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Signal Oil and Gas - Taxing oil profits: Proceed with caution
Politicians are dying to get at more of Big Oil's billions, but analysts are torn about what that will do to prices or future energy sources.
Politicians are eyeing oil profits like a fat juicy glazed ham.
With all the money Big Oil is making - the top five publicly traded firms pocketed over $120 billion in 2007 alone - and with an election on the horizon, it's easy to see why.
The leading Democratic presidential candidates want a windfall profits tax to do various things, and although their plans differ slightly they generally want to use the money to give Americans a break from skyrocketing energy prices and jumpstart research into renewable energy.
House Democrats have also warned of punitive measures if these massive profits continue at the expense of American consumers.
But while the politicians present their plans, analysts are far less sanguine about whether or not a windfall profits tax would actually help soothe steadily rising energy prices and spur R&D for alternative energy sources.
A consumer rights group says that windfall taxes could actually raise gas prices as oil companies might attempt to squeeze refinery production to recoup their lost profit.
"It would have a fairly easy passthrough" to motorists, said Judy Dugan, research director Consumer Watchdog.
Oil industry: Hands off our cash. The industry, of course, doesn't like the extra profit tax.
"If our profits are taxed, that means we'll have less capital to invest in new production" and it could raise gas prices, John Hofmeister, president of Shell U.S., recently told CNNMoney.com.
Oil companies have been investing more in new production lately, but that argument is a little hard to swallow given the disparity between the huge amounts of money the big firms have been returning to shareholders versus the meager new oil discoveries.
Amy Myers Jaffe, a fellow in energy studies at the James A. Baker III Institute for Public Policy just finished a two-year study looking at oil companies and how they spend their money.
The study found that for the five big international oil companies - ExxonMobil (XOM, Fortune 500), Royal Dutch Shell (RDSA), BP (BP), Chevron (CVX, Fortune 500) and ConocoPhillips (COP, Fortune 500) - spending on share buybacks went from under $10 billion a year in 2003 to nearly $60 billion a year in 2006.
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Spending on developing their existing oil fields, however, went from about $35 to $50 billion, while spending on finding new oil fields went from about $6 billion to $10 billion.
"These companies are spending a very small amount of their operating cash flow on exploration," she said. "They are spending the majority of their funds buying back stock."
Finding oil: No cheap feat. Recently, oil rich countries like Russia and Venezuela have begun to elbow out foreign companies in order to keep a larger portion of their own energy profits. In the meantime, a shortage of skilled workers and materials has hit the industry, making finding new oil is a challenge.
Oil analysts and the industry itself concede that this turn of events makes it hard for companies to invest profits for new exploration projects and must be redistributed to shareholders.
But it's unlikely this scenario - high oil prices and limited access to resources - will remain static forever, and it's important for oil companies to have access to cash when times change and exploration and development are more achievable, said Antoine Halff, head of energy research at Fimat in New York.
Fields in Mexico, Russia, Venezuela and other places are facing production problems, and its becoming more likely that big foreign firms will be called in to help, said Halff.
Halff said a one-time profits tax probably would have a negligible effect on worldwide production, but a permanent tax would likely hamper the hunt for oil in the future.
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What about the Google windfall profits tax? Analysts with energy consultants Wood Mackenzie agree with Halff's take, and introduced a more ideological reason for holding off on a windfall profits tax.
"Do they want to take some from Microsoft too? How about hedge fund managers," asked Wood Mackenzie oil analyst Ann-Louise Hittle, somewhat rhetorically.
It's true that while the oil industry rakes in huge sums of cash in raw numbers, the profit margin for the S&P energy sector, at about 10%, is only slightly higher that the average for the S&P 500.
Google, by contrast, has a profit margin of 25%, yet no one is calling for a special tax on search engines.
Others say there's a big difference between tech and oil companies.
"Their investment decisions affect you and I," said Jaffe. "If Google doesn't make the right investments, it doesn't impact my ability to get to work."
Jaffe also countered that the lack of access and manpower is no reason Big Oil isn't finding more oil now, saying her study showed the next 20 largest oil companies were investing far more in exploration, and finding far more oil.
Government vs. the free market. While the debate about whether or not to tax Big Oil's profit rages on, there's also the debate as to who is best suited to bet on our future energy choices.
The oil companies have been criticized for being shortsighted and not investing enough in renewable resources. Indeed, some want to use a windfall profits tax to fund renewable energy projects.
The counter argument to government sponsored R&D is that when it comes to new technologies, the market picks them best.
"Can [the government] take this capital and do a better job investing it than shareholders can," asked David Kreutzer, an energy economist at the Heritage Foundation, a conservative think tank. 'I'd say no on that one."
Dave Hamilton, director for global warming and energy projects at the Sierra Club dismissed the notion that free markets are the best way to solve the nation's energy challenge, saying capital gravitates towards what's profitable, not what's best for the nation.
"The oil companies are skimming the cream off the nation's economy," he said. "Look where's it gotten us so far. I don't think we've been successful in the last seven years in solving our energy problem."
Signal Oil and Gas - Indonesia mulls Opec withdrawal
Opec member Indonesia is considering leaving the oil cartel to concentrate on domestic production, the country's president has said.
Levels of oil production from its ageing wells are declining, making the country a net importer of oil when crude prices are at record levels.
It has had to cut subsidies on domestic fuel to avoid a massive budget deficit.
Some analysts have said the oil exporting group's reluctance to boost production has kept prices high.
Oil analyst Kurtubi said that - as an oil importer - Indonesia's concerns clashed with those of other Opec members.
"[Indonesia's] interests now are different. We want oil prices to come down as high oil prices put pressure on our budget. But exporters want a reasonable or even high price since it is their main source of revenue."
Declining investment in Indonesia's oil infrastructure has seen its output drop below a million barrels a day from about 1.5m in the mid-1990s.
President Susilo Bambang Yudhoyono said the government had begun talks as to "whether we should continue to stay with Opec or withdraw our membership".
Protests
The Indonesian government announced on Monday that it would have to cut subsidies on fuel to avoid a massive budget deficit.
The move led to a demonstration against the rising price of fuel in Makassar on Indonesia's Sulawesi island, according to one media report.
The decision to leave Opec will be a tough one for Indonesia, says Karishma Vaswani, one of the BBC's Asia business correpondents.
But it may be necessary because of the economic and political conditions the country is facing right now, she adds.
It spends billions of dollars every year subsidising fuel for its citzens, which is a huge drain on its economic resources and on the government's coffers, our correspondent points out.
However, raising fuel prices is a politically unpopular move, so it is choosing instead to focus its resources on investing in its domestic oil and gas production, she adds.
When Indonesia has had to raise domestic fuel prices in the past, this has led to big protests against the government, which faces an election in 2009.
Indonesia is South East Asia's only Opec representative and has been a member since 1962, two years after it was founded.
Signal Oil and Gas - Disruptions In Oil Supply May Extend Price Rise
Here's how a small group of militants in West Africa can help keep an issue alive in presidential politics in Indiana and Washington.
On Sunday morning, an e-mail arrived from a representative of the Movement for the Emancipation of the Niger Delta (MEND) announcing that 36 hours earlier, the group had overrun a "heavily fortified" Royal Dutch Shell oil installation in Nigeria's Bayelsa state.
When commodity markets opened in New York yesterday, crude oil prices pierced the $120-a-barrel threshold for the first time before settling at $119.97, a record.
The $3.65 jump in crude oil prices helped sustain the intensity of political debates about gasoline prices, which yesterday stood at a national average of $3.61 a gallon -- a penny shy of a record and up about 55 cents this year. In an interview with ABC's "Good Morning America" yesterday, President Bush said that the price of gasoline troubled him "a lot" and that rising gasoline prices were "like a tax on the working people."
But however troubled Bush and other political leaders may be, oil experts said the small cushion of excess capacity around the world could mean a continuation of the recent volatility of oil prices at a high level. That could result in a long, hot summer for drivers, and it could leave the domestic U.S. politics of gasoline hostage to outside events.
"This continues to be a crisis-prone market, and that is reflected in the oil price," said Daniel Yergin, chairman of Cambridge Energy Research Associates. "The fundamental fact is that it's a tight market."
Concern about Nigeria's output, which has been curtailed recently by labor disputes and militant attacks, raised new fears about the availability of world oil supplies. That concern fed into a rally in oil prices that started on Friday after federal jobs data raised expectations that the U.S. economy would be stronger than expected and that as a result, U.S. demand for oil would be more robust than expected.
"May is the lowest-demand month of the year, so it's really important that we see some buildup of stocks ahead of the summer," said Adam Robinson, an oil analyst at Lehman Brothers. "And here you have a couple of factors chipping away at that seasonal cushion."
Financial considerations continued to play a role in the high level of oil prices, oil experts said.
Robinson said that after 15 months of steady increases in oil prices, traders were reluctant to sell crude oil short, a financial method of betting on a price decline.
"There's nobody waiting at retail stations to fill up cars, and there's no problem getting crude to refineries," said Rob J. Routs, executive director of oil products at Royal Dutch Shell. "The subprime crisis has redirected a lot of money into commodities." That, he added, was creating a "speculative premium."
Oil prices "have changed dramatically" over the past year, Routs said, "certainly beyond our expectations."
Signal Oil and Gas - States Get In on Calls for a Gas Tax Holiday
Gov. Charlie Crist of Florida has been fighting to cut 10 cents from the state’s gasoline tax for two weeks in July. Lawmakers in Missouri, New York and Texas have also proposed a summer break from state gas taxes, while candidates for governor in Indiana and North Carolina are sparring over relief ideas of their own.
