What the author of the following article seems to miss is the importance of timing in the oil market. Not that he isn't right about increasing production in the American Midwest. "As we speak" more and more oil is being pumped from the ground in North Dakota, and elsewhere, even as coastal state production remains flat. Moreover, we can expect availability --for the European markets especially-- when offshore Brazilian oil comes online in a few years. Not to count Israeli oil at some point after 2014 or 2015. Then there could be another major offshore field near Cuba coming online in the 2020s. Meanwhile, with new technology nations like Oman which seemed to be headed for gradual phasing out of a declining production situation, have new life as recoverable oil from existing fields has increased dramatically. In other words, the US energy future looks good --starting as early as 2013 or no later than 2014-2015. The catch is that there is a "meantime" of a minimum of a full year, maybe 2 years or so, and some important things will happen during that time, such as the November election. At that, the full impact on prices simply cannot be felt immediately even if futures markets help drive down prices in anticipation of inevitable changes. We may be able to look forward to another "roaring 20s," but we aren't yet in the teens. The immediate future, from other sources, looks bleak. One expert said that $ 4 gallon prices should be with us in May or no later than June, and the way it looks today, that benchmark may arrive weeks before then. Probably four dollars will max the rise in prices, or maybe ten or twenty cents higher, but after that the market should stabilize. Indeed, a gradual decline can be expected, perhaps falling to current levels again by, say, September or no later than October. But that is plenty of time for serious political damage to be done, including still more pressure from the Republicans to get Keystone built, with one leg of the pipeline, between mid Oklahoma and southern Texas under way regardless of Obama, starting construction this year. The writer seems to think that energy independence isn't really what the future holds for the USA, nor that Americans want to be freed from any dependence on Mid East oil. The author, in Britain, cannot seem to be able to conceive an alternative. However, Americans do want energy independence and under no scenario that I know about can this be achieved without a lot of Canadian oil. In any case, however, expect gas prices to decline after this year, at least ceteris paribus, such things as a military strike on Iran, a major crisis involving China, a success story in India as 100 million new drivers with new cars hit the road in that country, a revolution in Nigeria, political upheaval in Russia, take your pick... That is, until prices start to fall, expect them to continue to increase for the next few months and stay high until the Autumn. At least this is what I have picked up on for now. ----- A note, there was a study reported on , on C-Span, about how presidential favorability ratings are tied directly to the price of gasoline. There is a sharp divide on this issue. People who earn above $ 100,000 are just as likely as before to continue to have a good opinion of Obama despite increase costs ; the theory is that they can easily absorb an extra dollar per gallon compared to a year ago. An extra 50 cents on top of that might still not have much effect. The % of income spent on fuel for $ 100,000 earners would only increase nominally, perhaps from 2% to 2-1/2%. For people ( voters ) earning less than $ 50,000 the story is vastly different. They already pay, let us say, 5 % of their incomes on gas, driving approximately the same distance as a $ 100,000 earner. Add another dollar or $ 1.50 and the increase comes in at 7+ %. Look at someone in the $ 15,000 - $20,000 bracket and the effect is major, maybe 10% of income already paid for gas with the cost increasing to perhaps 12 % or more. The price of a gallon of gas is one of the few 1 : 1 indicators of voter sentiment concerning presidential election politics. Billy =============================================== ‘Saudi America’ heads for energy independence _brian milner_ (http://www.theglobeandmail.com/authors/brian-milner/) >From Monday's Globe and Mail Published Sunday, Mar. 18, 2012
