http://www.atimes.com/atimes/Global_Economy/GH17Dj02.html

Global Economy
Aug 17, 2005

En route to $75 oil
By Scott B MacDonald

NEW YORK - Oil prices are high and likely to climb higher through 2005 and probably into 2006. Despite ongoing comments about the market actually having enough supplies, the reality is that international oil markets are not driven by anything rational. Rather, fear and loathing sit at the back of each upward oil trade. A confluence of increased demand and questionable limits to supply have resulted in a runaway oil market during the summer of 2005, with oil crossing $65 a barrel. The idea of oil hitting $75 a barrel is no longer so farfetched.

High oil prices - why?
High oil prices are likely to be around for a while. On the supply side, nagging points of concern include the expectation that non-OPEC oil supplies, mainly in the Gulf of Mexico and the North Sea, are set to fall. According to the International Energy Agency (IEA) in August, non-OPEC oil supplies are forecast to fall 200,000 barrels a day. Part of the reason for this is that political factors and less attractive investment regimes are hurting the discovery and development of new oil sources in countries such as Mexico and Russia. This puts much more pressure on Middle Eastern oil producers, in particular Saudi Arabia. Yet, there is concern about the true level of Saudi Arabia's oil reserves. Considering that there is a debate over the quality of transparency and disclosure of Saudi reporting, this only adds another factor to market nervousness.

Adding to the stew over oil prices is the nature of global refinery capacity utilization. During the early and mid-1980s, global refinery capacity utilization was around 75%; today it has risen to above 95%. US refineries have seen especially heavy use, with capacity utilization reaching a little over 98%. Historically, the refinery sector was a problematic area for oil companies to make money, and the long-term effect of this was that the sector is now largely defined by underinvestment and aging equipment. In addition, for environmental reasons, there have not been any new refineries built since the 1980s. This set of conditions has meant that existing refineries are under stress, breaking down or stopping operations to make repairs. Since July 20, there have been 14 refinery breakdowns.

The US refinery system is being pushed beyond its sustainable limits. As Richard Savage, global head of commodities research at Bank of America recently stated: "There are clearly issues in both production and refining capacity, because the plants have been running so hard that accidents keep happening."

Add to the above factors a damaging hurricane seasons in the Gulf of Mexico and the added weight of Chinese and growing Indian oil demand, not to mention the threat of geopolitical factors, and a bet on higher oil prices does not seem unreasonable. At the same time, the global economy has not taken a major nosedive. In the past, oil prices spikes have resulted in economic downturns or recessions. Thus far, we have strong economic growth despite higher oil prices, largely due to lower energy use intensity. Indeed, the International Monetary Fund is projecting 3.6% growth for the US in 2005 and again in 2006, along with increased economic growth in both Japan and Europe.

As a result, demand for oil is not likely to relent. That makes oil the key swing factor in the global economy over the next couple of years. Although we still have questions about oil breaching the $100-barrel mark, the general nervousness in the market, the ability of hedge funds to push prices up, and the existence of many geopolitical wildcards all translate into upward pressure.

The new world of higher oil prices has considerable implications for the structure of international relations. It has already added a degree of tension between the United States and China over the Chinese state-owned oil company CNOOC seeking to purchase US-owned Unocal. It has generated new tensions between China and Japan over potential oil and gas reserves in the seas between them and over access to Russia's energy sources. Competition for oil and gas has also stimulated a return of big power interest in Africa and a new scramble for that continent's resources, allowed Venezuela's populist leader President Hugo Chavez to pursue an anti-US foreign policy in the Americas that includes generous oil aid to Cuba, and provided an opportunity for China to develop closer ties with a number of Latin American countries.

The new flow of funds
Venezuela's Chavez enjoys theater. Seeking to bait the United States, he has steadily announced that Washington plans on invading Venezuela. He is also making use of higher oil prices to consolidate his position internally as well as providing help for other leftist leaders and organizations throughout Latin America. In 2002, Venezuela's foreign exchange reserves stood a little over $8 billion; as of mid-2005 they stand around $20 billion. Having eroded the control of the central bank over the country's foreign exchange reserves, Chavez can benefit from the rise in reserves by increasing social spending and offering to buy back debt to help Ecuador and Argentina. The former is also likely to help Chavez win re-election in 2006 for another six years.

Chavez is not alone in benefiting from the oil boom. The Gulf States, including Saudi Arabia, Kuwait, Bahrain, Qatar, and United Arab Emirates, are currently pumping oil at the highest rate in 25 years to keep pace with the growing demand. Throughout the region this trend is evident in faster growth rates, improved fiscal positions and rising foreign exchange reserves. According to the Washington-based Institute of International Finance: "Gulf state countries will buy about $360 billion in foreign assets from bonds to property in 2005 and 2006 - 50% more than their total purchases of the past five years." A lot of this money is heading to US and European markets, but also into the rest of the Middle East.

The geopolitics
Although the antics of Chavez make colorful copy, the major geopolitical concerns are largely centered on the Middle East. This is because three of the world's four largest oil reserves are located in the Middle East - Saudi Arabia, Iran and Iraq. Each of these has problems. Iraq remains locked in a civil war, with its oil industry a target of sabotage. Its level of production is well below its potential.

At the same time, neighboring Iran has just elected a hardline government under President Mahmoud Ahmandinejad. One of the cornerstones of the new government is the pursuit of nuclear power. Despite negotiations to prevent the emergence of a nuclear Iran, Tehran is determined to join the ranks of nuclear powers. This is especially the case now that North Korea, India and Pakistan already have nuclear weapons. Iran's policy, therefore, is set to put it on a collision course with the international community, which could conceivably lead to United Nations sanctions.

Saudi Arabia, the world's leading oil country, also faces major political challenges going forward. The Middle Eastern country is a closed society, confronted by difficult problems of extremist Islamic fundamentalism and increasing demands for economic and political reform. And then there is the issue of political succession. On August 3, the Saudi religious and tribal leaders gathered in Riyadh to pledge allegiance to new King Abdullah bin Abdel-Aziz al Saud following the death of his half-brother King Fahd.

The smoothness of the succession appeared to show a Saudi royal family well entrenched in power. The network of family relations, firm control over the state security apparatus and ability to tap the country's oil wealth give the appearance of control and stability. But in reality, Saudi Arabia is a restless society, with a young, relatively well-educated and generally underemployed population. Caught between influences from the West via satellite TV and a strict Wahhabist Islamic code, Saudi society has become more volatile, and its future path less certain.

Saudi Arabia's new king has been the real ruler of the country since 1995 when King Faud suffered a debilitating stroke. While this means continuity in policies, Abdullah is already 82. This means that another political succession sits out on the horizon, probably sometime in the next 10 years. The problem of an aging leadership elite is compounded by the fact that the next three leaders in line of succession are likely to be Crown Prince Sultan, a spry 81 years, Interior Minister Prince Layef, 71, and Riyadh Governor Prince Salman, 70. So even in the event of succession in this sequence, frequent transitions will make the system instable.

Thus oil markets are likely to remain volatile, with more pressure for prices increases than declines. The global economy has thus far been able to absorb the price increases due to past improvements in technology, which augmented energy efficiency. However, somewhere out there is a point where oil prices are simply too high, and become disruptive to economic activity.

Scott B MacDonald is Senior Managing Director at Aladdin Capital and a Senior Consultant at KWR International.