If experience with such gas tax “holidays” is any guide, drivers would save less than politicians suggest. But that is not necessarily the point. James Van Blaricum
“It’s about trying to serve the people and trying to understand and have caring, compassionate hearts for what they’re dealing with at the kitchen table,” said Mr. Crist, a Republican.
He added, “I’m supposed to respond to the people and try to make them happy.”
Rising frustration with gas prices has led two presidential candidates, Senators John McCain and Hillary Rodham Clinton, to promote proposals to suspend the federal gas tax from Memorial Day to Labor Day.
But state gas taxes, which run as high as 45.5 cents a gallon, often add far more to the price of gas than the 18.4-cent federal excise tax and are the primary cause of price disparities across state lines. So lawmakers and candidates at the state level have been getting into the act.
The response speaks not just to the reality of skyrocketing gas prices. It also highlights the political potency of anything that affects Americans’ bonds with their cars. Gas is a product that no one can ignore — and one that inspires intense emotion.
“It clearly evokes a visceral response because we’re the only industry that has our prices in two-foot-high letters on the street corner,” said John Felmy, chief economist at the American Petroleum Institute. “We’ve seen other things go up in prices, like milk, but if you ask 10 people on the street what’s the price of milk they may not know. All of them will know the price of gas.”
The gut-level frustration is especially visible at gas stations near borders between states with wide differences in gas taxes. The pumps here have the feel of a discount store, flush with bargain hunters and families on the edge of an economic precipice.
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At two gas stations in southern Alabama, at least half the cars were from Florida, where gas taxes are 13 cents higher. A similar flow of California drivers appeared last week at gas stations in Yuma, Ariz., where gas can be more than 70 cents cheaper a gallon.
Many said that in the last few months, they had reached a breaking point with gas prices that had forced them to change their lifestyle.
Rebecca Laster, a mother of four from Campbellton, Fla., near the Alabama line, said she now stayed near her children’s school after dropping them off to avoid a second trip.
“Gas takes up a majority of what I spend,” Mrs. Laster said after putting $40 worth of gas in the tank of her minivan. Referring to politicians, she said: “I don’t think they know what it’s like to count every penny. They’ve never been in that position.”
Economic studies have shown that high gas prices disproportionately affect lower-middle-class Americans like Mrs. Laster, whose family lives on her husband’s salary from McDonald’s. And these appear to be the voters politicians are trying to appeal to.
One of the Democratic presidential candidates, Senator Barack Obama of Illinois, has criticized the gas tax holiday as a gimmick, saying it would save drivers little money.
But his Democratic rival, Mrs. Clinton, and Mr. McCain, the presumptive Republican nominee, have defended their plans with emotional appeals. A recent Clinton advertisement highlighting her support for a summer gas tax suspension ends with a raspy, apparently working-class narrator saying: “People are hurting. It’s time for a president who’s ready to take action, now.”
Suspending federal and state gas taxes, however, would not necessarily lead to a commensurate drop in prices.
Since 2000, four states have enacted gas tax holidays: Florida, Georgia, Illinois and Indiana. In general, retailers did not pass on all of the intended savings.
When Illinois and Indiana suspended about 7 cents of their state gas taxes in the summer of 2000, prices fell by an average of only 4 cents, according to a study by the American Road and Transportation Builders Association, which opposed the plans. Drivers saved no more than $2.50 a month, while each state lost tens of millions of dollars in tax revenue.
Previous gas tax holidays caused other problems, too. During the last gas tax suspension in Florida in 2004, people hoarded gasoline, driving up demand and prices.
It is not clear how the new proposals would prevent such unintended consequences. Texas lawmakers are not in session, so their ideas have been limited to public calls for relief.
The draft measures in Florida, Missouri and New York do not require retailers to pass on the tax suspension to consumers, nor are there provisions to prevent hoarding.
The New York plan, sponsored by Republicans in the State Senate, would suspend three state gas taxes, amounting to about 32 cents per gallon, from Memorial Day to Labor Day.
The Florida plan would create a tax holiday around July 4, cutting 10 cents per gallon off the 33.2 cents in total state gas taxes.
Signal Oil and Gas - $5 gas near, 78% of Americans say
Americans are already paying through the nose for gasoline, and they think it's only going to get worse.
A CNN/Opinion Research Corp. poll found that 94% of respondents expect they will have to pay $4 a gallon sometime this year - and 78% said they figure it will hit $5.
The national average for gasoline was $3.61 on Monday, according to motorist group AAA.
Consumers' fears that they will have to pay more have intensified. A year ago, 79% thought gas would cost $4 by the end of 2007 and only 28% feared $5 gas.
At the same time, high prices seem to be easier to swallow now than it has been for most consumers in the past. Of the more than 1,000 American adults surveyed in the poll, conducted April 28-30, 60% said high fuel prices have caused hardship for them or their household. That's down from 72% in March and 66% during the same time last year.
Demand for gas is down
But if Americans feel better able to absorb the rising price of gas, it might be because they are driving less. In fact, demand for gas is far below the average for this time of year.
"It takes a big jump in prices to alter commuters' behavior, but it appears we have now approached that level," said Stephen Schork, editor of energy industry newsletter The Schork Report.
And with crude oil topping $120 a barrel for the first time Monday, gas may continue its historic rise.
"With oil prices so high and demand so low, refiners' incentive to produce gasoline is very thin," noted Schork, saying that low gasoline supplies have meant higher prices for consumers.
In addition to cutting back on driving, consumers are also buying more fuel-efficient vehicles. U.S. automakers reported a continued drop in SUV and truck sales in April, but smaller cars and hybrid vehicles have increased dramatically. Sales of Toyota's hybrid Prius rose 67% in April.
No end in sight
Of course, for some Americans in California, Hawaii, and other western states, $4 gas is already a reality. Gas prices have set record after record, rising 18.4% nationwide this year. Most of that increase has come in the past month.
Last month, the U.S. Department of Energy said that the national average price of gasoline would hit a high of $3.60 this year. But gas prices have already surpassed that forecast well before the typical peak in gasoline prices in June, leading some analysts to raise their forecasts toward a high beyond $4.
"For gas prices to come down significantly, we'll have to see a material depreciation in the value of crude, but with prices hitting $120, it doesn't look like that's happening any time soon," Schork said.
"We'll see a national average of $4, $4.10, $4.20 and maybe even $4.30," added Schork, saying that $5 gas was indeed possible in certain parts of the country by the end of the spring.
Signal Oil and Gas - Oil steady after approaching $123 a barrel a day earlier
VIENNA, Austria - Oil prices steadied Wednesday after hitting a record near $123 a barrel in the previous day's session on worries over supply disruptions.
Prices were supported by concerns about supply disruptions in Nigeria, where production at a Royal Dutch Shell PLC facility was cut after a weekend attack. The main militant group in Nigeria's oil-rich southern region said Tuesday it is willing to cease hostilities if the federal government allows conflict mediation by a former U.S. president.
A string of pipeline bombings in recent weeks has cut oil production in Nigeria by tens of thousands of barrels per day, contributing to the sharp rise in oil prices. The country is Africa's largest producer and a major U.S. supplier.
Light, sweet crude for June delivery on the New York Mercantile Exchange slipped 3 cents to $121.81 a barrel in electronic trading by afternoon in Europe. On Tuesday, the contract soared to a record $122.73 a barrel before retreating to settle at $121.84, up $1.87.
"Clearly there's a lot of concerns about supply at the moment. The market's very jittery on any type of news, particularly supply disruptions," said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.
"There are many in the market who think these prices are as good as it gets and are positioned to see lower prices but we continue to see one-off supply issues keeping prices high," Pervan said.
The rise in crude futures also gained momentum Tuesday as investors bought on a Goldman Sachs prediction that oil prices could rise to $150 to $200 a barrel within two years.
Still, expectations that U.S. crude supplies increased last week were helping to limit oil's rise ahead of the release of the U.S. Energy Information Administration's report on fuel inventories later Wednesday.
Analysts surveyed by energy research firm Platts expected the report to show that crude oil inventories rose by 1.5 million barrels last week.
Gasoline stocks were projected to drop by 500,000 barrels, according to the Platts survey. Inventories of distillates, which include heating oil and diesel, were expected to have risen by 1.3 million barrels.
In its newsletter, Vienna's JBC Energy noted that the latest EIA forecasts on demand — an estimated 170,000 barrels a day lower in the second quarter of this year over the same period last year — also worked to keep a lid on prices and offered its own, lower forecast decline; 230,000 barrels a day.
In other Nymex trading, heating oil and gasoline futures were only slightly off previous levels at $3.3601 and $3.1014 a gallon, respectively. Natural gas futures were fell by nearly 7 cents at $11.082 per 1,000 cubic feet.
In London, Brent crude futures rose 14 cents to $120.45 a barrel on the ICE Futures exchange.
Signal Oil and Gas - Oil prices bubble under 122 dollars per barrel
World oil prices neared record levels close to 122 dollars per barrel on Wednesday as traders awaited a crucial weekly update on American energy reserves amid concern about tight global supplies.
New York's main oil futures contract, light sweet crude for June delivery, eased ten cents to 121.74 dollars, after hitting a lifetime peak of 122.73 dollars on Tuesday.
The price of London's Brent North Sea crude for June delivery gained seven cents to 120.38 dollars. The contract had struck a historic pinnacle of 120.99 on Tuesday.
Runaway oil prices have almost doubled in the past year and have surged by more than 20 dollars since the beginning of 2008.
