June 2008 Archives

The Exxon Valdez grounded on Bligh Reef in Prince William Sound nineteen years ago, causing the worst oil spill in US maritime history, but the accounts of the sheer negligence that night of Joseph Hazelwood, the tanker's captain, are still breathtaking.

The tanker was traveling outbound when Hazelwood was cleared by the Coast Guard to cross the inbound lane to less icy water. But that move put the tanker in the path of the reef, requiring a turn back into the shipping lane.

Several panelists spoke this morning at the 5th annual Platts Bunker and Residual Fuel Oil (Bottom of the Barrel) Conference on proposals to shift ships away from using higher sulfur residual fuel oil to lower sulfur resids and distillates, lowering particulate emissions and SOx/NOx. But an effort to move the marine industry to a greener futures by moving to cleaner fuels could also create serious financial and fuel availabilty issues for shipowners, forcing them to pay more "green" for their fuel.

California is ahead of the pack on this, as usual, with a Air Resources Board proposal being debated this week to require ships to run lower sulfur marine gasoil and marine diesel within 24 nautical miles of the coast staring in 2009. Pacific Merchant Shipping Association, represented by vice president T.L. Garrett at the conference today, blocked CARB regulations similar to this in 2007 in court. Garrett reiterated how this could increase fuel costs and tighten fuel availability, and pointed to alternatives such as marine emission control systems, called "scrubbers," that ships could add and still burn resid to meet emission controls.

China shocked the world oil markets with its first price hike since November this week -- raising the possibility of a slow-down in Chinese demand growth for the first time this year. The timing of the news (ahead of the Olympics, not after) and the size of the increase (a relatively hefty 17% gain) were eye-popping. But in retrospect, was the news really worth all the fuss?

The numbers just released in Mexico are breathaking.

Platts' correspondent Ronald Buchanan reported today that the decline in Mexican crude exports gathered speed in "spectacular fashion" in May when they dropped 20.7% year-on-year to 1.376 million b/d, quoting Pemex figures. May production was was 2.798 million b/d, a decline of 10% on the same month of last year.

One thing is clear from the first episode of the new cable TV show, "Black Gold," on truTV: working on an oil rig in the Permian Basin (or anywhere, for that matter), is more dangerous than writing about oil in a Washington office (or anywhere for that matter).

truTV, formerly Court TV, has reinvented itself as television's "destination for real-life stories told from an exciting and dramatic first-person perspective." Not reality TV, it claims, rather "actuality," which actually is pretty much the same thing.

Americans are driving less, the US Department of Transportation said Wednesday, continuing a six-month trend. Overall vehicle miles on all public roads fell 1.8% year-over-year in April, and year-to-date mileage is down 2.1% compared with 2007.

The drop in mileage was spread across all regions except the Northeast, where miles driven actually rose 1.4%.

As this decade has passed, absent-minded, coffee-house chatter about blockading the sea routes that provide China with most of its imported crude oil seems to have died down. The paradox is that the "threat of blockade" seems to have receded, even as China's dependency on imports has shot through the roof.

Hybrid vehicles have gone mainstream in just a few years, with soaring gasoline costs boosting demand for more energy-efficient cars and sending Priuses and Civics off the lots in droves.

Off on the "lunatic fringe" of the hybrid crowd were hobbyists and tinkerers who wanted more bang from their rechargeable buck. These folks toiled in their garages to fill their already-limited trunk spaces to the gills with batteries, which could be hooked up to the house power supply at night to recharge...the so-called "plug-in" hybrid.

At my very first job at a newspaper, which was actually an internship, I was sent out on the second day to cover a presentation touting the investment opportunities of worms. The pitchman talked about the wonderful capabiities of worms, how they could attack a pile of sewage, chomp their way to bliss and excrete something like soil, saving governments millions in their sewage treatment costs. This was about 30 years ago, so the details are a bit vague at this point about just how it was that worms performed their magic.

