No fuelin' this time: Oil supply near crisis

[Fredfredson]

No fuelin' this time: Oil supply near crisis To protect our economy, we need a coherent national energy policy

May 11, 2007

BY STEVE HUNTLEY

http://www.suntimes.com/news/huntley...HUNT11.article

Gasoline prices in some places in the region are one thin dime away from $3.50 a gallon. If that's got you alarmed, consider this finding from the government's last report on petroleum supply: Nearly two-thirds of the world's proven oil reserves are in politically risky countries.

The news only gets worse in the crude oil report from the Government Accountability Office. The top 10 oil companies in terms of reserve holdings are, with one exception, government owned. And they are in places unfriendly to America, like Iran and Venezuela, or nations already suffering from political instability, like Iraq and Nigeria, or countries in politically risky regions, such as the Mideast states of Saudi Arabia, Libya and Kuwait. Only the Mexico-owned oil company can be ranked as reliably friendly to the United States and it accounts for just 2 percent of the top 10's reserves.

Add to that the realization that the United States imports 66 percent of the oil it uses, and you get a sense of how vulnerable our economy and national security are to the petroleum pipeline.

With the heavy driving season still ahead of us, some energy experts think gas prices this summer could soar up to $5 -- and that assumes no severe disruption, as in a new Mideast war or another Hurricane Katrina disaster. Americans paid $57 billion more for gasoline in the first half of 2006 than we did in the same period two years ago.

This runup comes from our increasing appetite for gasoline, major outages at refineries, elevated world demand, a jittery oil market nervous about Iranian troublemaking and price floors set by producers like Saudi Arabia, supposedly our good friend in the Middle East.

The Saudis know it's in their interest not to let prices get too high because the damage to the world economy would only drive down their oil bonanza. Do you sleep better knowing the fate of the economy may rest with the despots in Riyadh, the same ones responsible for promoting the fanatical Islamic fundamentalism at the heart of today's terror menace?

And what about our contribution to Mideast instability? Iraq oil production has yet to recover to its prewar levels. And should the surge strategy fail and the United States be forced to withdraw, nightmarish scenarios open up. Suppose the Sunni-Shiite fighting spreads beyond Iraq's boundaries. In a worst-case scenario, a combatant growing ever more desperate in a religious war might decide to strike at an opponent's oil fields.

That may sound alarmist. But the GAO report, in discussing its belief oil production will peak by 2040 or before, concluded a "sharp decline in oil production could have severe consequences, including a worldwide recession." That warning applies equally well to the political realities of oil supply.

All this underscores the pressing need for a coherent, far-reaching and urgent energy policy. If only the passions inflaming the Washington wrangling over Iraq could be focused on a comprehensive energy strategy. Instead, we get incremental thinking. Like increased fuel standards for cars, a tactic that in the past tended to result in people actually driving more and that doesn't fundamentally address our reliance on imported oil. Like ethanol from corn, a transfer of resources already pushing up food prices.

The United States has huge reserves of oil shale, which could provide billions of barrels of petroleum, and of coal, which could produce petroleum-like or alcohol fuels. Hydrogen remains a promising potential source of power. But huge startup and development costs confront new technologies, meaning development of them is vulnerable to price manipulation by the OPEC oil czars. Financial incentives to protect domestic production or tariffs to keep the cost of imported fuels high or a combination of both likely will be required.

Those pose painful economic choices for the country and challenges fraught with political risk for politicians who have to get elected. But the alternative is leaving our energy, economic and national security hostage to unstable and hostile governments. Who among our current crop of presidential candidates is the political leader with the courage and foresight to take on this urgent challenge?

[Fredfredson]

May 16, 2007, 11:56AM

Valero's Houston refinery offline until next week

By TOM FOWLER

http://www.chron.com/disp/story.mpl/...y/4809382.html

Valero's Houston refinery will be offline until sometime next week due to boiler and steam system problems, the company said today.