The market was also boosted this week after Goldman Sachs forecast that prices could strike 200 dollars per barrel within the next two years. The US investment bank had famously and correctly predicted three years ago that oil would break through 100 dollars -- which it did in January.
"Crude oil prices were trading (on Wednesday) around 122 dollars, with the weekly EIA data out later today keeping the market on edge," said Sucden analyst Michael Davies.
The US government's Energy Information Administration was due later Wednesday to reveal the state of American energy inventories for the week ending May 2.
Ongoing violence in Nigeria -- Africa's largest crude producer -- had helped push oil prices to record peaks on Tuesday, traders said.
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"Support stemmed from continued unrest in Nigeria where a string of attacks by rebels calling for a greater share of the country's oil wealth have shut-in a sizeable element of its production," said analysts at energy consultancy John Hall Associates.
"Concerns over further Turkish incursion into Iraq in pursuit of Kurdish separatists also underpinned price movements."
Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage over the weekend, a military spokesman said Sunday.
The incident on Saturday came after an attack on Shell oil wells and a flow station in southern Bayelsa state, leading to a cut in the company's output.
Such attacks have cut Nigeria's production by about a quarter over the past two years.
David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said sentiment remained buoyant after Tuesday's sharp gains.
"While issues on the supply side are being progressively resolved... they highlight the risks of oil production going forward," said Moore.
He added that "Iran may also add a little risk element" in the near term.
Iran said Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end a long-running standoff over its nuclear programme.
Oil players fear the ongoing tension could result in Iran using oil as a bargaining chip. Iran is the second-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC) cartel.
Signal Oil and Gas - Oil steadies ahead of U.S. inventory data
Oil held firm on Wednesday, within sight of a record high above $122 a barrel hit the previous day, as investors awaited weekly U.S. fuel stocks data.
U.S. crude was up a cent at $121.85 a barrel by 7:26 a.m. EDT. London Brent crude was 10 cents higher at $120.41.
On Tuesday, U.S. crude set a record of $122.73 and settled at $121.84 -- its highest ever close.
"The market is in a waiting mode before the U.S. inventory data comes out," said Yusuke Seta of brokerage company New Edge in Tokyo.
Further downward pressure came from a recovery in the weak dollar, which headed towards a two-month high against a basket of currencies.
Weekly U.S. government figures -- due out at 1430 GMT -- would show a 1.6 million barrel increase in crude inventories and an 800,000 barrel rise in distillate stocks, including diesel and heating oil, according to a Reuters poll.
Gasoline stocks were expected to drop by 100,000 barrels.
However, the head of the state run company of OPEC member Libya said oil prices would rise further.
Oil prices, which this week hit a record high near $123 a barrel, will probably rise even further,
"I think it will go higher," Shokri Ghanem, head of Libya's National Oil Corporation, told Reuters in a telephone interview. "It is the same old story -- speculation and geopolitics."
Traders remained concerned about supply disruptions in Nigeria, despite the end last week of a strike which halted Exxon Mobil (XOM.N) output there.
"We all share the concerns over supply issues as Nigerian production improves, but is way off normal capacity and of course Iran's nuclear debate has resurfaced and will not go away," MF Global Energy said in a research note.
Concerns over supplies from the world's No. 4 oil producer resurfaced when Tehran said earlier this week it would refuse nuclear inspections.
Signal Oil and Gas - Japan, China tout progress on gas feud at summit
The leaders of Japan and China touted progress towards settling a feud over energy rights in the East China Sea on Wednesday, and agreed at a summit in Tokyo that peaceful cooperation between the two Asian powers was their "only option."
Japanese Prime Minister Yasuo Fukuda nudged Chinese President Hu Jintao to continue dialogue with representatives of the Dalai Lama, Tibet's exiled spiritual leader, following unrest in Tibet that prompted protests around the world.
"I have high expectations that the dialogue will be held patiently and through that, for the situation to improve," Fukuda told a joint news conference with Hu after their talks.
Hu said China's recent talks with the Dalai Lama's representatives had been conscientious and serious and that the two sides had agreed to continue contacts.
But he urged the Dalai Lama and his supporters to show sincerity and blamed them for the unrest and trying to wreck the Beijing Olympics in August. The Dalai Lama has repeatedly rejected those accusations.
Tibet was just one of the sticky topics at a summit aimed at building trust between the two Asian powers, whose ties have long been marred by their bitter wartime past and feuding over matters from energy resources to military ambitions.
"We both believe relations between China and Japan are at a new starting point," Hu Jintao told the news conference, a day after offering a pair of pandas to Japan as a gesture of goodwill.
Fukuda, a proponent of warmer ties with Japan's neighbors, said good relations with China were vital for the region and the world. He and Hu agreed to make high-level visits regular.
EAST CHINA SEA
In a meeting otherwise dominated by broad-brush vows to cooperate, the two leaders said there had been real progress in resolving a dispute over rights to gas under the East China Sea.
"Prospects for settling the dispute are already in view and I'm happy about this," Hu said. "We have decided to continue consultations and reach an agreement as soon as possible."
Fukuda echoed the positive note, but declined to give a date for clinching a deal.
The tussle over undersea gas has come to embody their rival worries about access to limited energy resources, and it is the bilateral dispute that could most easily spark military clashes.
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Despite the warm words from the leaders, each faces citizens at home who are wary of the other nation's intentions and skeptical of prospects for a lasting improvement in relations.
Hu has offered to lend Japan two pandas and is expected to play ping-pong with Fukuda during the trip, moves aimed at wooing a Japanese public worried about China's growing clout.
"Everything logical in the relationship tells you that they should improve it," said Phil Deans, a professor of international affairs at Temple University in Tokyo.
"But they are dealing with significant nationalist sentiment at home and that is something that is not rational."
The two leaders signed a joint document on future relations between the two countries, who are increasingly linked by trade and investment. China replaced the United States as Japan's biggest trade partner in 2007.
Sino-Japanese ties chilled during Junichiro Koizumi's 2001-2006 term as Japan's prime minister over his visits to Tokyo's Yasukuni war shrine, seen by critics as an offensive symbol of wartime misdeeds, but improved after he stepped down.
During Hu's visit until May 10, both sides are keen to avoid a rerun of the last state visit by a Chinese leader in 1998, when then-President Jiang Zemin delivered a series of sharp rebukes to Japan over its wartime actions, leaving both sides bitter.
BEIJING OLYMPICS
The past took a back seat to present matters this time and in a joint document on bilateral ties the two said they would "look squarely at history, to turn towards the future."
Fukuda said that Japan was praying for the success of the Beijing Olympics but that he had not yet decided whether to attend the opening ceremony in August. "If the situation permits, I will consider it positively," he said.
The two leaders also signed an agreement on global warming in which Beijing said it would take an active part in fighting climate change and would study the sectoral approach to cutting greenhouse gas emissions that Japan has championed.
Tokyo had sought Chinese backing for a permanent seat on the United Nations Security Council, but China stated only that Beijing hoped to see Japan play a bigger role internationally.
China pressed Japan to declare again its stance on Taiwan, the self-ruled island that Beijing says must accept reunification. Tokyo reiterated its long-standing support for "one China" that includes Taiwan.
Hu said the two governments would work together more closely to resolve a dispute over toxic Chinese dumplings that made several Japanese people ill and set off a storm of worry.
Signal Oil and Gas - World oil price near record highs
World oil traded only a little below 122 dollars per barrel Wednesday after concerns over supply in key producer Nigeria helped push prices to record highs in frenzied trading, dealers said.
SINGAPORE (AFP) - World oil traded only a little below 122 dollars per barrel Wednesday after concerns over supply in key producer Nigeria helped push prices to record highs in frenzied trading, dealers said.
New York's main oil futures contract, light sweet crude for June delivery, was 21 cents lower at 121.63 dollars in afternoon Asian trade.
The contract closed on the New York Mercantile Exchange Tuesday at a record high of 121.84 dollars after leaping to 122.73 dollars, an all-time intra-day high.
Brent North Sea crude for June fell 15 cents to 120.16 dollars per barrel. The contract had earlier reached a new peak of 120.99 dollars before settling at a record closing high of 120.31 on Tuesday in London.
Runaway oil prices have almost doubled in the past year and have surged by more than 20 dollars since the start of 2008.
David Moore, a commodity strategist at the Commonwealth Bank of Australia in Sydney, said sentiment remained buoyant after Tuesday's sharp gains.
"While issues on the supply side are being progressively resolved... they highlight the risks of oil production going forward," said Moore.
The supply disruptions in Nigeria have been important but there have been indications they will be resolved, he said.
Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage over the weekend, a military spokesman said Sunday.
The incident on Saturday came after an attack on Shell oil wells and a flow station in southern Bayelsa state, leading to a cut in the company's output. Nigeria is Africa's largest oil producer.
Barclays Capital analyst Kevin Norrish said "supply losses" are the key driver at present.
"Iran may also add a little risk element" in the near term, Moore said.
Iran said Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end a long-running standoff over its nuclear programme.
Oil players fear the ongoing tension could result in Iran using oil as a bargaining chip. Iran is the second-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC) cartel.
An analyst at BMO Capital Markets earlier cited "rumors of US action against Iran circulating in the markets" that affected oil and the dollar.
Analysts also said prices have been boosted by latest data showing the United States economy might be in better health than expected.
Traders had feared that a severe slowdown in the United States, the world's biggest economy and largest energy consumer, could affect oil demand.
Record-breaking oil prices have sparked widespread international concern among consumer nations amid predictions that they could rise perhaps as high as 200 dollars per barrel.
Kuwaiti Oil Minister Mohammad al-Olaim last week said OPEC may hold an extraordinary meeting on oil prices before a scheduled conference in September, and did not appear to rule out higher production.
