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Security a major factor in considering oil options

    Oil — drill now, drill here! But let’s think about where we are going to drill. No one would say that we have enough oil; everyone would say we need more oil. But from where?
    ANWR is one of the options being discussed and offshore oil drilling is another alternative being considered. But before plunging our efforts into either of those options, let’s think of a problem with both of these alternatives.
    What is the problem with those two energy-generating, oil-producing locations? I can answer that question with three words — security, security, security. Offshore oil drilling and drilling in Alaska is doable but has inherent risk factors in the event of a war, or even from terrorists intent on disrupting production and delivery of our oil supply. Offshore oil rigs would be easy targets for enemy ships and or terrorists commandeering a fishing boat and loading it with explosives.
    A pipeline running hundreds or even thousands of miles through uninhabited lands, unprotected wilderness, could be extremely easy for just a handful of people to blow up sections of the pipeline or just use a high-powered rifle to shoot holes into and then set the pipeline on fire .
    The solution is drilling here, drilling now, but drilling within the boundaries of the continental 48 states, where security could be intense in the event of any type of hostility. Then after beginning drilling here, put our research into solar energy, which is gaining momentum in Australia and New Zealand as well as many other countries. Solar energy — once installed — is free!
    ED WAGNER
    Clifton Park

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Pelosi wants Bush to release oil from strategic reserve  
By Mike Soraghan  
Posted: 07/08/08 06:12 PM [ET]  
House Speaker Nancy Pelosi is calling on President Bush to release oil from the Strategic Petroleum Reserve in order to bring down prices.
Pelosi (D-Calif.) announced to Democratic leaders Tuesday night that she has written a letter to President Bush, urging him to release a “small” amount of oil from the government stockpile to increase supply and decrease prices, a leadership aide said.

In the letter, Pelosi said the price of a barrel of oil has risen nearly five-fold during Bush’s tenure and called the effects "devastating."

"These are the kind of circumstances, in addition to national security, in which utilization of the Strategic Petroleum Reserve is more than justified," Pelosi wrote in the letter, dated Tuesday.

The reserve comprises a series of Gulf Coast salt caverns that house the largest emergency oil stockpile in the world. It currently holds 706 million barrels, about 97 percent of the reserve’s 727 million barrel capacity. That’s the most the reserve has ever held and would replace foreign supplies for about 58 days.

It is not clear what impact a release would have on current prices. The U.S. uses about 20 million barrels of oil a day.

Pelosi’s letter noted that a release at the time of the start of the first Gulf War in 1991 brought prices down $8 a barrel. When President Clinton ordered a swap in 2000 to lower prices, she wrote, prices dropped 34 percent, to a little more than $20 a barrel.

The most recent drawdown, after Hurricane Katrina in 2005, lowered prices by about $5 a barrel, she said.

The reserve’s previous record of 700 million barrels was reached shortly before that post-Katrina drawdown.

Earlier this year, congressional Democrats scored their biggest success over Bush on energy when they passed legislation freezing the size of the reserve by a veto-proof majority. It was also supported by the three remaining presidential candidates at the time.

Bush opposed the idea, saying the 70,000 barrels a day being pumped into the reserve was too small to make a difference in prices. But he later relented. He signed the bill and deliveries stopped.

Pelosi’s is not the only proposal related to the reserve. Rep. Nick Lampson (D-Texas) has introduced a bill to take out more expensive “light” crude, and replace it with cheaper “sour” crude. He would use the difference in price to fund energy research.

The oil stockpile is designed to prevent an economically threatening disruption in oil supplies, according to the Department of Energy, which runs the reserve.

The stockpile has grown larger under President Bush, who has made it bigger and filled it fuller than ever before.

The 2005 energy bill ordered the Department of Energy to expand the capacity of the reserve to 1 billion barrels.

Bush went further in January 2007, announcing plans to double the size of the reserve to 1.5 billion barrels.

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Historical Crude Oil Prices (Table)

Updated June 12, 2008

This table shows the Annual Average Crude Oil Price from 1946 to the present. Prices are adjusted for Inflation to April 2008 prices using the Consumer Price Index (CPI-U) as presented by the Bureau of Labor Statistics.

