Hurri Rita - fuel shortage

[Karlin]

Hurrincane Rita landed Sept 23rd.

It missed Houston, barely, but it did damage a lot of oilfield installations. This will not only drive up prices due to supply problems creating higher bidding for future deliveries, but it is likely to create actual shortages where deliveries promised are not made.

Fill up soon eh? I think I will head down there now before the first wave of increases hits, and then make it last for a month. Glad I have a bicycle. They say prices could double soon.

Alternatives to gasoline will become a more urgent matter, and methanol/ethanol [ethyl alcohol] is looking better and better. At the very least, adding 20% of them to existing gasoline supply would really help. Why are they not doing this? -because a shortage is good for them? I believe it.

Government could easily step in to control the bidding on futures. There would be absolutely NO LOSS OF MONEY to the suppliers/financiers/refineries if a cap was put on gas prices because the price increases are only about shortages, not production cost related. Of course, there is a period of overlap, but it could be averaged.

This is an emergency, a threat to economic activity in all areas. Transport alone could shut down the whole economy if the cost of fuel means losing money or charging enough to cover it means prices double on all goods.... Would you buy bacon at $10? Or a set of tires for $500? It would stop a lot of commerce.

Of coure the fuel shortage is a bigger threat. Government controls the additives to gas, and the USA govt has allready relaxed environmental controls for refinery additives, so methanol [or ethanol or both] COULD just be added.

I noticed that Methanex, Canada's biggest producer of methanol, shut down last year DUE TO THE PRICES BEING SO LOW. They could not make a profit because they could not sell their bulk methanol for more than 30cents a litre [I will try find this Methanex article and post it later].. whats that tell us? Why could they not make a profit - by selling it for 50c - when crude was $50bbl and 80c at the pumps?
- that eventually when refineries/suppliers that were charging something like 80cents a liter [$1 at the pump] were avoiding the obvious savings of adding in 20% volume for 30cents/liter... And claiming that the refinery profits are so low as the reason for not building more rrefinery capacity... and that creates a shortage, prices go up, bla bla bla... thats a lot of extra money for crude producers, who also own or invest in the refineries.Boards of directors incestual relationships.

What a load. It is really just a basic squeeze play. "Hurri Rita, the big dance is about to begin!!"

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articles:

"Wholesale ethanol prices fell almost 30% between the first four months of 2005, according to the Oil Price Information Service. Economists associate the decline in price with an oversupply of ethanol, which in turn is caused by rather low domestic consumption and increased ethanol production. Ethanol prices have tumbled from a 2005 high of nearly $0.44 per liter (rack) in January to $0.31 in early April. The lowest prices of ethanol were recorded at $0.28 - $0.29 per liter in high-volume markets like Des Moines, Iowa City, Sioux City, and Omaha during the week of April 4-8. An average gallon of vodka costs anywhere between 40 and 100 dollars. Thus a profit from any given bottle of vodka, considering that no extra costs are required, is almost as much as the vodka itself costs to the consumer."

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Ok, so I don't claim to be a wiz at finances, but hey, $0.44, and a low of $0.28 [cents] a litre sounds economical to be adding to gasoline at $1 a liter, maybe $2 very soon.

Karlin

 

[Karlin]

Re:Oil Price Controls Needed - Public Citizen article

This story before Rita, btw - K

Sept. 1, 2005

Temporary National Gasoline and Oil Price Controls Needed Until Refineries Damaged by Hurricane Katrina Are Repaired

Statement by Joan Claybrook, President, Public Citizen

In the wake of skyrocketing gasoline and oil prices after Hurricane Katrina—both as a result of speculation on Wall Street and product shortages—President Bush and Congress should enact temporary, adjustable price controls to ensure that gasoline and home heating oil prices charged to consumers will be directly tied to costs, not speculation or price-gouging. The government also should enact an excess profits tax retroactive to January 2005 to reduce oil company incentives to gouge consumers and the transportation industry. Such a tax would require companies to pay the government all profits in excess of a designated percentage, such as 5 or 10 percent. Public Citizen is sending a letter this week to President Bush and congressional leaders calling for action.

Price controls have been used before to correct severe market dysfunctions during a time of crisis. The Federal Energy Regulatory Commission enacted strict electricity price controls over the entire western United States in June 2001 to address the widespread price-gouging by Enron, Reliant Energy, Duke Energy and other companies. Those price controls, which are still in effect, were enormously successful in protecting consumers, ending the power blackouts and holding corporations accountable.

Given the oil industry’s exorbitant profits—the five largest oil producers and refiners in America (ExxonMobil, ChevronTexaco, ConocoPhillips, BP and Shell) have enjoyed profits of $254 billion since 2001—the U.S. oil industry can easily afford to take a break from profiting from a national crisis and deliver this critical commodity at cost. And if price controls are temporary, there is no deterrent for future investment in the oil industry. Such a price control mechanism can be best administered by the U.S. Department of Energy.

So far, President Bush’s response to high gasoline prices in the face of Katrina’s catastrophic aftermath has been to order the U.S. Environmental Protection Agency to grant a nationwide waiver for clean gasoline blends, a response that fails to address the fundamental problem. Bush needs to do more.

Effective today, Hawaii became the first state to enact a price control measure to ensure that residents aren’t gouged at the pump; federal price controls could be implemented in a similar fashion.