Signal Oil and Gas - Oil holds above $120 a barrel on supply worries
Oil futures held steady above $120 a barrel Tuesday in Asia after surpassing that mark for the first time in the previous session on threats to supply and a weakening of the U.S. dollar.
The surge in oil prices was also fueled by hopes that the U.S. economy will be spared a sharp downturn after the release of data Monday showing an unexpected expansion in the U.S. service sector in April, analysts said.
Light, sweet crude for June delivery rose 20 cents to $120.17 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract surged to a trading record of $120.36 a barrel overnight before settling at $119.97 a barrel, up $3.65 from Friday's close.
"The bulls are in control of the market," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The economic report out of the U.S. yesterday on the service sector seems to suggest the economic slowdown may not be as deep as initially thought."
"The sentiment is that the oil pricing is likely going to stay quite strong, with a lot of volatility," Shum said.
The dollar weakened against the euro on Monday, attracting investors to oil and other commodities viewed as hedges against inflation. Also, a falling dollar makes oil less expensive to investors overseas. A series of U.S. Federal Reserve rate cuts starting last year weakened the dollar considerably against foreign currencies, and analysts blame the dollar's protracted decline for oil's sharp rise this spring.
Supply outages or potential threats to supply emerged in Iran and Nigeria over the weekend and from Iraq on Monday; events in all three nations have caused prices to spike many times in recent months.
In Iraq, Kurdish rebels warned they could launch suicide attacks against American interests to punish the U.S. for sharing intelligence with Turkey after Turkey bombed rebel bases in Iraq on Friday. In Nigeria, a Royal Dutch Shell PLC spokesman said attackers hit an oil facility belonging to Shell's joint venture in southern Nigeria and that some oil production has been shut down. And Iran's Supreme Leader Ayatollah Ali Khamenei said his country will not bend to international pressure and give up its nuclear program.
Energy investors grow concerned any time conflict breaks out or is threatened in the oil-rich Middle East. Years of unrest in Nigeria have cut off nearly a quarter of the major U.S. supplier's oil output.
Amid the occasional threats to crude supplies, global demand for oil continues to grow. While demand for oil and gasoline has been soft in the U.S., the Chinese and Indian economies are growing by double digits, boosting global demand for oil.
In other Nymex trading, heating oil futures rose 0.24 cent to $3.3089 a gallon (3.8 liters) while gasoline prices added 0.31 cent to $3.056 a gallon. Natural gas futures gained 1.2 cents to $11.19 per 1,000 cubic feet.
Signal Oil and Gas - World oil prices at new record above 120 dollars
World oil reached a new record price above 120 dollars a barrel on Tuesday as concerns over the United States economy eased, analysts said.
New York's main oil futures contract, light sweet crude for June delivery, reached an all-time high in electronic trade of 120.23 dollars a barrel, breaking the last record of 120.20 dollars reached during intraday trade on Monday.
After crashing through the symbolic 120-dollar ceiling for the first time, the contract was trading on Tuesday in Asia at 120.21 dollars a barrel against a record closing price of 119.97 dollars reached Monday on the New York Mercantile Exchange.
Brent North Sea crude for June delivery jumped 26 cents to 118.25 dollars a barrel, after settling at a record 117.99 dollars on Monday in London. The contract had earlier hit an intraday high of 118.58 dollars.
Oil futures prices on both sides of the Atlantic have nearly doubled in a year and have continued to soar since the benchmark New York contract broke through 100 dollars at the start of this year.
Latest US economic data have given oil prices a fresh boost, said Victor Shum, senior principal at Purvin and Gertz energy consultancy in Singapore.
On Monday the Institute of Supply Management said its index on the vast US service sector rose to 52 percent in April, above the level of 50 that means expansion, and better than expected by private analysts.
That report followed official data on Friday which showed that the US economy shed 20,000 jobs in April, far fewer than the 75,000 expected by the market.
The unemployment rate unexpectedly slipped a tenth of a percentage point to 5.0 percent, the US Labor Department said, compared with an expected rise to 5.2 percent.
Shum said the jobs report gave momentum to the market and the numbers from the services sector "further added to the thinking that the slowdown in the US economy may not be as bad as initially thought."
Traders had feared that a severe slowdown in the United States, the world's biggest economy and largest energy consumer, could affect oil demand.
"The sentiment is quite bullish as a lot of investors think that either way you can't go wrong with oil," Shum said.
Dave Ernsberger, Asia director of global energy information provider Platts in Singapore, said that "most importantly now there is evidence that the US economy is doing quite well."
Supply jitters from Nigeria and geopolitical tension over Iran added to the price surge on Monday, analysts said.
Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage, a military spokesman said Sunday. Shell accounts for about one-half of Nigeria's 2.1 million barrels-per-day output.
Signal Oil and Gas - New York oil price crosses 120 dollars for first time
Oil prices crossed 120 dollars a barrel for the first time Monday following fresh unrest in Nigeria, Africa's largest oil producer, and rising tensions between the West and Iran.
New York's main oil futures contract, light sweet crude for June delivery, surged to an intraday record high of 120.20 dollars.
The benchmark contract closed at an all-time high of 119.97 dollars, a hefty gain of 3.65 dollars from Friday's close.
In London, Brent crude for June delivery hit an intraday record high of 118.58 dollars before settling up 3.43 dollars at a record 117.99 dollars.
Trading volume in London was light as Britain marked a bank holiday.
Oil rallied close to a record 120 dollars a barrel last week on supply concerns linked to workers' strikes at a Scottish refinery and in Nigeria.
With the strikes resolved, crude prices were largely driven by movement in the US dollar, according to analysts.
Oil futures prices on both sides of the Atlantic have nearly doubled in a year.
"This stubborn oil bull just refuses to die," said Phil Flynn at Alaron Trading.
Oil prices surged Monday on supply jitters from Nigeria and geopolitical tension in Iran, analysts said.
"Nigeria is the lingering hotspot the markets will be focusing on," said MF Global analyst Ed Meir.
"The news over the weekend has been mixed; ExxonMobil said it has restarted 300,000 barrels per day of Nigerian production out of total of 800,000 sidelined earlier, but there are reports of fresh violence, as another pipeline explosion has shut in more oil production," he added.
Fresh militant attacks in Nigeria, Africa's biggest producer, have forced oil major Shell to shut down more of its oil production.
Nigerian militants attacked an oil ship off the coast of the west African country and took two people hostage, a military spokesman said Sunday. Shell accounts for about one-half of Nigeria's 2.1 million barrels-per-day output.
"A few oil delivery lines are affected and some oil has spilled into the environment," a Shell spokesman said.
Prices also got support from tensions between Iran and the West.
Iran said Monday it would reject any offer that violates its right to the full nuclear fuel cycle after world powers said they had prepared a new package to end the atomic crisis.
Oil players fear the ongoing tension could result in Iran -- the second-biggest OPEC producer after Saudi Arabia -- using oil as a bargaining chip.
Oil prices rose three percent Friday on better-than-expected employment figures in the United States which raised hope the world's biggest economy might avoid a recession.
The bombing by Turkish warplanes of Kurdish rebel bases inside Iraq and the strengthening of the dollar against the euro also supported oil prices.
Signal Oil and Gas - EU rules out linking Russia up to Nabucco pipeline
The European Commission ruled out on Monday the possibility of linking Russia up to the Nabucco gas pipeline, stressing that Europe would stick to its aim of diversifying EU supplies.
Nabucco, which is supposed to supply the bloc with gas from the Caspian Sea region by 2012-2013 while bypassing Russia, lies at the heart of the European Union's diversification strategy.
"Russia is working with its own project, South Stream," EU Energy Commissioner Andris Pielbalgs told reporters hours after meeting Russian Energy Minister Viktor Khristenko.
"They have never expressed any wish to join Nabucco," Pielbalgs said. "We should not ask Russia to join a project which they have never shown interest to join."
He said there were currently no discussions between Russia's Gazprom and the Nabucco consortium and "we should not speculate on issues that are not on the agenda.
"Safety and security in energy is in diversity," he added.
EU External Relations Commissioner Benita Ferrero-Waldner also excluded the possibility of linking Russia up to the Nabucco network.
"It's of high strategic interest and importance that we keep to our strategic goal of diversification, not just other resources but also other pipelines," she said, announcing that Egypt would contribute some two billion cubic metres of gas per year to the pipeline from 2010.
"Russia will always be an important supplier but we also have big countries around that have potentially very big reserves and they need to develop their reserves," she said.
The consortium behind Nabucco has struggled to get construction underway in the absence of enough investors amid fears that the EU will not find the 30 billion cubic metres of gas per year necessary for it to be viable.
Signal Oil and Gas - Survey finds gas prices up about 15 cents over past 2 weeks
The national average price for regular gasoline rose about 15 cents in the last two weeks, according to a survey.
The average price of self-serve regular gasoline on Friday was $3.62 a gallon, up 15 cents from two weeks ago. Mid-grade was at $3.74 and premium was $3.85. That's all according to the Lundberg Survey of 7,000 stations nationwide released Sunday.
Regular gasoline is up 55 cents since 2008 began.
Of the cities surveyed, the cheapest price was in Cheyenne, Wyo., where a gallon of regular cost $3.39, on average. The highest average was in San Francisco at $3.95.
Across California, the statewide average for a gallon of regular was $3.90, mid-grade was at $4.01 and premium at $4.11.
Signal Oil and Gas - Senators ready dueling energy plans
Democrats and Republican lawmakers in the U.S. Senate on Thursday set the stage for a divisive energy policy debate with two dueling party-line bills to combat high gasoline prices.
