1st Time In 62 Years, US Net Exporter of Oil. Drill Baby Drill?

[thoughtone]

So why aren't prices falling?


source: Wall Street Journal

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U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.

A combination of booming demand from emerging markets and faltering domestic activity means the U.S. is exporting more fuel than it imports, upending the historical norm.

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.

As recently as 2005, the U.S. imported nearly 900 million barrels more of petroleum products than it exported. Since then the deficit has been steadily shrinking until finally disappearing last fall, and analysts say the country will not lose its "net exporter" tag anytime soon.

"It looks like a trend that could stay in place for the rest of the decade," said Dave Ernsberger, global director of oil at Platts, which tracks energy markets. "The conventional wisdom is that U.S. is this giant black hole sucking in energy from around the world. This changes that dynamic."

So long as the U.S. remains the world's biggest net importer of crude oil, currently taking in nine million barrels per day, it isn't likely to become energy independent anytime soon. Yet its growing presence as an overall exporter of fuels made from crude gives it greater influence in the global energy market.

If the trend toward net exports persists, it could also influence the national political debate over U.S. energy policy, which has been driven primarily by concerns about upheaval in the Middle East over the past decade. The independence of the U.S. from foreign oil sources has long been a lightning-rod issue in Washington, one further inflamed by last year's oil spill in the Gulf of Mexico. Supporters of off-shore drilling have used the desire for independence to push their cause, setting up a battle with environmental groups and others who prefer a shift away from carbon-based fuels.

The growth in exports is part of a "transformation of the energy system," says Ed Morse, global head of commodity research at Citigroup Inc. "It's the beginning signs of a process that will continue for the next decade and will point toward energy independence."

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.

The shift is one of the clearest demonstrations of the diverging fates of the U.S. and emerging market economies. While the U.S. labors under stubbornly high unemployment and sluggish growth, emerging-market economies are growing strongly, bolstering demand for fuel.

U.S. customers have been pulling back in part because an anemic economic recovery has left millions still looking for work. In August, U.S. drivers burned 7.7% less gasoline than four years earlier, when gasoline usage peaked. Production of ethanol made from corn has also ramped up dramatically in recent years, cutting into the need for other fuels.

Now, "we're not using as much," said James Beck, an analyst at the EIA. "Prior to 2008, basically anything we produced, we used."

But U.S. drivers aren't seeing much benefit in the form of lower prices because refineries on the Gulf Coast are shipping much of their output to places where demand is strong, keeping prices high.

The U.S. was a net exporter of petroleum products in six of the first nine months this year, and the trend accelerated in the third quarter, with September data released Tuesday showing net exports of 919,000 barrels per day, more than any month this year. That indicates to observers that this year will be the U.S.'s first as a net exporter since 1949, when the U.S. economy was ramping up rapidly after World War II.

Mexico and Brazil were major consumers of U.S. exports, according to the September data, while the Netherlands—home to key European ports —and Singapore also were significant net importers.

Gasoline and low-sulfur diesel continued to be among the biggest lures for foreign customers, as was petroleum coke, which is used to make steel. Those are among the many products that are thrown off in the process of refining crude oil.

The growing exports have made the U.S. a pivotal part of the supply chain. In 2006, the U.S. was a net importer of petroleum products from Brazil, but last year it sent a net 106,000 barrels a day.

Argentina and Peru are now net importers from the U.S. For the next year or two, "the economies in Latin America will be growing faster than in the U.S. and the trend of increasing exports should continue," says Daniel Vizel, U.S. head of oil trading for Macquarie Group Ltd.

Singapore's net imports from the U.S. roughly quadrupled in the past five years, while Mexico's rose by about two-thirds. Mexico, in particular, is having trouble keeping pace with gasoline demand and buys about 60% of gasoline exports from the U.S.

The figures illustrate the impact of the significant increase in domestic production thanks to new sources of oil coming from North Dakota and Texas. North Dakota's oil production of 424,000 barrels per day in July was up 86% over the same period in 2009.

Growing domestic output means refineries in the U.S. are making more fuel than the local market needs. That has given those on the U.S. Gulf Coast added incentive to look for customers abroad.

Also adding to the U.S. exporting firepower: Refineries are more efficient, giving them an edge over older facilities in Europe. New drilling methods are boosting U.S. oil production, helping ensure steady supplies of raw material for refiners to process.

The U.S. could expand its export trade further next year. Motiva Enterprises LLC, a joint venture between Shell and Saudi Arabian Oil Co., is expected to finish work next year on a refinery expansion in Port Arthur, Texas, which would double the facility's capacity and make it the largest in the U.S. Kinder Morgan Energy Partners LP and TransMontaigne Partners LP plan to build a $400 million terminal on the Houston ship channel.

