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By Samuel R. Avro on Jun 24, 2011 with 47 responses

US, Other Countries Battle OPEC With Release From Oil Reserves

While Robert continues his trip to Europe and across the Continental U.S., a significant piece of news has been dominating the headlines. Although we’ve been closely monitoring the release of 60 million barrels of crude on our Energy Ticker page, we also wanted to generate some discussion on the topic, here, on the R-Squared Energy Blog.

Robert has, in the past, covered the topic of using the Strategic Petroleum Reserve as a weapon to control prices. In one article, he argued against politicians who were calling for a release, titling the essay: “Speculator’s Political Reserve?“. Robert also observed the Jekyll & Hyde phenomenon in “Contradicting Goals: Cheap Gas and Lower Carbon Emissions“. The topic was also covered in his “Debunking Five Myths about Gas Prices” essay.

To kick things off, here’s a quick bullet-point roundup of facts and analysis:

There certainly are more angles to this story than the above links covered, so feel free to add your own thoughts or links in the comments. We may edit the above list to include new information or interesting thoughts and links posted in the comments.

  1. By Lindsay Curren on June 24, 2011 at 11:44 am

    Given that 60 million barrels of oil equals 17 hours of world energy consumption, it’s a pretty ridiculous effort to do anything, from affecting prices in a meaningful way to affecting the trenchant recession to impacting the political scene. I tear the whole premise apart today on Transition Voice www . transitionvoice . com

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  2. By Optimist on June 24, 2011 at 2:19 pm

    Speaking of indices: my respect for the president tumbled to an all-time low. The man showed un utter lack of understanding of the challenges he faces with the oil market (and energy markets in general) and appears to be out trying to score cheap political points in an effort to blunt criticism about his handling of the economy. It reeks of desperation. Looking at the clowns lining up to run against him, desperation is not what I would have expected from the man who gave the brave order to knock out Osama bin Laden in Pakistan.

    A recurring theme in the criticism that business people level against the president is that his policies tend to increase uncertainty. The uncertainty in turn makes it hard for the business community to plan ahead and to make investment decisions. This little political stunt will increase uncertainty in oil markets to levels OPEC could only dream of achieving.

    Here’s how I see this dangerous precedent affecting future oil markets. Next time oil hits $100/bbl, the blame-the-speculators crowd (who will be much emboldened by the stunt) will demand immediate release from the SPR. Having given in to no pressure already, how is the president going to resist?

    Then there is the market: once bitten, twice shy, as the saying goes. Next time oil prices trend upward, the oil industry, already overcautious about investing, would be even less likely to respond to the price signal. Would you invest, if the president may try to cut the price for your product at any time, as a way to score political points? This the where the uncertainty comes back to hurt.

    Finally, there are our “allies” at OPEC. You can see how the debate will play out: as Saudi Arabia tries to make the case for bigger quotas, Iran and Venezuela would say: Why allow the US president to undercut us? Let him tap the SPR first, then let’s talk about higher quotas. This could become an interesting game of chicken, at the expense of the people the stunt was supposed to support.

    So nice job, Obama! Before yesterday I assumed you were coasting to re-election. Now I’ll be rooting for the other side.

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  3. By Optimist on June 24, 2011 at 2:33 pm

    It’s almost as if the president ready RR’s related post: Democrats and Energy and decided that he wanted prove RR right. Would be funny, if it wasn’t so sad.

     

    Of course, once the market has had the time to understand what a drop in the bucket 60 million barrels is, the next release (and you can bet that there will be one), will have to be much bigger to make a dent. See as there is only 700 million barrels and some change in the SPR, you pretty soon have to put it all on the table, just to show that you are a serious player. And then you’ve shot you wad. If a real crisis then rolls around, we are all going to be regretting the stunt.

     

    This proves David Brook’s recent comment: “As for the Democrats, they offer practically nothing.”

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  4. By paul-n on June 24, 2011 at 3:28 pm

    See as there is only 700 million barrels and some change in the SPR, you pretty soon have to put it all on the table, just to show that you are a serious player.

