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Common sense returns to Virginia as California Governor Gavin Newsom Struggles to defend inane policy. Let’s start with Newsom and gasoline prices.

In a Wall Street Journal Op-Ed, Newsom says “What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market.“

Here are the facts. Price spikes—like the $6.42 a gallon in June 2022 that sparked our new price-gouging law—happened when California taxes and fees remained unchanged, and crude prices had actually decreased. What drove up prices were increases in industry profits.

California’s new law provides us with tools to investigate profit spiking by Big Oil, helping us to prevent supply disruptions and take legal action when necessary. Another potential tool to encourage the oil industry to do right by Californians is a price-gouging penalty that will be developed through a public process.

What people pay at the pump isn’t simple supply and demand but the result of a highly concentrated and opaque market that lets a handful of mega-profitable oil companies upcharge tens of millions of people. In California, four companies control 90% of the gasoline refining capacity.

Factors such as refinery maintenance and lack of planning have been shown to reduce supply and increase refinery margins by upward of 200% at a time. California has also found that traders on the open “spot market” drive up prices, benefiting oil companies.

A Concentrated and Opaque Market

OK, why is the market in California concentrated and opaque?

California has the most regulations of any state
Refiners tired of California nonsense have left the state
California seasonal blend requirements have costs. But there’s not just one summer blend. Refineries make more than 14 kinds due to different state regulations.

Two California Refiners Shut Down

…click on the above link to read the rest of the article…

German Consumers Just Learned How Much Extra They Will Have To Pay For Gas This Winter

August 17, 2022

German Consumers Just Learned How Much Extra They Will Have To Pay For Gas This Winter

With millions of German facing a painful freeze in the coming months, a winter gas surcharge, which will come into effect in October for German households and businesses, was set at 2.4 euro cents per kilowatt hour on Monday, DW reported on Monday.

Gas prices have been driven by German sanctions on Russian gas, prompting market concerns about energy security and also shortfalls in deliveries in some cases. And while so far, consumers have been largely shielded from the increases, with companies unable to pass on their increased costs, all that is about to change.

“It will get more expensive — there is no getting around that. Energy prices continue to rise. But: we are already unburdening citizens to the tune of €30 billion,” Chancellor Olaf Scholz said on Twitter on Monday, soon after the announcement. “And we are working on a further relief package. We will leave nobody alone with these increased costs.”

The decision on the amount of the levy fell to the company charged with overseeing and coordinating the German gas market, Trading Hub Europe. The stated aim of the levy is to cover around 90% of the additional costs incurred by gas providers who are now paying higher prices to secure gas, in some cases from new sources other than Russia.

Just under half of German households are heated using gas, the most popular method by far in the country. German dependence on Russian gas has become notorious this year amid the war in Ukraine, both for household power and for industry.

Government seeks sales tax exemption

Finance Minister Christian Lindner has already said he aims to soften the blow by appealing in Brussels for the right to waive sales tax on the new gas levy…

…click on the above link to read the rest of the article…

Oops! U.S. oil and gas exports fuel domestic price rise

June 30, 2022

Oops! U.S. oil and gas exports fuel domestic price rise

The U.S. oil and natural gas industry long fought for and in the last decade finally won release from federal restrictions that limited exports. The ostensible reason was that because of the so-called “shale revolution” in the country’s oil and gas fields, the United States would have plenty of oil and gas to spare for export.

The real reason behind the push was that the oil and gas industry wanted what almost every other industry in American already had: The right to sell their products to the highest bidders no matter where they lived on the globe.

This made it almost certain that as U.S. prices rose to match world prices, U.S. consumers would feel the pain. And, since energy prices affect everyone who votes, they are always politically consequential.

So, it is unsurprising that with U.S. regular gasoline prices over $5 per gallon President Joe Biden lashed out at U.S. oil companies—which are having one of their best years ever—saying they need to increase production of refined oil products. The companies have responded that their refineries are running at close to maximum capacity and so there is not much they can do in the short run.

