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By Robert Rapier on Jun 26, 2011 with 86 responses

Tapping the SPR: The Root of Dysfunctional Energy Policies

Falling Into the Trap of Influencing the Crude Oil Markets

It seems that nothing quite brings out the silliness in politicians like the Strategic Petroleum Reserve (SPR). As you undoubtedly have now heard, the United States and the International Energy Agency are coordinating to release 60 million barrels of oil to the world markets. The U.S. portion of the release will be 30 million barrels from the SPR.

As I noted recently, despite my general Democratic leanings, I think Democrats are the most out-of-touch party when it comes to energy policy. I think the root of the problem can be understood if one examines some of the core beliefs of the Democratic party about energy and the environment. One is that greenhouse gas emissions must be brought under control. This is different from the Republican platform, which doesn’t concern itself much with greenhouse gases. In support of this goal, Democrats support carbon trading markets and various ideas to put a price tag on carbon emissions; ideas in general which would help drive up the cost of burning fossil fuels. Higher prices will also lead to conservation, another tool in their arsenal for reining in carbon emissions.

But a second core belief of the Democratic party is that fuel prices hurt the average American, and therefore must be kept low. The fact that this goal is totally at odds with their goal of lower carbon emissions seem to be lost on many. A perfect example is provided by the latest essay from Joseph Romm. Romm was part of the Department of Energy during the Clinton Administration. Time Magazine has called him “The Web’s most influential climate-change blogger” — and I would agree with that assessment. When I think of Joe Romm I think of someone who spends the vast majority of his time fighting for the reduction of carbon dioxide emissions. Almost every article he writes is on the theme of climate change.

Yet somehow this person who considers climate change one of the most serious threats to mankind thinks we need to make gasoline cheaper:

Why selling off the Strategic Petroleum Reserve is a good idea

Let’s take a look at “why” he thinks this is a good idea. He first reminds us of his July 2008 testimony at the Select Committee on Energy Independence and Global Warming hearing:

I have three main points. First, we tried offshore drilling in 2006 and oil prices doubled.

Wow. Debunking that could be a standalone essay. While I would agree that expanded drilling is unlikely to have a major impact on prices, the statement above is pretty silly. But that’s an essay for another day. Continuing…

Second, the only plausible remaining strategy for reducing oil prices fast is opening up the Strategic Petroleum Reserve or SPRO while making a major push for oil conservation.

There it is. Look, I can understand the desire to reduce oil prices. But coming from someone who believes climate change is such a serious threat, this argument is just bizarre. It’s like Richard Simmons campaigning to lower the price of Whoppers. Success with one undermines the other.

And remember that Romm called this “the only plausible remaining strategy for reducing oil prices fast.” Yet there was no general release of oil from the SPR in 2008, and prices were reduced really fast — from $147 around the time of Romm’s testimony all the way down to the $30′s by year’s end. (There were exchange agreements with some oil refineries in the wake of Hurricane Gustav and Hurricane Ike — but no general releases to the market as in the current situation). So it would appear that there is another plausible strategy for reducing oil prices fast — and that is to let high prices kill off demand.

Romm goes on to argue that the SPR can be used to pop a speculative oil bubble. There is no argument that the release of oil into the market can impact prices. But then what about when it has to be refilled? Romm’s answer to that is simple. Don’t refill it:

Let’s face it. The strategic reserve is not strategic. It was created at a time when people worried that countries could withhold oil from us. But now we have a global market, so that isn’t possible.

I am at a loss for words. The only way this scenario works would be for there to be large quantities of excess global capacity. We are dependent on OPEC for almost half of our oil imports, but no, I am sure they could never withhold oil from us. They simply don’t have the discipline to keep oil off the market. Why, that might drive oil prices all the way to $100…

But imagine for a second that political instability in Saudi Arabia takes 8.5 million barrels a day of oil production off the global market. Under Joe Romm’s scenario, life in the U.S. comes to an immediate, grinding halt. At least with the SPR in place, critical services can continue to operate while secondary plans (like rationing) are put into place. The SPR is supposed to be there as an insurance policy in case really bad things happen. Hopefully, we never need it. If we do and it isn’t there? Joe Romm would have some ‘splaining to do.

It is hard to fathom how someone can argue passionately against expanded drilling, but then want to flood the market with oil from the SPR. The only way I can rationalize Romm’s position is if he doesn’t really believe this is a good idea, but is rather just towing the party line. After all, as I have documented, prominent Democrats like Ed Markey and Chuck Schumer have a long history of lobbying for oil from the SPR. Perhaps one of them asked Romm to publicly support this position.

But if that’s the case, sometimes you have have to take a stand for what you believe is right. History shows us that low prices spur demand. Higher demand increases carbon dioxide emissions. So Romm can’t have it both ways, and if he is just being a good soldier than perhaps he should grow a backbone and speak out against this insanity.

Probably the biggest risk in all of this is that OPEC cuts production by the amount we release from the SPR. They are already threatening this. After all, their governments have gotten accustomed to $100 oil; they aren’t likely to act passively if oil prices crash. And therein lies the dilemma: Beyond the fact that tapping the SPR is contrary to the goal of reducing carbon emissions, there is no evidence that the long-term impact will be lower prices. It will, however, mean less insurance against supply disruptions.

Drilling for Crude Oil – in the SPR

This SPR move is but one example of a desire for mutually exclusive goals: Lower gas prices and lower carbon dioxide emissions. Actually, there is another goal in there as well that should be noted. Democrats like Romm believe that if we never drill for more oil, green alternatives will step into the void. This sets up one more set of mutually exclusive goals: Cheaper gasoline and development of renewable energy options. But renewable options are not cheap. This is why they have struggled to displace gasoline. The conflicting goals of Democrats goes a long way toward explaining their often dysfunctional energy ideas. To review, we have:

  • A goal of lower gasoline prices and lower carbon emissions — Mutually exclusive.
  • A goal of lower gasoline prices and renewable fuel development — Mutually exclusive.

The result of these mutually exclusive goals manifests itself in asinine ideas like drilling for oil in the SPR but nowhere else in the U.S.

  1. By Rufus on June 26, 2011 at 9:39 pm

    yep, ditto that.

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  2. By Wendell Mercantile on June 26, 2011 at 9:41 pm

    Second, the only plausible remaining strategy for reducing oil prices fast is opening up the Strategic Petroleum Reserve or SPRO while making a major push for oil conservation.

    Wow, what fuzzy-headed thinking.

    First, how long does he think the SPR would last? And then what would we have in reserve if someone decides to put their jack-booted foot on the flow of imported oil into this country?

