There’s a Direct Link between the Type of Crude refined and the Price at the Pump

Posted by PITHOCRATES - February 26th, 2012

Week in Review

Oil is not oil.  There is Brent sweet crude.  And West Texas Intermediate (WTI).  We import the Brent.  While a lot of the WTI comes from wells closer to home.  The U.S.  Canada.  The Gulf of Mexico.  And there is a correlation between gas prices and the type of crude (see Angry About High Gas Prices? Blame Shuttered Oil Refineries by Matthew Philips posted 5/24/2012 on Yahoo! Finance).

The U.S. refining industry is being split in two. On one hand are the older refineries, mostly on the East and Gulf Coasts, that are set up to handle only the higher quality Brent “sweet” crude—the stuff that comes from the Middle East and the North Sea. Brent is easier to refine, though it’s gotten considerably more expensive recently. (Certainly another reason for higher gas prices.)

Then there are the plants able to refine the heavier, dirtier West Texas Intermediate (WTI)—the stuff that comes from Canadian tar sands, the deep water of the Gulf of Mexico, and the newer outposts in North Dakota, which just passed Ecuador in oil production. These refineries tend to be clustered in the Midwest—places such as Oklahoma, Kansas, and outside Chicago. While the price of Brent crude has closed at over $120 a barrel in recent days, WTI is trading at closer to $106. That simple differential is the reason older refineries that can handle only Brent are hemorrhaging cash and shutting down, while refineries that can handle WTI are flourishing.

“The U.S. refining industry is undergoing a huge, regional transformation,” says Ben Brockwell, a director at Oil Price Information Services. “If you look at refinery utilization rates in the Midwest and Great Lakes areas, they’re running at close to 95 percent capacity, and on the East Coast it’s more like 60 percent,” he says.

How about that?  Economic reasons for the high price of gasoline.  The cost of Brent sweet crude makes it impossible to sell in America at a profit.  So the refineries are selling it overseas at prices that can keep them from operating at a loss.  Or they’re shutting down refineries.  To reduce the surplus of gas they can’t sell at a profit.  Making the gas stations supplied by these refineries sell at record high gas prices.  Whereas those stations supplied by the WTI refineries are able to sell gas at more affordable prices.

The lesson here?  The amount of oil brought to market matters.  The more the oil supplied the lower the price.  And the lower the price of gasoline made from that oil.  There’s not much we can do about the price of Brent sweet but there is something we can do about WTI.  Drill more.  Build more refinery capacity for it.  And build more pipelines to move that precious cargo all over the United States.  Creating lots and lots of jobs.  And letting people enjoy hitting the highway again in cars they like that may also happen to be gas guzzlers.  Which will also reduce the price at the pump.  Because demand for gasoline will rise to sustain this economic buildup.  Allowing prices to fall due to economies of scale.

And it’s all there for the taking.  All we have to do is to take this future.  Instead of the one we’re working on now where driving has become a four-letter word.


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The Deepwater Horizon Accident Destroyed the American Oil Industry, but not the Gulf of Mexico

Posted by PITHOCRATES - April 20th, 2011

Still no American Offshore Oil Production in the Gulf of Mexico

This is the anniversary of the Deepwater Horizon rig explosion in the Gulf of Mexico.  The beginning of the world’s greatest environmental catastrophe.  And the ‘day the music died’ for American oil exploration. 

But was it really that bad?  Sure, it was.  There was loss of life.  Eleven men died on that platform.  Brave men working the hard and lonely life of offshore oil production.  Their families no doubt suffering the greatest loss from this catastrophe.  So, in their honor, and everyone working the oil fields, let’s take a glimpse into that life.  And see what it was like in the beginning.  When we first went offshore oil in the Gulf of Mexico.  In the Jimmy Stewart movie Thunder Bay.   

That was then.  That movie had a happy ending.  The shrimpers, fishermen and oil men all lived happily ever after.  Together.  Today, the government itself is after the oil men.  And I doubt even a great American like Jimmy Stewart could stop what’s happening.

The Ecosystem doing just Fine in the Gulf of Mexico

They predicted the end of the world for the Gulf waters.  The oil spewing from Deepwater Horizon was going to kill everything in that ecosystem.  So they predicted.  But the dire predictions of doom and gloom, as usual, have proven more hysteria than fact (see BP Oil Spill: How Bad Is Damage to Gulf One Year Later? by Bryan Walsh, Time, posted 4/19/2011 on Yahoo! News).

