EIA: U.S. Now Has 1,000 Active Oil Rigs
A few of the 125 rigs in the Gulf of Mexico, even more than there were before the devastating BP oil spill. (image: nola.com)
The Baker Hughes weekly count of actively drilling oil rigs in the United States hit 1,003 in late June, its highest level since 1987 when the company first separated oil and natural gas rig counts, according to the Energy Information Administration. Since breaching 1,000, the count has continued to increase. The latest update on July 29th put the national oil rig count at 1,025 – the twenty-sixth consecutive month of increases.
Rig counts are important because they can be indicative of price trends for both crude and distillates like heating oil and diesel. For example, oil rig numbers fell shortly after the crash of 2008 when oil hit nearly $135 a barrel. Rig numbers started to rebound in March of 2009 when oil prices bottomed out at $40 a barrel and haven’t stopped climbing since.
The increase demonstrates federal and private operators’ interest in expanding drilling programs and exploring and utilizing the nation’s gas and oil-rich shale formations. And as one would expect, the rise in active rigs has boosted domestic production. From November 2008 to March of this year, U.S. daily oil production went from 5 million barrels to 5.6 million. It’s safe to assume the country’s steep decline in dependence on foreign oil imports in the last few years is no coincidence. In 2008, the U.S. got two-thirds of its oil from foreign producers. Now we only import 50%.
Also unsurprisingly, most of the increased activity is taking place in the country’s known hotspot basins. Monthly rig counts in the Permian Basin region of Texas and New Mexico has increased six-fold since the spring of 2009. Rigs in the Williston Basin have quadrupled, and average rig counts for the Western Gulf Basin went from 11 to 162 in the last two years.
How might this trend affect oil pricing? We know markets have been highly volatile for some time, but maybe this breakdown of the last three years could spread some light on the issue:
(image: Energy Information Administration)
New Legislation Unveiled to End Big Oil Tax Breaks
Big Oil company executives, from left, Shell Oil president Marvin Odum; BP America chairman H. Lamar McKay; and ConocoPhillips CEO James Mulva, testify before the Senate Finance Committee on Thursday. The hearing relates to whether oil companies should continue to receive billions of dollars in tax breaks at a time of record oil company profits and soaring gasoline and heating oil prices. (image: online.wsj.com)
The debate over Big Oil companies’ tax breaks is heating up, with new legislation unveiled this week to repeal the multi-billion dollar subsidies.
Oil company executives are scheduled to front a Senate committee hearing Thursday on the tax breaks after reporting record profits last month on the back of soaring oil prices.
Democratic Sens. Robert Menendez of New Jersey, Sherrod Brown of Ohio and Claire McCaskill of Missouri proposed legislation on Tuesday to remove $2 billion in annual credits and deductions used by Big Oil and gas companies, the Wall Street Journal reported. Oil executives argue that removing the tax breaks will result in even higher gasoline prices, cost jobs and see less energy production. They said they were being unfairly singled out this week.
The debate has largely seen a split along partisan lines, with Democrats calling for an end to the tax cuts but Republicans and Democrats in oil-rich states defending the subsidies and calling for more drilling permits to boost domestic oil supplies. The Obama administration also wants to reduce the nation’s dependence on foreign oil but has been cautious about granting new drilling permits in the aftermath of the BP Gulf of Mexico disaster.
Calling for an end to “unwarranted” Big Oil tax breaks last month, President Obama said the money saved should be invested in developing clean, sustainable energy technologies like biofuels. However this week’s bill would divert the savings towards reducing the spiraling US deficit.
Senate Majority Leader Harry Reid (D., Nev.) plans to bring some form of the legislation for an imminent vote, but allowed Senate Finance Committee chairman Max Baucus (D., Mont.) time to convene Thursday’s industry tax breaks hearing, which is to include Big Oil representatives. The proposed legislation would affect the five biggest oil companies.
