Category Archives: Energy Independence

Gasoline Price Hike Expected After Pipeline Shutdown

gasolinepipeline Panic Grips Eastern U.S.

Gasoline prices in the U.S. Southeast spiked in September after a major gasoline pipeline suffered a leak and was forced to temporarily shut down. The Southeast may see gasoline prices rise again because the problems with the pipeline are not over.

The Colonial Pipeline is a 2.5 million barrel per day system that carries refined products such as gasoline, diesel, jet fuel and heating oil. It consists of a massive 5,500 miles of pipeline, traveling from the Gulf Coast up to the mid-Atlantic. Fuels refined along the Gulf Coast can reach as far as New York Harbor.

On September 9, the Colonial Pipeline system was hit with a “system integrity issue” in Alabama, the company said, and was forced to shut down Line 1. That was a euphemism for a gasoline leak in the pipeline – about 8,000 barrels leaked in Alabama – which interrupted the flow of 1.4 million barrels per day of gasoline.

That was a problem for the U.S. Southeast because “there are no refineries between Alabama and Pennsylvania that produce substantial quantities of transportation fuels,” the U.S. Energy Information Administration said in September, adding that “the U.S. Southeast is supplied primarily by pipeline flows from refineries along the U.S. Gulf Coast and supplemented by marine shipments from the U.S. Gulf Coast and imports.”

The outage of the Colonial Pipeline led to a higher gasoline prices at the pump because there are few alternatives. Some cities with ports such as Savannah, Georgia, and Charleston, South Carolina, can receive shipments from the global market, but otherwise the region is isolated. When Colonial shutdown, some retail outlets ran out of fuel. A Virginia petroleum association member told Argus Media that it was “the worst outage he had seen in 17 years.” The outage led to an 8-cent per gallon increase in PADD 1C, which covers the southeast.

In Conclusion...This gasoline spike shows our energy delivery system is fragile and supplies can be interupted.

Reference: Nick Cunningham (2016, October 5, Pipeline Outage Could Lead To Another Gasoline Spike, OilPrice.com

Gigantic U.S. Crude Oil Inventory Plunge

cushingoilinventory

Cushing, OK Inventory 

Oil inventories plunge…more than 14.5 million barrels for week ended September 2nd.  This was the greatest weekly plunge in 17 years attributed to Tropical Storm Hermine.  The U.S. Energy Information Administration said expectations were for an increase of 225,000 barrels.

The price of oil jumped $1 to $47.25 a barrel from the news.  “I think you need to see more than one week of this to get worries about oversupply out of the market,” said Gene McGillian, senior analyst at Tradition Energy of Stamford, Connecticut.

Tropical Storm Hermine interrupted shipping routes and production last week, even though the storm eventually turned to the northeast and did not harm key facilities in the Gulf.

In conclusion…this report is a minor tremor in oil supply and pricing contrasted to the impact of oil inventory shortfall due to  the $1 trillion slash in new oil field investments from 2015 to 2026.  This was reported last week in the Oil And Gas Insider article Oil Price Spike Inescapable. Click here to read last weeks report.  

Reference: UPDATE 1: Biggest weekly U.S. Crude Inventory Drop, By David Gaffen, Reuters, September 8, 2016; Oil Price Spike Inescapable, By Bill Moist, Oil And Gas Insider, September 5, 2016

Jump In U.S. Oil & Gas Rig Count Impact

oilwelldrillbigLast week the  U.S. oil and gas rig count increased by 15 to a total of 462.  Canada rig count up seven to new total of 102 according to Baker Hughes report.

The biggest gains were in Texas where 15 new rigs were brought online with the Permian Basin adding eight.

At the time the rig count was released, West Texas Intermediate was trading at $43.94, but slumped by $.83 midday Friday.

In conclusion…The decline in price is attributed to a ramp-up in drilling fields that are profitable with oil below $50 per barrel, adding to supply surplus.

U.S. Now Largest Global Oil Reserve

 The United States has surpassed Saudi Arabia and Russia as the global leader in oil reserves.  This from a Norwegian consultancy firm report.

“We have done this benchmarking every year, and this is the first year we’ve seen that the US is above Saudi Arabia and Russia,” Per Magnus Nysveen, head of analysis at Rystad Energy, said. He credited the rise to a sharp increase in the number of discoveries in the Permian basin in Texas over the past two years.

The report found that many, especially members of the Organization of Petroleum Exporting Countries, exaggerated the size of their reserves in self-reported surveys. Rystad Energy came to the conclusion by only recording each country’s economically viable reserves.

American oil reserves have grown dramatically in the past two years due to improvements in technology for extracting shale called fracking. Increased productivity has cut the cost of extracting oil in half in the past two years, when compared to the price per barrel.

Nysveen is forecasting the price of the barrel to bottom out soon as supply is beginning to rebalance. “At the end of the year, we will see increases again in US oil production,” he said.

In summary…The future implications of the larger reserves as positive for the US economy. As the world’s largest consumer of oil, the reserves will help cut America’s trade deficit and strengthen the dollar. Geopolitically speaking, the large reserves will prevent oil from being used as a political tool against the United States as it can remain self-sufficient.

The last eight American Presidents have promised independence from foreign oil.  In spite of much opposition, the U.S. oil and gas industry has been using innovation to change the balance of geopolitical power in our favor.

Trump Pledges U.S. Energy Independence

Trump Pledges Energy Independence Bismarck- Donald Trump pledges complete U.S. energy independence.  Further he wants to put the focus on putting workers before regulations.  This message was delivered to a crowd who are eager to make the Bakken great again.

Trump told 7,000 people at Williston Basis Petroleum Conference that his policies on energy will put drilling rigs and people back to work.

“Under my presidency, we’ll accomplish a complete American energy independence. Complete,” said Trump, prompting cheers from the crowd that lined up for blocks to get into the Bismarck Event Center.

“North Dakota, you brought us over the line folks,” he said. “I will always remember that.”

“Costly regulation makes it harder and harder to turn a profit,” Trump said. “If crooked Hillary Clinton is in charge, things will get much worse, believe me.”

Trump said he has a 100-day action plan, which includes destroying all of Obama’s executive actions. He specifically mentioned repealing the Waters of the U.S. rule and canceling the Paris climate agreement.

Trump also said he would approve the Keystone XL Pipeline, but said the U.S. should get a significant chunk of the profits.

In conclusion… Whether you like Donald Trump or hate him, at least he is talking about what he will do to help America become energy independent.  It is crazy to send our petro dollars to those who promise to destroy us.