October 2008 Archives

This was a brutal week for the ethanol industry.

I thought this story was a bit weak. All of the evidence is antecdotal, except for citing the MasterCard data, which has been conceded by MasterCard is not particularly precise comparing one week to another. It's far more accurate over the longer term.

Earlier this month, we posted an item suggesting that Republican presidential candidate John McCain appeared to be backing away from his long-standing support for mandatory limits on greenhouse gas emissions.

When asked by CBS news anchor Katie Couric if McCain supports a mandatory or voluntary program, his running-mate Governor Sarah Palin, was non-committal. "[T]he details are being hashed out even right now," Palin said. "We're gonna keep working on how it can be implemented to actually make sense and make a difference."

It's not easy for any sort of economist or think tank to produce a number that everyone looks at as significant. But it's clear that MasterCard's Spending Pulse information on gasoline consumption has risen to that level.

Slowly but surely, the weekly MasterCard estimate of US gasoline consumption, which uses credit card swipes as the starting point for calculating the final number, has taken hold. It may have hit its most recent high point Tuesday morning when an analyst cited it in posing a question to the group of executives on the quarterly earnings conference call of Valero.

Complex, difficult issues are often reduced to blather on the political campaign trail. Consider John McCain mocking Barack Obama over the weekend.

"You know the other night in the debate with Senator Obama, I said his eloquence is admirable, but pay attention to his words - we talked about offshore drilling and he said he would 'consider' offshore drilling. We talked about nuclear power. Well, it has to be safe, environment, blah, blah, blah."

Even as the likes of Merrill, GM, Merck and Yahoo have become the latest to join the ranks of companies unleashing job cuts, some quarters of the petrochemical industry appear to be still hiring, but only for select technical positions.

These are hard economic times, but that's no reason for governments to back away from supporting the development and deployment of technologies to reduce greenhouse gas emissions, according to the investment bank, Deutsche Bank.

"Trillions of dollars have already been wiped off the global balance sheet by falling asset values, and the world's major economies are heading into recession," Kevin Parker, global head of Deutsche Bank's Asset Management division, said in a statement attached to a new bank report on investing in climate change. "Investors understandably lack confidence at the moment and governments...will be reluctant to commit further capital to the climate change sector for the foreseeable future," Parker acknowledged.

In fashion this year in Washington are simulation games played by Latin America policymakers and industry leaders, all of whom pretend to react to a Cuba suddenly bereft of the Castro brothers. The Brookings Institution earlier this month staged its fourth such simulation exercise.

Their playbook will change if alleged claims by Cuba's state-owned oil company Cupet of massive offshore oil reserves pan out. In news stories flashed round the world days ago, Cupet's exploration manager was quoted as saying that the island nation's offshore recoverable reserves could hit 20 billion barrels. One Cuba energy academic in the US called the possible find a "game-changer."

Thirty years ago, scientists were warning of a new ice age, climate change skeptics/deniers contend. Now scientists are saying that man-made global warming is threatening the planet. It's all bunk, the skeptics say.

"How quickly things change," Senator James Inhofe, Republican-Oklahoma, and the leader of the Senate's man-made-global-warming-is-a-hoax school, said in a 2003 floor speech. "Fear of the coming ice age is old hat, but fear that man-made greenhouse gases are causing temperatures to rise to harmful levels is in vogue."

OPEC ministers face one of their toughest challenges in recent memory as they prepare to meet in Vienna in an emergency session with the global financial swirling around them and clouding the future of demand for their oil.

Judging by remarks in the days leading up to the meeting, which was brought forward from November 18 as oil prices tanked, the majority of the 13-member group are in favor of a production cut to lift oil prices, which have slumped further as fears of lower demand for energy appeared to override any fear of a cut in oil supply by the cartel.

In the final arduous hours of the UN climate change talks in Bali last year, the US delegation was booed and upbraided for opposing a plan intended to guide future negotiations on an agreement to succeed key provisions of the Kyoto Protocol, which expire in 2012.

"If you are not willing to lead, then get out of the way," a delegate from the Pacific island state of Papua New Guinea scolded the US delegation. Ultimately, the US got out of the way and threw its support behind the so-called Bali Roadmap.

