This morning, the Wall Street Journal described China's explosion in nickel pig iron production, which has sent global prices reeling by introducing a glut of cheap supply. But it's not just nickel, the Journal reports. It's all kinds of commodities that we thought would start to disappear, and have instead started flowing even more freely, as producers found higher-tech ways of extracting them from the ground:
Oil prices took a tumble this weekend immediately after the nuclear deal between the United States and Iran was announced:
But the euphoria didn't very long: The price of a barrel of Brent crude fell nearly $3 after the deal, but soon bounced back up to its previous level of $110.96 by the end of the day Monday. And the cost of a barrel of West Texas Intermediate, the U.S. benchmark crude, has fallen just 66 cents since the agreement was announced.
If the world ever got serious about addressing climate change, fossil-fuel companies could stand to lose billions of dollars — maybe trillions. These firms all have large reserves of oil, gas, and coal that would have to stay in the ground in order to avoid severe warming.
But how likely is this scenario? Some environmentalists have argued that regulations are inevitable — which would mean that up to 80 percent of listed fossil-fuel reserves may be "unburnable." In an extreme case, oil, gas, and coal companies could be left with more than $6 trillion in stranded assets. This, they say, amounts to a massive "carbon bubble" set to burst.
Nearly 40 years ago to the day, oil producers in the Middle East retaliated against America's support for Israel during the Yom Kippur War by cutting their output by five percent. The result? Oil prices quadrupled and dented the U.S. economy.
In the decades since, the United States has been trying to insulate itself from similar shocks. The U.S. military dramatically expanded its presence in the Middle East to keep the crude flowing. The nation created a Strategic Petroleum Reserve to be tapped during shortages. And Congress enacted stricter fuel-economy standards to reduce the amount of oil we use.
There seems to be a pattern here. When U.S. military action in Syria looks more likely, traders get nervous and oil gets more expensive. When missile strikes look less likely, prices ease back down. But why would that be? After all, Syria itself produces very little oil — currently around 60,000 barrels of oil per day, or less than 0.1 percent of the world’s total.
The civil war in Syria is coming at a cost to Americans, even in the absence of cruise missiles or other overt interventionism. Here it is in a chart. This is the one-month forward contract for a barrel of crude oil on the New York Mercantile Exchange. In other words, the price of oil, more or less. It’s down a bit Friday after a steep rise since the spring.
The U.S. Energy Information Administration has created a fascinating short animation showing how the world's appetite for oil has changed over the past three decades.
Here's how much petroleum different regions used back in 1980, when the whole world burned about 63.1 million barrels a day of gasoline, diesel fuel, jet fuel, heating oil and other products:
The tiny nation of Ecuador is sitting on a lucrative oil reserve — some 846 million barrels of heavy crude. But that oil also happens to be right under a large, biodiverse rain forest. There'd be some obvious environmental problems with digging it up.
And so, in 2007, Ecuador President Rafael Correa came up with a innovative proposal. He'd ask wealthy countries and donors to pay Ecuador $3.6 billion to leave that oil untouched.
For years, there's been lots of debate over "peak oil" — the notion that, at some point in the near future, the rate of global oil production will bump up against a hard ceiling. This is generally considered a gloomy prospect.
But another, related concept has started to bubble up in energy discussions lately. It's the notion of peak oil demand.
When it comes to ethanol, the United States appears to have reached its limit — at least for the time being.
Back in 2007, Congress passed a law that would essentially require the nation to use more and more ethanol and other biofuels each year. But for reasons of chemistry and economics, those targets are becoming increasingly difficult to fulfill. That helps explain why, on Tuesday, the Environmental Protection Agency took the rather unusual step of announcing that it would look into ways to adjust those targets in the years ahead.
Over the past few years, the U.S. fracking boom has taken a great many people by surprise. Companies have been producing so much oil and gas that it's now putting a strain on America's energy infrastructure.
Case in point: The Energy Information Administration recently put out a report showing that U.S. transport of crude oil by rail, truck, and barge has soared by 57 percent between 2011 and 2012, surpassing 1 million barrels per day.
Here's a neat map looking at how oil travels by sea around the globe — focusing on the key "choke points" where that oil supply is most vulnerable to attack:
That map comes from this recent reporting project on U.S. energy security by nine student journalists at the Medill National Security Journalism Initiative. The Web site is really worth a look — the reporters explored all aspects of energy security, from presidential rhetoric on the subject to the oil markets themselves to a breakdown of U.S. military operations to stabilize the oil supply. And the site has plenty of charts and graphs.
Let's get this out of the way first: Michael Levi's new book, "The Power Surge," is very likely to be one of the best things you'll read about the ongoing oil and gas boom in the United States.
True, the book doesn't really have a grand overarching theory. There aren't any sweeping predictions that shale gas will supercharge the U.S. economy or that Canada's tar sands will destroy the planet.
Maybe you've heard that North America is producing a lot more oil these days, courtesy of fracking, tar sands and other new sources. The Atlantic has a nicely reported cover story on the whole phenomenon by Charles C. Mann. Headline: "We will never run out of oil."
It's a great article, but here's an key bit of additional context. Stuart Staniford has some great charts looking at the rapid growth in Chinese oil consumption over the past few decades. He's also done a simple extrapolation to see what China's oil demand would look like if it kept growing at 7 percent annually for another decade — hardly a wild assumption:
The U.S. economy has expanded 7.6 percent since the recession ended in 2009. That's better than Britain, Japan, the euro zone and many other advanced nations around the world. So why is that?
