Oil Is Over

From the wire services:

ANCHORAGE, Alaska (AP) – Royal Dutch Shell will cease exploration in Arctic waters off Alaska’s coast following disappointing results from an exploratory well backed by billions in investment and years of work.

The announcement was a huge blow to Shell, which was counting on offshore drilling in Alaska to help it drive future revenue. Environmentalists, however, had tried repeatedly to block the project and welcomed the news.

Shell has spent upward of $7 billion on Arctic offshore exploration, including $2.1 billion in 2008 for leases in the Chukchi Sea off Alaska’s northwest coast, where an exploratory well about 80 miles off shore drilled to 6,800 feet but yielded disappointing results. Backed by a 28-vessel flotilla, drillers found indications of oil and gas but not in sufficient quantities to warrant more exploration at the site.

Activists in Seattle had been protesting Shell for months after the oil company announced plans to use the Port of Seattle as its base for the Arctic drilling operation. The protests severely hurt Shell’s attempts to craft a public image of an “environmentally friendly” oil company.

I’ve said all along that the economics of offshore oil drilling just aren’t there at this point — maybe not ever again. The easy oil is gone; the stuff that’s left is extraordinarily difficult (and expensive) to get at. With oil prices plummeting, it just doesn’t make economic sense.

Meanwhile, Shell is in the hole to the tune of $4.1 billion thanks to this bad business decision — and not only that, it’s been a public relations disaster, too:

Shell is expected to take a hit of around $4.1bn as a result of the decision.

The company has come under increasing pressure from shareholders worried about the plunging share price and the costs of what has so far been a futile search in the Chukchi Sea.

Shell has also privately made clear it is taken aback by the public protests against the drilling which are threatening to seriously damage its reputation.

Ben van Beurden, the chief executive, is also said to be worried that the Arctic is undermining his attempts to influence the debate around climate change.

His attempts to argue that a Shell strategy of building up gas as a “transitional” fuel to pave the way to a lower carbon future has met with scepticism, partly because of the Arctic operations.

A variety of consultants have also argued that Arctic oil is too expensive to find and develop in either a low oil price environment or in a future world with a higher price on carbon emissions.

Oil is over. It’s yesterday, it’s finished. Give it up.

>GOP Party Of Know-Nothing

>Jeeeesus but John Boehner is an idiot:

Perhaps most interesting was his attack on the Obama administration’s attempts to impose a moratorium on deep-sea drilling. “The deep-water drilling — maybe there’s a reason there to pause till we know what happened and we can make sure we can prevent it from happening again,” Boehner said. “But all of this other drilling that’s going on down there in the more shallow waters — there’s no reason to have a moratorium.”

Oh for crying out loud, what have I been saying for weeks now? One more time, for the Republican Minority fucking Leader who seems to have absolutely no fucking clue what he’s talking about:

The offshore drilling moratorium applies to just 33 oil rigs drilling exploratory wells in water deeper than 500 feet.

Got that? All of the whining and moaning about the final nail in the Louisiana economy (since the oil spill destroyed their fallback industries of tourism and fisheries) and yammering on right wing radio and threats that the entire Gulf oil industry would pick up sticks and move to the North Sea because oil workers and supporting industries simply can’t wait six months … all of that is over 33 exploratory wells.

Think about that. Even the House fucking Minority Leader doesn’t know it because everyone has been acting as if the entire offshore oil drilling industry has been mothballed for the duration. And that’s because no one in our glorious media has bothered to mention that, or at least not mention it often enough and loud enough.

>Activist Judges In Louisiana?

>The judge who overturned the Obama Administration’s six-month deepwater drilling moratorium which affects just 33 rigs in the Gulf of Mexico should have recused himself from the case:

According to Feldman’s 2008 financial disclosure form, posted online by Judicial Watch [pdf], the judge owned stock in Transocean, as well as five other companies that are either directly or indirectly involved in the offshore drilling business.

It’s not surprising that Feldman, who is a judge for the Eastern District of Louisiana, has invested in the offshore drilling business—an AP investigation found earlier this month that more than half the federal judges in the districts affected by the BP spill have financial ties to the oil and gas industry.

Doesn’t bode well for any future lawsuits on this.

Remember people: the moratorium affects just 33 rigs. Hundreds are still operating in the Gulf of Mexico. The industry has not come to a grinding halt, fearmongering about economic destruction and job loss and all the rest are completely overplayed. It’s the oil barons trying to show their muscle.

Thirty-three rigs, people. All of this fearmongering and lawsuits are over 33 rigs.

