Believe it or Not: U.S. Exports More Gasoline Than Ever
Posted by Mike Tirone - Tuesday, December 6th, 2011
For years now, the United States has been struggling to maintain their fluctuating gasoline prices but in reality, the U.S. is quite practically swimming in gasoline. What may go unnoticed to many, the U.S. is actually exporting a record of amount of it.
In September, the country exported 430,000 MORE barrels of gasoline a day than it imported, according to the U.S. Energy Information Administration. That amount is nearly double from the start of the year. Many experts in the industry believe this over-exporting trend is not going to stop either.
Back in late 2008, the U.S. began exporting gas to try and offset the initial phrases of the economic downturn. But starting in 1960, the country not only used up all of it's gas it produced domestically but also had to import gas from Europe and other regions.
The demand for gas in the States has significantly dropped by 10% in the past few years. It peaked in 2007 at 9.6 million barrels a day to 8.8 million barrels today, according to the EIA.
The drop in demand has many causes; the recession tightening people's wallets, the advent of more fuel efficient vehicles, higher prices of gas and greater use of ethanol as an ingredient in gasoline. Demand for other products made from crude oil like diesel and jet fuel has also declined, although not as much.
Plenty of oil is still being imported by the U.S. to make gasoline and is still incredibly dependent on foreign countries for well over half the crude the country uses.
The one strong advantage the U.S. has is its massive refining infrastructure. Because of the refineries, more gasoline is being produced, along with diesel and jet fuel. So much so that there is an excess of gasoline to export to countries where demand is still quite strong like Brazil, Chile, and Mexico.
The Wall Street Journal, which reported on the export trend last week, said the United States is on track this year to be a net exporter of refined products for the first time in 62 years.
"We've got plenty of excess refining capacity," said Jonathan Cogan, a spokesman for EIA. "It's a reminder that this is a global oil market, and it's reflected by the movements of products to where they will get the highest prices."
People in the industry are seeing this trend more frequently, like Mark Williams, the global head of refining, trading and marketing for Royal Dutch Shell (RDSA). He says that exporting diesel and other refined products from the U.S. used to rarely happen but of recently it's becoming more common.
“It's growing as a new business,” he said, but also warned that the U.S. wouldn't become a huge exporter of fuel.
Either way, the ability to export oil is great for Shell and it's competitor oil companies like Exxon Mobil (XOM) BP (BP) and Chevron (CVX) because they can use their more modern refineries in the U.S. to then make gasoline for the rest of the world.
The issue that lies here is that with all of this gasoline, American drivers expect prices to drop significantly. But that won't be happening. Experts predict that $250-a-barrel oil is on it's way, therefore leading to surging gasoline prices once again, especially during the summer months. Even though U.S. demand may potentially hit its lowest level in ten years, the gas prices look to reach record highs, says chief oil analyst Tom Kloza of the Oil Price Information Service.
“I can understand it, from a truck driver's perspective,” he says. “You're paying $4 or $4.50 a gallon to run your rig, yet we're exporting the crap out of this fuel. I'd be outraged too.”
Kloza cautioned against restrictions on exports of diesel or gasoline, a move he expects politicians to talk about in 2012.
He explains that there is nothing forcing oil companies to bring crude to the States to refine which jeopardizes the jobs of thousands in the refining industry.
“If you restrict exports, you'd really be looking for trouble. You'd just see the refining and the jobs go offshore.”
$250-a-Barrel Oil Coming Soon?Posted by Brianna Panzica - Monday, December 5th, 2011
Western nations are resorting to serious measures to deal with escalating tensions with Iran.
Ever since November, when the United Nations was tipped off that Iran may be building an atomic bomb, tensions between Iran and the European Union and United States have been at a high point.
And things began to get out of hand last Tuesday when, after an announcement from London that Britain would be implementing sanctions on the Iranian central bank, the British embassy in Tehran was attacked.
Now both the United States and the European Union are considering heavier sanctions, but at the threat of damaging the global economy.
The Western nations have been considering an oil embargo, but they are tentative to take such a measure that could ramp up oil prices to ridiculous levels.
As Reuters reports, Foreign Ministry spokesman Ramin Mehmanparast warned against this move:
“As soon as such an issue is raised seriously the oil price would soar to about $250 a barrel.”
This may not be awfully far off, either. The current situation is already pushing oil prices up continuously. On Friday, Brent crude on the London-based ICE Futures was up to $109.94, according to Reuters.
