Masters Of War

Come you masters of war You that build all the guns You that build the death planes You that build all the bombs You that hide behind walls You that hide behind desks I just want you to know I can see through your masks. You that never done nothin' But build to destroy You play with my world Like it's your little toy You put a gun in my hand And you hide from my eyes And you turn and run farther When the fast bullets fly. Like Judas of old You lie and deceive A world war can be won You want me to believe But I see through your eyes And I see through your brain Like I see through the water That runs down my drain. You fasten all the triggers For the others to fire Then you set back and watch When the death count gets higher You hide in your mansion' As young people's blood Flows out of their bodies And is buried in the mud. You've thrown the worst fear That can ever be hurled Fear to bring children Into the world For threatening my baby Unborn and unnamed You ain't worth the blood That runs in your veins. How much do I know To talk out of turn You might say that I'm young You might say I'm unlearned But there's one thing I know Though I'm younger than you That even Jesus would never Forgive what you do. Let me ask you one question Is your money that good Will it buy you forgiveness Do you think that it could I think you will find When your death takes its toll All the money you made Will never buy back your soul. And I hope that you die And your death'll come soon I will follow your casket In the pale afternoon And I'll watch while you're lowered Down to your deathbed And I'll stand over your grave 'Til I'm sure that you're dead.------- Bob Dylan 1963

Sunday, August 23, 2015

frackers push to end the ban on oil exports as imports hit high for the year (w/ Ohio initiatives update)

you'll likely recall that last week we reported that Ohio Secretary of State Jon Husted had ruled that charter government proposals in Athens, Fulton and Medina counties could not appear on the November ballot because he felt they were designed to circumvent state law...apparently, his decision isn't the end of the story, because this week a handful of citizens from those 3 counties, backed by the Community Environmental Legal Defense Fund, sued Husted in his official capacity as secretary of state, charging that he can't invalidate petitions residents had signed “because of his particular quibbles over their content and legality”...so the question of these charter government ballot initiatives now goes to the Ohio Supreme court to be decided, where it would seem the odds are still stacked against them; as you'll recall, in the Monroe Falls case brought by Beck Energy, this same Supreme court ruled that local ordinances related to oil and gas drilling in the city were preempted by the 2004 state law that turned the power to regulate gas and oil drilling in the state over to the ODNR, a 4-3 decision which dissenting Justice William M. O’Neill said "was bought and paid for in campaign contributions they received" from the drilling industry...so we shouldn't be surprised to see the court to again rule in favor of the industry that has funded them...

one point of clarification on those initiatives: in talking about these three county charter government proposals, i had assumed they were all brought about for the same reason that Athens county initiated theirs; ie, in order to be able to zone against fracking and the out of state waste water injection wells that Athens county has been inundated with....however, the issue being addressed by Fulton and Medina county is different, in that they want local zoning control over the proposed Nexus pipeline, which we've also written about before...an article this week in the Toledo Blade clarifies that for the Fulton county issue, clearly making it a fight against gas pipelines....Medina county citizens, meanwhile, are engaged in an ill-advised campaign to have the Nexus route moved on to their neighbors to the south...that pipeline should be opposed unconditionally, and politically on the grounds that it is not needed to supply gas to anyone in Ohio, and is only being built to enrich the profits of the Houston company, who would be using it to export Ohio and Pennsylvania natural gas to Canada...


the total count of rigs drilling for gas and oil was little changed once again this past week, as Baker Hughes reported that a net of one rig was added in the week ending August 21st, as rigs drilling for oil increased by 2 to 674, working gas rigs were unchanged at 211, the last miscellaneous rig was shut down...but there was once again a major change in offshore rigs, as 3 were pulled from the Gulf of Mexico this week after 4 were added in the first week of August and 3 were pulled last week...that brings the offshore rig count down to 32, half of the 64 that were drilling offshore during the 3rd week of August a year ago...vertical rigs increased by 3 at the expense of 3 directional rigs, while one horizontal driller was added...that leaves the vertical rig count at 130, down from 366 a year ago, the horizontal rig count at 677, down from last year's 1321, and the directional count at 78, down from the 209 directional rigs that were in use last August 21st...

while the two largest Texas shale basins, the Permian and the Eagle Ford, both saw rig increases over recent weeks, 2 rigs were pulled from both of those basins this week, leaving 253 in the Permian, down from 555 a year ago, and 99 in the Eagle Ford, down from 200 last year...the Barnett shale of north central Texas saw a reduction of 3 rigs, leaving 7, down from 26 that were drilling in that basin a year ago...that left Texas with 383 rigs, down a net 6 for the week, and down 505 from the 888 rigs that were working Texas a year ago...elsewhere, 2 rigs were pulled from the Utica shale, leaving 20, down from 44 last year, and one each were pulled from the Marcellus and the Niobrara chalk, leaving those basins with 52 and 31 rigs respectively, down from 76 and 62 a year ago...meanwhile, 3 rigs were added in the Williston basin, bringing that count up to 73, down from 192 last year, and two rigs were added in the Cana Woodford, the only basin to see a year over year increase, now at 39, up from 33 a year earlier...other than Texas, states with reduced rig counts included Pennsylvania, down 2 to 36, Colorado, down 1 to 37, Louisiana down 1 to 77, and West Virginia, down 1 to 17...meanwhile North Dakota and Oklahoma each added 3 rigs. bringing those totals to 72 and 106 respectively, while Wyoming added 1 to total 25 and Alaska, California, and Kansas each added a single rig, bringing all three states up to 13 active rigs each...