    Second, he completely discounts the dramatic lowering of prices that would result if Americans simply quit using less oil. Something that would result if our country were to raise fuel taxes*.

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    * And apply the revenue to lowering the national debt, instead of spending it.

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  3. By Rufus on June 26, 2011 at 9:47 pm

    Actually, they know we’re heading back toward recession. they’re hoping they can drop gasoline far enough, fast enough to cause us to just skirt along the edge, and not fall all the way in.

    They figure, I think, that by the time the drawdown (in 60 days) is over, maybe Libya wil be coming back online, driving season will be over, and with lower gasoline prices the economy will slowly build going into the election.

    Tha’s what they’re hoping, I think .

    It’s a pretty thin shot, but they’re in a pickle.

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  4. By Wendell Mercantile on June 26, 2011 at 9:48 pm

    And speaking of dysfunctional energy policies:

    A major Op-Ed piece in the New York Times on corn subsidies and ethanol: The Great Corn Con

    Even in a crowd of rising food and commodity costs, corn stands out, its price having doubled in less than a year to a record $7.87 per bushel in early June. Booming global demand has overtaken stagnant supply.

    But rather than ameliorate the problem, the government has exacerbated it, reducing food supply to a hungry world. Thanks to Washington, 4 of every 10 ears of corn grown in America — the source of 40 percent of the world’s production — are shunted into ethanol, a gasoline substitute that imperceptibly nicks our energy problem. Larded onto that are $11 billion a year of government subsidies to the corn complex.

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  5. By Wendell Mercantile on June 26, 2011 at 9:49 pm

    Actually, they know we’re heading back toward recession….

     

    Not that I advocate it, but a recession would also drive down the price of oil.

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  6. By Rufus on June 26, 2011 at 9:55 pm

    IEA just released a statement saying “they might not be through”. Brent was up a buck, now down a buck.

    They don’t want low oil prices and a recession. They want low oil price, Without a Recession.

    I’m not biting on the corn ethanol deal tonight, Wendell. They’ll just have to “take the pot.”

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  7. By biocrude on June 26, 2011 at 10:39 pm

    Great piece, now where is Joe Romm to comment?  I know he reads this blog…

    @ Rufus, I think you are correct that this is all political theatre, and just a ploy to win re-election in 2012.  Also, I think this is meant to mess with the oil trading speculators, but undoubtedly is pissing off OPEC, and now we have a problem.  As someone said earlier, we only have a few more shots in our revolver, and if we want to reload it, we have to ask OPEC for more ammunition.  Unbelievable. 

    @Wendell as long as we are posting incorrect corn ethanol bashing articles, here’s another one from the Economist I came across yesterday.

    -At least the Republicans are just delusional about their abililty to “drill our way out of this mess” and not directly contradicting themselves with their goals and tactics like the Democrats with low gas prices and emissions.  

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  8. By paul-n on June 27, 2011 at 4:06 am

    There is one (long shot) theory that could explain Romm’s stance.  If they do what he wants, and drain the SPR completely – what happens?  First, it hurts investment in domestic oil production.  Second, it uses up all this oil, and when it is gone, there are no bullets left, and OPEC will have even more control.  

    They (opec) can then restrict supply/ jack up the prices, the domestic industry is weakened, and so oil prices will be high, and stay high,(and too high to refill the SPR) and force conservation as there is no other choice.  Will probably force the mother of all recessions too, but he probably views that as the price that has to be paid.  As do many other CO2 hawks.

     

     

     

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  9. By rrapier on June 27, 2011 at 7:07 am

    Paul N said:

    There is one (long shot) theory that could explain Romm’s stance.  If they do what he wants, and drain the SPR completely – what happens?  First, it hurts investment in domestic oil production.  Second, it uses up all this oil, and when it is gone, there are no bullets left, and OPEC will have even more control.  

    They (opec) can then restrict supply/ jack up the prices, the domestic industry is weakened, and so oil prices will be high, and stay high,(and too high to refill the SPR) and force conservation as there is no other choice.  Will probably force the mother of all recessions too, but he probably views that as the price that has to be paid.  As do many other CO2 hawks.


     

    Actually I have thought about this too. I guess if this is what he is after, he could never just come right out and say it. On the other hand, the attempted defenses from Joe of why he thinks this is a good idea just make him look silly. Look at the responses at his blog. People are asking him if he has lost his mind, and his responses are one non-sequitor after another. I think that’s either someone who is trying to defend something he doesn’t really believe, or it as you say that there is an ulterior motive that is even worse were he to explain himself.

    RR

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  10. By moiety on June 27, 2011 at 9:11 am

    I don’t know. For me the first reaction for releasing the SPR giving out a false impression to consumers. If prices get too high, we can just keep adding more to the market from the reserve. I doubt that most people will realise how much is in the reserve. Thus as a conservationist (well efficiency/reduction), my first impression was that

    1. It does not impact my views directly. I still believe that reduction is necessary
    2. This is not going to help consumers reduce
    3. Obviously this is not going to reduce CO2

    I think he just got it plain wrong on this issue as some of his other posts do seem to be reasonable. There is no ulterior motive in my opinion.

    The question then becomes why he got it wrong and RR has answered that. The environmental movement want clean energy but they also want cheap energy. They believe that if clean energy is not portrayed as cheap then it will hurt implementation (that is correct). However they do this by the back door and ensuring tariffs and subsidies that the consumer does not see, are included. They keep playing to the tune opf market parity or $2 dollar gas so that any clean technology beocmes on the surface, a win-win situation.

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  11. By Wendell Mercantile on June 27, 2011 at 9:48 am

    …as long as we are posting incorrect corn ethanol bashing articles, here’s another one from the Economist I came across yesterday.

    Biocrude,

    Thank you for the link to the Economist article, I hadn’t seen that. The Economist generally has high creditability — they do have a way of getting to the point don’t they?

    However, I would say the article was more a commentary on politics in the US than one of ethanol bashing.

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  12. By rrapier on June 27, 2011 at 10:12 am

    Moiety said:

    I don’t know. For me the first reaction for releasing the SPR giving out a false impression to consumers. If prices get too high, we can just keep adding more to the market from the reserve.


     

    Exactly. It sends the message to consumers that they shouldn’t worry; if prices go up politicians will intervene to make everything better. That is the exact opposite of what Romm wants to happen; he wants people to use less oil.

    There is no ulterior motive in my opinion.

    You start to get the impression of ulterior motive when you read through some of the replies on his blog. His defenses are very weak, and he just keeps repeating what a good idea it is. The only rational explanation I have is that he has been asked to publicly support this position by someone like Chuck Schumer.