For decades through World War II, the U.S. was a net exporter of petroleum products, with sales reaching a high of 126 million barrels in 1944. The country then became a net importer in 1950, and grew increasingly dependent on foreign supply in the 1960s. Net imports peaked just above a billion barrels in 1973, the year domestic oil prices spiked amid the Arab oil embargo. After falling off in the 1980s and 1990s, net imports spiked again in the middle of the last decade before tapering recently.

To be sure, the balance could shift back relatively quickly. If the U.S. economy were to rebound sharply, domestic need for fuels refined from crude oil could also shoot back up, which could increase crude import demand. In addition, U.S. refineries could lose customers if foreign economies falter, sending the U.S back to being a net importer.

Meanwhile, export demand is boosting corporate profits for oil majors, such as Exxon and Royal Dutch Shell PLC, and major U.S. refining firms, such as Valero Energy Corp. and Marathon Petroleum Corp.

"Unless there is a recession around the world, we're going to be exporting for quite some time," says Mike Loya, head of Americas for Swiss energy-trading firm Vitol Group, which moves more than five million barrels of crude oil and petroleum products every day.
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[QueEx]

 

[SPECTRE1]

It isn't oil that is being exported, it is the refined products such as kerosene, gasoline, diesel - that are being sent out.

Many of the oil producing countries don't have the capacity to refine their oil into gasoline like Iran.




They got rid of the corn subsidy to make ethanol and dropped the tariff on Brazilian ethanol which makes more sense than getting oil from the Tar Sands in Canada.

 

[thoughtone]

It isn't oil that is being exported, it is the refined products such as kerosene, gasoline, diesel - that are being sent out.

Many of the oil producing countries don't have the capacity to refine their oil into gasoline like Iran.




They got rid of the corn subsidy to make ethanol and dropped the tariff on Brazilian ethanol which makes more sense than getting oil from the Tar Sands in Canada.

So why are we importing oil?

 

[SPECTRE1]

So why are we importing oil?

Because we don't have it.

I saw something where we are exporting 136 million gallons of ethanol to Brazil and the United States are importing 36 million from them. Why don't they keep the 36 million that is being sent here, save on the fuel and import the difference?

Why are we exporting that much ethanol to another country, that could easily produce that amount. You got the complaints about the Tar Sands, energy security, and drilling in Alaska, we should be using that ethanol here...

Brazil isn't even touching the surface on ethanol production, if they weren't importing they would be forced to grow it on land that would not impact the rain forest.

International trade that doesn't make sense.

 

[thoughtone]

rrff

It isn't oil that is being exported, it is the refined products such as kerosene, gasoline, diesel - that are being sent out.

source: Wall Street Journal



U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.[/QUOTE]

 

[QueEx]

Re: Gas prices are getting rediculous y'all


They’re drilling, baby, drilling – and gas prices still going up

Filling the gas tank is costing more | Scott Strazzante/Chicago Tribune/MCT



McClatchy Newspapers
By Kevin G. Hall
February 19, 2013

WASHINGTON — They’re baaaacccck. Like locusts ravaging fertile crops, gasoline prices are soaring again and eating away at the purchasing power of ordinary Americans. And again, financial speculators appear to be a big part of the story.

The national average pump price hit $3.74 for a gallon of unleaded gasoline Tuesday, up a sharp 44 cents per gallon from just a month ago, according to the AAA Motor Club’s Fuel Gauge Report.

“It’s the 33rd day in a row that we’ve seen a consecutive increase” in gasoline prices, said Nancy White, a spokeswoman for AAA, who said there are several explanations but that none seem overly convincing.

The rising gasoline prices come even as the United States now produces more than half the oil it consumes. In fact, the nearly 800,000 barrel per day increase in U.S. production output from 2011 to 2012 reflected the largest one-year jump since oil drilling began in 1859.

The U.S. Energy Information Administration projects that U.S. oil production will rise from 6.89 million barrels per day in November 2012 to 8.15 million by December 2014. At the same time, the International Energy Agency has lowered its estimates for global demand for oil. Lacking demand, OPEC, the oil-exporters cartel, has reduced production.

It all argues for lower oil prices, or at least less volatility in the price of oil and thus gasoline.

More than a passing pain, rising gasoline prices act like a tax on consumers, harming the economy by whittling away at the amount of money the consumer can spend on other things. Gasoline expenditures as a percentage of U.S. household income hit three-decade highs in 2012, and the recent spike suggests 2013 might not be much better.

Enter financial speculation. Commercial end-users of oil such as airlines and trucking companies who once dominated 70 percent of the market for market for future deliveries of oil now represent just 30 percent. Non-commercial financial speculators now dominate 70 percent of the market. The trading is dominated by Wall Street banks, hedge funds and other financial institutions that have no intention to take delivery of the oil needed to make gasoline.

“It’s speculators who are moving markets,” said Bart Chilton, a commissioner at the Commodity Futures Trading Commission. “They are almost exclusively the entire market at certain periods of time.”