>Why Are Gas Prices Dropping?

>Yet more evidence that Newt Gingrich’s “Drill Here, Drill Now, Pay Less” campaign is bullshit: we’re two months into a six-month ban on deepwater oil drilling and gas prices are tumbling:

CAMARILLO, Calif. — The average price of regular gasoline in the United States has dropped more than 11 cents over a three-week period to $2.72.

Not possible! We were told that unless we drill for oil offshore, we’d be paying $4 and $5 a gallon! Instead, gas prices have been dropping since the oil spill started:

WASHINGTON (MarketWatch) — U.S. consumer prices decreased in May for the second straight month as gasoline prices fell, the Labor Department reported Thursday.

And no, I’m not suggesting that the oil spill is responsible for lower gas prices. That’s just stupid.

So why are gas prices dropping like a rock, despite a ban on offshore deep water drilling? Here’s an idea:

Analysts say a sluggish start to the summer vacation season has increased gas inventories, and serious economic problems in Spain, Portugal and Greece have helped lower prices as the dollar rose in value against other currencies.

The price drops, which began May 7 when the financial crisis in Europe worsened, have reversed a trend in early 2010 that had seen gasoline prices rising considerably higher than the previous year.

Hmm. So apparently the price of gasoline is more affected by world events and the global financial market than how many rigs are drilling off the coast of Mississippi.

Interestingly, the story goes on to say that hurricanes in the Gulf of Mexico could disrupt drilling operations and cause prices to go back up. That is an excellent reminder to us all that there is, in fact, offshore oil drilling going on in the Gulf of Mexico right now, as I type this. Republicans and even a few Democrats keep telling us that unless the deepwater moratorium is lifted, it will be an economic disaster for states already crippled by the oil spill, like Louisiana. Which ignores the fact that the oil industry is still chugging along down there.

So talk about platforms, specialized equipment and even the workforce leaving the Gulf of Mexico strikes me as unnecessary fearmongering. There’s still drilling going on, just not in water deeper than 500 feet. In fact, only 33 deep water rigs have stopped operations: so little that we haven’t even felt it at the pump. Gas prices are actually going down.

So quit yer whining. If there’s some deep-well engineering firm that’s going to have to leave the Gulf of Mexico because they are out of work for six months, see ya. Go pollute the waters off of Norway or Brazil (if you can). Take your trashy, polluting, risky, unsafe industry somewhere else. I’m not going to have a sad. I’d rather have some shrimp to throw on the barbecue and you guys screwed that up for us for good.

>Modern Corporate Patriotism

>Under the new Republican mantra of “privatize gains, socialize losses,” yesterday Alaska Senator Lisa Murkowski defeated a bill that would cap BP’s liability at $10 billion, an increase from $75 million. That means us taxpayers have to pay for the rest of the cleanup if BP opts not to.

How’s that for a Big Oil bailout? Let them make as big of a mess as they want, and we taxpayers will pay for the cleanup. Easy peasy.

The reason, she claims is that

It would be impossible or perhaps close to impossible for any energy company that is smaller than the supermajors, smaller than the national oil companies, to operate in the O.C.S.

which is patently dishonest because, for one thing, drilling on the Outer Continental Shelf is already prohibitively expensive, and thus only something the “supermajors” can tackle. And too:

Sen. Robert Menendez, D-New Jersey, said Murkowski’s argument didn’t hold up. “The risk is what has to be calulated here. If you drill, you need to be able to pay for the damages,” Menendez said.

Interestingly, there is a similar law over on the nuclear energy side called the Price–Anderson Nuclear Industries Indemnity Act. In the event of an accident at a nuke plant, the federal government pays all liability claims above $10 billion. So much for that free hand of the market stuff!

The American taxpayer needed to come to the rescue of the nuclear power industry because, as Wikipedia notes,

At the time of the Act’s passing, it was considered necessary as an incentive for the private production of nuclear power — this was because investors were unwilling to accept the then-unquantified risks of nuclear energy without some limitation on their liability.

Ah yes, just another way the “free hand of the market” isn’t really all that “free” but instead gives a generous government assist to the oil and nuclear industry–an assist I daresay the solar and wind power industries never see.

So don’t talk to me about how “competitive” green energy could never be, not when the game is rigged.

Anyway, all of this is preamble to what’s really outrageous about the whole “privatize gains, socialize losses” tactic at play here. Because where the BP oil spill is concerned, none of these players are American companies. They are all headquartered overseas, and therefore pay few U.S. corporate taxes.