    Well, unless Obama can get Congress to agree to change the rules, he can’t put it all on the table, only the first 227 of the 727m barrels.

    With thanks to Weekend Peak at The Oil Drum;

     

    The US is selling the maximum quanitity of oil allowed under 42 U.S.C. 6241

    (h) Prevention or reduction of adverse impact of severe domestic energy supply interruptions
    (1) If the President finds that—

    (A) a circumstance, other than those described in subsection (d) of this section, exists that constitutes, or is likely to become, a domestic or international energy supply shortage of significant scope or duration;

    (B) action taken under this subsection would assist directly and significantly in preventing or reducing the adverse impact of such shortage; and

    (C) the Secretary of Defense has found that action taken under this subsection will not impair national security,

    then the Secretary may, subject to the limitations of paragraph (2), draw down and sell petroleum products from the Strategic Petroleum Reserve.

    (2) Petroleum products from the Reserve may not be drawn down under this subsection—

    (A) in excess of an aggregate of 30,000,000 barrels with respect to each such shortage;

    (B) for more than 60 days with respect to each such shortage;

    (C) if there are fewer than 500,000,000 barrels of petroleum product stored in the Reserve; or

    (D) below the level of an aggregate of 500,000,000 barrels of petroleum product stored in the Reserve.

    So with the 30m barrels, Obama is maxing out his oil credit card here.

     

    Until he can define a “new” emergency for another 30m barrels..

     

    If I was OPEC, I think now would be a good time for some unscheduled “maintenance” outages.

     

    Of course, the drop in prices will cause some marginal domestic production to shut down.

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  5. By biocrude on June 24, 2011 at 3:43 pm

    Sam, great post.  

    Great points above guys.  I just can’t get over my disgust at Obama for his release of the SPR.  Even GW didn’t do anything this short sighted in terms of energy… 

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  6. By savro on June 24, 2011 at 6:18 pm

    Optimist said:

    Finally, there are our “allies” at OPEC. You can see how the debate will play out: as Saudi Arabia tries to make the case for bigger quotas, Iran and Venezuela would say: Why allow the US president to undercut us? Let him tap the SPR first, then let’s talk about higher quotas. This could become an interesting game of chicken, at the expense of the people the stunt was supposed to support.

    Good points, Optimist. I’m actually waiting to see how OPEC responds, because they’re not likely to just sit back and allow a new player to “meddle around” in their “market.” This could become really interesting. Indeed, OPEC members are already hinting at retaliation.
     

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  7. By Optimist on June 24, 2011 at 7:23 pm

    Thanks Sam,
    Did you see this quote (from your link)? The IEA said its surprise move–only the third emergency release in the agency’s history–is designed to address a real oil shortage rather than about influencing oil prices. It must be some kind of record for jamming the most BS into a single sentence!

    There is a real oil shortage out there, but prices are falling (even before the stunt)?

    Let’s look at some of the facts, coutesy of The Financial Times: The International Energy Agency had been tracking the precarious situation in the oil market since February, as Libyan oil production had collapsed from a pre-crisis level of 1.6m barrels a day, to just 200,000 b/d by early April. Note that the 1.4 mbpd loss equates to 1.75% of global oil use (~80 mbpd).

    Also: “The situation in Libya wasn’t causing huge supply problems, but was driving up the oil price,” a government official from a European country says. “And the macro-economic arguments about the danger of this trend made sense to us.” Oh-oh. Somebody didn’t get the IEA memo.

    But wait! It gets worse: Former and current officials said that the US, Japan and the European countries slowly convinced themselves that the situation ticked all the necessary boxes to justify a release of oil from the reserves: there was a large disruption in supply, [1.75% sure is a large disruption in supply] no prospect of an increase in output by Opec, [I guess Saudi Arabia was talking to itself] demand was set to increase over the summer [though high prices were trimming that back] and the economy was hurting. And if Mr. O thinks this will fix the economy, he really has NO idea.