    RR

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  13. By Wendell Mercantile on June 27, 2011 at 11:48 am

    Exactly. It sends the message to consumers that they shouldn’t worry; if prices go up politicians will intervene to make everything better.

    RR~

    That’s exactly what politicians want voters to think: That they are in control of the situation, that they know what is right, and that we don’t need to worry. Sort of, “Pay no attention to that man behind the curtain.”

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  14. By John Gear on June 27, 2011 at 12:06 pm

    Or, perhaps, Romm realizes that every drop of oil and gas that can be extracted at a profit will be and that there is zero percent chance that the world will forego use of a single drop or therm of either. And that, given the residence time of co2 in the atmosphere, burning oil and methane today is essentially indistinguishable from burning it in 20 years or 40.

    Im afraid the bottom line is that oil and natural gas are irrelevant to climate catastrophe. The only plausible route away from climate crapshoot is leaving coal in the ground, and we show no signs of being willing to do so. So we palaver about conserving oil and natural gas which simply delays their conversion to co2 slightly, meanwhile we blithely destroy mountains and pump coal into the air, all in the name of cheap power, a huge fraction of which is wasted in terrifically inefficient plants, having been shipped in diesel powered trains vast distances.

    We apparently are not smarter than yeast, as we are determined to render our planet-sized Petrie dish uninhabitable by the likes of us.

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  15. By Rufus on June 27, 2011 at 12:12 pm

    THIS is why he did it:

    Spending, after being adjusted for inflation, Fell 0.1% for Second Straight Month.

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  16. By Rufus on June 27, 2011 at 12:14 pm

    The Main thing is to remember that the Main thing is the Main Thing.

    The Main thing is to keep a Dem in the White House.

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  17. By Wendell Mercantile on June 27, 2011 at 12:21 pm

    The only plausible route away from climate crapshoot is leaving coal in the ground…

    Why is that the only plausible route? All the coal that is now underground was once biomass growing above ground. The earth survived nicely at the CO2 levels then, why would those CO2 levels have to mean catastrophe?

    There’s no reason we should expect the composition of the earth’s atmosphere has to forever remain as it was in the 1960s or 1970s. The atmosphere is dynamic, and if you think in geologic or astronomic time, change is inevitable.

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  18. By Benny BND Cole on June 27, 2011 at 1:14 pm

    Obviously, we should tax gasoline, if we want gasoline consumption to go down.
    But we have 12 farm states, and 24 Senators from states where people drive a lot. Ain’t going to happen.
    This leads to really stupid energy policies, especially from the Democrats.

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

    We apparently are not smarter than yeast, as we are determined to render our planet-sized Petrie dish uninhabitable by the likes of us.

    Oh, cut it out! Malthus has been wrong for 200 years. 500 years from now, he’ll still be just 25 years away from being proven right.

    We do have a mess on our hands. Mr. O is doing his level best to make it worse (gotta be elected again, see!), but eventually we’ll solve the problem, in spite of the prostitutians…

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  20. By Optimist on June 27, 2011 at 1:52 pm

    …if he is just being a good soldier than perhaps he should grow a backbone and speak out against this insanity.

    Growing a backbone would be great advice to the Dems in general. It’s been amazing to see how the GOP pushes them around regarding deficit reduction. The fine efforts of Paul Krugman notwithstanding, the Dems seem to have a hard time articulating a sensible economic policy and an even harder time standing up and defending it. Their energy policy is no different.

    Time to start educating the GOP candidates, I guess…

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  21. By Optimist on June 27, 2011 at 2:04 pm

    A major Op-Ed piece in the New York Times on corn subsidies and ethanol: The Great Corn Con

    Even more interesting to see who wrote that: Steve Rattner, the man who steered the auto bailout. If even the bailout boys are turning on corn subsidies, sensible policies may yet be at hand. One can only hope…

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  22. By KLR on June 27, 2011 at 2:24 pm

    Thanks for this, Robert. You should crosspost at TOD for greatest visibility – Romm has more than his fair share of public profile, and your suggestion that he’s in someone’s back pocket with this particular brand of absurdity is in all likelihood the truth, sad to say. This is all the more depressing for anyone who wants to see positive action to mitigate climate change.

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  23. By Rufus on June 27, 2011 at 7:29 pm

    WSJ has an article, behind the paywall, that a couple of Tankers have already been leased for “Storage” off the Gulf Coast.

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  24. By mac on June 27, 2011 at 10:26 pm

    Off topic. but please……

    Just rest a moment from your labors in regard to “saving the universe”(by my own personal thoughts) and instead just check out some of these “Old Timey” gas stations from the 20′s.

    Lot’s of fun.

    http://www.youtube.com/watch?v…..S6sPK-woTM

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  25. By paul-n on June 27, 2011 at 10:47 pm

    So two tankers have been booked to use as floating storage – to buy the oil that comes out of storage A, a secure underground storage, and then store it in B, ships in the Gulf, right in the middle of hurricane season.

     

    And this exercise was somehow meant to stop speculators?

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  26. By mac on June 27, 2011 at 11:32 pm

    It’s just about all over for gasoline and diesel derived from crude oil. 

    …….Just about over. 

     

    Will the NOCs and mutii-national oil companies back off  and actually welcome and allow alltenatives to flourish in the market-place?

     

    What do you think ?

     

    Personally, I think “NOT”

     

    Off topic ?  Not at all……….

     

    This is exactly why the  “Strategic Oil Reserve” argument is taking place.

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  27. By DownToTheLastCookie on June 28, 2011 at 3:04 am

    ” I think Democrats are the most out-of-touch party when it comes to energy policy”

    And I’m guessing you prefer a party who applys supply side economics to a finite resoure. Or attacks the wrong country in a war, but that country just so happens to have the worlds third largest oil reserves. Oh, here must be another one of your favorites from the party of intellignet design. – ” Drill, Baby, Drill”. Here is my favorite, just because the Gulf of Mexico has been turned in to a toilet bowl, that’s no reason to stop and a evaluate what we are doing a mile deep on the sea floor.

    Yea, those Democrats are crazy when it come to energy policy. Next thing you know they will be the party that trying to rise fuel ecomony standards on new vehicles. Or better yet drag Jimmy Carter out in the winter cold with a sweater on to make a point.
    God Bless those wild eyed Democrats

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  28. By rrapier on June 28, 2011 at 6:34 am

    DownToTheLastCookie said:

    ” I think Democrats are the most out-of-touch party when it comes to energy policy”

    And I’m guessing you prefer a party who applys supply side economics to a finite resoure.


