Emac's Stock Watch | Fox Business
  • August 6, 2008 08:29 AM EDT by Elizabeth MacDonald

    OilWorld

    With oil prices dropping to less than $120 a barrel, its lowest price in three months, and the Federal Reserve not hiking interest rates, the Dow industrials rallied 331 points yesterday to 11615.77, its highest one day uptick since April 1 and a jump of 6% from the bearish July 15 low.

    The debate now is whether the oil markets will turn even more bearish and oil goes to $100.  

    But with fall and winter fast approaching, and heating oil costs rising, don't expect the fight to end over new drilling in the outer continental shelf.

    Or the debate to stop being filled with all sorts of gaseous rhetoric, which ought to make you wonder when Congress is going to pass legislation to let T. Boone Pickens build a wind farm outside Capitol Hill, as Washington these days is really the Saudi Arabia of wind, not Tornado Alley (might solve much of our nation's energy needs).  

    The question is, how much oil really sits on US-owned coastal properties? The answer is, while oil barrels off US coasts likely number in the tens of billions, no one knows for sure. Read on to see why.

    President George W. Bush has urged Congress to end a ban on drilling for oil in US coastal waters, to make the US less reliant on imports from countries who, well, hate America. The U.S. uses about a quarter of the 86 mn barrels of oil daily consumed in the world, importing two-thirds from overseas.  

    Republicans have been trying to use a growing outcry from voters who see prices rising at the pump for increased oil production to break Democrats' opposition to lifting a decades-old moratorium on offshore drilling.

    Democrats are retaliating in part with a call to release 70 mn barrels of crude from the nation's strategic oil reserve. As US gas prices hover around $4 a gallon, half of what many Europeans pay, the move should make you wonder, when is the word "strategic" really "strategic"?

    According to conservative estimates from the Department of the Interior's Mineral Management Service, the Outer Continental Shelf contains 85.88 bn barrels of oil and 420 tn cubic feet of natural gas.

    The US Mineral Management Service, part of the Department of the Interior says there are 18.17 bn barrels that are "technically recoverable resources" but are "currently off limits."

    That's equal to about two and a half years of U.S. consumption, an oil supply that would be added at the margin to existing supply, to the 86 mn used daily worldwide. For some time, and with this supply, the US could easily displace the daily output of Venezuela or Iran.

    Set aside for now the battle royale that would likely erupt over getting at what the Arctic is estimated to hold, 90 bn barrels of untapped oil, according to figures from the US Geological Survey.

    Oil pros say that easing access to the technically recoverable 18.17 bn barrels sitting in the Outer Continental Shelf is one of the few responsible long-term remedies to solving the nation's energy problems.

    A Sanford C. Bernstein report says that there is a lot of offshore crude that can be produced relatively quickly.

    The problem is, of an estimated 18 bn barrels of oil in restricted coastal waters, almost 10 bn barrels sit off the coast of California, where politicians get elected to office by opposing new drilling. Gov. Arnold Schwarzenegger has already rejected the idea of drilling off of California's coast.

    The same holds true for New Jersey and Florida, where elected officials have stopped offshore drilling for fear their tourism trade would be damaged by oil spills (never mind that high oil prices feed inflation and cause prices to rise, helping to stop tourists from going on vacation).

    California could actually start producing new oil "within a year if the moratorium were lifted,"  the Sanford C. Bernstein report said, because the oil is under shallow water, has already been explored and the capacity for building drilling platforms have been there since before the moratoria was first enacted in 1982, (it was reinstated in 1990 and again in 1992).

    Also, the Mineral Management Service estimate of 18 bn barrels of oil is its most conservative. And it's based on old, outdated information, dating back 25 years or so, because government bureaucrats have used caked-over regulations to stymie offshore exploration that would help the US figure out what the heck sits off US shores. The analysis of this oil data is relatively primitive, too.

    It's also expensive to wildcat, as one estimate says two out of three exploration wells in the Gulf of Mexico are dry holes.

    You still have to drill a well to know for sure what's there, but why do it with the government tossing in wrenches and tort lawyers bearing down panting to sue (though Hurricanes Katrina and Rita did cause 124 offshore spills, with platforms causing 52 spills and pipelines responsible for 72 spills, see blog, "Oil Speculators Part One: Hurricanes DO Cause Spills").

