Monday, May 3, 2010

Where Would We Be Without Offshore Oil?

http://www.businessinsider.com/where-without-offshore-oil-2010-5
Gus Lubin

All the oil spilling into the Gulf of Mexico would not fill the gap between US production and demand.

Econbrowser's James Hamilton posted this chart as a reminder of why we're drilling miles below the Gulf.

US oil production (green) is on the decline, even as off-shore production (blue) is on the rise. Add the fact that US consumption has risen considerably since 1980 and the whole situation seems futile.

Sarah Palin leads on domestic drilling when it’s hard; and the rest of the GOP?

http://www.northstarnational.com/2010/05/03/sarah-palin-exercises-leadership-domestic-drilling-hard-rest-gop/

The Gulf of Mexico oil spill is a good test for the spines of today’s Republican Party. One Republican has already passed the test, and as usual, that’s Sarah Palin. The signs from the others are not encouraging.

A day after pundit Charles Krauthammer declared “drill, baby, drill” to be history in light of the spill, and two days after the Obama Administration halted all domestic drilling (gee, what a surprise), Palin came out and invoked her moral authority as an Alaskan who lived through the Exxon Valdez spill.


Drill, baby, drill.
Yes, Palin says, the spill is horrible, as was the Exxon Valdez, which was why she took steps as a regulator in Alaska to put tighter controls on the oil companies. But she still comes to the same conclusion she’s touted before: We need domestic drilling.

No matter how horrible the British Petroleum spill proves to be, it won’t change the economic reality. We are putting our economy and our national security at risk when we rely on the likes of Venezuela and Saudi Arabia to get the oil we need. And it is insane to do this when we can and should drill for oil on our own lands and in waters we control.

This drilling can be done safely and cleanly. It obviously wasn’t in the case of the BP explosion, but it can and it should.

But where are the leading Republicans – Palin excepted – to come out and say that? Where is Mitch McConnell? Where is John Boehner? Where is Bobby Jindal? (OK, we know where Jindal is, and it’s where he should be – managing the crisis off the shore in Louisiana. But it sure would be a powerful act of leadership for Jindal to reiterate even now that we still need domestic drilling, wouldn’t it?)

It appears your average Republican luminary doesn’t want to touch this for the same reason Republicans usually lose their nerve. They figure anyone who stands up and endorses domestic drilling now will get absolutely murdered by the Democrats and the media. They figure all the election momentum is going their way right now – and indeed it is – and it makes no sense to risk it by making a controversial statement about domestic drilling in the aftermath of a horrible spill.


A spiritual thriller by Dan Calabrese. Click the image to learn more and order a copy.
This does not bode well for the prospects of governance under Republican leadership. Indeed, it sounds a lot like the last time they were in charge. If Republicans won’t say and do the things that need to be said and done whenever a) it would jeopardize an advantageous political position; or b) the media would beat up on them for it; or c) both; then the Republicans can’t do the things the country needs them to do.

We need more domestic drilling, including off-shore, but when the GOP was in charge, they didn’t make it happen. We needed market-oriented health care reform, but it was easier for the GOP to do little or nothing on the issue, so they left the door open for Democrats to create a socialist behemoth the first chance they got. We need to get federal spending and entitlements under control, but that’s too hard because the media and the Democrats will say you hate Grandma. So the GOP did nothing.

Real leadership is what you do when it’s right but it’s also hard. McConnell, Boehner and company have never been known for this, and now we have the latest example as to why.

And if you don’t understand why so many people adore Sarah Palin, here’s Exhibit A. Many people understand we need to drill, baby, drill, but right now it takes courage to say so. While most Republicans run for the tall grass, Palin speaks the truth.

It’s hard not to respect that, or her, and by the same to token, it’s hard these days to respect just about anyone else – Paul Ryan excepted – in the Republican Party.

High crude oil prices add power to UAE infrastructure spending

http://gulfnews.com/business/oil-gas/high-crude-oil-prices-add-power-to-uae-infrastructure-spending-1.620460
•By Samia Badih, Staff Reporter

Oil flow is monitored at a pumping station at Iraq's Rumaila oil field near the southeastern city of Basra. In the Gulf countries oil exports are the key to infrastructure development and the creation of jobs.Image Credit: APDubai: A $1 increase in crude oil prices translates into $2.2 million additional income per day for the UAE or $803 million per annum.

With crude prices flirting around $85 per barrel, the UAE can count on a hefty $187 million income per day from oil, with its 2.2 million barrel daily production.