What is left unsaid is that it has long been the policy of the United States to allow the export of refined (as opposed to crude) petroleum products such as gasoline, diesel and heating oil. The country has refinery capacity significantly in excess of domestic needs and so exports a considerable volume of refined products including about 1 million barrels per day (mbpd) of gasoline and 1.4 mbpd of diesel and heating oil (for the week ending June 10)…

…click on the above link to read the rest of the article…

Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia

June 4, 2022

Why did gas prices go from $10 a gigajoule to $800 a gigajoule? An expert on the energy crisis engulfing Australia

Australia’s east coast has been plunged into an energy crisis just as winter takes hold, which will see many people struggle to heat their homes due to soaring gas bills.

Meanwhile, Origin Energy this week confirmed it could not source enough black coal to power Australia’s largest coal plant at full capacity, deepening shocks to the energy market.

The electricity price surge is so dire, small energy retailers such as ReAmped Energy are advising customers to switch energy providers or be hit with much higher bills.

So what on Earth is going on? It has a lot to do with Russia’s war on Ukraine, which has disrupted the global energy market. Sanctions on Russian coal and gas exports mean there’s simply not enough supply to meet demand. As a consequence, the global price of gas and coal has soared.

Why are energy prices are getting so high?

Australia is a net exporter of gas and coal. This means we export most of our fossil fuels overseas. As the global price of coal increases, the cost of generating domestic electricity from coal is increasing.

What’s more, many of Australia’s coal generators are ageing, which means they fail more often. At present, nearly 30% of our coal generation is offline.

The price spike comes as coal plant owners look for the exit. Australia’s largest coal plant, Eraring, has been operating for 35 years. In February, Origin announced it would shut Eraring seven years ahead of schedule in 2025 because renewable energy was impacting profitability.

Origin’s new challenge is securing enough coal to run Eraring at its full 2.8 gigawatt capacity. The problem is set to persist into 2023.

…click on the above link to read the rest of the article…

Largest California Refinery Hit With Strike Amid Record-High Gas Prices

March 22, 2022

Largest California Refinery Hit With Strike Amid Record-High Gas Prices

Hundreds of Chevron Corp. refinery workers in the San Francisco Bay Area went on strike Monday following a breakdown in talks between the oil major and the United Steelworkers (USW) union on a contract agreement.

At least 500 workers at a gasoline, diesel, jet fuel, and lubricating oils refinery owned by Chevron in the San Francisco Bay Area city of Richmond began striking at local time 12.01 am, the union said in a statement. According to AP News, this followed USW workers voting down a contract offer from Chevron and the company refusing to return to the bargaining table.

The strike’s timing is “very unfortunate” as refinery capacity in California is tight, Severin Borenstein, a UC Berkeley professor, told local news KTVU.

Chevron announced in a statement the strike has yet to affect operational capacity at the refinery.

“Chevron Richmond is fully prepared to continue normal operations to safely and reliably provide the products that consumers need. We anticipate no issues in maintaining a reliable supply of products to the market. Chevron remains committed to safe operations for our workers and communities.”

The heart of the problem is USW’s push to increase pay for workers by another 5%, on top of the national agreement to raise pay by 12%, purely based on the cost of living in the Bay Area is unbearable for blue-collar workers.

“The cost of living in the Bay Area, as any blue-collar worker knows, has gotten to the point that makes it hard to live,” USW Local 5 First Vice President B.K. White, told local news ABC7. “Our workers have to live 45 minutes to an hour out. We are just asking for a little bit of relief.”

…click on the above link to read the rest of the article…

OPEC+ Reportedly Threatening Response To Global Coordinated SPR Release

November 22, 2021

OPEC+ Reportedly Threatening Response To Global Coordinated SPR Release

In an apparent ‘threat’ response to headlines suggesting the Biden administration is attempting to coordinate a global SPR release to push down oil prices (and following reports from Japanese media that the government is preparing to release crude from its strategic stockpiles), the Riyadh-based International Energy Forum said OPEC+ may change its plan for raising oil output if consuming nations sell petroleum reserves or the coronavirus pandemic worsens.

