'Get the Usual Suspects'

Sam Fletcher
OGJ Senior Writer

On the defensive shortly into his reelection campaign because of high gasoline prices, President Barak Obama had Atty. Gen. Eric Holder form yet another task force to “round up the usual suspects,” the alleged villains manipulating and defrauding the oil markets.

In an unusually broad pledge under the circumstances, Obama said, "We are going to make sure that no one is taking advantage of the American people for their own short-term gain."

Of course, practically every politician running for office in recent years has pledged to return energy prices to the low levels of decades ago. Each time retail fuel prices spiked at the pump, politicians launched another investigation into price fixing and market manipulation, only to announce months later as prices fell in the cyclical market that no financial hanky-panky was uncovered.

While speculators are an element in any oil price rally, they’re only reacting to government policy influences. “It was not the speculators but [government] policy makers that decided to launch a new war on an oil-producing country (Libya),” said Olivier Jakob at Petromatrix, Zug, Switzerland.

When speculators accumulated long market positions after Ben S. Bernanke, chairman of the Federal Reserve board of governors, launched the second phase of the Fed’s “quantitative easing” program to stimulate the economy, it was because the Fed “was afraid of deflation and embarked on a program of providing $30 billion a week to financial participants with the aim of sponsoring some inflation,” Jakob charged.

He also noted Saudi Arabia recently made a massive production cut in a period of near-record oil prices, “making it hard for short traders not to lose faith.” He said, “We believe there is a political side to the Saudi Arabia cut in oil production, and if they are trying to barter oil against support for their Bahraini military operation then we are in a bit of trouble. Saudi Arabia seems today more focused on saving its political regime than saving the world economy.”

Hurricane factor
The National Hurricane Center recently tracked a tropical low off Puerto Rico that never developed into a storm threat, but it was a reminder that the annual hurricane season is approaching in an environment where US inventories are being reduced. Officials at AccuWeather.com said Apr. 25 some economists are projecting gasoline prices to hit $6/gal at the pump on economic factors alone by the end of summer, the most active part of the Atlantic hurricane season.

Thanks to a drastic slowing of drilling permits issued since the Apr. 20, 2010,Macondo well blowout in the Gulf of Mexico, there won’t be many rigs at risk to hurricanes in those waters this year, a fact that is driving up oil prices that in turn are clouding the president’s chances for reelection.

But a major storm that disrupts gulf production and shuts down Gulf Coast processing and refining as Katrina and Rita did in 2005 will make a bad situation even worse. Nearly 3 months of production were lost that year to those storms. The government’s post-storm investigation called in the usual suspects but eventually found no proof the industry actually caused the back-to-back hurricanes or purposely put their fixed platforms and refineries in their paths.

Two hurricanes, a tropical storm, and a tropical depression in 2008 shut in production of 62 million bbl of oil and 408 bcf of natural gas in the gulf. “How long the spike in price lasts is usually a byproduct of the damage that was done. If there is no long-term damage, [the price] corrects itself relatively quickly,” said AccuWeather’s Senior Meteorologist Ken Reeves. "Hurricanes do have an effect, but it's mostly short term. Economic and political influences are the overriding factors."

AccuWeather.com is predicting a higher-than-normal number of tropical systems with direct hits on the US in the 2011 Atlantic hurricane season. The area of greatest concern, of course, is the Texas and western Louisiana coastlines with a high concentration of refineries and platforms.

(Online Apr. 25, 2011; author’s e-mail: samf@ogjonline.com)

Related Articles

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

MARKET WATCH: NYMEX crude oil price slides below $61/bbl

12/11/2014 Crude oil prices fell below $61/bbl for January delivery on the New York market Dec. 10 after the Organization of Petroleum Exporting Countries low...

MARKET WATCH: US crude oil prices rebound modestly awaiting inventory report

12/10/2014 Crude oil prices rose modestly on the New York market Dec. 9 while analysts awaited the US government weekly inventory report on crude oil and prod...

ExxonMobil forecasts 35% higher world energy demand by 2040

12/10/2014 A significantly bigger global middle class, expanded emerging economies, and 2 billion more people will contribute to 35% higher world energy deman...

MARKET WATCH: Crude oil prices briefly dip to 5-year lows

12/09/2014 Oil prices on the New York and London markets remained volatile, briefly trading around lows not seen since 2009 although prices were attempting to...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected