July 1, 2008 8:48AM
Oil Speculators Part One: Hurricanes DO Cause Spills
By Elizabeth MacDonald
You’ve heard the argument that the last time the US saw an oil rig spill was in 1969, when residents of Santa Barbara, California saw a massive spill that coated their beaches with goo.
And you’ve likely heard the argument, too, that no oil spills occurred offshore due to hurricanes Katrina and Rita in 2005.
The argument is used to shut down the environmentalists now upset that the US may drill offshore on the outer continental shelf to go after the estimated 86 bn barrels and 420 tn cubic feet of natural gas technically recoverable. Some 54% supposedly sits in the Gulf of Mexico, 31% is thought to be off of Alaska, California is estimated to have 10 bn barrels off its coast, and Florida supposedly has 3.9 bn barrels of oil off its coast, as well as 22 tn cubic feet of natural gas.
But it’s wrong to say that Katrina and Rita did not create oil spills.
Just as it’s wrong to say that oil speculators are largely to blame for high oil prices.
Just as it’s wrong to take as gospel facts and statistics in recent testimony from dubious experts about oil speculation.
Just as it’s wrong to sit tight when someone tosses down a lightening bolt of a data point about oil spikes at you from on high, especially when there are bigger, macroeconomic factors involved, so conveniently left out of these arguments, don’t let the truth ruin a good narrative.
Because it’s hard to coalesce into this polluted stream of oil consciousness the weakening dollar, strong demand from emerging world economies, shoddy and corrupt oil supply data, Mideast political unrest, Nigerian conflicts, detrimental weather and ethanol mandates.
It’s easier in this irksome political season, one that likely has you feeling like you are chewing aluminum foil, to scapegoat and deflect the blame, especially when you are responsible for crafting legislation that could help American consumers.
On May 1, 2006, the US Government’s Minerals Management Service issued a release saying Hurricanes Katrina and Rita destroyed 113 oil platforms and 457 oil pipelines in the Gulf of Mexico. It also said these hurricanes created six spills of 1,000 barrels of oil, condensate, or chemicals, spills reported in federal offshore waters, with a total of 146 spills of one barrel or greater reported as well.
In 2007, it reported that Katrina and Rita caused 124 offshore spills, with oil platforms seeing 52 spills and pipelines, 72.
The 2006 report also said that no shoreline or wildlife impacts “were noted” from these spills, with an emphasis on “were noted,” as the government can’t have bureaucrats trolling round the clock through spill-damaged waters, so leave that as an open-ended question.
Note, too, that the report admitted that underwater damage assessments “have been delayed because of overwhelmed support resources, such as diving equipment, support vessels, and remotely operated vehicles.”
An apt correction in light of the recent news that the US Supreme Court reduced the fines owed by Exxon Mobil over its disastrous oil spill in Alaska. Though Exxon has paid dearly for this environmental crime, I have warned you before that US taxpayers are often left to foot the cleanup bill to deal with the oil slobs.
And it’s left to you and me to clean up after the nonsensical thinking that oil speculators alone are the reason why we may see $10 a gallon of gas soon, thinking that comes from certain precious media pundits, typically self serving and lazy, who have not done the needed rooting around to find out what is really going on with oil price spikes.
For instance, you’ve likely seen that the total value of index funds and other similar investments has grown exponentially to $225 bn. But that figure is still far less than the tens of trillions of dollars worth of trades in oil markets each year. Barclays Capital says the influence in commodity markets from investment in oil index funds is vastly overrated.
A conclusion is where the mind comes to rest, a smart person once said. But not for readers of this blog. More on oil speculators coming. Stay tuned.
Comment by SolarBarney
Jul 1st, 2008 at 8:54 am
Not that a giant purple dinosaur and solar have anything in common, I opted to change my nick and that’s what popped in my head.
I think the US has had it’s run on oil from early 1900’s to present. Had the better battery (Dr. Seuss potential there) been around in 1910 ? we’d probably have electric cars now.
