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Posts tagged “WTI”

By Robert Rapier on Jan 15, 2014 with 10 responses

Grading My 2013 Energy Predictions

Normally I would have had this out two weeks ago, but the 60 Minutes story has thrown me behind schedule. I continue to get lots of comments and questions about Vinod Khosla and now his righteous indignation over how the 60 Minutes story was portrayed (especially since that was the only part of my interview they aired), so I may follow up in a week or so to explain (once more) the precise nature of my criticism — as well as what it isn’t. To be honest, I am tired of writing about it, and I am sure that regular readers are tired of reading about it, but new readers continue to ask questions that indicate they misunderstand the nature of my criticism.

In the meantime, here is my report card for my predictions from last year. In the next article, I will give my predictions for 2014.

In January 2013, I made the following five predictions for 2013:

  1. Brent and WTI crude prices will both average less in 2013 than in 2012.
  2. The Brent-WTI price differential — which has widened substantially in the past two years — will narrow in 2013.
  3. The average annual price of natural gas — as measured by the Henry Hub Gulf Coast Natural Gas Spot Price — will be higher than in 2012.
  4. The Obama Administration will approve the northern leg of the Keystone XL pipeline.
  5. US oil production will continue to grow (but at a slower pace than in 2012), reaching the highest level since 1995.

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By Geoffrey Styles on Jul 12, 2013 with 2 responses

Are Oil Prices Signalling Another Gas Price Spike?

Which Oil Price to Watch?

Some economists and consumers are bracing for a sharp uptick in gasoline prices, because the price of crude oil has shot up by $10 per barrel in the last month. Except that it hasn’t, at least not if we’re talking about the global price of crude oil that’s factored into the price of the petroleum products sold in much of the US, especially along the coasts.

The global oil market, reflected in the price of UK Brent crude, is only up about $5 per barrel this month, mainly due to the situation in Egypt. A big part of the jump in domestic oil prices reflects the closing of a historically anomalous gap as US oil moves back into line with the rest of the world.

Such an increase in oil prices does not automatically herald a rise in gasoline prices, especially if it mainly erases a discount that benefited refiners in one region of the country. Moreover, gasoline and crude oil as commodities move in separate markets, linked but not in lock-step.  Over the medium-to-longer term they must clearly be connected, but in the short term each responds to distinct forces of supply, demand, inventories and expectations.
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By Robert Rapier on Jan 14, 2013 with 4 responses

Five Energy Predictions for 2013

Normally when I list the Top 10 stories of the year, I close the post by making predictions for the upcoming year. For 2012, my predictions were:

  1. President Obama will easily win reelection, which means that energy policies will likely continue along the current trajectory.
  2. The Keystone Pipeline project will be approved (although that decision may still slide into 2013).
  3. Natural gas prices will remain low, averaging below $5/MMBTU for the year.
  4. Oil prices — both West Texas Intermediate and Brent — will average above $100/barrel in 2012.
  5. We will look back on the fact that Newt Gingrich was once the leading Republican contender for president and have a good laugh about it.

Those predictions were correct for the most part. The first and third were correct, I believe the second will ultimately be correct, the fourth was mixed (Brent averaged above $100 and WTI averaged about $94), and the 5th just depends on one’s personal opinion. In my opinion, it is correct.

However, when I listed the Top 10 Energy Stories of 2012 — as voted upon by readers — I failed to list my predictions for 2013. So here they are:

  1. Brent and WTI crude prices will both average less in 2013 than in 2012.
  2. The Brent-WTI price differential — which has widened substantially in the past two years — will narrow in 2013.
  3. The average annual price of natural gas — as measured by the Henry Hub Gulf Coast Natural Gas Spot Price — will be higher than in 2012.
  4. The Obama Administration will approve the northern leg of the Keystone XL pipeline.
  5. US oil production will continue to grow (but at a slower pace than in 2012), reaching the highest level since 1995.

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By Robert Rapier on Dec 18, 2012 with 3 responses

Grading My Energy-Related Predictions for 2012

In my list of Top 10 Energy Related Stories of 2011, I made five predictions for 2012. Those predictions were:

  1. President Obama will easily win reelection, which means that energy policies will likely continue along the current trajectory.
  2. The Keystone Pipeline project will be approved (although that decision may still slide into 2013).
  3. Natural gas prices will remain low, averaging below $5/MMBTU for the year.
  4. Oil prices — both West Texas Intermediate and Brent — will average above $100/barrel in 2012.
  5. We will look back on the fact that Newt Gingrich was once the leading Republican contender for president and have a good laugh about it.

I never doubted for a second that Obama would win reelection, for reasons I have discussed on a number of occasions. The reason really boiled down to the weakness in the Republican field. Every contender had major baggage that I felt would keep some of the base from voting for that candidate. I believe this is indeed what happened, so the major swing states all went Obama’s way. Newt Gingrich is a prime example of the problem with the Republican field. Indeed, with all of his baggage, the fact that he led the pack for the nomination when I made these predictions boggles the mind.