With Senate Democrats promising to unveil a new proposal to tame record-high U.S. pump prices averaging $3.60 a gallon on Friday, Republicans rolled out their proposal that would open a small portion of the Arctic National Wildlife Refuge to oil drilling, among other things.
"Talk is cheap, but gas is not," said Senate Minority Leader Mitch McConnell, flanked by 11 other Republicans.
The GOP proposal will compete with a Democratic version which Majority Leader Harry Reid is expected to detail on Friday.
Reid has said he wants to call a vote on a new energy package by late May, before lawmakers depart for their home states for a Memorial Day holiday recess and face voter ire over gasoline prices.
Both parties seem to agree on a proposal to require the federal government to stop filling the U.S. emergency crude oil reserve until oil prices fall from current levels of more than $110 a barrel.
Beyond that, the Republican plan is heavy on supply-side ideas which could tap up to 24 billion barrels of new oil supply. Democrats have traditionally leaned toward demand-side energy solutions like fuel-efficient cars.
"What we are hearing from the White House and from the Republicans is the same song, same dance: drill in the Arctic National Wildlife Refuge," said Sen. Patty Murray, Washington Democrat. "We know we can't drill our way out of this problem."
Several of the Republican proposals -- like ANWR drilling and opening more offshore areas to drilling -- have been rejected by the Senate before.
However, Sen. Pete Domenici, New Mexico Republican, said lawmakers might see things differently now that crude oil prices have risen more than five-fold since 2002.
"If you voted against it before, take another look at it with oil at $115 a barrel," Domenici said.
Among other things, the GOP proposal would:
- Allow states to petition the federal government to allow oil drilling off the Atlantic and Pacific coasts;
- Suspend filling the Strategic Petroleum Reserve for 180 days;
- Require production of 6 billion gallons of coal-derived transport fuels by 2022;
- Repeal a 1-year moratorium on drilling in oil shale regions in Colorado, Wyoming and Utah;
- Repeal previous legislation prohibiting federal agencies from using alternative fuels that emit more greenhouse gases than conventional sources, which has been viewed as a de facto ban on U.S. government use of fuels refined from the Canadian oil sands.
Signal Oil and Gas - BP, ConocoPhillips team up to build vast gas pipeline
British energy giant BP and US-based ConocoPhillips announced plans Monday to build one of the world's largest natural gas pipelines from Alaska to Canada.
The companies said the proposed pipeline would be over 700 miles (1,126 kilometers) long and stretch from a gas treatment plant on Alaska's North Slope into Canada through the Yukon Territory and British Columbia to Alberta.
The planned Alaska Gas Pipeline, called Denali, would be able to ship four billion cubic feet of natural gas per day to markets.
The two energy groups said it would also be the "largest private sector construction project ever built in North America."
BP and ConocoPhillips said they will spend 600 million dollars on the project before 2010, after which they will need to gain approval from America's Federal Energy Regulatory Commission and Canada's National Energy Board before they can start constructing the vast pipeline.
"This project is vital for North American energy consumers and for the future of the Alaska oil and gas industry. It will allow us to keep our North Slope fields in production for another 50 years," said BP chief executive Tony Hayward.
"The Alaska Gas Pipeline project will deliver natural gas to meet North America's growing energy needs," said Jim Mulva, ConocoPhillips chairman and chief executive officer.
The companies said they have already assigned staff to the joint project team which will be ramping up its operations in coming months.
Signal Oil and Gas - Venezuela, India sign joint venture in oil-gas-rich Orinoco
Venezuela and India on Tuesday signed a five-year, 400-million-dollar joint venture to drill for oil and gas in Venezuela's oil-rich southeastern Orinoco region, Oil and Energy Minister Rafael Ramirez said.
"It's the first association agreement between the two countries," Ramirez said after signing the agreement with his Indian counterpart Murli Deora, the first energy minister from India to visit Venezuela.
The joint venture brings together Venezuela's state-owned oil company PDVSA and India's ONGC Videsh Ltd., a subidiary of India's top oil company Oil and Natural Gas Corporation Ltd (ONGC).
With PDVSA controlling a 60 percent stake of the venture and ONGC Videsh Ltd. 40 percent, the two companies will explore the 160 square kilometer (62 square miles) San Cristobal oil field in northern Orinoco, a region the size of Croatia that is rich in heavy crude oil.
Over the next few years, the joint venture is likely to double Orinoco's oil production from its current 30,000 barrels per day to 60,000, Ramirez told reporters at PDVSA heaquarters.
Preliminary studies by both companies also estimated the San Cristobal area can yield 7,476 cubic meters (264 million cubic feet) of natural gas.
India in 2006 increased its crude oil purchase to 50,000 barrels per day, and its trade with Venezuela has grown from 60 million dollars per year in 2004 to 138 million in 2005, and close to one billion in 2006, mostly in oil sales, the Indian Embassy said.
Venezuela, a member of the Organization of Petroleum Exporting Countries (OPEC), is Latin America's leading oil producer, with an estimated 100 billion barrels of crude oil reserves.
Last year, the leftist government of President Hugo Chavez nationalized the Orinoco oil fields, imposing a 60 percent share for PDVSA in all joint ventures in the area, and compensating some foreign oil companies for their lost interest.
Besides India, PDVSA is currently working with oil companies from Russia, Iran, China and Latin American nations in exploiting the heavy Orinoco crude, which is expensive to refine.
When fully tapped, Orinoco's estimated 270 billion dollars of crude oil reserves would make Venezuela at the world's top oil producer, beating current leader Saudi Arabia.
Signal Oil and Gas - Saudi Arabia says oil demand does not justify output rise
Saudi Arabian Oil Minister Ali Al-Naimi said here on Thursday that there were not enough buyers of oil to justify an increase in oil production, despite high prices.
Speaking outside an international oil conference here as the price of oil hovers at high levels, he said that there were not enough buyers of oil in the market to absorb extra output.
Asking where the buyers were, he said that if more buyers emerged, then "we" would sell. But there were no such buyers, he argued.
The minister said: "Where is the buyer ? If there is one we would sell (oil at once). There are no buyers."
As he spoke the price of Brent quality North Sea oil in London hit a record high point of 109.86 dollars per barrel.
Saudi Arabia is the biggest producer within the Organization of Petroleum Exporting Countries.
Signal Oil and Gas - Oil hovers below record after fall in U.S. stocks
Oil prices held steady around $111 a barrel on Thursday, within sight of the previous day's record high after a sharp fall in U.S. crude and fuel stocks rekindled concerns about summertime supplies.
U.S. crude eased 9 cents to $110.78 a barrel by 0704 GMT, below its peak of $112.21 touched in the previous session. London Brent crude fell 11 cents to $108.36 a barrel, about $1 shy of its record.
Prices surged 2 percent on Wednesday after data showed U.S. crude oil inventories fell 3.2 million barrels last week as imports declined, countering earlier expectations for a build, while gasoline and distillate stocks also fell, data from the Energy Information Administration showed.
"The data fuelled concerns of tight oil market conditions, pushing prices higher," said Commonwealth Bank of Australia's commodity strategist David Moore, in a research note.
U.S. gasoline and heating oil futures, as well as London gas oil, hit record highs after concerns about diesel supplies following a European refinery outage and after months of strong import demand from China, the world's number two oil consumer.
The premium for U.S. heating oil futures over crude has surged more than $5 to $25 a barrel this week, near the record high touched in the wake of Hurricane Katrina in 2005.
"The U.S. market is propped up -- even galvanized -- by increasingly heated global competition for scarce refinery supply, but the outlook for U.S. domestic demand is lackluster," said Antoine Halff, deputy head of research at brokers Newedge.
Oil also benefited from a broad commodities rally fuelled by the weakening dollar, which fell against the euro and the yen on views the U.S. Federal Reserve could cut interest rates by 50 basis points this month to stave off a possibly severe U.S. economic recession.
Although investors are rushing into commodities as a hedge against the weakening dollar as the U.S. economy falters, a possible recession would also cut into oil demand in the world's top consumer, where drivers are already reacting to high prices.
On Tuesday, the U.S. government forecast that summer driving use would fall for the first time since 1991.
And despite a plea from consuming nations for OPEC to raise oil production to help cap rising oil prices, cartel members insist the markets remain well supplied.
Signal Oil and Gas - Dozens hurt as Bangladesh Islamists battle police
Dozens were injured in the Bangladeshi capital Friday as police fired tear gas at thousands of Islamic activists protesting against the emergency government's bid to ensure equal rights for women, police said.
The roads in front of Dhaka's main mosque became a battleground as about 5,000 men armed with bamboo sticks and bricks clashed with police, who responded with tear gas and batons, deputy police commissioner Mazharul Islam said.
"They attacked the policemen with bricks and sticks immediately after the weekly Friday prayers. We shot tear gas shells and baton-charged the unruly activists," Islam said, adding that dozens were injured in the clashes.
Witnesses said at least 100-150 were injured including three photo-journalists as police let off scores of tear gas canisters, some inside the country's biggest mosque complex called Baitul Mukarram.
The activists belonging to the Committee to Resist Anti-Koran Laws, a coalition of Islamic parties, chased police with bamboo sticks and bricks, Islam said. Several policemen were among the casualties.
The protests were against a women's development policy adopted in March by the government advocating equal property rights for women.
Dozens were injured on Thursday when more than 3,000 members of Islamic parties lobbed bricks and stones at police.
They torched two police motorcycles, smashed dozens of car windows and halted traffic on the capital's main roads for hours, police said.
