May 2011 Archives

A transmission-interest group lamented the other day that the Department of Energy didn't specifically put upgrading and expanding the high-voltage transmission grid in the Strategic Plan it released earlier this month.

True, expanding the grid is not in there. "Modernizing" the grid is, and unsurprisingly, DOE focuses on new technology to make what amounts to a "smarter grid," to integrate renewables better and get to a more "actively controlled distribution network" (must be longhand for "smart meters").

But to the group known as Wires, building more transmission is essential, and DOE's championing of "policies that remove barriers to grid expansion and upgrades" is critical. DOE's Strategic Plan may not say so, but maybe Energy Secretary Steven Chu's new hire, Wisconsin utility regulator Lauren Azar, will focus on that as well as on the technology and innovation.

If natural gas vehicles are as great as proponents insist, then the industry doesn't need any federal tax incentives to encourage their use, insisted Nick Loris, a policy analyst for the Heritage Foundation in recent remarks.

Federal regulators have called it unnecessary, the Senate has shown no willingness to vote on it and the chances of President Obama signing it fall squarely between nil and zero.

So, if the Republican-sponsored bill to delay derivatives reforms until late 2012 stands virtually no chance of becoming law, why are top House Republicans pushing so hard for it and why is the opposition from Democrats so fierce?

European energy policy makers are caught in a difficult position: the targets set for carbon emissions reductions imply that almost no gas will be used in power generation without the hitherto-untested technology and unknown costs of carbon capture and storage. This will be a pricey burden for consumers.

And yet the emphasis on renewables, which is mostly wind, implies a need for a commensurate amount of gas in storage as back-up for wind. This will also be expensive.

If oil wells can be metaphors for people, the Shell executives who announced the go-ahead for the Prelude floating LNG project in Perth on May 20 can safely be labelled "gushers."

The excitement surrounding Prelude, which is set to be the world's first FLNG project, has been building among Shell's executives in Australia for a long time now, and last week they finally got to pop some champagne corks.

A lot has happened in Ed Tirello's 40 years covering the power industry, 30 as an equities analyst, 10 at an investment bank. But last week, he also said -- not in a good way -- that a lot has stayed the same, especially the mindset of the average utility executive.

The tendency to "cover your you-know-what" has only been reinforced in the last decade by the Enron collapse and the bankruptcies and drying-up of so many merchant companies. Unwillingness to try anything unless it's been tested for 20 or 30 years has stunted innovation. He cited superconductors, for instance, still a sparingly deployed technology advancement.

It's strange to be calling a year-on-year oil demand growth rate that begins with an 8 to constitute a "slowdown," but that's one way of looking at the most recent demand figures out of China. Platts' monthly estimate for April is that the country's petroleum demand rose 8.3% in April compared to a year ago. You can read about the numbers, and Platts' analysis of them, here.

China's policymakers have taken several measures in recent days to head off a repeat of the situation that occurred in late 2010, when an electricity shortage and power rationing led to a severe diesel supply crunch as manufacturers switched to using the fuel to run their captive power units.

An electricity shortage in the first quarter of this year has seen more than 500,000 enterprises in east China's Zhejiang province operating on insufficient power supplies, with the blame placed on rapidly expanding power demand, sharply reduced hydropower because of a lingering drought, and high coal prices amid regulated power prices that have kept utilities wary of running at full capacity.

With gasoline so much the focus of all US economic talking heads and politicians, it's important to remember that it isn't the only thing that comes out of a refinery.

I spent a few years of my sullied youth singing in a country-rock band. In that time I noticed that a lot of country songs revolved around Texas.

In fact, I recently saw an Internet list of several hundred songs whose titles invoke Texas, such as: "El Paso," "Houston," "Abilene," "San Antonio Rose," "All My Exes Live In Texas," "Does Fort Worth Ever Cross Your Mind?" "Amarillo By Morning," "Luckenbach, Texas," and so on.

With the final launch of the space shuttle Endeavour, NASA's experiment with reusable space vehicles is drawing to a close. Far from heralding an end to an era, however, the withdrawal of the space shuttle is acting as a catalyst to a new generation of space vehicles, with some aiming for that hitherto elusive goal of commercial space travel. And jet fuel could yet play a part in the first small steps towards taking the common man to the stars.

SMD. In the US power sector, them's fightin' words. And right now we have public power and other interests so riled up they have reminded the Federal Energy Regulatory Commission of the debacle that ensued in the early 2000s when it tried to impose SMD--"standard market design"--on regions throughout the country.