The UAE has a production capacity of more than three million barrels per day.

But production is held at 2.2 million bpd under the quotas agreed by the Organisation of Petroleum Exporting Countries (Opec) to help push up prices.

Hamad Bu Amim, Director General of the Dubai Chamber of Commerce and Industry, told Gulf News that the current crude oil prices are "excellent" and will help boost the UAE's economy.

Crude oil prices yesterday were slightly higher than $85 per barrel.

"We think that the level of $70 to $90, anything around this range is acceptable," he said.

Pries fell from a high of $147 per barrel in July 2008 to around $32 per barrel in March 2009. However, since then they have bounced back, hitting $80 per barrel.

Higher prices would translate into more investments in infrastructure and government services, Bu Amim said.

"Over the last year, oil prices have almost doubled and this is very important for the UAE's economy," he said.

"They [oil revenues] support the rest of the economy because the GCC and the UAE government use the revenues from the oil to invest in infrastructure," he said.

Support

"They will continue supporting the UAE and GCC economies as they recover from the financial crisis, and the governments are using these revenues and are investing in infrastructure and government services," he said.

According to a recent oil market report released by the Dubai Chamber, the recent spikes in crude oil prices have helped cushion the impact of the economic downturn in the UAE.

The report said that "high hydrocarbon revenues will allow the UAE to continue with its large-scale fiscal investments which will reignite aggregate demand and bolster the creation of new job opportunities."

According to the US Energy Information Administration's short-term energy and summer fuels outlook report which was published last month, West Texas Intermediate (WTI) prices are expected to average around $85 per barrel by the fourth quarter of 2011.

The Abu Dhabi National Oil Company (Adnoc), one of the world's top ten oil producers, produces over two million barrels per day.

An increase of $1 in oil prices corresponds to more than $2 million per day, assuming that production costs remain constant.

"However, the minute it goes to $100, it will hurt the global economy and we'll see that affect inflation rates," Bu Amim said.

"We've seen from the old days how the pressure from inflation affects everyone by the end of the day."

Kate Dourian, Middle East Editor at Platts, an energy and metal information provider, said that higher oil prices don't seem to be affecting the inflation rates in the advanced economies because the share of energy in them is shrinking.

"It's obvious that no one wants oil prices to go to an extent that would hurt the recovery or that would push up inflation," she said.

"Everyone's saying between $75 and $85 is a good level."

Venezuela Oil Basket Rose $1.42 As Of Fri To $75.16/Barrel

http://online.wsj.com/article/BT-CO-20100503-703997.html?mod=WSJ_latestheadlines


CARACAS (Dow Jones)--The average price for Venezuela's basket of crude oil and refined products rose $1.42 to $75.16 a barrel during the week that ended Friday, the Oil Ministry said.

The ministry said the increase in oil prices was due to positive signs for the U.S. economy and some optimism regarding a plan that would begin to fix Greece's financial problems.

With four months gone, Venezuela's oil basket is averaging $71.79 a barrel in 2010, up from $57.02 a barrel for all of last year but down from 2008's $86.49 average.

-By Dan Molinski, Dow Jones Newswires; 58-414-120-5738; dan.molinski@dowjones.com

The Gulf Coast oil spill is a consequence of our oil addiction.

http://globalcomment.com/2010/the-gulf-coast-oil-spill-is-a-consequence-of-our-oil-addiction/

The poor Gulf Coast.

So abused, so neglected, so forgotten.

The oil spill currently afflicting the Louisiana coast has received a great deal of attention. This media focus happens all too rarely in such an important part of the nation.

The Gulf Coast is one of the most beautiful and ecologically rich areas of the United States. A tremendous amount of our seafood intake comes from the region. Shrimp, crayfish, and oysters breed in the swamps’ brackish waters. These animals have fed Gulf residents for millennia and make up a significant part of our seafood diet today.

The marshes also serve a vital role for birds. Not only do many species breed in the swamps, the marshes are the first stop for exhausted birds migrating over the Gulf of Mexico from Latin America.

The coastal swamps are home to the nation’s only populations of American alligators and other reptilian species. While conservation programs have helped alligator populations recover since the 1960s, decreased and degraded habitat places their long-term future in question.


The bayous have an important human history as well. French Catholics fled to Louisiana in the 1760s after the British takeover of Canada. Living and working in the isolated bayous for over two centuries, the Cajuns created their own musical and food traditions, their own version of French, and a vibrant culture that have fascinated Americans past and present.