All of the plants 64,000 barrels per day of gasoline and 44,000 barrels per day of distillate production is offline due to the problem. Distillate includes diesel fuel and heating oil.

"We are working diligently to fix the problem, and expect to have production back to normal early next week," the company said in a statement.

Valero said output from the refinery is sold into the wider U.S. market via interstate pipelines, so the company does not anticipate that consumers in specific locations will be affected. Valero is bringing in product from other suppliers to cover its contractual commitments.

A lengthy outage of Valero's McKee refinery in West Texas was blamed for fuel shortages in parts of Colorado recently, but Valero spokesman Bill Day said the Houston refinery is not tied directly to one market.

"This does not mean that drivers in Houston will see shortages of fuel at the pump," Day said.

Refinery outages across the country have been blamed for some of the recent increases in gasoline prices.

U.S. refiners operated at 89 percent of capacity during the last week of April, according to the U.S. Department of Energy's Energy Information Administration. The April average has dipped that low only once before in the past 15 years, the agency said.

That was last year, when many refineries took plants down for routine maintenance they had deferred while Gulf Coast refineries recovered from damage inflicted by the 2005 hurricanes.

Gasoline prices hit a record national average of $3.09 Tuesday and are topping $4 a gallon in parts of the country, according to AAA.

Drivers in Houston paid an average of $2.90 for a gallon of regular unleaded Tuesday, up sharply in recent weeks but down from $2.94 this time last year.

Texas also still hovered below the $3 mark, coming in Tuesday at $2.93 a gallon versus $2.85 a year ago.

Valero is the U.S.'s largest refiner but the Houston refinery is considered a medium-sized refinery. It is ranked 69th out of 144 U.S. refineries in terms of its refining capacity, according to the ranking by the Energy Information Administration.

[Sir Digalot]

i estimate $4.50 buy midsummer...

no one seems to take seriously when OPEC ( the association of america hating oil producing countries) purposefully cut back their reserves to keep prices high, it is as much political as it is financial and preservatory, but that is all dissmissed our buddies would never do that not even with our non existant foriegn policy, or aggressive stance to all things brown or muslim, our general attitude that we are the world.

what is worse is the companies that are supllieng the end product are not hurting like we are they are posting record profits again and again!

no one is dismissing there is a need for change here in the US and elsewhere, but, it does not help that the countries supplying us with oil are the ones sticking it to us, (unless in the case of places like uk the government is equally as to blame for high taxes on the refined product)

there are big shortages in the supply chain the lack of refining capacity the lack of maintenance and now the lack of supply too.

[spindok]

So which is going to happen first?

Are we all gonna die when the fuel runs out, or will it be global warming, bird flu pandemic, nuclear war, or simply running out of resources.

Either way this is no time to quit drinking.

Spindok

[Fredfredson]

Agreed



F

[Francois Cellier]

From EV World

Searing Summer of Gasoline Shortages

Energy investment banker, author takes stock of U.S. gasoline inventories and finds problems ahead.

By Matthew Simmons
Published: May 15, 2007


Here is a quick run down on the possible disaster we face this summer as we head into Memorial Day with the lowest beginning-of-driving-season stocks in US history. It would have been convenient had someone found out exactly what Minimum Operating Levels* really have become. I suspect we will answer this riddle this summer.

Minimum Operating Levels of petroleum inventories are when all cushions have been used up and the system is now starting to “rob Peter to pay Paul." At this stage, the risk of shortages starting to crop up is Red Alert. Sadly, the last serious study of where this invisible line of minimum stocks is was a NPC study done in 1988.

The reality of gasoline demand is that it will rise during July and August unless we have some roads blocked off to stem demand. Rising late-summer demand has happened almost every year, even as prices rose from $1/gallon to over $3!

To supply this market, several things have to work in unison.

1. Refineries need to crank up to over 16 million b/d instead of current 15 as they struggle to get into compliance from too little maintenance for too long.
2. Imports need to average well over 1 million b/d, and probably need to hit 1.5 million b/d, matching the all-time record set last year.
3. No hurricanes can hit the Gulf producing region.
4. Stock draws are the last plug in the dike.