Chilton led the charge in seeking limits that reduced how much of the market for crude oil any single trader or company could control. Armed with the 2010 revamp of financial regulation, the commission sought to establish hard limits, but that effort is now bogged down in the courts.

“The more textured view would show you that at certain times it is not a question to whether or not speculators are moving the market. Speculators are the market,” he said.

Other forces are at work as well.

Nearly 1 million barrels a day of capacity has been turned off with eight refinery closures or announced closures on the U.S. East Coast and the Caribbean over the past year.

“What the market is really pricing in is potentially a new era of tighter gasoline supplies that are heavily reliant on imports,” said John Kilduff, a partner in the energy trading firm Again Capital in New York. “We might not ever turn back from these high prices. This isn’t episodic.”

Another factor is that refiners that turn oil into gasoline have chosen to switch to their summer blends much earlier than normal. This switch, which stops or slows production for a period of time, usually happens closer to the Spring Break driving season in mid- to late March.

Last year, gasoline prices peaked on April 5 and 6, so AAA is hoping that an early switchover may also mean an early peak to gasoline prices and that they may tumble later in the year.

The trade association for refiners, the American Fuel & Petrochemical Manufacturers, is unaware of any large-scale early switch away from winter fuels, said Joanne Shore, the group’s chief industry analyst.

“We don’t have information on that explicitly,” she said, noting that the association doesn’t keep real-time production data. California, Shore said, switches to summer fuels earlier than the rest of the nation, adding that some California refiners are undergoing maintenance and it’s been “one of the factors that has tightened (up) the Southern California market a bit.”
​

Email: khall@mcclatchydc.com; Twitter: @KevinGHall

Read more here: http://www.mcclatchydc.com/2013/02/19/183571/theyre-drilling-baby-drilling.html#storylink=cpy

 

[thoughtone]

Re: Gas prices are getting rediculous y'all

They’re drilling, baby, drilling – and gas prices still going up

The idiocy continues!

<iframe width="420" height="315" src="http://www.youtube.com/embed/-tPePpMxJaA" frameborder="0" allowfullscreen></iframe>

 

[QueEx]

So why aren't prices falling?


U.S. Nears Milestone:
Net Fuel Exporter


U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.

Are Fuel Exports Driving Up the Price of Gas?

Yes, they probably are. But here's why that's OK?



The Atlantic
Jordan Weissmann
April 3, 2013

The U.S. fossil fuel renaissance has sparked job booms in the oil fields of North Dakota and Texas, shrunk our national import tab, and led to a whole lot of talk about energy independence. But, as BloombergBusinessweek noted recently, one thing it hasn't done is lower the price of gasoline for American motorists, who are still paying $3.71 a gallon.

Why not? There are a lot of ways to answer that question, the simplest being that despite all our drilling, oil is remains expensive. Worldwide, demand still beats supply. And since the cost of crude accounts for 72 percent of the cost of gasoline,* pump prices have stayed high.

But that doesn't quite put the issue to bed. After all, Americans are driving and fueling up less, which should theoretically encourage the oil refiners that produce our gasoline and diesel to cut their prices. Businessweek points to a few reasons why that hasn't happened, but I want to focus on just one of them: exports.

As the magazine's graph below shows, U.S. exports of refined oil products have surged over the past couple of years, at the same time as the price of gas rebounded hard from its recession-time drop.

Coincidence? Some say not. Refiners, the argument goes, are choosing to make products that they can sell for a premium on the global market rather than more cheaply at home. And there's certainly truth to that. When something scarce is sold to the highest bidder anywhere in the worldwide, prices inevitably go up (See: Oil).

But does that mean it's time to clamp down on exports? Not necessarily.

First, it's not clear how big an impact they make, partly because we don't export a huge portion of our fuel supply. Of the 3 million or so barrels a day of refined products U.S. refiners ship abroad, only about half are either distillate fuels (which include diesel) or gasoline. American drivers and truckers, meanwhile, use roughly 12 million barrels of fuel each day. Meanwhile, there's no guarantee that if we suddenly clamped down on exports, refiners would choose to dump their extra supply on the domestic market. Instead, they could choose to reduce production, or as the industry argues whenever someone suggests cutting them off form the world market, simply shut down the refineries that stop being profitable. That might sound like fear mongering, but companies have done it in the past.



And finally, fuel exports offer certain perks. Namely, they're exports. Fuel and other petroleum products combine to make our largest export category by dollar value, bigger than cars, machinery, or jets. That, in turn, helps out our growth, and creates jobs in places like the Gulf region.

So in short, yes exports are probably costing drivers a bit more. But it's not clear that ending them would be worth losing their benefits.

__________________________________

*If you're really interested in the breakdown of what goes into gas prices, the California Energy Commission offers a handy year-to-year cart.
​

SOURCE

 

[thoughtone]

All that damn oil and little of it is used by the US. Who is getting rich?