Muslim clerics and parties have warned of nationwide demonstrations saying they will not tolerate any laws that contradict sharia, or the Islamic legal code.
Soon after the new policy was announced, the government backed down, explaining it had not been passed into law. No legislation would be passed "that goes against the Koran and the traditions of Prophet Mohammed," the government said.
Bangladesh, whose population is 90 percent Muslim, has a secular legal system but in matters related to inheritance and marriage Muslims follow sharia.
This generally stipulates that a girl inherits half of what her brother gets. Women's groups have long protested against the disparity and demanded equal rights.
Signal Oil and Gas - Oil prices drop on demand fears
Oil prices eased on Monday below 110 dollars a barrel on expectations of a drop in worldwide demand for crude after finance chiefs expressed deep concern over the US economy, analysts said.
But prices remained close to record highs of above 112 dollars reached last week on news of falling energy stockpiles in the United States.
On Monday, New York's main oil contract, light sweet crude for delivery in May, fell by 39 cents to 109.75 dollars. The contract had rocketed to a record 112.21 dollars on Wednesday.
In London, London's Brent North Sea crude for May dropped 58 cents to 108.17 dollars per barrel.
"Prices are going down from the given perception that the US is in recession," said David Johnson, an oil analyst at Macquarie Research.
Victor Shum, senior principal at Purvin and Gertz energy consultancy in Singapore, said prices were also under the influence of movement in the US dollar.
The latest economic warning came Friday from finance ministers and central bank governors of the G7 major industrialised countries.
The world economy "continues to face a difficult period... (and) near-term economic prospects have weakened," the G7 officials said in a statement after their meeting in Washington.
Top finance officials from Britain, Canada, France, Germany, Italy, Japan and the United States were tackling a complex crisis that began in the US subprime, or high-risk, home-loan market in August and has spread into a global credit squeeze draining world growth.
"The turmoil in global financial markets remains challenging and more protracted than we had anticipated," the G7 said before weekend meetings of the board of governors of the International Monetary Fund and World Bank.
A slowing US economy, the world's biggest, could hit demand for energy products. The United States is also the world's thirstiest oil consumer.
The dollar attempted a brief rebound on Monday after the G7 showed growing concern about the currency's recent slide, dealers said.
But the rally ran out of steam as traders bet that rich nations would refrain from joint intervention to buy the ailing greenback for now.
A stronger dollar discourages demand for dollar-priced goods, such as crude oil, as it can make them less affordable for buyers holding other currencies.
The International Energy Agency (IEA) on Friday revised its estimate for global demand for oil this year down to 87.2 million barrels per day, a reduction of 310,000 barrels per day from its estimate last month.
But the forecast initially did little to ease speculative fervour from investors who turned to oil in the face of financial market turmoil, dealers said.
Signal Oil and Gas - Sterling receives rare boost
The pound found a rare fillip from UK economic data which showed that pipeline inflationary pressures remain strong. Data out this morning showed that UK producer prices continued to surge in March, led by rising oil prices and duty hikes from this year's Budget.
The Office for National Statistics said producers' output prices rose by 0.9 percent in March from the previous month on an unadjusted basis, to take the annual rate up to 6.2 percent. The latter is the highest since May 1991. Meanwhile, input costs for producers also rose sharply. In March, they rose an adjusted 1.8 percent from February for an annual gain of 20.4 percent. The latter is the highest since records began in 1986.
Still, the pound could be in for a rough ride if two key surveys on UK house prices and retail sales, due out at midnight, come in weak.
Signal Oil and Gas - Oil hovers below highs as dollar gains on data
Oil prices hovered below record highs on Wednesday, after the U.S. dollar rose on surprisingly robust U.S. economic data that moved supply concerns to the back of investors' minds for now.
U.S. light crude fell 28 cents to 113.51 a barrel by 0140 GMT, off Tuesday's record high of $114.08, but is still up nearly four-fifths from a year ago.
London Brent crude fell 38 cents to $111.20.
The weak dollar -- together with strong demand -- has driven oil and other commodities like corn, gold and rice to record highs in recent months, as investors and speculators have sought a hedge against inflation.
"The dominant factor continues to be the U.S. dollar and I expect this to continue for a while," said Gerard Rigby, an analyst at Sydney-based Fuel First Consulting.
"Whenever you get any kind of good economic news out of the (United States) at the moment, the dollar will rise and oil falls, and the other way round, you get a new oil record," Rigby added.
The dollar rose against the euro on Wednesday after robust U.S. inflation and manufacturing data suggested the U.S. Federal Reserve may be less aggressive in cutting interest rates.
Lifting some concerns over a supply squeeze, Mexico, a major supplier to the U.S., reopened its three main Gulf of Mexico oil ports as bad weather cleared, the government said.
Only a smaller Pacific port remained shut.
But in a sign that consuming countries were still concerned about a supply shortfall, Britain's prime minister Gordon Brown on Tuesday called on the Organization of the Petroleum Exporting Countries to boost production to counter rapidly rising prices.
OPEC, which pumps more than a third of the world's oil, said late on Tuesday it was supplying enough oil and the U.S. economic slowdown may weaken consumption in the second quarter, underscoring its reluctance to raise supply.
Demand in the world's top consumer may be losing steam. U.S. crude oil imports fell in February to the lowest level in a year.
They declined by 486,000 barrels per day, or 4.9 percent, from the month before to 9.514 million bpd, the federal Energy Information Administration said.
U.S. crude oil inventories likely rebounded last week, with an increase in imports lifting supply, following a surprise drawdown the week before, a Reuters poll of 14 analysts showed.
But gasoline stocks probably fell for the fifth week running.
Signal Oil and Gas - Iran questions need for OPEC to cool oil prices
Iran's oil minister on Wednesday questioned the need for OPEC to hike production to cool surging oil prices, snubbing calls for more crude from its Western foes, the United States and Britain.
Crude hit a record high of $114.08 a barrel on Tuesday.
"Why should OPEC try to lower prices? ... Let America and Britain continue demanding," Oil Minister Gholamhossein Nozari told reporters on the sidelines of a conference in Tehran when asked about the calls from consumers for OPEC to act.
British Prime Minister Gordon Brown on Tuesday urged producers to open the taps to counter high prices, echoing a call by the United States.
Washington and London are embroiled in a row with Iran over its nuclear program, which they believe is aimed at building nuclear weapons despite Tehran's insistence that its goal is generating electricity.
Nozari, who heads the oil industry in OPEC's second biggest producer, described the current price as "suitable" and blamed factors like the weak U.S. dollar for the price surge.
"Oil supply is more than demand in the market but because of other factors including the U.S. dollar losing its value, the price of oil is going up," Nozari said. Jim E Van Blaricum
The Organization of the Petroleum Exporting Countries has also said there is no shortage of supply. As well as a weak dollar, it points to issues like speculative trading and political tensions for price rises.
'SANCTIONS INEFFECTIVE'
Nozari also said he saw no reason for an exceptional meeting by OPEC because the group had no power to act in a market where demand and supply were not the driving forces.
"I don't think there is a need for an extraordinary meeting to discuss the level of production or the current prices," Nozari said.
OPEC ministers last met for their regular talks in March and are due to meet again on September 9 in Vienna.
In its bid to isolate Iran, the United States has long imposed sanctions that target the Islamic Republic's oil industry and other areas. It has also been urging foreign firms to steer clear of the Islamic Republic.
Nozari said sanctions on Iran were not deterring investors or hampering the country's oil industry.
"Sanctions and threats are old, dull and ineffective instruments for Iran's oil industry," he said in a speech to the conference.
"Foreign companies are still coming to invest in Iran."
Industry experts say many Western firms are increasingly reluctant to invest or expand work in Iran but say Asian firms including from China have been signing up to energy projects.
The experts say Iran needs foreign investment and accompanying expertise to substantially expand output from the current level, which Iranian officials have put at about 4.2 million barrels per day.
The U.N. Security Council has also slapped sanctions on Iran because of the nuclear row. Those U.N. measures are not aimed at the oil sector but analysts say the standoff is adding to the concerns of Western companies about investing.
Signal Oil and Gas - Oil hovers below highs as dollar gains on data
Oil prices hovered below record highs on Wednesday, after the U.S. dollar rose on surprisingly robust U.S. economic data that moved supply concerns to the back of investors' minds for now.
U.S. light crude fell 28 cents to 113.51 a barrel by 0140 GMT, off Tuesday's record high of $114.08, but is still up nearly four-fifths from a year ago.
London Brent crude fell 38 cents to $111.20.
The weak dollar -- together with strong demand -- has driven oil and other commodities like corn, gold and rice to record highs in recent months, as investors and speculators have sought a hedge against inflation.
"The dominant factor continues to be the U.S. dollar and I expect this to continue for a while," said Gerard Rigby, an analyst at Sydney-based Fuel First Consulting.
"Whenever you get any kind of good economic news out of the (United States) at the moment, the dollar will rise and oil falls, and the other way round, you get a new oil record," Rigby added.
The dollar rose against the euro on Wednesday after robust U.S. inflation and manufacturing data suggested the U.S. Federal Reserve may be less aggressive in cutting interest rates.
Lifting some concerns over a supply squeeze, Mexico, a major supplier to the U.S., reopened its three main Gulf of Mexico oil ports as bad weather cleared, the government said.
Only a smaller Pacific port remained shut.
But in a sign that consuming countries were still concerned about a supply shortfall, Britain's prime minister Gordon Brown on Tuesday called on the Organization of the Petroleum Exporting Countries to boost production to counter rapidly rising prices.
