Analysis by the father of American Geopolitics Dr. Daniel Fine, MIT.

Archive for December, 2015

Lifting of export ban unlikely to fuel growth anytime soon byBy Kevin Robinson-Avila / ABQ Journal Staff Writer


For the complete article use this link-> http://www.abqjournal.com/695149/biz/biz-most-recent/lifting-of-export-ban-unlikely-to-fuel-growth-anytime-soon.html

ALBUQUERQUE, N.M. — The federal government is preparing to lift its ban on crude oil exports for the first time in 40 years, but most producers and industry analysts expect little benefit, at least in the short to medium term.

Congress agreed to suspend the ban in its new omnibus spending bill approved on Friday and since signed by the president. That could pave the way for the first crude exports since 1975, when the federal government originally imposed restrictions to shore up domestic supplies in response to the Arab oil embargo that decade.

U.S. producers have lobbied heavily to eliminate the ban, given that modern drilling technologies have opened up vast new U.S. crude reserves. That has pushed domestic output to its highest levels since the early 1970s, contributing to global oversupply and a fierce price war with the Organization of Petroleum Exporting Countries that began last year.

To sustain U.S. production, oil companies want to access foreign markets where prices are higher than that paid by domestic refineries.

But the battle with OPEC has sharply cut prices across the board, greatly narrowing the gap between what foreign refineries now pay for Brent oil — the international benchmark — and what domestic ones pay for U.S. benchmark West Texas Intermediate.

The price differential has shrunk to less than $3 per barrel, down from $20 or more a few years ago, said Tom Kloza, chief petroleum analyst with the Oil Price Information Service in Maryland. As a result, the benefits for accessing foreign markets are now minimal for U.S. producers.

“At this point, with the compression of crude oil prices across the board, the prices for Brent and West Texas Intermediate are very close to one another,” Kloza said. “That’s made the advantages of eliminating the export ban a moot point for the foreseeable future.”

U.S. exports could actually aggravate the price war with OPEC, driving markets even lower, said Daniel Fine, associate director of the New Mexico Center for Energy Policy at the New Mexico Institute of Mining and Technology.

“OPEC will likely move now to retaliate against U.S. crude exports,” Fine said. “U.S. producers will be unable to compete against severe price discounting by OPEC, particularly by Saudi Arabia and Iran. No country or refiner out there is going to take U.S. oil at a premium price against discounted prices from OPEC.”

Oil guru Fine was right on gas prices


The full article can be found here–> http://rdrnews.com/wordpress/blog/2015/11/28/oil-guru-fine-was-right-on-gas-prices/

Energy expert Dr. Daniel Fine, left, in March predicted the current low gasoline prices. Pictured with Fine during a meeting in Roswell in March are local oil men Rory McMinn of Reed & Stevens, center, and Bob Armstrong of Armstrong Energy Corp. (Jeff Tucker Photo)

An energy expert’s prediction in March that gasoline prices in New Mexico would dip to $1.65 a gallon has been proven true.
Dr. Daniel Fine, associate director of the New Mexico Center for Energy Policy at New Mexico Institute of Mining and Technology, said at a landmen’s association’s meeting in Roswell in March that gasoline prices in New Mexico would drop to as low as $1.60 a gallon this year as the United States and the Organization of Petroleum Exporting Countries engage in a crude oil price war.
Gasoline prices in Bernalillo County dipped to $1.64 a gallon this week at some stations, according to GasBuddy.com. Gasoline prices in Chaves County were as low as $1.80 a gallon this week at Sam’s Club in Roswell.
In March, Fine predicted gasoline prices in the Albuquerque market in 2015 would rise slightly to $2.35 a gallon before leveling off somewhere between $2.35 and $1.65 per gallon. He said in March that gasoline prices in Albuquerque could ultimately drop to as low as $1.60 a gallon.
“We made it to $1.60 and I have an outline of where we’ll be in 2016,” Fine told the Daily Record this week. “I’m getting calls to return to Roswell to do the next year.”
Fine said fuel prices in the United States are at their lowest levels since 1998, unadjusted for inflation. Fine attributed the low gasoline prices to soft market demand and excess supplies of crude oil.
The United States has more crude oil reserves than it has had since 1933, Fine said.
Fine said he’s not so sure crude oil prices will rise any time soon. He said there is a lot of anticipation about a Dec. 4 meeting of OPEC in Vienna, Austria.
“There’s a little excitement in the market about what the Saudi Arabian position might be on the 4th,” Fine said. “What’s reported out is some language about stability. So the speculators are buying oil today. But I am very skeptical that this will last.”
Fine, who has been critical of OPEC, said the oil cartel is creating an imbalance in the marketplace by over-producing while crude prices continue to drop.
Fine said many economists assumed Saudi Arabia’s state-owned oil producers would cut back production as crude oil prices plummeted, but he said that did no occur.
“From Thanksgiving (2014) on, we’re in this oil price war crisis,” Fine said.

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