The Obama Administration is under pressure to approve more applications for offshore drilling to help boost US domestic oil production. (image: treehugger.com)
Meanwhile, Shell says it is optimistic that it may soon gain permission to drill for oil off the coast of Alaska. With rising crude, heating oil and gasoline prices linked to supply concerns in the Middle East and North Africa, there is growing pressure on the federal government to allow more domestic oil production. The Chukchi and Beaufort Seas off Alaska are thought to contain 25 billion barrels of oil and 100 trillion cubic feet of natural gas, the Wall Street Journal reported Wednesday. But despite investing $3.5 billion in Alaskan offshore oil exploration, Shell’s plans have been stymied by legal challenges and regulatory hurdles, especially since the BP Gulf spill.
However, after a White House meeting last week between company executives and administration officials, Shell says it is now more confident the controversial project will get the green light. Shell’s US president Mervin Odum said the meeting was “the strongest indication we’ve ever had of a coordinated government approach to start drilling in Alaska.” A White House officials said: “We’re committed to increasing domestic oil and gas supply. This is a potential resource, and we’re going to look at it.”
Conservationists fear an oil spill off the Alaskan coast could devastate the area’s pristine natural environment.
Republicans won passage of a House bill Wednesday that would require decisions to be made about offshore drilling permits within 60 days. The vote took place hours after the Obama administration approved a proposal by Shell to drill five new exploratory deepwater oil wells in the Gulf of Mexico, the second such approval for the gulf since the lifting of a federal moratorium on deepwater drilling last October.
Ownership of Potentially Huge Arctic Reserves of Oil and Natural Gas Subject of UN Summit
Cairn Energy's drilling platform off the coast of the Greenland that recently struck oil. Could it be the first step toward an arctic black gold rush? (image: the BBC via bbc.co.uk)
Last year, HeatingOil.com’s Steven Zweig published a comprehensive report on the fossil fuel potential and looming territorial disputes over the frozen waters of the Arctic. This week, the competition for arctic oil and gas is heating up after a groundbreaking oil discovery raised the stakes of a United Nations summit at which countries will jockey for the rights to the Arctic’s natural resources.
The UK’s Guardian reported on Tuesday that the Scottish company Cairn Energy has struck oil with an offshore well off the coast of Greenland. While the company has not yet determined the size of the reserve or its economic viability, the discovery is the first of its kind off of the Greenland coast and could be the first of what the oil industry hopes will be scores of oil and gas production operations in the region.
The daily business program Marketplace Morning Report reported on Wednesday morning that US Geological Survey data shows that the Arctic could hold up to 25 percent of all the world’s undiscovered oil and gas. With this juicy figure in mind, five nations that have laid claim to arctic resources will be meeting at a UN summit this week to haggle over who gets to drill where in the icy north: the US, Canada, Russia, Denmark, and Norway.
In addition to the potentially massive reserves of oil and natural gas under arctic water and ice, global warming is also helping to make the region more attractive to seekers of fossil fuel. As the BBC reported on Tuesday, “Global warming is opening up the region.” As anticipated increases in global temperatures take hold, ocean temperatures will rise as well, causing huge areas of ice to melt and making offshore waters more accessible to drilling ships and platforms.
Environmentalists who are no doubt chafing at the idea of global warming making more greenhouse-gas producing fossil fuels available for burning have strongly expressed their opposition to oil drilling in arctic waters. Their main objection is that any spill would be devastating to surrounding ecosystems, and that spilled oil would take an extremely long time to dissipate—much longer than a spill in the Gulf of Mexico, for example. Shortly after Cairn announced its discovery, activists from Greenpeace occupied the drilling rig before being arrested for trespassing.
With global demand for oil slowly but steadily increasing and uncertainly about future supplies elevating the issue of peak oil production, the quest for arctic oil and gas will figure prominently in future debates over energy resources.
Giant Ice Island Breaks Off Greenland Glacier, Threatens Oil Drilling and Shipping
A satellite image shows that the enormous piece of ice has broken off of a Greenland glacier. The huge iceberg could drift southward and threaten oil operations in the Atlantic. (image: NASA/AP via npr.org)
If you are so inclined, you might call the enormous piece of ice that recently broke away from a glacier in Greenland and began moving through the Arctic Ocean the biggest piece of global warming evidence ever. The Associated Press reported on Wednesday that the 100-square-mile “ice island,” if it continues to drift south into the Atlantic Ocean, could severely disrupt marine oil drilling operations and oil shipping channels.
