Daily Archives: June 8, 2010

Kate Mackenzie

The Gulf oil spill may be raising prices for long-dated (eight years hence) crude oil futures. But is it really going to have much effect on fossil fuel production around the world?

Fossil fuels, after all, have a lot of form for enduring all kinds of disasters and tragedies.

Look at coal, for example: cheap, geographically well-distributed and ever more popular in recent years. The industry’s history is littered with accidents and fatalities, and just this year we have seen tragic mine accidents in the US (in which 29 people died) and Russia (at least 66 people died) . There were also several big coal accidents in China, but they need to be seen in the context of 2,631 deaths in coal accident deaths in the country last year alone.

And few have raised the prospect that coal mining will be reduced.

Kate Mackenzie

If true, this could be the worst news on global climate policy since Copenhagen:

A Senate proposal setting up a cap-and-trade program to curtail greenhouse gas emissions likely will be offered on the floor later this summer as an amendment to a smaller, energy-only approach, Sen. Chuck Schumer (D-N.Y.) said today.

As for climate change, Schumer predicted Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) would have a chance to win 60 votes on their plan during the floor debate on the underlying Bingaman bill.

“Kerry has … done a damn good job, and he’s going to, in my opinion, get a chance to offer that amendment, and we’ll see if it has the votes.”

Emphasis ours – it’s clear that Schumer thinks it doesn’t.

Kate Mackenzie

How much will the Gulf oil leak affect US oil industry? Many views have been circulating; those focused on politics tend to think the effect will be big; energy industry watchers are a little more sceptical.

But Philip Verleger, an energy analyst and economist who was an official in the Carter administration, probably has a decent view on both angles. And he believes the effect will be substantial.

Verleger points out that unlike many other industries, the energy sector – particularly oil – has been spared the effects of free trade. In fact, in stark contrast to manufacturing and car makers, the energy extracting industries have benefited from what he calls a ‘drill America first’ policy; even when it raised domestic energy prices, as it did between 1958 and 1973.

But now, he believes, times are changing.

Kate Mackenzie

At least some of the oil flowing from the BP well on the Gulf of Mexico seabed is now being captured. But many believe that better, faster solutions could have been found further outside of BP.

BP insists it has the ‘best and brightest’ working on the problem – and in fact, only 60 per cent of the 600 engineers tackling the leak work for BP; the remainder are from other oil companies, contractors, and government, plus a few academics. The company’s assurances were little comfort, however, for many onlookers worried that the company was not soliciting enough outside expertise. Some were angry that BP itself was trusted to solve the problem; others couldn’t see how modern technology could keep failing to fix it quickly.

There has been a deluge of criticisms of BP’s approach and suggestions for how it should be better tackled over the internet since the leak was first reported.

Kate Mackenzie

BP’s latest update says it has collected 7,541 barrels of oil in the 12 hours to midday, June 7, and that the operation was ‘stable’. At that rate, they do indeed seem to be on track to collect an impressive proportion of the oil flowing from the Gulf of Mexico, and as the image to the right shows, that rate has grown since the cap was installed.

But what proportion of the oil is actually being siphoned off?

The official ‘best estimate’ of the amount of oil flowing f from the well was 12,000 to 19,000 barrels a day. In that context, collecting the 15,000 to 20,000 barrels a day that incident commander Admiral Thad Allen expects the new operation to soon be recovering sounds quite good.

But the flow rate likely increased by as much as 20 per cent since the riser was cut, according to BP. And that 12,000 to 19,000 flow rate range, on close inspection, is already extremely fuzzy.

Kate Mackenzie

- 2018 oil futures have risen 86 per cent since the Deepwater Horizon explosion

- Assessing Matt Simmons’ claims of a bigger structural Gulf leak

- Oil leaks, kinky math and mechanical band-aids

- The dangerous new era of extreme energy

- ‘You are responsible for any spills

- The bright side of the BP oil spill

Kate Mackenzie

- BP ramps up oil recovery effort - FT

- Likely litigants look to Exxon Valdez precedent – FT

- BP pins hopes on relief wells to plug leak - FT

- Exxon says oil industry standards are rigorous - Dow Jones

- UK to double inspection of drilling rigs - FT

- $100 oil will soon be here to stay, says former Shell president – Yahoo

- Industry to MMS: clarify drilling rules - The Hill

- BP buys ‘oil’ search engine advertising - ABC News

- Deepwater Horizon widow testifies – Guardian

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