    Finally: Washington found the Saudis willing to ensure adequate supply. The IEA nonetheless decided to send a clear message to the market that it was ready to act. Nice of our elected prostitutians to grandstand for us, isn’t it? Makes me so confident in the future…

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  8. By Rufus on June 24, 2011 at 7:42 pm

    It’s the ethanol subsidies what’s at fault.

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  9. By DownToTheLastCookie on June 25, 2011 at 10:11 am

    Wow, I was wondering if the posters here could back their bus up one more time and make sure Mr. O is as flat as a pancake. Just what uncertainty has the release of 30 million barrel done ? None. One could argue less uncertainty. This is a wake up call for the 95 % that are cluesless out there that the world has an energy problem. Now isn’t that a good thing ?

    The only real answer to the world energy problem is increase efficiency and demand reduction. Of course, efficiency takes lead time and capital investment. So you just got an offical warning, a little extra time and a few extra bucks in your pocket to get your ducks in order for the future.

    The glass is half full, not half empty. Take the facts for what they are and get out of your bus and start walking. You will be healthier and a better person for it.

    Thanks Robert for a lot of quality written articles

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  10. By Rufus on June 25, 2011 at 10:56 am

    BP expects to begin production at their 36 Million gpy grass-to-ethanol facility in Florida in 2013. This, after operating their 1.4 million gpy facility in Jennings, La for several years, now.

    http://www.facebook.com/notes/…..0238058413

    After all the Screeching, Caterwauling, Wailing, and Gnashing of Teeth, this is the only answer available to us at this time (that can be ready “in time.”)

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  11. By rrapier on June 25, 2011 at 3:23 pm

    Nothing quite brings out Democratic schizophrenia like the SPR. Here is Joe “We Must Use Less Petroleum” Romm telling us why using the SPR to lower gas prices is a good idea. Note that the comments universally ask him if he is insane.

    RR

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  12. By rrapier on June 25, 2011 at 3:26 pm

    Rufus said:

    BP expects to begin production at their 36 Million gpy grass-to-ethanol facility in Florida in 2013. This, after operating their 1.4 million gpy facility in Jennings, La for several years, now.

    http://www.facebook.com/notes/…..0238058413

    After all the Screeching, Caterwauling, Wailing, and Gnashing of Teeth, this is the only answer available to us at this time (that can be ready “in time.”)


     

    I see you still haven’t learned not to count your chickens. If all of those cellulosic facilities that you have been talking about for years had delivered we would be swimming in cellulosic ethanol. I think I will wait until it is actually steadily producing before putting this in the “answer” category.
    RR

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  13. By paul-n on June 25, 2011 at 3:27 pm

    From the front page, “China supports IEA move” – well – duh!

     

    China is the biggest winner out of this whole exercise.  The second largest oil user in the world has not had to release any oil, and now has a great opportunity to buy even ore oil away from the OECD countries, at reduced prices.

    I think the non Saudi OPEC countries will retaliate, they have to regain the initiative.  It would be interesting if they did announce a co ordinated cutback, effectively daring the IEA to do another release.  The IEA (or the US SPR, anyway) only has six shots in the revolver, but the OPEC countries can go on longer, though they will have their own financial pain to bear.

    If there is a tit for tat “supply war” then one good thing that might come out of it is admission by the OECD countries that oil is now an unreliable energy supply – whoever gets off it first – wins.

    Time for another look at those CNG trucks…

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  14. By Rufus on June 25, 2011 at 4:25 pm

    Did you see where our Net Imports of Nat Gas were UP in 2010? From 2.2 Tcf to 2.5Tcf?

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  15. By Rufus on June 25, 2011 at 4:59 pm

    Accellerase Trio is an enzyme cocktail optimized to break down the difficult C5 and C6 sugars in various biomass feedstocks, potentially improving producers’ yields by up to 20 percent over Genencor’s previous best enzyme package, Accellerase Duet.