Posted with permission from KWR International Inc, a consulting firm specializing in the delivery of research, communications and advisory services.

http://www.atimes.com/atimes/Global_Economy/GH17Dj01.html Global Economy
Aug 17, 2005


Multinationals feel the pinch
By Emad Mekay

WASHINGTON - Dozens of US industry leaders say rising oil prices have dimmed the economic forecast and made their firms vulnerable, at a time when international oil companies are earning record profits. A survey released Monday by PricewaterhouseCoopers LLP says chief financial officers and managing directors of prominent US companies with offices around the world have grown gloomier about the prospects for the US economy and their own profits next year, largely because of rising oil prices.

Some 36% of 150 executives interviewed said their companies are scaling back expectations for revenue growth, new jobs and investments. Some 52% said higher oil prices were eroding profits, with 23% saying the impact is strongly negative and 29% describing it as moderate. On Monday, US oil prices retreated slightly to US$66.25 a barrel after crossing the $67 record on August 12. "In the second quarter, business leaders saw oil prices cross the $60-barrel mark for the first time," said John O'Connor, vice chairman of PricewaterhouseCoopers LLP. "It remains to be seen whether their reduced growth estimates, capital spending, and hiring plans represent a temporary case of the jitters, or a signal of something more."

The number of executives expressing optimism about the US economy in general dropped to 62% - 15 points less than the last quarter. One-third are now uncertain about the economy, a 13-point increase. Many have cited rising oil prices as a reason for reducing growth targets. The survey also shows just 47% of executives are planning large new investments, 12 percentage points less than the prior quarter. Only 46% plan new hiring, down 11 points.

O'Connor said the US economy has been resilient, clearing hurdles like the tripling of short-term interest rates, and enjoying a rallying dollar that now makes US exports more costly abroad. "Escalating oil prices have the potential to slow future economic expansion through their impact on profit margins, revenue growth, new hiring, and capital investments. The challenge now, in this increasingly uncertain period, is to adjust to $60 oil, and regain momentum."

Meanwhile, analysts note that oil companies are making a killing. ExxonMobil's second-quarter earnings jumped 35% over last year, while Royal Dutch Shell's rose 34% and ConocoPhillips' shot up 51%. On Monday, the Foundation for Taxpayer and Consumer Rights (FTCR), a Santa Monica-based consumer group, said profiteering by the oil industry is to blame for a 20% increase at the pump over the last three weeks.

The Congressional Research Service, which provides information at lawmakers' requests, issued a report earlier this month showing high prices for crude oil in 2004 and into 2005 raised costs for most businesses but steered billions of dollars to the oil industry. The report says the profits of virtually all firms in all segments of the oil industry have increased, and that the greatest hikes have been in the so-called "downstream", or refining and marketing, segments of the industry.

"The relatively high profit levels earned in refining and marketing suggest that conditions in the petroleum products markets, including the gasoline, diesel, and jet fuel segments, contributed to earned profits above and beyond the effect of higher crude oil prices," says the Congressional Research Service report. This view was corroborated by FTCR's research report Monday, which blamed "manipulation of domestic refining capacity and inventories by American oil companies" as the reason for gasoline price spikes, not the traditional scapegoats of Middle Eastern oil-producing cartels like OPEC, government regulation, litigation, or environmental standards.

"In a commodities market, domestic oil companies know the lower the inventories they keep, the higher the profits, because perceived shortages mean a speculative run-up in prices," said Jamie Court, president of FTCR. "Big Oil rigs summertime driving season for big profits by keeping inventories low ... every summer should not be open season for oil companies to gouge American motorists."

(Inter Press Service)

The Wall Street Journal, of all newspapers, just interviewed two economists who both agreed that Peak Oil would hit- they just couldn't agree on when. One said 15 years; one said anywhere from three to ten.

As most of you have already heard, peak oil is the point at which oil production starts to decline. Many economists fear that if peak oil hits too soon, the market won't be ready for it. In any case, peak oil means that we'll have to have $5-$10/gallon gasoline to get people to reduce their oil consumption.

There's some silver lining in this cloud. The good news is that it's the liberals who drive the small cars and take public transit, whereas most conservatives I know have cars that get less than 20 mpg. That means that Democrats (if such a party still exists in 20 years) are going to come out of this on top.

And as usual, you can hedge against the effects of '70s style energy problems by buying utilities, railroads, mining companies, and oil producers.

Poll: Anger at the Gas Pump

Updated 9:33 AM ET August 22, 2005

http://dailynews.att.net/cgi-bin/news?e=pr..._050822&src=abc

Americans aren't just unhappy with the soaring price of gasoline -- a substantial number are downright angry about it.

Nearly everyone in a new ABC News poll, 94 percent, expresses dissatisfaction with the price of gas these days -- not surprising since its average last week, $2.55 a gallon, set a record high in nominal dollars. But that dissatisfaction spikes to ire for a significant chunk of Americans: Forty-four percent say they're "angry" about pump prices.

Part of the reason is that gas prices are impacting people's pocketbooks away from the pump. In order to pay for gas, three-quarters of Americans say they're either spending less on other things (45 percent), saving less (21 percent) or increasing debt (10 percent).

While dissatisfaction crosses all groups, there are differences in the level of anger about gasoline prices: Fifty percent of Democrats are mad about the cost, compared with 37 percent of Republicans. Women are more likely than men to be angry. And anger about the price of gas peaks in the East, at 52 percent; it's lowest in the West, at 40 percent, even though the West consistently has the highest gas prices in the nation.

Gas prices are hitting the young and the less well-off especially hard, and these groups are the most likely to say they're shifting spending on other items to gas to offset the rising cost of gasoline.

This is an initial report on this ABC News poll on gasoline prices; full results will be released at 5 p.m. Monday. The survey was conducted by telephone Aug. 18-21, 2005, among a random national sample of 1,002 adults. The results have a three-point error margin.

Interesting point, but I would argue that Chavez isn't going to be that stupid.

If Chavez seizes oil assets in Venezuela, we can just sieze (Venezuelan owned) Citgo- it's got a lot of assets in refineries all over the U.S.

Chavez stands much more to lose by starting a p***ing contest with the U.S. than we do. And I think he knows it.

Are they angry enough to do anything about it? I think Americans are going to continue to act like sheep and be fleeced and butchered by foreign oil interests and the actions of our own leaders.

Perhaps sheep deserve what they get.

While high gas prices are something alot of people complain about, it does drive people to conserve and makes alternative energy sources economically competitve.

Copied from the Venezuela forum

My wife and I have a somewhat tight budget so we sat down the other day and did some figuring. Comparing a $1.60 a gal. last year vs. $2.60 now with an 18 gallon tank on my S-10, that about $20.00 a week more. Then we figured what we spend a week on miscellaneous sundries that we don't even think about on a daily basis. It came out to way over $20.00 a week for thing that we really didn't even need. It put our gas budget into perspective. I certainly have a hard time justifying the increases, but it's something we are going to have to live with for now on, so I will continue to look at my personal financial waste and conserve.

Dow Drops 85 As Oil Reaches Record High

Updated 5:08 PM ET August 24, 2005
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By MICHAEL J. MARTINEZ

NEW YORK (AP) - Stocks sank amid increasing pessimism on Wall Street Wednesday, shedding early gains after oil prices reached another record high and a mix of data provided conflicting views on the economy.