     

    Actually, I have covered Republican delusions in the past as well. I just don’t find that they are as consistently inconsistent as the Democrats. The question for me is “If I am listing misconceptions about energy, whose list is longest?” In my opinion, the Democrat’s list is going to be quite a bit longer. If I was running for office, I would run as a Democrat, but my energy policies would be quite different than those generally pushed by Democrats.

    When push comes to shove, the country will gravitate to the Republican policies of trying to bring more supplies online — regardless of environmental consequences. I don’t suggest it is a good thing, but it is what will happen. As Democrats are fighting to keep drilling off limits and to limit carbon dioxide emissions, the public will demand expanded drilling (and CO2 emissions will continue to go up — I don’t believe there is any stopping them before fossil fuels start to seriously deplete). So I see the Democrats as far more out of touch with what will actually transpire.

    Or attacks the wrong country in a war, but that country just so happens to have the worlds third largest oil reserves. Oh, here must be another one of your favorites from the party of intellignet design. – ” Drill, Baby, Drill”.

    You obviously don’t read this blog.

    Next thing you know they will be the party that trying to rise fuel ecomony standards on new vehicles.

    Of course it was a Democrat from Michigan who consistently blocked higher fuel economy standards. But that’s beside the point. I think this is a backwards approach. Democrats try to raise fuel costs and the cost of inefficient vehicles through the back door. Had we gone about this more directly our fuel economy could have been much higher at this point. The reason for low fuel economy is that fuel has long been cheap and people can afford to drive gas hogs. Thus, demand for fuel efficient vehicles has been low. So what we are trying to legislate is for car makers to build vehicles that people are not demanding. I would have attacked that problem from the other direction. Yet again here we have Democrats fighting to keep gasoline cheap — while at the same time legislating vehicles that are not popular when gasoline is cheap.

    Or better yet drag Jimmy Carter out in the winter cold with a sweater on to make a point.

    But did he make that point? That is my point exactly. It isn’t that the intentions are bad, it is that they are naive about the reality.

    This Joe Romm essay is a perfect example of some seriously inconsistent beliefs: That reducing carbon dioxide emissions is critical, and by the way gasoline is too expensive.

    RR

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  29. By mac on June 28, 2011 at 9:10 am

    Come on Joe… (Romm)
    You are jumping up and down on a diving board, ready to dive into a swimming pool in which there is no water.

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  30. By mac on June 28, 2011 at 11:01 am

    Dual-fuel vehicles where all you have to do is flip a switch and you can run on gasoline or CNG.
    OOOps……please don’t bother me with the “facts”

    Like in Brasil where there are many dual fuel vehicles.?

    Once again, please don’t bother me with actual facts.

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  31. By Addoeh on June 28, 2011 at 11:09 am

    The problem with releasing the SPR oil and expecting prices to come down is that prices only came down for a few days after this. Oil started last week at a little over $92. It’s basically back up to $92 today. Oil had been slowly coming down for a few weeks anyway. So this just leaves to believe that it was done as a publicity stunt. Release the maximum allowable amount of oil and then shrug your shoulders when prices go back up and say “Well, I tried”. Even if all the oil were released, it would only lower prices for a few weeks, maybe a month. And if that occurred, we’d lose our rainy day fund and prices could climb even higher since the SPR would be gone.

    The question I have about this is: “Was there any point since the revolution started in Libya that it would have made some sense to release some oil? Or does Libya produce such a small percentage of oil that it shouldn’t be used for this?”

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  32. By Optimist on June 28, 2011 at 2:01 pm

    I just don’t find that they are as consistently inconsistent as the Democrats.

    Vintage RR writing!

    I think the underlying problem with the Dems is lack of backbone. High oil prices present them with a key opportunity to show the limits of Republican energy policy (such policy as there even exists, which is summed up by the immortal words: “Drill, baby, drill!”). Instead, every time high oil prices occur the Dems panick about appeasing angry voters and hence you end up with all the inconsistency and downright dimwitted proposals: Hillary Clinton’s gas tax holiday and now Barack Obama’s little SPR stunt.

    This is sad. In the real world it means that “drill, baby, drill” (or more accurately: hold the hand of the King of Saudi Arabia, and beg him, nicely, to pump more oil) is the default energy policy of America. You’d think that 30+ years after the oil shocks of the 70s we could do better than that…

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  33. By Rufus on June 28, 2011 at 2:25 pm

    Wholesale Unleaded prices are up $0.10 since Friday.

    The oil market is too big. This policy will just enrich a few Big-Time Specs.

    They’re already leasing Tankers for offshore storage. Probably buying as we type.

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  34. By paul-n on June 28, 2011 at 2:34 pm

    The reason for low fuel economy is that fuel has long been cheap and people can afford to drive gas hogs. Thus, demand for fuel efficient vehicles has been low. So what we are trying to legislate is for car makers to build vehicles that people are not demanding. I would have attacked that problem from the other direction.

    Quite so, and the carmakers agree with you;

    GM CEO Dan Akerson wants the federal gas tax increased as much as $1 a gallon to nudge consumers toward more fuel-efficient cars. He said that this would do more good for the environment than forcing automakers to comply with higher gas-mileage standards.

    Bill Ford has been saying this for years, but I think this is the first time GM is (publicly) agreeing.  

     

    Instead of a complex system (CAFE) that car buyers can’t understand, and results in cars they don;t want to buy, have a simple system( HIgher gas tax) that everyone understands and results in them demanding cars they want to buy.  But American government loves having complex systems that people can’t understand, and just have to “trust” that the government knows best.

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  35. By Optimist on June 28, 2011 at 2:50 pm

    The oil market is too big. This policy will just enrich a few Big-Time Specs.

    Nice piece of inconsistency, Rufus!

    If the oil market is too big for Uncle Sam to affect, it is also too big for even Big-Time Specs. Or Vladimir Putin, Benny.

    The market will do what the market will do. Some speculators will win. Some will lose. Overall they will NOT affect the outcome.

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  36. By Optimist on June 28, 2011 at 2:54 pm

    Instead of a complex system (CAFE) that car buyers can’t understand, and results in cars they don;t want to buy, have a simple system( HIgher gas tax) that everyone understands and results in them demanding cars they want to buy.  But American government loves having complex systems that people can’t understand, and just have to “trust” that the government knows best.

    It’s not that complicated, Paul. As long as the Dems don’t have the backbone to stand up for what they believe, they will (have to) try to sneak things through the backdoor. Pathetic.

    At least now there can be no doubt: when it comes to energy, Obama is as spineless as the rest of them. Bachman for president?

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  37. By Rufus on June 28, 2011 at 3:01 pm

    Maybe I worded that poorly. Goldman, and Morgan will lease a few tankers, and buy oil at this price, and store if offshore. They (or someone like them) will posit that as soon as this little dab is soaked up we will be back in the same, or worse, boat as we were before.

