Kerry, Graham, Lieberman Climate Bill to be Unveiled on Monday
On Monday, Sens. Kerry, Graham, and Lieberman will finally reveal their climate bill. (image: son.jhmi.edu)
After months of deliberation and negotiation, Sens. John Kerry (D-MA), Lindsey Graham (R-SC), and Joe Lieberman (I-CT) will outline their proposed climate bill on Monday. Though the bill’s central features are already known—a cap on emissions from utilities, a fee of some kind on transportation fuels, and expanded offshore drilling and nuclear power—there is still uncertainty over how it will be implemented and whether it can gain the 60 votes needed to overcome a filibuster.
While there is some debate over the nature of the emissions cap—Dow Jones Newswires (via DownstreamToday.com) says emissions trading might not be permitted at all under the bill, but Bloomberg simply refers to a “cap-and-trade program”—the fee on transportation fuels is shaping up to be the main battleground. The central question: Is a fee the same thing as a gas tax?
“There is no gas tax, there was no gas tax and there will never be a gas tax,” said Kerry on Tuesday, but he has not been able to convince skeptics. The proposed fee would be linked to the price of carbon emissions to equitably distribute costs between the oil industry—responsible for transportation fuels—and the natural gas and coal industries—the main providers of fuel for electricity generation who would be hit by a cap on emissions from utilities.
However, Bloomberg reports that the fee has been abandoned altogether in the face of opposition from Senators, such as Mary Landreiu (D-LA), who want to steer clear of anything that could be labeled a “gas tax” during an election year. Here’s the latest development in how the climate bill would treat the oil industry, according to Bloomberg:
The latest proposal being considered would give the oil industry free pollution allowances that would expire by a certain date, after which allowances would have to be purchased. The Congressional Budget Office would be called upon to certify the mechanism wasn’t a tax.
Such a mechanism would bring the oil industry under the emissions cap already slated for the coal and natural gas industries, which would make the proposed bill closer to the House bill that was passed last summer but gained little traction in the Senate.
The potential fee, or gas tax, or “mechanism” will be a contentious issue, but it is not the only one. Some Democrats, fearful that the climate bill will weaken existing environmental protections, are threatening to vote against it if it dismantles the EPA’s authority or existing legislation in some states.
Lindsey Graham, one of the architects of the proposal, is concerned that a change in the Senate’s schedule would derail energy and climate legislation, reports Politico. For Congress to take up an immigration bill, as the Democratic leadership has publicly pondered, “destroys the ability to do something on energy and climate,” according to Graham. Between financial regulation and immigration, the Senate might not have time to take action on a climate bill. “This comes out of left field,” said Graham.
Obstacles to passing a climate bill are substantial and plentiful. Beyond scheduling the Senate’s workload and allaying the fears of Senators who face re-election, there is the complicated and vexing task of crafting legislation that creates jobs, fosters energy independence, and protects the environment without crippling the energy industry. One indication that the bill has a chance at passage is that the oil industry—which would have been hit especially hard by the House climate bill and would be most directly affected by any fee or tax on transportation fuels—has previously voiced support for a carbon tax, the most controversial piece of the proposed legislation.
If it’s satisfactory to Exxon Mobil, Conoco Phillips, and BP America, maybe 60 senators will get on board as well.
Heating Oil Price Trend for April 5: +3¢
A pickup in manufacturing activity in the US and China helped lift the price of heating oil on Monday. (images: alossix via flickr.com, Nick Whitaker for HeatingOil.com)
As expected, oil markets showed a delayed reaction to the government employment report released on Friday that send prices for crude and heating oil shooting upward. The price of crude hit an 18-month high this morning, briefly rising above $86 in early trading and lifting the price of heating oil by about one percent along with it. The jobs report released on Friday showed that the US economy added the most jobs in three years this March, but markets were closed for the Good Friday holiday. Oil prices are also supported by accelerations in American and Chinese manufacturing activity, which traders interpreted, along with the increase in US hiring, as a sign that economic recovery and an upswing demand for oil are already underway. Traders also noted that the price of crude had “broken out” of the price range it had been trading in for the last three months or so, which some interpreted as additional evidence of a longer-term upward trend in crude prices.
Today’s average retail heating oil price in the Northeast is 3 cents higher than Friday’s average price.
