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By Robert Rapier on Mar 25, 2007 with no responses

Windfall Profits: A Lesson from the U.K.

Regardless of your position on windfall profits taxes on oil companies, one thing has been demonstrated again and again. Governments consistently fail to accurately anticipate the consequences. As oil prices have increased, governments have seen tax revenues from oil and gas grow significantly. But they apparently believe they know how to deal with a goose that lays golden eggs: Take some food away from that corpulent goose, but expect it to keep laying golden eggs. The purpose for imposing windfall profits taxes is generally two-fold. First, a government can tell the citizens that despite their inability to control oil and gas prices, they are doing something by “punishing” the oil companies that benefit from these rising prices. Second, they genuinely… Continue»

By Robert Rapier on Mar 24, 2007 with no responses

Peak Oil and the Lunatic Fringe

I have been posting at The Oil Drum as a contributor for about a year now. Yesterday, I announced that I would be taking a break for a while. (I will continue to post at least one new essay a week here). As I am getting quite a few e-mails about this, I wanted to document what has precipitated this for those who may not know the history. The Oil Drum receives a great many visitors each day (currently over 12,000 a day). While the vast majority are interested in intelligent discourse on energy issues, there is a very vocal lunatic fringe who accept Peak Oil RIGHT NOW with a religious fervor. They lash out at any viewpoints that challenge… Continue»

By Robert Rapier on Mar 22, 2007 with no responses

What Planet Are They From?

I have come across a couple of articles in the past few days that really left me shaking my head. One praises Hugo Chavez as a hero, and the other blasts oil companies for their multi-million dollar gifts to higher education. These people definitely see the world through a very different set of lenses than I do. Hugo Chavez: Hero of the People There are extremists on both ends of the political spectrum. For every Ann Coulter on the Right, there is a Wayne Madsen on the Left: Both are just as out of touch as they can possibly be. I have found that I can’t communicate with either sort of extremist, because they are generally entrenched in their views… Continue»

By Robert Rapier on Mar 20, 2007 with 1 response

Hot Gas Lawsuit in Utah

I wrote this up a couple of weeks ago, but never got around to posting it. I guess business is slow for the folks who sue people for a living: Suit Seeks to Deflate Excess ‘Hot Gas’ Profit Source: Salt Lake Tribune Mar. 7–When the temperature of gasoline rises, the volume of the fuel expands. And that means Utah drivers who fill up during the summer may get fewer miles out of a tank of gas than during the colder months, when the temperature of the fuel they pumped into their automobiles and pickups was lower. The prospect that motorists may not always be getting all the energy from each gallon of gasoline that they paid for has ignited a… Continue»

By Robert Rapier on with 1 response

Water Usage in an Oil Refinery

There has been much controversy regarding the amount of water used to produce a gallon of ethanol. Considering just the usage in the ethanol plant (ignoring any irrigation requirements for the corn), this amounts to about 4 gallons of water per gallon of ethanol produced: New Research Paper Finds Water Availability Critical to Growth of Ethanol Industry Generally, an ethanol plant will use 10 gallons of water per minute for each 1 million gallons of ethanol produced. A typical 50 million gallon plant, would need 500 gallons per minute of water. There are no publicly available records on water use by ethanol plants in the United States, the authors found, with the exception of the Minnesota Department of Natural Resources…. Continue»

By Robert Rapier on Mar 19, 2007 with no responses

Ethanol in the News

There were several ethanol stories in the news today. It was a mixed bag. From BusinessWeek: Ethanol’s Growing List of Enemies Paul Hitch has spent his entire life raising cattle and hogs on a stretch of the Oklahoma panhandle he says is “flat as a billiard table.” But he worries that they’ll face mounting pressures in the industry, particularly because of the soaring price for corn, which the business depends on to feed the livestock. In the past year, corn prices have doubled as demand from ethanol producers has surged. “This ethanol binge is insane,” says Hitch, who’s president-elect of the National Cattlemen’s Beef Assn. (NCBA). “This talk about energy independence and wrapping yourself in the flag and singing God… Continue»

By Robert Rapier on Mar 16, 2007 with 2 responses

Refining 101: Summer Gasoline

Just what is summer gasoline? Twice a year, in the fall and in the spring, you hear about the seasonal gasoline transition. However, most people probably don’t understand what this actually means. AAA recently provided a Top 10 list explaining the recent rise in gasoline prices, and summer gasoline checked in at #7: 7. The summer blend switchover. This transition from winter-blend to summer-blend fuel, a concoction that causes less smog, occurs every spring. It causes a dip in gasoline supplies as refineries in the U.S. shut down temporarily to retool their production facilities. That’s only partially correct, and is probably the extent of most people’s understanding of this transition. But given that I am very keen that people should… Continue»

By Robert Rapier on Mar 15, 2007 with no responses

Energy Heating Up Inflation

I am not quite sure why this was a surprise: Producer prices unexpectedly jump 1.3% There were two major culprits identified: Energy and food. However, the food component was also related to energy: Food prices rose 1.9%, as prices for unprocessed foods rose 11.2%. Fresh fruit prices rose 15.7% and fresh vegetable prices rose 8.3%. Pasta prices rose 4.3%, the most in 11 years. Food prices have been rising rapidly, in part in response to the diversion of corn into the ethanol market as a substitute for gasoline. Food prices have now risen more than 1% for three months in a row and are running at an annualized rate of 18.1% in that time. Other than a spike in 2004… Continue»

By Robert Rapier on with no responses

OPEC Holds Steady

I have been trying to get inside the mind of OPEC lately and predict what they would do at this week’s meeting. Worldwide crude inventories have been falling, so the market appears to be undersupplied heading into high-demand season. So, if I was in charge of my country’s oil, do I open the taps a bit and risk bringing the price down, or do I hold steady and hope that I can react fast enough if prices start to spiral out of control? Or, do I make additional cuts in an attempt to stabilize prices at a higher price band? After mulling this over, I think I would take the middle-ground. The current prices have not stemmed demand. The money… Continue»

By Robert Rapier on Mar 14, 2007 with no responses

When Will Saudi Arabian Oil Production Peak?

The eventual decline of oil production in Saudi Arabia will likely have a profound impact on all of our lives. This event will result in energy shortages around the world, and depleting oil supplies will be bid up to higher and higher levels. Poor countries will no longer be able to compete, and they will be the first casualties of oil depletion. The richer countries will bid against each other for the remaining supplies, and if the depletion rate is high enough we will be in for some very tough times. The Saudis say they have plenty of oil. However, there are a lot of skeptics. So, I am very interested in understanding what’s going on inside Saudi Arabia. One… Continue»