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Oil price collapse stokes financial crises in producing countries

The most significant development in the world economy in 2014 was the collapse in the price of oil. The near-50 per cent drop in the price of internationally traded Brent crude from a high of more than $115 a barrel in June to less than $60 earlier this month has put extra money into consumers’ pockets and boosted fuel-intensive businesses such as airlines, while cutting oil companies’ revenues and stoking financial crises in oil-producing countries including Russia and Venezuela. The roots of the price collapse lie in the US shale oil boom, which began when small and medium-sized producers worked out in 2009-10 how to apply to oil production the techniques of horizontal drilling and hydraulic fracturing that had already been highly successful for natural gas. US oil production has soared, from about 5m barrels a day in 2008 to 9.1m b/d this month. For the first three years […]

Posted On : Published By : Tom Whipple
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Iraq faces new crisis as winter descends on millions uprooted by Islamic State

Iraqi refugees prepare for winter More than 1.3 million Iraqis have been displaced this year into a region crushed under the weight of the Syrian refugee crisis. View Photos IRBIL, Iraq — For three years, he worked closely with U.S. forces in Iraq. Now Ammar Younes sits in his frigid tent in a camp in Iraq’s Kurdish region, using a scalpel to gouge pieces of shrapnel out of his mangled legs as his young children look on. A trainer in the Iraqi army, the 34-year-old was wounded when Islamic State extremists placed a bomb under his car in Mosul in June, just a week before the northern city fell to the militants . He was forced to flee his hospital bed, still wearing his medical gown, when the city was overrun. Younes is one of more than 2 million Iraqis uprooted this year by the advance of the Islamic […]

Posted On : Published By : Tom Whipple
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Doubts deepen over Chinese-backed Nicaragua canal as work starts

MANAGUA (Reuters) – When one of the poorest countries in the Americas and a little-known Chinese businessman said they planned to undertake one of the biggest engineering projects in history, few people took them seriously. A year and a half after the $50 billion project to build a canal across Nicaragua was launched by President Daniel Ortega, a former Marxist guerrilla, the doubts have only grown. Work officially began this week. But reporters hoping to see any evidence of how it would be done in a fraction of the time it took to build the much-shorter Panama Canal, or discover who would pay for it, were left with more questions than answers. At events marking the start of what is meant to be a five- year job, Nicaraguan officials and the Hong Kong-based company behind the canal dodged questions about its financial backers, mounting delays and whether Washington had […]

Posted On : Published By : Tom Whipple
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Smoking Out Coal’s China Question

The global coal market has a burning question, and Li Zhidong has an answer. In a National Bureau of Research report, the management professor at the Nagaoka University of Technology in Japan addresses the issue of when coal use in China, the world’s largest consumer of the black stuff, will fall. Chinese coal demand has started slowing as officials favor cleaner fuels to combat pollution. That’s sent prices down, but demand hasn’t actually declined yet. Mr. Li calculates coal use in volume terms will fall starting 2016, as heavy industry also slows. The one consolation for international miners is that their higher-quality coal releasing more energy can find buyers longer. Mr. Li expects coal use in heat content terms to peak in 2019, as Beijing discourages lower-quality coal, and as higher heat-content stuff is still used by power producers who take time to switch to alternative energy sources. Pretty […]

Posted On : Published By : Tom Whipple
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China cuts retail oil price

BEIJING, Dec. 26 (Xinhua) — China’s top economic planner announced a cut on the retail price of gasoline by 520 yuan (85 U.S. dollars) and that of diesel by 500 yuan per tonne. The adjustment, effective on Saturday, means retail prices will drop by 0.39 yuan per liter for gas and 0.43 yuan per liter for diesel, according to the National Development and Reform Commission. The cut marks the 10th since July. China has a pricing regime which adjusts domestic fuel prices when international crude prices change by more than 50 yuan per tonne during a time span of 10 working days. The last time China cut the fuel retail price on Dec. 12, it also decided to impose higher taxes on the products, the second increase in a month. Tax on gasoline, naphtha, solvent oil and lubricating oil will rise to 1.4 yuan per liter from 1.12 yuan. […]

