.

“The Commission has concerns that the companies may have colluded in reporting distorted prices to a price reporting agency to manipulate the published prices for a number of oil and biofuel products,” it said.

The commission also said companies may have prevented others from participating in the price-assessment process with the intent to distort published prices.

Allegations of large firms rigging prices are, of course, nothing new. Here in the US, a number of high ranking elected officials have introduced measures to protect American consumers from these kinds of abuses. In late May, ranking Energy Committee member Senator Wyden wrote to Attorney General Eric Holder to investigate corporations in the United States for similar offenses. According to The Hill:

Wyden said price fixing in commodity markets “has been an area of abuse within the U.S. in the past,” noting the Enron power market scandal.

“It is critically important to determine whether or not similar efforts have been made to manipulate U.S. oil indices by these firms or others,” he added.

“Efforts to manipulate the European oil indices, if proven, may have already impacted U.S. consumers and businesses, because of the interrelationships among world oil markets and hedging practices,” Wyden said.

Gas prices around the country remain highly variable. Americans should expect to remain at the whim of price shocks and larger trends for the forseeable future, and certainly through the summer driving season.

Filed under:Fuel Price Trends | by Eyes on Energy @ 11:57 pm | 

May 21, 2013

Minnesota Gas Prices Eat Into Consumer Budgets

 

The continued high prices in Minnesota, as well as much of the Midwest, have begun to eat into the budget of the average consumer – with definite effects on even the largest businesses. The Minnesota Post details:

“Comparable store sales at Wal-Marts declined 1.4 percent in the United States for the quarter that ended April 26.

In announcing its results, Wal-Mart said: ‘Comp sales performance was impacted by a delay in income tax refund checks, challenging weather conditions, less grocery inflation than expected and the payroll tax increase.’

When the payroll tax was raised by 2 percent in January, it meant smaller paychecks for Americans.

That action translated into less money for Americans to make essential and discretionary purchases, and Wal-Mart acknowledges that it has had an effect on its first quarter sales.

Now, Minnesota consumers are paying dramatically more than they expected to fill up their gas tanks, so retailers will see another wave of consumer retrenchment in their stores. (Emphasis Added)

On Monday, according to the AAA Daily Fuel Gauge Report, Minnesotans were paying an average of $4.28 a gallon for regular unleaded. That’s more than 60 cents higher than the $3.65 a gallon that’s the current national average.”

Lawmakers are continuing to propose a variety of responses to the ongoing crisis. Most recently, Vermont Senator Bernie Sanders encouraged his fellow policymakers to investigate charges of price manipulation on the commodity markets. A local paper called the Vermont Digger says:

With gasoline prices rising rapidly, Sen. Bernie Sanders today proposed an amendment to make U.S. federal regulators follow the lead of Europeans and investigate oil and fuel price manipulation.

Sanders also proposed a 30-day deadline for the Commodity Futures Trading Commission to use its emergency powers to curb excessive speculation in crude oil markets.

‘We must do everything that we can to make sure that oil and gasoline prices are transparent and free from fraud, manipulation, abuse and excessive speculation,’ said Sanders, a member of the Senate energy committee.

…’The skyrocketing cost of gasoline and oil is causing tremendous hardship to the American consumer, small businesses, truckers, airlines and fuel dealers. In fact, as we struggle to claw our way out of this terrible recession, high oil and gas prices are enormously detrimental to the entire economic recovery process,’ Sanders said.”

Still, Sanders’ recommendation will do little to alleviate the current burden Midwestern consumers face due to continued refinery maintenance.

Filed under:Fuel Price Trends | by Eyes on Energy @ 4:12 pm | 

May 17, 2013

Midwest Gas Prices Continue to Spike Due to Refinery Malfunctions

 

States in the upper midwest are feeling extra pain this week as mounting refinery malfunctions drive prices at the pump to record highs. Aside from the two Chicago-area breakdowns that were responsible for trouble earlier in the week, problems at refineries in Kansas and Oklahoma also served to exacerbate the situation. According to the USA Today:

“Gas prices in Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska, Ohio, Oklahoma and Wisconsin have spiked up to 40 cents a gallon the past week alone…

While the USA may be dripping in new found crude oil deposits and early May supplies were at their highest levels since the early 1930s, issues at a handful of refineries that turn crude into gasoline and diesel fuel underscore how kinks in the supply chain can cause quick surges in what consumers pay at the pump.

In Minnesota, regular, unleaded gas averaged $4.15 a gallon heading into the weekend — an all-time state record. With some Twin Cities outlets now selling gas for more than $4.50 a gallon, making Minnesota the priciest state for gasoline in the continental U.S., overtaking California, which now averages $4.06 a gallon. In oil-rich North Dakota, prices average $3.98, also a record-high.

‘It’s amazing what problems refinery issues can cause,’ says Patrick DeHaan, senior analyst for price tracker gasbuddy.com. ‘If another refinery went down, all hell would break loose.’”

As Americans prepare to hit the road once again for the summer driving season, it appears as though there will be no relief for the immediate future. The Wall Street Journal reports:

“Rising crude-oil prices and tight supplies are among the factors that have recently pushed prices higher at the pump, according to AAA’s Daily Fuel Gauge Report. For 73 consecutive days the national average has been lower than it was on the same day a year ago…

The recent trend toward higher prices has affected most states, with only West Virginia and Ohio posting lower prices now than a week ago.  Prices in six states; Oregon, Minnesota, Washington, Oklahoma Nebraska and Iowa) have jumped by more than 20 cents, AAA said.”

This is yet another telling example of the power seemingly insignificant price shocks can have over large parts of the country. As more refineries switch away from their winter mix, more delays and malfunctions remain a definite possibility.

Filed under:Fuel Price Trends,Price Shocks | by Eyes on Energy @ 5:28 pm | 

May 16, 2013

Falling Gas Prices Lead to Deflation

 

The most recent reporting of the Consumer Price Index found an unexpected drop in inflation – almost entirely attributable to the degree to which gas prices have fallen in recent months. CNN Money reports:

“The Consumer Price Index, a key measure of inflation, fell 0.4% in April, according to the Labor Department. Compared to a year earlier, prices are up only 1.1%, a level of inflation that’s considered rather low.

Falling gas prices were the main driver for the broader decline for the second month in a row, the Labor Department noted.

The average price for a gallon of unleaded gas fell by about 13 cents in April, ending the month at $3.51, according to AAA.”

However, this trend may represent some other issues in economic stability. According to the USA Today:

‘Subdued demand means that core inflation is likely to edge lower, as retailers will be forced to pass previous falls in raw material costs onto customers,’ Paul Dales, an economist at Capital Economics, said in a note to clients. ‘The Fed may soon put more emphasis on fading inflation trends.’

As evidenced by the sustained, region-wide rise in prices through much of the Northern Midwest, these overall trends are often bucked by short term price shocks. It is unwise for fleet managers and consumers alike to take lower current prices as an indication of future costs.

Filed under:Fuel Price Trends,Gas price,Price Shocks | by Eyes on Energy @ 5:20 pm |