According to the AP report, experts from Europe and Canada are scrambling to predict the trajectory of the massive iceberg, which is four times the size of Manhattan. The worst-case scenario would be for the ice block to make it into the Nares Strait along Northern Canada’s coast before the winter freeze, which would allow ocean current to pick up the ice and send it southward along the Canadian coast, home to numerous drilling operations and important shipping lanes. The journey would take about two years, and the ice island could break up gradually along the way. But if it doesn’t, it is much too large to be redirected using towboats or water cannons, as can smaller icebergs.
The ice chunk, if it melted quickly, would raise global sea levels by a “devastating” 20 feet, according to the AP.
Whether or not you believe the gargantuan ice fragment is proof of global warming and climate change, its sheer mass is a force to be reckoned with, and could have the same disruptive effect on North Atlantic oil operations as a hurricane. So if you’re heading out into the waters of the Atlantic in the next two years, be sure to check up on the position of the gigantic island of ice that used to be attached to Greenland—and steer clear.
And if you see a puzzling HeatingOil.com headline about two years from now along the lines of “Huge Iceberg Drives up Oil Prices,” you’ll know exactly where that iceberg came from.
“Rigs to Reefs” Lets Fish Stay After the Oil Stops Pumping
Offshore oil platforms are home to flourishing marine communities. (image: dmr.state.ms.us)
“The first thing anyone—trained scientist or casual recreational diver—notices around a rig is the big fish, lots of them,” says Dr. Milton Love, a scientist at the University of California, Santa Barbara. Love has spent 10 years studying the thriving marine life that turns offshore oil platforms into artificial reefs. California’s offshore rigs boast fish populations that are larger than the populations at the state’s natural reefs, and 20–50 times larger than in the waters that surround the rigs.
But if offshore oil platforms have proved to be an attractive environment for fish, what happens to them when production slows and the rig’s owners decide to shut down the operation? An abandoned offshore rig must go through “platform decommissioning,” a costly process of removing all or part of the rig that could also disrupt the marine ecosystem that has developed on the rig.
In an effort to preserve these underwater ecosystems, Love and others champion the “rigs to reefs” concept that accepts the offshore oil platforms as artificial reefs and leaves them largely intact after drilling has shut down. As the news site Miller-McCune reports:
Rigs to Reefs is becoming an increasingly popular alternative to total removal of a platform because it maintains what is de facto marine reserve and at the same time saves oil companies money on their decommissioning obligations.
Decommissioning a rig can cost up to a billion dollars. In Louisiana, a rig operator who saves money by leaving all or part of the platform as a reef splits the savings with the state government, a plan that some in California want to duplicate.
Turning offshore oil platforms into permanent reefs has its opponents, who protest that rigs have toxic chemicals and that nothing artificial should be left in the ocean.
The fish, for their part, like their rigs. When researchers relocated fish from oil platforms to a natural reef 11 miles away, 25 percent found their way back home.
BP Board Game Predicted Offshore Oil Spill
A glance at the front of the box for BP’s 1970s board game is enough to make you think offshore oil drilling might not end well. (image: metro.co.uk)
In the 1970s, BP created a board game that promised a night of family fun pretending to be BP and trying to overcome the danger and difficulty of offshore drilling to reap huge financial rewards, reports Metro UK. It wasn’t popular then, and now that BP is playing the game for real in the Gulf of Mexico, with horrifying results, the board game “BP Offshore Oil Strike” seems like an even worse idea.
The game did contain an eerie forecast of the perils of deepwater drilling, though—one of the “hazard cards” that a player could draw reads:
Blow-out! Rig damaged. Oil slick clean-up costs. Pay $1 million.
Their prediction of the clean-up costs turned out to be way off. So far BP has spent roughly $3 billion cleaning up and trying to halt the oil spill in the Gulf of Mexico.
EIA: Gulf Drilling Moratorium Will Cut Oil Production by 82,000 BPD
A ban on deepwater drilling will curb oil output more than previously estimated, says the EIA, but the agency’s price forecast hasn’t changed. (image: examiner.com)
The Energy Information Administration (EIA), a branch of the Department of Energy, raised its estimate of the impact a moratorium on offshore deepwater oil drilling would have on US oil production, reports Reuters. The agency now says that the ban would curb oil output by 31,000 barrels per day (bpd) in the fourth quarter of this year and 82,000 bpd in 2011.
