Seven year ago (seven?!) when I started writing this blog, I would have never believed that a chart like this would be possible:
For 25 straight months, the state’s oil production rate has increased by more than 25 percent year-over-year, notes economist Mark J. Perry, a professor at the University of Michigan’s School of Management.
“Output in America’s No. 1 oil-producing state — Texas — continues its phenomenal, meteoric rise,” Perry wrote on his Carpe Diem blog. “That production surge has to be one of the most significant increases in oil output ever recorded in the U.S. over such a short period of time.”
It’s hard to say if this output can be sustained for any amount of time, or if it’s a last gasp effort to recover the oil left on the table to profit from the current high price per barrel. This oil renaissance has been happening around us for a few years now, and frankly, I never understood how big it was until today, when I saw this graph. I haven’t been writing about fuel for a while, instead concentrating on driver related safety, but this has my attention again in an unexpected way.
What do you think – is this an “oil bubble”? (Related: Is the word “bubble” being used too often to describe just about everything? Are we just living in a “bubble”, and didn’t know it?)
We’re very happy today to get referenced in a Yahoo Finance post about the winners and losers in the run up on gas prices:
The efficiency complex. When push comes to shove, Americans are really good at figuring out how to do more with less, and how to get more for their money — and then turning those ideas into businesses. When oil soars, websites such as Gasbuddy.com, which points users to cheap gas in the area, experience a surge in traffic. And firms like Propelit, whose software enables trucking fleet managers to monitor the driving habits of employees (and provide incentives for them to drive more efficiently), or FuelClinic.com, which coaches consumers on ways to drive more efficiently, find that their sales pitches go over much better.
We are in the “winners” camp, apparently members of the “efficiency complex”… I’m not sure I renewed membership this year, what with the fuel prices driving up my transportation costs and all.
None the less, very happy to be of service, coaching consumers on ways to drive more efficiently.
What to expect over the next few months… rising food prices that will lag behind fuel prices by a month or two, as most of our food is transported more than 1,500 miles from farm to your local market. Super-commuters will be hit hard, as just getting to work will become more and more expensive.
Will we hit $6.00 per gallon as some predict… what do you think?
Source: Automotive Fleet
Overall, gasoline demand was reported at a little more than 8 million barrels per day, which AAA said is a 400,000-barrel-per-day year-over-year decline and at the lowest level since 2003, according to a recent U.S. Department of Energy report.
Despite ample supply and low demand for gasoline, though, the national average for gas prices is still up 10 cents over the previous week, with impending refinery shutdowns and high crude oil prices pushing prices up, according to AAA. The national retail average price for a gallon of self-serve regular gasoline was $3.38 on Jan. 17, a penny more expensive than one week ago, 15 cents more expensive than one month ago, and 28 cents more expensive than a year ago.
All signs are pointing to a continued run on fuel costs here in the US, with many experts predicting $5.00+ per gallon prices common by mid-summer. This is despite a continuing slump in crude oil demand here in the US – now at a 12-year low. This paradox between low demand and high prices has many wondering what’s really happening in the market, and where will it go from here.
Some industry advisors blame commodity speculators for the gouging at the pump, while others say a booming Chinese market and weakening dollar are to blame for near-record pump prices. Still others claim it’s the work of the Obama Administration to raise energy costs in order to make alternative sources of energy competitive in price. (After all he did promise to do just that during his campaign.)
Regardless of the cause, the reality to commuters and business owners is a painful reminder of the summer of 2008 when rocketing energy prices caused a wide ripple effect on prices in nearly every sector of the economy. Many businesses were in a panic about paying surging fuel costs while keeping prices low and people employed. Consumers felt it everywhere, but especially at the pump with painful total sale costs per tank of gas.
So what will $5 per gallon gasoline mean to you?
Will you choose to car-pool, buy a more efficient car, walk or bike to work (where possible), take fewer trips, buy gasoline on discount-days, adopt eco-driving habits, or cut-back in other areas of spending to afford your normal driving habits?
Back to back bad news about fuel prices in the New Year.
It’s “certainly possible” that the price of a barrel of oil will push above $100 a barrel, Daryl Guppy, CEO of Guppytraders.com, told CNBC Thursday. “Once you move above $100, then $110 is just clear freeway straight to that level,” Guppy added.
