Get ready for high gas prices, brought to you by Obama and the Democratic party.

[shagdrum]

White House puts coastal drilling plans on hold
Zachary Coile, Chronicle Washington Bureau

President Obama is shelving a plan announced in the final days of the Bush presidency to open much of the U.S. coast to oil and gas drilling, including 130 million acres off California's shores from Mendocino to San Diego.

Interior Secretary Ken Salazar put the plan on hold Tuesday while his agency conducts a 180-day review. But Salazar's critical comments about the proposal made clear that the new administration will rewrite it if not completely scrap it.

"It opened the possibility of oil and gas leases along the entire Eastern seaboard, portions of offshore California and the far eastern Gulf of Mexico with almost no consultation from states, industry or community input," Salazar said at a news conference in Washington. "In my view, it was a headlong rush of the worst kind."

He said his agency will hold four public meetings over the next few months - one in Alaska, one on the West Coast, one on the East Coast and one near the Gulf Coast - to hear from governors, local officials, industry groups and environmentalists about the plan.

Salazar steered clear of the bigger question: Whether Obama will seek to renew the 3-decade-old presidential moratorium on drilling off most of the East and West coasts, which Bush lifted in July amid soaring gas prices.

He echoed comments made by Obama last year that the administration would be open to more offshore drilling but only as part of a broader policy focused on producing more renewable energy from wind, solar and geothermal power.

Seat at the table
"For those of you from the oil and gas industry ... I pledge to you that you will have a seat at the table," Salazar said. "We need your expertise and your resources as we move forward. But as President Obama has said and as I believe ... a drill-only energy approach, onshore and offshore, is not enough."

Salazar also ordered his agency to finalize rules to speed the development of offshore renewable energy, such as offshore wind turbines, tidal and wave energy and other emerging technologies, which he said the Bush administration had delayed.

Bush had sought to seize on a lapse in the congressional drilling ban last year to craft a new five-year oil-lease sale program, which it announced Jan. 16, the last business day of the Bush presidency. The outgoing Republican administration was daring the new president to reject the plan.

The Bush rules would have opened most of the U.S. coastline to exploration, from the Gulf of Maine to the Chesapeake Bay and the Outer Banks of North Carolina to the Gulf of Mexico, as well as areas of Alaska's Bristol Bay and the Arctic Ocean.

Effect on California
In California, the plan would have allowed drilling on 44 million acres of federal waters off Humboldt and Mendocino counties, and 89 million acres off San Luis Obispo, Santa Barbara, Ventura, Los Angeles and San Diego counties. One of the leases would have required special drilling equipment to reach oil beneath the Santa Barbara Ecological Preserve.

California officials praised the Obama administration for slowing down the process.

"I'm pleased the department will base its future leasing decisions on the strongest, most objective science available instead of campaign slogans, especially in areas that have previously been off-limits to drilling for decades," said Lois Capps, D-Santa Barbara, an opponent of drilling.

Oil industry setback
Oil industry officials were disappointed by Salazar's announcement, saying it was a major setback to efforts to tap what the Interior Department's Minerals Management Services estimates is 18 billion barrels of oil and 76 trillion cubic feet of natural gas in the areas of the Outer Continental Shelf that remain off limits.

Barry Russell, president of the Independent Petroleum Association of America said, "This unnecessary delay will hold America back, at the precise moment when we need to move forward the most."

Environmental groups applauded the decision, but they plan to keep pressuring Salazar, fearing that the Interior Department could still allow drilling in sensitive areas, especially Bristol Bay, a key fishery.

"We hope the secretary will apply the same principles of acting in the public interest to other offshore decisions, including those that are so critical to Alaskan communities in Bristol Bay and the offshore areas of the Arctic region," said William Meadows, president of the Wilderness Society.

 

[shagdrum]

Surprise!... Team Obama Nixes Offshore Drilling, Too!

Gee... We're All Shocked.
More hope and change for America.

For decades, Democrats have blocked efforts to responsibly develop this nation's energy resources, transforming vast areas of opportunity into "The No Zone."

Over the past 30 years:

Democrats have blocked the development of new sources of petroleum.
Democrats have blocked drilling in ANWR.
Democrats have blocked drilling off the coast of Florida.
Democrats have blocked drilling off of the east coast.
Democrats have blocked drilling off of the west coast.
Democrats have blocked drilling off the Alaskan coast.
Democrats have blocked building oil refineries.
Democrats have blocked clean nuclear energy production.
Democrats have blocked clean coal production.
​

Already this year democrats scrapped oil and gas leases in Utah and opened the 111th Congress by introducing a bill to permanently prohibit drilling in the Arctic National Wildlife Refuge (ANWR).