Last month the EIA forecast reductions of only 26,000 bpd for the fourth quarter and 70,000 bpd for next year.
While the moratorium would halt deepwater drilling, it would not stop deepwater oil production already under way. Though “drilling” is often used to refer to oil production in general, its meaning is technically restricted to drilling holes that search for oil. If a well is pumping oil, then “drilling” has concluded, and that well would be unaffected by the ban. The EIA’s lower forecast for US oil production reflects the moratorium’s impact on deepwater oil drilling projects that were expected to begin producing oil this year or the next.
Because the moratorium would postpone potential oil output, it would have an increasingly large impact on oil production as time wore on, said the EIA:
The reductions in crude oil production increase from a monthly average of about 10,000 bpd in September 2010 to nearly 100,000 bpd by December 2011.
That’s assuming the moratorium will even be in place. A federal court blocked the drilling ban in June, though the Obama administration is appealing the ruling. The administration may also counter with a new moratorium that could allow drilling in some deepwater fields.
Even if the US does lose 82,000 bpd of oil production on average in 2011, the EIA doesn’t think that will have an effect on prices. As Bloomberg reports, the EIA’s forecast for 2011 oil prices remains unchanged from last month’s forecast.
Part of the impact of delayed offshore drilling will be offset by greater oil production elsewhere in the US; though the EIA sees 82,000 fewer bpd coming from the Gulf, it expects total US production to fall by only 26,000 bpd—a small amount in comparison to the 5.37 million bpd that the EIA predicts the US will produce in 2011.
Destin, FL to Hold Fireworks Display Despite Oil Spill and Tar Balls
Despite its recent misfortune, the city that calls itself the “world’s luckiest fishing village” is moving ahead as planned with its Independence Day celebration. (image: cityofdestin.com)
Tar balls have speckled the beaches of Destin, Florida, ugly reminders of the catastrophic oil spill that threatens the Florida coastline, but the city is determined to move forward with its Second Annual Independence Day celebration, TheDestinLog.com reported.
Destin is a city whose livelihood comes from the water, through fishing and the tourists attracted to its beaches and water activities. Faced with this environmental calamity just off its shores, the city contemplated canceling the festivities, but decided that the Fourth of July event might be even more important in the wake of the oil spill. City of Destin Recreation Manager Lance Johnson told TheDestinLog about the decision:
We really need this as a community to help forget about everything that is going on around us for a few hours.
Despite the city’s resolve, the oil spill may force some modifications to the planned schedule. The pyrotechnics company plans to navigate through water to set up the fireworks display, but an oil slick could block their way and force the fireworks to be relocated; boating through the oil slick would only extend the contamination to other areas. The tar balls that are beginning to blight Destin’s beaches won’t cause any problems, though. According to Johnson, “the tar balls are weathered and not flammable,” so they pose no risk.
Cities and towns across the United States will be commemorating the Fourth of July this weekend, and Destin residents will brave the difficulties and not let the oil spill prevent them from celebrating their nation’s independence.
Video Game Gives YOU the Chance to Stop the Gulf of Mexico Oil Spill
In “Crisis in the Gulf,” it’s up to you to destroy the spheres of oil coming from the “DP” spill. (image: marketplace.xbox.com)
BP can’t stop the oil leak—can you? “Crisis in the Gulf,” a new downloadable Xbox video game, puts you in charge of keeping the gushing oil from spreading, reports MSNBC.com.
The game begins with the explosion of an oil rig that belongs to the fictional oil company DP, whose logo bears an uncanny resemblance to BP (as seen in this video at Kotaku.com). With the rig gone, oil begins to leak and it’s up to players to stop it. Instead of “top hats” and “junk shots” players deploy cannons and torpedoes to destroy the escaping orbs of oil, at difficulty levels ranging from “Lawn Mower Oil Leak” to “Gulf Oil Crisis.”