    It's habitually self-deceiving to say the US will survive solely on alternative energy. Joseph Petrowski, president of Gulf Oil, also rebuts the claim that "any oil we drill for now will not come on line for five years or longer--and will thus have no effect on prices today--is incorrect."

    Petrowski says that unlike past oil crises, where the spot price of oil (that is, today's price) rose more than forward prices, the oil price for delivery in 2012 is trading at $138 per barrel.

    Petrowski adds that "the market is sending a clear price signal that our problem is in the future--because we do not have the will to curb demand or increase supply."

Dave Swiderski - Penn State University

Hi Elizabeth! I really enjoyed reading your awesome blog! I found it to be really informative, and it makes you wonder with all these natural resources at our finger tips, why our government will not let Big Oil go and get it. What worries me most is if and when gas prices settle back down under $3, the debate over drilling will stop because we have all fallen into this false sense of security. Can't wait to read your next article :)

August 7, 2008 at 12:03 pm

Allen Gale

Watching the developments of the current "oil crisis" and the responses - or lack of them - from Congress, especially the Democratic majority, has brought me to view it in an entirely different light. We should stop looking at offshore drilling and additional domestic oil production as a solution to our oil problem and look at it as a solution to our balance of payments crisis. First, with the quantity of available oil reported lately, and the fact that rumors have it that the Russians and Chinese will soon be looking for more venturesome opportunities for their own oil, that if we don't go after it, they will. Whose technology would we rather have operating off our coasts - ours or theirs? Who do we think will be the more ecologically responsible - us or them? Second, with the price of oil far above the production cost, when we eliminate our dependence on imported oil, what better comodity to export than "excess" oil? What would happen to our upside-down balance of payments if we started exporting $100 or $200 bill. of oil to the world? What do we think would happen to our "friends" that really hate us when we did that? Third, I think it is high time someone got the real expertx, the drilling companies, to the spotlight to debunk all the rhetoric about it taking 10-20 years for any new oil to reach the market. Things to think about?

August 7, 2008 at 7:42 am

Jake

looks like the communist/democrats are about to implode. gotta love watching our idiot countryman triping all over themselves

August 6, 2008 at 3:26 pm

DrDetroit

Oh btw - on the title here ? Makes me think of WaterWorld - heh - and oddly enough ? What WAS up with the people in WaterWorld - they were always so dirty and yet they lived on the sea and cherished dirt as gold. Almost aounds like a group of super seniors picked from investment banks together in a room - except I think they cherished gold as diamonds, instead of dirt as gold. Seems WaterWorld being at the time the most expensive movie to ever produce ? I'd say this administration was prehaps the most expensive movie to ever be produced as well. I can see Rove sitting in the directors chair goin' 'Someone get on the bull horn and call Tommy Boy (General Tommy Franks), or Rush to get me 3 more boxes of these here cuban seeeeegars' Speaking of 20 minute movies out of Hollywood, this administration ? IS the money shot. Paglia is right, idealism churned like butter through christian fundamentalism will bring a directors cut scene of complete decadance in the end, just a matter of time before Dan Quayle golden days morality skipping in the sunshine down domestic abuse never existed alley hand in hand with Bush. Dan ? Bush ? Fox ? Hannity ? Uh, just when did those days exist ? Oh doesn't matter Ollie North is here to let YOU feel intimidated and secure at the same time! That's why I am leery of ANY fundamentalistic religious platform. Probably close to shoes there than something stand ON as in platform. I'm not sure there is need to spend our precious moments we have for what ? 80 to 110 years on this planet going around the sun ? on oil ? Heck no... I can't wait for more solar panel coverage on cars now - I can't imagine ! someone like me ? my car use is probably 5 miles a day on average - MAYBE - heck, I can just let that baby charge in the sun, oiiiiiiii? what ? buh bye petro - and all who are holding onto it's coat tails - good riddance, you lacked the creative 'energy' future generations of humanity are counting on you for - you insolent greedy hedge fund managers ! I'd suggest a new title for an article: The Solar Panel Express ? I hope everyone is aware they can sign up for the Clone Liz MacDonald project, in hopes of improving journalistic integrity - and flat out exciting, fun viewpoints into trying to solve, resolve, and understand the world's economic woes and successes. Just kidding on such a project, life doesn't work THAT way, heh, but if MacDonald wasn't with FBN, I'd add it to my blocked stations - which currently only contains Fox News. Tricky, from a political perspective, Fox floor 2 could say 'Yeah, but we don't understand why, but people respect MacDonald even though she's on our network, which is unheard of, so let's give her more space, maybe 1/2 on, 1/2 off with Cavuto' Then the rebuttle is what makes MacDonald so attractive to Fox Admins ? is that she COULD be a bridge to a greater audience that blocks Fox media out - even though most viewers might or might not seperate FBN from Fox News. All in all - MacDonald is on a rock right now with Fox, I hope someday she has a mountain to look out from, intelligent people who care are the ones that are best candidates to be left with power in resourcing reality to better understand it. HBO maybe ? heh - naw - MAYBE, but - no... I bet radio - She could be a better Stern as to the financials... My god, that would be a halarious show, and I bet she'd kick out the humor with full free reign to say what she wants about whatever corporate misgivings turn up.