Despite that introduction to the news business, I kept at it. So I couldn't help but think of that worm presentation when I read this story.

The West Texas Intermediate crude market has moved into a solid contango, with the August contract trading at a premium to the July contract. This sort of market structure is necessary to build inventories. The opposite structure, a backwardation, features prices in the "out" months declining from the front month, which is an incentive to sell inventories into the market. A contango encourages building inventories.

With crude inventories in the US declining week-by-week (four weeks in a row), and the International Energy Agency recently reporting global crude inventories declined in April, a month where they traditionally rise, the emergence of the contango in the WTI market could be a sign that inventory destocking will turn around into an inventory build. Such a build is necessary in the second quarter to prepare for the 4th quarter inventory draw.

The Commodity Futures Trading Commission had its inaugural meeting of the Energy Markets Advisory Committee Tuesday. The focus was clearly on Donald Casturo, managing director of Goldman Sachs.

The reason, of course, is the existence of the Goldman Sachs Commodity Index, a tool for institutional and individual investors to invest in commodities without holding physical positions. (Full disclosure: the GSCI is now owned by Standard & Poor's, like Platts a division of McGraw-Hill). But even though Goldman doesn't own the GSCI anymore, it manages the largest amount of money under its umbrella, though other firms can use the GSCI investment model through agreements with S&P. Index investing was the key topic discussed at the meeting.

Maybe we'll mark June 10 as the date that the world's consumers rose up, and grumbling went to open resistance.

This is being written mid-morning US Eastern time, and the news from around the world, a world that is seeing prices go up just about every single day, is grim. Things have happened before this date, but today, it seems as if a great big resistance, sometimes violent, is taking over the consuming nations. There's little news that hints things might get better soon.

Time magazine carried an interesting story Friday, on the same day that crude oil posted its biggest one-day jump in history, an increase of about $11/barrel.

Legendary upstream oil investor Richard Rainwater, at least for now, thinks the price has peaked.

The Lieberman-Warner climate change bill was rejected on a procedural Senate vote today. But while not quite a tsunami, there is a rising tide of support in the Senate for legislation to control US greenhouse gas emissions.

Forty-eight senators voted to allow debate on the bill to proceed; 36 voted no. Under Senate rules, 60 votes were necessary to avoid a Republican filibuster. However, Barbara Boxer, the bill's floor manager, said after the vote that six senators who were not present would have voted for the measure, for a total of 54.

On Wednesday, Senate Minority Leader Mitch McConnell, Republican-Kentucky, asked to have the entire Lieberman-Warner climate bill read aloud on the Senate floor. Bills are almost always accepted as read, and it's not a good sign when a senator demands a reading -- particularly of a 492-page bill.

The recitation took more than nine hours, and probably sent even the most dedicated C-Span viewer screaming into the night.

The rapid change in American driving habits and the quickly ebbing desire to own a great big vehicle can be viewed as a repudiation of the near-religious fervor that CAFE standards held in some activitists' eyes.

Corporate Average Fuel Economy (CAFE) standards have significant flaws whether the price of gasoline is high or low.

It should come as no surprise, given the Bush Administration's track record, but for over a year the political appointees in the public affairs office of the US space agency "managed the topic of climate change in a manner that reduced, marginalized or mischaracterized climate change science made available to the general public."

News releases in the area of climate change "suffered from inaccuracy, factual insufficiency and scientific dilution," NASA Office of Inspector General reported June 2. While not all adjustments to climate change news releases were politically motivated, "the preponderance of evidence does, however, point to politics inextricably interwoven in the news dissemination process."

The Lieberman-Warner climate bill, calling for sharp cuts in US greenhouse gas emissions, is refered to in some media outlets as "landmark" legislation.

But if by landmark one means a bill that for the first time mandates reductions in US GHG emissions, this week's Senate debate will actually mark the third time that the world's greatest deliberative body has considered landmark climate legislation.