“Do you have what it takes to cap the leak?” asks the video game’s developer, Super Boise, at the Xbox Live Marketplace. For about $1, you can download the game and find out.
Kevin Costner’s Oil-Separating Centrifuges at Work
Three centrifuges are aboard this barge and being used to clean up the oil spilled in the Gulf of Mexico. (image: BPplc via youtube.com)
Last week we reported that BP had bought 32 oil cleanup machines developed by Kevin Costner’s company, Ocean Therapy Solutions (OTS). Now those machines are in action, and BP has released a video describing in detail how the machines’ centrifuge technology works to separate oil from water.
So far the centrifuges are not a complete success—the separated water is not yet clean enough to be returned to the sea—but they’ve only just been deployed and their efficiency could be improved. To find out more about the technology and how it works with skimmers, barges, and holding tanks, watch the video below and listen to the explanations from the people directing this cleanup effort.
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Heating Oil Weekly Roundup: Oil Spill Terminology, Hydrofracking Critics, and the World Cup’s Carbon Footprint
(image: John Cole, the Scranton Times via cagle.com)
Is the oil spill a spill? Or is it a gusher, or a leak, or a catastrophe, or a blowout? Anita Lee of the Biloxi Sun Herald (via McClatchyDC.com) investigates the possibilities of what to call the…thing in the Gulf of Mexico.
It’s been a tough PR week for the natural gas industry, whose controversial practice of hydraulic fracturing (hydrofracking) has received sustained attention after Josh Fox’s muckraking documentary Gasland debuted on HBO on Monday, has been reviewed by nearly every national publication, and Fox himself has been everywhere (including The Daily Show). If that wasn’t enough, Christopher Bateman at Vanity Fair piled on with his own highly critical account of hydrofracking in Pennsylvania.
Fans and players from around the globe have converged on South Africa for the World Cup, and all of that travel used up a lot of fuel and emitted a lot of carbon, says the Center for American Progress. Even when international travel is left out of the equation, the carbon footprint of the 2010 World Cup is eight times bigger than that of the 2006 World Cup in Germany.
Solar power is a long way from being able to provide us with enough electricity to replace power plants, but there’s one thing we know it can do: power a car disguised as a shrub. Leslie Katz at CNET has the story on the “Terrestrial Shrub Rover,” which is pretty much what it sounds like and is powered entirely by the sun. Watch the video below to see a guy drive a shrub.
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The Oil Spill’s Effect on Mario World
(image: zero-lives via flickr.com)
The massive oil leak in the Gulf of Mexico has evidently spread to the video game world inhabited by intrepid plumbers Maro and Luigi. The oil has done serious harm to to sea life there, and apparently claimed the life of Mario himself. The tragedy continues…
Image by Flickr user zero-lives.
Heating Oil Weekly Roundup: Bookies Take Odds on BP’s CEO, Peak Oil Collapse, Trippy Biofuel
(image: Pat Bagley, Salt Lake Tribune via cagle.com)
BP’s CEO, Tony Hayward, has so far been able to hang on to his job but British and Irish bookies are taking bets on whether or not he’ll get the axe, says Anthea Pitt at UpstreamOnline.com. The bookmaker Ladrokes is offering 2/1 odds that Hayward will be pushed out of the CEO position by the end of the year. Ireland’s Paddy Power gives him even less of a chance—their odds are 1/2. Paddy Power also reported that only 10 people have bet on Hayward to keep his job.
The peak oil debate can stir passions on both sides—mostly because neither side thinks there’s much debate—but an Oxford researcher, Jorg Friedrichs, spoke with Melinda Burns of the website Miller-McCune about his latest research that skipped that debate and tried to foresee what would happen if peak oil is real. His answer? The “inevitable” crumbling of our society. If you’re not buying his argument, you’re not alone; his research was rejected 12 times before someone decided to publish it.
A mutant strain of corn (or maize, as the British call it) could yield more biofuel than regular corn, says new research in the journal Genetics (via innovation-reports.com). The key is its “psychedelic genes.” The mutated genes cause yellow and green streaks in the plants leaves (giving it a psychedelic appearance), but their more important role is in directing carbohydrates to different areas of the plant, which can improve crop yields. Far-out, man.
