The Daily Bulletin - August 1, 2014

The Daily Bulletin - August 1, 2014



Gas prices usually rise in the summer as the EPA demands various regional blends.  However, this year something strange is happening.  Gas prices are actually coming down.  The Christian Science Monitor takes note:  “The average US gas price is now $3.52 per gallon, according to a Thursday report released by automotive group AAA, making current prices the lowest since March of this year. This July, US consumers saw a bigger drop in gas prices than in any July over the last six years. The price at the pump fell every day but one over the course of the month, according to AAA. Gas prices generally rise in the summer months, as Americans hit the road and drive up demand for gas. The federal government also mandates that refineries produce a more costly, lower-emission blend of gas in the summer – and those increased costs are passed onto motorists.  Not so this year. A burgeoning supply of domestic crude oil is holding down gas prices at home, even as international tensions grip Russia and Ukraine, Israel and Gaza, and parts of Iraq. But shockwaves from international conflicts – Iraq in particular – hit markets hardest earlier this summer, and crude prices are normalizing as situations in oil-producing Iraq and Libya have yet to significantly disrupt output.”  Could it be all that Bakken and Eagle Ford oil is finally having an impact on supplies? 


The battle over whether to unload that Kurdish tanker and pay the Kurds $100 million for their oil has ended up back in a Texas court.  As Foreign Policy reports:  “The age-old dispute between Iraq's Kurds and its central government has found the unlikeliest of new battlegrounds: a Texas courtroom. In a contentious lawsuit, Baghdad and its semiautonomous northern region are waging a legal battle that's nominally about the ownership of a million barrels of crude oil sitting in a tanker parked outside the Houston Ship Channel. The real issue, however, is the future of the Iraqi state. Simply put, the hard-pressed Kurds are desperate to sell their oil to replace revenue they used to receive from the central government. But Baghdad is doing everything in its dwindling power to prevent such self-sufficiency. Its legal threats have cast a pall of uncertainty over Kurdish oil, which is discouraging potential buyers around the world. And that is inexorably pushing the Kurds further away from reconciliation with the Shiite-led regime in Baghdad and closer to open independence.”  You’d think we could find a way of supporting these brave people.  


That’s the contention of Martin Tillier on OilPrice:  “There now seems to be general consensus amongst the United States and many European nations regarding the actions of the Putin regime in Eastern Ukraine and what should be done about them. Tragically, It took the downing of a civilian plane and the loss of 298 innocent lives, but there is finally agreement that something must be done. It appears, though, that all are also agreed that action should fall short of a military response, either direct or indirect. As the father of a U.S. Army soldier, I hope that that can be achieved, but for economic sanctions to be effective, they have to hit hard. We have successive rounds of increasingly punitive sanctions, originally from the U.S. unilaterally, and now, as announced July 30, from Europe as well. Dig a little deeper, though, and it becomes clear that the package of measures agreed on keeps certain channels of trade open for certain countries. The French will still be able to sell Russia the two warships they have been building for them. Financial sanctions have been designed so as not to hit the U.K. too hard, and the lack of an energy embargo leaves Germany and others dependent upon Russian oil and gas still supplied.”  But what will it all mean for carbon emissions? 


While some people discuss Russia, Ukraine and the Middle East, CNN contends that we have a problem developing right here in the Western Hemisphere.  “Chinese President Xi Jinping arrived in Caracas last week with a new $4 billion gift for a country desperately looking to external financing to keep its economy afloat. The catch? Venezuelan President Nicolás Maduro reportedly must send China an additional 100,000 barrels per day (bpd) of oil in addition to the more than 500,000 bpd of crude it is already providing to China. With Venezuela’s production in decline, this latest announcement calls into question the long-term viability of Venezuela’s Petrocaribe oil alliance and the energy future for the Caribbean and Central American states that depend on it. The United States must act to proactively prevent a crisis off our shores. Vice President Biden has taken initial steps to lead this effort, but more must be done. For nearly ten years, some of the United States’ closest neighbors have used Petrocaribe – Venezuela’s financially attractive energy alliance and Chávez’s brainchild – to procure flexible credit terms to purchase crude oil and petroleum products. But Venezuela’s economic situation is dire, putting the benefits of the oil alliance at risk. Central American and Caribbean states will have little recourse if credit dries up, and the alliance’s government ministers, business leaders, and consumer advocates privately fret about how continued dependence on Venezuela for energy supplies might come back to pull the rug from under their economies.”  So does that mean we’ll soon have thousands of oil refugees streaming across our borders?  


Elon Musk says the final decision on the location of his Gigafactory is still months away but Reno is already claiming victory.  Reports SFGate:  “Reno, Nevada may have just won one of the most coveted economic prizes in America — Tesla Motors’ $5 billion 'Gigafactory.' The electric automaker reported Thursday that it had broken ground in June at a site outside Reno for its planned 6,500-employee battery factory. Five states, including California, have been vying for months to host the factory. Reno had been considered a logical choice ever since Tesla executives were spotted scouting sites around the city, which has easy rail and freeway access to the company’s Palo Alto headquarters and Fremont auto plant.  But Tesla said Thursday that it had not made a final decision on Reno, or any of the other locations under consideration. The company needs to be able to build the plant quickly so it can supply batteries for Tesla’s upcoming Model 3 sedan, due to hit the market in 2016 or 2017.”   Could this end up as Harry Reid’s crown jewel?  


You might think that the efforts to revive thorium as a nuclear fuel might produce one of those vested-interest reactions from uranium miners.  It’s certainly has happened before.  However, Jay Yao on Motley Fool has a good explanation of why it shouldn’t happen:  “First, although it costs a lot to build a nuclear power plant, once those fixed costs are accounted for, the variable cost of operating a nuclear power plant is actually quite low. According to some experts, the variable cost of nuclear is only around 2 cents per kilowatt hour versus the 6 cents per kilowatt hour of fixed costs. Because the variable costs of nuclear reactors are so low, many nuclear reactors currently using uranium will continue operating until they're decommissioned, even in the event that thorium reactors do become practical. That wide base of operating nuclear reactors using uranium will provide the uranium mining industry with a steady source of demand for many years afterwards.”  Let’s hope reason prevails. 


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