Thread: $6 per gallon gas looming, unlock the U.S. domestic oil and

We need to start exploring and developing our domestic oil and gas resources now

With $6 per gallon gas looming, it’s time to unlock all of America’s vast resources

- Andrew P. Morriss
Thursday, March 10, 2011

TUSCALOOSA, Al. — Oil and gas resources in the United States are growing. Surprised? Many people are, because we usually think of oil and gas as fixed pools gradually being depleted. But the combination of new technology and higher prices are making reserves available that were previously unknown or uneconomic.

Unfortunately, many such resources are controlled by the federal government. The Obama Administration’s hostility to petroleum and natural gas production in the United States is preventing their development. It’s time to rethink the policies that hinder domestic energy production.

Any rational discussion of U.S. energy policy must begin by recognizing that our economy depends on oil and natural gas and will do so for the foreseeable future, regardless of how much money we pour into subsidies for alternatives.

Petroleum provides 37 percent of our energy, and 95 percent of the energy used in transportation. Natural gas provides 23.8 percent of our energy, including a third of the energy used for residential, commercial, and industrial uses. Coal produces another 23 percent of our energy.

Renewable energy — including the large hydro power plants hated by environmentalists — provides just 7.3 percent of our energy. We have poured billions into subsidies for ethanol, wind, and solar energy yet these technologies remain uneconomical and provide a trivial amount of our energy needs..

The trucks we see on the highway are part of a vast logistical network that makes American factories and retailers efficient and enables us to have everything from books to groceries delivered to our door.

Our valuable infrastructure of roads, gas stations, pipelines, furnaces, industrial equipment, power plants, and more in place today mean that changing to other forms of energy – even if they were available at competitive prices —will be a slow, expensive process that will take decades.

There are no magic technologies to completely end our dependence on energy sources from outside North America. But there are technologies available today that can be deployed on existing, known energy reserves and which will lead to additional improvements in technology and discovery of additional reserves.

The federal government estimates that there are 86 billion barrels of oil on the outer continental shelf. We consume around 7.6 billion barrels of oil per year. The government also estimates there are 420 trillion cubic feet of natural gas offshore — enough for about 14 years domestic use at current rates.

Onshore, shale oil and gas recoveries have grown rapidly. In North Dakota alone, oil production doubled between 2008 and 2010. Some industry experts estimate we could increase production by 2.5 million barrels per day just from shale oil and are resources from the Gulf of Mexico.

That’s not enough to end our dependence on foreign sources but it is enough to smooth price swings from political instability in the Middle East and restrain price increases. Both effects would boost the economy and, increase employment. Because much of these resources are on federal property, increasing energy production would boost government revenues as well.

Increasing our domestic energy production won’t happen overnight. It takes time to identify reserves, drill wells, and bring production on line.

We don’t know how much our reserves are, in part because we’ve put huge areas off-limits to exploration. But waiting isn’t going to solve our problems.

We need to start exploring and developing our domestic oil and gas resources now, so the next time there is a crisis in a major oil producer, we don’t find ourselves in the same position we are today.

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Andrew P. Morriss is the H. Ross & Helen Workman Professor of Law and Business Professor at the University of Illinois. Readers may write him at the Institute for Government and Public Affairs, 504 E. Pennsylvania Ave., Champaign, IL 61820 or e-mail him at morriss@law.uiuc.edu

http://canadafreepress.com/index.php/article/34253

Exxon CEO: $4 Gas May be Breaking Point for Many Families

Thursday, 10 Mar 2011 07:02 AM

Exxon Mobil CEO Rex Tillerson said he doesn't think the recent jump in oil prices is hurting the U.S. economy — at least, not yet.

The head of the world's largest publicly traded oil company said that in 2008, when oil surged to near $150 per barrel, Americans didn't change their driving and spending habits until gasoline prices topped $4 per gallon. Average gas prices peaked at $4.11 in July that year.

"I don't know if that tip-over is still at the same $4 level or not," Tillerson told reporters at the New York Stock Exchange. "We'll see."

Oil is now about $104 per barrel after rising more than 20 percent over three weeks because of civil unrest in Libya. Tillerson hasn't seen any reduction in the demand for fuel from consumers or businesses.

