Archive for the ‘energy’ category

PISSED OFF about Inadequate US Energy Policy?

June 5, 2008

If you’re not going to read the message below… Here’s the take away… The US oil companies aren’t the price gouging bastards they’re made out to be. They’re making less than the government on each gallon of gasoline or diesel sold. Congress ought to look in the mirror and fess up… The Government is the one taking the bigger chunk of money out of your and my pockets. Didn’t we wage a massive, years long war against The Crown for some of this same crap? [EDIT: Maybe I’m just a dumb public school educated guy who doesn’t remember the rewrite of history correctly… hmm?]

So, are you good and mad? As well you should be. Are you ready to do something about it? While our congress does next to nothing to put an effective, blended US energy policy together they manage to pass things like the “National Do Not Call” legislation at flank speed. WTF!? That’s messed up!

Folks there’s no doubt… our elected leaders do some real good. But, too often they seem to come up lacking when we’re in a Fourth and Goal situation. Why can’t we, as a nation, convert this play? It’s beyond me. It’s beyond irresponsible. It’s reckless in this case. And, it’s maddening.

The US citizenry deserve a comprehensive Energy Policy. And, I’m not talking solely about oil and gas independence. There are renewables to develop. There are greener solutions to invent and bring to market. There are all kinds of thermal solutions to explore. Not to mention nuclear and H3 alternatives. But, I will focus on O&G exploration as that’s what I know a bit about. As a nation we are actively barring exploration in regions which would yield massive amounts of highly recoverable crude and gas. We know where it is. On the map there’s the equivalent of a big “drill here” marker. Yet, legislation and special interests keep those areas off limits, out of bounds and untouchable.

This is unacceptable from national security and fiduciarily responsible points of view.

I hope you’ll take a moment to read the message my friend Roger forwarded me. I’ve wondered for months what my 1,000th post would be. I’ve tried hard to provide an educational and entertaining blog over the years on a variety of things mostly geared to Apple stuff. I do love Apple. But, given all the things I’m most passionate about… There are few things I’m more “red-assed” about than what the US government has become and what appears to be self-serving tendencies particularly when they so brazenly posture to take profits out of US corporations (the same ones they readily accept campaign contributions from I might point out) and NEVER perform the more important and telling self-examination. If they did this they’d find the REAL inconvenient truth… they’re more culpable in the price gouging than the oil companies. It’s high time we educate ourselves on these matters and take our state and nations capitals to task.

May 21, 2008

Earlier today, the Senate Judiciary Committee summoned top executives from the petroleum industry for what Chairman Pat Leahy thought would be a politically profitable inquisition. Leahy and his comrades showed up ready to blame American oil compani es for the high price of gasoline, but the event wasn’t as satisfactory as the Democrats had hoped.

The industry lineup was formidable:
. Robert Malone, Chairman and President of BP America, Inc.;
. John Hofmeister, President, Shell Oil Company;
. Peter Robertson, Vice Chairman of the Board, Chevron Corporation;
. John Lowe, Executive Vice President, Conoco Philips Company; and
. Stephen Simon, Senior Vice President, Exxon Mobil Corporation.

Not surprisingly, the petroleum executives stole the show, as they were far smarter, infinitely better informed, and much more public-spirited than the Senate Democrats.

One theme that emerged from the hearing was the surprisingly small role played by American oil companies in the global petroleum market.

John Lowe pointed out:
I cannot overemphasize the access issue. Access to resources is severely restricted in the United States and abroad, and the American oil industry must compete with national oil companies who are often much larger and have the support of their governments.

We can only compete directly for 7 percent of the world’s available reserves while about 75 percent is completely controlled by national oil companies and is not accessible.

Stephen Simon amplified:
Exxon Mobil is the larg est U.S. oil and gas company, but we account for only 2 percent of global energy production, only 3 percent of global oil production, only 6 percent of global refining capacity, and only 1 percent of global petroleum reserves. With respect to petroleum reserves, we rank 14th. Government-owned national oil companies dominate the top spots. For an American company to succeed in this competitive landscape and go head to head with huge government-backed national oil companies, it needs financial strength and scale to execute massive complex energy projects requiring enormous long-term investments.

