Workers continue to strike at Total’s refinery in Flanders, but the walkout ends at all other plants. (image: france24.com)

Workers at five of Total’s six refineries in France voted to end their weeklong strike on Wednesday, allowing shipments and oil processing to resume, reports Bloomberg. Total, the French oil major, planned to permanently close one of its refineries, precipitating the strike, but unions advised workers to end the walkout after Total promised that no other refineries would be closed or sold in the next five years and that refinery workers at the closed plant would find other work within the company.

At the refinery in Flanders, near Dunkirk—the refinery Total plans to close—workers voted to continue the strike until March 8, when Total will present its plans for the future of the plant. Total still intends to close the Flanders refinery, but has said it will build a training center at the site and restructure jobs to keep refinery workers employed with Total. The Flanders refinery has been idle since September, so the continuation of the strike there will not affect oil production.

Total said it would take between two or three days for output to resume, but a representative for the CGT, a French labor confederation, said at Total’s Donges refinery that the plant had tanks full of refined products that were ready to be shipped, according to the AFP. This will help ease fuel shortages in France, where Hundreds of gas stations have run out of fuel due to the strike.

While the walkout has ended, the CGT’s labor coordinator with Total, Charles Foulard, warned Total that “if it doesn’t keep its promises there will be another strike with fuel shortages.”

The Druzhba pipeline system near Mozyr, Belarus. (image: Bymedia.net via rferl.org)

BusinessWeek reported on Friday that talks between Russia and Belarus over an oil imports dispute have ended with the Belarusian delegation walking out. The issue at hand concerns the Druzhba pipeline, which carries Russian oil from Siberia to the European Union across Belarus. The former Soviet state receives about 20 million metric tons of crude from Russia annually, only a quarter of which is used in Belarus, with the rest continuing on to the EU. Until December 31 Belarus enjoyed a 65-percent price discount on those supplies, but now Russia is asking Belarus to fork over full import duties, a change of about $5 billion, or 10 percent of Belarus’s GDP.

Thus far there have been no extended, wholesale shutdowns in the oil supply, a tactic that Russia has exercised in the past in disputes over natural gas with Ukraine, but the continued stalemate doesn’t bode well for oil prices. The spike that started off the new year with crude at $81 per barrel was linked, in part, to anxiety over reports of the dispute. A shutdown of the pipeline would affect not only Belarus, but a large swath of Eastern and Central Europe: Germany receives 15 percent of its oil from the Druzhba, the Czech Republic 50 percent, and Poland, Slovakia, and Hungary 75 percent or more.

Sure, natural gas is an important commodity that’s “giving people warmth and light for office and for home,” but does it deserve three and a half minutes of exultation that borders on religious fanaticism? It’s clear that natural gas is one of the main (if not the most important) factors that maintain Russia’s political relevance in our global society, as then-president Putin showed when he cut off Russia’s gas supply to the Ukraine in the dead of winter last year.

Crucial domestic resource, chief export, invaluable revenue source, political weapon…you can see why the Russians love their gas. However, I doubt average Russians share the unconditional love and reverence for Gazprom that the anthem expresses, or if the song is even known in the country (or anywhere outside the snickering group of 67,950 YouTube viewers), but I do know that they’ll “never ever find a surer friend than Gazprom.”

So pour yourself vodka straight up so we can “drink to all the Russian gas, that it never comes to an end, though it’s so hard to obtain!”

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Contango: a word that sounds much more exciting that it actually is. (image: Aphex Puddle via flickr.com)

Contango describes a futures market situation in which prices for future delivery of a commodity are higher than prices for immediate delivery. And contango has been present in the crude and heating oil markets for the last few months.

Since late 2008, investors have been working toward cashing in on the contango in the heating oil market. At that time, investors bought up cheap heating oil and put it in storage on huge tanker ships. The tankers then docked at locations around the world and waited for heating oil demand, and heating oil prices, to grow. This week, that time is at hand.

With unusually cold temperatures across the U.S., heating demand is expected to average about 21 percent higher than normal. To meet this demand, stocks of heating oil in storage on seaborne tanker vessels are on their way to the US, Reuters reported on Wednesday. An estimated 3.8 million tons of heating oil has been shipped from European waters to be used in the US, the world’s largest heating oil market.