 

[QueEx]

Shut Up and Drill: Why Fracking Could
End the Age of Gas Price Spikes

Drivers of the world, rejoice: The technology behind
the natural gas revolution could give us a more
flexible and dependable source of gasoline

​

For decades, a specter has haunted the U.S. economy: the specter of surging gas prices. From the malaise years of the 1970s to the early 21st century spike when a gallon of gas climbed from $0.90 in 1999 to more than $4 a gallon in 2008, family's lived in fear that we were one Middle East conflict away from another painful bite into our paycheck.

But what if I told you we could end that pain with one word. Fracking.

Hydraulic fracturing (a.k.a.: fracking) is the drilling technology that has produced a slew of cheap domestic natural gas. Some energy analysts suggest that it could do the same for oil and gasoline. That sounds crazy. Here's why it might not be.

Getting oil from earth crust to car is an arduous process that makes it susceptible to price surges. Oil fields have to be discovered, wells dug, pipelines constructed, and refineries erected. Each one of these investments is enormously expensive. Once in place, the system can produce constant flow for decades: up the well, down hundreds of miles of pipeline, into a refinery's distillation tower, through a series of chambers for oxygenation and blending, and ultimately poured out as consumer-ready gasoline.

Oil recovery and refinement is a marvel of engineering, but a disruption in the process can be catastrophic. Wars, embargoes, or refinery fires could shut down that flow, and nothing can be done in the near term to replace it. Gasoline stockpiles collapse, prices rise, and that familiar American syndrome would settle in.


It's not natural gas. It's fracked oil.

Fracking is altogether different. It's not just an innovative way to get at previously unreachable oil reserves. It alters the very nature of the oil and gasoline supply chain.

• A traditional well might produce 50 barrels of oil a day when it opens, but it will produce close to that for more than a generation.

• Newly fracked wells have been known to produce over 7,000 barrels a day. That torrent will slow to a trickle in as a little as 18 months, but the rush of oil fundamentally changes the dynamics..

• OIl is produced so quickly there often isn't time to lay pipelines. Much of the oil from North Dakota's prolific Bakken Shale has made it to market by train. .

Train transport is more expensive, but it also more flexible. Pipelines have a fixed destination, but tanker cars can unload anywhere a terminal is designed to accept oil. These facts -- gushing wells and flexible delivery by rail -- mean that fracked oil operations function more like a just-in-time service than a decades-long industrial investment.

The oil itself is also different in composition.

• Traditional crude is thicker and heavier. Refineries are designed to make the most out each barrel, separating out the light components (which become gasoline) medium components (diesel fuel and kerosene), and heavy components (asphalt)..

• Fracked oil rarely contains heavier molecules. Much of it nearly qualifies as natural gasoline, a descriptor typically applied to certain liquids extracted at natural gas processing facilities. Natural gasoline, as the name suggests, is very close to the stuff you that you put in your car and requires relatively mild refining and blending before it can be sold at the neighborhood gas station. For fracked oil, the heavy-duty refining operations designed for conventional oil are overkill.

As a result, older East Coast refineries that were once slated to be shut down -- like Sunoco Philadelphia -- have been revived as destinations for fracked crude. These refineries cannot compete with the sophisticated operations on the Gulf Coast and Midwest when it comes to processing thicker grades, but they can handle the light, fracked oil just fine.

This new oil production chain is still maturing, but it promises exactly what gasoline consumers have longed for: an industry that responds to shortages with increased supply rather than increased prices. In Eagle Ford, operators have been able to drill wells in as little as 10 days. Within a month those wells will produce millions of barrels of oil. That oil can be delivered by tanker car to just about any refinery in the nation and processed into gasoline.

Crises will continue to erupt and global oil supplies will continue to be threatened. Yet, now we have the means to fight back. The production of gasoline from domestically sourced, hydraulically fracked oil can be ramped up within months, and ever increasing pain at the pump can finally be relieved.
​

SOURCE

 

[QueEx]

Shut Up and Drill: . . .

​

New Study Finds High Levels of Arsenic in Groundwater Near Fracking Sites

A recently published study by researchers at the University of Texas at Arlington found elevated levels of arsenic and other heavy metals in groundwater near natural gas fracking sites in Texas’ Barnett Shale.

While the findings are far from conclusive, the study provides further evidence tying fracking to arsenic contamination.

