Peter: Your expertise is in energy economics, and therefore I would like to read your opinion about KXL after you read the analysis of McClade and Ekins (2015). While is true that we are not going to transition from fossil fuels overnight, we can begin to choose which ones to start deleting from the mix, and Canadian tar sands are near the top of the list for oil and gas reserves. McClade and Ekins analysis is probably not going to be received warmly in Alberta or by Stephen Harper and his colleagues in Ottawa. Similarly, arguments for leaving coal in the ground are not going to be viewed favorably in Kentucky, West Virginia, the Dakotas or by Mitch McConnell and his colleagues in DC. Fortunately, whether KXL is approved or not, tar sands look like a very poor investment while oil is priced at less than $50/bbl. While I think oil prices are going to increase to greater than $50/bbl again, I don’t think it is going to happen very quickly since Saudi Arabia can make plenty of money while undercutting the break-even prices of its competition. Since Americans are not going to pay for gasoline based on $75/bbl tar sand-derived oil when they can get gasoline based on $50-60/bbl Saudi oil (see analysis below), I think the only way to achieve energy security in the US is to get off of fossil fuels as quickly as possible. We will never be secure until that happens.
Chuck Greene High Noon on the Gulf Coast: Canada, Saudi oil set for showdown BY CATHERINE NGAI NEW YORK Tue Jan 6, 2015 7:56am EST * * inShare94 * Share this * * Email * Print [Oil goes into a tailings pond at the Suncor tar sands operations near Fort McMurray, Alberta, September 17, 2014. REUTERS/Todd Korol] Oil goes into a tailings pond at the Suncor tar sands operations near Fort McMurray, Alberta, September 17, 2014. CREDIT: REUTERS/TODD KOROL RELATED NEWS * Oil down almost 10 percent in two days as hunt for bottom continues<http://www.reuters.com/article/2015/01/06/us-markets-oil-idUSKBN0KE06V20150106> * Global stocks fall, bonds rise on oil, euro zone worries<http://www.reuters.com/article/2015/01/06/us-markets-global-idUSKBN0KF02420150106> * UPDATE 1-Hedge fund manager Andurand strikes gold again by betting on oil crash<http://www.reuters.com/article/2015/01/06/andurand-results-idUSL6N0UL1B220150106> * UPDATE 2-MIDEAST STOCKS-Gulf mkts tumble as oil slides below $53<http://www.reuters.com/article/2015/01/06/stocks-mideast-idUSL6N0UL07H20150106> * GLOBAL MARKETS-Asian shares slump as oil gloom deepens, euro falters<http://www.reuters.com/article/2015/01/06/markets-global-idUSL3N0UL02K20150106> ANALYSIS & OPINION * The oil price is just plain wrong<http://blogs.reuters.com/edward-hadas/2015/01/05/the-oil-price-is-just-plain-wrong/> * Begin Again<http://blogs.reuters.com/morning-bid/2015/01/05/begin-again/> RELATED TOPICS * Saudi Arabia »<http://www.reuters.com/places/saudi-arabia> (Reuters) - As a test of wills between OPEC nations and U.S. shale drillers fuels a global oil market slump, a brewing battle between Canadian and Saudi Arabia<http://bit.ly/1svR331> heavy crudes for America's Gulf Coast refinery market threatens to drive prices even lower. While the stand-off between the oil cartel and U.S. producers of light, sweet shale oil has captured the limelight in recent months, the clash over heavier grades - playing out in the shadowy, opaque physical market - may put even more pressure on global prices that have halved since mid-2014. Two factors will come into play over the next few weeks: From the North, new oil pipelines will pump record volumes of Canadian crude to the southern refineries, many better equipped to process heavy crudes than lighter shale oil. >From the Middle East, top exporter Saudi Arabia is offering crude at >discounted prices in an attempt to defend its remaining share of the important >regional market, which has shrunk by more than half in recent months. "So far, the Gulf Coast has suffered from an oversupply of light oil, but now there's competition for heavier crude," said Sandy Fielden at RBN Energy. With the Saudis already facing fierce competition for their light grades, the arrival of Canadian crude "could add insult to injury", he said. On Monday, Saudi Aramco stepped up its counteroffensive, cutting its monthly U.S.