Today, the Obama Administration blocked offshore drilling.
SFGate reported:

President Obama is shelving a plan announced in the final days of the Bush administration to open much of the U.S. coast to oil drilling, including 130 million acres off California's coast from Mendocino to San Diego.

On Tuesday, Interior Secretary Ken Salazar ordered the plan be put on hold while his agency conducts a 180-day review of the country's offshore oil and gas resources. Salazar's critical comments about the plan signaled that the new administration will seek to rewrite it if not completely scrap it.

The Bush proposal "opened the possibility of oil and gas leases along the entire Eastern seaboard, portions of offshore California and the far eastern Gulf of Mexico with almost no consultation from states, industry or community input," Salazar said at a news conference in Washington. "In my view it was a headlong rush of the worst kind."
​

But, honestly... Barack Obama is going to free America from our dependence on foreign oil.
He's going to create or save(?) 4 million jobs.

Remember this the next time gas prices go to $4.00 per gallon.

Prairie Pundit adds this:

They knew Republicans were getting voters attention on the issue so they pretended to agree to get themselves through November. Obama did give some hints when he only committed to "look" at offshore production. I guess he has had his look.
​

Oh, and windmills are a carbon-saving scam.

 

[shagdrum]

Get ready for high gas prices, brought to you by Obama and the Democratic party.

 

[luxuryrules]

Heaven forbid fuel gets expensive and motivates people to lead more efficient lifestyles. Nope, can't have that happening!

 

[shagdrum]

Heaven forbid fuel gets expensive and motivates people to lead more efficient lifestyles. Nope, can't have that happening!

Our "lifestyles" are efficient enough. This is imposing a political agenda on society that it doesn't want and has consciously rejected it. It is based on wrong assumptions and is unethical for the government to do this.

I should not be forced to change my lifestyle to fit your unrealistic view of how "efficient" it should be. Government should not artifically drive up prices to do that. It is wrong and an abuse of power for the government to take that action.

 

[JWerner2]

See now that is ridiculous. There is no reason why we cant use the oil that we have of shore and else where to supply the US. I think we should drill, drill, drill and then black ball other countries and shut them out of the game and tax them and see how they all feel when the US no longer needs to run to their aid cause they supply us.

But, is there any thoughts that it would help us out rather then just turn into a greedy situation? ( honest question shag )

 

[MonsterMark]

The person with the LAST reserves wins.

 

[shagdrum]

But, is there any thoughts that it would help us out rather then just turn into a greedy situation? ( honest question shag )

Could you rephrase the question? I don't quite understand what you mean by "it" and "greedy situation"...

 

[JWerner2]

Do you think the oil companies would take advantage of the offshore drilling and end up jacking the prices up more since it is domestic and we would no longer be getting oil from other countries?

I don't see it really happening but its just a thought.

Looking back I did screw that one up

 

[foxpaws]

The person with the LAST reserves wins.

Which will be us if we keep happily buying everyone else's oil...

Keep getting it out of the sand - it is cheaper, and eventually they will run out...

Have production ready here - and the ground work laid, but why bother going into full production now?

Where the new reserves are, it is expensive and somewhat prohibitive to get out (we have more oil in oil shale in the western states than the middle east has left). Just use the cheap stuff from the middle east and South America and Canada, and basically save ours.

 

[JWerner2]

That is very true but when they consider it a crisis we should still have at least some sort of limit to what we have within our own boarders.

 

[shagdrum]

Do you think the oil companies would take advantage of the offshore drilling and end up jacking the prices up more since it is domestic and we would no longer be getting oil from other countries?

I don't see it really happening but its just a thought.

Looking back I did screw that one up

How would they "take advantage" of the offshore drilling to "jack up the price"? What would be the mechanism?

I really don't see how they could do that. What makes you think they have they ability to do that and would be inclined to do so? I need a bit more clarification to see where you are coming from before answering throughly.

Where have they taken advantage of offshore drilling (or something similar) in the past to jack up prices?

They really don't have much control over prices, that is more the middle east and OPEC. The market sets the price and OPEC has an exceedingly large amount of influence on the market.

What popped the oil bubble last summer was (in large part) Congress being pushed to open up offshore drilling . That blunted and countered the effect OPEC nations had on the market (at least temporarily), because there was a percieved increase of supply on the way.

I think we covered a lot of this pretty throughly last summer on this board as well, might wanna do some searching around that time frame (I may later if I have time).

I need you to be as specific as possible with the question to give me a better idea how to answer it, please.