    I meant, the market is too big, with too many Very Large players, for such a small, Temporary, infusion of oil to have a large, or lasting, effect.

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  38. By mac on June 28, 2011 at 3:06 pm

    Optimist said:

    “This is sad. In the real world it means that “drill, baby, drill” (or more accurately: hold the hand of the King of Saudi Arabia, and beg him, nicely, to pump more oil) is the default energy policy of America. You’d think that 30+ years after the oil shocks of the 70s we could do better than that…”

    Excellent comment.

    Just exactly what do you propose that we should do about this dilemma ?

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  39. By Wendell Mercantile on June 28, 2011 at 3:24 pm

    Instead of a complex system (CAFE) that car buyers can’t understand, and results in cars they don’t want to buy, have a simple system (Higher gas tax) that everyone understands…

    Paul,

    I agree. Gas taxes are the way to reduce gas consumption, with the revenue that generates going specifically to debt reduction. But, no politician who proposed higher gas taxes could withstand the political heat. Few American voters have the ability or inclination to understand that higher gas taxes would actually be good for us.

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  40. By Rufus on June 28, 2011 at 3:41 pm

    Gasoline prices are killing these guys down here. I can’t imagine trying to tell them that they need “higher” prices.

    That’s the kind of theory that takes hold in a “make believe” world.

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  41. By mac on June 28, 2011 at 4:03 pm

    Absurdly high gas taxes in Europe have created a mass exodus from gasoline

    N..O. T.

    Next ?

    Neither will artificially high gas taxes in America result in alternative transportation. They haven’t done so in Europe. Notice how many Euros drive CNG or electric vehicles.

    Yup, high gas prices will force alternatives.

    Ying Yang and Ding Dong

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  42. By mac on June 28, 2011 at 4:03 pm

    Absurdly high gas taxes in Europe have created a mass exodus from gasoline

    N..O. T.

    Next ?

    Neither will artificially high gas taxes in America result in alternative transportation. They haven’t done so in Europe. Notice how many Euros drive CNG or electric vehicles.

    Yup, high gas prices will force alternatives.

    Ying Yang and Ding Dong

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  43. By Wendell Mercantile on June 28, 2011 at 4:18 pm

    Gasoline prices are killing these guys down here.

    Rufus~

    Then why do they use so much of it? Why aren’t they using alcohol fuel from the Tunica County small-scale, co-op ethanol plant?

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  44. By Wendell Mercantile on June 28, 2011 at 4:22 pm

    They haven’t done so in Europe. Notice how many Euros drive CNG or electric vehicles.

    Mac~

    In the European Union, there are roughly 1.000.000 natural-gas-powered vehicles – about 10 percent of the world’s total and at least six times the number in the United States. Almost 40 percent are in Italy.

    Almost every automaker in Europe offer at least one natural gas model.

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  45. By Optimist on June 28, 2011 at 4:34 pm

    Maybe I worded that poorly. Goldman, and Morgan will lease a few tankers, and buy oil at this price, and store if offshore. They (or someone like them) will posit that as soon as this little dab is soaked up we will be back in the same, or worse, boat as we were before. I meant, the market is too big, with too many Very Large players, for such a small, Temporary, infusion of oil to have a large, or lasting, effect.

    I don’t think wording is your problem, with all due respect. It’s your odd idea that the market is too big for 60 million bbl to make a dent, but small enough that a few tankers (hint: the ultra large ones hold about 4 million bbl each) could easily sway the price.

    The logic doesn’t hold up, Rufus. It’s not the (evil) speculators, (that all politicians, including our clueless president want to blame). It’s just the market. Yikes!

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  46. By Rufus on June 28, 2011 at 5:02 pm

    We’re talking past each other, Optimist. I’ll take the responsibility. Most of that oil will be stored on those tankers that hold a little over two million barrels. All they have to do is fill one of those every four days @two million gallons/fill to negate any effect from the American SPR release.

    Probably some tankers will get filled in Rotterdam, and Iran, also.

    Remember, it was along about this time last year that they started bringing all that “floating storage” ashore. Now, this year, they’re going to movesome of it back out.

    Also, don’t be surprised if you read, over the next few weeks, of a couple of fields being taken down for “maintenance” a little ahead of schedule.

    Mr Market is just a little too big, I think, to be much bothered by a small, temporary injection.

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  47. By Optimist on June 28, 2011 at 5:05 pm

    Gasoline prices are killing these guys down here. I can’t imagine trying to tell them that they need “higher” prices. That’s the kind of theory that takes hold in a “make believe” world.

    Sorry, Rufus, cheap gasoline is no longer on the menu of options. Oil prices are going back up, even after Barry’s clever stunt of last week. Uncle Sam may bravely try to bail you out a few more times, but he’s running out of cash. And time.

    Hint: it’s not a theory in make believe world, it’s called reality.
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  48. By Optimist on June 28, 2011 at 5:12 pm

    All they have to do is fill one of those every four days @two million gallons/fill to negate any effect from the American SPR release. Probably some tankers will get filled in Rotterdam, and Iran, also.

    In a big market they are taking a big risk. Fill when oil is expensive, pay for storage and then bring ashore when oil is cheap is a recipe for bankrupcy.

    Also, don’t be surprised if you read, over the next few weeks, of a couple of fields being taken down for “maintenance” a little ahead of schedule.

    Again: for the company doing the maintenance that is lost income. Who can afford that? Why help out your competitors?

    You are implying that there is a vast conspiracy, somewhere out there. One every single Congressional investigation so far failed to find. Don’t tell me: it’s because Congress is in on the take too.

    Rufus, you’re proving my statement that when it comes to oil, no conspiracy theory is too outrageous for Americans…

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  49. By Rufus on June 28, 2011 at 5:15 pm

    The “theory” part refers to the statement “Higher gasoline prices Are Good For You.”

    I agree they’re going up; I just don’t want to be the one to try to explain to the guys down at the coffee shop that “gasoline prices going up is Good for You.

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  50. By Rufus on June 28, 2011 at 5:19 pm

    Optimist, they all do “maintenance” on a regular basis. If you had a deepwater field that had maybe 10 good years left (maybe 4, or 5 for your best wells,) and you had maintenance scheduled for Sept, would you be tempted to go ahead and move it up a couple of months?

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  51. By mac on June 28, 2011 at 5:35 pm

    Okay Wendell

    You are undoubtedly right. The only point I was trying to make was that high gas taxes don’t necessarily translate into alternative fuels.

    Piaggio (the Italian firm that makes Vespa scooters and Moto Guzzo motorcycles) has been selling electric mini-vans in Europe for years.