Arsenic is a pretty well-known poison. If you experience a lot of long-term exposure to arsenic, you get a lot of different risks, like skin damage, problems with the circulatory system or even an increased risk of cancer. The levels that we found would not be a lethal dose, but they’re certainly levels that you would not want to be exposed to for any extended period of time.
​

 

[QueEx]

Texan drought sets residents against fracking

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In Mertzon and Barnhart in western Texas, the worst drought in two generations
is choking the water supply. Water shortages are raising tensions between locals
and the fracking industry. Drilling for shale gas uses up to 8m gallons of water
each time a well is fracked. Suzanne Goldenberg reports
​

 

[QueEx]

Improving U.S. oil production reaches
milestone in October, agency says​

U.S. oil production surpasses imports

For the first time since February 1995, U.S. crude oil production has exceeded crude oil imports



Washington Post
November 13, 2013

The United States produced more crude oil in October than it imported for the first time since early 1995, as domestic shale oil output continued to surge and U.S. consumption of petroleum products remained relatively flat, the Energy Information Administration said Wednesday.

The figures mark a milestone in the rebound of U.S. oil production since drillers started using a combination of horizontal drilling and hydraulic fracturing to unlock oil previously trapped in layers of shale rock in states such as North Dakota and Texas. At the same time, gains in automobile fuel efficiency and other areas have been curbing U.S. oil consumption.

The trend is expected to continue for another decade as U.S. domestic oil supplies grow and reliance on imports shrinks, easing one of the main sources of pressure on global oil markets.

For now, however, the United States remains the world’s biggest oil-consuming nation and the largest importer of crude oil. (China is the world’s biggest importer of crude oil and refined petroleum products combined.) Moreover, global crude oil prices remain high by historic measures.

U.S. crude oil production reached 7.74 million barrels a day in October, down slightly from September because of disruptions from Tropical Storm Karen, but up 17 percent from the year before. Aside from September, U.S. production in October was the highest level of any month since May 1989.

Net crude oil imports in October fell to 7.57 million barrels a day, down from 7.92 million barrels in September and down 8 percent from the year before.

The White House sought to take credit for the figures. It issued a statement calling them “a result of both increased production and Administration policies like increased fuel economy standards that cut oil consumption, cut carbon pollution, and cut consumer bills.”


Economists welcomed the figures.

“It highlights the reversal of fortune in our energy sector, that we are increasingly energy independent and prospects are good that we’ll be more energy independent going forward,” said Mark M. Zandi, chief economist of Moody’s Analytics. “It’s one of the reasons to be optimistic about our growth prospects.”

Zandi added that rising domestic oil production “means a smaller trade and current account deficit, which is a big plus for the economy. We’ll be less sensitive to increases in global oil prices.”

According to figures compiled by Zandi, the oil import bill as a percentage of the gross domestic product in the third quarter of this year was lower than any quarter since 1986. The firm estimates that shale oil output will result in an $80 billion reduction in imports this year.

Frank Verrastro, senior vice president and energy expert at the Center for Strategic and International Studies, said the milestone was important, although he warned that higher costs, geological variations and constrained exploration budgets at many independent drillers could make it a “challenge” to meet expectations for future crude oil output growth.

The turnaround in U.S. oil fortunes has been rapid. Five years ago, U.S. oil production hit a 62-year low. Since then, domestic production has increased by more than 50 percent.

Prices remain high. This is the third consecutive year in which the price has hovered above $105 a barrel for crude oil produced by the Organization of the Petroleum Exporting Countries. The U.S. benchmark for crude oil, West Texas Intermediate, has tumbled to about $95 a barrel, down from $110 a barrel in September, but that is still high by historic standards.

Some oil analysts note that prices would be even higher without the increase in U.S. production, which has helped offset oil disruptions in Libya, Iraq and Nigeria and sanctions on Iran.
​

SOURCE

 

[thoughtone]

What Happens When You Just Give Money To Rich People?


source: Reuters

Factbox: Big tax benefits enjoyed by oil companies

(Reuters) - President Barack Obama and some fellow Democrats want to slash tax benefits now enjoyed by large oil companies such as Exxon Mobil Corp and Chevron Corp to raise up to $40 billion over a decade in government revenues.

That effort hit a roadblock on Thursday when the Democratic-controlled U.S. Senate voted to hold back legislation backed by most Democrats to repeal some of the biggest tax benefits for the five biggest oil companies, in a 51-to-47 vote.

Four Democrats sided with Republicans in the vote against moving forward on the legislation.

With gasoline prices rising past $4 a gallon in some parts of the United States, energy and the companies that produce it are hot topics in the Republican race to take on Obama in November.

Below are major provisions of the tax code used by oil and gas companies. Revenue estimates are over a decade.

INTANGIBLE DRILLING COSTS

When Exxon Mobil wants to drill a well to look for oil, it can under present law "expense," or quickly deduct, the costs for labor, drilling and rig time. These are known in the tax code as "intangible drilling costs."

Oil companies say these costs are the equivalent of their research and development costs, like the effort and resources Apple Inc engineers expend to create their next big gadget.

Critics say this tax break, dating to the beginning of the code, is unjustifiable. As a general rule, though there are other exceptions, expenses incurred by a business for the intent of producing future income must be written off over time, not right away.

The code now allows independent oil companies -- mid-sized competitors such as Marathon Petroleum Corp and Occidental Petroleum Corp -- to recover 100 percent of intangible drilling costs in the first year.