 

[shagdrum]

Which will be us if we keep happily buying everyone else's oil...

Keep getting it out of the sand - it is cheaper, and eventually they will run out...

Have production ready here - and the ground work laid, but why bother going into full production now?

Where the new reserves are, it is expensive and somewhat prohibitive to get out (we have more oil in oil shale in the western states than the middle east has left). Just use the cheap stuff from the middle east and South America and Canada, and basically save ours.

But limiting drilling has a psychological effect short term effect on the economy, and gives OPEC nations undue influence. You saw the effect that Congress simply lifting the ban had on oil prices (and that was without any actual drilling).

It created a shift in supply that dropped the equilibrium price and popped the oil bubble. Combine that with the shift in demand (by people reacting to high gas prices by driving less) which further dropped the equilibrium price and we saw gas go from near $150 a barrel to less then $40 in less then a year!!

Here is an interesting study worth reading about how the government could provide a free market based $1.7 trillion dollar stimulus package through allowing drilling.

 

[JWerner2]

I would just think that maybe and that is a big maybe if they started pulling in large quantities of oil off the shore of the US they would stop buying from over seas. Then maybe just decide they have the ability to set a higher price tag for it because it is domestic. Like I said, it was just a thought that I really dont see happening myself.

I mean it dont need to be imported which is a plus I guess.

 

[foxpaws]

But limiting drilling has a psychological effect short term effect on the economy, and gives OPEC nations undue influence. You saw the effect that Congress simply lifting the ban had on oil prices (and that was without any actual drilling).

It created a shift in supply that dropped the equilibrium price and popped the oil bubble. Combine that with the shift in demand (by people reacting to high gas prices by driving less) which further dropped the equilibrium price and we saw gas go from near $150 a barrel to less then $40 in less then a year!!

Here is an interesting study worth reading about how the government could provide a free market based $1.7 trillion dollar stimulus package through allowing drilling.

What had a bigger affect was the fact we were using less oil and buying cars that got better mileage.... OPEC wants us hooked on oil, anyone's oil, even if it is domestic oil. They know they will get their share of the profits...

Supply and demand.

What is odd is gas is going up - why? Because the refineries have curtailed some activities. So, while oil reserves are huge, gas reserves are down. They have cut back because they see the fall in the job market, and with that they know the demand for gas will be down. They currently are 'artificially' raising the price of gas. Didn't you wonder why with oil so low, gas has been creeping back up?

But, we do need to gear up and get the machinery in motion. We don't have to pull production from the wells - and right now, at $40 per barrel, we can't (the oil companies would lose money on a lot of the production in the US at that price). Do the exploration, but how do you do that if you know you probably won't make money on it, in the sort term? The government could go in and on those long term investments and create tax incentives, on 'long term' capital gains.

The government could also create ways to find better ways to extract oil. How to creative incentives for that is difficult though. There wouldn't be profit in it for perhaps decades. For instance oil shale, currently it is way too expensive to even think about unless oil gets to about $200 a barrel. But, we should have the ways and the means ready... We may need to use it in the future.

What we don't need is drilling in Arches National Monument. There are plenty of other reserves that can be tapped, long before that should happen. Some of the plots of land that Salazar took of the table in Utah were in Arches. In fact, if you were standing on the bluffs behind Rainbow Bridge - you would have been able to see the rigs... right above the arch.

I am not quite ready to give up all of our natural beauty for exploration yet...

 

[luxuryrules]

Our "lifestyles" are efficient enough. This is imposing a political agenda on society that it doesn't want and has consciously rejected it. It is based on wrong assumptions and is unethical for the government to do this.

If you don't like the government doing this, then do what every responsible American citizen will do. Vote them out. Whining about it on the internet is not going to accomplish anything. Besides, what you see as them "imposing a political agenda on a society that doesn't want it" could also be perceived as "protecting the natural beauty of the world around us." Who is to say what their motives truly are?
Is it ethical for them to prevent us from tapping our own reserves? I'll leave that to the philosophers, of which I am not.

I should not be forced to change my lifestyle to fit your unrealistic view of how "efficient" it should be. Government should not artifically drive up prices to do that. It is wrong and an abuse of power for the government to take that action.

Who says my view is unrealistic? Everywhere else in the world people drive smaller cars and live more efficient lifestyles, and they manage to scrape by just fine. What's so unrealistic about Americans living the same way?

I'm just pointing out that if market forces dictate that fuel should get prohibitively expensive, we have two options: pay for it, or use less of it. By choosing to use less of it, we can blunt the effect of increases in price or; by simply keeping demand down, fundamental economics dictate the price will stay down too (unless production/supply is cut).