From the looks of things as we view Memorial Day weekend starting in just over a week, we fail on all four counts. The burning question is how much lower stocks can drop before shortages sweep our fragile gasoline supply system. Historically, it has been critically important that we build up gasoline stocks during the spring shoulder season (April-May) so that they can be liquidated during peak demand to prevent shortages. We seem to have run out the clock to fix the problem this summer.

[Mr. Amphibian]

Originally Posted by spindok

So which is going to happen first?

Are we all gonna die when the fuel runs out, or will it be global warming, bird flu pandemic, nuclear war, or simply running out of resources.

Either way this is no time to quit drinking.

Spindok

Eat, drink, and be merry, for tomorrow we die.

But to seriously answer your question, well, the bird flu pandemic might thin our numbers a little, but it won't kill off the human species, just stop our growth for a while. Nuclear war could happen, but I'm doubting it, because people generally don't want to get nuked in retaliation, so self-preservation makes it less likely. Running out of fuel and running out of resources are exactly the same thing (fuel is a resource), and both will completely change the way we live (in the rich world anyway), and have the potential to seriously kill off a lot of people (perhaps most of the human population) while we adapt to the changes, but neither will result in the death of the species. Roughly the same can be said for global warming.
So, in conclusion, none of these things will destroy the species (nuclear war could, but it is even more dependent on human influence than the other scenarios are, so it depends completely on the choices we make), although they will change the way you and I live... but that's alright. Contrary to what seems to be obvious common knowledge, western civilization is neither the height of civilization (just technology), nor does the human species disappear when it is forced to mend its ways, but all the scenarios could somehow kill you or I. Then again, we could both die in a car crash in a few hours, so they're not worth worrying about (act to change them, but don't worry about things beyond your control).
So, in conclusion, eat drink and be merry, for tomorrow we die.

[Fredfredson]

Oil surges to $70 on U.S. gasoline concerns

Thu May 17, 2007 3:45pm ET161

By Matthew Robinson

http://today.reuters.com/news/articl...ARKETS-OIL.xml

NEW YORK (Reuters) - Oil surged more than $2 to a fresh 8-month high above $70 a barrel on Thursday as U.S. refinery breakdowns choked gasoline supplies in the world's top consumer just ahead of peak summer demand.

London Brent crude <LCOc1> settled up $2.30, or 3.4 percent, at $70.27 a barrel, after hitting $70.33, the highest level since September 1, during intraday activity. U.S. crude <CLc1> rose $2.31 to $64.86 a barrel.

Oil prices jumped after news of a glitch at Murphy Oil's refinery in Meraux, Louisiana, and the shutdown of a gasoline pipeline in the U.S. Northeast.

Both were expected to be repaired later Thursday, but the problems added to a string of refinery outages that has sapped U.S. gasoline supplies ahead of the summer driving season.

"The gasoline market is on a boil because of the string of refinery issues. Murphy is the latest one," said Jim Ritterbusch, president of Ritterbusch & Associates.

Despite record gasoline pump prices above $3 a gallon, there has been no let up in robust demand in the world's top consumer. More motorists than a year ago were expected to hit the roads during the May 26-28 U.S. Memorial Day weekend, the traditional start to the driving season.

"For a majority of drivers, the thought of driving less is simply out of the question," said Edward Meir of Man Financial Energy Group. "We don't think we have seen the last of the current gasoline spiral, and could very well see one more significant spike higher during the new few weeks."

Gasoline futures <RBc1> surged Thursday by 9.96 cents, or more than 4 percent, to $2.4366 a gallon.

Stockpiles of gasoline in the United States are roughly 7 percent below a year ago, after prolonged refinery maintenance and a rash of operational glitches slowed production.

U.S. imports of gasoline jumped recently to make up some of the shortfall -- rising to the fifth highest level on record at 1.5 million barrels per day last week -- but investors have taken little comfort.

