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Economy

Oil Prices Are Rising Despite Lowest Demand Since 1997

Oil is once again trading above $100 per barrel, bringing with it estimates that U.S. gas will cost more than $4 per gallon by May, if not sooner. The Obama administration is already bracing for higher gas prices and the political cost that they could exact.

But it isn’t increasing demand for oil that is driving the recent price increase. In fact, demand is the lowest it’s been since April, 2007, according to the Oil Price Information Service (OPIS). Instead, OPIS points to speculators as the party responsible for driving up prices:

Strangely, the current run-up in prices comes despite sinking demand in the U.S. “Petrol demand is as low as it’s been since April 1997,” says Tom Kloza, chief oil analyst for the Oil Price Information Service. “People are properly puzzled by the fact that we’re using less gas than we have in years, yet we’re paying more.”

Kloza believes much of the increase is due to speculative money that’s flowed into gasoline futures contracts since the beginning of the year, mostly from hedge funds and large money managers. “We’ve seen about $11 billion of speculative money come in on the long side of gas futures,” he says. “Each of the last three weeks we’ve seen a record net long position being taken.”

A multitude of experts, from academics to government agencies, have pinned the 2008 gas price spike on oil speculators. Of course, a big increase in gas prices could doom the slow but steady economic recovery.

Green

Fact Check: Gingrich Falsely Claims That EPA Proposes To ‘Raise The Price Of Gas By 25 Cents A Gallon’

Appearing on NBC’s Meet The Press this Sunday, Republican presidential candidate Newt Gingrich attempted to shift blame away from oil companies for rising gasoline prices. Asked by host David Gregory how he would attack President Obama given positive news about the economy, Gingrich falsely claimed that the Environmental Protection Agency has a plan to “raise the price of gasoline by 25 cents a gallon”:

His policies have consistently, I think, weakened the country. He has an Environmental Protection Agency proposal that would raise the price of gasoline by 25 cents a gallon. There are very few Americans who want to see the price of gasoline raised by government to 25 cents a gallon.

Watch it:


Gingrich’s claim was generated last July by the oil industry’s lobbying arm, the American Petroleum Institute. On behalf of API, oil industry consulting firm Baker & O’Brien analyzed a proposal by the auto industry’s lobbying arm, the Alliance of Automobile Manufacturers, for “a single national (excluding California) summertime gasoline specification that they referred to as National Clean Gasoline (NCG).”

According to the Alliance of Automobile Manufacturers, their proposed National Clean Gasoline standard would cost about one to 5 cents per gallon, while cutting smog and other air pollution by 10 to 20 percent. The oil-approved Baker & O’Brien study argued — using a proprietary and opaque methdology — that the proposal “could boost the cost of making gasoline by up to 25 cents per gallon and could shutter up to seven U.S. refineries.”

The EPA has been working on a plan to require cleaner new passenger vehicles and cleaner, low-sulfur gasoline – a move that could cost less than a penny a gallon. Reducing the sulfur content of gasoline would make every catalytic converter on the road today more effective. Every car in America would emit fewer smog-producing emissions. In fact, reducing sulfur is the single quickest and most effective step that EPA could take to reduce smog levels from coast to coast.

In summary, Gingrich’s claim that the EPA has a proposal to raise the price of gasoline by 25 cents a gallon ignores a number of facts. The proposal to which he’s referring came from the auto industry, not the EPA. The charge that the auto industry’s clean-gasoline proposal would increase prices by 25 cents per gallon is based on an oil-industry study that gave costs five times higher than other analyses. The EPA’s actual proposal for cleaner gasoline would have significant health and economic benefits for Americans with minimal effect on gas prices.

(HT Frank O’Donnell)

Update

NRDC‘s Rich Kassel goes into more detail about the oil industry’s deceptive attacks about EPA rules, “Reid vapor pressure,” and gas prices.