“I anticipate OPEC+ energy ministers will maintain their current plan of adding more supplies to the market gradually,” IEF Secretary-General Joseph McMonigle said in a statement Monday after a meeting with a Japanese foreign ministry official about recent volatility in energy markets.

“However, certain unforeseen external factors such as a release of strategic reserves or new lockdowns in Europe may prompt a reassessment of market conditions.”

Critically, this confirms much of what we have written about how any coordinated SPR release (however unlikely that is in and of itself) that any increase in supply will be met by action from OPEC+ moving to not hike outputs as previously planned – thus perhaps helping prices in the short-term, but raising them longer-term.

For now, oil traders are undecided at what this news means…

For now we expect gas prices to drop in the short-term as the lag in the supply-chain from crude to the pump implies some built-in reduction…

But, if OPEC+’s threat response plays out with higher prices, those lower gas prices will prove ‘transitory’.

…click on the above link to read the rest of the article…

Biden says he worries that cutting oil production too fast will hurt working people

November 1, 2021

Biden says he worries that cutting oil production too fast will hurt working people

President Biden spent three days in Rome talking to world leaders before and during the G-20. He held a formal press conference before heading to the UN climate summit in Glasgow.

Brendan Smialowski/AFP via Getty Images

President Biden said on Sunday that the world can’t immediately stop using oil and said OPEC and Russia need to pump more of it, even as he pushes the world to pledge to cut climate-changing carbon emissions at the Glasgow climate summit this week.

After three days of meeting with world leaders in Rome, where he attended the G-20 summit, Biden said he is worried that surging energy costs are hurting working class families.

“On the surface it seems like an irony,” Biden said of simultaneously calling on major oil producers to pump more as he heads to the COP26 climate change summit. “But the truth of the matter is … everyone knows that idea that we’re going to be able to move to renewable energy overnight … it’s just not rational,” he said.

Biden said the idea that Russia, Saudi Arabia and other producers are holding back to boost prices “is not right.” With gas prices averaging $3.40 a gallon in the US, according to AAA, Biden said families are feeling it.

“It has profound impact on working class families just to get back and forth to work,” Biden said. He talked about the issue with other major oil-consuming countries at the G-20, but told reporters he was reluctant to reveal any of their plans to spur producers to pump more.

Europe’s gas price surge is about to hit you in the belly

October 15, 2021

Europe’s gas price surge is about to hit you in the belly

Soaring fertilizer prices are set to push up the price of food.

US-HEALTH-VIRUS-ELDERLY — With the price of fertilizer increasing, food prices will follow | Chandan Khanna/AFP via Getty Images

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LUXEMBOURG — It’s not just your heating bill that risks going up thanks to Europe’s energy crisis; EU ministers are now warning that the power price surge means your food will be more expensive in the coming months too.

At a meeting of European farm ministers in Luxembourg on Monday and Tuesday, there was consensus that the sky-high price of natural gas is ramping up the cost of fertilizers, and that this increase is likely to land squarely on consumers’ plates. Natural gas is the key feedstock for the production of some of the most common artificial fertilizers, such as urea and ammonium nitrate, which farmers rely on to keep up Europe’s crop yields.

“The increase of energy prices: This is the main reason for the increase in fertilizer prices, and of course it can impact food prices in the future, of course this is the risk,” EU Agriculture Commissioner Janusz Wojciechowski said on Monday during the EU Council meeting, where ministers from the 27 member countries gathered.

EU farm ministers discussed a document circulated by the Polish government — obtained by POLITICO — which predicted that the fertilizer crisis will trigger “social unrest” across the entire European Union unless policymakers halt the soaring cost of natural gas. Warsaw blamed its traditional enemy Russia for the price surge, alleging the export giant Gazprom was restricting supply. (The Russian company says it’s fulfilling the terms of its export contracts with EU countries.)