    I don’t see them taking over the market any time soon.

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  52. By Optimist on June 28, 2011 at 5:49 pm

    Optimist, they all do “maintenance” on a regular basis. If you had a deepwater field that had maybe 10 good years left (maybe 4, or 5 for your best wells,) and you had maintenance scheduled for Sept, would you be tempted to go ahead and move it up a couple of months?

    Affraid I don’t get your point, Rufus.

    If I had to do maintenance, I’d obviously want to do it at a time that the product was selling (relatively) cheap, in order to minimize my losses while I am out of production. Nothing untoward about that. And obviously my well would be too small to affect the market.

    So, far from gaming the market, I’m just looking after my own interests. As every business owner in America would.

    Where is the problem in that?

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  53. By Rufus on June 28, 2011 at 6:01 pm

    Who said it was a “problem,” Optimist?

    I was just stating an opinion that the effect of this release might be less than has been anticipated.

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  54. By Optimist on June 28, 2011 at 6:59 pm

    I guess in that case we agree: a lot less than anticipated.

    Almost make me wonder what stunt would be next. Gas tax holiday? Maybe a nice speech on how evil speculators stole Christmas, no mention of how some speculators get a bail-out (think rich investment bankers), while others (think GM bondholders, many of whom were middle-class retirees) get a lump of coal.

    As you may be able to tell, I’m getting tired of Barry’s preach’n…

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  55. By Rufus on June 28, 2011 at 7:07 pm

    I’m pretty much an equal opportunity agnostic, Optimist. Especially when it comes to politics. I’m not particularly fond of any of’em.

    If you read me hammerin’ one party, it doesn’t mean I support the other one. They All get their day in the barrel in Rufus-land.

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  56. By Optimist on June 28, 2011 at 7:22 pm

    Ain’t that the truth…

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  57. By mac on June 28, 2011 at 10:03 pm

    Mac~

    In the European Union, there are roughly 1.000.000 natural-gas-powered vehicles – about 10 percent of the world’s total and at least six times the number in the United States. Almost 40 percent are in Italy.

    Almost every automaker in Europe offer at least one natural gas model.

    Okay, Wendell. Considering the fact that most of Europes nat gas comes from former SSR Republlcs, notably Ukraine, I GUESS THAT’S A PRETTY FAIR ASSESMENT

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  58. By Rufus on June 29, 2011 at 9:48 am

    Sam, Robert, the spam filter seems to have snagged a couple of my posts.

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  59. By Rufus on June 29, 2011 at 10:12 am

    Another Major Company makes the move. Dupont/Danisco (now, just Dupont, I guess) will build its first Cellulose to Ethanol Plant in Nevada, Iowa.

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  60. By Rufus on June 29, 2011 at 10:12 am

    Dupont/Danisco to build their Cellulosic Ethanol Plant in Nevada, Iowa.

    http://domesticfuel.com/2011/0…..nol-plant/

    Another Major Company makes the move.

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  61. By rrapier on June 29, 2011 at 10:13 am

    Rufus said:

    Sam, Robert, the spam filter seems to have snagged a couple of my posts.


     

    Sam is on a mini-vacation and I am still traveling, but I managed to
    fish them out. Not sure what triggers that flag at times. Those seemed
    pretty innocuous.

    RR

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  62. By Rufus on June 29, 2011 at 10:23 am

    Thanks, Robert.

    I wonder if it might have something to do with that website I was linking?

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  63. By Rufus on June 29, 2011 at 10:45 am

    Gasoline usage during the last 4 weeks is down 0.3% from the same period last year.

    Diesel usage is down 4.7% YOY.

    The next GDP Report is going to be shocking. EIA Report

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  64. By savro on June 29, 2011 at 12:29 pm

    Rufus said:

    Thanks, Robert.

    I wonder if it might have something to do with that website I was linking?


     

    I find that it just picks and chooses when to flag a comment posted using the blog comment form (not the forum). 99.9% of the time it’s because of a link or multiple links within the comment. For every legit comment that gets flagged, there are several hundred real spam comments that get filtered out, so the filter is needed. As I told you before, if you instead used the forums to leave comments then they shouldn’t ever get flagged. Sorry for the inconvenience.

    BTW, I had posted an article about Dupont to the Ticker before I viewed your comment.

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  65. By Rufus on June 29, 2011 at 1:02 pm

    You also linked This Story which is, probably, much more interesting than the one I linked.

    As they say, “The Debil’s in the Details,” but I would sure like to get more info on that unit.

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  66. By Rufus on June 29, 2011 at 2:40 pm

    According to Feinstein — who along with Sen. Tom Coburn (R-Okla.) has led the charge to kill ethanol subsidies — the planned deal would quickly end the ethanol blenders’ credit, which is worth an estimated $6 billion annually, and the tariff.

    “The [volumetric ethanol excise tax credit] is gone, the tariffs are gone, as of July 1,” she said, while noting the deal would extend incentives including credits for producing next-wave cellulosic ethanol.

    Klobuchar cautioned that a final agreement is not in place. “We are still in the proposed-agreement stage,” she said, noting that negotiations continue.

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  67. By paul-n on June 29, 2011 at 3:38 pm

    @ Sam/Robert/Rufus,

     

    Can’t we have an open forum on ethanol, so that Rufus can post these things there ? (or you can move them to there?)  Not that I don’t want to read or discuss them – ethanol is probably the most discussed (and interesting) topic here.  But it is not the only one, this thread is about the SPR and oil, not new cellulosic plants starting up.  I don’t want to ignore Rufus’ posts, which are usually the most up to date info on this stuff, but in responding to them we inevitably sidetrack from the discussion at hand.

    Isn’t this the whole purpose of having the Forums?  

     

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  68. By Rufus on June 29, 2011 at 4:05 pm

    Well, dammit, Paul, post something.

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  69. By Rufus on June 29, 2011 at 4:08 pm

    I mean, let’s be fair. So far, today, I’ve put up a couple of posts, and no one else has put up anything.

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  70. By Kit P on June 29, 2011 at 5:40 pm

    From the ticker we have this head line:

    “Google: 90% of Cars Could be EVs and Hybrids By 2030”

    http://www.environmentalleader…..s-by-2030/

    This lead to the study done by Google

    “The Impact of Clean Energy Innovation”

    The basic premise, from the folks who have done innovative things while using electricity, is that we can use innovation to change how we make electricity.

    Power plants need lots of stuff like steel, copper, aluminum, and cement to get them built. You can make a cell phone smaller but you can not make a copper wire carry more current without making it bigger.