Yet nearly a year after the spill began, it seems clear that the worst-case scenario never came true. It’s not that the oil spill had no lasting effects – far from it – but the ecological doomsday many predicted clearly hasn’t taken place. There is recovery where once there was only fear. ” A lot of questions remain, but where we are now is ahead of where people thought we’d be,” Safina says. “Most people expected it would be much worse.”

Good news indeed.  And there’s more.

Yet the damage does seem so far to have been less than feared. Take the oil itself: scientists with the National Oceanic and Atmospheric Administration estimated last August that much of the oil had remained in the Gulf, where it had dispersed or dissolved. Many environmentalists attacked the report for underplaying the threat of large underwater oil plumes still active in the Gulf, yet later independent scientific studies indeed found that oil had largely disappeared from the water. Turns out we can thank bacteria. Scientists from Lawrence Berkeley National Laboratory; University of California, Santa Barbara; and Texas A&M University traveled to the site of the blown well and found that microbes had digested much of the oil and methane that remained in the water. By autumn, the levels were back to normal. “It’s very surprising it happened so fast,” John Kessler, an oceanographer with Texas A&M, told me earlier this year. “It looks like natural systems can handle an event like this somewhat on their own.”

Is Mother Nature mocking us?  Is she taunting, “Is that the best you can do?”  For it would appear she is.  Here we all were, wrought with worry about oil in the water.  Both of which Mother Nature created.  During our time on this planet.  And long before man began adapting nature for our own needs.  And now, despite all the doom and gloom, the water appears just fine.  As is the stuff that lives in it.

The Gulf’s valuable fisheries also seem to have escaped the worst damage. John W. Tunnell Jr., the associate director of the Harte Research Institute at Texas A&M, estimated in a report that the region’s shrimp fisheries would rebound to normal within two years, while blue-crab populations would be back to normal this year and commercial fish species such as red snapper and grouper largely escaped any negative impact. (Oyster beds, hit hard by the oil, might take up to a decade to recover, however.) It’s possible that the lengthy moratorium on fishing in much of the Gulf during the worst days of the spill – when up to 84,000 sq. mi. (217,600 sq km) were off limits – may have even given some fish species a much needed break from exploitation, allowing them to recover in population.

You know, that’s not bad.  For America’s worst environmental catastrophe.  And the shrimpers and fishermen are going to escape unscathed, too.  A year or two of loss revenue?  The slush fund President Obama shook down BP for will more than cover two years of lost revenue.  And the shrimpers, fishermen and oil men may very well all live happily ever after.  Just like they did in Thunder Bay.

The Environmentalists have Never been Right

You know, this is not surprising.  Because environmentalists are a bunch of fear mongers who haven’t a clue of what they’re talking about.  They’re not scientists.  They’re activists.  Even their ‘scientists’ are activists.  For no matter how wrong they are with their catastrophic forecasts, they just keep shoveling their doom and gloom.   But we should believe them this time.  Because this time, their models are better.  And this time, their ‘science’ is better.  Sure, they may have been a little off before.  But this time they got it right.  This time it’s for real.

So when it comes to forecasting, let’s take a look at some of these oldies but goodies of yesteryear (see Eight Botched Environmental Forecasts by Maxim Lott posted 12/30/2010 on FOX NEWS).

1. Within a few years “children just aren’t going to know what snow is.” Snowfall will be “a very rare and exciting event.” Dr. David Viner, senior research scientist at the climatic research unit (CRU) of the University of East Anglia, interviewed by the UK Independent, March 20, 2000.

2. “[By] 1995, the greenhouse effect would be desolating the heartlands of North America and Eurasia with horrific drought, causing crop failures and food riots…[By 1996] The Platte River of Nebraska would be dry, while a continent-wide black blizzard of prairie topsoil will stop traffic on interstates, strip paint from houses and shut down computers.” Michael Oppenheimer, published in “Dead Heat,” St. Martin’s Press, 1990.

3. “Arctic specialist Bernt Balchen says a general warming trend over the North Pole is melting the polar ice cap and may produce an ice-free Arctic Ocean by the year 2000.” Christian Science Monitor, June 8, 1972.