The national average price for a gallon of gas has increased 40 cents to $3.52 in the same period.

Drivers on the West Coast are already paying close to $4, however, and prices are expected to rise through spring and summer.

Gas at $4 a gallon "creates some real challenges" for average American families and their household budgets. When the price rises above that, it's a "significant emotional event for a lot of people," he said.

"Even if you're paying $50 a month (for gas), $50 a month is significant for the way they have to manage their income."

Tillerson remembered that in 2008, many Americans switched to taking the bus or joining community carpools to save on gas costs.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said Americans forced to live paycheck to paycheck already are cutting back on driving. And not just in the West.

The difference between now and 2008 is that many motorists remember getting burned by high pump prices, Kloza said. They'll conserve now with the expectation that gasoline will hit record levels this year.

"I think they're wrong to assume it'll get that high," he said. Kloza has predicted the national average would peak at $3.75.

Many analysts think benchmark West Texas crude would have to rise at least another 10 percent to $115 or $120 per barrel to force a significant change in consumer spending. Some economists think oil rising to $150 or more per barrel and staying there for months could trigger another recession.

Output in Libya, which is a member of petroleum export group OPEC, has dropped significantly as rebels battle the government of Moammar Gadhafi for control of the country. Analysts are concerned the unrest could spread to bigger producers in the region like Saudi Arabia.

Tillerson pinned the rise in oil prices on the perception of future shortages rather than actual problems. He said traders are pricing in a "risk premium" to account for Libya's political situation. Oil executives in both Saudi Arabia and the U.S. have made similar statements.

At an energy conference in Houston, Youcef Yousfi, the Algerian Minister of Energy and Mines, said, "There is no shortage of oil in the market."

"When people see that the supply is at a normal level, the price will go down," he said.

Tillerson said Exxon Mobil Corp. was recently forced to stop buying Libyan oil because of U.S.-imposed sanctions, yet the company didn't have trouble finding other sources of crude.

"And we're unaware of anyone who is having difficulties."

Earlier, the CEO told Wall Street analysts that Exxon would spend nearly $100 million per day over the next five years on capital investments, mostly devoted to oil and natural gas production. Capital spending will range between $33 billion and $37 billion annually between 2011 and 2015, he said. At those levels, Exxon's oil and natural gas volumes should grow between 4 percent and 5 percent until 2014.

Another major disruption in global supplies could still send prices leaping higher. But so far, "I'm not concerned about the ability of producers to meet the market's demand."

http://www.moneynews.com/Headline/Exxon ... /id/388959

Annual Gasoline Cost to Jump $700 for Average US Household

Thursday, 10 Mar 2011 11:18 AM

WASHINGTON — U.S. drivers will pay another 10 cents a gallon for gasoline before the latest jump in wholesale costs is fully passed on at the pump, and yearly motor fuel costs will rise 28 percent from last year, the Energy Department said Wednesday.

The average U.S. household will spend about $700 more for gasoline in 2011 than it spent last year, bringing total motor fuel expenses up 28 percent to $3,235, based on an annual pump price of $3.61 a gallon, the department's Energy Information Administration said.

Retail gasoline prices soared by 38 cents over the last three weeks to $3.52 per gallon, according to the EIA, because of high crude oil costs due to unrest in the Middle East.

"Because the pass-through of changes in wholesale gasoline prices to the retail level is lagged, pump prices would be expected to rise a further 10 cents per gallon to fully reflect the current wholesale price level even without considering any future wholesale price movements," the EIA said in its weekly review of the oil market.

Higher gasoline prices will give consumers less money to spend on other goods and services, which many economists fear could slow the U.S. economy.

The EIA said it expects drivers will pay an average $3.71 a gallon during the summer peak driving season from June through August, about 98 cents more than last year.

There is a 25 percent chance the pump price will exceed $4 a gallon from June through August, the agency said, compared with a 10 percent probability gasoline could fall below $3 during the same period.

http://www.newsmax.com/Newsfront/gas-ju ... /id/389015

Rep. Upton: Obama Launches US to '70s-Era Oil Crisis

Thursday, 10 Mar 2011 01:45 PM

By Henry J. Reske and Kathleen Walter
Video at the link:

President Barack Obama’s energy policies are catapulting the country into a 1970s-style energy crisis of high prices and short supply, Rep. Fred Upton tells Newsmax.TV. The president has done nothing as gas prices have spiked and caused more hardship for lower- and middle-income families, says the Michigan Republican, who chairs the House Energy and Commerce Committee.