The largest oil companies -- including the "Big Five" players Exxon, Chevron, BP Plc, ConocoPhillips and Royal Dutch Shell Plc -- can recover 70 percent of these costs in the first year.

DUAL CAPACITY RULES

The United States taxes companies on profits earned both inside the United States and abroad in a system known as worldwide taxation. To prevent companies from being taxed twice on the same income, they can claim a tax credit for taxes paid to a foreign country. The credit reduces their U.S. taxes.

Oil companies are known as "dual capacity" taxpayers because they pay taxes to foreign countries and they also get an economic benefit from those countries. Energy companies are often subject to higher corporate tax rates than other corporations doing business in a given country.

Obama and other critics say this higher rate amounts to a royalty or economic benefit for access to the country, not an income tax to be credited against U.S. taxes.

The industry says there is no evidence that companies are using royalties as foreign tax credits.

PERCENTAGE DEPLETION

The percentage depletion provision does not apply to the Big 5 oil producers, but independent firms can claim it.

The provision lets companies take a tax deduction of 15 percent a year for the depletion of oil and gas resources in the ground, instead of deducting the decline in the value over time.

The Obama administration wants to repeal this, citing its Pittsburgh G20 pledge to phase out subsidies for fossil fuels.

The administration argues that the provision causes market distortion, skewing investments toward oil and gas that might go elsewhere under neutral tax rules.

The industry says the deduction is a vital part of the economics of their cost recovery, and says the rules only allow the smallest producers to benefit because of quantity limits.

DOMESTIC ACTIVITIES DEDUCTION

Many big U.S. companies are entitled to a 9 percent tax deduction from their income from property manufactured, grown, extracted or produced in the United States.

Oil companies can claim a 6 percent deduction for this.

Critics say oil production is not manufacturing, and the oil industry does not need the deduction with oil prices so high.

The oil industry counters that taking the benefit away from it alone puts the government in the business of picking winners and losers.

 

[QueEx]

Rise of ‘Saudi America’ will alter globe,
prolong U.S. superpower role

​

MEXICO CITY — For the past 40 years, U.S. presidents have launched distant wars, allied with autocratic sheikhs and dispatched naval fleets to protect sea lanes, all for the imperative of keeping foreign oil spigots flowing.

That imperative has now subsided. Rather suddenly, the center of gravity of global energy production has swung toward the Americas as shale oil and gas fields in North Dakota and Texas hum with activity. America is moving to the fore as the world’s largest producer of petroleum and natural gas.

That change will reorder the globe in ways large and small.

U.S. experts say it will prolong the United States’ position as the predominant global superpower. Arab nations that shook the world with the 1973 oil embargo almost certainly will be weakened. Russia will find its power ebb as European nations find alternate suppliers for natural gas. New energy technologies will reorder the scales of global winners and losers.

“There are not many times in history where you can see the balance of power shift,” said David L. Goldwyn, founder of Goldwyn Global Strategies, an energy intelligence consultancy in Washington. “We are going to see that.”

Coinciding with America’s shale oil boom, Goldwyn said, are cutting-edge technologies that allow new parts of the globe to tap into unconventional energy resources, including deep offshore natural gas beds. Places like Cyprus in the eastern Mediterranean, Mozambique in Africa and Colombia in South America hold promise with energy reserves.

“We’re really seeing the small ‘d’ democratization of access to energy in more countries and more places,” Goldwyn said.

There are skeptics, of course, whose doubts range from distrust of the geological forecasts to analysts who say an environmental disaster could derail the shale oil and gas boom, just as the 2011 Fukushima nuclear disaster in Japan sapped global enthusiasm for nuclear energy.

“The implications of the U.S. shale revolution are so great for its economy and security that you don’t want to kill it with stupidity,” said Robert A. Manning, an energy expert at the Atlantic Council, a public policy think tank on trans-Atlantic issues. He advocates more federal regulation on the process of extracting energy from hydraulically fractured shale formations, a process known as “fracking,” to ensure that environmental or other setbacks do not occur.

“If we find out that it’s causing earthquakes, or something else bad happens, you want to prevent that stuff,” he said.

Even doubters, however, are beginning to think the fracking boom may have long-range implications.

Chief among them is the Organization of Petroleum Exporting Countries, the energy cartel that for four decades was the arbiter of world energy supplies and prices. Just this month, OPEC reversed its previous view of the “marginal” nature of the U.S. fracking boom, acknowledging that energy supplies created by new technologies could cut sharply into the cartel’s market.



Throughout Africa, oil-producing states express alarm about the drop-off in their exports to the United States. The flow of Nigerian crude to U.S. shores hit 1.3 million barrels per day in 2007, but by August it had fallen to 77,000 barrels daily. African oil producers now ship more oil to Europe and China, but many there are concerned by the loss of a dependable customer.