4. “Using computer models, researchers concluded that global warming would raise average annual temperatures nationwide two degrees by 2010.” Associated Press, May 15, 1989.

5. “By 1985, air pollution will have reduced the amount of sunlight reaching earth by one half.” Life magazine, January 1970.

6. “If present trends continue, the world will be … eleven degrees colder by the year 2000. This is about twice what it would take to put us in an ice age.” Kenneth E.F. Watt, in “Earth Day,” 1970.

7. “By the year 2000 the United Kingdom will be simply a small group of impoverished islands, inhabited by some 70 million hungry people … If I were a gambler, I would take even money that England will not exist in the year 2000.” Ehrlich, Speech at British Institute For Biology, September 1971.

8. “In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish.” Ehrlich, speech during Earth Day, 1970

In case you’re wondering, they were wrong on all of these predictions.  And sea life?  Even America’s worst oil catastrophe couldn’t kill it off.  You’d think the people making these predictions would be a little embarrassed today.  Not so.  FOX asked them.  They’ll admit that they weren’t 100% correct.  But they say they were still pretty damn close.  And their work is still relevant.

Particularly fascinating about this wild-ass guessing that they call science is this statement by Dr. Paul Ehrlich, author of “The Population Bomb” and president of Stanford University’s Center for Conservation Biology about the trend of global temperatures (see Item 6 above).

“Present trends didn’t continue,” Ehrlich said of Watt’s prediction. “There was considerable debate in the climatological community in the ’60s about whether there would be cooling or warming … Discoveries in the ’70s and ’80s showed that the warming was going to be the overwhelming force.”

Ehrlich told that the consequences of future warming could be dire.

So the scientific consensus that chose cooling over warming was wrong.  They should have been warning us about the end of the world due to global warming, not global cooling.  There, I’m glad we cleared that up.  For awhile there, in the Seventies, we were living in fear of the wrong fear.  Boy, is my face red.  From embarrassment.  Not cooling.  Or warming.

The lesson learned?  Don’t take any investment advice from an environmental scientist.  Because their track record proves that they’re not very smart.  And that they’re pretty bad guessers, too.

Global Cooling Elbowing its way past Global Warming in Chicago

Or maybe the dumb environmentalist scientists were right after all (see Temperatures Lowest For Time Of Year Since 1940s posted 4/20/2011 on CBS Chicago).

Not only has Chicago dealt with chilly rain, hail and even snow this week, but temperatures Tuesday were at their lowest for this late spring date since the 1940s…

In the early evening hours, just walking a few blocks along the streets of Chicago felt like going out to sea in an open boat during a rainstorm in northern Canada. Anyone walking against the wind was blasted continuously in the face with cold droplets of rain, and given the strength of the winds, an umbrella was as good as useless.

Score one for the dumb guys in the Seventies.  They were right.  It’s getting cooler.  The glaciers must be on the move in northern Canada, pushing that arctic weather ahead of them.  Gee, I wonder what will happen when this new ice age slams into the global warming front.  I can’t say for sure but I’ll bet it’ll be a pretty windy day.  Probably best not to schedule any golf when that happens.  I don’t play well on windy days.

Bye, Bye, Miss American Pie

The good news is that the Gulf of Mexico is fine.  The bad news is that the Obama administration has killed the American oil industry for no good reason.  All for the insanity that is global warming.  Or Cooling.  Or Change.  Whatever we’re calling the impending climate disaster heading our way these days.  We’ve acted and made horrible energy policy decisions based on a bunch of ramblings from these pseudo scientists.  And it is killing our economy.  For as Jimmy Stewart said in Thunder Bay, “Without oil this country of ours would stop.  And it’d start to die.”

So we’ve stopped drilling.  But China hasn’t.  Brazil hasn’t.  In fact, we’ve invested in the Brazilian oil industry.  While China works with Cuba to drill for oil in our backyard.  The Gulf of Mexico.  So their economies will grow.  While ours continues to limp along in the recession that just never ends.  As gasoline shoots past $4/gallon once again.  This energy shortage will drive inflation.  Making the basics of life more expensive.  Leaving us with less disposable cash to enjoy life.  Lowering our standard of living.  This in the world’s largest economy.  Well, largest for now.

Bye, bye, Miss American Pie.


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