I’m not electronics engineer, but with ebay (and some money I don’t have) - I can pick up a base electric base - and for approximately $6,000 I see these panels - 1400 Watts a piece, all about the size of a beach towel. DC - two wires out - right into the wires into charging the battery on the car ? I bet 1 day I could have it wired in.
Result ? no more fuel prices for me OR my driving around town, ever. Sure I will get some looks as ‘look at the nutcase with the solar panel on the roof of the car’ Seems sane to me.
Comment by SolarBear
Jul 1st, 2008 at 8:57 am
I think 100 years of blowing up volatile liquids to solve my lack of intellectual potential to do otherwise is enough.
Even if my ‘car + solar panel on the roof’ idea doesn’t pan out, I could STILL put that panel in my back yard, and charge my car in my drive way. Small town driving ? Hey, that’s ALL you need.
over TEN years ago - In this Hyundai newsletter I’d get - they had a Sonata you could plug into a WALL socket - 20 minute charge. 200 Mile distance on one charge. Gee, why can’t I just buy one of THOSE, and a single panel to put on the roof of the garage ? 1400 Watts ? $6000 ? Heck, I could even spend LESS probably and STILL keep that car charged.
Oil is for people that are unable, or incapable of doing otherwise. Before petro, we had whale oil - I’m not sure we’re THAT far ahead of the late 1800’s.
Comment by BushEnergyReport
Jul 1st, 2008 at 9:01 am
According to the Bush admin’s 3 year late climate report - it states Global Warming IS real, AND further that petro exhaust DOES contribute to rising temperatures.
Couple THAT with NASA’s report 2+ weeks ago stating that rising temperatures will bring more powerful storms ?
Looks like petro might take care of itself in the gulf !
Anyone who can’t ‘get’ that solutions exist right now, has been living in a box as a hedge fund manager thinking it’s THEIR money they’re using to make ‘their’ income perhaps.
The ONLY drawback on electric cars is what feeds the grid. Solar / Geothermal solutions DO exist right now. Oil is NOT necessary - which would you rather have in the desert ? a car that’s out of gas ? or a car that needs to sit in the sun to charge for 2 hours before it will take you down the road again ?
Bottom line, electricity will fair you far better in the desert than oil. 100 years is enough for oil.
Comment by AmericasFuture
Jul 1st, 2008 at 9:05 am
If you ask me, and no one is… or does… ?
I think the United States brought oil to the world as an energy resource post 1900- and rode that wave for a LONG time, probably even had oil come in contact with the presidency at one point (cough).
I think the BEST way out for the US is to be a leader in providing the NEXT - CLEANER - solution. Come on, people burned WHALE OIL - and petro was cleaner ? probably smelled better, I love the smell of diesel myself, too bad it will kill me. I did read an article once on that some people have taste buds that reflect whether they love the smell of diesel - oh well, genetic nuances.
Only an intellectual parasite would say “uh, I know, let’s just follow in footstep of the last 100 years, and ignore all scientific data showing that burning petro is going to be bad for our children”
THAT the AMA says - kids who live within 500 yards of a highway have a 2x rate of asthma ? isn’t THAT enough ? it’s not about money at some point in my book.
If we fail to protect children from health dangers ? Really, what ARE we living for ?
Comment by AmericasFuture
Jul 1st, 2008 at 9:10 am
If burning petro - according to Bush admin’s climate report (I DO love quoting that - heh) increases global temperatures - AND NASA says (I mean, come on NASA ? it’s not like THEY ever get anything right, RIGHT ? [/sarcasm]- NASA is usually VERY accurate down to the mm in measurements trillions of miles away even) that this will mean more powerful storms and hurricanes ?
Seems to me petro will bring about it’s own demise.