Oil Speculation Debate Heats Up Again as Prices Rise, Threatening Economic Recovery
Oil analyst Peter Buetel believes that speculation is the main force currently driving up oil prices, and is concerned about what high prices might do to the US economy. (image:msnbcmedia.msn.com)
Writing for the news network’s business news site, MSNBC producer John W. Schoen reported on Wednesday that speculation is driving up oil prices at great cost to American consumers and the economic recovery in the US. This is, of course, a story that dates back to the summer of 2008, when many believe excessive speculation caused the price of oil to skyrocket to $147 a barrel before it crashed due to the financial collapse. The story of speculation driving prices faded in the year after prices collapsed, as low crude prices brought lower gasoline prices that allayed consumers’ cost concerns. As President Obama put it in his recent speech on energy security, “When gas gets expensive at the pump, suddenly everybody is an energy expert. And when it goes back down, everybody is back to their old habits.”
While the president makes a good point, it’s not as true today as it once was. The recession led American drivers to seriously cut back on gasoline consumption. Today, cost-conscious conservation and other factors (like the growth of the biofuels industry) have led many analysts to declare that US gasoline consumption reached its all-time peak in 2007. It appears as though Americans’ “old habit” of gas-guzzling may in fact be gone for good. New consumption habits and a global recession have seriously reduced the world’s demand for crude oil and petroleum products, despite continuing demand growth from developing economies like China’s. More than a year of reduced demand has led to a build up of petroleum supplies that today remain well above average levels in most parts of the world.
Which brings us to the latest iteration of the debate over oil speculation and how it affects oil prices. In a world of low demand and high supplies, why have crude and heating oil and gasoline prices been rising steadily for the last 12 months? A growing number of journalists, analysts and politicians have said the answer is simple: oil speculation. Some analysts in this camp, including Schoen’s main source for his report, Peter Beutel at Cameron Hanover, warn that the stakes are even higher in today’s debate, as speculation-inflated prices are not only taking a bite out of consumers’ wallets, but also slowing the sorely-needed economic recovery in the US that is still in its infancy. The gravity of such concerns is clear in a quote from an OPEC minister included in Schoen’s article:
“Prices above $85 for a sustained period of time could well be harmful,” one OPEC delegate told Reuters. “We have to be aware that the economic recovery is still fragile.” (MSNBC, March 31st)
When members of OPEC, a group of nations whose lifeblood is oil sales to the world, say that prices are too high, it’s well worth listening to them. To address its concerns, OPEC has allowed its production levels to slip above official quota levels to sneak more supply into the market in an attempt to put a damper on oil prices. But if the engine of speculation keeps churning out higher prices, added supplies may have little effect on the market.
Some say the only way to reign in rising prices is to place limits on oil speculation. In the US, the Commodities Futures Trading Commission is considering imposing just such limits—the policies are currently in a public comment period and should be unveiled in their final forms at the end of the month. But plans to limit speculative activity have been met with strong resistance, primarily from institutions and individuals who participate in oil trading. This week Jeffrey Sprecher, the chairman and CEO of London’s Intercontinental Exchange (Europe’s main commodities market) called blaming speculators “a crutch for why prices went up instead of looking at the underlying supply and demand and fears.” Sprecher referred specifically to the price peak of $147 reached in July of 2008, but curiously omitted any comment on the current situation, when the evidence for speculation, not supply and demand, driving up prices is arguably stronger than it was two years ago.
Whether new limits on speculation in the US and/or UK will be adequate to curb volatility and reassert the influence of supply and demand over oil prices remains to be seen. But considering the strained budgets of heating oil and gasoline consumers and the fragile state of our economy, it is clear that lowering oil prices is more crucial than ever, no matter how they are brought about, as Peter Beutel explained:
Higher oil prices—even oil prices at existing levels—represent a tax on the American consumer at absolutely the worst possible time when we’re trying to fight our way out of a recession. We would still be producing plenty of oil at $50 and give consumers a reasonable relief that would allow this economy to grow much more substantially and put us on a much firmer footing.
Inside Source: CFTC Will Enact “Generous” Limits On Energy Trading
Highly lax regulation of commodity futures speculation makes market abuse frighteningly feasible. (image: mediainfidel.com)
Question: When is a limit not a limit? Answer: When it’s generous. That’s something every parent knows. Telling your fifteen-year-old to be back by 2 a.m on a school day isn’t exactly laying down the law, and telling your five-year-old she can only have five cookies after dinner isn’t holding the line.