Oil companies operate as near-monopolies, producing huge amounts of oil not only in the United States but in the Middle East, Africa, South America, Asia and Europe. They own the refineries that turn their crude oil into gasoline. In fact, the five largest oil producers and refiners control nearly half of U.S. oil production and more than half of all refining capacity, enabling them to enjoy huge profits both when the price of crude oil and the price of gasoline rise.

Consider that the top five oil companies also produce 14 percent of the world’s oil. Combined, these five companies produce 10 million barrels of oil a day—more than Saudi Arabia’s 9 million barrels of oil a day. This extent of market control has reduced competition and makes apparent the need for price caps.

Oil and gasoline prices were rising long before Hurricane Katrina wreaked havoc. U.S. gasoline prices jumped 14 percent from July 25 to Aug. 22. Indeed, profits for U.S. oil refiners have been at record highs. In 1999, U.S. oil refiners made 22.6 cents for every gallon of gasoline refined from crude oil. By 2004, they were making 40.8 cents for every gallon of gasoline refined, an 80 percent jump.

The energy bill signed by the president on August 8 does nothing to address this country’s energy problems. For example, the bill fails to improve fuel economy standards, an unbelievable failure given the fact that the United States consumes 25 percent of the world’s oil every day, with more than 50 percent of that being burned in passenger cars and light trucks. The proposed fuel economy standard issued by the U.S. Department of Transportation last week is miniscule, saving only 10 billion gallons over 15 years. It exempts the largest vehicles—those over 8,500 pounds such as the Hummer. No significant new fuel economy standards have been issued since 1977. Instead of tackling the problem, the Bush energy bill spends $6 billion of taxpayer money over the next decade on tax breaks and new spending programs to benefit these same wealthy oil companies.

Reducing the profit margins of U.S. oil companies in a time of national emergency is necessary to keep the current regional disaster from becoming a national disaster. We urge the president and Congress to take immediate action.

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[Karlin]

Re: internal memos - supply limited to drive up prices

Group: Internal memos show oil companies limited refineries to drive up prices

RAW STORY <http://rawstory.com>

Internal Texaco memo, March 1996

The Foundation for Taxpayer and Consumer Rights (FTCR) today exposed internal oil company memos that show how the industry intentionally reduced domestic refining capacity to drive up profits, RAW STORY has learned.

The three internal memos <http://www.consumerwatchdog.org/energy/fs/>
from Mobil, Chevron and Texaco illustrate how the oil juggernauts reduced refining capacity and drove independent refiners out of business in an effort to increase prices. The highly confidential memos reveal a nationwide effort by American Petroleum Institute, the lobbying and research arm of the oil industry, to encourage major refiners to close their refineries in the mid-1990s.

"Large oil companies have for a decade artificially shorted the gasoline market to drive up prices," said FTCR president Jamie Court, who successfully fought to keep Shell Oil from needlessly closing its Bakersfield, California refinery this year. "Oil companies know they can make more money by making less gasoline. Katrina should be a wakeup call to America that the refiners profit widely when they keep the system running on empty."

"It's now obvious to most Americans that we have a refinery shortage," said petroleum consultant Tim Hamilton, who authored a recent report <http://www.consumerwatchdog.org/energy/rp/> about oil company price gouging for FTCR. "To point to the environmental laws as the cause simply misses the fact that it was the major oil companies, not the environmental groups, that used the regulatory process to create artificial shortages and limit competition."

The memos from Mobil, Chevron and Texaco show the following:
An internal 1996 memorandum <http://www.consumerwatchdog.org/energy/fs/5105.pdf>
from Mobil demonstrates the oil company's successful strategies to keep smaller refiner Powerine from reopening its California refinery. The document makes it clear that much of the hardships created by California's regulations governing refineries came at the urging of the major oil companies and not the environmental organizations blamed by the industry. The other alternative plan discussed in the event Powerine did open the refinery was "....buying all their avails and marketing it ourselves" to insure the lower price fuel didn't get into the market.

-- An internal Chevron memo <http://www.consumerwatchdog.org/energy/fs/5103.pdf> states; "A senior energy analyst at the recent API convention warned that if the US petroleum industry doesn't reduce its refining capacity it will never see any substantial increase in refinery margins."

-- The Texaco memo <http://www.consumerwatchdog.org/energy/fs/5104.pdf> disclosed how the industry believed in the mid-1990s that "the most critical factor facing the refining industry on the West Coast is the surplus of refining capacity, and the surplus gasoline production capacity. (The same situation exists for the entire U.S. refining industry.)

Supply significantly exceeds demand year-round. This results in very poor refinery margins and very poor refinery financial results. Significant events need to occur to assist in reducing supplies and/or increasing the demand for gasoline.

One example of a significant event would be the elimination of mandates for oxygenate addition to gasoline. Given a choice, oxygenate usage would go down, and gasoline supplies would go down accordingly.

"Much effort is being exerted to see this happen in the Pacific Northwest." As a result of such pressure, Washington State eliminated the ethanol mandate - requiring greater quantities of refined supply to fill the gasoline volume occupied by ethanol.

Abridged and edited from a release.'

links above live here:
http://www.consumerwatchdog.org/energy/fs/ http://www.consumerwatchdog.org/energy/rp/ http://www.consumerwatchdog.org/energy/fs/5105.pdf Chevron: http://www.consumerwatchdog.org/energy/fs/5103.pdf Texaco: http://www.consumerwatchdog.org/energy/fs/5104.pdf Source home page:[updates on Rita] http://rawstory.com/

 

[Jo Canadian]