Tag Archives: Fossil Fuels

Data Suggests Global Economy “More Vulnerable than Ever” to Price of Oil

Rising oil prices have had significant negative impact on the global economy, according to new economic research.  As oil prices approach historical highs, the global economy may suffer from another “price shock,” warns Dr. Minqi Li, associate professor of economics at the University of Utah.

Dr. Li’s regression analyses of world economic growth rate versus change in world oil consumption suggest that the global economy has not, in fact, become less dependent on oil in recent years, contrary to much previous research.

Furthermore, Dr. Li’s models show that world oil supply has become much less responsive to oil price increases.  As seen in the graph above, from January 1994 to May 2004, an oil price increase of $0.97 on average brought about an additional influx of one million barrels of oil to the world’s daily supply.  From June 2004 to November 2011, however, it took an increase of $11.80 dollars to bring about the same increase in daily oil supply.  The observed “world oil supply curve” has dramatically steepened by nearly 12 times.  This may have serious ramifications for future global economic growth.

“If world oil production does peak and start to decline in the near future, it may impose a serious and possibly an insurmountable speed limit on the pace of global economic expansion,” says Dr. Li.

To ensure sustained global economic progress despite the challenges of rising oil prices, we must seek out opportunities in the “Bridge Period” as emerging energy technologies become more cost effective, and traditional energy production becomes cleaner and more energy efficient.

Learn more about Investing in the “Bridge Period” by clicking here

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Posted by on March 27, 2012 in Commodities, Oil


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State of the Union Address – Renewed Focus on Energy

Investing in clean energy, expanding energy efficiency programs and harnessing America’s vast natural gas resources received considerable emphasis in President Obama’s State of the Union Address.  Below are key excerpts from his speech:

Natural Gas

“…nowhere is the promise of innovation greater than in American-made energy. Over the last three years, we’ve opened millions of new acres for oil and gas exploration, and tonight, I’m directing my administration to open more than 75 percent of our potential offshore oil and gas resources.”

“This country needs an all-out, all-of-the-above strategy that develops every available source of American energy. A strategy that’s cleaner, cheaper, and full of new jobs. We have a supply of natural gas that can last America nearly 100 years.”

“The development of natural gas will create jobs and power trucks and factories that are cleaner and cheaper, proving that we don’t have to choose between our environment and our economy.”

Clean Energy

“Our partnership with the private sector has already positioned America to be the world’s leading manufacturer of high-tech batteries. Because of federal investments, renewable energy use has nearly doubled, and thousands of Americans have jobs because of it.”

“I will not cede the wind or solar or battery industry to China or Germany because we refuse to make the same commitment here. We’ve subsidized oil companies for a century. That’s long enough”

“The Department of Defense…the world’s largest consumer of energy, will make one of the largest commitments to clean energy in history -– with the Navy purchasing enough capacity to power a quarter of a million homes a year.”

Energy Efficiency

“The easiest way to save money is to waste less energy. So here’s a proposal: Help manufacturers eliminate energy waste in their factories and give businesses incentives to upgrade their buildings. Their energy bills will be $100 billion lower over the next decade, and America will have less pollution, more manufacturing, more jobs for construction workers who need them.”

Read the full transcript of the speech here


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Sinopec & Total to Invest $4.5 Billion in U.S. Natural Gas

Booming natural gas resources in the United States have attracted significant investment from major foreign energy players in Asia and Europe.

China’s China Petroleum & Chemical Corp (Sinopec) and France’s energy giant Total SA recently announced new investments totaling $4.5 billion to take advantage of as of yet undeveloped shale rock formations in Alabama, Mississippi, Colorado, Ohio and the Michigan Basin.

In its first entrance into the U.S. natural gas industry, Sinopec will partner with Devon Energy Corporation in  a $2.2 billion joint venture to develop five fields.

Total cemented a $2.3 billion agreement with Chesapeake Energy Corporation to develop the Utica gas field in Ohio, which studies indicate is rich in liquids such as butane, propane and ethane as well as natural gas.

At under $3 per million BTUs, U.S. natural gas prices are at their lowest in over two years.  As a result, shale formations with high concentration of liquids, such as the Utica field, are attractive to investors because prices of extracted liquids are linked with crude oil, rather than natural gas.

Additional interest in U.S. natural gas has been seen from Norway’s Statoil ASA and India’s Reliance Industries Ltd., indicating that global energy conglomerates are seeking to add “unconventional” fossil fuel resources to their portfolios and are willing to spend big money to do so.

The explosive growth in North American natural gas resources is one of today’s key energy trends.  For more information, click here to read more of our posts on natural gas.

Read the full article here…


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Canadian Oil Sands Output May Triple by 2035

Did you know that the largest source of oil imports to the United States comes not from Saudi Arabia, Venezuela or Russia, but from Canadian oil sands?

Following Saudi Arabia and Venezuela, the oil sands of northern Alberta, Canada are the world’s third largest crude reserves.  Over the next 25 years, Canada’s national energy regulator forecasts production from these oil sands will triple.