NEWS FLASH

Democrats Propose Gas Price Protection Export Ban For Keystone XL | On Friday, House Democrats led by Rep. Ed Markey (D-MA) introduced legislation that would ban exports of the output of the Keystone XL tar sands pipeline, including refinery output, ensuring that its crude oil and gasoline would benefit American consumers. Senate Majority Leader Harry Reid (D-NV), Sen. Mark Pryor (D-AR), Sen. Ron Wyden (D-OR), and Sen. Jeff Bingaman (D-NM) have all indicated that they are likely to support the initiative to ensure Americans aren’t assuming the risk of a foreign oil pipeline entirely for foreign benefit.

Green

Ed Markey: Keystone XL Was A Dirty Distraction From Energy Security

Rep. Ed Markey (D-MA), the ranking member of the House Natural Resources committee and the former chair of the disbanded Global Warming and Energy Security committee, has applauded the decision to drop the “bad idea” of the Keystone XL pipeline, which would have made the United States a “middleman” for the “dirtiest oil on the planet”:

The Keystone pipeline was never and will never be a key part of U.S. energy policy, and has instead become a distraction from real attempts to reduce our dependence on foreign oil. This pipeline would have taken the dirtiest oil on the planet, sent it snaking across the Midwest in an already-leaky pipeline, only to be exported to foreign markets once it reached the Gulf Coast.

The United States shouldn’t be used as a middleman between the dirtiest Canadian oil and the thirstiest foreign markets, when what the American people get in return is environmental risk and higher gas prices. This pipeline was a bad idea from the start, and this is the correct decision in the end.

As Markey mentions, the main effect for Americans of the Keystone XL pipeline would have been higher gas prices as Canadian oil was diverted to the international market.

Update

Other Congressional leaders in the fight against the corrupt Keystone XL approval process have weighed in.

Rep. Steve Cohen (D-TN), the only member of Congress to attend an anti-Keystone rally outside the White House last year:

For almost two years, I have been working to convince the State Department that their environmental review for the proposed Keystone XL pipeline was flawed and insufficient, which they finally acknowledged today. I would like to commend the President for his bold leadership and dedication to protecting the environment and upholding the ideals of transparency and scientific integrity. I would also like to commend the hundreds of thousands of Americans who stood up for clean air and water and helped convince the President that their review is insufficient. Today is not only a victory for everyone who wants to protect the water we drink and the land we live on. It is also a victory for democracy and for the enduring gift the Founding Fathers gave us in free speech and public participation in government.

Rep. Earl Blumenauer (D-OR):

I’m pleased that the President is not being intimidated by attempts to short-circuit the review process for the Keystone XL pipeline. This is not just any pipeline. It would carry tar sands oil, which is more polluting than conventional crude oil, from Canada’s boreal forest, through sensitive ecosystems and water supplies in the Midwest, to the Gulf Coast for refinement and likely export. Despite exaggerated jobs claims by pipeline supporters, there is no national security or economic reason to expedite approval of this project, which could be environmentally damaging and unsafe.

Climate Progress

January 6 News: Gas Prices to Keep Climbing in 2012 as Global Demand Increases

Other stories below: A coal-fired plant eager for pollution rules; Keystone pipeline puts Obama in a pinch

AP Photo/Paul Sakuma

Forecast: 2012 Worst Year for Gas Prices

To the dismay of drivers across the country, 2011 went down in the record books as having  the most expensive gasoline average ever, $3.513 for the year, 72 cents per gallon higher than 2010′s yearly average, according to GasBuddy.

Patrick DeHaan, GasBuddy’s senior petroleum analyst, projects that by Memorial Day, the national average will be between $3.86 to $4.13 per gallon, and that prices in 2012 will come close to or set new all-time highs. If that happens, drivers could spend $200 to $300 more for gas this year.

Inflation adjusted data from the Energy Department’s U.S. Energy Information Administration confirmed that 2011 was a record year. The real annual average for a gallon of regular gas last year hit $3.56, up from $2.90 in 2010, according to the EIA. From its data that begins in 1919, the previous record high was in 1981, at $3.45.