To simply maintain our current operations and make needed capital investments, Exxon Mobil spends nearly $1 billion each day.

Because foreign companies and governments control the overwhelming majority of the world’s oil, most of the price you pay at the pump is the cost paid by the American oil company to acquire crude oil from someone else.

Last year, the average price in the United States of a gallon of regular unleaded gasoline was around $2.80. On average in 2007, approximately 58 percent of the price reflected the amount paid for crude oil. Consumers pay for that crude oil, and so do we.

Of the 2 million barrels per day Exxon Mobil refined in 2007 here in the United States, 90 percent were purchased from others.

Another theme of the day’s testimony was that, if anyone is “gouging” consumers through the high price of gasoline, it is federal and state governments, not American oil companies. On the average, 15% percent of the cost of gasoline at the pump goes for taxes, while only 4% represents oil company profits. These figures were repeated several times, but, strangely, not a single Democratic Senator proposed relieving consumers’ anxieties about gas prices by reducing taxes.

The last theme that was sounded repeatedly was Congress’s responsibility for the fact that American companies have access to so little petroleum.

Shell’s John Hofmeister explained, eloquently:
While all oil-importing nations buy oil at global prices, some, notably India and China, subsidize the cost of oil products to their nation’s consumers, feeding the demand for more oil despite record prices. They do this to speed economic growth and to ensure a competitive advantage relative to other nations.

Meanwhile, in the United States, access to our own oil and gas resources has been limited for the last 30 years, prohibiting companies such as Shell from exploring and developing resources for the benefit of the American people.

Senator Sessions, I agree, it is not a free market.

According to the Department of the Interior, 62 percent of all on-shore fed eral lands are off limits to oil and gas developments, with restrictions applying to 92 percent of all federal lands. We have an outer continental shelf moratorium on the Atlantic Ocean, an outer continental shelf moratorium on the Pacific Ocean, an outer continental shelf moratorium on the eastern Gulf of Mexico, congressional bans on on-shore oil and gas activities in specific areas of the Rockies and Alaska, and even a congressional ban on doing an analysis of the resource potential for oil and gas in the Atlantic, Pacific and eastern Gulf of Mexico.

The Argonne National Laboratory did a report in 2004 that identified 40 specific federal policy areas that halt, limit, delay or restrict natural gas projects. I urge you to review it. It is a long list. If I may, I offer it today if you would like to include it in the record.

When many of these policies were implemented, oil was selling in the single digits, not the triple digits we se e now. The cumulative effect of these policies has been to discourage U.S. investment and send U.S. companies outside the United States to produce new supplies.

As a result, U.S. production has declined so much that nearly 60 percent of daily consumption comes from foreign sources.
The problem of access can be solved in this country by the same government that has prohibited it. Congress could have chosen to lift some or all of the current restrictions on exploration and production of oil and gas. Congress could provide national policy to reverse the persistent decline of domestically secure natural resource development.

Later in the hearing, Senator Orrin Hatch walked Hofmeister through the Democrats’ latest efforts to block energy independence:

HATCH: I want to get into that. In other words, we’re talking about Utah, Colorado and Wyoming. It’s fair to say that they’re not considered part of America’s $22 billion of proven reserves.

HOFMEISTER: Not at all.

HATCH: No, but experts agree that there’s between 800 billion to almost 2 trillion barrels of oil that could be recoverable there, and that’s good oil, isn’t it?

HOFMEISTER: That’s correct.

HATCH: It could be recovered at somewhere between $30 and $40 a barrel?

HOFMEISTER: I think those costs are probably a bit dated now, based upon what we’ve seen in the inflation…

HATCH: Well, somewhere in that area.