So if every parent gets it, why don’t commodities regulators? Inside sources told the Wall Street Journal that the CFTC will consider “generous” trading limits for energy speculators when it meets January 14th. The CFTC’s concern? That meaningful limits might disrupt how the futures market functions.
NJ Residents Look to Private Organizations for Heating Assistance
(image: Run Strong via flickr.com)
Hundreds of thousands of New Jersey residents rely on heating assistance to get through the winter. The number is growing—many more people are expected to require financial help this year than last, reports the PressofAtlanticCity.com Wednesday. Much of the support comes from government programs, such as the Low Income Energy Assistance Program (LIHEAP), which serves people making no more than 225 percent of the federal poverty level. That’s less than $50,000 a year for a family of four, and with average annual NJ property taxes of $7,045, it’s easy to see that less than $50,000 for a family may not leave much for heat.
Graham Restates Commitment to Climate Legislation
Senator Lindsey Graham. (image: media.counton2.com)
Bucking criticism from fellow Republicans and drawing praise from Democrats and environmentalists, Senator Lindsey Graham (R-SC) reiterated his call on Tuesday for the federal regulation of greenhouse gasses, The State reported.
Speaking at a climate-change conference in Columbia, SC, the senator described a cap-and-trade bill that would reduce US carbon emissions by 17 percent by 2020, while including allowances for offshore oil drilling and nuclear power. “Whatever political push back I get I’m willing to accept because I know what I’m trying to do makes sense to me,” Graham said. “I am convinced that reason, logic and good business sense, and good environmental policy, will trump the status quo.”
Commodities and Dollar Now Rising Together
The dollar's rise now comes with a rise in commodities as well, pointing to growing demand for both. (image: thebull.com)
The Wall Street Journal reported Thursday on an unusual pattern occurring on Wall Street between commodities and the dollar. While the prices of commodities and the value of the dollar normally move in opposite directions, (with commodity prices rising as the dollar falls) both have been on the rise since the end of November. Since commodities are priced in dollars, a declining dollar means it takes more of them to purchase raw materials, and vice versa. A strong dollar usually pushes down the price of commodities, which happened as recently as mid-December. However, the larger trend of the last month has been commodities and the dollar rising together.
Behind the current anomaly, the Journal reports, are signs of an economic rebound and the widespread belief that a recovery would lead to an increased demand for commodities, thus bolstering the dollar. Furthermore, some investors expect the situation to continue for some time.
Heating Oil Price Trend for January 8: -2¢
(image: treehugger.com and life.com)
Signs that China’s economic growth may be slowing knocked down oil prices on Thursday after a two-week rally in which crude and heating oil prices had surged. China raised its interest rates yesterday, which will limit credit and slow growth. Economic expansion in China has supporting climbing oil prices for the past year. This week’s inventory reports, which showed a surprising build in crude oil and a small drop in distillates, had little effect on Wednesday’s prices but played a role on Thursday, now that Chinese demand appears stable for the near future.
Today’s average retail heating oil price in the Northeast is 2 cents lower than Thursday’s average price.
Schumer Wants LIHEAP Contingency Money Released
Senator Schumer on NBC’s “Meet the Press.” (image: zimbio.com)
Senator Charles Schumer (D-NY) is urging President Obama to release millions of dollars from a contingency fund set up to help deal with unexpected higher demand for energy assistance, an article on LoHud.com reported on Thursday. While addressing a group at the J. Edward Fox Senior Center in Mount Kisco, Schumer said that Obama should release $590 million from a fund that is part of the $5.1 billion appropriation for the Low Income Home Energy Assistance Program, or LIHEAP.
Schumer told the group of about 50 senior citizens that, “Because so many people are applying (for heating assistance) and because it’s so cold and because the price of oil is so high, we need to tap that emergency funding now.” The senator added that he believes Obama is likely to sign off on releasing the money, because it is already part of the 2009-10 federal budget.
Heating Oil Price Trend for January 7: +1¢
(image: welt.de and life.com)
Oil prices rose on Wednesday in spite of an EIA inventory report that showed a surprising increase in crude oil inventories and a small decline in distillate inventories, which include heating oil and diesel. Cold weather had helped to lift oil prices recently, with the expectation that it would boost heating oil demand and cut into fuel inventories. Nevertheless, oil prices were unfazed by the EIA’s data, and some said the real impact of cold weather would be seen in next week’s inventory numbers. Crude and heating oil’s small gains on NYMEX yesterday underscored the limited impact supply and demand can have on oil prices, as expectations of future economic recovery overwhelmed bearish supply data.