Transocean Ltd.? They’re based out of Zug, Switzerland. They moved there two years ago–from the Cayman Islands. Formerly based out of corproate-friendly Delaware, they haven’t called America home since 1999.

Halliburton? Once based in Houston, they now call Dubai home. This despite raking in billions in U.S. government contracts.

BP, as we all know, stands for “British Patroleum.” They are based out of the United Kingdom.

So there you go. American taxpayers will be paying for this oil spill in a lot of ways: loss of jobs in affected industries such as tourism and fishing. There’s the damage to the ecosystem. There will be health costs associated with the toxic mess. And while Lisa Murkowski blocks raising BP’s liability, meaning Joe and Jane taxpayer will pay for more of the cleanup, we’ve got three two major players who have dodged paying their full share of corporate taxes by moving to overseas tax havens. Talk about “starving the beast”!

Even worse, as I frequently remind my readers, all of this talk about us “needing” to drill offshore for our “energy security” is just a load of bull. We don’t have a nationalized oil industry in this country. Oil is traded on the world market. That oil pulled out of the deep sea bed is as likely to end up in South America, China, or the EU as it is American SUVs.

So how about this. Since American taxpayers are paying to clean up this mess anyway, why don’t we make sure we’re the ones reaping the rewards of offshore drilling? How about nationalizing the oil companies, or at the very least creating a nationalized oil company. If you’re going to drill in U.S. waters, then that’s who’s going to have to do it. Hell, we’re paying for it anyway.

Sound too socialist for you? Maybe. But the alternative isn’t looking much better.

>Stupid, Greedy, Stupid, Greedy, Stupid

>[UPDATE]:

Oh my God it’s worse. It’s already worse.

————————————–

This shit is making me nuts.

BP America Chairman and President Lamar McKay:

McKay compared efforts to try to trigger the blowout preventer to stop the flow of oil from the sea floor to performing “open heart surgery at 5,000 feet in the dark with robot-controlled submarines.”

Yeah, no shit, Sherlock! We got that! That’s why environmentalists wanted things like acoustic triggers, blowout preventers, yada yada. Which you in your brilliance lobbied against because you said an incident would be “unlikely.”

Let me repeat: you are drilling the world’s deepest oil well, which requires some very specialized technology, yet from a safety and risk standpoint you acted as if this was just any ol’ offshore well. And you claim that you didn’t put “blowout preventers” on these wells because an accident like what we’re seeing “seemed inconceivable”.

I repeat: You are doing something that has never been done before and yet in your brilliance an accident was “inconceivable.”

You think we’re stupid, don’t you?

For starters, you assholes at BP know you had a history of problems on your offshore rigs:

BP faces fresh questions over the cause of the Gulf of Mexico oil spill after it emerged that problems with the type of equipment that led to the disaster were first reported a decade ago.

In June 2000, the oil giant issued a “notice of default” to Transocean, the operator of the rig that blew up last month. The dispute was over problems with a blowout preventer, a set of iron slabs that should close out-of-control wells. It failed on the Gulf of Mexico rig, triggering the explosion and oil spill.

Transocean acknowledged at the time that the preventer did “not work exactly right”. The rig in question, the Discover Enterprise, was unable to operate for extended periods while the problem was fixed.

The preventer was made by Hydril, now owned by GE’s oil and gas arm, and Cameron International, a Houston company. Cameron also made the preventer on the Deepwater Horizon, the rig that exploded. Its preventer was fitted at about the same time BP was complaining of problems with its sister vessel.

Oh this is peachy. So excuse me if I don’t take Mr. McKay’s PR bullshit seriously.

And I have a very special fuck you to Interior Secretary Ken Salazar:

He expressed confidence that the oil industry “can operate safely.”

Salazar said, “There are 30,000 wells that have been drilled out in the Gulf of Mexico, and so this is a very, very rare event.”

Okay, let me take a deep breath and try to explain this stuff slowly and carefully to you. I’ve said this before a thousand, gazillion, bazillion times but I will say it again: there is a reason these deep water oil reserves are untapped. They are really, really, hard to get to. And expensive. And hard. And did I mention expensive?

So when BP execs tell you that blowouts were “inconceivable” let me point out that they are talking out of their ass. Look, not all offshore oil wells are the same, got it? This was the deepest oil well in the world. That’s a whole ‘nother ball of wax than what you’re dealing with everywhere else. And the very last thing in the world I want to hear right now is Administration officials repeating oil industry talking points. So I have a steaming cup of STFU with Ken Salazar’s name on it.