But, you're right, let's drill our way out of it and we'll keep having cheap fuel for another few decades. That has long term solution written all over it.

 

[04SCTLS]

In 1980 in Canada, Trudeau brought in his National Energy Policy and within 2 years jacked the price .40 cents higher by increasing the fuel tax.
People were confused because Canada went metric in 1980 and the pumps were changed over to liters.
5 cents a liter becomes 19 cents a US gallon but people didn't complain.
This windfall Trudeau used to expand the Canadian welfare state and the provincial governments also increased their fuel taxes to help pay for universal healthcare.
Canada is sort of self sufficient in energy but gas prices are .40 to 1.00 dollar higher than the US mostly to pay for social programs.
I fear this kind of situation may come to pass here under Obama.

 

[XLRVIII]

That little yellow Zone off the coast of florida, but above Cuba..

China is already drilling there, sucking oil from ALL that red area that "we" aren't drilling.

we keep our little RED ZONES and the rest of the world sucks those zones dry from ajoining areas...

GOOD PLAN.. LEAVE ALL THAT OIL FOR CHINA!!!
*shakes head*

 

[shagdrum]

Besides, what you see as them "imposing a political agenda on a society that doesn't want it" could also be perceived as "protecting the natural beauty of the world around us." Who is to say what their motives truly are?

Who's to say? Their actions and the justification and defense of those actions speak for themselves.

And I don't care what their justification is, they are taking away right that they are not constitutionally allowed to take. It is unconstitutional, unethical and an abuse of power.

Is it ethical for them to prevent us from tapping our own reserves?

Yes!

Who says my view is unrealistic? Everywhere else in the world people drive smaller cars and live more efficient lifestyles, and they manage to scrape by just fine. What's so unrealistic about Americans living the same way?

So...just because everyone else is doing it means it is not in some way unrealistic? There are massive protests over the high price of gas all across europe. In the long term, it is not economically sustainable. Technology can only get so far in terms of efficientcy before you have to start making compromises in reliability, comfort and (most importantly) safety; forcing a lifestyle change to meet an arbitrary (and unrealistically high) efficency standard.

I'm just pointing out that if market forces dictate that fuel should get prohibitively expensive, we have two options: pay for it, or use less of it.

Market forces have not show (or dictated) that. The reason oil prices are so high in other countries is taxes and fees imposed by the government, not supply and demand.

The government here artificially limits (and bottlenecks) supply, allowing OPEC to have undue influence on price. When market forces are allowed to work, prices are not as artifically inflated.

 

[shagdrum]

What had a bigger affect was the fact we were using less oil and buying cars that got better mileage.... OPEC wants us hooked on oil, anyone's oil, even if it is domestic oil. They know they will get their share of the profits...

I'd like to see you prove that. It is nothing more then speculation. Prices always ramp up going into the summer and drop after summer. Their is a bubble every year. Every year it is a little worse, but tends to even out. The drop this year was quite a bit different for a number of reasons.

People have maintained their low levels of driving due to fears about the economy, and the opening up of areas to drill had a huge psychological effect on the economy.

What is odd is gas is going up - why?

They always start to go up this time of year and peak in the summer. A bubble always develops over the summer.

Because the refineries have curtailed some activities.

Oil refineries are mandated by the government to make certian mixtures for certian times of the year and for certian areas of the country. They have to shut down and retool to be able to make a different blend. It happens every year.

So, while oil reserves are huge, gas reserves are down.

How long has it been since we have built refineries in this country? 25, 30 years?

They have cut back because they see the fall in the job market, and with that they know the demand for gas will be down. They currently are 'artificially' raising the price of gas.

More baseless speculation passed off as fact from foxpaws.

Didn't you wonder why with oil so low, gas has been creeping back up?

Not really. As I pointed out, we haven't been allowed to build refineries in this country for decades, so that is a huge bottle neck in the supply of gas. They are also required by the government to change blends for certian times of the year and certian areas of the country. Thank you Democrats.

Do the exploration, but how do you do that if you know you probably won't make money on it, in the short term? The government could go in and on those long term investments and create tax incentives, on 'long term' capital gains.

Government can create incentives. Tax cuts on capital gains is one way. Corporate tax cuts too. Giving an exemption on the mandatory changing of blends for oil drilled in US teritories. There are plenty of mechanisms that can be used. The Democrats won't allow any of that though.

What we don't need is drilling in Arches National Monument. There are plenty of other reserves that can be tapped, long before that should happen. Some of the plots of land that Salazar took of the table in Utah were in Arches. In fact, if you were standing on the bluffs behind Rainbow Bridge - you would have been able to see the rigs... right above the arch.