    “Trio moves us along the line of decreased cost and use,” said Aaron Kelley, business development director at Genencor. “With the same dose that you would use of Duet, you’ll get improvements in conversion. It depends on the biomass substrate and pretreatment, but potentially 10 to 20 percent improvement on yield. Or, you can choose the lower enzyme dose to maintain the same conversion you had with Duet and in that case typically you’re seeing a two-fold dose reduction.”

    http://www.ethanolproducer.com…..ic-ethanol

    There are just too many big companies saying they’re going to begin construction this year, Robert. I take companies like BP, Dupont, Abengoa very seriously (I take Poet seriously, also, but I don’t know if they’ll be able to come up with the money.)

    I know one thing; I can’t think of any other technology that has the potential to make a difference anywhere near the time frame as cellulosic ethanol. And, I know we’re going to have to do something.

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  16. By mac on June 25, 2011 at 6:32 pm

    Paul said
    “Time for another look at those CNG trucks…”

    Benny, “the floor is yours,,,,,,,,,,,,,,,,,,”

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  17. By mac on June 25, 2011 at 7:01 pm

    Rufus said:

    “Did you see where our Net Imports of Nat Gas were UP in 2010? From 2.2 Tcf to 2.5Tcf?”

     

    I also mentioned this to Robert about 2 or 3 years ago and he simply said it was a matter of economics.  It was (at that time) cheaper to

    iimport natural gas from Canada than to pipe it into Northeast markets.

     

    The Marcellus Shale may change all that. The same goes for the natural gas we import from Mexico. With the recent massive shale discoveries in the Northeast and Texas, all that may change,

     

    The U.S. imports LNG on the East Coast, but we also export LNG from Alaska to Japan.  I thinik it’s mosty an issue of geography and simple  economics.

     

     

     

     

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  18. By Rufus on June 25, 2011 at 7:23 pm

    Weelll, I don’t know, Mac. That number is Net Imports.

    We export a little, but On Net we Import 2.5 Trillion cu. ft. more than we export.

    And, with all that shale gas, and the pipeline from Colorado the number still went UP, not Down. If we start running trucks on Nat Gas it will be Imported Nat Gas. Oh, and I think I read that Canada’s nat gas production is falling, not rising; that means we’d probably be importing LNG on the world market.

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  19. By mac on June 25, 2011 at 10:22 pm

    OPEC is producing just about the same amount of oil that they were producing 25-30 years ago, while OCED oil production has doubled.in the same period.

    Oh, well……

    Sing me a song of six-pence….

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  20. By rrapier on June 25, 2011 at 10:22 pm

    Rufus said:

    You cut it one year short, Robert.

    2009: 20.6 – 22.8 = -2.2

    2010: 21.6 – 24.1 = -2.5

    First column – Production , Second column – Consumption, Third Column – Net Imports


     

    I just grabbed the latest annuals at EIA. One thing yours don’t account for is what went in and out of storage. Prices have been depressed; there is a lot more shale gas that can come online. But the net import trend has been pretty consistent since the shale gas revolution started.

    RR

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  21. By mac on June 25, 2011 at 7:55 pm
    “Weelll, I don’t know, Mac. That number is Net Imports.

    We export a little, but On Net we Import 2.5 Trillion cu. ft. more than we export.

    And, with all that shale gas, and the pipeline from Colorado the
    number still went UP, not Down. If we start running trucks on Nat Gas
    it will be Imported Nat Gas. Oh, and I think I read that Canada’s nat
    gas production is falling, not rising; that means we’d probably be
    importing LNG on the world market.”

    .

     

    Yup. Exxon has  an LNG deal with Quatar and freighters chock full of nat gas (LNG)

    All are eagerly waiting to descend upon the U.S.

     

    The only way to get away from OIL is to actually get away from it.  Not just make cosmetic changes to the present structure.

     

    That means bio-fuels, electricity, etc.

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  22. By Rufus on June 25, 2011 at 8:07 pm

    http://cleantechnica.com/2011/…..this-year/

    Solar powered Computer from Samsung

    $399.00 coming in July

    14 hr battery

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  23. By Rufus on June 25, 2011 at 8:13 pm

    They’re taking 35 yr. old solar panels down that are still within factory specs, and now they’re talkiing $2.00/Watt “installed” by the end of 2012.