Look, the oil wells close to land are done, tapped, finished, over. We are going further and further out into the deep water, which presents new technological challenges. We are, quite literally, in uncharted waters here, people.

Here, lookie, Wired did a wonderful piece on this waaaay back in 2007. Read it and stand in awe at what it takes to pull oil out of the deep, dark, cold water. BP knows this, it’s their business to know this. Hell, even folks who work for Chevron call deep water oil drilling “a total crap shoot.”

Meanwhile, assholes like Bill Kristol, who say we just need to drill closer to land, don’t have a fucking clue. We’ve been there and done that and that oil is gone. Got it? The easy oil is gone. We are going after the hard stuff. The expensive stuff. The difficult-to-extract stuff. That means that extra precautions need to be taken. Extra safeguards. Belt-and-suspenders stuff. Acoustic shut-off valves and whatnot. Hell, I don’t know. I just know that when you are walking on the Moon you don’t pretend it’s an afternoon in Central Park. You do, you know, extra shit to be extra careful.

Because these deep water oil wells are not like any other well. So when you say, “Oh gosh there are tons and tons of offshore oil rigs and they haven’t blown,” well let me point out the very fucking obvious to you: This is what the oil industry refers to as “The Last Frontier.” This isn’t business as usual. This is special circumstances.

Got that?

Special fucking circumstances. And when you are operating in special circumstances as if it’s the same ol’ same ol’ to maximize your profts and keep Big Government off your back then you, in my opinion, are a greedy fucking asshole. And if there is any justice in the world then Corporate Person BP will be given the death penalty for this crime it has inflicted on the American people.

That is all.

>So Much For The Free Hand Of The Market

>All of you people hitting the Google to find out “why are gas prices going up again,” I have a very simple answer:

BECAUSE THE INDUSTRY IS GREEDY!

I’ve said this, oh, like a hundred thousand times before, but those old rules about supply and demand simply do not apply to oil and gasoline. So Newt Gingrich’s “Drill Here, Drill Now, Pay Less” campaign of last summer (remember that?) was and is a lie.

I know, I’m sounding like a broken record. I just think you can’t say it often enough, especially when Republicans are trying to pull the ol’ switcheroo where their good buddies Big Oil are concerned.

Remember back in 2003 when fears of a supply disruption caused by the invasion of Iraq prompted gas prices to “skyrocket” all the way up to $1.60/gallon? Good times, good times.

Now, however, gas prices are jumping not because there’s too little supply, but too much:

Pitfield said refineries are charging retail gas stations more for wholesale gasoline because “the refineries aren’t making money. They’re not making money right now. We’re awash in supply, in fuel. But they’re not producing it to the degree that they would normally be, as at previous demand. And demand for fuel is probably off 20 percent to 25 percent across the board, worldwide, if not more. And I don’t see a great reason for that to be coming back up anytime soon.”

That is, except for a relatively small increase in demand, this year, between Memorial Day and Labor Day, he said.

Let the record reflect that gas prices have continued to rise in advance of Memorial Day Weekend this year.

Under “normal” laws of supply and demand, when demand is lower, prices should be lower.

“Prices should be lower,” Pitfield said. “Prices will continue to go higher.”

In short, refineries have decided to refine less to keep gasoline prices high so they can make more money. Well, fuck you very much. Basically, gasoline consumers can’t win for losing; when demand goes up, so do prices. And when demand goes down, prices go up anyway.

Hmmm, seems like the system is rigged.

Now that President Obama has raised automobile fuel efficiency standards, one wonders what impact this will have on gas consumers. Funny you should ask:

11Alive: “If we’ll be using less gasoline because we’ll all be driving higher-mileage cars, are the refineries going to kick up the prices because we’re using less?”

Pitfield: “Oh, absolutely. I mean, that’s basic economics.”

The new basic economics of supply and demand.

It’s always good news for the oil companies.

Speaking of, last year ExxonMobil sold 2,220 gas stations, saying they weren’t profitable, even with gas at $4 a gallon. A friend of mine who works for Mapco calls gasoline a “loss leader” — they make their money off of beer and cigarettes.

WTF?

It’s amazing that we’re all paying through the nose yet nobody is making any money.

>Sarah Palin’s Bad Week

>Woopsie-daisy. Gov. Sarah Palin just learned she has to pay back taxes “on thousands of dollars in expense money she received while living at her Wasilla home.” Ouch!

It’s funny because I know this really conservative guy who said he voted for John McCain because while he hated McCain, he really liked Sarah Palin. But this guy was also in an uproar over the whole Tom Daschle tax mess, really pissed off about it. He said he was going to write his “U.S. senator” Jim Cooper.