I am not quite ready to give up all of our natural beauty for exploration yet

Says who?

Just because you don't want that doesn't give you the right to impose your radical agenda on all of society; a society which has rejected that agenda.

Besides, the means to extract oil very cleanly with minimal permenant footprint are available today. So to assume that drilling would ruin our "natural beauty" is either ignorant or a bit of a red herring.

Also, beauty is very subjective. Just because you find no drilling beautiful doesn't mean that the next person would. Maybe they find more beauty in capitalism or have no concern for it at all.

 

[shagdrum]

I would just think that maybe and that is a big maybe if they started pulling in large quantities of oil off the shore of the US they would stop buying from over seas. Then maybe just decide they have the ability to set a higher price tag for it because it is domestic. Like I said, it was just a thought that I really dont see happening myself.

Your instincts were right. It wouldn't happen for a number of reasons the biggest of which is the prisoner's dilemma.

In this instance, it would mean that even if 2 or more oil companies agreed to fix prices, they cannot be sure another company won't come along and offer gas at a lower price, or that one of the companies that agreed to fix prices wouldn't all of a sudden undercut them and steal some of their market share.

Also, drilling here would not negate importing of oil as well. It would simply add more supply worldwide and would drive down prices worldwide (which would include America).

 

[foxpaws]

SIOUX FALLS, South Dakota (AP) -- Oil prices plummeted below $36 Wednesday on more evidence that U.S. storage facilities are bulging with unused crude.

Light, sweet crude for March delivery fell $1.99 to settle at $35.94 a barrel on the New York Mercantile Exchange.

Oil closed under $40 Monday for the first time in several weeks, and has closed lower every day since.

A weekly report from the Energy Information Administration showed that crude inventories jumped by 4.7 million barrels for the week ended Feb. 6. That easily surpassed the expectations of analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., who expected a boost of 3.4 million barrels.

Including last week's build up, crude inventories have increased by more than 30 million barrels in the past five weeks.

But gasoline futures soared on Nymex when the same report showed that U.S. inventories had declined by 2.6 million barrels, surprising trader who expected stockpiles to grow by 900,000 barrels.

"Demand went positive for the first time in recent memory, over a year ago, so that's given us a little bit of support," said Phil Flynn, an analyst at Alaron Trading Corp.

Retail gasoline prices have been a sore point for motorists in recent weeks, as prices at the pump rise even with oil in the doldrums.

Prices at the pump rose again Wednesday, and the EIA report spelled out some of the reasons why.

Refiners took in 214,000 fewer barrels of crude last week and gasoline production fell, the EIA reported.

The companies that own refineries are seeing the same dour headlines about job losses, and have slashed production as they try do match supply with demand.

That means there is less gas on the market, and consumers are seeing that at the pump.

The national retail average price for a gallon of regular gas rose 1.2 cents to $1.94 a gallon (51 cents a liter) overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 15 cents a gallon above what it was a month ago, but about $2.17 below last July when prices peaked at $4.11 a gallon ($1.08 a liter).

"Weak product demand is forcing these refiners to curtail activities, cutting runs, and that backs crude up into terminals, pipelines and floating storage, etc.," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "At the same time, it reduces gasoline production."

Many refiners shut down early this year for regular maintenance due to a growing consensus that millions of lost jobs will translate into less demand for gasoline.

A dismal forecast by the International Energy Agency on Wednesday further highlighted falling demand.

The Paris-based agency lowered its estimate for global oil demand in 2009 by 570,000 barrels to 84.7 million barrels per day because of the worsening economic downturn. The lowered forecast came after the International Monetary Fund predicted the world economy to grow by only 0.5 percent.

"Not only will the two-year contraction in oil demand be the first since the early 1980s, but 2009's decline will also be the largest since 1982," the IEA said.

The IEA forecast arrived one day after the U.S. Energy Information Administration predicted global oil consumption would decline by 1.2 million barrels a day this year.

Flynn said any optimism has to be tempered because of the continued build in crude inventories.

"People are going to realize that at some point, that oil is going to come to market," he said. "And when it does, it could dramatically pressure prices to the downside."

Addison Armstrong, director of market research at Tradition Energy, said the latest China customs data show net January crude imports that dropped to the lowest level in 13 months.

"The decreases are the result of the slowing economy, which has caused manufacturing plants to be closed and electricity generation to shrink," Armstrong wrote in a research note.