    The world, it be a’changin’.

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  24. By rrapier on June 25, 2011 at 8:17 pm

    Rufus said:

    Weelll, I don’t know, Mac. That number is Net Imports.

    We export a little, but On Net we Import 2.5 Trillion cu. ft. more than we export.

    And, with all that shale gas, and the pipeline from Colorado the number still went UP, not Down.


     

    No, it has been going down:

    Gross imports (including both natural gas transported by pipeline and
    LNG) continued to decline in 2009 after a relatively large decrease in
    2008. As a result, gross imports were nearly 850 Bcf lower in 2009 than
    in 2007. Net imports, which reached a recent peak as a portion of
    consumption at 16 percent in 2007, represented only 12 percent of total
    domestic consumption, at a total of 2.7 trillion cubic feet (Tcf), in
    2009. The decrease in net imports resulted from a decline in gross
    imports and an increase in gross exports.

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  25. By mac on June 25, 2011 at 8:37 pm

    Robert,

    Well, they just passed a law here in Texas stating that shale oil companies will be required by law to disclose the ingredients in their “fracking” fluids.

    That’s OK. It’s just the fact that the oi companies have been doing this for years.

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  26. By Rufus on June 25, 2011 at 8:55 pm

    You cut it one year short, Robert.

    2009: 20.6 – 22.8 = -2.2
    2010: 21.6 – 24.1 = -2.5

    First column – Production , Second column – Consumption, Third Column – Net Imports

    [link]      
  27. By mac on June 25, 2011 at 8:59 pm

    The Natural Gas people and the Geothermal people borrowed their technology from the oil companies. Come on,,,,,,

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  28. By Rufus on June 25, 2011 at 9:01 pm

    EIA Dry Nat Gas Production

    http://www.eia.gov/dnav/ng/his…..70us2A.htm

    EIA Nat Gas Consumption

    http://www.eia.gov/dnav/ng/his…..40us2a.htm

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  29. By mac on June 25, 2011 at 9:32 pm

    The problem is not oil.

     

    Oil is a great substance, a great resource.

     

    Like someone once said :

     

    “Oil ?……..  Such a beautiful substance… what a shame to wasre it on Automobiles”

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  30. By paul-n on June 25, 2011 at 10:48 pm

    OPEC is producing just about the same amount of oil that they were producing 25-30 years ago, while OCED oil production has doubled.in the same period.

    I think this is a fairly important, but often ignored fact.  Whenever anybody blames OPEC or saudi arabia for ot producing enough oil, or game playing etc, it is prudent to remind them that “they” produce as much as they ever have while “our” oil use has doubled.  It is very nice of them to sell “their” oil to “us”, but there is no international law that says they have to.  (actually, there is such a law, in NAFTA, that once  a country starts selling to the US, they can;t stop, and only Canada and Mexico were silly enough to agree to it.)

     

    Here in Canada, we don;t really care what OPEC does or doesn;t do, and I’m sure people in Norway feel the same.  When you are not dependent on imports of the stuff from OPEC, you can worry about everything else.  Presently, the worrying about oil imports/prices is pretty much preventing the US from doing anything else.  The major companies and investement funds are looking elsewhere to invest, as they see the US economy as too vulnernable top oil “shocks” (price or supply) – and they would be right.

    The approach of the government seems to be to try to prevent such shocks from occurring – much better would be to reduce the exposure to imported oil in the first place so the shocks don;t matter.  This is happening, slowly, but more because of recession than anything else.

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  31. By Rufus on June 25, 2011 at 10:53 pm

    Yeah, I’m not trying to make a big thing out of it. We went into recession and net imports dropped pretty good; then, in 2010 we started crawling out (temporarily, I’m afraid) and net imports rose some.

    Overall, it looks like we’re fairly steady at around 10 – 15%. It does look likely that any increased use of nat gas will come from Imports (I still think using some nat gas for delivery vehicles, and whatnot is a good idea. Over the road trucks, I’m not so sure about.)