Offshore oil drilling is now the object of great scrutiny, but much of how it works is still very obscure. To help make sense of it, Infrastructurist presents an image gallery by Tim Sheehan, with photos and explanations of the machines that make offshore drilling possible.
Heating Oil Prices Still Unaffected by Gulf Oil Spill
The oil from the gusher in the Gulf of Mexico continues to spread, but the prices of heating oil and other petroleum products remain untouched. (image: Eric Gay/AP via nydailynews.com)
Oil has been spewing into the Gulf of Mexico for a full six weeks now, and as anyone who owns a television or Internet-connected device has seen, the spill has devastated the Gulf Coast. On the bright side, those millions of gallons of oil lost to the waters of the Gulf have done nothing to increase crude, heating oil, or gasoline prices. This week saw the first string of three consecutive increases in the price of crude in a month, but those gains were largely attributable to factors (like manufacturing activity in China and a decline in US crude stockpiles) unrelated to the oil spill.
Reuters Breakingviews noted on Wednesday that US oil production is nothing more than a drop in the proverbial bucket of world oil supplies, with deepwater drilling supplying an even smaller portion:
Deepwater wells in the Gulf produce around 1.3 million barrels a day, against total global output of roughly 85 million. A two-year moratorium on new drilling would reduce potential output by only 300,000 barrels a day in 2015, the International Energy Agency calculates — a piffling 0.4 percent of current world production.
The Reuters article went on to comment on the political implications of these facts, questioning claims often made by drilling advocates that restrictions on US oil drilling will bring higher prices. The sudden removal of a major source of American oil has done nothing to drive up gasoline or heating oil prices a full month and a half after tragedy first struck. Even the imminent threat of tighter regulation of drilling off of US shores has not touched on current or future prices. Taken together, these realities provide further proof that the ups and downs of oil production in the US have little (if any) effect on prices set by a global market.
For consumers, it appears (at least for now) that the Gulf spill will not be the unexpected event that drives up heating oil prices this year. In fact, a busy hurricane season, as was predicted by the NOAA, poses a much larger threat to steady heating oil prices than does the oil spill. Because hurricanes can damage or shut down refineries that make heating oil, they can reduce the supply of heating oil to the Northeast and drive up prices.
Oil Spill Adds New Spin on Debate Over Canadian Oil Sands
Though they may be a favorable alternative to a massive oil spill devastating the Gulf Coast, the effects of oil sands processing can’t quite be called clean or safe. (image: Edward Burtynsky for the Globe and Mail via treehugger.com)
The environmental and economic disaster in the Gulf of Mexico oil spill has made clear the risks of deepwater drilling in search of crude oil. Images of oil-covered seabirds and contaminated beaches on computer monitors and television screens across the country will no doubt bring increased wariness and stricter regulation of deepwater drilling and offshore drilling in general.
Proponents of Canada’s oil sands are taking advantage of this unprecedented situation by singing its praises in contrast to the terrible cost of deepwater drilling gone wrong. But while their praises may seem legitimate in the shadow of the largest oil spill in US history, the environmental devastation and high cost of extracting and processing oil sands have not changed.
Reporting on a speech he made to a business group, the Calgary Herald summed up the message from CEO Bruce March of oil sands developer Imperial Oil: “Canada’s oil reserves offer the only safe and most environmentally friendly source of energy to meet world demands over the next three decades.” Whether those exact words were spoken by March himself is not clear, but the statement is at best open to debate and at worst deeply misleading. Squeezing synthetic crude oil from oil sands in Alberta requires the excavation of millions of tons of earth in a forested wilderness, contamination of millions of gallons of fresh water that form toxic ponds, and emits millions of pounds of greenhouse gases into the atmosphere.
Responding to a US trip by Alberta Premier Ed Stelmach that included promoting oil sands to US lawmakers, economist Jeffrey Rubin summed up his criticism:
The tar sands aren’t a greener alternative to deep-water oil. They’re just a more expensive alternative. And the more that synthetic oil from tar sands replaces deep-water production, the more you’ll pay to burn it.
