Bill to Eliminate Big Oil Tax Breaks Defeated
Big Oil companies' $2 billion-a-year in tax breaks are safe - for now - after a bill to strip the five biggest oil companies of the taxpayer-funded perks was defeated this week. (image: redgreenandblue.org)
An attempt to end billions of dollars in tax breaks for Big Oil companies has been defeated in a Senate vote.
The Democrat-sponsored bill aimed to strip the five biggest oil companies of an estimated $21 billion in tax breaks over the next decade and divert that money to paying off the federal deficit. But it provoked fierce opposition from Republicans and oil company executives, who warned it would raise gasoline prices, cost America jobs and make it more reliant on foreign oil.
The bill was defeated – largely along party lines – on Tuesday, falling eight votes short of the 60 votes needed to progress it. Senate Majority Leader Harry Reid, D Nev, said he would try to revive the bill in budget talks with Republicans aimed at cutting more than $6 trillion in spending.
“Instead of defending oil companies, Republicans should be defending the American taxpayer,” he said.
Exxon Mobil, BP, ConocoPhillips, Shell and Chevron reported record first quarter profits this year of $36 billion. Their huge windfalls come amid soaring world oil prices, near record heating oil fuel costs and gasoline prices nudging $4 a gallon. Under pressure to reign in gas prices, President Obama had supported the bill, calling last month for an end to the industry’s “unwarranted” taxpayer-funded subsidies.
Oil industry group the American Petroleum Institute spokesman Martin Durbin welcomed the bill’s defeat this week. “With this vote we hope Congress will now turn to more constructive policy-making on energy.”
But the bill’s sponsor, Sen. Robert Menendez, NJ, said at a time when families’ incomes were being swallowed up at the pump and the deficit kept growing, “we simply can’t afford to keep giving away billions in taxpayer handouts to oil companies that are doing nothing to help lower prices.”
Big Oil executives defended the tax breaks in a Congressional hearing last week. The bill’s opponents have argued ending the subsidies would force up the cost of gasoline.
However a report prepared for Sen. Reid by the Congressional Research Service has found that eliminating the tax breaks is unlikely to cause a price rise.
The report said crude oil was the largest factor in the price of gas, and that the price of crude oil was set by world market, MinnesotaIndependent.com reported. The tax changes were unlikely to affect oil output, the price of oil and, consequently, the price of gas. Furthermore, the price of oil was high enough to provide incentive for continued production in the US without tax breaks, CRS said.
“The incidence of the tax would appear to be on shareholders.”
Citgo Begins 6th Annual Heating Oil Assistance Program in Boston
Joe Kennedy of Citizens Energy kicking off the Citgo heating oil assistance program in New york City in 2010. (image: citizensenergy.com)
Citgo and Citizens Energy’s heating oil philanthropy program, in doubt just a few months ago, officially kicked off its 6th year in Boston on Thursday, according to a Citgo press release.
Since 2005 Citgo, the American branch of Venezuela’s national oil company (Petróleos de Venezuela, S.A. or PDVSA), in conjunction with Massachusetts non-profit Citizens Energy, has distributed hundreds of thousands of gallons of free and low-cost heating oil to needy American families and homeless shelters across the US. The program was on shaky ground in late November, when Venezuelan president Hugo Chávez proclaimed his desire to sell the company and faced serious budget shortfalls that endangered a raft of social programs proposed by Chávez. Some wondered whether a new, more profit-driven owner of Citgo might put an end to the yearly giveaway. But no buyers materialized and Citgo remains in the hands of PDVSA.
With the ownership unchanged and the eager participation of Citizens Energy, the sixth consecutive year of the program opened with a delivery to a family in need in South Boston on Thursday.
The Citgo/Citizens Energy program began in 2005 in response to an open letter from 12 US senators calling for donations from major oil companies and oil-producing countries. The senators urged the companies and nations to help needy Americans defray high energy costs brought on by hurricanes Katrina and Rita. Only Venezuela and Citgo agreed to donate fuel in response. According to Citizens Energy President Joseph P. Kennedy, II (the same Joe from the Joe-4-Oil commercials), his organization makes the same appeal each year and each year receives the same response:
Every year, we ask major oil companies and oil-producing nations to help our senior citizens and the poor make it through winter, and only one company, CITGO, and one country, Venezuela, has responded to our appeals.
The program, which according to Citgo has donated over 170 million gallons of heating oil since its inception, has been criticized as political leverage for the outspokenly anti-American Chávez. President Chávez frequently points to the program as a sign of his socialist nation’s altruism in contrast to American greed and selfishness.
Heating oil users in need can find more information on the Citizens Energy website and should call 1-877-JOE-4-OIL (1-877-563-4645) to apply for assistance.