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  32. By paul-n on June 25, 2011 at 11:24 pm

    Rufus,

    Just down the road from you, Cheniere is now planning to export up to 0.8tcf/yr of LNG, and has recieved DoE approval to do so!

     

    http://phx.corporate-ir.net/ph…..highlight=

     

    Seems an odd one, given that Cdn NG production is fairly flat, and more and more of it is being used in the oilsands.

     

    Using NG for over the road trucks (and on the rails trains) is exactly what should happen.  It is the easiest way to use NG to displace the most oil in the shortest time, and can be added to existing trucks, while still allowing them to run on 100% diesel, if necessary.

    It is ready to roill out in Australia;

    http://mexiaholdings.com/natur…..australia/

    For a truck that drives all day, every day, the payback will be pretty good.  And it does not require the network fuelling stations to be built first. 

    Also helps trucks meet emissions requirements too.  if you had a truck that was set up so that it always had to use both fuels, you could greatly simplify the emissions control, which would pay for halt the cost of the NG system.

    I really don’t know what is holding the American trucking industry back.

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  33. By mac on June 25, 2011 at 11:53 pm

    Paul,
    Paul,

    Americans have often regarded Canada as their “little brother to the North”: or “America’s Attic”:

    That may soon come to a screeching halt as easy and cheap gas begins to run out.

    We may end up crawling on our bellies up to the Alberta Tar Sands to get the last drop of gasoline on earth. (Just kidding Paul).(Please don’t take me seriously, I’m just kidding, just like I kid Rufus about everyone crawling across the desert sands to Rufus’s house to get the “last drop” of ethanol on earth)

    I’m just kidding and it’s just a joke (with an undertone of reality)

    What will it be ? The 48 Southern Provinces of Canada with Alaska summarily annexed by the Canadians ? and Hawaii sold to the Japanese ?

    Just kidding, Paul.

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  34. By Rufus on June 26, 2011 at 12:03 am

    I don’t know, Paul I’ll have to defer until I know more. I’ve read so many articles Like This One.

    On the other hand, I’ve read so many articles about ethanol that are just horribly wrong, that I have to keep that in mind, also.

    I still can’t shake a funny feeling about getting all het up about an Imported Fossil Fuel. It just doesn’t feel right.

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  35. By paul-n on June 26, 2011 at 3:23 am

    Mac, you don;t have to come crawling here for the oil – we’ll happily send it, if we don’t send it all to China first – that’s your call.

     

    @ Rufus,

    I agree that the shale gas thing is an investor train wreck waiting to happen, but there is still plenty of NG to be had.  Not only that, the major use of NG, electricity generation, can be (partially) displaced by coal or nuke if need be.

    So for heavy trucks, which use about 2mbd of oil, what other alternatives are there?

    You could shift freight to rail, but the railroads are already near capacity, and don’t want to expands in an uncertain economy. The trucking industry will resist any move to build gov funded rail lines (but will happily accept gov funded highway lanes!)

    You can;t really electrify trucks, excpet for some very niche applications (container port tractors, urban delivery trucks)

    You can run them, in dual fuel mode, on ethanol, but how much interest has the ethanol industry shown in doing that?

    You can do the same with methanol, and there has been about the same level of interest.

    And then there is NG, where you can do it, and even if you just had stations only at major truckstops on the Interstate and other major hwys (say 10 per state, on average, for 500 nationwide)  you can service a lot of heavy traffic.

     

    If we wanted to displace half the diesel used – one mbd – then we need six bcf/day to do it.  That is roughly equal to 10% of current consumption, or the amount imported from Canada.  This would raise the price of NG a bit, which is fine, because at the current cheap level, a fair amount is being used inefficiently.

    This might be a good incentive to use Alaska’s stranded NG, estimated at 60-80 TCF – this would provide that 6bcf for 23-30 yrs – enough to justify building the Alaskan gas pipeline.

    It is less convenient than oil to be sure, but getting hold of oil is not that easy these days.  And the only other alternative fuel in play at present, ethanol, is supplying the equivalent of 0.55mbd of oil.  You would need to double present production and devote it all to trucks, just to get to what NG could do.  