Note: Since these are ANNUAL Averages they will not show the absolute peak price and will differ slightly from the Monthly Averages in our Oil Price Data in Chart Form.

Also note that although the monthly peak occurred in December 1979 the annual peak didn't occur until 1980 since the average of all the monthly prices was higher in 1980.

Inflation adjusted prices reached an all-time low in 1998 (lower than the price in 1946)! And now just ten years later we are at the all time high for crude oil (above the 1979-1980 prices) in real inflation adjusted terms.

Prices are based on historical free market (stripper) prices of Illinois Crude as presented by IOGA . Price controlled prices were lower during the 1970's but resulted in artificially created gas lines and shortages and do not reflect the true free market price.

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Top Democrat may back new offshore drilling: report
Wed Jul 9, 2008 9:43am EDTNEW YORK (Reuters) - A top U.S. Democratic senator said in a newspaper interview published Wednesday that he would consider supporting opening up new areas for offshore oil and gas drilling.

"I'm open to drilling and responsible production," Senate Majority Whip Richard Durbin told The Wall Street Journal, adding that Senate Majority Leader Harry Reid could also support the move.

However, Durbin said his support for opening new areas to drilling was contingent on setting requirements that oil and gas companies begin production within a specified time frame on acreage they have leased from the government.

The spike in oil prices to record highs above $145 per barrel has prompted calls for the U.S. government to allow energy producers to explore for oil and gas off the East and West Coasts and in the eastern region of the Gulf of Mexico. Those areas are currently off limits to exploration.

Republicans say their efforts to open up new regions for exploration have been stymied by Democrats.

Democrats say energy companies are producing oil and gas from only about a quarter of the 91.5 million acres currently leased from the government.

(Reporting by Matt Daily; editing by John Wallace)

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Oil adds a penny on US data, Iran missile tests
Wednesday July 9, 4:40 pm ET
By Adam Schreck, AP Business Writer  
Oil prices inch higher after Iran test-fires missiles, US crude inventories fall


NEW YORK (AP) -- Oil prices finished about where they began Wednesday after jumping more than $2 earlier on reports of lower U.S. oil stockpiles and an Iranian missile test.
Light, sweet crude for August delivery rose a penny to settle at $136.05 a barrel on the New York Mercantile Exchange, but prices shifted between positive and negative territory as traders parsed details of the inventory report following its midmorning release. In aftermarket trading, oil prices fell 40 cents to $135.64 a barrel.

The moves follow two days of steep declines that left prices 6.4 percent below last week's record high.

Figures from the Energy Information Administration showed U.S. oil supplies fell by 5.9 million barrels last week, a decline of 2 percent. That is far above the 1.9 million barrels forecast by analysts surveyed by the energy research firm Platts.

Prices often rise in response considerably to large drops in U.S. oil supplies. But Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, noted that much of this week's inventory decline was concentrated on the West Coast and was not representative of supplies overall.

"Whenever it's out on the West Coast region, the impact is blunted appreciably," he said.

In addition, gasoline stockpiles rose more than expected, partly offsetting the decline in crude. Inventories of distillate fuel, which include diesel and heating oil, also rose, but less than analysts anticipated.

Retail gasoline prices in the U.S. hovered at a record high just shy of $4.11 a gallon for the third straight day, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel prices at the pump rose by more than half a penny to a new high of $4.813 a gallon.

Prices rose as high as $138.28 earlier in the day following reports that Iran's elite Revolutionary Guards fired missiles during war games that officials said were meant to show that the key oil producer can retaliate against a U.S. or Israeli attack, state television reported.

The barrage was said to include a new version of the Shahab-3 missile, which officials have said has a range of 1,250 miles. That makes it capable of striking Israel, Turkey, the Arabian peninsula, Afghanistan and Pakistan.

Gen. Hossein Salami, a top commander, was quoted as saying the exercise "is to demonstrate our resolve and might against enemies who in recent weeks have threatened Iran with harsh language."

A day earlier, Iranian President Mahmoud Ahmadinejad dismissed fears that Israel and the United States could be preparing to attack his country, calling the possibility a "funny joke."

"Iran is certainly sending mixed signals," said Victor Shum at Purvin & Gertz in Singapore. "There was an apparent easing of tensions, but then the missile tests had an impact on prices today."