Oil had been trading near $40 for about two weeks, underpinned by OPEC production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global crude supply, said earlier this week it has completed about 80 percent of 4.2 million barrels per day of output cuts announced since September.

 

[foxpaws]

I'd like to see you prove that. It is nothing more then speculation. Prices always ramp up going into the summer and drop after summer. Their is a bubble every year. Every year it is a little worse, but tends to even out. The drop this year was quite a bit different for a number of reasons.

Consumption. Total petroleum products consumption in 2008 declined by almost 1.2 million bbl/d, or 5.8 percent, from the 2007 average, the largest annual decline since 1980 (U.S. Petroleum Products Consumption Growth). The major factors behind the fall in consumption were a rapid rise in retail prices to record levels during the first half of 2008 followed by a weakening economy in the second half. Motor gasoline consumption in 2008 declined by 320,000 bbl/d, or 3.4 percent. Despite the cold weather that gripped much of the Lower-48 States in December, distillate fuel consumption in 2008 fell by 5.4 percent from the previous year as a result of precipitous declines in transportation consumption of diesel fuel. Major reductions in airline capacity during the fourth quarter contributed to the 100,000-bbl/d, or 6.2-percent, drop in jet fuel consumption. Total petroleum products consumption in 2009 is projected to fall by a further 460,000 bbl/d, or 2.4 percent, because of continued economic weakness. Consumption of both motor gasoline and distillate fuel are projected to decline by about 100,000 bbl/d each. Jet fuel is forecast to fall by a further 60,000 bbl/d. The expected economic recovery in 2010 is projected to boost total petroleum products consumption by 220,000 bbl/d, or 1.1 percent.

People have maintained their low levels of driving due to fears about the economy, and the opening up of areas to drill had a huge psychological effect on the economy.

I don't understand this - by saying that we would open up most of the US to drilling, the economy got better?

US can't afford to drill in the areas opened up - even at $80 a barrel or more. OPEC likes to keep oil in that range - they make good money, and they make sure we don't drill, no matter how many areas we open up. OPEC isn't served by having oil at $120 a barrel.

They always start to go up this time of year and peak in the summer. A bubble always develops over the summer.

How long has it been since we have built refineries in this country? 25, 30 years?

Not really. As I pointed out, we haven't been allowed to build refineries in this country for decades, so that is a huge bottle neck in the supply of gas. They are also required by the government to change blends for certian times of the year and certian areas of the country. Thank you Democrats.

I believe 30+ years. There was talk of building more after Katrina, but, I don't believe any got started.

In 1981, the US had 324 refineries with a total capacity of 18.6 million barrels per day, the Department of Energy reports. Today, there are just 132 oil refineries with a capacity of 16.8 million b.p.d., according to Oil and Gas Journal, a trade publication.

What they now do is get more capacity out of existing refineries, without building new ones. Also, there is a concern that the current consumption levels will continue to drop over the next decade, as higher efficiency vehicles replace the aging vehicle population. Also, population trends are moving from suburbs closer into the city (or work) - closer commutes mean less miles traveled. Building new refineries probably isn't in the near future for the US, it doesn't make very good business sense to be building in an area that is forecasted to be shrinking. That is why they keep expanding the output of the ones we have. They are far more efficient than they were in the past. Also EPA standards make it difficult to build new ones. All-in-all there currently is a situation of 'what if you build a refinery and nobody came?'

Government can create incentives. Tax cuts on capital gains is one way. Corporate tax cuts too. Giving an exemption on the mandatory changing of blends for oil drilled in US teritories. There are plenty of mechanisms that can be used. The Democrats won't allow any of that though.

Change the blends - why?

Just because you don't want that doesn't give you the right to impose your radical agenda on all of society; a society which has rejected that agenda.

Besides, the means to extract oil very cleanly with minimal permenant footprint are available today. So to assume that drilling would ruin our "natural beauty" is either ignorant or a bit of a red herring.

Also, beauty is very subjective. Just because you find no drilling beautiful doesn't mean that the next person would. Maybe they find more beauty in capitalism or have no concern for it at all.

No shag, somethings at least should be left for the day we enter our MadMax society phase. Once they have torn apart our western plateaus for fossil fuel, we have off shore rigs dotting the eastern seaboard, and you can see 'grasshoppers' from the Mississippi to the base of the Rockies... Then we can start to strip things we can't get back. Obviously you have never watched the sun rise in Arches. Just because you can't appreciate natural beauty doesn't mean most of us can't. Those capitalists can sit in Ogallalla and see oil being pumped up for miles and miles. Let them sit there and watch the sun rise above a holding tank, counting their cash. There is enough room in the US for both sides of this.