The former president of Shell Oil, John Hofmeister, says Americans could be paying $5 for a gallon of gasoline by 2012.
In an interview with Platt’s Energy Week television, Hofmeister predicted gasoline prices will spike as the global demand for oil increases.
“I’m predicting actually the worst outcome over the next two years which takes us to 2012 with higher gasoline prices,” he said.
Tom Kloza, chief oil analyst with Oil Price Information Service says Americans will see gasoline prices hit the $5 a gallon mark in the next decade, but not by 2012.
“That wolf is out there and it’s going to be at the door…I agree with him that we’ll see those numbers at some point this decade but not yet.” Kloza said.
Gasoline prices have been steadily rising. Last week, gas prices crossed the $3 mark for the first time since October 2008. According to AAA figures, prices are up 4% from a month ago and 16% from the $2.585 average a year ago.
Some additional information regarding how the DoD is exploring options to ween the military away from petroleum based fuels.
On Earth Day, 22 April, the US Navy conducted a test flight of an F/A-18 Super Hornet at Naval Air Station Patuxent River, Maryland, run on a 50-percent mixture of a fuel refined from the crushed seeds of the flowering Camelina sativa plant. The flight of the Green Hornet, as it was called, followed an Air Force test a month earlier of an A-10C Thunderbolt II at Eglin Air Force Base, Florida, fueled with a similar blend.
Both events had the purpose of testing the performance of biofuel/petroleum mixtures with an eye toward the eventual certification of the fuels for routine use. They also demonstrate the efforts of the Department of Defense to increase its use of renewable energy, not only for environmental reasons but also to protect the military from energy price fluctuations and dependence on overseas sources of petroleum.
The DoD spends $20 billion a year on energy and incurs $1.3 billion in additional costs for every $10 per barrel increase in the market price of oil, according to a report recently released by the Pew Project on National Security, Energy and Climate. In addition to vulnerability to price fluctuations, the DoD’s “reliance on fossil fuels also compromises combat effectiveness by restricting mobility, flexibility and endurance on the battlefield,” said the report. “Transportation of fuel to the combat theater is a significant vulnerability as fuel convoys are targets in Iraq and Afghanistan.”
Source: ISN Security Watch
Take a look at this graph of average gas prices courtesy of GasBuddy.com and you’ll see that prices continue to rebound from the “crash” of 2008… which shouldn’t be a shock to anyone.
Not much has changed as far as our “oil addiction” since the “crash”. Looking back, it seems that Cash for Clunkers was the only national attempt at dealing with oil’s monopoly since the collapse, and the merits of that program as an energy policy are laughable.
It took a global economic collapse to undercut the oil gouging, something we can not afford to repeat. (I continue to assert that the uncertainty of affordable fuels contributed to the economic tsunami that brought world markets to their knees that summer.)
What are we going to do to shift oil from a strategic political and economic weapon to just “another” commodity that must compete with alternative sources?
1. I’ve long been a proponent of Flex-Fuel vehicles, since they offer the simple option to use purely petroleum based gasoline or alternative alcohol-blended (up to 85%) gasoline replacement fuels. Manufacturers “promised” to add Flex-Fuel capabilities into much of their fleets by 2010, yet most only add the systems to the most inefficient models, taking “credit” for making their fleet more efficient instead. Having Flex-Fuel vehicles on the road in great numbers will be an incentive for stations to carry more alcohol-blends, and at the same time allow motorists to travel far and wide without worry that they won’t find a filling station specific to their vehicle while the network of supply is created by the opportunity to serve this demand.
2. Small efficient diesel engines are hot sellers in Europe – 50% of all new car sales across the pond are diesels. Why? Because they are clean, quiet, powerful, last a long time, and get upwards of 65 to 80 MPG every day of the week. Plus you can fuel them with bio-diesel, and reduce the amount of petroleum based diesel fuel. Again, you can travel far and wide, taking advantage of bio-diesel when available – an incentive for stations to carry the product. Since bio-diesel is made closer to home, distribution is cheaper, jobs are created locally, and competition controls costs.