The surge in crude prices wiped out the advance that followed the Energy Department's latest inventory report, which showed a strong buildup of heating oil and distillate stocks. Concerns about a drawdown in crude oil and a tropical storm threatening oil facilities pushed crude futures to a new record. A barrel of light crude surged $1.61 to settle at $67.32 on the New York Mercantile Exchange, surpassing the previous record settlement of $66.86 per barrel on Aug. 12.

The market's earlier momentum grew out of the Commerce Department's latest report on new home sales, which rose to an annualized 1.41 million units, better than the 1.328 million home sales expected. But the government also reported a sharp decline in orders for big-ticket manufactured goods _ leading investors to wonder whether an economic slowdown was imminent.

"In all you're seeing sort of a mixed reaction out there," said Brian Williamson, an equity trader at The Boston Company Asset Management. "The oil data was good because of the distillates, but you're still seeing oil prices higher because of demand. And we're seeing a lot of volatility across the board."

The Dow Jones industrial average fell 84.71, or 0.81 percent, to 10,434.87.

Broader stock indicators also lost ground. The Standard & Poor's 500 lost 8.00, or 0.66 percent, to 1,209.59 _ falling back into negative territory for the year. The Nasdaq composite index dropped 8.34, or 0.39 percent, to 2,128.91.

Volume was light, which is typical for late August, but that only magnified stocks' volatility and possibly exaggerating Wall Street's reaction to oil prices and the economic news.

Bonds traded in a narrow range throughout the day, with the yield on the 10-year Treasury note steady climbing to 4.17 percent from 4.18 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.

Investors started the session with the Commerce Department's report that durable goods _ items designed to last at least three years _ fell 4.9 percent in July, a sharp drop from the 1.9 percent climb in June and far steeper than the 1.5 percent drop economists had expected.

However, the home sales report helped home builder stocks rebound from the previous session's losses. Toll Brothers Inc. gained $2.07 to $50, KB Home jumped $1.24 to $72.20 and Lennar Corp. rose $1.17 to $60.10. Yet even the housing report carried a caveat _ while sales are up, the average price of a new home fell.

"Although there was some encouragement by new homes sales rising, prices declined. That suggests we are possibly getting a decline in prices, and that's not good for consumer spending," said Hugh Johnson, chairman and chief investment officer of Johnson Illington Advisors, noting that many consumers had refinanced their homes in order to continue spending at current levels. "Combined with the pinch from oil prices, this is not good for the market."

While worries about high oil and gasoline prices have already prompted warnings from much of the retail sector, high-end luxury retailers have yet to be affected. Coach Inc. climbed $1.35 to $33.99 after the handbag and leather-goods maker said its first-quarter profits would exceed Wall Street's forecasts.

Poultry producer Pilgrim's Pride Corp. reaffirmed its earnings outlook after rival Sanderson Farms Inc. posted a 29 percent drop in profits on Tuesday. Pilgrim's Pride rose 11 cents to $31.21 while Sanderson Farms gained 63 cents to $36.40 after falling 7.6 percent Tuesday.

Google Inc. added $2.99 to $282.57 after the Internet search company said it would create an instant messaging and voice chat program to rival popular chat programs from Time Warner Inc.'s America Online, Yahoo! Inc. and Microsoft Corp.

The United Auto Workers may offer consessions that would help General Motors Corp. in its cost-cutting efforts, according to The Wall Street Journal. GM rose 75 cents to $34.27 on the news.

Declining issues outnumbered advancers by about 6 to 5 on the New York Stock Exchange, where preliminary consolidated volume came to 1.95 billion shares, compared to 1.69 billion on Tuesday.

The Russell 2000 index of smaller companies fell 0.46, or 0.07 percent, to 655.01.

Overseas, Japan's Nikkei stock average rose 0.24 percent. In Europe, Britain's FTSE 100 closed down 0.47 percent, France's CAC-40 fell 0.27 percent for the session, Germany's DAX index lost 0.04 percent.

Oil Prices Soar Above $67 Per Barrel

Updated 4:24 PM ET August 24, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8c6df7g1&src=ap

By BRAD FOSS

(AP) - Oil prices surged to a new high above $67 a barrel Wednesday on concerns about a storm that could hit production sites in the Gulf of Mexico and a U.S. government report that showed a decline in the nation's gasoline supply.

Natural gas futures also rallied on the storm fears _ even though forecasters anticipate a weak hurricane _ as traders recalled the months-long disruption to oil and gas production in the region following last year's Hurricane Ivan.

"The fear of a replication of that is going to keep the market on its toes and we could easily test $70 a barrel," said Marshall Steeves, an analyst at Refco Group Inc. in New York.

After climbing as high as $67.40 per barrel, crude oil for October delivery settled at $67.32, an increase of $1.61 on the New York Mercantile Exchange, topping the front-month contract's previous closing high of $66.86, set Aug. 12.

On an inflation-adjusted basis, oil prices would need to hit about $90 a barrel to match the highs of 25 years ago.

September natural gas futures climbed 30.1 cents to $9.984 per 1,000 cubic feet. The contract had surged as high as $10.128 per 1,000 cubic feet in overnight electronic trade.

Brokers said supplies of oil, natural gas, gasoline and other products are adequate for this time of year, explaining that the seemingly unending rally on energy markets is more a reflection of fears about unexpected supply disruptions at a time when demand is strong.

With global demand averaging some 84 million barrels a day this year, the world has scant excess production capacity _ about 1.5 million barrels _ to offset any lost output.

"A lot of this is 'just in case' buying," said oil broker Mike Fitzpatrick at Fimat USA in New York.

The amount of natural gas in storage in the U.S. stands at 2.52 trillion cubic feet, according to the Energy Department. That is about 0.2 percent below year ago levels.

"I don't see a big problem," Fitzpatrick said.

In its weekly petroleum supply report, the Energy Department said domestic inventories of gasoline fell by 3.2 million barrels last week to 194.9 million barrels, or 7 percent below year ago levels.

U.S. supplies of crude oil grew by 1.8 million barrels to 322.9 million barrels, or 13 percent above year ago levels, the agency said. The supply of distillate fuel, which includes heating oil and diesel, increased by 1.4 million barrels to 132.5 million barrels, or 4 percent above last year's level.

The mixed picture did little to calm nerves on energy markets.

"The inventories have built a little bit, but that doesn't mean an outage somewhere doesn't cause price spikes," said oil broker Tom Bentz at BNP Paribas Commodity Futures in New York.

On London's International Petroleum Exchange, October Brent crude futures rose $1.36 to settle at $66.01 a barrel. Prices climbed as high as $66.19.

Nymex gasoline futures jumped 6.2 cents to $1.92 per gallon, while heating oil futures gained 6.78 cents to $1.9258 per gallon.

Retail gasoline prices are averaging $2.61 a gallon nationwide, an all-time high and 73 cents higher than last year, even as demand continues to rise, according to government statistics.

But with the summer driving season drawing to an end, market focus is expected to shift to heating oil and natural gas as demand for these products peak in the winter.

Stoking bullish sentiment on Wednesday was Tropical Storm Katrina, which formed in the Bahamas and could reach hurricane strength before hitting the coast of Florida later this week. The National Hurricane Center said the storm is expected to cross the state and head into the Gulf of Mexico, dropping a foot or more of rain.

While jitters about Katrina's strength and path were the predominant force on energy markets on Wednesday, some analysts said the storm worries may be overblown.