Today’s average retail heating oil price in the Northeast is 1 cent higher than Wednesday’s average price.
Maine Heating Oil Prices Jump Seven Cents
(image: pocket farmer via flickr.com)
Mainers didn’t see a break in heating oil prices this week, as the statewide average rose for a second week in a row. Maine Public Broadcasting reported on Monday that the cost of No. 2 fuel oil jumped seven cents in the last week, repeating its climb from the week before. According to the state’s Office of Energy Independence and Security, the price jump leaves heating oil at $2.67 a gallon in the state. That said, prices throughout Maine do vary, and in southwest Maine heating oil was found to be as low as $2.48 a gallon; in eastern Maine prices jumped as high as $2.90 a gallon.
The rising prices are, not surprisingly, tied to the intense cold front that has settled over the Northeast. According to January 5th’s weather report, Portland saw a low of 29 degrees. Speaking to the prices, OEIS director John Kerry said that the “noticeably colder weather” combined with “strengthening economic indicators” brought about the rising in heating oil prices.
As Refineries Close, Families and Communities Struggle
An unemployment office. (image: blog.mlive.com)
What do you do when you lose your job—a good job—of 34 years, and whatever comparatively few jobs remain in your industry are located states away?
If you have a good answer, tell Harry Schaeffer of National Park—he’d like to know.
Schaeffer is one of more than 1,000 refinery workers in New Jersey, Delaware, and Pennsylvania who are losing their jobs, BusinessWeek reported Saturday. The losses stem from layoffs at Sunoco’s Eagle Point, NJ refinery (almost completely closed), Valero’s Delaware City, DE plant (closing), and Valero’s Paulsboro, NJ plant (20 percent reduction in workforce). Worse, these cuts are expected to be the start, not the end, of job shedding for US refineries.
Midday Heating Oil Price Change: +7¢
The Energy Information Administration’s inventory report showing big drawdowns in crude, gasoline, and distillate fuel stockpiles released this morning drove heating oil prices up sharply after its release at 10:30 am EST. As a result, retail heating oil prices are 7 cents higher per gallon, effective 11:30 am EST.
Cash for Caulkers Co-Author Offers Plan’s Details, Wants Name Change
Stephen L. Cowell, energy conservation executive. (image: csgrp.com)
As President Obama’s “cash for caulkers” program remains in limbo, notably left out of a just-presented $75 billion job-creation package by House Democrats, one of the initiative’s authors defended it, saying the real issue might be more about an unfortunate nickname than anything else.
In a blog published Tuesday on the Huffington Post, Stephen L. Cowell, executive officer of the Massachusetts-based Conservation Services Group, said Shakespeare’s famous rhetorical question—‘What’s in a name?’—isn’t being applied to “cash for caulkers”…even though it should be.
Another Forecast for Falling Crude Oil Prices in 2010
A strong dollar could keep oil prices down in 2010. (image: weakonomics.com)
Forces such as emerging market demand, speculation, and a weak dollar—all of which have supported higher oil prices in 2009, despite a recession—may not sustain oil prices in 2010, according to an article published on Seeking Alpha on Monday. First of all, signs exist of a global tightening of monetary policy, said author Peter Cooper. In addition, the true strength of emerging market economies, such as China, is being called increasingly into question.
Third, the US dollar is recovering after an extended decline against the euro. Cooper cited weak global demand caused by the recession as a fourth reason that oil prices might be lower in 2010, as demand could lag even as the global economy lurches toward recovery.
Analysts Lay Out Two Scenarios for 2010 Crude Prices
Bloomberg asks 2009’s best oil forecasters what they see in their crystal ball for 2010. (image: telegraph.co.uk)
Bloomberg asked the oil analysts who had been most successful in predicting the price of crude oil in 2009 where oil prices would be headed next year, and two divergent scenarios come to the fore: the first sees crude staying high and looming in the $88-$92 range for the fourth quarter of 2010, while the second has it dropping much lower, to $59 a barrel by the end of 2010.
The first scenario, the Bloomberg post notes, is supported by the two analysts who were the most accurate forecasters of crude prices in 2009; their predictions were “within 9 percent of market levels.” Mike Wittner of Societe Generale SA and Hannes Loacker at Raiffeisen Zentralbank Oesterreich AG think that oil will stay up in 2010, buoyed by increased demand and stagnant production.