Of COURSE those that makes TRILLIONS from petro - I do mean trillions, Exxon is now over 1 trillion last I checked, and that’s serious money, that’s buy your own nation state money - at the LEAST buy your own presidency money- LOVE the petro.
Hey, if YOUR family ? ran a business that was THAT profitable ? wouldn’t YOU hang onto it ? Or ? would you say - hmm - what good is money if the kids will get sick ?
People over look that one aspect, burning petro is ugly, dirty, nastyburger - and it kills. Go to a city on a hot stagnant air day and watch the warnings for the elderly on smog.
And people actually WANT to invest in oil futures.
blows MY mind.
Well they just want to exploit the dollar’s inflationary influence on futures IF you ask me, and again, no one ever does. heh
My view - a weak dollar makes for dangerous volatility on futures.
I think Muriel - in Liz MacDonald’s interview (Siebert) put it best - futures were created to help companies price their product, NOT to be exploited.
Comment by WhaleOil
Jul 1st, 2008 at 9:13 am
Maybe we could clone whales
and just clone the fat and bring that back ?
imagine the smell
I’m VERY close to getting petro out of my life -
I just need to save enough money to get the electric car.
It’s not that the electric is costing me more, it’s more so that I just don’t manage my money well and spend it all !
100 years is enough.
Let America be the leader in a new energy solution for automobiles.
The technologies ARE here - we’re capable of this. Perfect timing. AND ? you know ? we’ll probably decrease lung problems and make life more enjoyable for those that are very young, and those that are very old.
I’m going back to my mid-life crisis and coffee.
Happy to see a new article here !
Comment by DubiousOrNot
Jul 1st, 2008 at 9:27 am
I observe the Saudi’s saying they would increase output, but they don’t have buyers.
I observe the CEO’s of US oil corporations all saying “there is no surge in demand”.
I do not believe oil futures price doubling without a demand that’s been anything out of the ordinary is responsible for the oil going up.
It’s clearly not demand.
I used to think speculators, now I think it’s almost all the US Dollar.
I also no longer look at gold as going up - I look at gold going up to mean, merely - the dollar is worth less, and it takes MORE dollars to buy the same amount of gold.
It’s tricky with so many currencies in a global economy, but with the dollar no longer being the #1 currency, it’s not fair to use it to gauge oil or gold- MY view.
Comment by Justin
Jul 1st, 2008 at 10:03 am
I keep hearing these environmental whackos talk about how the buring of “fossil” (a lie) fuels is causing global warming (another lie). I’m tired of it. Temperatures on each planet in our solar system have been rising. Are human activities all of a sudden causing global warming on Mars? Look who gains to profit from carbon tax mandates. Follow the money people.
Until green energy can provide me the same bang for my buck as good old fashioned petro, I’ll continue burning it. I swear, some of these greenies make me want to burn some tires in my backyard out of spite. I’m sick of this cult of collectivist earth worshipers that are ruining this nation. No one wants a dirty environment, but at least restore some private property rights and allow those who are willing to drill, drill.
I’m sick of subsidizing rich farmers and green energy companies that can’t compete in the free market. I’m sick of the federal reserve destroying my dollar. I want liberty. I want an end to this tyranny. I’m sick of these bureaucrats telling me how I can live my life. I’m not your property Uncle Sam.
Comment by Caveman
Jul 1st, 2008 at 10:21 am
Yesss, return to stone age.
Beat stick with rock. Make spear.
Hunt big animal. Cook fat in pot. Make oil.
Not need washing machine. Wears skins till fall off.
Comment by jeronne
Jul 1st, 2008 at 1:16 pm
The existing technology used by train locomotives could be used for cars right now to eliminate the need for expensive, complicated batteries that need re-charging.. A small gasoline engine could turn a generator which would supply the electricity to an electric motor which would power the car.. This is a true hybrid.. It still makes use of internal combustion, but it runs on a fraction of the cubic inches.. Trains use this combination but make use of diesel instead.. The engineering and design just need to be miniaturized and adapted for road use instead of rail.. Plus, this uses a combo of existing simple technologies that could not be patented.. Anyone could start building or converting small cars right away. There is no need to wait for years to refine new technology and/or wait for it to become economically viable..