Mike Tidwell’s superb 2003 book Bayou Farewell: The Rich Life and Tragic Death of Louisiana’s Cajun Coast lays out the damage we have done to this fragile ecosystem and social system. For decades, we have ignored, drained, starved, industrialized, and destroyed this vital habitat of American ecology and society.

In order to contain flooding, the U.S. Army Corps of Engineers has constructed levees to keep the rivers in its banks. The floods provided sediment that recharged and expanded the marshlands. Today, all of that sediment washes out to sea.

To improve transportation, the oil industry cut shipping channels through the bayous. The engineers did not know that once created, the canals would eat away at the marshes, created huge expanses of salt water in the former marshes.

Without the nourishing sediment and with the canals, the bayous are melting away. Each day, we lose 25 acres of land. Southern Louisiana is in danger of disappearing. The ocean eats away at the marshes every day the sediment does not replenish them. Entire towns have fallen victim to oceanic erosion.

When the bayous go, the wildlife disappears as well. That includes the shrimp, crayfish, and oysters that make up Louisiana cooking and much of the state’s economy. Within decades, the bayous, which have nurtured Native Americans and Cajuns for centuries, may disappear.

To date, the greatest manifestation of this environmental damage came in the form of Hurricane Katrina in 2005. These coastal marshes provided a buffer zone for New Orleans. Hurricanes hit the marshes and lost their power in the fifty miles between the open water and New Orleans. Without those wetlands and their ability to both soak up water and weaken storms, Hurricane Katrina hit the Gulf Coast at full force, devastating the area and causing the levee breaches that drowned New Orleans.

Now we have the oil spill. This disaster will exacerbate the region’s problems. It will devastate the fishing industry. It could kill millions of birds, some of which are endangered species. Spring is the migration and breeding season and thus the spill’s damage to birds will be more far-reaching than if it happened in December.

But perhaps we can find a silver lining in this catastrophe. American reliance on oil imports means that we can remain ignorant about drilling’s effects. Not since the Santa Barbara, California oil spill of 1969 has a major spill affected the Lower 48 states. That previous incident helped shape the environmental movement that created the first Earth Day in 1970 and a tremendous amount of legislation during the next decade which cleaned up our rivers, air, and soil, placed industries under new regulations, and led to the recovery of many endangered species.

Moreover, the 1989 Exxon Valdez oil spill in Alaska turned much of the American public against oil drilling in our most beautiful places. Memories of this event and the millions of dead birds, seals, and fish made it impossible for George W. Bush to open Alaska’s Arctic National Wildlife Refuge (ANWR) to drilling. Yet none of this has dampened Americans’ zeal for consuming foreign oil, where we can’t see the consequences.

Perhaps then it is better that the oil spill happened in the United States instead of Nigeria, Saudi Arabia, or Venezuela. A giant spill and subsequent environmental disaster means nothing to most Americans if it happens far away. The oil industry has created ecological and human catastrophes across the world for a century. But we keep driving our vehicles, oblivious to our impact upon the world. Seeing that damage in the form of oil-covered herons and alligators may create a moment for serious reflection of our actions.

Hopefully, the oil spill will make President Obama rethink his decision to open up parts of the Atlantic Coast to oil exploration. Although elected on a clean energy platform, Obama’s energy policy has in fact favored development. He has not shown a real commitment to clean energy in the form of legislation or executive policy. I call for President Obama to use this tragedy as inspiration both for a comprehensive energy bill and for renewed environmentalism at the federal level with far-reaching legislation rivaling that signed by Presidents Johnson, Nixon, and Carter.

Realistically, the marshes’ disappearance may prove easier to solve than the oil spill’s long-term implications. We can recreate the marshes by removing the levees and allowing the sediment to replenish the land. Scientists have successfully done this in small regions and almost immediately the alligators, fish, and birds return. But weaning the nation off oil is a fantastically difficult task. And no matter how rigorous the regulations, oil spills will happen.

As long we mine the waters off the Gulf Coast for oil, the bayous and all the people and wildlife that rely on them remain in peril. So long as we remain reliant upon oil, versions of the Exxon Valdez and the Gulf Coast spill of 2010 will happen somewhere around the world almost every year.

This entry was posted in Current Affairs, Editor's Pick, north america, politics and tagged bp, climate, environment, erik loomis, fish, gulf coast, louisiana, mike tidwell, mississippi, new orleans, obama, oil spill. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Is oil Venezuela's sovereign debt solution?



