In The Pipeline 6/24/11

After working for two years to drive up the price oil, the administration tries to temporarily lower the price in an effort to drive up the President’s approval numbers. Also, the editorial notes the fun fact that we can get ONE MILLION barrels a day if we are allowed to drill more in Alaska WSJ (6/24/11) reports: It wasn’t long ago that the Obama Administration was trying to drive up the price of fossil fuels to reduce carbon emissions, promote “green jobs” and save the planet from global warming. Gasoline at $3.50 or $4 a gallon has ended that. And yesterday the White House went so far as to join a global effort to release 60 million barrels from oil stockpiles to further reduce prices…The U.S. will release one million barrels a day for 30 days from the Strategic Petroleum Reserve—the nation’s 727 million barrel oil stockpile located in salt domes in Texas and Louisiana. The spot price of oil dropped about $5 a barrel on the news, and if that decrease holds it could be the equivalent of a 10 cent a gallon reduction in gas prices. One irony is that a million barrels a day is about how much oil experts believe we could be producing from the vast oil fields in Alaska’s wildlife reserve. President Obama has said that tapping Alaska wouldn’t affect oil prices but now says a temporary spurt will do so. How about opening up Alaska, and dropping the de facto Gulf moratorium too?

We have a theme: President Obama is using his executive powers to increase his poll numbers — this time to waive the Jones Act Washington Examiner (6/24/11) reports: Soon after the Deepwater Horizon disaster began, with raw crude pumping out of the seabed into the Gulf of Mexico in the worst oil spill in American history, foreign nations began offering help with the clean up…Especially notable was the Belgian firm DEME, which specializes in ocean-going clean-up work and which offered to bring the best equipment in the world for the operation to the Gulf. But it didn’t happen because President Obama refused to waive the Jones Act, a protectionist law sought by the maritime unions to keep foreign-crewed vessels out of U.S. waters…The Jones Act has a national emergency provision that allows the president to waive its requirement of American crews, as President George W. Bush did during the Hurricane Katrina disaster that nearly destroyed New Orleans. But Obama resolutely refused last year to waive the Jones Act in order to allow the DEME and other equipment to be employed in the Deepwater Horizon cleanup. An operation that could have been completed in four months instead stretched into nearly a year…But this week we have learned that under certain well-defined conditions Obama is more than willing to set aside his reservations about waiving the Jones Act. And those conditions have mainly to do with the fact Obama wants to be re-elected in 2012…Among the biggest obstacles to Obama’s re-election effort is the prospect that gas will still be around $4 a gallon next year. So what does Obama do? Not only does he authorize using 60 million gallons of oil from the U.S. Strategic Petroleum Reserve, he waives the Jones Act to allow foreign crewed ships to deliver the SPR oil to U.S. ports.

The NYT might not realize it, but they just got a lesson in economics: when you increase supply to meet growing demand, the price drops New York Times (6/24/11) reports: The United States and its allies will release 60 million barrels of emergency oil reserves to replace lost Libyan oil production and assure adequate supplies for the summer, officials announced on Thursday… The action accelerated the drop in oil prices that began in late April, taking them to levels not seen since Libyan oil exports were virtually halted by political turmoil four months ago…Italy in particular was dependent on Libyan crude, taking nearly a third of the 1.3 million barrels a day that Libya was exporting before hostilities began. Other European nations like France, Germany and Spain were also large buyers of oil from Libya…Of the total amount of oil to be released, about half would come from reserves in the United States, with the rest to be provided by the other 27 industrialized nations who belong to the International Energy Agency. Negotiations for the coordinated response have been going on in secret for weeks, American officials said. Similar unified action was taken in 1991 at the outbreak of the first Persian Gulf War.

What’s going to happen after 60 days of tapping the SPR? Something tells me speculators think long term… WSJ (6/24/11) reports: Just as the Federal Reserve prepares to turn off one spigot, members of the International Energy Agency turned on another, catching investors off guard and upending financial markets…The decision on Thursday to release more oil into the market drove crude prices to their lowest settle in four months, sent stocks down sharply, and gave the dollar a lift…While the move was intended to ease pressure on the global economy, many investors saw it as yet another sign that policy makers are particularly worried about recent signs of a slowdown…But late-day headlines indicating that Greece had reached a breakthrough on a five-year austerity plan with the European Union and International Monetary Fund pushed stocks, the euro and oil back off their lows…The Dow Jones Industrial Average fell 59.67 points, or 0.49%, to 12050.00, with energy stocks among the biggest losers.

This isn’t news, but it’s worth mentioning that Google and Soros are still up to no good Bloomberg (6/24/11) reports: Transphorm Inc. closed a $25 million round of financing from an investment fund managed by Soros Fund Management LLC and existing investors such as Google Inc. (GOOG) to fund its power waste reduction technology…Quantum Strategic Partners Ltd. joined Kleiner Perkins Caufield & Byers, Google Ventures, Foundation Capital and Lux Capital in the Series D round of financing to bring the total raised by the Goleta, California-based company to $63 million since its founding in 2007, Transphorm said in a statement..The company will use the funding announced today to speed development of its technology to reduce electricity waste on industrial equipment, Primit Parikh, president of Transphorm, said in the statement…Transphorm says its products reduce power waste by 90 percent and simplify the design and manufacturing of electrical devices such as motor drives, power supplies and inverters for solar panels and electric vehicles.