"There's still a relatively low rate of refinery runs -- the current tightness in gasoline is unlikely to ease in the short term," said Makoto Takeda, analyst at Bansei Securities.

Oil's gains were tempered by news of the end to an occupation of an oil hub by Nigerian villagers that had forced Royal Dutch Shell to cut output by 170,000 bpd.

Militant attacks have shut nearly 900,000 bpd, or 30 percent of supply capacity, from Africa's biggest oil producer -- depriving refiners of crude prized as a feedstock for making gasoline.

The Nigerian disruptions, together with worries over Iran's dispute with the West and supply cuts by the Organization of Petroleum Exporting Countries, have pushed crude well above a January low near $50.

Consumer nations have called on OPEC to open the taps, but the group, which supplies a third of the world's oil, says it sees no need to act. Its next scheduled meeting is in September.

Abdullah al-Badri, the group's secretary-general, said OPEC was content with prices in their current range.

"I don't want to see a low price and I don't want to see a high price," he said on Thursday.

[Diemos3211]

Well Mr. Amphibian you make good points, but I'm still betting that it will be the zombies that get us in the end.

[Fredfredson]

Refiners are struggling to meet demand for fuel

By LARRY RINGLER Tribune Chronicle

http://www.tribune-chronicle.com/New...rticleID=18419

Blame it on Nigeria.

Refinery maintenance outages, both unplanned and planned, aren’t helping. Then there’s continued rising demand on top of sinking supplies and the threat of a nasty hurricane season.

In what could be termed an almost perfect storm –– at least there’s no oil embargo yet –– gasoline prices Monday hit $3.50 a gallon at some area stations, smashing the inflation-adjusted peak of $3.15 set in March 1981, and straining consumers’ budgets as never before.

Oil refiners and retailers don’t like high prices, either, company spokespeople said.

‘‘We usually lose money when the price shoots so high because our inside-store sales suffer,’’ said Monica Jones, spokeswoman for Altoona, Pa.-based retailer Sheetz Inc.

Sheetz only makes about 3 cents a gallon before costs such as taxes and transportation, Jones said. It depends on profit generated by selling food, beverages and other items inside its gasoline-convenience stores.

‘‘When the price gets so high, no one comes into the store, so we lose out,’’ she said.

Findlay-based Marathon Petroleum LLC, owner of Speedway stations, reported earning 10 cents per gallon in the first three quarters of the year. The company dropped to a negative margin this quarter, prompting it to raise prices to ‘‘restore profitability,’’ spokeswoman Linda Casey said.

A lot of pricing comes from things beyond many companies’ control, Casey said, rattling off a long list of factors:

∫ Rising crude oil prices. West Texas Intermediate rose $1.33 to close Monday at $66.11 per barrel, although the price tailed off Tuesday.

The price hikes were caused by ongoing tensions in major oil producers Iran, Venezuela and Nigeria, the latter suffering from pipeline and other operations explosions caused by rebels, Casey said.

∫ U.S. gasoline inventories as of a week ago today declined for the 12th straight week by more than 34 million barrels, or 15 percent. It’s the sharpest fall in 16 years, Sheetz’ Jones said.

∫ U.S. demand for gasoline rose almost 2 percent in the first three months of the year versus the year-ago period to 380 million gallons per day.

∫ Some refineries have been closed or limited by planned and unplanned maintenance. In addition, some refineries still haven’t recovered from Hurricane Katrina in September 2005, Casey said.

Adding to the concerns is a new hurricane season starting June 1 that’s predicted to be severe, which can raise oil prices on the trading markets.

∫ Gasoline imports have dropped dramatically to historic lows because of some European maintenance problems, a French workers strike and more focus on making diesel.

Foreign gasoline is important because the U.S. imports about 1.5 million gallons a day to satisfy its demand.

‘‘We compete in the world market for that,’’ she said.