Iran is the world's fourth-largest oil producer and OPEC's second-largest exporter. Oil traders fear any military conflict could prompt Iran to block the Strait of Hormuz, a passageway that handles about 40 percent of the world's tanker traffic.

The declines earlier in the week dragged crude prices back to levels not seen since June 26. However, a number of analysts have cautioned that the sell-off might not represent a long-term shift in the bull ran that just last week drove prices past $145 a barrel.

In Washington, House Speaker Nancy Pelosi called on President Bush to open up the country's Strategic Petroleum Reserve in an effort to bring down prices she said "are helping push the economy toward recession." Bush repeatedly has rejected calls to use oil from the emergency government stockpile.

In other Nymex trade, heating oil futures fell 3.14 cents to $3.8516 a gallon while gasoline futures lost 1.77 cents to $3.3808 a gallon. Natural gas futures dropped 36.2 cents to $12.006 per 1,000 cubic feet.

August Brent crude rose 15 cents to $136.58 a barrel on the ICE Futures exchange in London.

Associated Press writer Ali Akbar Dareini contributed to this report from Tehran, Iran.

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Bush, Democrats bicker over soaring energy prices
By TERENCE HUNT, AP White House Correspondent

President Bush on Saturday tried to pin the blame on Congress for soaring energy prices and said lawmakers need to lift long-standing restrictions on drilling for oil in pristine lands and offshore tracts believed to hold huge reserves of fuel.

"It's time for members of Congress to address the pain that high gas prices are causing our citizens," the president said. "Every extra dollar that American families spend because of high gas prices is one less dollar they can use to put food on the table or send a child to college. The American people deserve better."

With gasoline prices above $4 a gallon, Bush and his Republican allies think Americans are less reluctant to allow drilling offshore and in an Alaska wildlife refuge that environmentalists have fought successfully for decades to protect. Nearly half the people surveyed by the Pew Research Center in late June said they now consider energy exploration and drilling more important than conservation, compared with a little over a third who felt that way only five months ago. The sharpest shift in attitude came among political liberals.

Democrats say they are for drilling, but argue that oil companies aren't going after the oil where they already have leases. So why open new, protected areas? they ask. Democrats say there are 68 million acres of federal land and waters where oil and gas companies hold leases, but aren't producing oil.

"Americans are fed up every time they go to fill up and they're right to demand action. But instead of a serious response, President Bush and his allies simply repeat the same old line more drilling," Rep. Chris Van Hollen, D-Md., said in the Democrats' radio address.

"Democrats support more drilling," he said. "In fact, what the president hasn't told you is that the oil companies are already sitting on 68 million acres of federal lands with the potential to nearly double U.S. oil production. That is why in the coming days congressional Democrats will vote on 'Use It or Lose It' legislation requiring the big oil companies to develop these resources or lose their leases to someone else who will."

"But we know that drilling by itself will not solve the problem of high gas prices," Van Hollen said. "We cannot drill our way to energy independence."

He cited Democrats' calls to tap the nation's Strategic Petroleum Reserve, because it is full and "America's rainy day is now." And he said the country must focus on new energy policies that focus on alternatives to oil.

Bush said that Democrats are at fault and that "Americans are increasingly frustrated with Congress' failure to take action.

"One of the factors driving up high gas prices is that many of our oil deposits here in the United States have been put off-limits for exploration and production. Past efforts to meet the demand for oil by expanding domestic resources have been repeatedly rejected by Democrats in Congress."

Bush repeated his call for Congress to lift the restrictions, including a ban on offshore drilling. A succession of presidents from George H.W. Bush to Bill Clinton to the current president have sided against drilling in these waters as has Congress each year for 27 years, seeking to protect beaches and coastal states' tourism economies.