Calling oil sands excavation and processing “effectively a massive strip-mining project with a huge carbon emissions trail,” Rubin expressed disappointment that the tragedy in the Gulf had led some to see the process in more environmentally favorable light. Taking a page from his book that paints a gloomy picture of our petroleum-based global society, Why Your World is About to Get a Whole Lot Smaller, Rubin also noted the great economic expense of making useful crude oil out of oil sands and predicted that it would help drive gasoline, heating oil, and other petroleum product prices to staggering highs in the next decade. Those spiking prices, he posits, will bring about profound societal changes; “The very oil prices that are needed in order for tar sands to replace deep-water production are the same ones that will take millions of North American drivers right off the road,” he wrote.
The environmental effects and high cost are not lost on oil sands-men like March, who said his company and others are working to bring down costs and mitigate negative environmental effects:
“Our goal on land use is simple,” he said. “After development is completed, we want no evidence that we were ever there.”
Until that goal is achieved, however, oil sands will continue to be a costly and environmentally taxing source of crude oil, regardless of disasters that result from other methods of oil extraction. True, oil sands operations will never spout millions of gallons of crude into the ocean, but unchecked water pollution, excavation of forests, and greenhouse gas emissions associated with oil sands processing hardly make it a “clean” alternative.
False Rumor Brought on Oil Price Spike Last Week
False reports of a ban on shallow-water drilling led to frenzied trading and higher oil prices. (image: Nicholas Whitaker for HeatingOil.com)
False reports of a ban on all offshore drilling sparked a rally in the oil markets on Thursday, and even though a spokesperson for the Interior Department quelled the rumor later on Thursday afternoon the rally lasted through the close of the trading day and lifted the average retail price for heating oil the following day.
President Barack Obama had already announced a moratorium on deepwater drilling, but Thursday’s reports that the ban was being extended to all offshore drilling—even shallow-water drilling, which is drilling in less than 500 feet of water—caused oil prices to spike. The reports did have some foundation. The Minerals Managements Service (MMS, a branch of the Interior Department) rescinded five permits for drilling in shallow water, the Washington Post reported. Two of the companies whose permits had been withdrawn received an email from a regional supervisor for the MMS who said that “until further notice we have been informed not to approve or allow any drilling not [sic] matter the water depth.” The email made its way to a number of news outlets and after oil traders learned of the report oil prices jumped, propelled by the concern that a drilling ban would cramp oil supply.
However, the MMS email did not reflect the administration’s true policy. Kendra Barkoff, a spokeswoman for the Interior Department, unequivocally rejected the position stated in the MMS regional supervisor’s email:
There is a six-month moratorium on deepwater drilling. Shallow-water drilling may continue as long as oil-and-gas operations satisfy the environmental and safety requirements [Interior] Secretary Salazar outlined in his report to the president and have exploration plans that meet those requirements. There is no moratorium on shallow-water drilling.
President Obama offered his own clarification in an interview with CNN, saying, “Actually the moratorium is not extended to the shallow waters.”
The false report did not last long, but its timing maximized its impact on oil prices. As the oil industry-focused site The OilSpot News reported, crude oil futures rose by 2.3 percent between 2:00 pm and 2:30 pm, when trading on the New York Mercantile Exchange closed. Heating oil futures underwent a parallel increase. Because the closing price on the market on Thursday helps determine the wholesale (and so retail) price of heating oil on Friday, the false report of an offshore drilling ban was largely responsible for the 4-cent average increase in the retail heating oil price that Friday.
The incident was not the first example of misinformation driving up oil prices this year—in February, oil traders mistook a report of a coup in Nigeria as coming from oil-rich Nigeria. The resulting fear-driven buying frenzy drove up oil prices considerably.
Despite the environmental damage wreaked by the BP oil spill in the Gulf of Mexico, oil prices have been largely unaffected. In terms of the global oil supply, the loss of oil from one well is barely perceptible. The real threat to supply—and therefore to prices—is that the spill will prompt regulation that will curtail offshore production more broadly. Thursday’s report hit on the oil industry’s fears of a comprehensive ban on offshore drilling, and traders readily accepted it as both plausible and meaningful. If an email from an official with the MMS can move oil prices, an actual shift in policy could have a jarring and lasting impact on oil markets.