HOFMEISTER: I don’t know what the exact cost would be, but, you know, if there is more supply, I think inflation in the oil industry would be cracked. And we are facing severe inflation because of the limited amount of supply against the demand.

HATCH: I guess what I’m saying, though, is that if we started to develop the oil shale in those three states we could do it within this framework of over $100 a barrel and make a profit.

HOFMEISTER: I believe we could.

HATCH: And we could help our country alleviate its oil pressures.


HATCH: But they’re stopping us from doing that right here, as we sit here. We just had a hearing last week where Democrats had stopped the ability to do that, in at least Colorado.

HOFMEISTER: Well, as I said in my opening statement, I think the public policy constraints on the supply side in this country are a disservice to the American consumer.

The committee’s Democrats attempted no response. They know that they are largely responsible for the current high price of gasoline, and they want the price to rise even further. Consequently, they have no intention of permitting the development of domestic oil and gas reserves that would both increase this country’s energy independence and give consumers a break from constantly increasing energy costs.

Every once in a while, Congressional hearings turn ou t to be informative.

(How To) STOP High Gasoline Prices

June 3, 2008

I was in the airport terminal several weeks back in San Antonio eating a sammich and this half-drunk lately stumbles off the plane and plops down a couple seats away. She’s got a nice young man by the arm showing him off all proud like (with good reason). He’s one of our Iraq vets coming home to start his life in the work-a-day world he’s helped to preserve. Hooyah! I greet the guy. Tell him how proud we are of him and his service.

Conversation turns to what I do. Me? “I’m in the energy business.” What part? “Oil.”

Little miss half-to-the-wind starts laying into me like Jackie Chan. OMG! Of a sudden I’m Bush’s lackey, yada yada. What am I going to do about oil prices? Here’s where I get quiet. Stone dead silent. My close friends and family know when I’m quiet I either don’t have anything to say or I’m pissed to the nth degree. (On this matter I had plenty to say). 10-second rule lapses…

“Ma’am. Where are you from?” California. “Your gasoline bills ARE high. Here in San Antonio I talked with the cabbie. He paid $3.29 a gallon today. Not bad. In Tulsa it was $3.20.” WOW! “Want to know why?” Uh huh… “We have refineries close by. We have a little more friendly tax situation than you do in California. It all adds up… these little things.” Yeah, still, YOU’RE driving the prices up. Probably intentionally. This young man went to war for Bush’s oil. (SILENCE)

“Ma’am, whether he did or whether he didn’t is for history to decide.” Now SHE goes silent… this is about to get fun…

“Have you adjusted how much gasoline you purchase? At all? Since the prices have gone up?” No. Not really. No.

“OK. Follow along… When bananas, eggs or milk go up in price and you don’t like it do you just buy them anyway?” No. Well, sometimes.

“Fair enough. And what eventually happens if enough people feel the same way as you on that price and don’t buy? It adjusts down again doesn’t it?” Yeah, normally.

STOP BUYING GASOLINE! It’s simple supply and demand. Enough of us stop it for whatever reason by whatever method and prices will come down. WE decide if we buy or not. The oil companies and refineries don’t. You bring enough alternates like CNG, hybrids or whatever to market… gasoline prices will straighten out. Better yet, get more efficient, gas powered engines legislated. 83% of the energy in gasoline is NOT converted to forward motion. Change THAT equation and you change the whole game.”

This time it was silence. But, it was stunned silence. Golden.

Food Prices Outpace Gasoline

June 4, 2007

There are all kinds of fun little analogies to put the prices of gasoline in perspective. Some more realistic and effective than others.

But, when the prices of FOOD begins to outpace gasoline… methinks THAT! more than just about anything else will drive the point home… The next President of the United States of America and his (or her) cabinet and Congress absolutely must nominate a comprehensive and long looking energy policy.

Way overdue.

Why ARE Gas Prices “High”?

May 25, 2007

[DISCLAIMER: I work on the service side to the energy exploration sector.]