US crude oil output fell this week, but our oil imports were the highest since early April, and with a major refinery idled, that unexpectedly led to the largest increase in our inventories of oil in storage in 4 months, precipitating yet a further crash in the price of oil...US field production of crude oil fell for the third week in a row in the week ending August 14th, from 9,395,000 barrels per day last week to 9,348,000 barrels per day in this week's report...while that was down 2.7% from the modern record of 9,610,000 barrels per day set in the week ending June 5th, it was still 9.6% higher than our output of 8,556,000 barrels per day in the same week last year...our imports of crude oil, meanwhile, rose for the 3rd week in a row, jumping from 7,573,000 barrels per day in the week ending August 7th to 8,038,000 barrels per day in the current report...while that's 2.4% more than the same week last year, our 7.6 million barrels per day average crude imports of the last 4 weeks is still 0.9% lower than the same 4 week period of last year...

however, even with the increased oil supply brought about by that large increase in imports, that oil was not being put to use to the same degree as last week...due in large part to the unexpected August 8 outage at the BP refinery in Whiting, Indiana, the largest BP refinery and the largest in the US Midwest, U.S. crude oil refinery inputs dropped to 16,775,000 barrels per day, from the 17,029,000 barrel per day level of the week ending August 7th...so with greater supply and less refinery throughput, our crude oil inventories in storage rose by 2,620,000 barrels to 456,213,000 barrels in week ended August 14th, 24.3% more oil than the 367,019 ,000 barrels we had stored at the end of the 2nd week of August last year...that was, of course, more than was ever stored anytime in August in the 80 years that the EIA has records for, which had never seen the 400 million barrel inventory level breached before this year...that news of even higher inventories during the summer driving season when inventories usually fall sent oil prices down by 4.8% to a six and a half year low at $40.57 a barrel on Wednesday, and although the expiring September contract price inched up on Thursday on news of the first hurricane of the Atlantic season, oil prices for October delivery crashed again on Friday in the midst of a global market panic, briefly slipping below $40 a barrel, before closing the week at $40.45, capping the longest weekly losing streak for oil prices in 29 years...

so, if we've got plenty of oil stored, and with at least two refineries operating below capacity, why do we continue to import near fracking-era record amounts of crude oil?  one reason is the contango trade that we've talked about in the past, wherein contracts for oil to be delivered in the future are at a price somewhat higher than the cost of buying oil now, such that it pays for speculators to buy oil and pay for its storage, and enter into a contract to sell it back at a higher price in the future...at one point last week, the contract for oil to be delivered in December was more than a dollar a barrel higher than the current price, meaning that a speculator could buy oil at today's price, pay the fees to have it stored at Cushing or elsewhere, and sell it back in December with a clear profit...but as we should all know, for every contract there has to be a counterparty, and for everyone who's buying oil now with a contract to sell it in December, there was a seller of that oil at today's price and a someone else buying a contract to take delivery of that oil for a dollar more a barrel in December...so for every one who's trading oil like this, there is someone on the other side of those trades, be it a bank, commodities house, or an oil company, taking the other side of those contracts, and effectively betting against the contango trader...they both can't be right, and those who bet on higher prices in March and a month ago have since lost their shirts...

another reason for continued high imports of oil is that we're exporting more refined products than ever before...in the 2nd week of August, our total exports of refined petroleum products averaged 3,884,000 barrels per day, up 10.6% from the 3,512,000 barrels per day we were exporting in the same week last year...but that's also more than double the 1,851,000 barrels per day of refined products we were exporting in August 2009, and more than quadruple the 964,000 barrels per day of refined products we were exporting in August of 2004...we're also exporting more crude oil too, mostly mostly to Canada, where the lighter grades of distillates are blended with tar from the oil sands to produce diluted bitumen, or dilbit, which can then be delivered by pipeline...on a monthly basis, our total exports of crude and petroleum products hit a record 4,943,000 barrels per day in April, more than double the 2,432,000 total exports of April five years earlier...

but the week just ended was somewhat an anomaly, in that with the aforementioned refinery constraints, our total exports did not rise, and our total imports of refined products rose to 2,614,000 barrels per day, up from 1,927,000 barrels per day of refined product we imported just two weeks ago ...that was only the 2nd time in the past two years wherein our refined product imports topped 2.6 million barrels per day, and as a result our total imports of crude oil and petroleum products rose to 10,652,000 barrels per day, for our highest weekly total imports this year...subtracting the 4,460,000 barrels per day of crude and products that we exported this week means our net petroleum and product deficit was at 6,192,000 barrels per day for the week, which was also the greatest excess of crude and products imports over exports that we've seen this year...

but even with all the oil and products that we're importing, there's been an ongoing push by the frackers and their supporters to end the federal ban on crude oil exports, which was instituted in 1975, at a time when our production started to slip and domestic shortages developed...the reason the oil industry wants to export crude, even though we're importing so much, is simple; international oil prices have been running between $5 and $10 a barrel more than US oil prices...so if they're able to sell their crude overseas (Canada and Mexico are exempt from the ban), US prices for oil will quickly jump to the international price, and we'll be paying 10% to 20% more for our oil products than we otherwise would if our market remained protected...a bill to lift the ban has passed the U.S. House, and a similar bill cleared the U.S. Senate Energy Committee in July, and it will probably be taken up when the Congress returns from recess after Labor Day...a new report, published Friday by the Center for American Progress, predicted that US oil production will increase if the export ban ends, and that an average of 26,385 new oil wells would be drilled in the U.S. each year between 2016 and 2030 if the ban is lifted, 7,600 more wells per year than would be otherwise...as a result, an additional 137 square miles of land would be developed for oil each year...over 15 years, that would be 2055 more square miles of oil drilling sites than we'd otherwise see, or a total drilled out and fracked area more than 60% larger than the area of the state of Rhode Island...so if we want to save ourselves from that dystopian future, we'd better start pushing back against the frackers on that export issue now..


NB: links to more related news stories can be found here

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