"As with most storms, we think the fear factor is exceeding the likely impact on production here," said Timothy Evans, senior energy analyst at IFR Energy Services in New York.

The market has also been rattled lately by production outages in Ecuador, due to worker unrest, and in Iraq, where insurgents shut down most of the country's electricity grid on Monday.

"The markets are focused on event risk, and the fact that any small disruption in production, due to the thinness of refinery capacity, could lead to a short-term hiccup," said Joe Duarte, a Dallas-based independent energy analyst. "The market is clearly in a different zone now, being driven by momentum more than fundamentals."

Iraqi exports have since begun returning to normal, and the situation in Ecuador also has stabilized.

it has now passed 68$ in price.

March futures touched $70/barrel, yesterday. But Oil's down about 50 cents right now.

The NYMEX has 5 minute-old data on crude oil, gasoline, and nat. gas futures.

Bush Weighs Tapping Strategic Oil Reserve

Updated 11:47 AM ET August 29, 2005

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By JENNIFER LOVEN

WACO, Texas (AP) - President Bush weighed a decision on whether to release some oil from the nation's petroleum reserves to help refiners hurt by Hurricane Katrina, administration officials said Monday. A decision was expected later in the day.

The storm already forced the shutdown of an estimated 1 million barrels of refining capacity along the nation's Gulf Coast.

Adminstration officials, speaking on the condition of anonymity because they were not authorized to speak publicly, said Bush seemed likely to authorize a loan of some oil from the Strategic Petroleum Reserve but that details remained in flux.

In 2004, the president authorized loans from the reserve to help refiners make up for missing supplies when Hurricane Ivan struck.

Meanwhile, Bush got a briefing on the powerful storm from Michael Brown, the director of the Federal Emergency Agency, White House spokesman Scott McClellan told reporters as Bush headed to Arizona for a speech on Medicare after leaving his Texas ranch.

A Department of Energy spokesman said the U.S. government was in touch with oil companies in the region and that a decision on whether to release oil from emergency stockpiles would likely be made in the next 24 to 48 hours.

The government's supply of nearly 700 million barrels of oil is stored in underground salt caverns along the Texas Gulf Coast.

The reserve was established to cushion oil markets during energy disruptions.

The administration was considering what it calls an "exchange" of oil.

After Hurricane Ivan struck the Gulf of Mexico in September 2004, the administration loaned about 5.4 million barrels of crude oil from the reserve to five companies. It was repaid by April 2005.

Sen. Charles Schumer, D-N.Y., who was pushing the White House to dip into the reserve even before Hurricane Katrina hit to help bring down gas prices, said, "If there was ever a time for the Strategic Petroleum Reserve to be tapped, it would be now."

Retail Gas Prices Set to Hit New Highs

Updated 12:48 PM ET August 29, 2005

http://dailynews.att.net/cgi-bin/news?e=pr...8c9jooo0&src=ap

By BRAD FOSS

(AP) - Retail gasoline prices are poised to jump to new highs this week as Hurricane Katrina barreled through the heart of U.S. oil and natural gas operations in the Gulf of Mexico on Monday, sending crude-oil futures briefly above $70 a barrel for the first time.

Natural gas futures surged 18 percent after the closure of a critical distribution hub and on concerns that power outages and other storm-related damage could prevent processors from running their plants for days, if not weeks.

The Bush administration is considering releasing some oil from the nation's emergency petroleum stockpile to help refiners once the storm passes, though a spokesman said no decision had been made yet.

Wholesale gasoline prices in the New York and Gulf Coast markets soared by 25-35 cents a gallon on Monday following reports that about 8 percent of U.S. refining capacity had been shut down because of the storm. One analyst said pump prices nationwide would likely average more than $2.75 a gallon by week's end, up from about $2.60 a gallon Monday.

"Unfortunately, I don't think $3 a gallon is a hyperbolic number in some markets anymore," said analyst Tom Kloza of Wall, N.J.-based Oil Price Information Service. He emphasized that the market reaction is a reflection of supply tightness, not shortages.

The Category 4 storm hit an area crucial to the U.S. energy infrastructure _ offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi.

On Wall Street, companies that ferry workers to and from offshore oil platforms, as well as those that provide other support services to the industry, saw their stock prices rise. Shares of Offshore Logistics Inc. climbed 2.58, or 8 percent, to $35.03 on the New York Stock Exchange, where shares of Oceaneering International rose by $1.45, or 3 percent, to $43.65.

Chevron Corp., Royal Dutch-Shell Group, BP PLC, ExxonMobil Corp. and others began evacuating workers from the region over the weekend. Refineries capable of processing some 1.6 million barrels a day were closed and more than 600,000 barrels a day of oil production in the Gulf was shut down. Sabine Pipe Line LLC on Sunday shut down the Henry Hub, a natural gas distribution center that connects to interstate pipelines.

The Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday.

After slamming ashore, it charged through low-lying New Orleans with winds of 145 miles per hour and the threat of an extremely dangerous storm flood surge.

"The damage to the electric power grid is the most important source of damage to consider in evaluation of the impact of Hurricane Katrina," said energy analyst Dan Lippe of Petral Worldwide in Houston.

Lippe said the operations of oil refiners, natural gas processors and chemical manufacturers could be disrupted for as little as a few days or as long as a few weeks. The extent of the damage will not be known until later this week, he said.

"This is the big one," said Peter Beutel, an oil analyst with Cameron Hanover. "This is unmitigated, bad news for consumers."

Light sweet crude for October delivery jumped as much as $4.67 a barrel to hit a high of $70.80 a barrel in electronic overnight trading, before slipping back to $68.50. That was still up $2.37 from its close Friday in New York.

Oil prices would need to rise to about $90 a barrel to match the highs of 25 years ago, when adjusted for inflation.

Gasoline futures zoomed 11.5 cents to $2.04 a gallon on Nymex, but on spot markets in New York and the Gulf Coast, prices were as much as 8-15 cents higher, according to Kloza. Nymex heating oil futures rose by 6.34 cents to $1.90 a gallon.

Brent crude was not trading Monday, with London's International Petroleum Exchange closed for a bank holiday.

While the precautionary shutdown of oil production and refining rattled oil markets, analysts said the storm's potential damage to facilities was even more worrying.

"It's not only the suspension of production that's causing concern, it's the fact that we could see potential damage to the platforms, which would cause longer disruptions to production," said energy analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore.

The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States' domestic output, according to the U.S. Mineral Management Service.

Unlike last year's Hurricane Ivan, which only hit the edge of the oil and natural-gas producing areas in the central Gulf of Mexico, Katrina is plowing right through the heart of that region.

PVM Oil Associates in Vienna, Austria, said Katrina had the potential to do more damage to southeastern Louisiana than Ivan, which damaged seven platforms, 100 underwater pipelines and shut down production at some facilities for several months.

Did a little bird named Bush call him????

OPEC President to Propose Production Hike

Updated 11:35 AM ET August 29, 2005
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KUWAIT CITY (AP) - The president of OPEC said Monday he will propose that the group of oil producing states increase its production by 500,000 barrels a day next month.

"I will try, as the president, to propose the issue of increasing the production and the output ceiling at our coming meeting" on Sept. 19, said Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's energy minister.

He said he wants to boost actual production by 500,000 barrels a day above what the Organization of Petroleum Exporting Countries currently supplies to the market. Past increases in OPEC's official output ceiling have usually failed to impress the market as the group is known to produce above that limit.