Consumer Protection Chief: Reform Needed to Protect Pre-Buy Heating Oil Customers in NH
Heating oil users who enter into pre-buy contracts in New Hampshire are left vulnerable by inadequate oversight, according to Senior Assistant Attorney General James T. Boffetti. (image: buildingwellness.com.au)
In an opinion piece written on Saturday for the Concord Monitor, the head of the Consumer Protection and Antitrust Bureau in New Hampshire James T. Boffetti called for a strengthening of the laws governing pre-buy heating oil contracts.
Bofetti’s article was a response to an earlier editorial that appeared in the Portsmouth Herald and faulted the state Attorney General’s office, where Bofetti serves as a senior assistant attorney general, for lax enforcement of pre-buy regulations. The criticism came out of the case of Flynn’s Oil, the New Hampshire heating oil dealer that went out of business in late 2009 and is currently in the process of repaying $534,603.08 to pre-buy customers who did not receive deliveries, as ordered by a criminal court in April. The Herald editorial argued that Flynn’s fleecing of pre-buy customers could have been avoided if the Attorney General’s office had better enforced existing laws governing pre-buy contracts.
Bofetti defended the Attorney General’s office in his response, explaining that the critical editorial had incompletely represented pre-buy regulations when it claimed that heating oil dealers who offer pre-buy contracts are required to send a letter of credit to the Attorney General’s office. He wrote,
RSA 339:79 requires businesses that enter into [pre-buy contracts] to have one of the following in place: a futures contract, a surety bond or a letter of credit. The oil company can choose whichever option it wants. The overwhelming majority of companies offering these contracts in New Hampshire chose the futures contract option and not a bond or letter of credit. The reason for that is simple: The futures contract is the only option that does not require the oil company to pay for the oil up front…That is where the law falls flat. There is no legal requirement that oil companies set aside the money they receive for pre-buy contracts and reserve it for the future purchase of oil.
Because the letter of the law allows dealers to get around purchasing enough oil to cover all of their pre-buy contracts, Bofetti argued that it needed to be changed. He stated that his office was working with state legislators to amend the law and give pre-buy heating oil customers the protection they deserve:
The attorney general is working with legislators to advance legislation that will require oil companies to obtain a security bond, a letter of credit, or place pre-buy payments in an escrow account dedicated to the purchase of oil.
To be sure, the case of Flynn’s Oil highlighted a major deficiency in New Hampshire law that fails to protect heating oil consumers. Clearly, the law needs to be changed, and both Bofetti and his detractors who wrote the Herald editorial agree on that fact. With the ball rolling on the reformation of applicable laws, New Hampshire pre-buy heating oil users can look forward to improved protections that should prevent a repeat of the Flynn’s Oil fiasco. However, when state legislators will take action on those reforms is unclear.
Oil Refiners’ Bookkeeping Trick Artificially Deflates Year-End Inventory Numbers
To save money on taxes, US oil refiners routinely use up their stores of crude oil at the end of each year, which leads to an artificially-large decrease in year-end petroleum inventory data. (image: citifmonline.com)
American companies do all they can to reduce their tax burden. Some keep their money in foreign bank accounts. Others scour tax code in search of loopholes. In the oil refining industry, one way to lower taxes is to use up stored supplies of crude oil right before the end of each calendar year, the Wall Street Journal reported on Monday.
The “last in, first out” (LIFO) practice involves refiners using up (or at least claiming they used up) more recently-purchased crude oil and keeping crude purchased earlier in the year in storage. Refiners do this because at the end of each calendar year, they are taxed on their store of crude oil. On the quantity of barrels that they held in storage at the beginning of the year, refiners pay a tax based on the January price of crude. However, every barrel above the refiner’s original holdings is taxed at the end-of-year price, which is almost guaranteed to be higher due to crude’s long-term price trend of consistent increase. This gives refiners the option of paying less in taxes on their crude holdings by shuffling them around at the end of each year—an option that they exercise regularly.
The effect of the LIFO practice in the refining industry is a large reduction in US crude inventories during the last two months of the year. Falling inventories are usually a clear signal of increases in oil demand and often result in price upswings—the bigger the inventory decrease, the bigger the price increase. Last week’s inventory data released by the Energy Information Administration that showed a big decrease in crude inventories (7.3 million barrels), however, did nothing to raise prices. Apparently, that was because traders were well aware of the refining industry’s use of LIFO, and knew that the huge inventory drop was a result of refiners halting imports and refining crude they already have in storage until they reach the magic number that will reduce their taxes. One market analyst made clear to the Journal that the cause of crude major inventory drops each November and December is no secret among oil traders:
“Year after year, we see crude inventories in the Gulf Coast region decline in December…and it doesn’t mean a darn thing in terms of whether the global oil market is tight or not,” said Tim Evans, an oil analyst at Citi Futures Perspective.