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CAPITAL REGION
Energy going up Businesses forced to raise prices, cut staff to meet increasing costs
BY JASON SUBIK Gazette Reporter

    At Perecca’s Bakery in Schenectady, the ovens run on coal — 24 hours a day, every day of the year.
“Even on our days off, I go in and shake the fire to keep it going. We need to have constant heat. We can’t just crank up the heat, so ours is always going. It never goes out, ever,” Perecca’s owner Tony Papa said.
    “Our bakery has been around since 1914 and we don’t have a [natural] gas oven. I guess my grandfather switched it over at one point and the bread wasn’t any good, so he switched it back to coal.”
    Coal-fired ovens might be better for bread baking but they can’t be turned on and off like a gas oven. Papa said he is forced to continually buy coal for the ovens and pay for new delivery surcharges added to his bill by his suppliers, who are looking to pass on the rising cost of gasoline.
    Businesses in New York state have long faced some of the highest energy costs in the United States, and those costs are only going up. Record oil prices have pushed gasoline over $4 per gallon. Electricity in New York state is the third most expensive in the nation and nearly double the national average, according to the U.S. Energy Information Administration.
    Local companies are being forced to change the way they do business to survive the rapid climb in energy costs.
COST-CUTTING MOVES
    Papa said his bakery is wed to coal for its ovens but he’s doing all he can to reduce energy costs in other areas, including installing more energy-efficient compact fluorescent light bulbs and changing his dough mixing schedule when possible.
    “If I can mix twice instead of three times, instead of making three little ones I’ll make two big ones, just so I won’t have to run the mixer as much,” he said.
    In a very different industry, St. Johnsville-based commercial foam manufacturer Cellect LLC is deploying the same tactic. Cellect makes foam products used in athletic padding, medical equipment, orthopedic footwear, automobiles and industrial gaskets. Cellect president and CEO Scott Smith said his company tries to produce as much foam in as few runs of his equipment as possible to combat propane fuel costs that have doubled over the past three months. He said he’s looked into ways to generate his own electricity but hasn’t found a cost-effective plan yet.
    “This is the most difficult economic environment I have ever seen,” Smith said. “We’re trying to become as efficient as possible and do everything in our power to generate more product with less energy.”
    Cellect uses petrochemicals and plastics derived from oil to make its foam products. Higher input costs have forced the company to raise prices.
    “Obviously we’re trying to pass our increases on in this difficult economic environment. Our raw materials have gone up on average 115 percent since last year,” Smith said.
    Niskayuna-based chemical manufacturer SI Group recently announced price hikes for its chemical products. Starting July 1, SI Group raised the price of its alkylphenols product from 12 cents per pound to 20 cents per pound due to an “unprecedented rise in feedstock, packaging and energy costs.” On June 13, SI Group doubled the price of all grades of its phenolic resins from 4 cents per pound to 8 cents per pound, citing the same reasons.
    “The chemical raw materials we buy have risen dramatically in cost. They are derivatives of crude oil,” SI Group Brand Marketing Manager Juliana Lam said. “We certainly have raised our prices to keep up with those increases. I wouldn’t say we try to pass as much of the [increased cost] on as we can. We only do what the market dictates. We certainly try to keep our partnerships with our customers. Of course, if we pass the costs to our customers, they in turn pass them ultimately to the consumer.”
    Lam said one of SI Group’s biggest costs is the natural gas and oil it uses to power its plant in Rotterdam Junction. Company officials estimate SI Group’s local operations consume the second-largest amount of power in Schenectady County and the third most in the Capitol Region.
STATE GRANT
    In 2006, SI Group received a $1 million grant from the New York State Energy Research and Development Authority to help pay for a 5 megawatt wood-fired boiler, which would serve as a demonstration model for other companies in the state. Once completed, the boiler is expected to reduce energy costs at SI Group’s Rotterdam Junction plant by 15 to 20 percent annually, while also producing 34 million extra kilowatt hours of electricity the company may sell back into the power grid.
    “We’ve received permits from the [New York state Department of Environmental Conservation] and the town of Rotterdam, but we have not begun the project. We are still several months away,” Lam said. “The project itself should take about 12 to 18 months to complete.”
    NYSERDA backed the wood boiler project because it uses a renewable energy source, wood chips and unadulterated wood waste, and should have environmental benefi ts by reducing SI Group’s carbon footprint.
ENERGY EFFICIENCY