OPEC's 11 member states pumped more than 30 million barrels a day in July, according to a Dow Jones Newswires survey.

Sheik Ahmed's comments came as U.S. crude futures briefly surged to more than $70 a barrel on Monday as Hurricane Katrina struck the United States' Gulf coast.

Sheik Ahmed said OPEC was concerned about the soaring oil price, but he blamed it on factors beyond the group's control.

"We are trying to do everything to stabilize the prices. It looks like the prices are not related to the production anymore. They are related to other factors, like geopolitics, the weather, the refining," he said.

Sheik Ahmed said most of the extra crude would come from Saudi Arabia.

I wonder what level they would want the prices "stabilized." Why would they want them at a low level?

Weird thing is that at least some of that extra money we're sending over there as we fuel up our SUVs goes to pay for the religious schools that the Saudis have set up around the world. It's been said that the clerics who teach in those schools are sympathetic to Al-Qaeda.

You'd think the big heads in our government would be encouraging alternatives to foreign oil to provide jobs, lower the trade deficit, encourage new technologies, perhaps develop the exports of new technologies, perhaps increase air quality and because it would be a very cool thing to do.

What happened to the spirit of American Independence?

"We have ambitious expansion plans to boost our capacity ... [and] raise our production capacity to 15 million barrels a day... We are confident that we can maintain these production rates for about half a century"

Saudi Aramco's chief executive officer Abd Allah Jumaa


Bullsh*t

I'm upset, but not because of the price. I'm upset because I have no non-automotive way to get to my place of employment. It's a classic suburb designed for the movement of automobiles, not people. As such, public transit cannot serve it efficiently. The community I live in is walkable and has public transit, but I have no choice but to commute by car.

My brother lives in a different city than I. He is able to ride a bus to work. He said until recently, there were usually only 15 people on the bus by the time it got downtown. Now there are usually 1-2 people standing. He has been overhearing conversations by lower income workers that they can no longer afford to put gas in their cars for their daily commute.

With these high prices, light rail should be an easy sell for some cities. I used to live in a place where I could take a train to work and didn't miss driving a bit. I think you are on to something.

Hurricane Katrina caused oil prices to go above $70/barrel again today. Higher prices in time for Labor Day.

Simplest way to cut fuel costs in half is to carpool. Check sites like Craigslist if you live in a metro area.

Also, you would be AMAZED how much driving you can eliminate buy carefully planning your trips for shopping.

see also

http://www.commongroundcommonsense.org/for...ST&f=16&t=36461

News story after Bush's press conference:

Bush signed off on a plan to release oil from emergency stockpiles, a decision intended to offset the loss of production from Gulf Coast refiners.

At the same time, Environmental Protection Agency Administrator Stephen Johnson announced a temporary nationwide waiver of certain pollution standards covering gasoline and diesel fuels.

Johnson had issued the waiver for the four storm-damaged Gulf states on Tuesday but said the broader move was necessary "to ensure that fuel is available throughout the country, to address public health issues and emergency vehicle supply needs."

Additionally, Bodman said the Transportation Department had waived rules governing trucker hours, a step he said would increase the supply of gasoline.


Why do we have to sacrifice the environment more than it is already damaged? Why put the truckers in danger by eliminating the maximum hours they can drive per day? Bush said this cleanup could take years. Are we to have these rules waived for years?

Also, the news reported that gas in Atlanta is $3.55/gallon and some stations are rationing to $10 limit.

The American Petroleum Institute (API) president, Red Cavaney was on C-span today. He said the people need to start conserving gasoline.

The recent energy bill has no fuel conservation programs. Bush just came out last week with a ten year plan to raise CAFE 2 miles/gallon. Big deal. Republicans are so short-sided and spend all the money so there is none for emergencies

See also

http://www.commongroundcommonsense.org/for...ST&f=16&t=36471

If it wasn't for a horribly distorted energy marketplace due to our government heavy subsidization of fossil fuels, alternative energy sources would been competitive a long time ago. In a true free energy market, nuclear would die a quick death because of its huge capital costs, and solar, wind, and other alternative energy sources would be able to compete well with fossil fuels.

I would love to conserve more gasoline than I already try to do (my car gets 31 mpg) and we live in a town where we can walk for several of our normal errands (grocery store, library, post office, bank, eye doctor, haircuts, and more) and we have public transit access for some other things. My problem is that my employer is located in a totally auto-dependent exurb. My only choice is to drive and carpool options are extremely limited (though I'm going to try).

America's transportation system is horribly inefficient compared to other western nations. We need more non-automotive ways to get around or we'll never kick our oil habit. I would love nothing more than to be able to get rid of one of our two cars (my wife can't get to work on public transit either). I wouldn't even mind it if we could get rid of both, but we're stuck.

I got this off of www.energybulletin.net. It came from a blog/discussion site called www.theoildrum.com

According to the poster, this person is gulf oil industry insider and has provided accurate information in the past:


Newest (and very informative and very scary) report from an anonymous insider
Posted by Prof. Goose in Supply/Production
Wed Aug 31 at 8:12 PM EST
Original post [2005-8-31 10:30:32 by Prof. Goose]This is from an oil industry insider I consider quite credible. She was definitely right about everything in her last post. If she's right about this one, we may finally start to get a true picture of what's going on. All below the fold.

Update [2005-8-31 16:02:53 by Prof. Goose]:This story has been confirmed by the Coast Guard, at least 20 rigs gone.

There's more... (708 words) | Comments (59) | Permalink
There are MANY production platforms missing (as in not visible from the air). This means they have been totally lost. I am talking about 10's of platforms, not single digit numbers. Each platform can have from 4 to 100+ wells on it. Most larger ones have 20-30 wells in this area, with numerous caisson wells. They are on their sides, on the bottom of the gulf - they will likely be left as reef material, provided we can get permission. MMS regulations require us to plug each of the wells that were on these platforms - HUGE cost now, as the platforms are gone... Hopefully, MMS will grant `abandon in place' status for these wiped out structures.

We also set individual wells as satellites and pipe them back to existing platforms. These stand-alone wells are called caisson wells. 90% of those in the storm path are bent over, rendering them a total loss, We would have to remove the existing bent structure and drill a new well, as bent pipe is basically unusable.

We utilize platforms as gathering hubs. We pipe the raw oil/water to them and then send it on for separation, or separate it there and send finished oil on. Damage to a hub means everything going to the hub is offline indefinitely. There are +/- 15 HUBS missing. MISSING!! As in we cannot find them from the air.

Thus even if the wells feeding the hub are ok, we have nowhere to pump the oil to...

The jackup drilling rigs appear to be in various stages of damage, but most rode the storm out with minimal problems. However, each of them has shifted position.

When we jack the rig up, it is carefully positioned directly over the well slot where we are working. The derrick has rails that allow us to slide it in 4 directions to get the derrick directly over the well or slot. If the rig moves (right/left, or from level to uneven), it has to be jacked back down to the waterline and repositioned with tugboats, then jacked back up. After it is back up and level, the derrick is slid on the 2 sets of rails, and bolted into position over the well or slot again.

Thus we have to reset each of the drilling rigs, which requires getting OUT of the well, tugboats and a move, then getting back into the well. The open hole we have drilled (what is not enclosed in cemented casing) is likely to be lost, and if the wellhead or the casing is bent, then the well will have to be redrilled. This is an exploration setback of at least a month, but we don't yet know the boat situation.