The good news is that the refining industry’s LIFO operations don’t appear to drive up oil prices by falsely deflating crude oil inventory data. But refiners sure have found an effective way to give taxes the run-around.
Oil Industry Mogul and Leading Peak Oil Defender Matt Simmons Dies
Matt Simmons, an energy entrepenuer and leading voice on the subject of Peak Oil, died on Sunday. (image: Michael Lewis via opednews.com)
Matthew Simmons, a successful businessman in energy industry and one of the most vocal and respected defenders of Peak Oil theory died suddenly on Sunday at the age of 67. Will the world run out of accessible crude oil in the foreseeable future? For Simmons and other adherents to Peak Oil, the clear answer is yes. For the last two decades, Simmons declared that Peak Oil is a reality the world must come to grips with or face dire consequences, a sentiment he expressed in March of this year in an interview on the Financial Sense News Hour (HeatingOil.com’s Zoe Macintosh quoted extensively from the interview in her article on a secret energy meeting in the UK). Many voices in the energy industry denounce Peak Oil talk as alarmist kookiness, but Simmons’ education and experience in the oil industry gave him unmatched credibility on the issue and quickly elevated him to the status of the unofficial leader of the Peak Oil movement.
After graduation from Harvard Business School, Simmons became a money manager for wealthy individuals. After helping a client get into the rapidly expanding offshore oil drilling business in the 1970s, Simmons moved to Houston and founded his own energy company, Simmons & Co., with his brother, the Houston Chronicle reported. From there, Simmons worked tirelessly in the oil industry, helping companies weather the uncertain energy landscape of the 1980s. By the 2000s, Simmons’ credibility in the industry helped land him a job as an energy advisor to President George W. Bush.
In 2005, Simmons Published Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, a book in which he argued that the oil reserve and oil production estimates of Saudi Arabia and other oil-producing nations were wildly overstated and that Peak Oil was just around the corner. While this position was and is largely dismissed by the world energy establishment, many of Simmons’ beliefs have attracted some notable supporters. Last November, a whistle blower inside the International Energy Agency claimed that the international body deliberately exaggerated world oil supplies to avoid global panic. Simmons made a major investment to back up his bleak views on the future of oil by founding the Ocean Energy Institute in 2007 to investigate ways to reap renewable energy from the ocean.
Bold predictions and great conviction of his beliefs characterized Simmons’ public life. In 2007, he correctly predicted that the price of crude would surpass $100 per barrel the following year (it hit an all-time high of $147 a barrel in July 2008). More recently, Simmons harshly criticized BP for the Gulf oil spill and incorrectly forecast that the company would go bankrupt paying for the cleanup.
While Simmons’ controversial statements on Peak Oil and other energy topics will likely be debated for years to come, his status as an influential firebrand in the energy industry cannot be questioned. Matthew Simmons died at his vacation home in Maine on August 8. He is survived by his wife Ellen and their five daughters.
Happy Birthday to Us!
HeatingOil.com celebrates its first birthday. (image: cakes-you-can-bake.com)
Over this past weekend, HeatingOil.com reached an important milestone…our first birthday.
Way back in July 2009 when we first launched the site, we had a pretty good idea of what we wanted to accomplish. We wanted to fill in what we perceived to be a massive information gap about this vital fuel and industry. And somehow we hoped we could make a dollar doing it. We were pretty sure we could handle the first part but the making a dollar part was a very open question. Thankfully, after a lot of hard work, experimentation, testing and about 5,000 WebEx presentations to heating oil dealers, we’re well on our way.
HeatingOil.com now counts over 200 heating oil suppliers among its customers and signs up more every day. We are also the most heavily trafficked site in the heating oil industry, with tens of thousands of unique visitors and hundreds of thousands of page views per month. In addition to providing news and information, we also help thousands of heating oil consumers identify the best heating oil suppliers in their area. We really didn’t expect all this to happen a year ago, and we’re very grateful to everyone that has helped us get this far.
In the current state of the world, just being in business a year later is a major accomplishment. We owe that to the incredibly high quality of work from our inveterate staff of writers, video production pros, administrative and sales staff, and our passionate and brilliant consultants that have made HeatingOil.com the most visited and important website in the heating oil industry.
Hopefully we’ll have as much good news to share on our second birthday—and we’ll work hard to make sure we do. Thanks for reading and stay tuned.
Oil “Barrels” Trace Back to Pennsylvania Whiskey
From one revered liquid to another: crude oil’s American unit of measurement, the 42-gallon barrel, derives from whiskey barrels of the 19th century. (image: mymodelships.com)
If you didn’t know before, the BP oil spill has likely taught you that in the US crude oil (like some other petroleum products) is measured in barrels. Commodity market prices, inventory data and oil spill volumes are all presented in barrels. An American barrel contains 42 gallons—hardly an intuitive or easy-to-remember quantity. So where did the 42-gallon barrel come from?
