Another lesson in how the oil biz works

[dogtowner]

and how the administration could do much to help, if it wanted to...

speaking truth to dictatorial power ? yeah kind of : )

the simple truth is that the administration wants energy to cost more and is taking the predictable steps to make it happen.

The rise of gasoline futures prices is an example of having adequate supplies of gasoline domestically, but in the wrong location. In gasoline, as in real estate, price is driven by location, location, location.


The key fact to understand is that futures contracts are written with a clearing mechanism based on a standard amount of a standard product delivered at a specific location on a specific day. So while speculators can trade contracts like Monopoly money, on contract expiration day, whatever open contracts exist must be settled by physical delivery of the commodity. In the case of NYMEX gasoline futures contracts, the basic contract calls for the delivery of 42,000 gallons of unleaded gasoline to New York Harbor.

One factor driving up the price is the impending closure of large Northeast refineries due to oppressive EPA regulations unilaterally imposed by Lisa Jackson of Obama's EPA. Boutique blend requirements for different markets imposes extra costs on refineries and make them less profitable.

Want to drive gasoline prices down? Fire Lisa Jackson and impose a six-month moratorium on the EPA regulations hamstringing the market. Suspend boutique blend requirements and allow a national market in gasoline salable anywhere. A six-month moratorium was supposed to improve the safety of offshore drilling. Why wouldn't a six-month moratorium improve the quality of government regulation? What would we have to lose by merely delaying the new regulations by a mere six months, other than an Obama excuse for ripping off the taxpayers?

Now, if you are a bit more ambitious and confrontational, you could go for the completion of the Keystone XL pipeline. The spot price for crude oil in Canada is $74 per barrel (one barrel is 42 gallons, so this amounts to $1.76 per gallon). The spot prices on the Gulf Coast and from Europe are about $122, or roughly $2.90 per gallon. Does anybody think an alternate source of crude oil at a price $48 less per barrel might help lower and stabilize the price of the gasoline refined from it? Keystone XL would transport Canadian (and North Dakotan) oil at far less expense than alternative means, such as Warren Buffet's railroad tanker cars, so the combination of larger supply and lower transport costs would exert downward pressure on prices for crude, and ultimately gasoline.

Sunoco's Northeast refineries in and around Philadelphia serve New York, where prices are set, and are threatened with closure. Canadian tar sands crude oil is quite heavy and viscous, similar to the Venezuelan oil that was a principal input for Sunoco. Conversion to Canadian crude would both help lower prices, and would poke Hugo Chávez in the eye, supporting our friendly Canadian neighbors instead of a Marxist dictator and ally of Iran. So the problem is to get Canadian oil to the Sunoco refinery in Philadelphia to save all those high-paying unionized blue-collar jobs. The path would be south from Alberta, Canada to the Gulf Coast, and thence to Philadelphia by tanker.

Another way to ease the supply situation in New York would be to declare a national emergency and allow exemptions to the Jones Act. This act limits shipments between United States ports to U.S.-flagged and crewed ships. You may remember the controversy over using Dutch oil skimmers to contain the oil being spilled from BP's Macondo 252 well. Temporarily waiving the Act would allow foreign-flagged tankers that now carry American-refined gasoline from Gulf Coast ports to Europe to deliver it to New York instead. The sudden increase in the supply of gasoline for delivery in New York and not Rotterdam would cause futures prices to drop precipitously.

So the plan is simple: John Boehner and the House Republicans ought to pass a bill imposing the six-month moratorium on EPA regulations and an associated six-month waiver of the Jones Act and see what happens to gasoline futures prices. The results might delight undecided voters at the gas pump.

 

[cashmcall]

and how the administration could do much to help, if it wanted to...

speaking truth to dictatorial power ? yeah kind of : )

The simple truth is that the administration wants energy to cost more and is taking the predictable steps to make it happen.

VERY GOOD ARTICAL and so true..
The USA has 1.4 trillion barrels of technically recoverable conventional oil, the EIA and other experts estimate, and enormous additional supplies in shale and tight sand deposits. The best way to keep prices down is to produce more of this American oil, and import more from secure, friendly, nearby suppliers like Canada.

However, our government prohibits leasing and drilling on nearly 95% of the onshore and offshore lands it controls. It is dragging its feet on leases and permits for the remaining 5% and over-regulating production on private lands. It vetoed the Canada-to-US Keystone XL pipeline. It is imposing layers of costly and unnecessary new regulations on every aspect of energy production it does not simply reject.

We are losing billions of dollars in bonus, rent, royalty and tax receipts, killing countless jobs, and impairing Americans’ living standards, health and welfare.

“More exports mean more jobs,” President Obama said recently. “We need to strengthen American manufacturing. We need to invest in American-made energy and new skills for American workers.”

His words ring hollow. Above all, President Obama and his environmentalist and congressional allies want to end our “addiction” to oil, “fundamentally transform” America, and “invest” billions of dollars (borrowed from us and our children and grandchildren) subsidizing efforts to turn corn, switchgrass, algae and pond scum into fuel.

Generating billions of dollars and millions of real jobs by producing American oil and manufacturing American oil products doesn’t fit this agenda. Even though one of every ten jobs created in the last three years has been in oil and gas, when it comes to petroleum, Obama wants to punish success, and reward failures like Solyndra, Fisker and the Chevy Volt.

A recent White House jab at Republicans who want more drilling and fewer obstructionist regulations: Every time prices start to go up, President Obama heads down to the local pond or cornfield, makes sure a few cameras are following him, and starts acting like he can wave a magic wand, throw a few more billions around, and have cheap, eco-friendly biofuels forever.

Meanwhile, Energy Secretary Steven Chu has made it abundantly clear that he wants to “boost gasoline prices to European levels” – $8 to $10 per gallon! He’s already half way to his goal.

Those prices would certainly force Americans to drive less, and “hope” the hype about “changing” to algae-gas becomes reality in less than twenty or thirty years.

Meanwhile, skyrocketing fuel prices will certainly “boost” the cost of transporting people, raw materials, food and products by wheels, wings and waterways; manufacturing anything still made in America; and preserving jobs, family and business budgets, and dreams that depend on affordable energy.

Hunting for scapegoats won’t lower pump prices. Real energy policies will.