    While you can make assumptions about break through technologies, the fact remains that the sun shines and the wind blows when it does. The optimal capacity factor is locked in by Mother Nature.

    Simple put, the new coal plant is going to be more expensive than the old one. The new coal mine is going to cost more than the old one.

    For renewable energy the same pretty much holds. A new geothermal plant is going to cost more than the old one.

    As far as innovation in transportation fuels, here is one of the assumptions.

    “To model the impact of continued innovation in natural gas extraction and its effect on the energy system, we assumed an optimistically low Henry Hub spot gas price of $3/million British Thermal Units (MMBTU) and held it constant until 2030.”

    The good news about innovation of shale gas is not cheaper NG but increased domestic production. Maybe we can hold at $4/MMBTU until the economy picks up. My conclusion is NG is going to be limited as far as transportation fuels are concerned.

    “The bulk of innovation’s benefits by 2030 were attributed to advances in battery technology, enabling adoption of EVs, PHEVs, and HEVs.”

    Once again proving that you can get any answer you want depending on the assumptions you make.

    “Second, electric drivetrains have a higher conversion efficiency (i.e., the power plant that generates the incremental electricity has a higher thermal efficiency than a vehicle’s internal combustion engine).”

    It sort of depends on how you drive and which power plant is producing the power.

    “Coal is Very Hard to Displace on Economics Alone: Coal power is abundant and cheap, especially from older and fully depreciated plants.”

    One of the interesting things about Figure 12 is the missing data point. The cost of electricity from existing nuke plants! As France has demonstrated, it is not all that hard to displace coal.

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  71. By paul-n on June 29, 2011 at 5:52 pm

    Rufus, I have been in quiet contemplation all morning of this extraordinarily complex situation – I just can’t decide what to make for the Canada day BBQ on Friday!  (though I will concede that ethanol will be involved, of course)

    Ok, so back to the topic of the SPR release…

     

    The announcement was made on the 23rd, lets take a look at the world oil price (Brent crude) since then, with thanks from Euan Mearns at The Oil Drum;

     

    So the oil price was already trending down, the spike in volume (grey peaks at the base of the chart) on the 23rd relates to the announcement, and now, it has bottomed out and is almost back to the pre-announcement level.

     

    So, if the intention was to control world prices, it did so for about one day – which is roughly the volume of oil that is to be released!

     

    It would seem though, that it is more to do with releasing light, sweet oil, which is what they all have in storage, and is what is no longer available from Libya.  Also, it seems Saudi Arabia has no ability to increase production of light sweet oil – all their spare capacity is heavy and sour oil, which many of the Euro refineries apparently can’t handle.

    My expectation is we will continue to see a growing gap in the prices of heavy and light crude, and when (if) it comes to refilling the SPR, it will be with heavy oil.

     

    Of course, if the US gov would pull its finger out and approve the new oil pipeline from Canada to the Gulf, it would do far more to relieve domestic high prices/short supply, for far longer, than this trivial exercise will.  

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  72. By Benny BND Cole on June 29, 2011 at 7:22 pm

    You know, I hate to encourage Rufus, but…

    1. Yeah, $6 billion for ethanol is $6 billion too much, But it is less than 1 percent of what we annually spend on our Defense-Homeland Security-VA complex.

    2. What if the supply and demand curves for oil are “steep”? That means small decreases in supply, or small increases in demand, lead to much higher prices. In that case, making ethanol could be reasonable, in helping to keep a lid on oil prices.

    I still think the path forward for ethanol is in pure ethanol motors that power PHEVs. You can use higher compression ratios with pure ethanol, use very little, if you are in a PHEV.

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  73. By Rufus on June 29, 2011 at 8:04 pm

    I think those two oil tankers being leased for “floating storage” snapped everyone back to reality. World “supply” is flat, and Chindia is growing.

    As I said, weeks ago, the Blender’s Credit, and Import Tariff are History. The deal has been all but made. If you’re not trying to market E85 you’ll never notice.

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  74. By Rufus on June 29, 2011 at 8:14 pm

    Benny, the good news is: you don’t have to run “pure” ethanol to run high compression. You can, actually, jack it up as high as you’d ever want running E30, and, probably, lower blends.

    I think you’ll start seeing some hybrids with flexfuel engines in a year or so when the “heated” injectors come online. That’s, also, I believe, when you’ll start seeing flexfuels that get the same mileage on high ethanol blends as on gasoline (the Regal is, already, within approx. 10%.)

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  75. By Optimist on June 30, 2011 at 2:51 pm

    So the oil price was already trending down, the spike in volume (grey peaks at the base of the chart) on the 23rd relates to the announcement, and now, it has bottomed out and is almost back to the pre-announcement level.

    Great work, Paul! So, can it be that the stunt changed the direction of the oil price curve from negative to positive? Great work, Barry! Next time stick to something you understand…

    So, if the intention was to control world prices, it did so for about one day – which is roughly the volume of oil that is to be released!

    ROFLOL! Barry, are you listening?

    It would seem though, that it is more to do with releasing light, sweet oil, which is what they all have in storage, and is what is no longer available from Libya. Also, it seems Saudi Arabia has no ability to increase production of light sweet oil – all their spare capacity is heavy and sour oil, which many of the Euro refineries apparently can’t handle.

    Maybe Barry can explain to the voters that the purpose of the stunt was to keep gasoline cheap. In Italy and France. Hey, those are important allies.

    So, Paul, is the implication that all those new refineries in Saudi Arabia will be putting European refiners out of business? Seeing as the Europeans are likely to find light sweet crude increasingly in short supply. Finally some good news for American refiners?

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  76. By Optimist on June 30, 2011 at 2:58 pm

    What if the supply and demand curves for oil are “steep”? That means small decreases in supply, or small increases in demand, lead to much higher prices. In that case, making ethanol could be reasonable, in helping to keep a lid on oil prices.

    Vintage Benny: ignore the facts, go with the gut.

    You may recall RR’s post that showed ethanol made no decernable dent on oil imports. Or recall that the experts are having a catfight about whether ethanol’s EROEI is slightly more or slightly less than unity. Bottomline: it’s to close to unity to be of much use: you put in just as much fossil energy as you get out in “renewable” energy. Helps us squat as far as extending available supplies go.

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  77. By Optimist on June 30, 2011 at 3:02 pm

    You also linked This Story which is, probably, much more interesting than the one I linked.

    As they say, “The Debil’s in the Details,” but I would sure like to get more info on that unit.

    I wish them all the best, Rufus. But by now you should know that announcing the intention to build is quite different from announcing the first profits. We’ve seen this movie before, and so far they all end in tears.