An informative article in Tuesday’s Washington Post answers that question with some surprising facts. The first oil wells, drilled in Titusville, PA in the 1860s, frequently sprung leaks or “blowouts.” When blowouts occurred, nearby workers scrambled to collect the spewing crude in any receptacle they could find, and 40-gallon whiskey barrels quickly became reliable standbys. As the oil industry grew, it sought to set its own standards of measurement, and adopted the whiskey barrel plus two gallons. Why the extra two? The Post cites one oil historian’s theory that it was the oil producer’s equivalent of a “baker’s dozen”:
One theory comes from Charles A. Whiteshot in “The Oil-Well Driller,” who cites producers agreeing in 1866 that “An allowance of two gallons will be made on the gauge of each and every 40 gallons in favor of the buyer.”
The article goes on to explain the discrepancies between US and UK gallons: both contain eight pints, but British pints (as most American beer-drinkers traveling in the UK have noted) are larger than American pints—20 ounces to 16 ounces. Because of that difference, our 42-gallon barrel of oil represents just 35 British gallons, though the UK now favors metric “litres” over gallons.
So it turns out that the American tradition of crude oil production is intertwined with another great American tradition—whiskey. And even though the rest of the world measures crude by weight (in metric tons—a much more accurate measurement that factors out fluctuations in volume that come with temperature changes), the US will continue using its own special measurement for the foreseeable future, despite the obvious benefits of adopting the rest of the world’s established standard.
Take that, metric system! American exceptionalism marches on!
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.
Oil Spill Curbing BP’s Oil Trading Operations
Stock traders at the NYSE, with BP CEO’s Senate testimony on television in the background. In addition to its status as one of the largest producers of oil in the world, BP has powerful operations in the world’s commodities markets, but their power is waning due to fallout from the oil spill in the Gulf of Mexico. (image: Brendan McDermid/Reuters via nytimes.com)
Early investigations point to BP’s aggressive, fast-paced, profit-driven approach to offshore drilling as at least a partial cause of the catastrophic oil leak in the Gulf of Mexico. Now it appears that the fallout from that catastrophe is seriously diminishing the power and influence of BP’s trading division, which takes the same approach to commodities markets, the New York Times reported on Friday.
BP’s trading operations in crude oil and refined products at commodities markets around the world has gained a reputation for being bigger, more aggressive, and more successful than their competitors. This reputation was perhaps best embodied by a $303 million fine levied against BP by the Commodity Futures Trading Commission (CFTC) in 2007 for illegal manipulation of the propane futures market in 2007. According to government documents, BP traders bought up 5.1 million barrels worth of short-term futures contracts on propane stored in Texas pipelines, which represented 800,000 more barrels than were actually in storage. By snatching up such a huge portion of the short-term propane market and refusing to sell any propane contracts, BP traders drove prices sky-high before finally offloading the contracts and making a killing. One trader pled guilty to this illegal market cornering, and four other BP traders’ indictments were thrown out by a judge who determined that they were exempt from federal regulations because they took place in barely-regulated over-the-counter markets. The Times reported that investigators found evidence of BP attempting a similar scheme that involved moving crude oil around its storage facility in Cushing, Oklahoma, but could did not prosecute due to an almost-expired statute of limitations.
The days of BP throwing its massive weight around commodities markets may be numbered, however, as the effects of the Gulf oil spill are rapidly draining the company’s financial and personnel resources. Every billion dollars BP pays out to the US government or Gulf Coast residents is a billion that can’t be paid out to commodities traders. As a result, rival international trading companies are already poaching BP traders. Depleted coffers at BP also limit the company’s ability to secure short-term bonds that allow its traders to increase their buying power.
Although its financial assets may be seriously reduced by oil spill-related costs, BP retains a huge advantage in the oil trading game: its massive network of oil extraction, refining, and storage facilities. With control and knowledge of a huge portion of the world’s supplies of crude and refined products, BP can use its own data to accurately predict when prices will move up or down. While this advantage seems at least a little unfair, it is fully legal.
Levering the advantages afforded it by its huge share of the world’s physical oil market and its seemingly infinite stores of capital to further increase profits on the world’s commodities markets has been an immensely successful endeavor for BP. From the Times:
Analysts estimate that BP’s trading profits have remained in the $2 billion to $3 billion range since then, which would be slightly less than 20 percent of the company’s $16.7 billion in earnings in 2009.
Responding to the Times article, oil market commentator Raymond Learsy argued in a column for the Huffington Post that the trading maneuvers employed by BP to maximize its profits usually involve driving the price of crude and other petroleum products like heating oil up and not down. And when prices on commodities markets increase for commodities traders, they increase at gas stations and heating oil racks as well—meaning that as BP drives up the prices of its own products on commodities markets, they drive up the prices that average Americans pay for those products as well.