OPEC, which pumps more than a third of the world's oil, said late on Tuesday it was supplying enough oil and the U.S. economic slowdown may weaken consumption in the second quarter, underscoring its reluctance to raise supply.
Demand in the world's top consumer may be losing steam. U.S. crude oil imports fell in February to the lowest level in a year.
They declined by 486,000 barrels per day, or 4.9 percent, from the month before to 9.514 million bpd, the federal Energy Information Administration said.
U.S. crude oil inventories likely rebounded last week, with an increase in imports lifting supply, following a surprise drawdown the week before, a Reuters poll of 14 analysts showed.
But gasoline stocks probably fell for the fifth week running.
Signal Oil and Gas - Alaska rejects final Exxon plan for giant gas field
Alaska on Tuesday rejected Exxon Mobil Corp's (XOM.N) latest plan for the giant Point Thomson natural gas field on the North Slope despite industry warnings of another lengthy setback to development of an Alaska gas pipeline.
Exxon said it will appeal the decision, which terminates the Point Thomson development unit and could lead to the cancellation of the field leases. A spokeswoman said the energy company plans to "pursue all alternatives to protect our rights to develop these resources."
Chevron Corp (CVX.N), which holds a 25 percent stake in Point Thomson, vowed to sue over the decision.
"We are shocked and very disappointed by this decision," Scott Davis, the Chevron executive overseeing its Alaska business, said in a statement. "With this decision the state has taken a giant step backward in bringing North Slope gas to market."
Point Thomson, discovered in 1977, is thought to hold at least 8 trillion cubic feet of natural gas reserves and 200 million barrels of liquids and would be a vital source of supply for any Alaska natural gas pipeline project. Signal Oil and Gas
The state has accused the oil companies of deliberately delaying development of Point Thomson. The majors reject that charge, saying the giant gas field cannot be put into production until a pipeline is constructed to ship Alaska gas to the rest of the United States.
Field operator Exxon owns about 36 percent of Point Thomson, and BP Plc (BP.L) owns 32 percent of the field.
The Alaska Department of Natural Resources ruling said Exxon's failure to develop the field under 22 previously submitted development plans compromised the credibility of its latest proposal.
"The history of this unit and the evidence offered by the Appellants have convinced me that approving the (development plan) will not result in timely development of these valuable state lands," DNR Commissioner Tom Irwin wrote.
Alaska Gov. Sarah Palin, a strong critic of the oil industry, welcomed the decision.
"I support the commissioner's decision because I want development and Alaskans are ready to see real progress at Point Thomson, finally, after 30 years," she said in a statement.
Alaska and the companies have been sparring over Point Thomson since late 2005 when the state made the first step to break up the field unit and possibly cancel the leases.
The state so far has been successful in early legal battles. Officials concede that a lengthy period of litigation may ensue. James Van Blaricum
BP and ConocoPhillips both hold stakes in Point Thomson and have been spearheading efforts to build a $30 billion Alaska natural gas pipeline.
Plans for that project still are moving forward, according to BP Alaska spokesman Steve Reinhardt. Still, he cautioned that doubts about the availability of Point Thomson gas could delay or even kill the pipeline.
If the companies are unable to develop Point Thomson, they also will miss out on adding the reserves from the field to their reserve base. All the companies involved have struggled in recently to add oil and gas to keep up with their production, prompting questions about their long-term growth prospects.
Exxon has 20 calendar days to appeal the DNR's decision. Following an unsuccessful appeal with the DNR, Exxon would have recourse to state courts under Alaska law.
Signal Oil and Gas - Oil must stay high if world to have enough supply
Energy producers cannot halt a rally that has driven oil to nearly $120 a barrel and the world might have to live with even higher prices if it wants supplies for the future, exporters said on Tuesday.
Signal Oil and Gas - OTC: Definition of energy security is changing
The definition of energy security must incorporate social acceptance of technology, availability of diverse energy sources, and environmental sustainability, said speakers May 6 during a panel discussion at the Offshore Technology Conference in Houston.
Robert Fryklund, IHS vice-president of industry relations, said society in general, including the oil and gas industry, is working to figure out how to achieve a balance between energy security and climate security.
"Unfortunately, this puzzle has a couple missing pieces," Fryklund said, "There is a lot that we know, but there is a lot that we don't know. In the corporate world, we ask how much is it going to cost? As individuals, we ask how much more are we going to have to pay at the pump?"
Varied definition
Amy Jaffe of Rice University's Baker Institute, said the concept of energy security varies over time and also varies depending upon where one lives. For instance, Europeans generally are talking about natural gas when they discuss energy security while US citizens generally are talking about gasoline, she said.
"So, different parts of the world are not even talking about same commodity," Jaffe said.
The definition of energy security also changes over time given perceived threats to energy supplies. Current threats include political instability and civil unrest in some producing countries, severe storms, and work stoppages.
"On top of that, we have to worry about a new producer climate. National oil companies feel empowered by oil supply shortages, and this will tempt them to flex their geopolitical muscle," Jaffe said.
Not all types of energy are well received, she added, noting that oil sands are perceived by some as being good for energy security but bad for climate security.
Saying that she does not view energy security and climate security "as two sides of the same coin," Jaffe acknowledged "a growing sense of urgency about climate change and security of supply." New fuel efficiency standards will reduce US oil demand and emphasize greater fuel diversity, she said.
Trade offs will have to be made when determining the future energy mix, she said, adding that she questions whether many people yet realize the ramifications of such decisions.
"If we move to greater use of natural gas, what is that going to mean for US energy security," Jaffe asked. "In a carbon-constrained scenario, LNG becomes quite more dramatic. It makes the US more dependent on imported LNG."
MMS view
Randall Luthi, director of the US Minerals Management Service, said he believes environmental security needs to be considered along with energy security and climate security.
"The price of gasoline is only part of our energy equation," Luthi said. "Without increased domestic production, imports will have to increase."
US energy production must be increased from all sources, including alternative and renewable energy, he said.
"We do have to look at all possibilities: new sources of energy as well as more efficient use of existing sources," Luthi said. "It needs to be a worldwide effort. The US is a key part but other emerging economies need to be a part as well."
Kevin Leahy, Duke Energy managing director climate policy and economics, said climate change will rework the energy supply and distribution system in the US, particularly for transportation fuels.
He believe the electric-generation business is going to drive carbon dioxide prices in a global carbon-trading scenario. He believes power also will drive natural gas prices.
Regarding the future role of hydrocarbons, Leahy said, "I could see where electrons would become the energy carrier for wealthy countries, and liquid fuel would still provide the energy in countries with emerging economies."
Key considerations for expanding the role of clean energy involve more than cost, said Robert LaCount of Cambridge Energy Research Associates. Other factors are scale, reliability, timing, integration, and unintended consequences.
"When we look over the next couple decades, we would recommend keeping our eye on many different aspects" to see how different energy sources develop, LaCount said.
International perspective
Fatih Birol, chief economist for the International Energy Agency, sees a "new world energy order" with some new actors entering and some others leaving.
China and India are transforming global energy markets, Birol said, adding those two countries are expected to contribute almost half of the increase in global energy and 60% of CO2 emissions by 2030. China's oil imports are expected to reach 13 million b/d in 2030, and car ownership there is forecast to jump to 140 vehicles/1,000 people compared with 20 vehicles/1,000 people today.
Signal Oil and Gas - Nigeria invites investors to implement Gas Master Plan
Nigeria is seeking $20-25 billion of private investment to build natural gas pipelines, processing plants, and other infrastructure under its Gas Master Plan, which has just been approved by the federal council.
The plan will help Nigeria become a major gas consumer and monetize its 182 tcf of proved gas reserves, said David Ige, group general manager at Nigeria National Petroleum Corp. Ige told delegates at the Offshore Technology Conference May 6 in Houston that the plan would help connect the resources to Nigeria's domestic and export markets.
"The US Geological Survey puts undiscovered reserves at 600 tcf and our gas reserves are those found so far in exploring for oil. We have had any gas exploration program on its own," Ige added. "The commercial framework and the lack of infrastructure have made it difficult to bring the resources to market."
The plan anticipates an aggressive demand increase of 20-25% in the midterm because of domestic projects such as methanol plants, gas-to-liquids plants, fertilizer plants, independent power projects, and other LNG export plants such as Brass LNG.
Nigeria aims to have a market-driven gas sector by 2014 where the domestic and export market will come together, Ige said. "We did the mistake with oil where exports were preferred over the domestic market and we don't want to make that mistake with gas." President Umaru Yar'Adua has called on companies to set aside gas production for local use and Ige told OGJ that the new domestic market supply obligation launched in February would see 1 bcfd of natural gas directed to consumers in Nigeria. This would rise to 4-5 bcfd over the next 5 years.
By January 2011, Nigeria hopes to see a commercial domestic market and commercial pricing for gas to power. By January 2013, it expects to have a GTL market. Nigeria will give presentations in May in Abuja, London, and Singapore to provide more details on how investors can become involved in its gas development.
Signal Oil and Gas - Crude hits new high; $200/bbl predicted
Crude futures prices hit an intraday high May 5 in the New York market as traders worried about the falling US dollar and supply disruptions in a tight market.
Prices continued climbing in early trading May 6 after Goldman Sachs Group Inc., the world's largest securities firm, predicted crude costs could escalate to $150-200/bbl within 2 years. The front-month price for benchmark US crudes soared past $120/bbl in intraday trading May 5 from $62/bbl a year ago, indicating a continuing super spike in crude futures market, said Goldman Sachs analyst Arjun Murti.