    But why not do both?  Imported oil is a mugs game.  At least the NG can be imported from Canada, and if the price goes up a bit, there is a fair bit more supply available.  Sure beats trying to squeeze oil out of Libya.

     

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  36. By rrapier on June 26, 2011 at 8:14 am

    Paul N said:

    Mac, you don;t have to come crawling here for the oil – we’ll happily send it, if we don’t send it all to China first – that’s your call


     

    And on that theme, something I have been warning about for years now: 

    China Eyes Canada Oil, US’s Energy Nest Egg

    Canada’s only major oil export market is the U.S. But with the product
    of oil sands and pipeline delivery to the U.S. under perennial clouds of
    environmental objections, and with Asian demand growing, this country
    wants to diversify its market, and China is eager to oblige.

    RR

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  37. By Rufus on June 26, 2011 at 8:41 am

    Paul, we’re using about 3.6 million bpd of diesel. Are you saying that only 2 mbpd of that is going to trucks?

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  38. By Rufus on June 26, 2011 at 8:45 am

    And, another thing; we lost a tremendous amount of industry, and jobs a few years ago when nat gas was $13.00 tcf.

    I don’t think we want to take a chance on repeating that debacle (if we can help it.)

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  39. By paul-n on June 26, 2011 at 3:45 pm

    Rufus,

     

    I had read that 2mbd figure somewhere, but can;t find it now.  The 3.6 mbd is straight from the EIA, but how much is used on the highway?

    So 63% of 3.6 is 2.27mbd of highway fuel.  And we’ll assume that 98% of that is freight trucks (as opposed to diesel PU’s and a few VW Jettas running around), so 2.22mbd.  I think that is close enough.

     

    What is also interesting is that railroads use 1/10 the fuel of trucks, but carry about half as much freight.

     

    When the price of NG goes up, I think that will actually help the US.  Not only will it reduce wasteful consumption, but also, it makes US manufacturing more competitive, as it is, generally, more energy efficient than China.  I think Jeff Rubin has it nailed in that high energy prices, and subsequent high shipping costs, will erode China’s cheap labour advantage.  

    This is actually already happening, as some industries return here.

    For the US trucking industry to go to NG, in a time of high oil prices, makes US manufacturing and distribution more competitive.  At the moment, the trucking industry is at the mercy of OPEC, and who wants to be in that situation?   Iran and Venezuela know they can force the US into recession with high oil prices, and Saudi is unable to increase production to stop them.  Why take the risk for the US trucking industry?  Get out of the game altogether – OPEC does not control NG.

     

    If ethanol can eventually displace 1mdb, and NG another 1mbd, and continuing efficiency measures of various sorts can crimp oil use (but not productivity) by another 2mbd, then you have halved US oil imports and saved $4bn a day – not bad.

    My point is that there is no one solution to the oil problems – there are several, and none of them, individually, can do it.  But put them all in play and there is real potential – this is not an either/or situation.

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  40. By Kit P on June 26, 2011 at 4:23 pm

    “EIA Nat Gas Consumption ”

    “I don’t think we want to take a chance on repeating that debacle (if we can help it.) ”

     

    http://www.eia.gov/dnav/ng/his…..45us2a.htm

     

    Rufus coal plant after coal plant is being closed in the US rather than deal with the uncertainty of Obama admin regulations. Therefore I expect the trend in NG consumption for electricity generation to continue. If NG production can keep up, US electricity generation will remain independent of imported fossil fuels. 

     

     

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  41. By Rufus on June 26, 2011 at 4:52 pm

    Good link, Paul. I’m pretty much a dummy; I forgot all about home heating oil. I was also a little brain-locked on Farmers. I was thinking 1.5 to 2% (and, I was right if the question was Total Petroleum Use, but obviously dead wrong if you just considered Diesel)

    Those Northern/Eastern homes really should get off the Diesel, and onto Electric, either from nat gas, nuclear, wind, biomass, hydro, or whatnot.)