Several European countries have cried out against oil sanctions. Spain, Italy, and Greecereceived most of the oil exported from Iran to Europe in the second quarter, and after coming out of a series of debt crises, those nations would feel the extreme pressure of a price jump.
And as Iran is the fifth-largest oil exporter, supply would be at an all-time low. Especially in relation to increasing demand.
According to Reuters, the U.S. is one step ahead of the E.U. and has put a ban on oil imports from Iran. It also decided on Thursday to go as far as penalizing banks that associate with Iran’s central bank. The second sanction has not yet been implemented out of concern for the global economy.
Spiegel reports that the E.U. will decide what sort of sanctions to put on Iranian oil imports by at least January.
And according to the article, one thing the union of nations could really use is support from China on their sanction decisions. Backing from this fast-growing oil consumer could provide an even larger power against Iran in future actions.
The Natural Gas Comeback of 2011
Posted by Wealth Wire - Wednesday, March 2nd, 2011
Guest post by Keith Kohl of Energy and Capital.
You've probably been told — warned, even — that natural gas may be one of the last places you should put your hard-earned money...
I've been told the same thing.
They say the natural gas markets are dead, that there's no hope in sight for decades to come. They liken natural gas profits to seeing pink elephants — something only witnessed after you've had your head in a pail of Natty Boh.
Sure enough, one quick glance at stagnant price charts, and there's a chance you might take those warnings to heart.
Who's to argue?
Flat prices have been commonplace during the last few years:
But where most of the herd tends to panic, others see potential...
The natural gas price problem
For starters, the problem lies in the surge in shale gas plays across the United States.
For the sake of our newer readers, here's a good look at where the U.S. shale plays are located:
Furthermore, we have a lot of gas. According to the EIA, the United States has 2,552 trillion cubic feet (Tcf) of potential natural gas resources. Approximately one-third of that resource (nearly 827 Tcf) is from shale formations.
Shale gas now makes up 14% of our domestic natural gas supply, but I'll get further into that detail in just a second.
Today, natural gas futures fell more than they have in three weeks. Not only is the winter heating season almost over, but production is also on the rise.
2011: The year of the natural gas comeback
There's no doubt that demand is back on the up and up.
According to EIA data, U.S. natural gas demand in 2010 was higher than ever. Our total consumption for that year reached 24.1 trillion cubic feet, a 5.6% year-over-year increase.
Consider the fact that we only produce about 27% of the oil we use. And we're all painfully aware of our country's addiction to foreign oil...
Natural gas is much different. Last year, we produced 87% of our demand domestically.
Although demand for natural gas goes primarily towards electric power and the industrial sector, there's also a wild card: the U.S. transportation sector.
Doesn't it make sense that our transition away from oil would come from natural gas?
Perhaps UPS adding 48 LNG-fueled heavy-duty trucks to their fleet is a sign of things to come. To date, the company has just under two thousand alternative technology vehicles — more than half of which use LNG for fuel.
Is it time to buy natural gas?
You might find it all too easy to dismiss natural gas plays. The price chart above might suggest there's not much to get excited about...
Natural gas has been shadowed by oil throughout the last few years.
Only two years after oil bottomed at $33/bbl, and we're once again staring down the barrel of $100 oil. Brent crude even hit $120 per barrel recently — just $27 shy of the WTI record set during the summer of 2008.
In fact, crude prices have jumped considerably higher, up more than 170% since 2009. I showed you earlier that oil drilling activity is ready to overtake natural gas.
Does that mean your natural gas investments have suffered a similar fate?
Far from it, actually.
Take a look at how some of those companies have been performing for investors:
The truth is these companies don't need $15/Mcf to thrive. And some companies are eying even bigger returns...
Range Resources (NYSE: RRC), for example, announced this week the company is selling off their Barnett Shale properties for $900 million. (That's roughly 20% of their total production.)
The sale will allow Range to focus on other plays with more potential, like the Marcellus Shale in the Appalachian region. Almost 90% of their 2011 budget is being spent on the Marcellus.
Those shale plays are going to play a major role in meeting future demand. As you can see below, the EIA expects shale gas to make up 45% of production by 2035:
Just imagine what will happen when natural gas prices start to rebound...
Later this week, I'm going to show you another hotbed of natural gas activity. And the best part is these natural gas investments are still flying under everyone's radar.