Posted On : Published By : Tom Whipple
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Oil Jobs Squeezed as Prices Plummet

ENLARGE A host of companies working in and around the oil patch are facing tough times amid a sharp decline in energy prices over the past year. Here, Endeavor Energy Resources’ Big Dog Drilling Rig 22 in the Permian basin outside of Midland, Texas. Bloomberg News U.S. oil and gas companies have been an engine of growth through much of an otherwise lackluster economic expansion, providing steady employment, solid wages and fierce competition for workers across wide swaths of the country. Now, after a roughly 50% plunge in oil prices, exploration and production companies are cutting capital budgets, service companies are weighing layoffs and nonenergy firms that popped up to support the industry are bracing for a protracted slowdown. One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren’t renewing contracts […]

Posted On : Published By : Tom Whipple
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In Oil States, Bracing for a Price Bust’s Ripple Through the Economy

Photo Gas prices dropped below $2 a gallon in Houston last week. While oil states like Texas are seeing revenues fall, experts say the price drop is unlikely to create the kind of economic disaster that accompanied the 1980s oil bust. Credit Michael Stravato for The New York Times HOUSTON — States dependent on oil and gas revenue are bracing for layoffs, slashing agency budgets and growing increasingly anxious about the ripple effect that falling oil prices may have on their local economies. The concerns are cutting across traditional oil states like Texas, Louisiana, Oklahoma and Alaska as well as those like North Dakota that are benefiting from the nation’s latest energy boom. Here in Houston, which proudly bills itself as the energy capital of the world, Hercules Offshore announced it would lay off about 324 employees who work on the company’s rigs in the Gulf of Mexico at […]

Posted On : Published By : Tom Whipple
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E.P.A. Wrestles With Role of Nuclear Plants in Carbon Emission Rules

WASHINGTON — Trying to write a complicated formula to cut carbon emissions, the Environmental Protection Agency thinks it has found a magic number: 5.8. The agency is trying to complete a rule governing carbon emissions from power plants, and among the most complicated and contentious issues is how to treat existing nuclear power plants. Many of them are threatened with shutdowns because cheap natural gas has made their reactors uncompetitive. The agency’s proposal gave an odd mathematical formula for evaluating nuclear plants’ contribution to carbon emissions. It said that 5.8 percent of existing nuclear capacity was at risk of being shut for financial reasons, and thus for states with nuclear reactors, keeping them running would earn a credit of 5.8 percent toward that state’s carbon reduction goal. Since receiving tens of thousands of comments on the proposal, the agency is now reviewing the plan. It must evaluate all comments […]

Posted On : Published By : Tom Whipple
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Bakken, A Tale of Two Counties

North Dakota publishes their  Historical Barrels of Oil Production by County  which gives county by county production back to 1951. The data here does not include confidential wells but they publish the last couple of months production data that does include confidential wells here: Oil and Gas Production Report . Looking over this data I found something very strange. In October Bakken production was down by 1,598 barrels per day and all North Dakota was down by 5,4054 barrels per day. All data is in barrels per day with the last data point October 2014 . McKenzie County was up 19,609 barrels per day or 4.88 percent. In October McKenzie was up even more than it was in September when the Bakken was up 52.5 thousand barrels per day. Mountrail Countywas down 18,728 barrels per day or 6.42 percent. There is  more on this story below. Dunn County was down […]

Posted On : Published By : Tom Whipple
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Russia: Oil Output Could Be Cut Next Year

Russia may cut its oil output because of low global oil prices and a lack of investment in the country’s energy industry, Deputy Prime Minister Arkady Dvorkovich said Dec. 25, Xinhua news reported. According to Dvorkovich, Russia’s oil output could shrink by 10 percent over the next two or three years. Dvorkovich predicted that oil prices would remain at the current level or keep falling for a few months before stabilizing around $80 per barrel. At the beginning of December, the Russian government revised down its forecast for next year’s oil exports by 2.19 percent.

Posted On : Published By : Tom Whipple