Iraq, whose oil deposits were once thought likely to benefit U.S. oil companies, has found that Chinese, not U.S., companies are the ones interested in its oil bounty. American oil companies would rather drill at home.



Perhaps what is most alarming to some is that the shale revolution is likely to perpetuate U.S. dominance, not just in geopolitics but in the energy industry itself. While many countries also have massive shale reserves – China is the most notable, but Algeria, Argentina and Mexico are others – none is thought likely to be able to take advantage of those deposits easily, certainly not with the explosive growth seen in the United States.

Many factors give the United States a head start in exploiting energy locked in shale, including its access to cutting-edge technology and risk capital, clear private resource ownership and huge numbers of drilling rigs, most of them capable of the difficult horizontal drilling required in fracking.

“I’m very skeptical about the ability of any other country to replicate the drilling intensity” of the United States, said Leonardo Maugeri, a former executive at the world’s sixth largest oil company, Italy-based Eni, who is at the Belfer Center for Science and International Affairs at Harvard’s Kennedy School of Government.



Companies in the United States own nearly 60 percent of all active drilling rigs in the world, Maugeri said, a key condition for the continuous drilling needed for fracking.

“Texas is the most drilled state in the world,” Maugeri said. “To give you an order of magnitude, the number of wells drilled in Texas compared to Saudi Arabia is 1,000 to one.”



The ability of the United States to dominate the extraction of shale deposits at home raises another question, troubling to some: Will the United States become less interested in the global military role it plays now?

“One thing this may do is untangle the obsessiveness about Middle East oil, this whole idea that we have to somehow protect these sea routes at all costs,” said Mark Clinton Thurber, associate director of the Program on Energy and Sustainable Development at Stanford University.

Forty years ago, supertankers sailing through the Strait of Hormuz at the entrance to the Persian Gulf carried more than half the world’s crude. U.S.-allied petro states there grew rich, buying U.S. armaments and fighter jet squadrons. U.S. strategic interests led it to launch Gulf wars in 1991 and 2003.

The greatest symbol of U.S. presence and power in the region is the Navy’s 5th Fleet, docked in the tiny sheikdom of Bahrain. Comprising some 30 ships and 20,000 personnel, the fleet protects the Persian Gulf and the Red and Arabian seas.

Today, U.S. taxpayers foot the bill for Navy ships that largely protect supertankers headed to Asia. China overtook the United States as the largest importer of Persian Gulf oil two years ago.

That trend will surge, and “it’s going to raise all new questions,” said Amy Myers Jaffe, an expert on global energy production at the University of California, Davis.

“You have the Chinese and other Asians free riding on a U.S. security presence, and I’m not sure that’s sustainable,” said Manning of the Atlantic Council.​

As Asian populations rise and economies grow, nations there should be recruited to help patrol sea lanes, said Charles K. Ebinger, director of the Energy Security Initiative at the Brookings Institution, a Washington think tank.

“I can envisage that as both India and China become maritime powers, that we have joint operations,” Ebinger said. “Let’s say that we are even thrown out of our base in Bahrain; I could see a rotational basis between the three great powers, China, India and the U.S.”



Some experts argue that the United States should not disengage from the Persian Gulf because U.S. interests there go far beyond energy supplies.The region is vital to efforts to contain nuclear proliferation and religious extremism, the protection of Israel remains a central U.S. interest, and while the importance of Middle East oil may be on the decline for the United States, any disruption there would send world prices skyrocketing – harming economies in Asia that are vital U.S. markets.

“The United States is so woven into the world economy that we need that energy flowing to Asia,” said Rachel Bronson, vice president of studies at the Chicago Council on Global Affairs and an expert on U.S.-Saudi relations.



Saudi Arabia, Washington’s most important strategic Arab partner, has sharply diverged from the Obama administration this year over whether to arm Syrian rebels and how to confront Iran’s nuclear program.

The Saudis still share strategic interests with the United States and continue to play a large global energy role for their ability to increase oil production so prices do not spike even as OPEC, the once-formidable cartel, has seen its production remain stagnant for 40 years. The 12-nation cartel now supplies 39.8 percent of world crude and liquid fuels production, down from 54 percent in 1973, according to the Energy Information Administration, the statistics branch of the U.S. Energy Department.

“OPEC’s going to be on the defensive,” said Jaffe of UC-Davis.


For the short and medium term, oil giants like Saudi Arabia and Kuwait may survive unscathed as they look to Asia, sending as much as 70 percent of their oil there. Smaller oil producers in North Africa and the Middle East, however, may encounter “power struggles or upheaval” as they face declining revenue, according to a report in February from Citigroup, the global financial concern.

Over the longer term, the outlook may be brighter. The Paris-based International Energy Agency forecast in a report this month that rising global demand would allow the Middle East to recapture its role as a key source of oil by the mid-2020s, primarily to meet surging demand in Asia while Europe and the United States reap benefits of improved energy efficiency.