Now that the U.S. economy is showing signs of life after debt, President Barack Obama has decided it’s safe to hold up his administration’s less than stellar economic record as a selling point on the campaign trail. But one big dark cloud still hovers overhead: the steadily rising price of oil in general and gasoline in particular. Oil prices are plainly headed in the wrong direction for an economy still in the early stages of recovery and reliant on energy imports. Benchmark Brent crude closed in on $125 (U.S.) a barrel Friday, a hike of more than 30 per cent so far this year. But what really scares sitting politicians in an election year are sharp jumps at the pumps. U.S. retail gasoline prices rose again last week, to a national average of $3.83 a gallon, an increase of more than 55 cents so far this year. In half a dozen states, including politically important California and New York, the price is already north of $4. Canadians would be delighted to be paying the equivalent of only slightly more than $1 a litre. But Americans are fuming. The good news for President Obama and his brain trust is that these price trends won’t continue. “What we’ve had is a tight [oil] market,” says economist Philip Verleger Jr., who has devoted much of his long career to digging deep below the surface of oil and other commodity markets. “I think it is in the process of unwinding.” Mr. Verleger, who recently recommended that the U.S. government release oil from its strategic reserves to ratchet up pressure on Iran, dismisses that country’s threats to disrupt Mideast shipments. He also notes that U.S. gasoline consumption has been falling at an accelerating clip – 5.5 per cent in January from a year earlier, 7 per cent in February and probably more than that in March. The U.S. really behaves like three different countries when it comes to oil – the East Coast, West Coast and the vast middle, which he calls “Saudi America”, stretching from the Appalachians in the east to Utah in the west. “ ‘Saudi America’ is moving very quickly to energy independence,” says Mr. Verleger, president of Colorado-based research firm PKVerleger LLC. Refiners in the midwest have more gasoline than they know what to do with. “By summertime, a wall of gasoline is going to be working down the Mississippi, pushing on refiners down there.” All of which will ease pressure at the pump. But even bigger changes in the market lie just down the road. That’s because the U.S. is in the midst of a remarkable transformation that will end its dependence on foreign imports, including Canadian oil, much faster than anyone realizes and give its manufacturers a huge comparative advantage over competitors from China and other high-cost energy markets. Mr. Verleger has circled November, 2023, as the magic date, exactly 50 years after then president Richard Nixon called for the U.S. to meet all its own energy needs by 1980. Now, the shale gas explosion and increased production from offshore and unconventional oil sources in the U.S. heartland are turning the impossible dream into reality. “It is a very good news story for the [U.S.] economy, leaving the [presidential] campaign aside,” says Mr. Verleger, who retired last year as a professor of strategy at the University of Calgary. “And it’s a good news story for Canada, if you respond quickly and realize the best thing that ever happened [to the industry] was Keystone getting delayed.” The U.S. Midwest is awash in crude and natural gas supplies, “so what are we going to do with the Canadian oil? The smartest thing the Canadians could do is take a look at the rapidly changing energy situation in the United States and realize that what you’re doing is pumping oil into the middle of the United States and it’s just going to sit here. We could have a situation of $1 a gallon gasoline in Houston and $5 a gallon in New York City. And there’s no way for the stuff to get out [of the country]. We don’t have any export ports.” The solution for Canada: Expand the necessary pipeline and port capacity and steer the production to Asian markets. But in the meantime, “we’ll keep seeing the Canadian exports coming into the U.S. market, because they have no place else to go. What’s going to happen is that the price gap between U.S. and world prices is just going to get wider and wider and wider.” Getting back to the here and now, the world market has faced a series of disruptions in recent months, including lost output from Nigeria, the bankruptcy filing of Europe’s biggest refiner, PetroPlus, and the surprising fallout from the European Union’s decision to impose sanctions on Iranian oil. The actual oil embargo doesn’t take effect until July and is expected to have minimal impact on the global market – and even less, if the U.S. taps the surplus in its strategic reserves. But the sanctions have already taken a big chunk of the world’s tanker fleet out of the market, because operators can no longer obtain the costly insurance they need from European underwriters to cover cargos of Iranian crude, even if they pick up the oil in Egypt, where it is shipped via pipeline. Traders have been scrambling to locate other supplies since the curbs went into effect in January, while major Asian importers continue lobbying the EU for an exemption. It’s far more serious than any Iranian military threat, Mr. Verleger says. “The sanctions on the insurance side are really a big deal.” -- Centroids: The Center of the Radical Centrist Community <[email protected]> Google Group: http://groups.google.com/group/RadicalCentrism Radical Centrism website and blog: http://RadicalCentrism.org