One popular theory is that the United States has benefited from a huge domestic energy boom. Thanks to new advances in drilling technology — particularly in hydraulic fracturing — U.S. companies have managed to exploit new sources of oil and shale gas in places like North Dakota, Texas, Ohio and Pennsylvania.
Warnings about "peak oil" have been with us since the OPEC crisis in the 1970s. At some point, the experts said, the world would hit a limit on how much oil could be extracted from the ground. Production would then drop, prices would soar, chaos would ensue.
But after a worrisome series of price spikes starting in 2007, oil triumphalism is once again ascendant. Companies are now using new technologies to extract crude from hard-to-reach sources, from the tar sands of Alberta to shale formations in North Dakota. After decades of decline, U.S. oil production has risen to its highest levels since the 1990s. And that's led many analysts and journalists to confidently declare that "peak oil is dead."
This week, the National Academy of Sciences put out a massive — as in, 395-page — report on how the United States can cut gasoline use in half by 2030. And, beyond that, how to cut greenhouse-gas emissions from transportation 80 percent by mid-century.
Those are audacious goals. But if the United States ever plans to deal seriously with climate change, the transportation sector will have to change drastically. And the National Academy of Sciences report concludes that no one single policy or technology will do the trick.
We've noted before that cars and trucks in the United States have starting becoming more fuel-efficient in recent years — after decades of stagnation — in response to high oil prices and strict new vehicle standards. That's one reason why U.S. oil imports have plummeted.
But a new report (pdf) from the Environmental Protection Agency offers the most detailed breakdown yet of this trend. The EPA is a particularly helpful source on fuel-economy because the agency tests how cars and trucks actually perform in the real world — rather than simply looking at what the laws say.
Like it or hate it, policymakers in Washington are still obsessed with the deficit. That's why think tanks keep churning out clever plans to cut spending and raise taxes.
And here's a new paper from the Council on Foreign Relations offering an interesting twist on the theme. Using economic modeling, Michael Levi and Citgroup's Daniel Ahn suggest that a tax on oil consumption could be one of the least harmful ways to trim the budget deficit.
—How one black-out-drunk broker went on a $520 million trading spree and caused the price of oil to spike.
— Nate Silver explains Bayes’ theorem.
— More on predicting House elections.
— ”The position of pharmacist is probably the most egalitarian of all U.S. professions today.”
—The candidate leading in September won 17 of the last 19 presidential elections (and has won the popular vote in 18).
— A t-shirt for the philosophy student in your life.
In his energy plan released Thursday, Mitt Romney lamented the fact that a large chunk of federal lands and waters in the United States were off-limits to oil and gas drilling: places such as the Arctic National Wildlife Refuge or the Outer Continental Shelf off the coast of Virginia and the Carolinas. The presumptive Republican presidential nominee promised to open many of these areas for leasing if elected.
In the old days, whenever oil prices got bumpy, the United States could ask Saudi Arabia to pump out more crude and calm the markets. But that’s increasingly no longer the case. Saudi production is struggling to keep up with rising demand in places like China. What’s more, as Jim Krane reports today, Saudi Arabia is growing so fast that it’s consuming its own oil at a shocking rate:
With domestic electricity demand rising 10% per year in Saudi Arabia, the kingdom now devours more than a quarter of its oil production—nearly three million barrels per day. International Energy Agency figures show that Saudi Arabia now consumes more oil than Germany, an industrialized country with triple the population and an economy nearly five times as large.
Worries about Saudi excess capacity are one reason why Iran-related tensions have driven crude prices up so high. By one estimate, this spare capacity could vanish entirely by 2020. If that happens, oil prices will get seriously volatile.
With oil prices still in the stratosphere, the rumblings are getting louder that the world’s nations may release some of the crude they have saved up in their strategic reserves. On Thursday, French Prime Minister Francois Fillon said there was a “good chance” that the United States and Europe will tap those reserves.
But experts remain sharply divided over whether now is the right time for countries to sell off oil from their stockpiles. The U.S. has 696 million barrels of crude sitting in its Strategic Petroleum Reserve, stored in salt caverns near the Gulf of Mexico. That’s enough to supply the country for 36 days. Similarly, the 28-country International Energy Agency has said that it remains “ready to act if market conditions so warrant.” Yet the IEA has also maintained that the reserves should only be tapped in the event of a severe supply disruption — and not merely to combat high prices.
In the past five years, warnings about peak oil have gained a lot of traction. U.S. oil production, after all, has fallen sharply since 1970. Global oil output has plateaued of late, even as China and India are demanding ever more crude. And that’s all caused prices to soar.
Yet the recent shale-oil boom in North Dakota has some analysts brushing off this gloomy perspective. A new research note (pdf) from Citigroup argues that the recent surge in North American production has “buried” the peak-oil hypothesis. New drilling technology has allowed companies to extract oil from once-inaccessible shale rock, which has, in turn, allowed the U.S. to slash its oil imports dramatically. What’s more, there are tantalizing shale deposits all around the world — in Argentina, Australia, and even France. So does that mean that, as the Citigroup analysts say, the peak-oil hypothesis is “dead”? Well, not so fast.