Heating Oil Price Preview: December 21, 2009
Last week’s inventory reports showed a large decline in stockpiles of distillates, which includes heating oil and diesel, and caused a spike in the price of heating oil. However, with refineries operating below 80 percent of their capacity, it’s not clear that the drawdown of distillates was due to increased demand.
The dollar’s recent resurgence has pressured the price of oil and other commodities, and the dollar will likely stay strong as the US economy improves. While that will weigh on the price of heating oil, cold weather could trump the dollar and push heating oil prices higher this week.
White House Supports $5 Billion More in Tax Credits for Alternative Energy
Vice President Biden announced the White House’s support for an expansion of tax credits for green technology. (image: lycoming.edu)
The Obama administration wants to offer $5 billion in tax credits to green technologies and jobs, particularly in the manufacturing sector, reports Bloomberg. Vice President Joe Biden announced the plan, which is an expansion of a program begun under the $787 billion economic recovery plan that President Obama launched in February. If Congress approves the plan, new or expanded factories that make products such as wind turbines, solar panels, and electric vehicles would get a 30 percent tax credit. The program may also help green companies that increase their production in the US, such as Vestas Wind Systems A/S and First Solar, Inc.
Administration officials said they expected quick Congressional support for the plan, which they expect to generate $15 billion in private investment and create thousands of new manufacturing jobs. Vice President Joe Biden said the first round of tax credits was an “overwhelming success” and that there were more qualified applicants than expected. The announcement was timed to accompany a new White House report on the vital role manufacturing plays in the U.S. economy.
“I don’t understand why we can’t once again produce cutting edge technology that will create 21st century jobs that are here in America, not abroad,” said Biden as he hosted a meeting to discuss the administration’s latest jobs initiative with executives from Dow Corning, Procter & Gamble, Goodyear Tire & Rubber Co. “If we’re going to lead the world in production of clean energy, shouldn’t we build our capacity to make clean energy equipment?”
Heating Oil Price Trend for December 17: +7¢
(image: welt.de and zimbio.com)
Oil prices surged on Wednesday after the EIA’s weekly inventory report showed a substantial decline in inventories of crude oil and distillates, which include heating oil and diesel. Stockpiles of crude dropped by 3.7 million barrels, while distillate inventories fell by 2.9 million barrels. Prices jumped as some investors took this drop in supplies to indicate that cold weather and a recovering economy had boosted oil demand. However, others attributed the drop in distillates as much to a lack of refining output as winter heating oil demand, and supplies of oil remain well above average.
Today’s average retail heating oil price in the Northeast is 7 cents higher than Wednesday’s average price.
House Shuts Cash for Caulkers Out of New Jobs Bill
South wing of the U.S. Capitol Building, where the House of Representatives recently passed over Obama's "Cash for Caulkers" proposal. (image: Dan Beards via flickr.com)
Despite President Obama’s most candid efforts to promote his “cash for caulkers” program, which he described in alluring language yesterday at a Home Depot in Virginia, Congress was not enticed, according to a report in Wednesday’s Wall Street Journal. The president’s proposal, which would provide cash rebates for home energy-efficiency renovations, is conspicuously missing from the new $75 billion job-creation package unveiled yesterday by House Democratic leaders. So much for sex appeal.
White House economists believe that proposals such as cash for caulkers will create the most jobs for the least amount of federal spending. Obama has spent the last week touting the program, along with a proposal to give tax credits to small businesses that hire new employees, as the best answer to America’s soaring unemployment rate. This is surely a sign that the president would like his voice to be heard in the “jobs debate,” but as Wall Street Journal reporter Jonathan Weisman remarks, it appears that Congress is giving his proposals little thought.
House Democratic leadership aides say they aren’t ignoring the president’s ideas, they have simply decided to promote job policies that won’t prompt hesitation among Democrats as they rush to pass a bill before adjourning for Christmas. Cash for caulkers might be too ambitious and complicated for a party desperate to show it is addressing the 10% unemployment rate, and too much for president Obama to handle given his crowded domestic agenda (i.e., health care, Guantanamo). Instead, the Democrats are dolling out $35 billion for highway and transit projects, $2 billion for water projects and affordable housing development, and the remainder for school construction and renovation.
While cash for caulkers isn’t dead, it is clearly no longer on the fast track to implementation that Obama’s urgent Home Depot speech implied. HeatingOil.com will continue to follow the story as it develops.