Gas prices could reach $4 a gallon before the end of the month — and some are predicting prices as high as $5 a gallon in the not-to-distant future. “This is really a devastating hit on our economy. There is no question about that,â€

Increasing Pain at the Pump Could Stall Economic Recovery

Thursday, 10 Mar 2011 01:24 PM
By Newsmax Wires

Economists warned that the recent surge in fuel prices will eventually hurt the fragile economic recovery, while the Energy Department predicted that the average U.S. household will spend about $700 more for gasoline in 2011 than it spent last year.

Higher gasoline prices will give consumers less money to spend on other goods and services, which many economists fear could slow the U.S. economy.

So far, fuel prices haven't slowed consumption, but economist Michael Lynch told the Associated Press that drivers and businesses may start cutting back, if oil remains above the $100 per barrel level.

"We're past the point of, 'Oh, it's only going to be up for a few days,'" Lynch said. "I think people are already starting to change their behavior, and they're modifying their vacation plans as we get closer to the summer."

The Energy Department warned this week that U.S. drivers will pay another 10 cents a gallon for gasoline before the latest jump in wholesale costs is fully passed on at the pump, and yearly motor-fuel costs will rise 28 percent from last year, Reuters reported.

The average U.S. household will spend about $700 more for gasoline in 2011 than it spent last year, bringing total motor fuel expenses up 28 percent to $3,235, based on an annual pump price of $3.61 a gallon, the department's Energy Information Administration said.

Retail gasoline prices soared by 38 cents over the last three weeks to $3.52 per gallon, according to the EIA, because of high crude oil costs due to unrest in the Middle East.

"Because the pass-through of changes in wholesale gasoline prices to the retail level is lagged, pump prices would be expected to rise a further 10 cents per gallon to fully reflect the current wholesale price level even without considering any future wholesale price movements," the EIA said in its weekly review of the oil market.

The EIA said it expects drivers will pay an average $3.71 a gallon during the summer peak driving season from June through August, about 98 cents more than last year.

There is a 25 percent chance the pump price will exceed $4 a gallon from June through August, the agency said, compared with a 10 percent probability gasoline could fall below $3 during the same period.

Meanwhile, news that forces loyal to Libyan leader Moammar Gadhafi were poised to recapture the strategic oil port of Ras Lanouf from opposition forces sent oil down nearly 3 percent to $101 a barrel, well below the high of nearly $107 a barrel it reached on Monday.

Benchmark West Texas Intermediate for April delivery fell $3.06, about 3 percent, to $101.32 per barrel in midday trading on the New York Mercantile Exchange. In London, Brent crude lost $1.80 at $114.14 per barrel.

Dismal global and U.S. economic news Thursday helped fuel the oil sell-off. China, which is expected to drive increases in oil demand for years to come in its growing economy, reported overnight that surging oil and commodity prices produced a surprising trade deficit of $7.3 billion for February. And the U.S. Labor Department reported that the number of people seeking unemployment benefits rose last week.

Oil prices started rising since late last year, as investors anticipated new tax cuts and gasoline demand increased. They soared above $100 per barrel last week as the Libyan uprising essentially shut down the country's exports.

"When you've risen as quickly as we have, there's always going to be a risk of a big drop when you hear stories that say the world isn't as wonderful as you think," Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, told the AP.

The plunge in oil prices Thursday helped push oil company shares lower as well. Exxon Mobil Corp., Chevron Corp., BP, Total, ConocoPhillips, Occidental Petroleum Corp., and Royal Dutch Shell all fell 3 percent or more.

The oil industry has tried to ease concerns recently, saying the rise in prices was mostly due to speculation and there's still plenty of crude to meet world demand. But investors continue to worry about future supplies.

Although Saudi Arabia and other OPEC members have said they will cover any shortfall from Libya, the wave of unrest in North Africa and the Middle East will make it harder to crank up production if another crisis affects shipments elsewhere, traders said.

http://www.moneynews.com/Headline/us-ec ... /id/389031