Boats are usually brought into harbor to weather storms. We do not have a boat count yet, but from the initial reports, we may have lost or grounded 30% of the Gulf of Mexico fleet. This means everything will cost more, take longer - repairs, repositioning, everything.

In short, the Gulf area hit by the storm is basically in about the same shape as Biloxi. The damage numbers you have gotten from the government and analysts are, in my opinion, much too low. We are looking at YEARS to return to the production levels we had prior to the storm. The eastern Gulf of Mexico is primarily oil production...

Loss of the MARS platform alone cost us 95,000 barrels a day for a year or maybe more.

YEARS, people. I know what this means - hope everyone else gets it too...

Click here to go to an image of a destroyed rig.

The front page of the Houston Chronicle has a rig beached on Dauphin Island. The legs have been sheared off and derrick is missing – thus it is a total loss. This rig was operating in Main Pass (adjacent to Plaquemines Parish), and thus was blown to Alabama and beached.

Update [2005-8-31 10:6:22 by Prof. Goose]:The insider asked me to attach this article to her post.

Consumer Federation of America is on C-span now (taped from Thursday, 9-1-05) discussing fuel economy and gas prices.

75% are concerned about prices. (poll taken a few weeks ago - that number would be even higher now)

related forum

http://www.commongroundcommonsense.org/for...ST&f=16&t=36586

http://toccionline.kizash.com/films/1001/178/index.php

see also

http://www.commongroundcommonsense.org/for...T&f=172&t=36845

The Energy Department on Wednesday said natural gas prices for the Midwest could increase by as much as 71 percent this fall, while heating oil prices in the Northeast could rise 31 percent. Electricity prices in the South could jump 17 percent, the department said.

http://dailynews.att.net/cgi-bin/news?e=pr...8cg4k1o1&src=ap

Natural Gas Shortages Worry Bush Officials

Updated 10:57 AM ET September 13, 2005
By H. JOSEF HEBERT

http://dailynews.att.net/cgi-bin/news?e=pr...8cjehn03&src=ap

BATON ROUGE, La. (AP) - Senior Bush administration officials touring the Gulf Coast area devastated by Hurricane Katrina expressed concern Tuesday about possible shortages of natural gas, saying that the region's production may not recover for months.

Energy Secretary Samuel Bodman said there is less known about the damage to the natural gas supply system than about the effect on crude oil production. He said in addition to possible pipeline damage, the hurricane also shut down gas processing facilities on-shore.

"The great concern is about natural gas," Bodman told reporters as he flew to Louisiana from Houston.

Interior Secretary Gail Norton, who accompanied Bodman, said that 90 percent of the Gulf oil platforms "will be capable of production by the end of the month." But she said damage to on-shore facilities is expected to keep oil production down.

Norton said that 58 percent of Gulf oil production remains shut down, as does 38 percent of the region's natural gas production.

"But there is more concern about gas because we don't have an international market" that the country could rely on for additional supplies as it does with oil, she said.

Last week, the Energy Information Administration estimated that natural gas prices would soar this winter because of the hurricane, including increases as much as 71 percent in parts of the Midwest.

Bodman and Norton were to visit the government's Strategic Petroleum Reserve facility near Baton Rouge. The government is already supplying oil to some refineries from the reserve on a loan basis.

Later the two Cabinet secretaries were to tour an Exxon Mobile refinery near Baton Rouge that escaped damage from the hurricane but had to scale back production because of the shortage of crude oil. The refinery has since resumed production using SPR supplies.

Bodman and Norton met with senior executives from two dozen energy companies Monday evening in Houston. The executives said they needed government help in arranging for housing for thousands of employees as they struggled to return the Gulf's oil and gas system to full operation, he said.

[more corporate welfare]

FEMA said yesterday that they are providing government provided trailers for the oil and gas workers. While only 10 evacuee families got trailers so far.

Gee, I wonder why..... I did hear that Halliburton got another no- bid contract for New Orleans. They must raking it in.

Poll: Public Feeling Fuel Prices' Effects

Updated 4:34 PM ET September 16, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8clioq80&src=ap

By WILL LESTER

WASHINGTON (AP) - Diane Utecht of Wisconsin plans to close off most of her house this winter to reduce her heating bill. Elaine Hobbs' husband recently canceled a trip from their home in Rochester, N.Y., to Baltimore to see his daughter on her birthday because gas prices were too high.

With gasoline hovering close to $3 a gallon and the government forecasting big increases in heating fuel costs this fall, these are only a few of the adjustments Americans are making. And they aren't happy about it.

"I have to block off every room except the kitchen, the bathroom and the living room," said Utecht, a retiree from Loconto, Wis. "I sleep in my living room because I can't afford to heat the house."

Seven in 10 people in a recent AP-Ipsos poll said they expect high gas prices to cause financial problems in the coming months _ up from half who felt that way in June 2004. Four in 10 of those polled recently _ especially women, minorities and older Americans _ say gas costs will cause them serious problems.

The cost of gasoline could ease somewhat as domestic oil production returns to August levels in the coming months. Industry officials estimate that natural gas and heating oil prices will rise about 70 percent because already tight supplies were disrupted by Katrina.

Those high prices are changing people's behavior, a recent Pew Research Center poll found.

More than two-thirds of people say they're driving less and shop for the best price on gasoline. More than six in 10 say they're adjusting the temperature in their homes to keep a lid on utility bills. Almost that many say they have changed their plans for travel to avoid driving long distances.

Almost three in 10 say they've bought a car that gets better gas mileage.

Aware of public frustration over gas prices, Republicans and Democrats in Congress are looking into whether oil companies and gas stations are unfairly boosting prices in search of higher profits.

Seven in 10 in the AP-Ipsos poll said they disapprove of how the president is handling gasoline prices, and 43 percent of Republicans surveyed said they were unhappy with Bush over fuel costs.

"This is getting out of hand if the person in charge ain't putting a stop" to it, said Hobbs, whose husband canceled a trip to Baltimore and is rethinking a trip from upstate New York to Kentucky for her mother's 70th birthday.

"What it used to cost going both ways, now costs that to go one way," Hobbs said.

Gas Price Jump Boosts Use of Mass Transit

Updated 5:38 PM ET September 16, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8cljmvo4&src=ap

NEW YORK (AP) - Early this month, when Hurricane Katrina sent gasoline prices soaring above $3, officials at the Washington Metropolitan Area Transit Authority put out an advisory warning commuters about overcrowded trains.

The Metro, the Washington-area subway and commuter rail system, had already broken a string of ridership records this year, and officials worried that increased ridership in the wake of the latest spike at the pump would crowd trains even more.

"It's costing people twice as much per gallon of gasoline today as it did about a year ago, and so the likelihood that more people will look to Metro to get them to work, to meetings or to a ball game is greater now than it was just a few weeks ago," Metro General Manager and Chief Executive Richard White warned, urging commuters to avoid the Metro during rush hour.

Despite the warning, ridership on the Metro during the first two weeks of September was up more than 4 percent from August and more than 10 percent from a year ago.

Transit agencies around the country are reporting an unusual spike in ridership on buses, light rail, commuter trains and city-run vans. The Environmental Protection Agency confirms the trend, reporting a surge in employee demand for company transit benefits.

To be sure, the number of new riders is small relative to the population. Only 5 percent of the American work force uses public transportation every day. But that's still 32 million trips a day, so a 4 percent increase in ridership this year and next, as projected by the American Public Transportation Association, adds up.

