July 2009 Archives

The Memorandum of Understanding issued by the Governments of China and the US following their meeting in Washington earlier this week certainly doesn't lack for ambition.

It also has something of the flavor of the high-minded statements made by beauty pageant contestants who when asked to discuss their goals and aspirations talk about working for world peace and ending hunger.

Japan is getting serious about diversifying into biofuels and non-hydrocarbon sources of power generation. The country's parliament, the Diet, on July 1 passed a legislation that provides for imposing fines of up to Yen 1 million or $10,500 on companies failing to meet the minimum government requirements of non-fossil fuel consumption.

The new regulation, expected to come into force within two years, leaves out smaller players, who might not have the financial capability to make the necessary changes. The government is set to kick off a series of panel discussions August 3 to fill in the details in the broad framework that has been agreed and define the legal obligations of the companies that will be covered by the regulation.

Occasionally oil industry remuneration makes the headlines; Lee Raymond's golden goodbye from ExxonMobil or the former-BP trader Jimmy Dyer using BP's leverage (unfairly, say some) at the Cushing WTI delivery point to net bumper bonuses. Or the biggest oil-trading baddie of them all -- Marc Rich -- who seemingly broke just about every white-collar crime in the book in making a ton of money.

So it was only a matter of time before the thorny subject of excessive bonuses reared its head in the world of oil. The latest oil-trading media star is, as The Wall Street Journal described him -- "secretive" Andrew Hall, overlord of Citigroup's highly-profitable energy-trading unit, Phibro.

If you shout it from the hilltops, it must be so, no?

Despite Petrobras's facing down what some call its worst-ever crisis of alleged fraud and corruption, and simmering charges by Belgium-based trader Astra Oil that the Brazilian giant stiffed it over payment for a Texas refinery, Petrobras is taking solace as "the world's fourth most reputable company."

A quick hit before the weekend:

We've written on this blog before about the problems in Mexico. The latest figures are sobering, and we'll provide them without commentary. They speak for themselves.

Dear Mr. Anil Ambani,

It's time for a reality check. Do you sincerely believe that your company Reliance Natural Resources Limited is entitled to natural gas at heavily subsidized rates from your estranged brother Mukesh Ambani's D6 block?

You want to pay $2.34/MMBtu for supplies from the multi-billion-dollar deepwater project when all its other customers are forking out a wellhead price of $4.21. And these are customers in the power and fertilizer sectors who depend on government help because their own product prices are capped. These are players forced to operate their plants at partial capacity because they cannot afford to buy feedstock at market prices. And the D6 gas is costing them above $6/MMBtu at the customer gate.

Some bullishness is creaping into the US heating oil market, although considering the current level of inventories -- in the US and abroad -- you have to wonder why.

The September heating oil crack spread on the NYMEX was trading around $7.35/barrel midday July 21, up from $4.31/b on July 13. The September RBOB crack has also climbed, although the spread between the two has narrowed. The September RBOB crack was trading around $9.35/b midday July 21, up from $8.09/b on July 13.

Forty years ago on July 20, 1969, a man walked on the moon, a milestone on a variety of fronts. At the time, the posted oil price of West Texas Intermediate crude oil was $3.35/barrel. Pegged to a generally accepted rate of inflation since then, it would be somewhere under $20/b in today's dollars.

In 1969, OPEC set the oil prices pegged to a dollar which was still on the gold standard. Also in 1969, the last of the great trans-Atlantic ocean liners, the Queen Elizabeth 2, made its first voyage, which was coincidentally the same year that the Concorde made its maiden flight and Boeing delivered the first 747 commercial airplane to Pan Am. The former marked an end of an era and the latter two were harbingers of the shift in travel, and the boom in jet fuel to come.

There was a low-key event in New York last night with several leading energy analysts. I hesitate to write something about it, because I violated every journalistic rule in the book and didn't jot down a single note.

But there seemed to be a fairly widely-held consensus in the room, so passing it on accurately is not particularly challenging.

As if US ethanol producers didn't have enough to worry about, the man behind the design of Nintendo's popular wii game controller, Thomas Quinn, says his E-Fuel Corp has invented a device that will make ethanol for consumers right in their own homes.

The first shipments of the so-called MicroFueler are expected this month. After "the world's first home ethanol system" arrives, the customer's "sole task" is "to simply fill their vehicles with E-Fuel100 ethanol," according to an E-Fuel press release. The machine makes up to 35 gallons of ethanol per week and can double that using alcohol as feedstock.

Efforts by European governments to halt the slide in new car sales this year are having one very unexpected side-effect which could spell trouble for refiners -- they have knocked diesel-engined vehicles off the top spot.

Several countries, including Germany, France and the UK, have introduced so-called 'scrappage' schemes designed to help the ailing automotive industry.

India is preparing to bite the bullet on domestic oil pricing reforms after a year that saw its fuel subsidy bill rocket to more than $20 billion. The government needs to get its act together quickly, because the window of opportunity might be small.

Benchmark crude prices, which spiked from a low of $30s/barrel in February to more than $73/b at the end of June, have since slipped back to around $60/b, but could start spiraling up again at the first signs of a global economic recovery.

Spillers beware: Some oil-spill investigations may one day involve a different and perhaps better kind of chemical fingerprinting, if investigators pick up on and decide to use research done at Environment Canada.

The work shows that one particular family of molecules, bicyclic sesquiterpanes, may be better suited to identifying some oils and some refined products than families currently in use