The financial hemorrhaging inflicted on BP by the Deepwater Horizon oil leak and cleanup have already begun to erode the company’s influence on commodities markets, which could have an ever-so-slight cooling effect on petroleum product price volatility. However, the company’s trading operations will march on, and continue to make significant (though somewhat smaller) profits for the oil giant.
So if you needed a non-oil spill-related reason to be ticked off at BP, there you have it.
BP Buys Kevin Costner’s Oil Cleanup Machines to Use in the Gulf
Kevin Costner testified to members of Congress about the capabilities of his oil separation machine. (image: nytimes.com)
Kevin Costner returned to the limelight in May when he demonstrated an oil separation machine that could be used to clean the Gulf of Mexico. BP—ready to accept ideas from pretty much anyone—has tested Costner’s machines and was so “excited” and “pleased” with their performance that the embattled oil giant bought 32 of them for deployment in the Gulf of Mexico, reports ABC News.
Costner’s company, Ocean Therapy Solutions (OTS), has been working on its centrifuge that can separate oil from water since the Exxon Valdez oil spill spurred Costner into action. Costner says that his machines could have mitigated the disastrous effects of the Valdez spill:
If 20 of my V20s [a model number of an OTS oil separator] would have been at the Exxon Valdez, 90 percent of that oil would have been cleaned up within the week.
BP hopes that Costner’s confidence is justified, and is giving OTS’s oil separators a chance to prove their value in the gulf, a BP official told ABC News:
“We were confident the technology would work but we needed to test it at the extremes. We’ve done that and are excited by the results,” said Doug Suttles, BP’s chief operating officer. “We are very pleased with the results and today we have placed a significant order with OTS and will be working with them to rapidly manufacture and deploy 32 of their machines.”
Only time will tell if the Costner’s oil separators are a feel-good success like Field of Dreams or a post-apocalyptic flop like The Postman, but BP needs all the help it can get to contain the out-of-control oil spill in the Gulf of Mexico.
From the HeatingOil.com Video Vault: Inside Big Oil’s Boardroom
The face of Big Oil.
As we approach our one year anniversary in late July, we thought it might be fun to share some videos we made in June of 2009 to help us launch the site. We ended up not using any of them at the time- they seemed either too smarmy or too crazy- not the first impression you want to make on the reading public. So they’ve remained in the HeatingOil.com archives for 11 long months, until now.
The first time I watched this, I have to admit I was kind of shocked and horrified. There was no way I was going to use this to help promote our blog. We wanted to talk about helping our readers save money on heating oil and equipment- not terrify them.
But events change your perspective. The insane and creepy feeling of the piece seems entirely appropriate given the absurd situation with BP in the Gulf of Mexico. I think our fictitious ‘Board’ looks more realistic than ever.
embedded by Embedded Video
YouTube Direkt
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.
Delaware Refinery to Reopen with Plans to Produce Low-Sulfur Heating Oil and Biofuels
Thomas O’Malley (center, to the left of Delaware governor Jack Markell) and his PBF Energy Partners have provided Delaware’s economy with a shot in the arm by purchasing the refinery in Delaware City. (image: The News Journal/Jennifer Corbett via delawareonline.com)
In November of last year, as slumping demand for refined products shrunk the refining industry’s revenue stream to a trickle, Valero shut down its Delaware City refinery. The permanent closure of the facility dealt a huge blow to Delaware’s economy and resulted in the loss of 550 jobs.
In an uplifting and somewhat surprising turn, the new owner of the refinery announced on Tuesday that it would not only re-open the plant, but also improve and expand it. DelawareOnline.com reported that PBF Energy Partners finalized its purchase of the refinery and announced at a ceremony marking the event that it would expand the refinery’s use to include the production of biodiesel, ethanol, and low-sulfur heating oil.
After the plant’s closing, Valero had planned to demolish it, as it had been fraught with maintenance issues. This led governor Jack Markell to search for a new buyer to salvage the facility. The governor’s efforts helped bring in PBF Energy Partners, a joint venture headed by energy industry veteran Thomas D. O’Malley. PBF bought the refinery from Valero for $220 million.
At the transfer of ownership ceremony, O’Malley announced that PBF had plans to spend $500 million on a new wing of the plant that will produce low-sulfur heating oil and also significantly reduce the facility’s greenhouse gas emissions. The announcement seems to have come as a direct result of legislative and industry trends that call for a major upswing in the production of the low-sulfur fuel. While some refiners aligned with Big Oil have resisted the trend, O’Malley made clear that his company plans to be the first in the industry to embrace it, saying, “We’re going to come out publicly as the first refining company to support low-sulfur heating oil.” The fact that the European affiliate of PBF, Petroplus, which is also headed by O’Malley and is Europe’s largest independent refiner, already produces low-sulfur heating oil makes the transition that much easier.