A Coal-Fired Plant That Is Eager for U.S. Rules

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NEWS FLASH

2011: Highest Oil Price In History | The annual average oil price of global benchmark Brent crude for 2011 is by far the highest ever at $111, even when adjusted for inflation. A new analysis from IHS Cambridge Energy Research Associates finds that oil prices have never been higher, going all the way back to the birth of the oil age in 1860. The $111 average oil price is far higher than the previous high of about $99 in 2008 ($97 in 2011 dollars). The United States has been somewhat insulated from the rise by a glut of Canadian tar sands oil, but producers are working to build pipelines like Keystone XL to export the oil and raise prices.

Green

What ‘War On American Energy’? U.S. On Track To Be Net Fuel Exporter For First Time Since 1949

Conservatives would have you believe that President Obama has led “nothing short of a war on American energy,” as Senate Minority Leader Mitch McConnell (R-KY) said in May, repeating a common refrain. “Obama is waging war on American energy,” GOP presidential front runner Newt Gingrich agreed. Fellow candidate Rick Perry said Obama’s “draconian” energy policies don’t let Americans create energy “and sell it to the world.” “All of this killing of our energy supply,” said Sen. James Inhofe (R-OK), perhaps the industry’s biggest apologist in Congress. Of course, when conservatives say “energy,” they mean oil and fossil fuels, as they themselves have led a real war against American clean energy.

But like many conservative attacks on the president, the war on American energy is a fiction. In fact, as the Wall Street Journal reports today, U.S. exports of fossil fuels “are soaring” and the U.S. is on pace to be “a net exporter of petroleum products in 2011 for the first time in 62 years”:

According to data released by the U.S. Energy Information Administration on Tuesday, the U.S. sent abroad 753.4 million barrels of everything from gasoline to jet fuel in the first nine months of this year, while it imported 689.4 million barrels.

That the U.S. is shipping out more fuel than it brings in is significant because the nation has for decades been a voracious energy consumer. It took in huge quantities of not only crude oil from the Middle East but also refined fuels from Europe, Latin America and elsewhere to help run its factories and cars. [...]

The reversal raises the prospect of the U.S. becoming a major provider of various types of energy to the rest of the world, a status that was once virtually unthinkable. The U.S. already exports vast amounts of coal, and companies such as Exxon Mobil Corp. are pursuing or exploring plans to liquefy newly abundant natural gas and send it overseas.

This is, of course, good news, even though much of it has to do with the faltering U.S. economy, which has driven down demand for fuel. But the new data also demonstrates the absurdity of conservative energy policy, which starts with the (baseless) assumption that domestic fossil fuel production is too low and follows that it must be incentivized with taxpayer dollars and licenses to pollute and bend labor safety rules in order to increase output.

Meanwhile, U.S. oil production is up, despite Obama’s mythical war against the industry. American drivers have seen little benefit from this, however, because prices are set in a global market, where quickly developing countries are driving up demand and thus prices. So increasing production here would have negligible impact on prices as American refineries would just ship their product abroad where it could fetch higher prices.

Green

Announcement Of Alternate Tar Sands Pipeline Sends Midwest Oil Prices Surging

After the spiking of the Keystone XL pipeline by the Obama administration, the tar sands industry moved quickly to open an alternate route from Canada to Gulf Coast refineries. With the announcement of the pipeline deal, U.S. oil prices spiked, on the expectation that Canadian tar sands crude would no longer be locked in the Midwest market. ConocoPhillips sold its stake in the Seaway Pipeline, which connects Texas to Oklahoma, to Enbridge Inc. Enbridge plans to alter the 200,000 barrel-per-day pipeline so that it can take Candian crude from Oklahoma to Texas:

The sale of an oil pipeline running from Oklahoma to Texas upended U.S. energy markets Wednesday, sending the price of crude surging above $100 a barrel as America copes with the promise and pitfalls of its new energy boom. Enbridge Inc.—which bought a 50% stake in the Seaway Pipeline—announced it would reverse the direction of the flow, allowing more crude to move south from oil storage in Cushing, Okla., into the world’s largest refinery complex along the Gulf Coast.