    I think we will, in a decade, or so, get our gasoline usage down around the 7.5 million bbl/day range. I think we will replace about 2.5 to 3.0 of that with ethanol. That puts us in the 4.5 to 5.0 million barrel are which we can just about manage with our own supplies, and some help from Canada.

    I’m not a Doomer. I just see some dicey times ahead, for awhile.

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  42. By Rufus on June 26, 2011 at 5:01 pm

    I don’t worry a whole lot about Electricity production, Kit. You guys have it under control pretty good. I do think we’ll all be surprised to see the eventual efficacy of technologies like Wind, Solar, etc.

    There’s a good chance we’ll see our first $2.00Watt “Installed” (w/o subsidies) Solar farm Next year. In 2013 we should be seeing some electricity coming off of a few cellulosic ethanol plants. Tying the whole mess together won’t be easy, but I have no doubt that the Dukes, and Entergies of the world will manage it handily.

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  43. By moiety on June 27, 2011 at 3:35 am

    Rufus

     

    Installed is only part of the cost. Massive subsidies will come in the form of feed in tarrifs that solar recieves every year of electricity production. In any case according to the EIA, your statement of w/o subsidies is incorrect. Subsidies not related to electricity production are amoung the largest to solar companies when normalised to electricity production.

    http://www.eia.gov/oiaf/servic…..xecsum.pdf

     

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  44. By Wendell Mercantile on June 27, 2011 at 12:01 pm

    I do think we’ll all be surprised to see the eventual efficacy of technologies like Wind, Solar, etc.

    Rufus~

    Wind farms now put out about 30% of their placarded capacity, and that’s because the wind doesn’t blow all the time. How are you going to improve the fact the wind doesn’t blow steadily?

    There are some locations (Examples: Offshore, and several miles out in the Great Lakes where the wind blows more steadily) but by definition, wind power will always be tied to the wind.

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  45. By Optimist on June 27, 2011 at 1:18 pm

    There are just too many big companies saying they’re going to begin construction this year, Robert. I take companies like BP, Dupont, Abengoa very seriously (I take Poet seriously, also, but I don’t know if they’ll be able to come up with the money.)

    Yes, Rufus. There are also several car companies sponsoring $1 million a piece hydrogen fuel cell cars to drive around SoCal freeways. Do you expect hydrogen to be abundant as a result? Or is it just an extended ad campaign? Hint: the answer is really that obvious.

    BTW, the use of enzymes for fuel production makes no sense. But don’t take my word for it. Wait 5 -7 years and then Vinod Khosla would admit the same…

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  46. By Optimist on June 27, 2011 at 1:26 pm

    Wow, I was wondering if the posters here could back their bus up one more time and make sure Mr. O is as flat as a pancake.

    Happy to oblige!

    Just what uncertainty has the release of 30 million barrel done ? None. One could argue less uncertainty.

    You’re kidding, right? This stunt added a new player to the oil markets, one that everybody will have to wonder about? Unlike oil producers and consumers, who act in a rational and predictable way, the new player is a political animal: anything is possible, rationality is excluded by definition.

    But don’t take my word for it: wait until oil hits $100/bbl again and watch as everybody sit on their hands, allowing oil to go MUCHG higher and wait for another stunt to occur.

    This is a wake up call for the 95 % that are cluesless out there that the world has an energy problem. Now isn’t that a good thing ?

    Where is the wake-up call? This is the opposite of a wake-up call: it is the usual: Don’t you worry, (poor little defenseless) cunsumer! Uncle Sam will make sure you’ll have all the oil your heart desries… It promotes cluelessness. I don’t see how it buys us any time.

    Now, let me put it in drive, and do this one more time…

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  47. By mac on July 15, 2011 at 2:21 am

    Look,

    A number of bright people on R-squared have already noted the main problem for the U,S, geo-politically is not electricity production,

    Rather it is how to replace the ancient, out-moded , and inefficient ICE with something else.

    Gasoline ?…….. The Achilles heel of America,

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