August 6, 2008 at 12:11 pm

DrDetroit

Oil is centurian. I hold people accountable for endangering themselves, others around them, including their children if they have any - for failing to either seek education through academic channels or self educate regarding matters of physics. Yesterday, Liz MacDonald suggested to question whether to believe anything Merrill Lynch's Thain says regarding the company integrity. Hmm, financial outfit, head of outfit says of course this is the way, come fly with us. Oil outfit, head of oil outfit says - keep your eye on us, just you go and forget about anything else, now, git! ? I do say, somewhere people have become intellectually lazy, or perhaps just paralytic at the neuronal level. Where is it written in stone that burning petro products to cause a controlled explosion by any means A. Ideal B. the ONLY solution that's ever been C. the solution we must hold onto, for - we will die on this cold rock in space without our precious petro D. In any way out qualifying so many other solutions which - gee, just kinda 'popped up' over the last 100 years, and yet each one runs into acceptance because this mindset that one size must fit all, one solution to rule them all ! Where somehow people lack the ability to understand how a free market towards energy well integrated spanning various energy resources would be good ? Demand sets the morning price - through better education, people can again and again realize why complacency towards petro energy, let's include coal - why ? The #1 user of the Bush campaign jet in year 2000 was TXU Energy, who has been found with many others to lack the ability to pull the mercury that otherwise gets strewn up and down the east coast, into the ocean (FDA says to pregnant women (and the FDA remember, is pretty paralyzed these days too! - to not eat tuna at all - currently it says to avoid Tuna, Sword Fish and Shark. I went to FDA site and found a list of all the mercury concentrations for ALL the fish, 100's - I'd check it out) you might want to make for better quality years in old age with less mercury, or better years in young age for kids with less mercury). People don't understand what they're trading for that crack-pipe solution incandescent light bulb - which is WAY over due to be outed. Talk about dependency, forget about WHO you're dependent on oil for... cough... who even closed the discussion on WHAT we're going to be dependent ON ? really - my god - I will attempt to refrain from comments on helium 3 ! heh I'd watch those oil futures for a big jump in 2015, 2018 was one suggested target date before h3 fusion reactors are online. China already launched its program to acquire h3. Japan, Russia and India have all followed, with China proclaiming helium 3 IS their energy solution, and you know ? we will get there, those that lack faith, hey, I can't be held responsible for your lot, and those that just don't even get what I'm talking about ? I can't be held responsible for your lack of intellect to comprehend 'the' energy solution here, with full implementation GLOBALLY right around the corner. Gee, petro must have heavy influence in the press, you just never see anything about helium 3 in the press, almost ever. And yet ? here is China saying, 'We are going to the moon, and we have found our energy solution' Here is Japan, India and Russia saying - 'This is the way' Oddly ? Bush chimed in publicly in 2001 to state the US would return to the moon, but of course, for the betterment of mankind, with a promise that by 2008 - according to Bush, US would have harvesting robots on the moon. Hmm - Odd, Halliburton entered the space vehicle sector the year following and continued their acquisition of helium 3 reactor patents. hmm. But - anyway, petro is on its last leg, castles made of sand won't last Dubai. People will pay what they will pay. End of dialog on oil eh ? And people will charge what people will pay. "It comes out of the ground, kill it, er, I mean burn it Jed !, GIT IT! git that oil, let's get us a cement swimmin' pool and live like we've never lived before !' ? give me a break I even find the hype on discussing oil or seeking dialog about it, is just that, hype - if anything ? it keeps people focussed on petro again, it's manipulative almost. For example, try this brand of advertising... Just came to me. You bring up useless nonsensical high sensationalism tickets, like missing young people, oh, maybe some domestic issues that are better suited like the Runaway Bride to America's Funniest Home Videos, than Fox News, and after you capture the attention of the viewer and get their brain literally - into a specific mode of operation ? Perhaps even after littering a few brain washing esque Head On ads in between JUST to help peoples brains learn to 'not care anymore' - THEN - you start mentioning key subjects, and you never let it go. In this case ? oil Watch Fox, oil is everywhere, Look at all the Newscorp TV, radio and newspaper resources, if you CAN handle more sources than the 4500 News.google.com amasses from the entire world (makes you wonder why NewsCorp needs to seek to dominate media outlets eh ? Sheesh, I'd hate to see THAT abused my god, you could start a rumor and go on a bear run and rule the market place - thank GOD Murdock doesn't have interest in buying the - say - Wall Street Journal or - hmm - anything like that, or MarketWatch.com - my god, NewsCorp would have total bias at production/editorial level of media offerings), NewsCorp uses this strategy - it's useless sensationalism stories, then ? oil oil oil - liberal - oil - liberal - sounds like freakin' hollywood 20 minute movie after a while, I wish they'd just move all of Fox News over to nakednews.com and stop baiting and just get to act IV of this play. Hey, let petro die in dialog, discussion and even in trading interests- before it kills you, or really screws up your kids lungs - AMA even backs this. And Gee, lung cancer is #1 in the US, MUST be all those smokers. My god, could you imagine the class action liability if the oil companies were held responsible, or the gasoline companies were held responsible for endangering peoples health as - seeems no lawyer has put this 1 and 1 together, the AMA states petro exhuast will render a 50% chance your child will get asthma (don't worry, just watch Fox News and other NewsCorp sites - just use Advair, forget the causal factors as to your asthma, just don't you mind the oil companies don't care about your lungs, least not as much as the tobacco companies) if you live within 500 yards of a highway. Yeah right oil oil oil It almost reveals what stations, media corporations are either on the take, completely owned, or simply - out of gas to find something else to report on.