Comment by TB
Jul 1st, 2008 at 1:24 pm
fowssil fuels don’t come from dinosaurs. There is so much scientific data that is fed to people that are based on non proven assumptions that no on eunderstands the truth any more. Scientist decide “blank” must be the answer, and base everything they do as far as reasearch and statements off that assumption, without proving the assumption.
America needs to drill their own oil and start making their own decisions, instead of letting other countries spoon feed us oil. If we want clean energy, cars are the hard prat, lets do the easy part first, and start producing clean energy for our homes and infrastructure, and develop the car technology as we go….
As for this article, sounds like rambling and personal opinion. please don’t constrew the statements in this article as fact, these are this person’s opinions. The main problem in society these days is reporters get to report stuff and not state openly and up front whether they are reporting opinion of fact. rediculous. And i usually like her article, but not this one.
finally, Noah’s flood flooded the earth, created the grand canyon, created our ice caps, it’s taken a few thousand years for all that to melt. Pay attention people, science tries to explain stuff in terms of millions of years, archeologists find hard evidence, and it never says older than thousands of years. keep an open mind about that as your read through these “scientific reports”.
Comment by knoyddotcom
Jul 1st, 2008 at 1:27 pm
113 oil platform spills, reduced from 115 according to the same MMS report. Of those, sixteen platforms are being replaced by four, which will produce the same output.
That’s 113 platforms that showed spills out of a total of 4,000 platforms in the gulf. 2.8% ain’t bad.
However, drilling in the gulf is a strawman to divert attention from the 1.5 trillion barrels of oil available in Colorado, Utah, and Wyoming.
“Drill and Mine US Oil–Buy and Refine US Oil!” (copyright knoyd.com, 2008)
Comment by Mike from las Vegas
Jul 1st, 2008 at 1:31 pm
Wow……..you mean hurricane Katrina actually caused six minor oil spills?
So what; get over it.
Current technologies (oil, nuclear, coal, etc.) are the ONLY bridge to future technologies on a commercial scale so start drilling now, develop clean coal now and build nuclear energy now.
Leaving these natural resources unused makes no sense at all unless, of course, you think man made Global Warming is a proven fact. If you do, I have some great land in Florida for sale we should talk about………….
Comment by Dan from Navarre
Jul 1st, 2008 at 2:14 pm
Sorry but I am not buying into the oil speculators are not a driving factor. Since buying oil contracts only costs the investor 5-7% up front versus 50% to buy stocks you do the math.
As for supply problems, all we have heard of late is that consumption is down. Lets not forget about the mantra of reasons for higher prices, that by the have been around for the past 5-6 years, Iran nukes, MIddle East tensions, Nigerian attacks, recently Hugo Chavez and his crappy high sulphur oil that only we can refine. And yet everyone seems to get their oil with out massive disruptions. Same Crap, Different Day.
Much like the housing fiasco, speculators wanting to make a cheap buck while investing in nothing are hurting all.
Comment by Econ
Jul 1st, 2008 at 2:21 pm
It’s apparent that the dollar is part of the problem with the oil futures since the economy is forcing the Fed’s to keep interest rates low. That said, the underlining fix if you will to the dollar and the oil situation is very simple. By electing to drill off the coast and in Alaska, the value of oil futures will drop (almost overnight without drilling) and in turn so will the effect oil is having on the economy. The decision to drill will allow the Fed’s to adjust interest rates up again and allow the dollar to move to a level that it should be at in the world market. This approach will also calm the world oil markets (including our own), stop the flow of capital out of this country and take a big stick out of the hands of our enemy’s.