Every analysis has been that giving Canada access to Gulf Coast refineries would increase prices for Americans. TransCanada estimated its 700,000 bpd Keystone XL pipeline would increase oil prices by about $6.55 a barrel in the United States.

Despite the facts, the fiction that building the Keystone XL pipeline would benefit American oil consumers has been popular among proponents.

Sen. Grassley (R-IA) claimed the Keystone XL project would “reduce prices at the pump for consumers.” House Speaker John Boehner (R-OH) said the pipeline would “lower gas prices.” Energy chair Fred Upton (R-MI) claimed expediting the pipeline would “lower energy prices.” Natural Resource Committee chair Doc Hastings (R-TX) claimed Keystone XL would “lower gasoline prices.” Rep. Lee Terry (R-NE) said it would “help reduce energy prices.” Rep. Ed Royce (R-CA) said his vote to approve the pipeline “reduces the cost of gas and boosts the economy.” Rep. Gus Bilirakis (R-FL) complained that “delaying the pipeline will hurt American energy prices.” Rep. Ed Whitfield (R-KY) said the pipeline would mean “lower prices.” Rep. Mike Rogers (R-MI) said the pipeline would help “stabilize prices at the pump for Michigan families.” Rep. Renee Ellmers (R-NC) claimed it would “lower gas prices.” Rep. Mary Bono Mack (R-CA) said the pipeline would help “hold down future price increases.” It would “help reduce the burden of high gas prices on American families,” claimed Rep. Gary Miller (R-CA). Rep. Mike Ross (D-AR) said it would “lower the price of fuel for all Americans.”

Climate Progress

October 25 News: Obama Campaign Hires Former Keystone Pipeline Lobbyist, McKibben Slams Move on Behalf of 99%

Other key stories below: Solar Has Highest Return on Investment Among Renewables; House Votes to Ban Airline Compliance With EU Climate Law

Keystone pipeline

A September protest of the Keystone XL Pipeline project. Credit: AP

Former Keystone Pipeline Lobbyist Hired by Obama Campaign

President Obama’s reelection campaign has hired a former lobbyist for the controversial Keystone XL oil pipeline as a top adviser.

The campaign said that Broderick Johnson, founder and former principal of the communications firm the Collins Johnson Group, would serve as a senior adviser for the campaign. Before founding the firm this spring, he worked for the powerhouse lobbying firm, Bryan Cave LLP, where his clients included Microsoft, Comcast and TransCanada, the company planning to build the $7-billion pipeline to carry crude from Alberta’s oil sands to the Texas Gulf Coast.

Johnson’s federal lobbyist filings indicate that TransCanada paid Bryan Cave at least $240,000 late last year and early this year for Johnson to work on supporting the “submission for a presidential permit for Keystone XL Pipeline.” He lobbied members of Congress, the filings show, as well as the administration and the State Department.

TransCanada spokesman Terry Cunha denied that Johnson lobbied on behalf of the Keystone project.

An Obama campaign official said that in his new role Johnson would “serve as a national surrogate for the campaign and our representative in meetings with key leaders, communities and organizations.  Broderick will be an ear to the ground for the campaign’s political and constituency operations, helping to ensure that there is constant, open communication between the campaign and our supporters around the country.”

JR:  This is a tone-deaf, bone-headed move that Bill McKibben slammed on behalf of the increasingly disenfranchised 99%:

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NEWS FLASH

Northeast Facing Record Heating Oil Prices This Winter | Households in the Northeast will face record prices for heating oil this winter, the Energy Information Agency projects. The record-high costs are caused by the earlier surge in crude oil prices, spurred by rampant financial speculation. Homeowners in the region have been moving rapidly away from the once-dominant heating oil to natural gas, which has been much cheaper in recent years.

Update

At Climate Progress, Stephen Lacey has more: “The continued increases in oil-based heating fuels is encouraging many consumers to switch to gas. But it also offers an opportunity for the renewable thermal-energy sector to raise awareness about biomass, solar thermal and geothermal heat pumps.” Even more important for the Northeast’s old housing stock is home insulation retrofits.

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