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  78. By biocrude on June 30, 2011 at 3:15 pm

    Go Dems!  From Biofuelsdigest.com

    “US Senators Jeff Merkley (D-OR), Tom Carper (D-DE), Tom Udall (D-NM) and Michael Bennet (D-CO) introduced the Oil Independence for a Stronger America Act today in an effort to eliminate dependence on foreign oil by 2030 and create a National Council on Energy Security that would be charged with providing recommendations to the President and Congress to ensure America’s energy goals are met. More specifically the act calls for more production and use of electric vehicles, increase in travel options (more public transportation including high-speed trains), infrastructure improvements, development of alternative transportation fuels and reduce the use of oil to heat buildings.”

     

    Looks like actual solutions and rational energy policy from politicians.  

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  79. By Wendell Mercantile on June 30, 2011 at 3:50 pm

    Looks like actual solutions and rational energy policy from politicians.

    Bio~

    There are no solutions there — it’s a call for recommendations. There are already literally book shelves full of recommendations in Washington from think tanks, government agencies, and testimony at past Congressional hearings.

    We need more than recommendations — we need a firm course of action and a steady hand at the tiller.

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  80. By paul-n on June 30, 2011 at 4:59 pm

    So, Paul, is the implication that all those new refineries in Saudi Arabia will be putting European refiners out of business? Seeing as the Europeans are likely to find light sweet crude increasingly in short supply. Finally some good news for American refiners?

    Not quite.  I invite RR’s take on this, but here’s how it was explained by some oil industry veterans;

    Much of the new production coming from Saudi Arabia (e.g. the Manifa field) is heavy, sour crude, and with a high vanadium content

    Many of the Euro refineries are set up for light sweet oil, and to refit them for handling heavy, sour oil costs almost as much as building a new one.

    Worse still, high vanadium is another problem that needs special attention – something the Euro refineries haven;t had to deal with.

    The implication is that Saudi is building this refinery specifically to handle this oil because, basically, no one else can.  They had been blending amounts of this oil into their lighter grades and the customers were complaining and then rejecting it.

    So, it seems, much of the vaunted “spare capacity” is actually only for heavy, sour grades that most refiners, especially in Europe, can’t use.

    Now, US gulf coast refiners can use it – they have been using heavy, sour Venezuelan crude for decades.  this is also why Trans-Canada wants to build the Keystone XL pipeline to the Gulf, to take oilsands heavy oil there – bypassing the midwest market ewhich is already over supplied – hence the $20bbl discount of WTI at Cushing compared to Louisiana Sweet on the coast.

     

    Once again, Europe is in a much more precarious position than the US, very nice of O to help them out, really.

     

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  81. By Red on July 1, 2011 at 1:11 pm

    WAR! Prelude to WAR On LYBIA, it’s just that simple, the tapping of the SPR. Obama’s on record saying he wants all energy prices to double on all americans. He is going to war on an oil nation. He is making that perfectly clear.

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  82. By russ on July 2, 2011 at 11:18 am

    The only plausible route away from climate crapshoot is leaving coal in the ground.

    The silly season is declared open!

    *********

    Obama releasing the oil from the reserve has pacified a certain section of his supporters. Even he can’t be so stuğid as to think it will make any difference to anything but getting re-elected is his ONLY goal.

     

    Obama’s good fortune is that the opposition will probably end up with some nut case giving him a shoo in – kind of like the opportunity in Nevada that was lost.


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  83. By Wendell Mercantile on July 5, 2011 at 9:37 pm

    So much for the short-term effect of releasing oil from the SPR: Oil up past $96 on higher price forecast

    Crude fell to near $90 early last week after the International Energy Agency announced June 24 the gradual release of 60 million barrels of oil from strategic reserves. But oil prices have rebounded to where they were before the IEA announcement as the dollar weakened against the euro after the Greek parliament approved austerity measures, averting a debt default.

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  84. By Optimist on July 6, 2011 at 1:47 pm

    So much for the short-term effect of releasing oil from the SPR

    Homework for everybody: As we enter another election season: Remind all your friends and loved ones of the short-term effect of stunt and how such desparate, dim-witted stunts from one side hardly qualifies as an energy policy. It makes ‘drill, baby, drill’ look like a well-researched policy by comparison.

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  85. By quasecarioca on July 10, 2011 at 1:10 pm

    I have to agree that the position Romm is taking is entirely incoherent, but I’d have to point out that the Republican/Tea Party position on the SPR is equally non-sensical. I listen to libertarians arguing day and night that governments should get out of energy markets and then simultaneously argue in favor of the existence of the SPR, which is nothing other than a government effort to manipulate a market. I hear the energy libertarians tell me that markets must determine the price of everything, then turn around and say energy must be cheap for everyone. And once the Republicans are in the White House, they will be in favor of doing anything to lower gasoline prices even at the expense of their mallleable and ever-changing opposition to government manipulation of oil prices.

    If the Saudis take 8.5 million barrels per day out of the market and prices jump to $250 per barrel, isn’t this simply a market signal telling us we should not allow our supplly of energy to be controlled by an unpredictable global market? Shouldn’t this risk of oil disruption be priced into crude anyway? Why is it that the most die-hard of market defenders suddenly start calling for government interventionism as soon as oil prices go up?

    Again, my root problem with the SPR is that it’s designed for a set of circumstances that no longer exist (I happen to agree with Romm on this one). Global markets do guarantee that we will always have access to oil, what they don’t guarantee is that we will have access to oil a price we like. This means the only criteria for releasing oil from the SPR is that the price of oil is too high — look at every release and loan since it was created and that’s been true (though not the stated) justification. Ask Republicans today whether they think Bush I should have authorized and SPR release on the eve of the First Gulf War and you’re likely to hear something patriotic about supporting our troops. Bush I released oil then for the same reason Obama released the oil now — because they wanted to lower the price.

    Does America really wanted our fuel prices to be based on market forces? Let’s shut down the SPR. Do we think it damage our economy to allow oil prices to fluctuate as they will? Then let’s accept that the government needs to be in the picture when it comes to energy. I’m sorry, neither Romm nor Boehner nor Palin can have this one both ways.

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  86. By Optimist on July 11, 2011 at 7:30 pm

    Does America really wanted our fuel prices to be based on market forces?

    Whether or not that is what America wants, that is the reality of the situation.

    Bush I released oil then for the same reason Obama released the oil now — because they wanted to lower the price.

    Not quite. Bush I understood the market overpriced the danger of a supply interuption, and corrected it with a release, as the response of the oil price after the release proved. For all his faults, Bush II understood that SPR cannot be used to manipulate the oil markets. For all the hype about hope and change, Obama has trouble understanding this. But the markets are already showing they are not impressed by the stunt.

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