…click on the above link to read the rest of the article…

Gas prices skyrocket as the global energy crisis worsens

October 11, 2021

Gas prices skyrocket as the global energy crisis worsens

New York (CNN Business)The cost of energy was dirt cheap in the spring of 2020 as roads and airports sat nearly empty during the height of the Covid-19 pandemic.

Energy demand is back today as the world economy reopens — but supply simply hasn’t kept up. That’s why US oil prices have skyrocketed $120 since crashing to negative $40 a barrel in April 2020. US oil prices finished above $80 a barrel on Monday for the first time in nearly seven years.

Crude gained 1.5% to end the day at $80.52. The last time oil closed above $80 was October 31, 2014.

Gas prices are at 7-year highs, and Biden can’t do much about it

All of this is leading to sticker shock for many Americans filling up at the pump — at a time of the year when gas prices typically cool off. The national average price for gasoline hit a fresh seven-year high of $3.27 a gallon on Monday, up by 7 cents in the past week alone, according to AAA. Gas has nearly doubled since bottoming at $1.77 in April 2020.

High gas prices will only exacerbate elevated inflation, squeeze the budgets of American families and hurt President Joe Biden’s political fortunes.

Unfortunately, prices at the pump may get lifted even higher by the global energy crisis.

Natural gas prices have skyrocketed so much, especially in Europe and Asia, that power plants and factories may increasingly turn to a relatively cheaper fuel source for electricity: crude oil.

“It’s a case of just trying to keep the lights on,” said Matt Smith, Kpler’s lead oil analyst for the Americas. “This is essentially creating demand that typically isn’t there,”

…click on the above link to read the rest of the article…

Oil Prices Rebound As U.S. Walks Back Plan To Tap Strategic Petroleum Reserve

October 10, 2021

Oil Prices Rebound As U.S. Walks Back Plan To Tap Strategic Petroleum Reserve

The U.S. Department of Energy is walking back previous comments that it was considering a release of the Strategic Petroleum Reserve and a ban on crude oil exports
The DoE isn’t considering tapping the SPR “at this time”
Goldman Sachs: SPR release would have limited impact on crude prices

The U.S. Department of Energy is walking back previous comments that it was considering a release of the Strategic Petroleum Reserve and a ban on crude oil exports, Bloomberg’s Javier Blas reported on Twitter.

According to Blas, the DoE isn’t considering tapping the SPR “at this time”.

The news comes shortly after Goldman Sachs estimated that if the DoE released oil from the SPR, it would likely be limited to just 60 million barrels—posing a $3 downside risk to its year-end $90 barrel Brent forecast.

A White House press briefing took a similar no-SPR tone.

The Biden Administration will not make any predictions about releasing the SPR to alleviate high gasoline prices, Press Secretary Jen Psaki said at the daily briefing on Wednesday.

Psaki instead focused on the climate crisis, commenting on the fact that the matter was so urgent that it could not wait any longer.

“I’m not going to make any prediction of that from here.”

The press secretary noted that the Administration took steps in the aftermath of Hurricane Ida, including by authorizing exchanges from the SPR with oil and refining firms.

“We’ve also taken steps into — including engaging with members of OPEC,” Psaki said.

“But I’m not going to make any other predictions at this point in time. We’re continuously monitoring. We’ll look to take additional steps as needed,” she added.

…click on the above link to read the rest of the article…

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

October 9, 2021

Kemp: Forget Russian Intentions, Fundamentals Drove Up Europe’s Gas Price

European policymakers and some traders blame Russia for the low volume of gas stored across the region which has sent both gas and electricity prices surging to record highs.

Russia’s pipeline gas export monopoly Gazprom has met commitments for long-term contracts, its clients confirm. But it has not raced to book extra pipeline capacity for spot buyers, despite European calls for more supplies.