3. Hybrids are great technology for getting slightly better mileage from a gallon of gas – but they are all still 100% petroleum-dependent. Flex-Fuel Electric or Diesel Electric hybrids would allow motorists to offset even more of their oil addiction to alternatives, not just kick the can down the road a little further.
4. 100% electric vehicles are still not a replacement for the family car in most cases. High costs, limited range, and long recharging times limit options and create a situation where drivers must change habits (and hardware) to participate. Plus there is the battery problem, making exotic metal ore addiction the replacement for oil addiction.
5. Conservation (aka: eco-driving) is first-aid remedy immediately available for free (better than free when you consider the money savings) available to everyone right now. With modest changes to your driving habits, you can increase your fuel mileage 5% to over 25% no matter what you prefer to drive (including Hummers and Hybrids). And while “ecodriving” sounds like “hypermiling” to some people, in fact eco-driving is easy, courteous, and safer driving. It does require you to pay attention to operating your car (shouldn’t you be?), but relieves you from the urge to compete against those other drivers around you, and instead compete against the gas pump.
In the end, as we approach the future still addicted to oil we limit our geopolitical power and remain at the mercy of markets we do not have much control over politically. We have been at war for years thanks to oil, with no end in sight. While our planets poorest nations are prime real-estate for several bio-fuel industries that could lead them from poverty to prosperity, the “powers that be” lobby and maneuver to protect their monopoly on your mobility.
What are you doing to make progress? What do you see as our future?
The Great Geopolitical Battle Over Energy Transit Routes
by Philip H. de Leon
As we all live in the present, it is very hard to fully assess the future implications of decisions supported or made by political and business leaders. An extraordinary game of geo-strategy is under way to lock in long-term agreements, notably in the energy sector. At a global level, the transit routes of future oil & gas pipelines become the object of a power struggle involving not only the suppliers and end-users but also the transit countries. Intensive courtships are under way where a ménage à trois, or more, may be the best option to prevent any country from being in a dominating position to rule a region and exercise political or economic pressure.
Let’s take a practical example and look at some of the dynamics behind the Nabucco pipeline and at the different interests involved.
The Untapped Energy Riches of Uzbekistan
by John C.K. Daly
While many Western investors remain fixated on somehow acquiring a slice of Turkmenistan’s natural gas riches, despite a recent scandal over the country’s actual reserves, there is another country further east whose energy and mineralogical reserves have been overlooked – Uzbekistan.
While a number of factors are responsible for this oversight, including relative geographical isolation (Uzbekistan, along with Liechtenstein, is one of the world’s doubly landlocked nations, requiring crossing two other nations to gain access to the oceans), which currently limits energy exports available for the global market, there are a number of pluses that the country has for investors willing to “think outside the box.”
With a population of 27 million, Uzbekistan is Central Asia’s most populous and dominant power. A conservative fiscal policy since 1991, including inconvertibility of the national currency, the som, has shielded its citizens from the hyperinflation that ravaged other former Soviet republics, but the policy previously diminished potential foreign investment.
Since the global recession that began a year ago, however, Uzbekistan’s fiscal conservatism, previously dismissed by the foreign investment community, has looked more and more like a pragmatic policy that isolated the country from the worst aspects of the recession in stark contrast to other post-Soviet states that fervently embraced free market capitalism like Lithuania, whose economy contracted 18.1% this year and is expected to shrink further by 3.9% in 2010. In a move certain to be welcomed by foreign investor Uzbekistan is slowly moving towards making its currency convertible but whenever it happens, for the present the country offers a fiscal stability unmatched by many of its more free-market neighbors.
Back in June I took a first look at a new movie called “Houston We Have a Problem” – now there is an updated theatrical trailer (see below) and some recent screenings in select cities and film festivals (right now at the Austin Film Festival).
Houston We Have A Problem is about America’s ferocious appetite for oil from the insider’s perspective of the Energy Capital of the World – Houston Texas. The film explores our dangerous addiction to oil through candid insights from the Barons, Wildcatters, CEO’s and Roughnecks that comprise the world of Big Oil. Oilmen on oil addiction.
Has anyone been able to see the film? What did you think?
