Gas Embargo on Iran

There has been a lot of talk in Washington about cutting off Iran's gas imports to pressure Iran to stop enriching uranium. Robert Naiman of The Huffington Post wrote on this issue and explains why this, in his words, is a "stupid idea."

For one, Naiman says, without the support of other allies, this type of action would have little impact. "A U.S.-sponsored gas embargo on Iran isn't likely to have much impact if Russia, China, Turkey and half of Europe aren't cooperating - after all, it's not the U.S. that's exporting gas to Iran - unless it is imposed by force. "

Naiman also points out that Iranian retaliation, which they have threatened to do by stopping oil exports to the West, could have a significant effect on gas prices in the U.S. He estimates a price jump of 30%, which could have political implications for Obama. "If you think the teabagger right wing in the U.S. is nuts now, wait until they can blame $4 a gallon gas on an Obama Iran gas embargo demanded by the Israel Lobby," Naiman says.

Naiman suggests several other reasons why a gas embargo is a bad idea in addition to lack of support, Iran retaliation, and increased gas prices. He makes some really interesting points. I suggest you check out his article, "Mr. Mousavi's Gas Embargo on Iran?"

Vitol's Intention to Acquire Hillsborough

IBT Commodities reported yesterday that shares of coal miner Hillsborough Resources increased more than 41 per cent to 44.5 cents on Monday, after Vitol Anker International B.V., a wholly owned subsidiary of the Vitol Group, announced its intention to make an offer to acquire all of the common shares of the company that it does not currently own for 45 cents per share.

"Our offer presents compelling value to Hillsborough’s shareholders and creates an immediate opportunity for shareholders to receive cash proceeds for their investment. Our offer price reflects our respect and enthusiasm for Hillsborough’s business,” said Jacobus Sterken, Vitol Anker’s Director.

More Oil Traders

Ari J. Officer wrote an article for TIME magazine arguing the need for more oil traders. He says the Obama Administration can’t stabilize prices by regulating speculators. According to the article, limiting trading would make the oil-futures market smaller than it currently is, something Officer believes is dangerous.


“The oil-futures market is tiny compared with the physical oil market: less than 3% of the world’s oil consumption over the next year is accounted for in the open interest.”


Because oil is an international commodity and the U.S. government can’t regulate the global market, Officer believes that the U.S. “should not outsource markets by placing a divide between America and the rest of the world.”

Check out the article. It is an interesting read.

Oil Prices

The Wall Street Journal reported yesterday on the decrease in oil prices after a year long rally that culminated in its best quarter since 1990. This is interesting given what happened last year after oil reached a remarkable high of $145.29 a barrel only to fall 77% in seven months.


The high price of oil this year is unexpected given the low demand. As Vitol CEO Ian Taylor noted last month, “The recent rise in oil prices [does] not appear to sit comfortably with the currently available supply and demand data."

The downward pressure on oil is so great it could trade for as little as $20 a barrel by the end of the year, according to the Chicago Tribune. This is due to the lessened demand at a time when there is a big surplus, Philip Verleger Jr., an expert on energy markets at the University Calgary, told the Tribune.


It will definitely be interesting to see what happens the rest of the summer.

Update on Galoc Oil Field

Production at the Galoc oil field in the Philippines was delayed due to technical problems following the halt in production last week because of adverse weather. UPI and BusinessWorld covered Vitol’s decision to delay production.

Galoc Considers Increasing Production

According to Reuters, Galoc Production Co (GPC) is considering increasing production of the Galoc oilfield offshore of the Philippines. Currently, Galoc produces between 12,000 and 14,000 barrels per day from two subsea wells.

Vitol has a 68.6 percent stake in GPC along with Otto Energy with 31.4 percent.

Bingaman to offer new fuels reserve legislation

As part of the energy legislation that Senate Energy Committee is developing, Chairman Bingaman has introduced S. 967, the Strategic Petroleum Reserve Modernization Act of 2009 to create a refined petroleum product reserve that would contain at least 30 million barrels of transportation fuels like gasoline and diesel.  The new reserve will be part of the nation’s 1-billion-barrel Strategic Petroleum Reserve (SPR).

 

Sen. Bingaman:  “Our domestic oil market has changed and we must have a more sophisticated strategy to react to disruptions in our oil supply.  While we are more dependent on imported crude oil than ever before, we also import more refined petroleum products.  When U.S. refinery operations are disrupted, imported products from other countries are required to fill the gap.  This legislation would provide a needed cushion while damaged infrastructure is repaired.”

 

In the 1970s, when SPR was set up, the U.S. was vulnerable to supply disruptions, as the nation was a significant and growing importer of crude oil.  However, the country then had plentiful refining capacity and did not import large volumes of refined products such as gasoline and diesel.  Therefore, SPR managers decided to stockpile only crude oil.

 

Since then, history has shown that severe weather, not geopolitical events, is the most frequent cause of supply interruptions.  For example, Hurricanes Gustav and Ike last September halted much of our nation’s refining operations, and that resulted in fuel shortages in parts of the U.S. (mainly in the Southeast).  The SPR was of limited use in easing these outages because the refineries affected by the storms were not able to process the crude oil from the reserve into fuels.

 

Both the bill text and a one-page summary have been posted to the Senate Energy