Glaciers provide a frozen window on earth's climate over a span of thousands of years, but that window is closing and the climate history is vanishing as glaciers retreat under the assault of global warming.

"Glaciers are the most visible evidence of global warming," Lonnie Thompson, a glaciologist at Ohio State University said at a conference in Columbus this week.

Wall Street and most of the European stock markets have plummeted as economic turmoil rippled through the Western world, and investors question whether bailout of the US financial sector will be enough to prevent a global recession. But business executives in China and India have been busy lining up the their next asset targets to buy, usually for billions of dollars apiece.

As crude oil futures prices tumbled from their all-time highs between July and October, open interest dropped sharply as well. But investors did not completely abandon the market, but shifted their bets over to options.

Between July 8 and October 7, open interest in NYMEX light, sweet crude futures fell from 1,316,278 to 1,087,569 contracts, according to Commodities Futures Trading Commission weekly position data. The decline was steepest in the past month, falling from 1,231,450 contracts on September 9.

It's always been said that California is a little different. No doubt about that this week.

After the momentous events of the last few weeks it is was perhaps to be expected that the International Energy Agency would cut its estimates of world oil demand in the next year, and it didn't disappoint when it released its latest oil market report on Friday.
The IEA slashed its demand numbers for 2008 and 2009 by 240,000 b/d and 440,000 b/d respectively, and was particularly gloomy about the prospects for growth in the developed world.

A study that concluded US autos can run just fine on a 20% ethanol blend, released Tuesday, makes one immediately turn to the market to see if financial incentives exist for blending 20% ethanol into a finished gasoline mix.

The Environmental Protection Agency on October 7 joined the Department of Energy and the Department of Agriculture in releasing the preliminary report, which showed that when E20 was injected into 13 popular late-model vehicles that were not designed to run on more than 10% ethanol, tailpipe emissions were similar to E10 levels. Concerns remain among auto makers about whether a 20% blend would damage engines; that is a separate issue from the tailpipe emissions.

Arjun Murti, the Goldman Sachs petroleum equity analyst who was dead-on in his call of higher prices earlier this year, is still holding to his generallly bullish outlook.

With crude prices plunging below the $90 level Monday, a far cry from the early days of $140 plus in early July -- almost $60 in three months! -- it's tough to be a bull. But Murti's primary argument continues to rest on the supply side.

Feeling a rising unease over near-term commodity and financial markets, E&P operators have reined in capital spending and scaled back rig counts amid plunging commodity prices and credit fountains that are fast drying up.

We're talking a late 2008 scenario, right? Yes and no. These events are in the present, but the above statement could also describe in some parts late 2007, late 2006, late 2001 and going back further, the late 1990s.

Republican presidential candidate John McCain refers to himself as a maverick. McCain's running mate, Alaska Governor Sarah Palin, calls herself a maverick and said she has "joined this team that is a team of mavericks."

The term maverick was first applied to unbranded cattle, especially a motherless calf, in the American West in the 19th century, after Samuel Augustus Maverick. Maverick was a lawyer, politician, land baron and signer of the Texas Declaration of Independence.

It's been something of a foregone conclusion about where Senator John McCain stands on climate change. He unquestionably accepts that human activities are a major contributing factor to global warming and has co-authored legislation imposing mandatory caps on carbon dioxide emissions.

McCain's support for mandatory emissions caps put him at odds with most of his fellow Republicans. But he muddied the picture somewhat at a press conference in June when, in response to a question, he said that while he believed in an emissions cap-and-trade system, "I would not at this time make those...impose a mandatory cap at this time."

Senator John McCain, Arizona, opposes opening the Arctic National Wildlife Refuge to oil and gas drilling. "As far as ANWR is concerned, I don't want to drill in the Grand Canyon, and I don't want to drill in the Everglades," McCain said earlier this year. "This [ANWR] is one of the most pristine and beautiful parts of the world."

However, Alaska Governor Sarah Palin, McCain's running mate on the Republican presidential ticket, like most Alaskans supports drilling for oil in ANWR. (Not coincidentally, every man, woman and child in Alaska receives an annual payout from the Alaska Permanent Fund, which is derived from oil revenues).

Several items from the world of trading, courtesy of various Platts' reporters, and what the credit crunch is doing to it.