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By James Hamilton on Jul 13, 2012 with 3 responses

The Effect of New Production Methods on U.S Oil Output

Since 2005, the “total oil supply” for the United States as reported by the Energy Information Administration increased by 2.2 million barrels per day. Of this, 1.3 mb/d, or 60%, has come from natural gas liquids and biofuels, which really shouldn’t be added to conventional crude production for purposes of calculating the available supply. Of the 800,000 b/d increase in actual field production of crude oil, almost all of the gain has come from shale and other tight formations that horizontal fracturing methods have only recently opened up. Here I offer some thoughts on how these new production methods change the overall outlook for U.S. oil production.

Let me begin by clarifying that “shale oil” and “oil shale” refer to two completely different resources. “Oil shale” is in fact not shale and does not contain oil, but is instead a rock that at great monetary and environmental cost can yield organic compounds that could eventually be made into oil. Although some people have long been optimistic about the potential amount of energy available in U.S. oil-shale deposits, I personally am pessimistic that oil shale will ever be a significant energy source.

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By James Hamilton on Jun 25, 2012 with 1 response

Get Set For a Dramatic Fall in Gas Prices

West Texas Intermediate crude oil, which had been selling for $105 a barrel at the end of March, fell to $80 a barrel last week, while Brent has come from $125 down to near $90. These price declines will translate into substantial savings for U.S. consumers in the weeks ahead.

Since Brent and WTI diverged, it has been Brent that matters for U.S. retail gasoline prices; this fact and the reasons for it were discussed here. A regression of the average U.S. retail gasoline price on the price of Brent over 2000-2012 captures the close relation (OLS standard errors in parentheses):

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By Robert Rapier on Jun 14, 2012 with 7 responses

Oil Prices and Updates About Merica International — R-Squared Energy TV Ep. 24

In this week’s episode of R-Squared Energy TV, I answer the following questions:

  • Is there any merit to the rumor that the Obama Administration asked Saudi Arabia to increase crude oil output in order to lower prices leading up to the November election?
  • What has caused the drop in West Texas Intermediate prices over the past few months?
  • Can you give an update about Merica’s activities? You mentioned several projects in this interview with Katie Fehrenbacher ;Can you please bring us up-to-date and generally state what progress has been made?

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By James Hamilton on Apr 10, 2012 with no responses

Is Replacing Iran’s Oil Production Wishful Thinking?

If an embargo is successful in preventing Iran from selling a significant amount of oil on the world market, what would replace it?

On Friday the White House released the following statement:

there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil, taking into account current estimates of demand, increased production by some countries, private inventories of crude oil and petroleum products, and available strategic petroleum reserves and in fact, many purchasers of Iranian crude oil have already reduced their purchases or announced they are in productive discussions with alternative suppliers.

That the President or anybody else is counting on the world demand for petroleum curve to shift left in 2012 seems doubtful. And which are the countries from which increased production is anticipated? Libyan production averaged only 500,000 barrels/day in 2011, and if things go well could soon be producing a million barrels more than that daily. In the mean time, disruptions in Sudan, Syria, and Yemen have taken out a separate 640,000 barrels/day. The best hope is perhaps Saudi Arabia, which presumably has been making private statements to U.S. officials similar to this public statement from Saudi Oil Minister Ali Naimi last Wednesday:

Saudi Arabia’s current capacity is 12.5m barrels per day, way beyond current levels demanded, and a reliable buffer against any temporary loss of production. Saudi Arabia has invested a great deal to sustain its capacity, and it will use spare production capacity to supply the oil market with any additional required volumes.

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By James Hamilton on Mar 22, 2012 with no responses

Why Do Gasoline Prices Differ Across U.S. States?

Gasoline prices differ substantially across different parts of the United States. For example, the average price in Illinois is currently 70 cents/gallon higher than that in Wyoming, and California motorists pay 86 cents/gallon more than the folks in Wyoming. Why is that? Source: GasBuddy.com. The biggest single factor is taxes. The tax on a gallon of gasoline in Illinois is 25 cents higher than in Wyoming, while the California tax is 35 cents higher. Source: American Petroleum Institute. But that still leaves 45 cents of the Illinois premium and 51 cents of the California premium unexplained. Political Calculations has created a map of average gasoline prices once you subtract out taxes. (His original map, like that from GasBuddy above, also… Continue»

By James Hamilton on Mar 20, 2012 with no responses

Will Oil Release from Strategic Petroleum Reserve Lower Prices?

The United States and Britain have apparently been discussing a joint release of strategic petroleum stockpiles.

The U.S. Strategic Petroleum Reserve was intended to be used in the event of a “severe energy supply interruption” whose legal definition is as follows:

A severe energy supply interruption shall be deemed to exist if the President determines that–

  1. an emergency situation exists and there is a significant reduction in supply which is of significant scope and duration;
  2. a severe increase in the price of petroleum products has resulted from such emergency situation; and
  3. such price increase is likely to cause a major adverse impact on the national economy.

Historical experience has shown that seemingly temporary supply disruptions can have very long-lasting consequences. Libyan oil production in November was still only about a third of what the country had been producing in January 2011 prior to last year’s disruptions. Iraqi production still has not returned to the average value seen in 1989 prior to the First Persian Gulf War. Iranian production has never returned to the average values achieved in 1977 prior to its revolution.

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