Most U.S. experts concur that a big loser from the growth of the U.S. shale industry will be Russia, which has locked in Eastern and Western Europe as clients for its natural gas, leveraging the reliance on its supplies for political gain.

The Russian share of the European Union’s natural gas imports is expected to drop, however, from the current 34 percent to below 15 percent over the next 10 to 15 years, according to some analyses, replaced by supplies of liquefied natural gas from the United States.

“Russia is in big, big trouble,” said Ebinger of Brookings, noting that Moscow is losing revenue by subsidizing domestic consumption even as natural gas prices are under assault, slowly decoupling from decades of linkage to crude oil prices.​

China, with its massive appetite for energy and pressing need to cut down on coal-fired power generation that contributes to pollution, has compelling reasons to extract more energy – if only it can corral the know-how and drilling muscle to do so.

According to a June estimate by the U.S. Energy Information Administration, China has the world’s largest recoverable shale gas reserves, nearly double of those in the United States. Its shale oil reserves are the world’s third largest after Russia and the United States, the EIA said.

But whether China will exploit those finds is uncertain. The country’s three major oil companies currently see greater profits for themselves working overseas rather than at home. And foreign companies are reluctant to work in China because of restrictive contracts and other conditions.

Chinese analysts have wrung their hands over the impact of the U.S. shale revolution, with one heavyweight pundit declaring that it will remold the world.​

“This writer, as a diplomat who has over 40 years of experience in the Middle East, believes that the U.S.-initiated shale gas revolution will not only change the global landscape of energy distribution but will also change the world’s geopolitical layout. The United States will take a more dominant position in global energy distribution,” wrote Wu Sike, a senior statesman who used to be China’s envoy to the Middle East and is now member of a key foreign affairs committee.

Middle East turmoil, however, won’t end, and eventually, Wu writes, “The United States will become less and less reliant on Middle Eastern oil, until this reliance finally ends.”

Wu sees fracking as having “an insurmountable impact on the Middle East, the global economy and the world’s geopolitical map.”

Some U.S. analysts generally agree, and say the result of the U.S. shale revolution will be a strengthened economy and a turn-around morale in a nation that some felt was on the decline.

“As the United States’ imports shrink, and we are exporting less dollars abroad to pay for oil and gas, then our trade deficit will narrow,” said Jaffe. “We won’t be as badly disadvantaged compared to China anymore. And their economy is going to shrink some because they’re not going to be leading in petrochemicals anymore because some of the industry . . . is coming back to the United States.”

The February Citigroup report, titled “Energy 2020: Independence Day,” put it more simply.

“The United States should see its role in the world as a singular superpower enhanced and prolonged,” the report says.
​

Read more here: http://www.mcclatchydc.com/2013/11/28/209033/rise-of-saudi-america-will-alter.html#storylink=cpy

 

[QueEx]

​

 

[xfl]

Why the hell is gas prices 3 dollars a gallon?

 

[QueEx]

Shut Up and Drill: . . .

​

$3 million verdict for ‘first fracking trial’

​

A Texas family has won a $2.925 million judgment against an energy corporation over damage to health and property caused by fracking operations.

Bob and Lisa Parr sued Aruba Petroleum in 2011 for damages to their 40-acre ranch and for a host of health problems they and their daughter Emma have suffered from. Aruba Petroleum operate 22 wells within two miles of the Parr’s property.

“They’re vindicated,” attorney David Matthews said in a blog post on his firm’s site. “I’m really proud of the family that went through what they went through and said, ‘I’m not going to take it anymore.’ It takes guts to say, ‘I’m going to stand here and protect my family from an invasion of our right to enjoy our property.’ It’s not easy to go through a lawsuit and have your personal life uncovered and exposed to the extent this family went through.”

Attorneys for the Parrs said this suit was the first fracking trial in the United States. Hydraulic fracking is a process used to extract natural gas from underground. It pumps millions of gallons of water and toxic chemicals into well drilled deep into shale deposits and pushes natural gas out through cracks that form. At least 15 million people lived within a mile of a well drilled since 2000.

During the trial, Robert Parr testified that his family could no longer drink the water from their well and that his daughter sometimes woke up covered in blood thanks to debilitating nose bleeds.

While this is not the first lawsuit against an energy company for damages related to fracking, it is common for plaintiffs to settle. Those settlements sometimes include strict gag orders, such as one 2013 settlement that barred two young children from talking about fracking for their entire lives.

Aruba Petroleum plans to appeal the jury’s decision. At the trial, the company’s lawyers argued that since there are dozens of other drilling operations in the area, it was not possible to prove that it was its wells that caused harm to the Parr family. Most of the other companies sued by the Parrs have settled.
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http://www.msnbc.com/msnbc/texas-fracking-trial-3-million-verdict