“Oil prices are on a cold-weather rally, with heating oil demand seen rising for the next few weeks amid forecasts for temperatures for much of the country to be much below normal in that period,” said Andy Lebow, broker at MF Global in New York.

Although distillate stocks, which include heating oil, were expected to fall during the last week of 2009, the American Petroleum Institute reported a 962,000 barrel rise in distillate inventories on Tuesday. However, rising New York Mercantile Exchange prices for crude and heating oil on Wednesday showed that traders are betting that cold weather will keep oil demand on the rise for at least most of January.

And that’s where contango comes into play: as the current price for heating oil rises, it becomes less profitable to store and more profitable to sell. The contango spread (the price difference between current and months-ahead contracts) on London’s Intercontinental Exchange (ICE) for heating oil has shrunk from about $18 a ton in December to a low of $2 this week as greater demand for heating oil has increased current prices.

As frigid temperatures persist in the U.S. and Europe, more cargoes may move out of storage.

“People will probably start to liquidate volumes in storage in Europe but it’s not desperate yet,” says distillates trader, referring to ample stocks on land.

As huge quantities of long-stored heating oil make their way across the Atlantic, owners of the oil (which include investment bank JP Morgan) can look forward to the big reward from their contango play: profit. But heating oil consumers also have something to look forward to. When tankers arrive on the East Coast and the heating oil they carry enters the market, it will help moderate rising prices associated with lower temperatures and stronger demand.

In a rare twist, what’s good for Wall Street appears to be good for heating oil users living on Main Street.

This oil depot in Belarus is along the Druzhba pipeline that carries Russian oil to Europe. (image: nytimes.com)

Tensions are high between Russia and the former Soviet republic of Belarus, the Wall Street Journal reported Tuesday, with Belarus threatening to cut off electricity to Russia’s westernmost region.

Belarus raised the stakes in an energy dispute that threatens midwinter disruptions for a pipeline system that supplies about 10 percent of the EU’s oil. Russia recently throttled back on supplies through the Druzhba pipeline, the main route for Siberian oil, after a pricing deal expired on December 31. The core of the dispute rests on Russia’s imposition of a new tax structure on the oil that Belarus siphons from the Druzhba line for refining. The demands could cost Belarus an estimated $5 billion this year, more than 10 percent of its GDP.

While deliveries have been resumed and much of Europe’s supply is buffered by reserves, effects have already been felt throughout the oil industry. Crude oil prices rose on Monday to $81 a barrel, and the average retail price of heating oil increased by 8 cents in the northeastern United States. The very public dispute between Russia and Belarus is one of several reasons that the new year (and decade) started with oil futures so high.

The conflict is not the first of its kind, but rather mirrors a pattern set by Russia in similar disputes with Belarus in 2007, along with a Ukrainian natural gas dispute in both 2007 and 2009. As illustrated in this 2007 article from the BBC, the details strikingly echo the current dispute, with exports through the Druzhba system halted after Belarus balked at imposed tax increases on their gas supplies. Likewise in 2009, the Russian natural gas company Gazprom cut supplies to the Ukraine over an owed debt of $2.4 billion.

Russia is a nation with big oil ambitions. As the world’s second largest producer of oil after Saudi Arabia, it has had a tumultuous relationship with the rest of the world concerning its oil resources. In September 2009, Russia publicly spurned OPEC by raising its output just as OPEC collectively decided to curb production. While it had previously enjoyed a positive relationship with OPEC, this action was a bit of a slap in the face to the cartel.

These current and past disputes have raised some doubts in Europe about Russia’s dependability as an energy supplier. Although the disputes don’t often directly affect European countries, which have large stockpiles of crude, the instability is definitely not good news for the world at large. The delivery cuts, or even the mere threat of them, often drives up heating oil and other energy prices.