The issue is of critical importance for oil markets. U.S. drivers consume more than one out of every 10 barrels of oil produced in the world. And with most producers and refiners near capacity, whether the long rally endures turns almost entirely upon the health of demand.

Mass-transit ridership had been rising by about 2 percent a year on the strength of the economic rebound and growing job market. But beginning this summer, the gains started accelerating and then spiked higher late last month.

For many drivers, the arrival of $3 gasoline proved the breaking point, said Joe Schwieterman, a transportation economist at DePaul University near Chicago.

"They realized that small adjustments to driving habits weren't going to be enough," Schwieterman said. "Many simply parked the car and opted for transit."

Officials from more than a dozen small and big transit authorities _ from New York City's Metro-North Railroad to Tulsa Transit's bus system to Los Angeles's Metro-Link commuter rail _ confirm they have seen some of the biggest increases in ridership in years.

In August, Metro-North, the commuter rail linking the New York and Connecticut suburbs to New York City, saw its biggest ridership increase in nearly four years. More surprisingly, monthly pass sales jumped 5 percent, representing 4,000 new customers. All this came despite a fare hike of about 6 percent.

"We do believe that the high costs of gasoline are driving those numbers, no pun intended," Metro-North spokesman Dan Brucker said.

The Long Island Rail Road, the nation's largest commuter rail system, declined to disclose data on August ridership. But according to spokesman Sam Zambuto, "crews are reporting that the trains are more crowded in all time periods."

In Dallas, an increase in ridership in the past month on DART has resulted in "incredibly creative parking at some outlying stations," and the service received a growing number of complaints from motorists demanding to know why the system doesn't serve their destinations, according to DART spokesman Morgan Lyons.

The Trinity Railway Express, a commuter rail service between Dallas and Fort Worth, has benefited even more from high gasoline prices, posting a 15 percent increase in ridership so far this month, Lyons says.

In famously car-addicted Los Angeles, ridership on city buses and subways jumped 7.82 percent in August, while ridership on the Metro-Link, the regional commuter rail service for the metropolitan area, rose 6 percent, the largest monthly increase since last November.

In Tulsa, a city of 800,000 people with no rail system, bus ridership has been climbing at an unprecedented rate. Last week, Tulsa Transit reported that daily ridership on city buses was up more than 15 percent since June and 36 percent over the past year.

Nice to see that. With gas prices up, it looks like everyone's working harder at conserving.

My estimate is that for every $1/gallon increase in the price of gasoline, we'll see anywhere from a 2-7% drop in demand. Part of that comes from my anecdotal experiences with friends conserving; part of that comes from the opinions of some of the oil traders I talk with. In any case, I may not be much better at guessing the impact of higher gas prices than anyone else.

Oil Prices Gain on Winter Expectations

Updated 12:07 PM ET October 3, 2005
http://dailynews.att.net/cgi-bin/news?e=pr...8d0leoo0&src=ap

By GILLIAN WONG

SINGAPORE (AP) - Oil prices gained slightly Monday on expectations of higher demand for heating oil as the Northern Hemisphere winter approaches, stretching supplies strained by the slow recovery of U.S. crude production following back-to-back hurricanes.

Light, sweet crude for November delivery on the New York Mercantile Exchange rose nine cents to $66.33 a barrel. The contract on Friday slipped 55 cents to settle at $66.24 a barrel.

November Brent futures at London's International Petroleum Exchange traded at $63.63 a barrel, 15 cents higher than Friday's settlement.

Concern is growing that damage caused by Hurricanes Katrina and Rita will hurt refineries' efforts to gear up for the winter, the peak season for production of distillate stocks _ fuels that include heating oil, jet fuel, kerosene and diesel.

"The longer term outlook is bullish for prices going into the fourth quarter, with heating oil demand now being in focus," said Victor Shum, oil analyst at Texas-headquartered energy consultants Purvin & Gertz in Singapore.

"We will watch the weather again, but not the hurricane season so much as how cold the winter will get," Shum said.

Analysts said much depended on how quickly oil and gas production facilities can come back online in the aftermath of the hurricanes, which shuttered more than 7 percent of annual U.S. oil production and more than 5 percent of annual natural gas production.

But recovery remains slow, with 98 percent of the area's crude production still shut in and natural gas output down 79 percent, the U.S. Minerals Management Service said. The region usually produces 1.5 million barrels of crude oil a day. It wasn't clear when output would fully recover.

"(With) a lot of questions concerning productive infrastructure in the Gulf still unanswered, it is difficult to envision any scenario right now that has prices retreating too far," said Mike Fitzpatrick of Fimat USA Inc. "Barring a miracle, don't look for much relief until spring."

Crude-oil prices hit an all-time high of $70.85 briefly on Aug. 30, after Katrina touched down. They remain about 32 percent higher than a year ago, when Hurricane Ivan disrupted oil production and refining in the Gulf.

Meanwhile, November natural gas was flat at US$13.921 per million British thermal units. Last Thursday it settled at a record high of US$14.196.

Natural gas futures have risen about 18 percent since Katrina hit, and are about 74 percent higher than they were two months ago.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Our love affair with SUVs coming to an end
Dealers say consumers want to trade gas-guzzling monsters for something small
Sunday, October 09, 2005

By Don Hammonds, Pittsburgh Post-Gazette

http://www.post-gazette.com/pg/05282/584656.stm

SUV sales have been falling for the better part of a year, but the bottom fell out of the market last month, with sports utility vehicle sales plummeting more than 30 percent, signaling what some observers believe could mark a permanent falling out with American consumers.

"What you're looking at is a sea change in consumer preferences," Peter Morici, a University of Maryland economist who follows the auto industry, said last week after reviewing the worst showing for sports utility vehicle sales since they first hit the market in the 1980s.

While SUV sales may recover a bit if gas prices ease, "it will never, ever grow back to where it was before," when SUVs accounted for huge profits and market share for domestic automakers, Mr. Morici said.

Reports coming from all over the country say dealer used-car lots are filling up with SUVs as owners, shocked at having to pay $50 and up just to fill the tank, are trading them in for gas-sipping smaller cars.

From truck-crazy Texas to Pittsburgh, moving SUVs off the new car lot is a lot like getting a child to clear his plate of vegetables......

Editorial: Pious sermons / Bush is not doing enough for energy conservation
Thursday, October 06, 2005

Pittsburgh Post-Gazette
http://www.post-gazette.com/pg/05279/583345.stm

The energy legislation President Bush signed in August won't lower gasoline prices, lessen our dependence on foreign oil or allocate any more federal money to help poor families or strapped seniors heat their homes this winter when energy prices skyrocket.

What it will do is extend daylight saving time, give tax breaks to buyers of hybrid cars and expedite the building of nuclear power plants. It makes a lovely gift for energy companies.

And not a cheap one. The cost will be $12.3 billion over 10 years. Energy companies will get billions in tax breaks and loan guarantees for new nuclear plants, clean coal and wind. Consumers will get tax credits for hybrids and energy-saving home improvements, as well as three extra weeks of sunny evenings in the spring and one more in the fall.

Expect to hear exhortations in the coming weeks to drive slower, add insulation, use compact fluorescent lights and turn down your thermostat. Government employees have already been advised to trim nonessential travel, carpool, tele-commute and take public transit. White House staffers have been told to turn off the copiers when they go home.

That's the Bush conservation program.