US Won’t Nuke Oil Leak, But This Video Shows How it Worked for the Soviets
Could a nuclear bomb stop the oil spill? (image: atomicarchive.com)
As desperation mounts with each failure to stop the oil leak in the Gulf of Mexico, the idea of using a nuclear weapon to melt the rock surrounding the well and seal off the gushing oil has gained traction. Despite the idea’s popularity in some quarters, the US government has rejected it, says the New York Times. A spokeswoman for the Energy Department, Stephanie Mueller, said the nuclear option had not been considered, and one unnamed senior official called the proposal “crazy.”
So where did this crazy idea come from? The Soviets, who successfully sealed four onshore natural gas leaks by using nuclear explosives. Their efforts caught the attention of the US Department of Energy, reports Salon’s Andrew Leonard, and in 2000 the DOE published a report titled, “The Soviet Program for Peaceful Uses of Nuclear Explosions.” The report concluded that the first use of nuclear explosives occurred on a gas well that had been leaking for three years. The leak stopped 23 seconds after the nuclear detonation.
Leonard also turned up the video below, which appears to be old Soviet propaganda and shows the Soviets’ successful nuclear attack on a gas leak.
So is nuking the oil leak still a crazy idea? Probably. But if the oil is still flowing into the Gulf in a month or two, the nuclear option might start to seem more reasonable.
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Do YOU Have an Idea For Stopping the Oil Leak? WhatshouldBPdo.com Wants to Know
For those who think you know what BP should do, here’s your chance to shine. (image: whatshouldbpdo.com)
With a massive leak still blasting crude oil into the Gulf of Mexico after 45 days and no solution in sight, people across America are offering their ideas for how to “plug the damn hole.” From a Long Island engineering prodigy to blockbuster movie director James Cameron, it seems like everybody’s weighing in—so why not you?
WhatShouldBPDo.com offers a central database of ideas submitted by ordinary Internet users, and allows site viewers to vote on which ideas are best. Ideas submitted so far range from the basic (“Insert an reverse umbrella device”) to the fancy sounding (“Giant Kevlar Bag Weighted at skirt over wellhead with hoses coupled to bag to retrieve outflows”) to the sarcastic (“Stuff it with 538 congressmen and senators, plus a few others”).
So what are you waiting for? Your idea could be the one that works!
A Graphic Summary of the Oil Spill
(image: zmgraphics.com)
The massive oil spill and ongoing leak is without question the biggest news story of the year, but all those facts and figures can be a bit overwhelming. Graphic designer Carol Zuber-Mallison addressed the issue by creating a huge infographic that fits a lot of the need-to-know info on one page. It’s a lot to digest, but the graphic is well-organized and pleasing to the eye. It was first created a couple weeks ago, so some of the info needs to be updated, but most of it is still accurate and relevant.
Click here for a readable close-up view of the full graphic.
Heating Oil Weekly Roundup: James Cameron Wants to Help, Biofuel Breakthroughs, and Western Wind Power
(image: xkcd.com)
Kevin Costner had his chance to fight the spill. Now James Cameron, director of Avatar and Titanic, wants to help, says Rebecca Keegan at Vanity Fair. Though BP was drilling for oil, not unobtainium, Cameron says his experience with underwater filming gives him the expertise needed to combat the gushing oil. BP didn’t take him up on his offer, so Cameron called them “morons.”
Ecofriend has tallied up 10 breakthroughs in the production of biofuels. Many of the breakthroughs have been covered here at HeatingOil.com, but to see them listed shows the diversity of technological advances in biofuels. Coolest sounding? Nanofarming. Grossest looking? The gribble. (Click through for a more close-up view of a gribble than you would ever want.)
A new report from the Department of Energy says that wind power may be more promising than previously thought for the western United States, says the New York Times’ Green blog. Wind energy could provide up to 30 percent of electricity for Arizona, Colorado, Nevada, New Mexico, and Wyoming. The key that the study found was that those states could avoid the major pitfall of wind power—what do you do when the wind stops blowing?—by coordinating utilities operations across such a large geographic area. The wind might stop in one place, but it will be blowing somewhere in those five states.
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