He headed a Goldman Sachs team that in 1985 predicted a super spike of crude prices to $50-105/bbl at some point within a few years because of continued unexpected strength in world oil demand and economic growth, especially in the US and China. The group also said at that time that retail gasoline prices could hit $4/gal during the multiyear "spike" period until high prices force a reduction in oil consumption. Oil was then trading at a record level of $58/bbl (OGJ Online, Apr. 5, 2005). Late last year, Goldman Sachs raised its 2008 oil price prediction to $95/bbl from $85/bbl for benchmark US crude and predicted crude might hit $105/bbl before 2009 (OGJ Online, Dec. 17, 2007).
"The market-making strength of Goldman Sachs in the oil futures market is something to be never fully discounted," said Olivier Jakob at Petromatrix, Zug, Switzerland.
The recent rally in oil futures prices has been so extreme (up $10/bbl since May 1) that "momentum indicators are hard to define as it took 2 days to do what previously took 10 days," said Jakob. Energy prices rebounded May 2 and May 5 from a brief but sharp decline in the middle of last week. The front-month benchmark crude has broken $120/bbl in intraday trading but still needs to confirm that new mark by closing above $120/bbl, said Jakob. There is no clear resistance level above $120/bbl before $125/bbl," he said.
"Energy stocks advanced yesterday, as both crude oil and natural gas [futures prices] increased. Crude eclipsed the $120/bbl mark on concerns of supply disruption and signs of increased US demand. A report yesterday showed that US service industries increased in April, signaling higher energy use," said analysts in the Houston office of Raymond James & Associates Inc.
Meanwhile, Royal Dutch Shell PLC confirmed May 6 that a May 2 attack on a flow station in southern Nigeria forced the company to reduce exports by 170,000 b/d (OGJ Online, May 5, 2008).
Energy prices
The June contract for benchmark US sweet, light crudes hit an intraday high of $120.36/bbl before closing at $119.97/bbl, up $3.65 for the day on the New York Mercantile Exchange. The July contract gained $3.68 to $119.47/bbl. On the US spot market, West Texas Intermediate was up $3.65 to $119.97/bbl. Heating oil for June delivery advanced 8.78¢ to $3.31/gal on NYMEX. The June contract for reformulated blend stock for oxygenate blending (RBOB) increased by 8.65¢ to $3.05/gal.
The June natural gas contract shot up 40.1¢ to $11.18/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., escalated by 39.5¢ to $10.88/MMbtu.
In London, the June IPE contract for North Sea Brent crude gained $3.43 to $117.99/bbl. The May gas oil contract jumped up $23 to $1,099.50/tonne.
The average price for the Organization of Petroleum Exporting Countries' basket of 13 reference crudes increased by $4.61 to $111.50/bbl.
Signal Oil and Gas - Technology key to Mexico's future oil production
Technology is key to unlocking Mexico's petroleum resources and enhancing production, said Mexican Petroleum Institute Chief Executive Heber Cinco Ley at the Offshore Technology Conference in Houston May 5.
With subsalt plays and poor recovery efficiency for existing fields, Mexico needs improved oil recovery and innovative technology to help extend the productive life of its reservoirs, Ley stressed. Operators are finding Mexico's fractured reservoirs challenging because they are difficult to characterize, model, and simulate. "We need a new generation of reservoir simulators," he said.
The country's oil and natural gas industry is crucial to its economy, accounting for 40% of Mexico's federal budget. But production is on the wane: oil output is 3.1 million b/d, and gas is 6 MMcfd. Cantarell, Mexico's largest oil field, generates half of the output of state-owned oil company Petroleos Mexicanos (Pemex). Cantarell had been producing an average of 1.58 million b/d, but production began falling last November to 1.3 million b/d, and it is expected to drop to 600,000 b/d by 2013.
Ley said the challenge with Cantarell is accessing oil that is trapped under the gas cap.
Onshore Chicontepec field will require $14.5 billion to develop. Pemex expects to drill 5,421 development wells in the field by 2012. Oil production is expected to hit 1 million b/d. However, according to Ley, Chicontepec has a primary recovery factor of only 5-7%.
Deep water will be the future source of oil production in Mexico, but expertise is needed in flow assurance, control pipelines, subsea systems, and other areas, Ley added.
Pemex has assembled its first deepwater asset team for the Coatzacoalcos Profundo area, which Pemex hopes will produce 400 MMcfd of gas under a $40-70 billion investment program. The main fields are Noxal, Lakach, Lalai, and Nab.
Pemex also has contracted three semisubmersible drilling rigs for deepwater activity. Two of the rigs can drill in water as deep as 2,100 m, and the third can work in water 3,000 m deep.
Water management from producing reservoirs is another major challenge, as it takes 3 bbl of water to produce each barrel of oil, Ley added. "We need to predict this accurately, as it can affect hydrocarbon production. We need to develop efficient drilling at lower costs."
Signal Oil and Gas - Lieberman-Warner bill could reduce domestic gas supply
A climate change bill headed for the US Senate floor in early June could greatly reduce domestic natural gas production and send refining production and jobs overseas, according to a new report commissioned by the American Petroleum Institute.
ICF International report, which API released May 5, says that S. 2191, which Sens. Joseph I. Lieberman (I-Conn.) and John W. Warner (R-Va.) introduced Oct. 18, 2007, would raise the $25,000 estimated annual cost of operating a domestic gas well by some $12,500/year by 2012 and $25,600/year by 2030 because producers would be required to buy greenhouse gas emission allowances.
Even though methane emissions from upstream oil and gas operations represent only about 1% of the national total, the impact on investment in new wells would be substantial because the estimated cost of allowances is high relative to gas well operating costs, the report says in its executive summary.
Higher costs would reduce the incentive to drill for gas, and it is estimated that gas drilling "would decline, relative to the base case and depending on assumptions about potential additional mitigation efforts, by about 18-22% over 2012-20 and about 31-40% over 2021-30," the report maintains.
Domestic gas production could be reduced (from the level estimated without the bill's enactment) by 3-4% in 2012, by 5-6% in 2020, and 7-12% in 2030, it indicates. "Over the entire 2012-30 period, lost natural gas production is estimated at 20.4-30.8 tcf, which is roughly equal to 1½ years worth of production," it says.
Less for refining in US
The report also warns that refinery investment would move overseas because US plants would be required to obtain greenhouse gas allowances for emissions when most foreign refineries would not. Domestic refinery investment could drop by more than $3 billion/year by 2012 and $11.5 billion/year by 2020, it says.
US refinery throughput could drop by an estimated 3 million b/d in 2020 from a level of about 18.5 million b/d under the study's base case, it continues. Imports of refined products could increase in 2020 to about 29% from 15% under the base case, the report says.
Refiners and gas processors would feel additional negative impacts because they would be required to buy emissions allowances for their customers that would cost much more than the allowances for their own operations.
For refiners, consumer emissions allowance costs would total an estimated $90.21 billion in 2012 (compared with more than $10.37 billion for emissions allowances from their own operations) and nearly $123.45 billion in 2020 (versus more than $13.59 billion). Gas processors could pay $39.62 billion for consumers' emission allowances (compared with nearly $1.86 billion for their own operations' allowances) in 2012 and $59.89 billion (vs. nearly $2.2 billion for refiners allowances) in 2020, the study projects.
The study does not consider how the cost of consumer emissions allowances for gas processors could affect domestic gas supplies if the Lieberman-Warner bill is enacted.
To the extent that any of the consumer allowance costs are borne by gas processors or producers, the adverse impact on US natural gas supplies would be greater than estimated in the report, it says in its executive summary. The report did not examine that scenario because it could have created antitrust problems, API policy analyst Russell Jones said. But the American Exploration & Production Council and American Gas Association have both raised the question with senators and their staffs.
Focus on supplies
"When we started this study, the question was what the impact would be under the Lieberman-Warner bill's mandated requirements. We thought it would be better to look at supplies, which had not been done previously," Jones told reporters during a May 5 teleconference.
Other industries have suggested that requirements of the Lieberman-Warner bill would send jobs overseas, he said.
"This study convinced us that our industry also has to worry about international leakage [of refining jobs]," Jones said. When a refiner would plan to increase capacity, "some accountant would ask why the money shouldn't be spent overseas where greenhouse gas emission allowances aren't required. Tankers [that] transport products instead of crude oil, would be required, but the same pipelines and terminals would be used," he said.
"Refineries are very long-lived assets that require huge investments. Signals such as those which Lieberman-Warner would send are causes for concern because they would make executives in board rooms consider where they will invest for additional capacity," noted API Pres. Red Cavaney, who participated in the teleconference with API Chief Economist John C. Felmy and Lou Hayden, another API policy analyst.
Hayden said Lieberman and Warner's staffs have been receptive to possible gas cost impacts of the bill and the need to increase access to more domestic supplies. But he suggested that a bigger question is how extensive mandatory measures must be because the 2007 Energy Independence and Security Act and other existing laws already may be having a negative impact on greenhouse gas emissions.
API released a second report May 5 which shows that the US oil and gas industry invested about $42 billion in greenhouse gas emission mitigation technologies during 2000-06. This represents 45% of an estimated $94 billion spent on such technologies by all US industries and the federal government, according to the report by T-Squared & Associates and the Center for Energy Economics at the University of Texas at Austin. Signal Oil and Gas
Cavaney suggested that the upcoming debate on S. 2191 may not lead to passage of major climate change legislation this year but could set the stage for action in 2009.
"We anticipate Congress coming together with a climate change bill, and we want to be a part of it. We think that while the debate has gone on for a long period, starting to look at details is just beginning," he said. Cavaney also expects this Congress to debate the issue but that the next one will actually discuss details.
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