The administration comes very late to the energy-efficiency party and is now doing as little as it can while trying to sound pious and responsible. "Most of the serious problems," Mr. Bush said Monday, "such as high gasoline costs or the rising dependence on foreign oil, have developed over decades. It's going to take years of focused efforts to alleviate those problems."

But Americans have known about these problems for decades. How focused are the new efforts, when the administration has no goal for energy savings?

Instead of more money in the Low Income Home Energy Assistance Program, we'll get the Department of Energy's Energy Hog campaign with its porky mascot (sponsors include Home Depot and the North American Insulation Manufacturers Association).

Vice President Dick Cheney has said mere conservation is a "sign of personal virtue, but it is not a sufficient basis of a sound energy policy." He is right, and the administration can play an effective role. Instead of opposing tougher Corporate Average Fuel Economy standards, it can embrace them.

Nearly half of U.S. daily oil consumption is poured into our rides, and tomorrow the House will consider a bipartisan bill to raise vehicle fuel-economy standards and reduce the juice use by 2.6 million barrels a day. The Boehlert-Markey bill would take CAFE standards from the average of 25 mpg to 33 mpg by 2016 and close the SUV loophole.

The burden of addressing the new energy crisis needn't fall exclusively on consumers. The government can do its part with higher CAFE standards and more stringent efficiency for appliances. Oil is a costly and dangerous addiction: We will never produce enough for our needs. And some of the oil money we send abroad is enriching our enemies.

Vague appeals to personal virtue are no substitute for leadership. As China and India boom and their thirst for energy grows, the crunch is only going to get worse. It's time for fewer sermons and more action

Ford halts production of gigantic SUV
Saturday, October 01, 2005
By Dylan T. Lovan, The Associated Press
LOUISVILLE, Kentucky -- The last Ford Excursion, a super-sized sport-utility vehicle, rolled off the assembly line Friday as the automaker shifts its focus to producing more fuel-efficient vehicles.

The company announced in July that it would halt production of the 19-foot (5.7-meter) gas-guzzler as sales of its larger SUVs dragged.....

http://www.post-gazette.com/pg/05274/580722.stm

Car companies tackle hybrid mileage complaints
Thursday, October 06, 2005

By Gina Chon, The Wall Street Journal
http://www.post-gazette.com/pg/05279/583776.stm

With consumers complaining that hybrids vehicles don't get the gas mileage advertised on window stickers, Ford Motor Co. and Toyota Motor Co. are stepping up efforts to let drivers know why they might not get the desired fuel economy.

Hybrids, which combine a gasoline engine with an electric motor, have become hot sellers because they are touted for their fuel efficiency at a time when gas prices are hovering around $3 a gallon. In September, Toyota's Prius, the top selling hybrid in the U.S., saw sales jump by 90 percent compared with the same period last year. The vehicle sticker pasted on Prius windows at dealerships says the Environmental Protection Agency estimates the car goes 60 miles on a gallon of gas.

But there have been increasing complaints that many cars, and especially hybrids, don't deliver the miles per gallon estimated by the EPA. According to a study by Consumer Reports that tested the mileage of vehicles in real world conditions, hybrids had some of the biggest disparities, with fuel economy averaging 19 miles per gallon below the EPA city estimate. The problem is that the EPA estimates assume that drivers are operating under certain ideal conditions, such as not using air conditioning and accelerating slowly, that can be very unlike what people actually do on the road.

The groundswell of complaints is spurring the EPA to act. The agency says that by the end of this year it will propose changes to the methods used in calculating fuel economy ratings for vehicles. The EPA said the new rules will more accurately reflect how people actually drive and will consider the impact of air conditioning, aggressive driving and traffic congestion on fuel economy.

To help drivers improve their mileage, Ford is creating a "Hybrid Patrol," a group of Ford staffers who will travel to 11 cities to talk about fuel economy.

This weekend Ford is holding a clinic at the Ford Research and Innovation Center in Dearborn, Mich. More than 280 owners of hybrid-powered Escapes and their guests, who are traveling from 24 different states, will learn driving tips to improve fuel efficiency and get a chance to ask Ford engineers about hybrid technology. The attendees, who are paying their own travel expenses, will also be able to test drive the new Mercury Mariner hybrid, Ford's second hybrid vehicle, which is arriving at dealerships next week.

There are likely to be few surprises or silver bullets among the fuel-efficiency tips, however. They include common sense bits of advice that few drivers are likely to abide by: Don't brake as much. And drive a maximum speed of 60 miles per hour on the highway. Auto experts say if you do follow these rules, you will get the EPA estimate.

Ford decided to hold the clinic because its studies showed that two out of every five hybrid owners lacked knowledge about their cars' technology. The Ford Escape hybrid, which gets a maximum of 36 mpg in the city according to EPA estimates, saw sales jump to 1,808 in September, compared with 1,363 sold in August.

Auto companies are putting more resources into hybrids. Last month Ford Chairman William Clay Ford Jr. said his company would increase production of hybrid vehicles so that more than half of its Ford, Mercury and Lincoln vehicles would be powered by a gas-electric engine.

At Toyota, luxury brand Lexus has begun distributing through dealerships a pamphlet on the RX 400h, Lexus's luxury hybrid SUV, listing reasons why the vehicle may not get the 31 mpg the EPA estimated for the vehicle in city driving.

The EPA tests, the brochure points out, assume drivers accelerate slowly, leave the air conditioning off, and average a speed of 20 miles per hour in the city. The pamphlet tells drivers that quick acceleration, heavy braking and driving at speeds above 60 miles per hour can make the mileage lower than the EPA estimates.

The RX 400h, which was introduced in April, had sales of 2,113 in September, compared with 2,607 in August.

Some hybrid owners are frustrated by the disparity between the EPA estimates and their cars' actual gas mileage. When Amy Quirk bought her Toyota Prius, the pricing sticker said it got 60 mpg. So when the San Francisco-based environmental lawyer saw she was consistently getting only 30 mpg, she complained to her dealer's service department. First she was told the problem was the cold weather. Then she was told that the Prius didn't get the mileage that was advertised on the vehicle sticker price. Ms. Quirk now gets about 40 mpg on her Prius, which she bought a year ago, by coasting down hills when she drives.

"You have to be very mindful of how you drive to get good mileage," she says.

Jim Press, head of Toyota's U.S. operations, said in an interview last month that the Japanese auto maker is trying not to overpromise on fuel efficiency, particularly for hybrids. That includes telling dealers to be clear to consumers that the EPA estimates can vary, depending on driver behavior. Mr. Press noted that if a driver is constantly hitting the brakes and the gas hard, then the vehicle won't get the EPA miles-per-gallon estimate.

Business Q&A: Is the U.S. on the verge of a natural gas crisis?
Saturday, October 08, 2005

By Brad Foss, The Associated Press

http://www.post-gazette.com/pg/05281/582534.stm

-----------------------
Fuel demand falls, but high energy prices still threaten economy
Monday, October 10, 2005

By Brad Foss, The Associated Press

http://www.post-gazette.com/pg/05283/584785.stm

This one sure has the smell of an artificial crisis.

In the 1800s, the supply of whale oil dwindled. This was an inducement to the development and use of kerosene lamps. Maybe, if an actual fuel crisis is looming, it will spur the people of today to once again adopt scientific innovations.

Too bad. The Excursion is big enough to live in. Might come in handy as housing after the great collapse. As long as you don't have to start the engine.