The PIIGS of Europe aren’t the only ones with debt troubles. In fact, at the end of the first quarter, Venezuela topped a list of the countries most at risk of default.

Based on the price of its credit default swaps, Venezuela had a 48.5% probability of default in the next five years. Greece ranked ninth with a 25.4% chance, according to credit information specialist CMA Datavision.

There are a variety of reasons often provided for why Venezuela will not default on its sovereign debt. They include Hugo Chavez’ reputation as a regional leader, the fact that most of the debt was contracted by the Venezuelan president himself, and the presence of state-owned Citgo assets in the United States that could be seized by boldholders.

However, these factors seem less and less convincing as the total stock of public debt multiplies and Venezuela’s problems grow, according to Joe Kogan, head of emerging markets strategy at Scotia Capital. He suggests that behind much of the decision to buy Venezuelan bonds is the assumption or hope that the country’s oil could ultimately become available to satisfy sovereign debts in a default. However, he does not expect a default from any major oil exporter anytime soon.

While the scarce number of sovereign defaults by oil-exporting nations in recent history leaves bondholders with little guidance, Mr. Kogan says there is nothing terribly unusual about seizing oil to satisfy debts.


For example, Taiwanese shipping investor Nobu Su had his crude-oil tankers detained in Rotterdam and Delaware in October 2009. The fuel from those ships was seized in response to missed rental fees.

After buying several packages of overdue Republic of Congo debt for cents on the dollar in the 1990s, hedge fund Kensington International chased down oil shipments from the country and pursued it in courts around the world in order to get their money back.

However, litigation and attempts to seize foreign assets are not the most powerful weapon wielded by bondholders, since those approaches are often slow and tiresome. Rather, it is the threat of such action that deters many, Mr. Kogan says.

If President Chavez did choose to default – whether for political or economic reasons – while oil prices were still strong, the strategist is confident that bondholders would go after U.S. assets such as Citgo, which are owned by Venezuelan state oil company PDVSA. Next, bondholders would likely turn to Venezuelan oil exports, which could be used to repay the full amount of its debt.

“Venezuela’s first defense here would be to sell its oil at the port of departure, rather than arrival,” Mr. Kogan says. “By the time the oil reached the Texas coast, it would be the property of the buyer and no longer attachable.”

Venezuela would also look for other customers for its oil. If it sold its oil to a company in China, Mr. Kogan notes that creditors would have a very hard time getting at either the oil or the receivables.

So while the probability of a Venezuelan default remains relatively low, the country has top-notch legal counsel in the United States that is surely aware of all these issues.

Venezuela exported 1.6 million barrels of oil per day in February, so current prices correspond to annual revenues of US$42-billion. Given its US$1.3-billion in annual interest costs and a probability of success in litigation to seize Venezuelan oil assets above 3%, Mr. Kogan says the country would be better off paying its debt than defaulting. “We think the probability is higher than that, and for this reason, Venezuela will continue to pay as long as oil prices remain high.”

Jonathan Ratner




Read more: http://network.nationalpost.com/NP/blogs/tradingdesk/archive/2010/05/03/is-oil-venezuela-s-sovereign-debt-solution.aspx#ixzz0msoe0fz6

Venezuela delivers first batch of crude oil to Belarus

http://en.rian.ru/exsoviet/20100502/158842283.html

The first batch of Venezuelan oil arrived at an oil refinery in Belarus on Sunday under agreements reached between the presidents of both countries.

A total of 4,400 metric tons (32,000 barrels) of crude were delivered by railway to the Mozyr refinery in Belarus.

The agreements on the supply of up to 80,000 barrels of crude oil per day to Belarus were reached in March at a meeting between Belarusian President Alexander Lukashenko and his Venezuelan counterpart Hugo Chavez in Caracas.

The first tanker loaded with crude oil for Belarus set off from Venezuela on April 2.

Oil is shipped to the Ukrainian Black Sea port of Odessa, from which it is delivered to Belarus by rail.

Some experts say the transportation of Venezuelan oil to Belarus is an unprofitable project while the Belarusian government believes the project is advantageous for the ex-Soviet republic.

Belarus has little hydrocarbon resources and depends on fuel supplies from Russia. Early this year the two ex-Soviet neighbors were involved in a dispute over oil supplies, as Moscow demanded Minsk pay full import duties on crude its refines and transits to Europe, dropping considerable subsidies.

MINSK, May 2 (RIA Novosti)