∫ The switchover from winter gasoline to less polluting summer grades is completed, but the process raised costs and yields less gasoline per 42-gallon barrel of crude oil.

Casey said oil companies are asked why they’re not sinking some of their profits into new refineries. The answer, she said, isn’t lack of investment, but opposition from communities that don’t want a refinery near them or environmentalists who argue against relying on oil and other fossil fuels.

The industry in 2006 invested $9 billion to meet rising demand, Casey said. Marathon spent $3.2 billion on its Garyville, La., refinery to boost production to 425,000 barrels a day from 245,000 barrels. The company also spent $300 million to boost production at its Detroit refinery to 100,000 barrels of oil a day from 74,000 barrels.

‘‘It’s not like the money is being pocketed,’’ Casey said.

[Quarken]

Refinery production is a very different problem than oil supply. Don't be tempted to confuse the two. In the long run, this is a very good scenario, however, because it will apply needed market forces to resolve the big problems earlier rather than later.

[Fredfredson]

A Gas Crisis 30 Years in the Making

By Warren Brown
Sunday, May 27, 2007; G02

http://www.washingtonpost.com/wp-dyn...401121_pf.html

Embrace the memory of the average $3.21 cents we'll pay for each gallon of regular unleaded gasoline purchased this Memorial Holiday weekend. The chances are we'll pay a lot more next year and the year after that.

Abandon your conspiracy theories, your worries that global oil companies are gouging us at the pump. For the record, they are. It's the kind of profiteering that accompanies any crisis -- war and rumors of war, hurricanes, or other actual or imminent disasters.

What the oil companies are doing isn't moral. Nor is it illegal. But it is business.

Crises usually are profitable for people positioned to exploit them; and they usually are costly for those who aren't.

When it comes to oil and the motor fuels it provides, we're in a crisis. We've been in a crisis for nearly 30 years now.

But the only times we've paid attention to it were during those rare, for us, seasons of gasoline shortages, such as the spot shortages that occurred in the United States in the early 1970s. What we now regard as high gasoline prices -- laughable in the rest of the developed world -- have also gotten our attention.

We're upset. Life is unfair. Someone has taken away our cheap gasoline. It just isn't right.

Damn those oil companies and their lackeys in the automotive industry, especially in Detroit, who busily are churning out gas-guzzling trucks when everybody knows that all we've ever wanted in the United States were fuel-sipping sedans such as the gas-electric Toyota Prius.

Never mind that Toyota got the money for the Prius through highly profitable sales of models such as the Toyota Land Cruiser, Toyota Sequoia and FJ Cruiser sport-utility vehicles. Never mind that Toyota, hungry for the dollars that Detroit has been raking in on sales of big pickup trucks, is going after that particular cash pile with its new, super-powerful, quite fuel-thirsty Toyota Tundra CrewMax pickup truck.

Fie on those Detroit companies! They have no interest in producing fuel-efficient vehicles. Never mind that they've been doing exactly that for decades in other parts of the world where gasoline isn't dirt cheap. Never mind that they tried on numerous occasions to do the same thing in the bigger-is-always-better United States, much to their fiscal distress.

And on that point, never mind that any American who wanted a car that could get at least 30 miles per gallon could have done so, most certainly, in the last two decades. But year after year, according to U.S. automotive sales histories, those cars lingered at the very bottom of the market regardless of whether they came from Japan, the United States or Europe.

But I digress. I was writing about the crisis. It is this: Despite all of the happy talk you hear from lawmakers who have fooled themselves into believing that the next big exploitable oil reserve is bubbling just beneath the surface of our national will to pump it from the ground or the sea, despite profound media hand-wringing over the putative sins of the oil industry or their cronies in the car business, despite the inane congressional tendency to try to avert an energy crisis by making the car companies produce more fuel-efficient vehicles while asking consumers to do nothing except sit and wait for gasoline prices to come down, world oil production cannot match the trajectory of demand.