Currently, oil sands production contributes 1.5 million barrels out of Canada’s 2 million barrels per day (mbpd) total oil exports.  By 2035, Canada’s exports are predicted to rise to 5mbpd, with the majority of the increase coming from oil sands output.  Oil shale reserves such as the Bakken region in Saskatchewan will boost total output as well.

Major energy companies such as Suncor Energy, Royal Dutch Shell and Canadian Natural Resources have already embarked on mining projects in the oil sands region. Although the projects are capital intensive, the region’s promise is likely to draw much more private investment.

This positive outlook for Canadian oil sands comes despite the United State’s recent decision to delay approval for TransCanada Corporation’s Keystone XL pipeline, which would pump oil produced in the Alberta region to refineries in Texas.  Concerns over possible environmental and water contamination, particularly related to the crucial Ogallala Aquifer, have prompted the administration to push back the decision by as much as 18 months.

Read the full article here…

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Posted by on November 29, 2011 in Commodities, Oil, Policy


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LNG Demand Reaches New Highs in China & Japan

The month of June saw dramatically increased demand for liquefied natural gas (LNG) in both China and Japan.

Japan, still reeling from the Fukushima nuclear crisis, has a serious power deficit as a result of nuclear reactors damaged during the earthquake or taken offline for safety reviews.  Prior to March of this year, nuclear power formerly supplied 30% of all Japanese energy.

Japan was already the world’s leading LNG importer, but since the spring its imports have risen higher.  Current import levels rose 10.6% year on year during June, the third straight month of increases.

LNG has been used as an important fuel substitute for nuclear power.  Industry experts say in the event of total nuclear closure, 20 additional tons of LNG would be tacked on to yearly Japanese demand, which last year reached 70 million tons.

However, Japan may find some resource competition coming from its neighbor China.  Industrial power demands have grown, prompting additional LNG imports.  In June, imports were 4.3% higher than the previous high in December 2010, when the nation imported 1.03 million tons to meet winter heating needs.

PetroChina has opened a new LNG receiving terminal in the eastern province of Jiangsu and expects increase gas imports to help ease power shortages in some provinces.  Tony Regan, analyst for Tri-Zen International remarks “we might be seeing this great leap forward in the [Chinese] gas market.”

Chinese import levels are predicted to rise to 13 million tons in 2011 from 9.3 million in 2010.  By the end of the decade, China will likely surpass South Korea to become the world’s second largest LNG importer.

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Auto Industry Shifting Focus Towards Natural Gas Fuels

The automobile industry is looking beyond conventional gasoline towards a natural gas future.

General Motors, the United States auto giant, has announced plans to develop its first engine to run on liquefied natural gas, joining a group of other smaller companies with their sights set on utilizing the plentiful natural gas resources in the United States.

Although natural gas is widely used in electricity generation, it has not yet broken through to the transportation fuel market.  Currently only 120,000 natural gas vehicles are on the roadways.

However, auto makers expect this will change dramatically as the industry continues to strain under high, and sometimes unpredictable, oil prices.  Conventional gasoline prices spiked due to unrest in the Middle East, with crude prices rising above $110/barrel this year.  The markets have struggled with volatility and political turmoil in key oil producing regions.

In contrast, new natural gas drilling techniques have unearthed vast resources from shale rock in the United States, keeping prices low and relatively steady.  Reuters estimates that when gasoline hit $4 a gallon, drivers who used natural gas as fuel achieved a cost savings of $2 per gallon – a big deal for penny pinched companies and consumers.

The booming U.S. shale gas industry and the rise of hydraulic fracturing or “fracking” drilling practices has decoupled natural gas prices from diesel prices, making natural gas that much more attractive, particfularly to the trucking industry.  Mack Trucks, for example, has noticed a 50-100% rise in natural gas vehicle sales over the past year.

“The big draw is the difference in fuel price, especially with diesel above $4 a gallon,” explained Curtis Dorwart, vocational marketing product manager.  “The movement again toward natural gas is greater than in the late 1990s and this time it looks like it might have legs,” he continued, noting estimate that U.S. gas supply could meet 100 years worth of demand.

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Defying OPEC Veto, Saudi Arabia will Raise Oil Production Unilaterally

The Organization of Petroleum Exporting Countries (OPEC) met earlier this month and for the first time in two decades, failed to reach an agreement on oil production targets.  The June meeting in Vienna collapsed in disarray, with long-time Saudi Oil Minister Ali Al-Naimi calling it “one of the worst meetings we’ve ever had.”

OPEC member nations, led by Iran, which this year holds the revolving presidency post, vetoed Saudi Arabia’s proposal to raise oil output levels.  In a move of defiance, Saudi Arabia announced it will unilaterally raise its production rates to 10 million barrels a day in July, up from 9.3 million barrels.

Saudi Arabia’s move comes at a time when the world market is under strain.  The fighting in Libya has eliminated 1.3 million barrels from the world market, and turmoil in Yemen and Syria has removed another 300,000.  The fragile global economy may suffer if left to deal with sustained high oil prices, and Saudi Arabia has been under international pressure to take action to stem the rising tide.

However,  Saudi Arabia’s “cushion” of 2.5 to 3 million barrels a day of spare capacity might wear thin if unrest continues across the Middle East/North Africa region.  In short, despite Saudi action, many analysts say high oil prices are likely here to stay.

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