In as far as to the concerns of the environmentalist, I too would like to have a plant that is clean but they need to take a hard look at the facts and not be so quick to blame man for whole the situation. As it has been reported in the WSJ and other publications, the basic reason for most of the temperature changes to the plant is directly related to our current position with the sun and the activity taking place in the form of solar radiation. We are in a cycle that has been ongoing since the beginning of time and it is not something we can easily control. Bad science is partly to be blame for the current political situation and people with the wrong agenda comprise the rest.
Comment by DubiousOrNot
Jul 1st, 2008 at 2:42 pm
Justin,
you don’t want liberty
you want unregulated anarchy.
If you burn a tire in MY town ? you’ll be fined. If you continue to ? you’ll be arrested.
In MOST towns and cities, it is illegal to burn rubber and plastics.
Why do you think that is Justin ?
Perhaps you would be willing to burn in within the privacy of your own home Justin.
Take an extra deep breath for me and rid me of your insolence.
Hey, as a friend of mine says who’s a pharmacist, people don’t regulate their intake of even over the counter medicines, and you know ? when they double up on prilosec and it inhibits the heart muscle for proper ion uptake ? and they have a heart attack ? it’s too bad.
Justin, you’re desire for no regulation, no laws leaves me wondering at what stage of adolescense you’re locked into.
Comment by Karnak ..
Jul 1st, 2008 at 3:18 pm
An oil expert who is familiar with the Gulf of Mexico said on TV a few days ago that the oil and natural gas there could be extracted starting in approximately 1 year if construction started now.. The problems of drilling in the Rockies, stormy seas, frozen tundras, etc just do not exist in the Gulf.. — We keep hearing the anti-drilling crowd say that effective extraction will take 8-10 years and will only hold down gas prices by a penny or two.. If that were true and Clinton had not blocked drilling then we would be pumping serious oil right now.. And, I wonder how the anti-drillers know what the net effect of drilling will be on gasoline prices in 8 or 10 years when nobody even knows what it will be next week.. Why do we keep allowing the mid-easterners to mug us when we have so much available energy to be developed here?? Even if prices stayed the same, all those 100s of billions of dollars could be kept here in the USA if the oil companies weren’t allowed to sell domestic production on the world auction block.. This present Congress has been in majority for almost 2 years and has done NOTHING to halt price increases. In fact, gasoline has doubled since they took office.. It looks as though they are protecting big oil; which is exactly the same thing they accuse Republicans of … Big oil is not going to ramp up production unless they are forced to.. They are making record profits right now while doing things the same old way …
Comment by Chris
Jul 2nd, 2008 at 8:24 am
After reading your run on the “supply and demand” of Oil in the world, it is clear that Fox along every one else is blind to the reality of the issue.
Look at what you wrote, aging infrastructure in Russia, lower output in Nigeria, countries that shield their population from the real price of a gallon of gas, that is not so much a reduced supply, we still run a 2m barrel a day surplus. However, with the futures market in a frenzy to make a buck on, as you put it, a shrinking dollar, the price of a future barrel of oil goes up.
Where would you put the blame, on Russia, Nigeria, etc, or on those who set the price and are making a profit at it.
Those who look at the oil companies as the big bad wolf are short sighted. Those who look at Saudi’s and others to be at fault are also short sighted. Even those who solely blame the market place are short sighted to a degree.
The real blame lies with a combination of groups, first and foremost, the US Gov. and Congress for not allowing drilling, not MANDATING new drilling to put the signal out that we are going to take steps to mitigate the risk. Further, Congress and the environmentalists for not allowing new refineries be built in the US. (As you stated, other countries love to stick it to the US). And last but certainly not least, the environmentalists who have found a new way to make using petrol even more evil in the eyes of the public.
Well, since I am cut off, I’ll end it here.
Comment by John Hunter
Jul 2nd, 2008 at 2:36 pm
OK Elizabeth you have done your research (I assume) how many of those spills were offshore, vs. onshore?