-bound price for Arab Medium for a sixth straight month, putting it at the deepest discount against the regional sour crude benchmark since December 2013. [OSP/SA]. The timing of this clash may magnify its market impact as Houston-area oil refiners shut down for maintenance in early spring, further reducing their demand by an estimated 1 million barrels a day (bpd). "We'll see that overhang into the summer, at least," said one physical crude trader. That will put further pressure on U.S. prices and may spur investors in New York and London to extend a sell off in crude futures. SPOILT FOR CHOICE The looming clash of barrels comes at a time when oil markets already face a global glut expected to last for a year or longer. Large volumes of foreign heavy oil reaching the Gulf Coast will give many U.S. refiners more choice after they have upgraded their systems to process cheaper, heavier crudes. The new supply also marks a breakthrough in Canada's years-long effort to bring its growing Alberta oil sands crude output to new markets. Enbridge Inc's 600,000 bpd Flanagan South pipeline, which runs from Illinois down to the Cushing, Oklahoma, oil hub began commercial service on Dec. 1; Enterprise Product Partner announced that its 450,000 bpd Seaway Twin pipeline from Oklahoma to Freeport, Texas, shipped its first volumes on Dec. 21. That promises another quantum leap for Canadian crude after its U.S. Gulf Coast sales already hit a record 274,000 bpd in October, nearly three times as much as a year earlier, according to U.S. data. The new flows will compete with other crudes as well. Some refiners see Saudi's medium crude as a more direct substitute for Mexican and Venezuelan crudes. However, some refiners are likely to blend oil sands crude with overabundant super-light U.S. condensate, creating medium blends that may rival Saudi Arabia's main grade, said Citi global commodities<http://bit.ly/1stY5jl> strategist Ed Morse. He warns the clash could set up another tumble in global prices. The growing pressure on the Gulf market is already showing up in pricing and inventories. Mars Sour, a domestic grade similar to Arab Medium, has fallen to a discount of $1.90 a barrel compared with U.S. crude futures after trading at a premium over 45 cents two months ago. Crude oil inventories in the U.S. Gulf have risen to nearly 200 million barrels, a record high for late December and up some 15 percent from a year earlier. The build-up comes as Saudi Arabia shifts its focus to fiercely defend what remains of its market in the United States - the world's largest consumer of oil. Until recently, it seemed to be holding its own in part thanks to a major expansion of its joint-venture Motiva Enterprises refinery. Saudi crude sales to the U.S. Gulf rose by a third to a record high of nearly 1 million bpd in the two years to 2012, a period where gushing shale production had begun to displace foreign suppliers. But this year it has begun to lose ground, with shipments tumbling to 461,000 bpd in October, data from the U.S. Energy Information Administration showed. Ironically enough, the decline was driven partly by a one-third cut in imports by Motiva, jointly owned by Saudi Aramco and Royal Dutch Shell<http://bit.ly/1su3qXO>. Other customers have also turned away. Valero Energy Corp's cut imports by 85 percent in the first 10 months of 2014, with Saudi purchases falling to just 35,000 bpd, according to EIA data. Marathon Petroleum Co cut Gulf Coast imports to 33,000 bpd in October from 205,000 bpd 10 months earlier. While most Saudi customers agree on annual contracts with little room to reduce purchases, the Kingdom's state oil firm knows it needs attractive prices to retain long-term buyers. "As refiners look at Canadian crude availability long term, they'll be thinking about ways to give themselves more options" said Richard Mallinson, an analyst at Energy Aspects in London. (Reporting By Catherine Ngai; editing by Jonathan Leff<http://blogs.reuters.com/search/journalist.php?edition=us&n=jonathan.leff&;> and Tomasz Janowski<http://blogs.reuters.com/search/journalist.php?edition=us&n=tomasz.janowski&;>) -- You received this message because you are subscribed to the Google Groups "geoengineering" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/geoengineering. For more options, visit https://groups.google.com/d/optout.