O’Malley went further in staking out his company’s forward-thinking position in the industry by announcing plans to eventually produce ethanol and biodiesel at the newly-purchased refinery:
From our perspective, biofuels are a reality. They’re going to be around for a long time, and we’re going to be pushing second-generation ethanol production here and trying to put a facility here.
As for the refining jobs lost when the plant closed in November, PBF had more good news. The Delaware City Refining Co. that it created to operate the plant has already begun a $130 million inspection and refurbishment initiative that will create 700 jobs. When the refinery returns to normal operation (which could happen as early as April of 2011), it will employ some 700 full-time and contract workers.
Will the reopening of the Delaware City plant mark the beginning of a revitalization of the US refining industry and gradual transition to producing more green fuels? If so, the still-sluggish economy and low demand for petroleum products will likely hinder the process for months or even years to come. In the meantime, however, heating oil users should be glad that a heating oil producer with an eye on the future will reopen right here in the Northeast, giving a boost to local economies and helping to ensure ample supplies of heating oil (low-sulfur and otherwise) for winters to come.
Fake BP Twitter Account Offers Bitterly Comic Take on Oil Spill
The fake account poses as a BP spokesperson to send out messages like the one above to the account’s followers. (image: twitter.com)
With the Secretary of the Interior promising to “keep his boot on the neck of British Petroleum,” BP might want to do some public relations work to try to burnish its image. Unfortunately someone is already doing it for them with the fake BP Twitter account @BPGlobalPR, a parodic Twitter feed that has about 10 times more followers than the actual BP America Twitter account (and just slightly more than our own @heatingoil account).
The fake Twitter account has won many fans with its dark humor and scathing satire, as seen in tweets like: “Catastrophe is a strong word, let’s all agree to call it a whoopsie daisy,” and “If we had a dollar for every complaint about this oil spill, it wouldn’t compare to our current fortune. Oil is a lucrative industry!” BP Global PR has also gained the attention of the news media and BP itself; a BP spokesman told the Wall Street Journal that the fake account was “a shame.”
So far BP hasn’t taken any action to remove the fake Twitter account, which may be in violation of Twitter’s terms of service and has confused some Twitter users who thought the account was genuine and took issue with its irreverent tone. The Los Angeles Times talked with the once-anonymous tweeter (since outed as Mike Monteiro, CNET reports, who said that the fake account had raised more than $3,000 dollars for the Gulf Restoration Network by selling t-shirts emblazoned with the slogan “BP cares.”
The fake BP representative has been less tolerant of competing BP Twitter accounts, accusing the genuine @BP_America account of being a fake and saying, “if we find out who is in charge of them, we will annihilate them.”
(image: twitter.com)
Congress Considers Tax Hike for Oil Spill Cleanup Fund; Could Raise Heating Oil Prices 1¢ Per Gallon
A new tax would help fund efforts to cleanup oil spills and pay for the economic damages that oil spills cause. (image: John Moore/Getty Images via propublica.org)
As the BP oil spill threatens to sap the $1.5 billion Oil Spill Liability Trust Fund, lawmakers are considering raising the tax that finances the fund by 24 cents per barrel of crude oil, quadrupling the amount of the tax from 8 cents to 32 cents. The House vote could happen as early as Wednesday, says the Associated Press, and Senate leaders aim to put it to a vote by the end of the week.
The oil spill fund covers damages from spills, including environmental damages and damages to local industries, such as fishing and tourism, CNN Money reports. Current law caps BP’s liability at $75 million for economic damages, after which point the Oil Spill Liability Trust Fund is supposed to cover excess damages. However, BP’s liability and the $1.5 billion that the 8-cent-per-barrel tax has so far raised for the fund do not come close to meeting the estimated $14 billion it may cost to clean up the oil spill in the Gulf of Mexico. The tax increase would raise nearly $11 billion over the next decade to finance oil spill cleanups.
Even though the oil tax would be quadrupled, analysts anticipate that the impact on consumers will scarcely be perceptible. CNN Money heard from Tom Kloza of the Oil Price Information Service on the costs the tax would add to refined oil products:
We’re not talking a big impact here; we are talking about adding less than a penny to the cost of the fuel.
While the oil tax increase has escaped public criticism from the oil industry and lawmakers, it is part of a larger spending bill that has generated opposition in Congress. Critics on both sides of the aisle have opposed the bill, which includes a variety of tax credits, on the grounds that it would add to the federal deficit.
If the tax increase does take effect it will add roughly a penny to the cost of every gallon of heating oil. Every penny counts for heating oil users who may already face difficulties meeting their heating expenses, but it may be a worthwhile tradeoff to save the local environment and industries scarred by the next oil spill.