    Patrick Morris, spokesman for Schenectady-based nutrient premix manufacturer Fortitech, said his company has replaced all of its incandescent light bulbs with more efficient compact fluorescent bulbs. Fortitech is also building in energy efficiency measures to its new 48,000-square-foot warehouse in Glenville, including 90 skylights and sensors to turn off lights in areas that aren’t being used.
    “The updates that we’ve made to our lighting will probably provide $60,000 to $70,000 per year in savings,” Morris said.
    NYSERDA spokeswoman Colleen Ryan said energy efficiency programs are available through NYSERDA for companies with less than $75,000 in annual electricity costs. She said companies with electric bills of less than $25,000 pay a $100 fee for a complete energy audit aimed at pointing out ways companies can reduce energy costs. Businesses with annual electric bills of between $25,000 and $75,000 pay a $400 fee, but all fees are reimbursed if a company implements the energy-saving recommendations of the audit.
    “Interest in the program has defi - nitely increased. Energy costs are a large part of the budget of a small business,” Ryan said.
    This year, the average number of monthly applications for the energy audit program as of April was 73, up from an average of 43 applications per month in 2007.
    NYSERDA contracts with Troybased RLW Analytics to provide energy audits for companies in the Capital Region. RLW consultant Mark Adams said he often performs the audits.
    “We’ll take a look at windows, lighting, insulation, [and heating and air conditioning],” Adams said.
    Utility company National Grid also provides energy audits, but only for certified businesses located inside Empire Zones, said company officials.
    National Grid Principal Energy Manager Jim Stapleton said some of the benefits offered to Empire Zone companies include 10-year discounts on energy bills and 50 percent matching funds on up to $25,000 worth of energy-efficient retrofits. National Grid recently submitted a proposal to the New York state Public Service Commission to expand its energy-efficiency efforts to homes and businesses outside of Empire Zones. The PSC has not yet ruled on the proposal.
FIGHTING GAS PRICES
    Some organizations are also trying to help their cash-strapped work force deal with escalating commute costs.
    Kris Dzikas, the human resources director for Precision Valve and Automation, a 75-employee manufacturer located in Halfmoon, said her company recently instituted a fourday work week for the company’s 40-employee production team.
    “We started it in June, and they can work four 10-hour days instead of the typical five eight-hour. Many of [our employees] are coming from up past Lake George, so it’s saving them quite a bit,” Dzikas said. “Half of the [production team] work Monday through Thursday, and half of them work Tuesday to Friday.”
    The Albany–Colonie Regional Chamber of Commerce has also gone to a four-day week schedule as a pilot program starting July 7.
    “We determined we can maintain a high level of service to our members and at the same time provide some assistance to our employees,” chamber President Lyn Taylor said. “We have half the staff off on Friday and half the staff off on Monday. We’re at full strength Tuesday through Thursday. I have heard that many, many companies have considered changing employees’ schedules, perhaps closing one day a week, which some companies can do and some can’t.”
    Some companies have also been forced to fire workers. Robert Treacy, the owner of Latham-based TNT Courier Service, said over the past six months he’s been forced to shrink his delivery service company from six vehicles and eight drivers down to three vehicles and three drivers. He said the cost of gasoline has also forced him to create a vehicle surcharge so his customers will be prepared for price increases.
    “The increase to the customer definitely doesn’t take care of all of the increase in the fuel. We’re at about a break-even point,” Treacy said.
    High gas prices have been good for bus route logistics software company Transfinder, which is located in Schenectady. Transfinder President and CEO Antonio Civitella, who owns all of the shares of the 20-year-old private corporation, said his company is seeing revenue growth because of school systems devastated by high diesel prices.
    “So far we’ve had a record year, a lot of new customers,” Civitella said.
    Transfinder’s software enables school districts to quickly plan the most efficient bus routes to save money on fuel. Civitella said his company has not yet expanded its routing software products into the private sector delivery market but may do so in the future.
    Treacy said he’s spent a lot of time combining his routes in an attempt to lower fuel costs. He said he’s also tried to eliminate any left turns on his routes so his vehicles will be able to take advantage of “right on red” intersections and not have to waste fuel idling.
    “I designed routes four or fi ve months ago that are basically big loops with nothing but right-hand turns,” he said.

BRUCE SQUIERS/ GAZETTE PHOTOGRAPHER Working at a mixing machine he inherited from his grandfather, owner Tony Papa dumps a bag of flour as he makes bread dough at Perecca’s Bakery in Schenectady. He says he is doing all he can to reduce energy costs, such as installing more energy-efficient fluorescent light bulbs and changing his dough mixing schedule.