(image: s.wsj.net and zimbio.com)

A variety of factors combined to produce yesterday’s price spike in crude and heating oil. Sustained cold weather in the US Northeast and in Europe, two large heating oil markets, has encouraged some investors that the fundamentals—supply and demand—of the oil market are improving as freezing temperatures boost heating oil consumption. Positive manufacturing reports from the US, China, and India signaled that those economies were recovering, which would raise global energy demand and support higher oil prices. Lastly, a tariff dispute between Russia and Belarus led Russia to briefly stop its oil shipments to Belarus, through which Russia supplies much of Europe’s oil. Russian exports have returned to normal, but the threat to the global oil supply worried investors and lifted oil prices.

Today’s average retail heating oil price in the Northeast is 8 cents higher than Monday’s average price.

A winter storm and freezing temperatures have battered the Northeast. (image: burlingtonfreepress.com)

For market-watchers, today isn’t just the beginning of a new year, it’s the beginning of a new decade. And for those watching oil prices, things kicked into high gear quickly as oil futures hit $81 a barrel. As the Wall Street Journal reported, that figure marked a two-month high brought on by, among other factors, a holiday weekend that saw bone-chilling temperatures throughout much of the Northeast.

The cold—the low in New York City for today is expected to be 17 degrees and the forecast shows no signs of the chill letting up in the region—brought about a spike in heating oil prices this morning with light, sweet crude hitting a high of $81.68, marking a level that it had not reached since October 23.

That the chilly weather extends beyond the region—Europe and parts of Asia are also experiencing a major cold front and forecasts call for China to see some of its lowest temperatures in decades in the coming days—is only part of the reason oil prices kicked off 2010 with such a bang. Analysts pointed to both the continuing weakness of the dollar against the Euro, as well as the hopes that an economic recovery will boost consumption, as contributing factors to the high prices.

Growth in the manufacturing sector, both domestically and abroad, also contributed to rising oil prices. the US, the UK, and China all saw expansion in manufacturing in December.

Potential disruptions of Russia’s oil supply to Europe—which runs through Belarus—are affecting crude prices today, some analysts think. Russia continues to negotiate with Belarus over oil shipments for the year and could cut off oil shipments to Belarus. Phil Flynn, an analyst with PFG Best in New York, told the Journal that even a potential threat to oil supplies will tend to raise the market price of crude.

While investors hold different interpretations of what the first trading day of the new year portends for the financial future—and, in this case, what the first trading day of a new decade could mean for an even longer stretch—many have predicted that oil will be down this year. Despite crude’s short-term gains on today’s trading floor, a number of analysts and organizations have predicted that oil prices will drop, not rise, in 2010. Commerzbank AG’s Eugen Weinberg, for example, predicted crude would fall as low as the $50-range this year, and the Energy Information Agency also called for crude prices to drop in 2010.

Conflict between Russia and Ukraine again threatened energy supplies to several EU countries. (image: koxuz.org)

At least this year’s dispute didn’t escalate into January 2009’s crisis when natural gas shipments were halted and residents of 20 Central European countries shivered. No, this time an agreement was reached before Russian threats to cut off supplies to Slovakia, Hungary, and the Czech Republic were carried out. As it was in January of this year, the dispute between Ukraine and Russia centered on the price of oil transit fees that Russia pays to Ukraine. Happily for Central Europe, Russia and Ukraine have resolved their differences, reports AFP.

The cutoff would have come via the Druzhba oil pipeline (ironically, Druzhba means “friendship”) one of the world’s biggest in capacity and length, connecting West Siberian oilfields to refineries in Europe. The pipeline has a capacity of over 2 million barrels per day (bpd); 1.2 million barrels of that went directly to the European Union in 2008, while about 400,000 bpd stayed in Belarus.

The current dispute between Russian and Ukraine concerned the oil transit fees Russia pays. Ukraine wanted to increase the fees by 15 percent to 20 percent next year and then move to a “pump or pay” agreement, said Bohdan Sokolovskyi, Ukrainian President Viktor Yushchenko’s top aide for energy, by phone in Kiev, and reported by Business Week. “Pump or pay” refers to provisions that would require Russia to pay transit fees for a predetermined amount of oil, and pay an additional fee if it failed to ship (or “pump”) that amount of oil.