Heating Oil Weekly Roundup: Offshore Oil Drilling, Building-Top Wind Turbines, Trading Oil with Iran
Caption: (image: Mike Lester, Rome News-Tribune via cagle.com)
Opposition to offshore oil drilling has swelled in the aftermath of the BP oil spill in the Gulf of Mexico, but environmental risk may not be the only argument against offshore drilling, points out Glenn Morton at The Oil Drum blog. Morton looks at BP’s Thunder Horse drilling platform (not the Deepwater Horizon platform that collapsed and spilled) and finds that it is not performing nearly as well as expected, which could be another reason to recalibrate the cost-benefit analysis of offshore drilling.
If you own a large building and you want to save $100,000 a year, here’s a tip: don’t run your heating and cooling systems at the same time. That’s the sort of fix that can be found through “building commissioning,” the surprisingly little-used practice of having an outside expert test a building’s climate control and energy systems, reports Richard Conniff at the Yale Environment 360 blog. If applied to all non-residential buildings, commissioning could save $30 billion dollars by 2030.
Building-top turbines seem like a neat way to add some self-sufficiency to a home or building and cut down on energy bills in the process. Now just imagine how cool they would be if they worked. The trouble is, they usually don’t, as the Museum of Science in Boston found out. Martin LaMonica of CNET tells the story of how the museum is taking advantage of its failed urban wind effort to learn more about the challenges of small-scale wind energy.
Buying oil exports from Iran is legal, but it’s a secretive trade nonetheless, says the Wall Street Journal. Sanctions against Iran only apply to selling oil to Iran, but oil majors like Shell and Total still alter ship-tracking data and turn off electronic transponders when doing business with the ostracized country.
New Ownership Has Big Plans for PriceEnergy, Pledges to Repay Heating Oil Dealer Debts
The re-branding and re-launch of PriceEnergy (set for next week) includes a new logo. (image: industry-publications.com)
In March, the online heating oil shopping service PriceEnergy.com was in an uncertain position as its parent company Able Energy struggled its way through serious financial and legal troubles. Since then, the PriceEnergy.com website has been taken down, with little to no indication of the company’s future.
That changed on Friday, when a press release from Exousia Advanced Materials, Inc. announced the “successful” debut of the new PriceEnergy at the Atlantic Region Energy Expo in Atlantic City last week. An April 19 press release from Exousia had announced that its acquisition of Evergreen Global Investments, Ltd. had taken longer than expected but was “proceeding according to plan.” Evergreen had previously acquired PriceEnergy from Able, but details on that transaction are unavailable.
According to Exousia, PriceEnergy has been completely re-branded and re-staffed, complete with a new logo and website. As of Tuesday afternoon, however, the website was still unavailable. PriceEnergy CFO Bob Roddie told HeatingOil.com that the new website will be up and running next week and will be preceded by a press release announcing the site’s re-launch on Wednesday, May 12.
When asked about the heating oil dealers who are owed payment by PriceEnergy for services rendered when the company was still owned by Able, Roddie gave assurances that the company would settle all dealer debts and acknowledged that “dealers are an important part of our business.” He declined to give details on how many dealers are owed back payments by PriceEnergy or the amount of the company’s debts, which one anonymous tipster told HeatingOil.com totaled more than $1 million. He did say that PriceEnergy planned to resolve those debts and all other issues stemming from the company’s former affiliation with Able Energy in “a very positive way.”
So what’s in store for the new PriceEnergy? The press releases offered more positive generalizations than specifics, but did offer a few telling details. The April 30 release stated, “The new PriceEnergy team is expanding the company from its home heating oil base to propane and other fuel products.” Roddie confirmed that heating oil would remain the focus of the company, and that expansion into other products would include propane and natural gas.
The same press release also announced,
“PriceEnergy intends to migrate its entire product base to include green energy attributes.”
This somewhat cryptic statement, made by a company that facilitates distribution of heating oil, hints at working exclusively with biodiesel heating oil. Roddie confirmed that biodiesel heating oil, also known by its brand name Bioheat, would be a part of PriceEnergy’s future, but did not elaborate. The move toward green heating oil would make business sense for the website’s new parent company. The April 19 press release stated,
Evergreen has an interest in a South Carolina biodiesel production facility (”Biodiesel Production Facility”). The Biodiesel Production Facility is a producer of soybean oil based biodiesel…
Clearly, a company with an integrated biodiesel production facility could provide affiliated heating oil dealers with the fuel at a lower cost than an independent supplier. However, the press release also stated that the South Carolina facility produces biodiesel according to European Union specifications, raising the question: how much biodiesel will be used to supply the domestic heating oil market, and how much will be exported to the lucrative European market?
The marketing materials published by the new parent company of PriceEnergy paint a picture of a reformed and streamlined company that will provide the same services as before, but better. Whether or not the new PriceEnergy.com can deliver on these promises will be seen next week. The first order of business would have to be repaying heating oil dealers who were shorted by Able Energy’s sudden implosion. Once its outstanding debts are settled, PriceEnergy will be free to develop into the leaner, greener company Exousia has described.