Fuelishness! Feed: Oil prices cloud recovery; When the Clunker Is Greener; Chevy Volt to Get 230 MPG; A 5-Stroke Engine; Diesel as alternative fuel in US
- Economic outlook: Oil prices cloud recovery hopes – The nascent recovery in global economic activity could yet be derailed by rising oil prices, with Brent crude hitting $76 a barrel last week, its highest levels of the year to date.
- When the Clunker Is Greener – Policies that encourage purchases of energy-efficient products may also increase, rather than decrease, energy use by confusing efficiency with consumption.
- Chevy Volt to Get 230 Miles per Gallon in the City, GM Says – If the figure is confirmed by the EPA, which does the tests for the mileage posted on new car door stickers, the Volt would be the first car to exceed triple-digit gas mileage, Posawatz said.
- Ilmor Engineering Creates a 5-Stroke Engine – The engine operates by using low- and high-pressure cylinders and a similar setup for the camshafts. The two high-pressure cylinders operate as a conventional 4-stroke engine does and alternately exhaust into the third, low-pressure cylinder, where the burnt gases perform more work.
- Diesel play catch up in alternative fuel race with help of German automakers – With a fuel efficiency boost that some claim can approach 40 percent over gas-powered counterparts, diesel is at least starting to make more and more sense from a cost perspective to the consumer.
Mexican drug cartels are skimming oil from the government owned pipelines an selling it to several U.S. refineries.
In a surprising public acknowledgment, Mexican President Felipe Calderon said last week that drug cartels have extended their operations into the theft of oil, Mexico’s leading source of foreign income which finances about 40 percent of the national budget.
At least one U.S. oil executive has pleaded guilty to a conspiracy that involved what prosecutors said was about $2 million in stolen Mexican oil, U.S. Justice Department officials confirmed to The Associated Press.
Fuelishness! Feed: U.S. gasoline prices hover around $2.66; Have gas prices peaked for summer; States Consider Gas and Oil Levies; IEA slashes oil demand forecast
- U.S. gasoline prices hover around $2.66/gallon: survey — The average price of a gallon of gasoline in the United States remained virtually unchanged from two weeks ago as crude oil prices hovered at about $70 per barrel, according to an industry analyst.
- Have gas prices peaked for summer? — After running up every day for nearly two straight months, gasoline prices have fallen this week — as they typically do a little before or after the Fourth of July holiday.
- States Consider Gas and Oil Levies — Cash-strapped states are considering raising taxes on oil production to plug yawning budget gaps, but they face strong resistance from oil companies, which warn the moves could lead to lost jobs and higher energy prices.
- IEA slashes oil demand forecast — The International Energy Agency on Monday cut sharply its medium-term forecast for oil demand because of economic recession, but said the threat of a supply crunch had only receded, not gone away.
- Nigerian militants say attack Shell despite amnesty — Nigeria’s main militant group said its fighters had attacked an oil facility belonging to Royal Dutch Shell in the Niger Delta on Monday, days after President Umaru Yar’Adua proposed an amnesty.
Here’s a first look at the trailer for a new film Houston We Have a Problem – a feature documentary about America’s ferocious appetite for oil from the insider’s perspective.
Exploring our dangerous addiction to oil through candid insights from the Barons, Wildcatters, CEO’s and Roughnecks that comprise the world of Big Oil. This film is an inside look into the culture of oil that explores the history of our dependency that has led us to our current ENERGY CRISIS.
We learn how the perceived perpetrators of this critical American problem understand its complexities better than anybody. These seasoned professionals and New Wildcatters are presenting innovative strategies with a systemic shift to renewable, sustainable energy sources.
For too long, the energy policy of this country has been dictated by lobbyists and knee-jerk political decisions but now, politicians and business are finally joining together for a solution
The film premiered at the AFI Dallas International Film Festival earlier this year. Unfortunately, I wasn’t lucky enough to be there. There is, however, an interesting interview from the festival with director Nicole Torre and producer Eric Mofford where they talk about how the motivation for the film developed out of a conversation where two people, representing two distinctly different political and social perspectives, were able to overcome the obvious obstacles and discuss real solutions to the shared crisis.
I talked briefly with the film’s director Nicole Torre yesterday who told me they are still shopping it around for national theatrical distribution, and the screening schedule and DVD release date is not yet available.