Before an agreement was reached, Russian Prime Minister Vladimir Putin accused Ukraine of “abuse” on the Russian oil transit deal. “We are ready to deliver, we have a contract, but if any of the transit countries abuse, what can you do?” Putin said. The EU was notified through the “early warning mechanism” agreed to by the EU and Russia to help prevent energy crises. The mechanism appears to have worked, as Russia told Europe that their oil supplies were in danger. The Slovak Prime Minister said that Russia’s notice told them “that such a risk is fairly high and that Europe should potentially prepare” for a supply disruption.

Naftogaz, the owner of the Ukrainian state oil pipeline monopoly, said that they wanted changes to the 2004 oil transit contract with Russia. The new deal, said a Naftogaz spokesman, will see transit fees increase by 30 percent in 2010 compared to this year. The volume of shipped oil will remain at 2009 levels, even though the agreement only covers 2010.

Experts believe that much of this current but familiar dispute was the result of domestic Ukrainian politics—Ukraine’s presidential election is held on January 17—and that due to Ukraine’s heavy dependence on Russian oil supplies, the threat of a major oil supply crisis was not likely. A chief strategist with Uralsib, a bank in Moscow, said that the transit fight might have been picked to boost Ukrainian President Viktor Yushcenko’s reelection bid.

However, Ukraine does still have one problem: due to the economic crisis, they can’t pay their December gas bill to Russia. They have until January 11t to pay up.

(image: cnsx.ca and cleancarboneconomy.com)

Copenhagen didn’t result in any binding agreement, and a Senate climate bill still looks a long way off, but some businesses are reporting their carbon emissions anyway.

The Carbon Disclosure Project, a London-based nonprofit, collects the emissions reports and shows businesses how they stack up to other firms in their industry. This information can help businesses reduce emissions, and by making it publicly available (see their website) to any potential investor the Carbon Disclosure Project hopes to create a market incentive to cut energy consumption and emissions. Boeing’s vice president for environment, Mary Armstrong, said the project encouraged Boeing to set environmental performance targets.

While the Carbon Disclosure Project’s founder and chief executive, Paul Dickinson, says the voluntary program could help cut emissions in China and India, where businesses are face fewer regulations than in Europe and North America, critics contend that no voluntary program could do enough. The project’s reports don’t undergo any external verification, and companies that pollute cannot be obligated to take part.

Though energy companies are targeted by legislation and international agreements to mitigate climate change, many have been willing participants in the project—giants like Chevron and Russia’s Gazprom filled out disclosure reports, to name two. With the EPA contemplating regulation, and the possibility of legislation still looming, they may have decided that disclosing their carbon emissions now will give them an edge on their competitors if such disclosures become mandatory. Disclosing emissions may cost them money—in the labor spent filing reports, if nothing else—but doing it now may position them to adapt more quickly to a new legislative or regulatory environment.

Scotland plans to convert its waves into a renewable source of energy. (image: woodruffshelties.com)

Scottish energy developer Pelamis has signed a joint venture agreement with Swedish energy company Vattenfall for an energy project worth about $100 million off Scotland’s Shetland Islands, CleanTechnica reported on Monday. The project has been dubbed Aegir, after the mythical Norse sea god, and will be Scotland’s largest wave power scheme.

The project is expected to feature 26 wave power machines, each at a length of 180 meters; these machines will generate a total of up to 200 megawatts of power, which can power about 13,000 households for one year. Aegir will begin producing power in 2014.

Scotland hopes that this project and others like it will help the country to reduce its greenhouse gas emissions by 42 percent by 2020, as delineated under the Scottish Climate Change Act. However, organizations such as the World Wildlife Fund think Scotland can do even more, and that renewable energy could fulfill 60–143 percent of Scotland’s energy requirements by 2030.

Scotland seems to be keen on using wave energy to reduce its greenhouse gas emissions. Many other countries and universities are also interested in harnessing the power of the sea to meet their renewable energy needs. For their part, England, Norway, and Australia have reported success with oscillating water columns. In addition, the Scottish government and its partners recently launched Oyster, the largest working hydroelectric wave energy device in the world.