Exxon CEO Latest to Worry that Oil Prices Could Derail Recovery
Exxon CEO Rex Tillerson is concerned that high oil prices could hurt the economy and lead to demand destruction. (image: arabianoilandgas.com)
While the rising price of crude oil has spawned a vigorous debate over the impact of speculation on oil prices, seasoned observers of oil markets appear to have reached consensus on another question: high oil prices threaten economic recovery. Representatives of the IEA, OPEC, and other economists and oil consultants have all worried that rising oil prices will curb consumer spending on other goods and impede the global economy’s tentative recovery.
Now the Houston Chronicle has reported that Rex Tillerson, the CEO of Exxon Mobil, has joined the club:
As oil prices move upward, they begin to become adverse for the national economy and adverse for some big pieces of the state economy for sure.
For Tillerson, the danger comes when gasoline prices hit $3.00–$3.50 a gallon. At that point consumers begin to change their behavior in order to reduce their energy demand. While changes in consumption can have “a detrimental effect” on the entire economy, Tillerson also worried that high prices pose a long-term threat to the oil industry through demand destruction, the permanent reduction of demand.
The other analysts cited above have cautioned that crude oil prices above $100 a barrel could halt the recovery, and that prices above $80—which happened in the fall, and has been the case for nearly all of March and April—are slowing the burgeoning recovery.
While many consider high prices the result of speculation, and the Senate gets set to debate financial reform that would curb speculation, Tillerson believes the solution to higher prices is to encourage investment and not to “over-regulate” the oil and gas industry.
Oil Refining Industry Showing Some Signs of Recovery Outside US
The massive refinery complex at Jamnagar, India can process high- and low- quality crude oil into consumer products. (image: ftdata.co.uk)
Since October of last year, HeatingOil.com has been reporting on the refining industry’s struggle to stay profitable in these times of expensive crude oil and low demand for refined products. On Friday, the investment blog 24/7 Wall St. reported that the trend was reversing, though almost exclusively in China and other parts of Asia.
In the United States, demand for heating oil, gasoline, and diesel fuel remain below average as crude prices reach 18-month highs. However, global demand for refined products has risen steadily in the last five years, despite a slowing in that growth in 2008 and 2009 that owed to the global recession. World demand grew from 85.3 million barrels per day (mbpd) in 2006 to 86.6 mbpd in 2010.
According to 24/7 Wall St., the lion’s share of that demand growth has come from China: “Chinese demand more than makes up for total global demand growth. Even other developing countries, as a group, are using less oil now than they did in 2006.” Even as those other developing nations as a group use less petroleum products, the Chinese consumers, and those in many other parts of Asia, continue to use more. This is great news for Asian refiners, as “demand for refined products in Asia is expected to grow by 900,000 b/d in 2010 according to a report from Australia’s Macquarie Research quoted by MarketWatch.” Many Asian refineries are able to process light, sweet (viscous and low-sulfur) as well as heavy, sour (sticky and high-sulfur) crudes, affording them substantial savings because low-quality crude gets cheaper in comparison to higher-quality crude.
Unfortunately for US refiners, growth in demand for consumer petroleum products is nowhere in sight. Furthermore, most US refineries require the more expensive, higher-quality crude to manufacture other fuels, preventing them from cashing in as the price gap between light, sweet crude and heavy, sour crude widens.
The “Yes Men” Target Royal Dutch Shell, Issue Fake Apology to Niger Delta
A member of the Yes Men apologizes on behalf of Shell. (image: Mike Bonnano/The Yes Men via motherjones.com)
The “Yes Men” are a group of activists and performance artists who have made their name by posing as representatives of powerful businesses or organizations. We last covered them on HeatingOil.com for their prank on the Chamber of Commerce, when the Yes Men—in the guise of Chamber of Commerce spokesmen—held a phony press conference to announce that the Chamber had reversed its position to support the pending climate bill.
Their most recent target was Royal Dutch Shell, reported Mother Jones. Shell has extensive operations in the Niger Delta, and the Yes Men’s hoax centered on issuing an apology, in Shell’s name, to the residents of the Niger Delta for human rights abuses. The Yes Men, as they’ve done previously, held a press conference (video below) to read Shell’s public apology, and also launched a website, shellapologises.com.
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When the Chamber of Commerce was on the receiving end of a Yes Men prank, they retaliated by suing for copyright infringement. There’s no word yet on Shell’s response, but Mike Bonnano of the Yes Men told Mother Jones that he looked forward to a reaction but was prepared for silence:
It would be a bonus if they counter attack. But success does not require a response, it is just enhanced by it. If they fail to attack us, after all, we can always assume their identity and attack us for them, as we did with Dow Chemical in the past.
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