Fuelishness! Feed: Iran Removes Oil Chief Torkan Amid Political Unrest; Iran’s oil supply and potential for disruption; [Flashback 2006] Why Iran oil cutoff could be suicidal
Some fresh Fuelishness!
- Iran Removes Oil Chief Torkan Amid Political Unrest – The sudden dismissal could raise concerns that political unrest in the second-largest member of the Organization of Petroleum Exporting Countries may be spilling over into the country’s oil industry.”If his removal is for political considerations, it is sad to bring in politics into the oil industry,” Manouchehr Takin, an analyst covering Iran at the U.K.-based Centre for Global Energy Studies. “He was considered a ‘doer’, someone getting things done. He got projects moving.”
- Iran’s oil supply and potential for disruption – Disruption to Iran’s oil exports would drive up the oil price as refiners that buy the Islamic Republic’s oil would be forced to buy elsewhere. Strikes in the run up to the Iranian revolution in 1978 stopped the flow from the southern fields, and the country’s capacity has never recovered to the 6 million bpd of before the revolution.The disruption was keenly felt by top oil consumer the United States, which had to ration fuel. The shortfall ruptured global supply lines, sparked panic-buying and saw a sharp rise in oil prices that contributed to the U.S. recessions of 1980 and 1981.
Iran now pumps around 3.8 million barrels per day, or about 4.5 percent of global supply.
- [Flashback 2006] Why Iran oil cutoff could be suicidal – Iran’s nuclear standoff with the United States, Europe, and other nations has led to considerable speculation of $100-per-barrel oil and $4-per-gallon gasoline in the US. Such high prices might kick off a worldwide energy crisis and recession.
Refer to the following charts and an estimate from the Energy Information Administration looking ahead twenty years.
Click image to enlarge.
Take a look at transportation – 96% of the energy we consume leading our modern mobile “just in time” lives is derived from one sole source – oil. In no uncertain terms, that’s a monopoly.
According to the Annual Energy Outlook 2009 (AEO 2009) from the Energy Information Administration, not much is due to change in the next 20 years. They outlook for 2030 shows oil slipping it’s grip only slightly – down just 9% to still monopolize our transportation sector at 86% in 2030.
In 2030, oil will cost anywhere from $50/bbl to $200/bbl – depending on various factors, but the AEO’s best guesstimate settles somewhere around $130/bbl:
In the AEO 2009 reference case, world oil prices rise to $130 per barrel (real 2007 dollars) in 2030; however, there is significant uncertainty in the projection, and 2030 oil prices range from $50 to $200 per barrel in alternative oil price cases. The low price case represents an environment in which many of the major oil-producing countries expand output more rapidly than in the reference case, increasing their share of world production beyond current levels. In contrast, the high price case represents an environment where the opposite would occur: major oil-producing countries choose to maintain tight control over access to their resources and develop them more slowly… (read more…)
Astonishingly enough, the forecast calls for no growth in oil consumption during this time, which I find very hard to believe. Consumption will be curbed thru a mix of high prices and regulation.
Total U.S. demand for liquid fuels grows by only 1 million barrels per day between 2007 and 2030 in the reference case, and there is no growth in oil consumption. Oil use is curbed in the projection by the combined effects of a rebounding oil price, more stringent corporate average fuel economy (CAFE) standards, and requirements for the increased use of renewable fuels… (read more…)
Will we suffer through high gas prices for the next 20 years? Or longer?
– or –
Will pragmatic innovators lead the world beyond oil, into a future where seeking energy sources no longer dominates our time and politics, or limit so much of our human potential?
What do you think? Comments are open and greatly appreciated.
There’s an outstanding report from American Petroleum Institute (API) called Energizing America. I’m going to cherry pick some of the best and most informative info-graphs from this report and highlight them over the next few weeks. You can download a free copy of their report from their website.
Click image to enlarge.
The API report wants to emphasis that oil companies only make a 5.5% margin on each drop of oil the buy, refine, and transport to your local filling station.
More interesting are the taxes; nearly a quarter of the money consumers spend at the pump gets fed back to local, state, and federal governments. Any idea why every administration since the 1970’s oil crisis has so far failed to solve our oil addiction? Anyone?