 

[shagdrum]

SIOUX FALLS, South Dakota (AP) -- Oil prices plummeted below $36 Wednesday on more evidence that U.S. storage facilities are bulging with unused crude.

Light, sweet crude for March delivery fell $1.99 to settle at $35.94 a barrel on the New York Mercantile Exchange.

Oil closed under $40 Monday for the first time in several weeks, and has closed lower every day since.

A weekly report from the Energy Information Administration showed that crude inventories jumped by 4.7 million barrels for the week ended Feb. 6. That easily surpassed the expectations of analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., who expected a boost of 3.4 million barrels.

Including last week's build up, crude inventories have increased by more than 30 million barrels in the past five weeks.

But gasoline futures soared on Nymex when the same report showed that U.S. inventories had declined by 2.6 million barrels, surprising trader who expected stockpiles to grow by 900,000 barrels.

"Demand went positive for the first time in recent memory, over a year ago, so that's given us a little bit of support," said Phil Flynn, an analyst at Alaron Trading Corp.

Retail gasoline prices have been a sore point for motorists in recent weeks, as prices at the pump rise even with oil in the doldrums.

Prices at the pump rose again Wednesday, and the EIA report spelled out some of the reasons why.

Refiners took in 214,000 fewer barrels of crude last week and gasoline production fell, the EIA reported.

The companies that own refineries are seeing the same dour headlines about job losses, and have slashed production as they try do match supply with demand.

That means there is less gas on the market, and consumers are seeing that at the pump.

The national retail average price for a gallon of regular gas rose 1.2 cents to $1.94 a gallon (51 cents a liter) overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 15 cents a gallon above what it was a month ago, but about $2.17 below last July when prices peaked at $4.11 a gallon ($1.08 a liter).

"Weak product demand is forcing these refiners to curtail activities, cutting runs, and that backs crude up into terminals, pipelines and floating storage, etc.," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "At the same time, it reduces gasoline production."

Many refiners shut down early this year for regular maintenance due to a growing consensus that millions of lost jobs will translate into less demand for gasoline.

A dismal forecast by the International Energy Agency on Wednesday further highlighted falling demand.

The Paris-based agency lowered its estimate for global oil demand in 2009 by 570,000 barrels to 84.7 million barrels per day because of the worsening economic downturn. The lowered forecast came after the International Monetary Fund predicted the world economy to grow by only 0.5 percent.

"Not only will the two-year contraction in oil demand be the first since the early 1980s, but 2009's decline will also be the largest since 1982," the IEA said.

The IEA forecast arrived one day after the U.S. Energy Information Administration predicted global oil consumption would decline by 1.2 million barrels a day this year.

Flynn said any optimism has to be tempered because of the continued build in crude inventories.

"People are going to realize that at some point, that oil is going to come to market," he said. "And when it does, it could dramatically pressure prices to the downside."

Addison Armstrong, director of market research at Tradition Energy, said the latest China customs data show net January crude imports that dropped to the lowest level in 13 months.

"The decreases are the result of the slowing economy, which has caused manufacturing plants to be closed and electricity generation to shrink," Armstrong wrote in a research note.

Oil had been trading near $40 for about two weeks, underpinned by OPEC production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global crude supply, said earlier this week it has completed about 80 percent of 4.2 million barrels per day of output cuts announced since September.

Is any of that "unused crude" refined? Or is it waiting to go through the refineries which are down right now retooling for different blends? This line from your article would suggest that that may be the case:

Refiners took in 214,000 fewer barrels of crude last week and gasoline production fell​

This line also seems to support this theory, considering the unique circumstances of oil production in this country:

"Weak product demand is forcing these refiners to curtail activities, cutting runs, and that backs crude up into terminals, pipelines and floating storage, etc.," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "At the same time, it reduces gasoline production."
​

Normally, this would mean lower prices, but you have to consider the huge bottleneck in refining in this country.

Going off last years numbers (in large part), they make estimates on demand for this year and plan accordingly. Clearly the oil companies got too much oil and had more then the oil refineries needed to meet demand (demonstrated by the fact that they have been having to cut runs to meet demand). Now is the time of year that they are also retooling to change blends, so refining capacity always drops this time of year and prices rise as the supply ready for market drops below the level to meet demand.

you seemed to overlook this line in your highlighting:

Many refiners shut down early this year for regular maintenance due to a growing consensus that millions of lost jobs will translate into less demand for gasoline.​

Interestingly, the article never provides any proof that the reason for refineries shutting does for regular maintenance is due to a "growing consensus that millions of lost jobs will translate into less demand for gasoline".