The simple answer OUGHT to be supply and demand. And, that’s predominantly true.

Take a look at the following graphs and you’ll see the broad brush stroke that is “pricing” of gasoline (in the U.S.)… Source


Now, the RAW cost of the crude oil has gone UP while almost everything else is pressured down right? NO! look at the price deltas $1.85 up to 2.27, years 2004 to 2005. That doesn’t factor 2006 and 2007 which are higher still.

So, crude costs were $.87 per gallon in 2004 vs. $1.20 in 2005. Quick math says crude exporters bagged a 72.5% raise. Don’t be so quick to bad mouth the Exxon’s and Shell’s of the world. Hydrocarbons (oil and natural gas) are getting HARDER to find. NOT EASIER. It’s expensive as hell to find new fields. The technology is pushing us farther out and into deeper water/extremes to satisfy the energy requirements of the world (expected to grow by 50% by 2020).

How did taxes fare? $.43 per gallon (2004) vs. $43 per gallon (2005). A push.

This surprises the heck out of me. But, is telling… Refining claimed $.33 per gallon (2004) vs. $.43 per gallon (2005). A 30% raise. You might not know a thing about refining capacity in the U.S. But, there hasn’t been a new refinery built in the U.S. in umpteen years. Even though our consumption has skyrocketed the 149 operating refineries in the U.S. have shouldered the demand. BTW, that number is down from 216 refineries in 1986! How are they doing it? Expansion of existing facilities and efficiencies.

Finally, distributing and marketing (gasoline trucks and gas stations). $.22 per gallon (2004) vs. $.20 (2005). WHAT!?!?!? WTF!?!?!? The people we’re beating over the head and grousing about the most are the ONLY outfits to take a bath on the price of oil.

I hope this helps some of you better appreciate a few of the supply side facts of our addiction to oil. It’s not cheap and it IS going to get more expensive in the U.S. If you’ve had the good fortune to travel abroad… we have it GOOD in the continental U.S. Go to Europe or South America or Africa.

It doesn’t help that we’re a net importer of oil (a strategic element of our growth engine economy).

Two fantastic books worth reading to better understand our pickle and how some “oil smart” economists figure we can navigate the impending shortages (non-affiliate links):

Thousand Barrels A Second,” by Peter Tertzakian. I spent a couple hours with Mr. Tertzakian. He’s smart as hell and very deliberately tells a tale of how we’ve navigated various energy sources and their depletion over time (tallow, whale oil, kerosene, etc). What’s ahead is still largely an unknown. Nuclear? Maybe. Still an option. Takes about 10 years to build a modern facility and bring it online. Did you know France is 70% powered by nuclear plants!? True! Renewables? Not with current technologies. Doesn’t scale adequately. Petrochemicals remain the highest density, best value for the money source of energy on planet earth given our current scientific knowledge. H3 sounds like an interesting source. But, it’s closest plentiful source is the surface soil of the moon. (Which China is about to set up shop on).

Energy Futures,” by Ralf Boscheck. This book came across my desk just this week for review. I’m only 15 pages in and I can tell you this darned thing is jam packed with so much geopolitical insight I’m not going to read another book of any kind until I finish this dude. It underscores why the major oil companies, the national oil companies and the independents do what they do (and how and when).

Folks, I’ve been forthright… I’m in the oil industry in a sense. I’m not an industry apologist. I’m WAY, WAY, WAY down the foodchain. I’m ALL FOR developing alternate resources! One of these days 20, 50 or 100 years out… we’re not going to have the amount of oil needed to power the economic engines of the world. The gap of known recoverable reserves is not growing at a clip that can keep pace with the forecasted appetite. Two things could happen:

We could become more efficient in our global energy consumption. Technology could help us here. Gas powered engines are TERRIBLY inefficient!;

We could become more efficient in our global energy production. Again, technology could help us reclaim more efficiently the resources we’ve already discovered (or can discover).

The alternatives are shortages or alt fuels. Only time will tell.