Some policymakers and traders have speculated additional gas has been deliberately withheld to make a diplomatic point and accelerate the approval of the Nord Stream 2 pipeline. Others say Russia has withheld gas to create a shortage, drive up prices and increase export revenues, similar to the way the OPEC+ producer group raises oil prices and its revenues.

The other possibility is Russia has not supplied more gas because it faces its own shortage and wants to rebuild domestic stocks after they were depleted by a cold winter in 2020/21.

There is no empirical way to determine which theory is correct or what Russia’s intentions have been. But whatever the reason, the result is the same: gas is in short supply and European energy prices have hit record levels.

Escalating energy prices are a global phenomenon. Shortages of gas, coal, electricity and to a lesser extent oil are evident across North America and Asia as well as Europe. In every case, very high and rapidly rising prices this year are a reaction to very low and rapidly falling prices last year during the coronavirus-driven recession.

Energy prices have always been strongly cyclical. In this instance, an exceptionally severe cyclical slump in 2020 has produced an equally extreme cyclical upswing in 2021.

…click on the above link to read the rest of the article…

The UK is racing towards a winter energy crisis

September 21, 2021

The UK is racing towards a winter energy crisis

Gas prices are spiking and the energy markets are coming under increasing pressure. The combination may lead to a bleak winter

Winter is coming – and it looks like it’s going to be a rocky one. The price of natural gas in the UK has increased more than 420 per cent year on year. In mainland Europe, prices are tracking a similarly sharp trajectory. And a perfect combination of other factors – including environmental conditions and unpredictable accidents – is putting the industry under further strain.

These price fluctuations have a knock-on effect: the price of electricity – often generated from gas – is spiking, while household suppliers are hitting the wall as catastrophically high wholesale prices make their businesses uneconomical. Seven UK supply firms have gone out of business so far this year. Bills for end users are forecast to rise 20 per cent, according to Citigroup.

It all makes for grim reading – particularly as gas remains a key source in powering our homes and business. But we should get used to it. According to some experts, it’s just the first flashing warning light on the dashboard of a car heading headlong into a prolonged, painful crash.

Almost everything that could go wrong with the energy markets is currently going wrong – and there are few easy fixes. First, take the climate crisis: our fixation on low-cost fossil fuels has engendered a situation that makes us more susceptible to supply shocks as we try and wean ourselves off the thing that helped cause the problem in the first place. “We always had these geopolitical risks,” says Adi Imsirovic, a senior research fellow at the Oxford Institute for Energy Studies, and a former oil trader with 30 years’ experience. “Now we have climate change risks that are essentially a premium on the prices.”

…click on the above link to read the rest of the article…

Gas Is Going To $5 Per Gallon: First In California, Then Across The Country

May 30, 2021

Gas Is Going To $5 Per Gallon: First In California, Then Across The Country

Get ready for $5 per gallon gasoline – especially if you live in California.

At least, that was the contention of a new WSJ op-ed that claims higher taxes and environmental regulations are both driving up the price of gas.

Author Allysia Finley notes that the average cost at the pump in California is now $4.18 a gallon, pointing out that in 2017, Democrats in the state’s legislature raised a tax on each gallon by 20.8 cents over three years.

California drivers are now paying an astonishing average of 63 cents a gallon in state and local taxes, compared an average of 36.8 cents elsewhere in the country.

The reasoning for the price hike was to repair the state’s infrastructure, but instead the proceeds have been “directed toward projects aimed at reducing greenhouse gas emissions, such as bike lanes and mass transit,” the op-ed notes.

The California Air Resources Board is also responsible for imposing a tax through its cap and trade program, which has added about 14 cents per gallon to the state’s average gas price.

CARB requires that retailers sell “a special extra-clean-burning gasoline blend” which raises the price about another 10 cents per gallon. The Board “assigns carbon-intensity scores to hundreds of fuels” and requires refiners to meet a low score to blend lower-carbon fuels. If they can’t meet the threshold, they are forced to buy carbon credits, which also drives up the price of fuel.