I write a lot about the price of oil because it is the single most important indicator of coming hardship and suffering for those of us surviving on the thinnest margins. Those of us who are “scraping by” and have to go without other things in life to put gas in the tank, or work hard at a job that barely pays enough to justify the drive in each day, or those small business owners who are fighting to keep their dream alive – their employees working – and their deliveries and service calls on time.
I maintain that hyper-inflated fuel prices contributed to and certainly compounded last year’s global economic collapse. Yes, there were (are!) deep systemic problems with toxic mortgages being traded by Freddie, Fannie, and the rest – and the system had been failing (with warnings) for some time.
But the promise of oil prices skyrocketing at a dizzying speed well into the foreseeable future pushed the teetering economy off the cliff. Citizens and businesses didn’t know how they would survive in a world of $5/gal, $6/gal or $10/gal gasoline. We didn’t know how to plan for our future, so we did the only thing that made sense – we stopped spending money – on everything – including houses and cars.
It took a global economic meltdown to stop oil from reaching $5/gal, $6/gal or $10/gal in the US.
A few weeks ago I wrote about the oil-price hockey stick with a hook. Today I’ve updated the chart to include the last few months where oil continues to climb again at a dizzying pace.
So, what are you going to do about it?
I promise you it really is possible for you to spend 10% to 25% less for gas – while driving the same distances you normally do, without buying anything to add to your gas or bolt in to your engine, and without become a road hazard or nuisance to others around you.
The “trick” is to adopt some very practical and efficient eco-driving habits – and leave inefficient aggressive driving habits behind. You are leaving up to 25% of your gas money “on the table” when you drive aggressively, in a rush, competing to get to the next stop light, only to arrive at your destination in about the same amount of time.
You bought that gas with money you’ve already paid taxes on, and being thrifty with your after-tax money is akin to giving yourself a “virtual” pay raise roughly equal to the money you saved plus your tax bracket (around +33%). Saving gas money is even more satisfying, because those virtual pay raises are paid by the oil companies.
How much of a pay raise do you want to give yourself today?
Remember the most inconvenient double-hockeystick graph? Get a load of this.
Source: Yahoo Finance/AP
Oil prices have been soaring for months despite a massive surplus of petroleum and natural gas. A large amount of speculative money has flowed into the markets, according to government reports, potentially taking advantage of a weak U.S. currency.
Surging energy prices appear to be outpacing an economic recovery for now, and there are concerns that consumers may pull back spending further, especially with retail gasoline nearing the $3 mark.
Pardon me. “Concerns” that consumers may pull back? Let’s hope!
There is NO LEGITIMATE REASON for oil to be this high right now. We are sitting on the largest stockpiles of oil in history. Ships are still doing circles at sea because there’s no storage left on shore for their oil. Demand is still depressed in general. Why is it being sold at premium prices?
And why is this not news any longer? Are we so shell shocked and distracted by the trillions that we’ve spent bailing everyone out to not notice the same mechanisms that helped trigger the largest financial disaster in history are back at work steadily inflating the next oil bubble?
OPEC say $85-$90 by the end of the year…we’ll be at $85 in two months or less.
“That everyday, in-your-face experience of seeing higher gas prices at the pump; that has quite an impact on people’s psyche,” said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
“There’s this feeling of ‘here we go again’ with what happened last year,” Kloza said. “It hurts discretional spending. It leaves people to think about not taking those summer vacations.”
I’m quite a bit more pissed than “Here we go again…”
I built FuelClinic to help people realize how much they spent on fuel, and find ways to improve their efficiency, as a “band aid” to high gas prices. I’m beginning to thinking we may need less of a “band aid” and more of a “war footing”.
We need to get serious about our oil problems, introduce as much direct competition as we can – as quickly as we can.
In the mean time we need to buy as little of it as possible, and let it circle in those expensive oil tankers as long as possible.
Here are some more resources, just in case you don’t like the first two for some reason:
You can cut your expenses and improve your mileage 10% to 25% (sometimes more) – depending on your driving habits.
With the burst of the FY’08 oil bubble last year, OPEC has taken actions to bouy the price of oil with several sets of substantial production cuts made over the winter. At the time they had set a target price for a barrel of oil to $75. This week they’ve decided to set their sights a little higher.
“The price will go to $80-$90 maybe at the beginning of 2010,” OPEC’s Abdullah al-Badri told the Reuters Global Energy Summit.