Chairman Pat Wood, at that time fresh from a restructured power market in Texas, was gung-ho until members of Congress, governors, state utility commissions, consumer groups, utilities and probably more kinds of people as well unleashed storms of opposition that shut him down.

Craig Pirrong has long been known as the academic who probably most closely follows, and is widely quoted, on the impact that trading is having on the price of oil. His expertise is at the nexus of speculation/fundamentals/financial conditions, and how that's driving the price of oil.

At a luncheon this week in Houston, the University of Houston economist told a small gathering that he believes that exchange rate movements between the US dollar and the Euro over the past week or so, "explains," or represents as much as 70% of the variation of the price of crude over the same time period.

Apologies to Bob Seger, but it seems just about everyone in the oil and gas industry these days is following the sentiment in this song, or at least doing a reasonable facimile.

There are all sorts of statistical goodies buried in the Baker Hughes weekly rig count. Here is one of them:

The International Energy Agency's latest monthly oil market report contained what may on the surface appear to be contradictory messages of falling oil demand but a need for additional supply.

What a difference a year makes. Just last September, former Australian resources minister Ian Macfarlane was warning that Queensland's emerging coalseam gas industry was "within a blink" of being shut down by angry farmers and graziers.

But the previously explosive relationship between local landholders and the gas industry has now stabilized, Macfarlane told journalists on the sidelines of last month's Australian Petroleum Production & Exploration Association's annual conference in Perth.

With oil above $100/barrel and crude production rising, Nigeria's oil industry should be a hugely attractive energy investment opportunity.

But concerns over the stringent terms in a new Petroleum Industry Bill (PIB), which is yet to be passed, has slowed down the pace of development rather than encourage it.

Platts' monthly survey of OPEC production can be found here.

US Attorney General Eric Holder and Obama press secretary Jay Carney may think the process for how retail gasoline prices get established in the US is a big mystery. It isn't.

On Friday, two key Obama administration officials indicated that the federal government was going to investigate whether retail gasoline prices were coming down fast enough in the wake of last week's collapse in commodity prices. Attorney General Holder wrote a letter to the recently-established "oil and gas price fraud working group," saying that "fraud or manipulation must not be allowed to prevent price decreases from being passed on to consumers at the pump." Earlier in the day, in his daily press briefing, press secretary Carney said the administration had asked Holder to investigate the so-called "rockets and parachutes" phenomenon. It's a theory that retail gasoline prices rapidly rise when spot prices are ascending, but drift down slowly -- like a parachute -- when they are declining.

(Of course, all these events happened before prices soared on Monday, both on the NYMEX and in physical markets).

For more than 50 years, Cuba and the US have been at loggerheads over just about everything. But now, as Platts' Leslie Moore Mira spells out in this week's Platts Oilgram News column "New Frontiers," it is the threat of an oil spill from drilling in Cuban waters that may lead the two sides to begin talking about at least one area of common interest.

Mark Dubowitz, a leading advocate of tightening sanctions on Iran, is urging a new strategy that builds upon the philosophy of fictional Wall Street trader Gordon Gekko: "Greed is good."

Dubowitz, the executive director of the Foundation for the Defense of Democracy, has his own formulation of that motto that he applies to a plan to target Iran's export of crude in a way that does not drive up the price of oil. Dubowitz says the US and other Western nations must "unleash the greed" by declaring the US an "Iranian oil free zone."

The oil bulls Wednesday could take little comfort in data released Wednesday by the US Energy Information Administration. The EIA showed US oil demand tumbling 1.256 million b/d to 18.332 million b/d last week, feeding into a crude stock increase of 3.421 million barrels. But gasoline stocks continued to tighten on the US Atlantic Coast, giving the bulls some hope for the the New York-delivered NYMEX RBOB contract.

You can see Linda Rafield's analysis of the report here.

Day 2 at the OTC, where the Houston weather for May is very un-Houston like, and the lines at the ticket booths are longer than they were a day ago.

The US National Energy Technology Laboratory is testing what it calls a "novel" water cleaning technology that should "significantly reduce" many of the nasty chemicals found in fluids used to hydro-frack natural gas shale wells.

In this week's Platts Oilgram News column, Washington senior editor Gary Gentile discusses how rising gasoline prices have become far and away the number one point of energy policy discussion in the US capitol, and how it might result in changes to existing tax policy.