The board awards these credits to utilities when their customers charge EVs at home. Utilities then turn around and sell the credits to refiners. Gas powered vehicle drivers are subsidizing thousands in incentives to EV buyers, the op-ed notes:

So Californians can get a $1,500 rebate from their local utility on top of $2,000 from the state and $7,500 from the feds for buying an electric vehicle. Sweet.

…click on the above link to read the rest of the article…

Spanish Energy Markets Roiled Amid Chilling Temps

January 9, 2021

Spanish Energy Markets Roiled Amid Chilling Temps

A cold snap across Spain is expected to last through mid-January has resulted in natural gas prices more than doubling in the last week, according to Bloomberg.

LNG prices trading at Spain’s Punto Virtual de Balance (PVB) gas trading hub hit a record 51.55 euros ($63.13) a megawatt-hour this week, or $18.54 per million British thermal units as the nation grapples with dangerously cold weather and snowfall in Madrid.

Spain has one of the largest LNG terminals in Europe. “Surging prices, coupled with a lack of available LNG vessels for longer journeys between Europe and Asia, will probably limit cargo exports from the nation’s ports and further tighten the supply of the fuel,” Bloomberg noted.

Frigid weather in China has resulted in surging LNG prices as well. This week Beijing meteorological station recorded one of the coldest temperatures in decades this past week, sending power demand through the roof. LNG imports in China last month were at record highs as demand to heat homes has surged.

A possible theory behind the wicked cold weather could be the sudden stratospheric warming splitting the polar vortex into two, allowing Arctic temperatures to pour into Europe and Asia.

“A strong sudden stratospheric warming event (SSWE) over the Pole has temperatures spiking in the Arctic, plummeting in portions Europe and Asia.

The remnants of the Polar Vortex (PV) has also aided in unusual heavy snow in the forecast across portions of Spain in…forecast models spitting out over 12″ + of snow in the short term. While these areas of the world feel more “wintry”, it has allowed especially the northern half of the US to run much above normal in temperatures, losing our tap to cold air. Signs will need to be watched getting later into January, however, for the increased potential for cooler or colder outbreaks of air across the eastern/southern US if we can move the remnants of the PV more towards the US,” said Kirk Hinz, meteorologist with BAM Weather.

Low Gas Prices Crush Appalachia Shale Boom

January 11, 2020

Low Gas Prices Crush Appalachia Shale Boom

Low natural gas prices have finally brought the decade-long shale gas boom in Appalachia to a halt.close

Gas production in Appalachia declined by about 1 billion cubic feet per day (Bcf/d) over the past 30 days, bringing output down to an average of 32.7 Bcf/d, according to S&P Global Platts Analytics. That helped drag down overall U.S. gas production to 91.8 Bcf/d, a 1.7 percent decline from 93.4 Bcf/d in November.

The Permian hogs a lot of attention in the press, but the Marcellus shale has been growing at a blistering rate for about a decade. That is now coming to an end as the shale gas industry struggles with oversupply and low prices, lack of profits, debt, investor skepticism and also competition from associated gas in the Permian.

Natural gas prices fell sharply last year, ending the year down more than 25 percent. The rig count in the Marcellus fell by 1 last week, dropping the total to 40. Eight months ago there were 65 rigs operating in the area.

Front-month gas contracts are trading at about $2.12/MMBtu, although at the wellhead prices can be much weaker. S&P said that prices at Dominion South, a hub in the Marcellus, have averaged just $1.78/MMBtu in the past month. S&P says that average breakeven prices are $1.80/MMBtu, but that likely understates the price level that drillers need, given the struggles that many have gone through. Related: How Long Will The Oil Price Fear Premium Last?

“Gas prices are down. It has a big impact, the difference between $2.75 gas and $2.50 gas,” Toby Rice, EQT’s new president and CEO, told the West Virginian legislature in December “A lot of this development doesn’t work as well at $2.50 gas.”

…click on the above link to read the rest of the article…

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