“I don’t think the price will go down… By the end of the year we’ll see $75. $80-$85 is possible — not with the demand we see at this time, but if demand picks up month after month, then maybe we’ll see this price.”
Last week, Badri said he expected to see oil at $70 to $75 a barrel by the end of this year. U.S. crude has already more than doubled from a low of $32.40 reached in December, its weakest in nearly five years, to around $68 on Tuesday.
Oil consumers are in for a painful case of deja-vu this summer as oil prices continue to recover from last fall’s collapse. The “double hockeystick” hook at the end of the historic oil price charts continues moving upwards faster than anytime in recent history (up 30% this month – the fastest climb since the March 1999) to settle yesterday over $66/bbl – only $9 off OPEC’s “preferred” price of $75/bbl.
Nothing of merit has changed in our transportation energy sector – we still have the same petroleum-only supply/distribution/consumption system as before. Despite the continued general stagnation in demand, price controlling cuts in production imposed by OPEC seem to be having an effect on market prices. While crude continues to be stockpiled in ships and shore based storage facilities, somehow the price continues to recover – approaching half of the record highs of last July.
Indeed there is nothing now in the way in terms of resistance between here and the next target in the medium term which is at $73.40, which would make the price of oil close to that suggested by the OPEC ministers at their meeting in Vienna yesterday where they intimated that a $75 a barrel would not be unacceptable.
It took a world-wide economic collapse to stop last year’s run on oil prices. The collapse was triggered by skyrocketing oil prices and the world’s inability to keep up with the extortion payments. With the world economy still trying to restart itself, a new run-up of oil prices will at least slow recovery – possibly causing a second collapse we may not have the capacity to recover from.
While America fiddles with remaking the auto-industry and busies itself bankrolling pet projects that can not cure our oil addiction, the market is preparing a second swipe at our wallets.
Looks like the oil price has hit bottom, and is starting it’s steady march back up. This week futures settled firmly over $60/bbl. More worrisom than the price this week is the rate of the new rise over the last few weeks. Take a look at this updated chart I found at Wikipedia (click to visit):
In fiscal year ’08 – from the Fall of 2007 to the Fall of 2008 – American consumers, governments, and businesses paid nearly $1-trillion dollars for imported petroleum to make fuels like gasoline and diesel. One trillion dollars – per year.
If you do the math, this comes out to an average cost to every living American citizen of ~$3200/yr. To the average “family of four” we’re talking a hit of ~$13,000. If your family was very average and household income was $42,000 – last year you paid approximately 30% of your income for oil. (It’s much worse for people who drive as much, but earn less.)
Last summer oil prices had doubled for no real apparent reason, and a trillion dollars left the American economy directly at the “grass-roots level”. People stopped paying their mortgages or spending new money.
If any of the economic recovery plans actually do work, and our economy sputters back to life, expect oil prices to continue to “recover” as well.
Keep an eye on that little hook – the start of a “double hockey-stick”?
Fuelishness! Feed: Oil firms above $60; Venezuela builds oil rig with China; The end of the gas guzzler; Will transform US auto fleet; Safety could suffer
- Oil firms above $60 – Oil prices have been on an upward trend since mid-April on equity-led rallies. They have recovered from below $33 in December after a plunge from record highs above $147 in July.
- Venezuela set to build first oil rig with China – China buys 300,000 barrels of Venezuelan crude every day, and is eager for more from the Latin American country as part of its global quest for a diverse range of energy supplies.
- The end of the great American gas guzzler – President Barack Obama will unveil new fuel efficiency standards today in an effort to limit the release of greenhouse gases by cars and trucks.
- Obama’s new rules will transform US auto fleet – The new rules would bring new cars and trucks sold in the United States to an average of 35.5 miles per gallon, about 10 mpg more than today’s standards. Passenger cars will be required to get 39 mpg, light trucks 30 mpg.
- Safety could suffer if we boost mileage by making cars smaller – The National Academy of Sciences, Insurance Institute for Highway Safety, Congressional Budget Office and National Highway Traffic Safety Administration have separately concluded in multiple studies dating back about 20 years that fuel-economy standards force automakers to build more small cars, which has led to thousands more deaths in crashes annually.