Logically, that conclusion doesn't follow that premise. Considering the AP's tendancy for distortion through underhanded speculation of the author's of it's articles passed off as objective reporting, this should probably be taken with a grain of salt.

It is just as likely that it is simply due to being "regular maintenance" to retool for different blends of gas (as they historically have at this time of year).

You need to consider the fact that profits for oil companies are very volatile; they can make huge profits and can experience huge losses, depending on fluctuations in the market. That is simply the nature of the business.

Also, the same forces that artificially inflated the price or crude last summer to near $150 a barrel are artificially keeping prices low. That is another economic bubble that is going to burst, and we are seeing the market correction. Some economists have estimated that through purely supply and demand market forces, gas should be selling at around $60-$70 dollars a barrel. It is currently selling around $40.

Refineries cannot make enough money to support the scale of operation they have, so they are curtailing activities to meet the current demand.

Everything in that article is easily explained by market forces and a basic understanding of economics. Nothing is explained only by a dishonest and underhanded attempt to artificially inflate prices by the oil companies (outside of OPEC).

Unless you can discount other just as likely, free market based possibilites, your view is based on speculation assumed as fact.

 

[foxpaws]

Is any of that "unused crude" refined? Or is it waiting to go through the refineries which are down right now retooling for different blends? This line from your article would suggest that that may be the case:

Refiners took in 214,000 fewer barrels of crude last week and gasoline production fell​

They are backing up the pipeline of oil because the demand for gas at the pump is down. They factor in the retooling between the refineries and go down a group at a time so the levels are kept constant. No refineries are operating at capacity right now, because the demand is off. Some are running short shifts or have taken shifts down.

"Weak product demand is forcing these refiners to curtail activities, cutting runs, and that backs crude up into terminals, pipelines and floating storage, etc.," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "At the same time, it reduces gasoline production."
​

Normally, this would mean lower prices, but you have to consider the huge bottleneck in refining in this country.

Right now there isn't a bottleneck at the refinery level - if anything there is a bottleneck at the consumer level. As the quote stated 'weak product demand' is why they are slowing down at the refineries.

you seemed to overlook this line in your highlighting:

Many refiners shut down early this year for regular maintenance due to a growing consensus that millions of lost jobs will translate into less demand for gasoline.​

Interestingly, the article never provides any proof that the reason for refineries shutting does for regular maintenance is due to a "growing consensus that millions of lost jobs will translate into less demand for gasoline".

No shag, read closer - they shut down 'earlier' that is what happened due to the lower demand for gasoline. They were able to move their maintenance schedules up, because there isn't a gasoline pipeline fill problem right now. (and I went back and highlighted it - sorry - probably right before you posted your answer).

Logically, that conclusion doesn't follow that premise. Considering the AP's tendancy for distortion through underhanded speculation of the author's of it's articles passed off as objective reporting, this should probably be taken with a grain of salt.

Nope, it does make sense. If demand is low, it is the time to take your refinery off-line for maintenance. You do that in hopes that as spring and summer approaches that demand will increase, and you will be running at capacity to meet the higher demand.

You need to consider the fact that profits for oil companies are very volatile; they can make huge profits and can experience huge losses, depending on fluctuations in the market. That is simply the nature of the business.

Also, the same forces that artificially inflated the price or crude last summer to near $150 a barrel are artificially keeping prices low. That is another economic bubble that is going to burst, and we are seeing the market correction. Some economists have estimated that through purely supply and demand market forces, gas should be selling at around $60-$70 dollars a barrel. It is currently selling around $40.

Gas doesn't sell at barrel rates - oil should be at about $70 a barrel right now, but OPEC was slow in responding to the weakening demand worldwide.

Refineries cannot make enough money to support the scale of operation they have, so they are curtailing activities to meet the current demand.

Everything in that article is easily explained by market forces and a basic understanding of economics. Nothing is explained only by a dishonest and underhanded attempt to artificially inflate prices by the oil companies (outside of OPEC).

Unless you can discount other just as likely, free market based possibilites, your view is based on speculation assumed as fact.

And Shag - none of this made sense to me - I went by supply and demand. Maybe you are confusing me with another liberal . I stated that we were using less oil - so prices fell with the lack of demand... Am I wrong there? Supply and demand had far more to do with the lowering prices that then the perception by OPEC that we might open or close areas for drilling.

And you are stating in the first paragraph of this last quote that the refineries are scaling back to meet current demand. That isn't bottleneck at all. That is just the opposite isn't it? They actually have more capacity - but are curtailing production. Scaling supply to meet demand.