August 6, 2008 at 11:36 am

chuck

Rule one: don't trust politicians. Rule two: now that the speculators are under the microscope,it's time to see who else has benefited from high retail gas prices. If local mayors municipilities raise nautral gas rates where their constutients can't pay--calll it on them. They use the market as exscuse hit them with the facts. Now the jobbers should be next under the microscope. Both large and small.See whose taking care of their community and see whose exploiting it to get wealthy off of it. See which Jobbers are telling no to Costco,Kroger,SuperWalmart who want to put in gas pumps in the marketplaces. And this includes the NonCompetitive markets where some really need real competiton. Where a town like Vicksburg Ms has one jobber who calls the shots. Raise another question: why aren't there more than one gas jobber to handle the local oil which comes from the pipeline here? Status quo needs to be shaken up. But the jobbers should be next and see what corrupt games they've been playing to keep control of thier monolopolies large and small. People want real change. Not exscuses.

August 6, 2008 at 11:30 am

douglass graem

The management of RIG, the world's leading drilling company, believes that drilling off-shore could bring new supplies on the market in TWO years or less! This is as expert opinion as we can get and refutes the Democrat mantra that it would take TEN years to get results. Why is this RIG opinion not given much wider publicity? Go Cavuto, go!

August 6, 2008 at 9:33 am

about this blog

  • Elizabeth MacDonald is the stocks editor for Fox Business Network. She is recognized as one of the top prize-winning business journalists in the country, and has received 14 awards, including the top prize in business journalism, the Gerald Loeb Award for Distinguished Business Journalism, and the Newswomen's Club of New York Front Page Award for Excellence in Investigative Journalism.

most popular posts