In the Pipeline: 8/15/11

Obamanomics: destroy demand by eviscerating all value created over the past decade and you’ll have cheaper gas at the pump Wall Street Journal (8/15/11) reports: The tumbling price of crude oil this month and signs of falling fuel demand point to lower U.S. gasoline prices ahead, though consumers will have to wait for savings to trickle down to the pump…After reaching an almost three-year high of $3.97 a gallon in early May, U.S. retail gasoline prices have fallen nearly 30 cents on a combination of lower oil prices and flagging sales in the important summer-driving season…The latest step down in oil futures suggests more relief is on the way. Crude futures settled 34 cents lower at $85.38 a barrel Friday on the New York Mercantile Exchange. Oil is down 10% in August, at one point last week falling as low as $75.71 a barrel, the lowest price in almost a year… The cost of oil is the biggest driver of gasoline prices, but it can take several weeks for a decline in oil prices to work its way through the system and become reflected in retail sales. After oil prices tumbled 15% in the first week of May, it took nearly two weeks for retail prices to drop by 10 cents a gallon…Over the next month, as oil futures held near $100 a barrel, pump prices per gallon continued to drop by another 25 cents. In early July, prices briefly rose before again turning lower.

How about an energy partnership with American companies, Mr. President? The Hill (8/15/11) reports: A top Energy Department official will travel to Brazil next week to launch a high-level partnership aimed at developing the South American country’s oil-and-gas resources…The administration could be wading into politically thorny territory with the partnership. Republicans have pounced on President Obama’s plans to work with Brazil on energy issues, arguing that the administration should be spending more time developing U.S. oil resources…Obama announced his intentions to launch the partnership in May while visiting Brazil. He said at the time that he hopes to invest in Brazil’s oil-and-gas resources because the country is more stable than the Middle East and has vast fossil fuel reserves…“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers,” Obama told a group of Brazilian business leaders in May…“At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”

One more Malthusian trying to cash in with tax payer money on the peak oil scare New York Times (8/15/11) reports: Sitting in a Panera in Boston’s financial district in early July with Jeremy Grantham, I suddenly found myself considering how I might safeguard my children’s and notional grandchildren’s future by somehow engineering the U.S. annexation of Morocco. Grantham, the founder and chief strategist of the asset-management firm GMO, was reading aloud from a rough draft of his next quarterly letter to investors, in which he ranks some long-term crises of resource limitation along a scale from “merely serious” to “dangerous.”… Energy “will give us serious and sustained problems” over the next 50 years as we make the transition from hydrocarbons — oil, coal, gas — to solar, wind, nuclear and other sources, but we’ll muddle through to a solution to Peak Oil and related challenges. Peak Everything Else will prove more intractable for humanity. Metals, for instance, “are entropy at work . . . from wonderful metal ores to scattered waste,” and scarcity and higher prices “will slowly increase forever,” but if we scrimp and recycle, we can make do for another century before tight constraint kicks in…Agriculture is more worrisome. Local water shortages will cause “persistent irritation” — wars, famines. Of the three essential macro nutrient fertilizers, nitrogen is relatively plentiful and recoverable, but we’re running out of potassium and phosphorus, finite mined resources that are “necessary for all life.” Canada has large reserves of potash (the source of potassium), which is good news for Americans, but 50 to 75 percent of the known reserves of phosphate (the source of phosphorus) are located in Morocco and the western Sahara. Assuming a 2 percent annual increase in phosphorus consumption, Grantham believes the rest of the world’s reserves won’t last more than 50 years, so he expects “gamesmanship” from the phosphate-rich.

You know it is bad when the National Journal starts calling your bluff National Journal (8/12/11) reports: President Obama says his new automobile fuel economy standards will create jobs…Not so fast…What he doesn’t say is that those standards will lead to sustained job creation only if Americans choose to buy more fuel-efficient cars in the coming years. And if recent history is true, the driving decision behind that will be the price of gas…Over the past two weeks, Obama has repeatedly touted his ambitious new fuel-economy standards as good for the environment and good for the economy. While the first part of that statement may be self-evident, the second is open to debate…On Thursday, Obama again claimed a nexus between higher mileage vehicles and jobs, this time while touring the Holland, Mich., plant of Johnson Controls, which builds advanced batteries for hybrid and electric cars…“I brought together the world’s largest auto companies who agreed, for the first time, to nearly double the distance their cars can go on a gallon of gas,” Obama said. “That’s going to save consumers thousands of dollars at the pump. It’s going to cut our dependence on foreign oil. It’s going to promote innovation and jobs, and it’s going to mean more groundbreakings and more job postings for companies like Johnson Controls.”…The new fuel-economy standards apply to cars and light trucks through 2025 and – for the first time – to heavy trucks through 2018. Cars and light trucks must reach an average of 54.5 miles per gallon by 2025 (up from the current 28 mpg). The truck standards require cuts of 7 to 20 percent in fuel consumption and greenhouse-gas emissions for trucks between 2014 and 2018.

So… I guess even the Messiah has to follow…the law Seattle Times (8/12/11) reports: A judge on Friday threw out Obama administration rules that sought to slow down expedited environmental review of oil and gas drilling on federal land…U.S. District Judge Nancy Freudenthal ruled in favor of a petroleum industry group, the Western Energy Alliance, in its lawsuit against the federal government, including Interior Secretary Ken Salazar…The ruling reinstates Bush-era expedited oil and gas drilling under provisions called categorical exclusions on federal lands nationwide, Freudenthal said…The government argued that oil and gas companies had no case because they didn’t show how the new rules, implemented by the U.S. Bureau of Land Management and U.S. Forest Service last year, had created delays and added to the cost of drilling…Freudenthal rejected that argument…”Western Energy has demonstrated through its members recognizable injury,” she said. “Those injuries are supported by the administrative record.”..An attorney for the government declined to comment but Kathleen Sgamma, director of government and public affairs for the Denver-based Western Energy Alliance, praised the ruling.