No magic turn of the OPEC (Organization of the Petroleum Exporting Countries) oil wheel is going to alleviate that problem over the long term. No amount of U.S. military boots on the ground of someone else's oil-producing country is going to ultimately alter the inevitable outcome of rapid global consumption of a finite resource.

What is odd -- indeed what is scary -- is that there are so many Americans who don't get this, who don't believe it, who think that a quick fix is just around the corner. When you think about it, our mindset about oil is very much like that of a crack addict desperate for his or her next fix: "There must be some around here somewhere. I've got to have it. What must I do to get it? Whom must I kill? From whom must I steal?"

It's a useless pursuit.

Truth is we've got to withdraw from oil as much as possible. But a just-published survey by the Consumer Federation of America ("Americans Alarmed About Dependence on Oil Imports and Resulting High Gas Prices and Funding of Terrorism") says U.S. consumers are a long way from dealing with the truth.

Americans want a mandated increase in vehicle fuel efficiency. They are even willing to pay more for more fuel-efficient vehicles, the survey said. But they don't want carbon taxes or any other levies designed to curb their thirst for gasoline, according to CFA survey authors.

Reducing highway speeds can save as much as 19 cents per gallon of regular unleaded gasoline per five-mile-an-hour drop, according to the CFA's estimates. But anyone who has tried driving 55 miles per hour or even 65 miles per hour on Interstate 95 knows that he or she risks being run over by the majority of motorists who think that 75 or 80 miles per hour is okay.

We consume 20.8 million barrels of crude oil per day. But we daily produce only 5.2 million barrels of that amount within U.S. borders. We use 25 percent of the total oil and gasoline consumed in the world -- substantially more than any other country, including those that have no fuel economy rule. But we believe that fuel economy rules alone -- effectively shifting the burden of fuel conservation to the car companies while leaving the consumer side of the equation virtually untouched -- will solve our problem.

It's time to face up and fess up: We're high on cheap gasoline. Our current distemper is caused by the reality that in a world that loves the stuff as much as we do and that is beginning to use it with a profligacy that matches our own, we're going to have to pay much more to get it.

There is not an inexhaustible supply of oil. There is not now, nor has there ever been, and nor will there ever be an inexhaustible finite resource. Get over it. Let's start withdrawing now. Let's face, share, and manage the pain. Let's deal with our own greed either by using only what we need or paying more of the real price for using more than what is needed. Yeah, carbon and horsepower taxes, and congestion pricing to control the egregious fuel waste in urban rush-hour traffic jams. When it comes to oil, it's not going to get much better than this.

[Sir Digalot]

actually no i do not want to pay more for fuel efficient vehicles and neither should i be forced too, do you know how hard it is to get s decent diesel vehicle here? screw hybrid it is a waste of money for the amount of time we would own a car.... hence in the uk and europe diesel is much more common and recently round here, cheaper then regular unleaded.

and opec are also cashing in on the situation by purposfully limiting supplies as a political gensture to all us other countries... though they are ultimatly screwed which is a nice fuzzy warm feeling

[Underhill]

Ironically the company I work for makes one of the 'upgrades' the power plants need. Preheaters which boost efficiency by around 6-8%. We're so busy our heads are spinning at the moment.

The stupid part is that the upgrades (or at least ours) pays for itself in about 5-6 years and the equipment generally last 30 years. It seems like a no brainer.

[Underhill]

Originally Posted by Sir Digalot

actually no i do not want to pay more for fuel efficient vehicles and neither should i be forced too, do you know how hard it is to get s decent diesel vehicle here? screw hybrid it is a waste of money for the amount of time we would own a car.... hence in the uk and europe diesel is much more common and recently round here, cheaper then regular unleaded.

and opec are also cashing in on the situation by purposfully limiting supplies as a political gensture to all us other countries... though they are ultimatly screwed which is a nice fuzzy warm feeling

I agree with most of that.

It pisses me off. Europe has an abundance of diesels that we could have tomorow but we've regulated them out of the market. Diesels may not be the long term solution but they're a good stop gap for the short term.