Brick to forehead, please.

Anyway, it’s fine to rake Daschle and Geithner over the coals for their tax problems, force Daschle to withdraw his name from a cabinet position, and all that. No one is above paying taxes, folks! But cue outrage over media coverage of Sarah Palin’s tax mess as more liberal hypocrisy in five … four … three …. Wow. that didn’t take long (check the comments).

Between this and daughter Bristol’s surprise Fox News interview where the kid stated the obvious about abstinence, it appears the Governor is having a tough time, post-election.

Check out this hypersensitivity at an Alaska state senate retreat:

Accompanied by a retinue of advisers, she took a seat at one end of a conference table and listened passively as Gary Stevens, the president of the Alaska Senate, a former college history professor and a low-key Republican with a reputation for congeniality, expressed delight at her presence.

Would the governor, a smiling Stevens asked, like to share some of her plans and proposals for the coming legislative session?

Palin looked around the room and paused, according to several senators present. “I feel like you guys are always trying to put me on the spot,” she said finally, as the room became silent.

Dang, and Katie Couric wasn’t even anywhere nearby.

Perhaps Palin is a little oversensitive because of this:

The rapid decline of oil prices has left the state in a looming budget crisis and a late-entrant in the national recession. And that could have political repercussions for the former Republican vice presidential hopeful, who has signaled an interest in a 2012 presidential run but must stay visible in the Lower 48 to be successful.

[…]

Oil accounts for as much as 90 percent of state revenues. So the plunge of North Slope crude from an all-time high of $144.59 per barrel last July threatens to give the state an estimated budget shortfall of up to $1.5 billion in the fiscal year that ends June 30.

Palin bills herself as a fiscal conservative and has called for reducing state spending by $268 million in this budget year, but lawmakers and others say these aren’t reductions at all and do nothing to curtail spending. For example, the bulk of that sum — $200 million — is unspent tax credits for companies investing in oil and gas development that are being returned to the treasury.

We all knew that Gov. Palin’s “Alaska miracle” was built on a whole mess of false assumptions which no one in the national media ever bothered to address.

No one could have predicted this. Oh, wait. Never mind.

>Waving The Middle Finger

>File this under “broken record department”: the day before Thanksgiving, I bought gasoline for $1.76/gallon.

Wow.

What a difference two months makes. Gas prices have dropped over $2/gallon in just eight weeks.

This is a delightfully satisfying wave of the middle finger to OPEC , for whom I have no sympathy:

As Oil Prices Fall, Tensions Among OPEC Members Seem to Deepen

For the first time in a decade, oil producers are facing a real test of their unity.

As the OPEC cartel meets in Cairo on Saturday, exporters are being pummeled by a triple whammy of lower prices, falling demand and declining revenue. The group, whose members account for more than 40 percent of global oil exports, is desperately seeking ways to stop the drop in prices, which have fallen from their summer peaks at a record pace.

Oh, I’m so sorry. You poor dears.

It’s also a delightful wave of the middle finger to Newt Gingrich, whose book on “energy independence” was rendered obsolete on its release date (September 23, 2008). Ha ha. What a maroon.

Since “drilling here” has had nothing to do with the dramatic plunge in gas prices, the past two months prove how intellectually bankrupt Gingrich and his cohorts truly are. Because what we have here is proof that the best way to lower gas prices is to reduce demand. But that puts ExxonMobil and the rest of the oil industry, to whom Gingrich and the rest of the GOP are beholden, in a tight pickle. They don’t give a crap about “paying less,” if they did they’d be screaming for conservation reforms at the top of their lungs. But conservation doesn’t help ExxonMobil’s bottom line, does it? Of course not.

But here’s another fact: you can give the oil companies all of the Arctic wildlife preserves and miles off-shore that you want, as long as oil remains at $55/barrel, not one drop is going to be pulled out of the ground. Got that? Not one drop.

There’s a reason that stuff hasn’t been drilled yet. It’s expensive. It’s some of the most inaccessible, unprofitable oil we have. That’s why it’s still there. And with oil at $55/barrel, there’s no profit in drilling it.

So as long as demand remains low, I get to wave my middle finger at ExxonMobil too. Ha ha.

Of course, with gas at $1.76/gallon, the morons in Nashville, Tennessee are already pulling their Hummers out of the moth balls. I saw three shiny behemoths barreling down Thompson Lane on Wednesday, in the space of about 10 minutes. Meanwhile, sales of SUVs and pickups are on the rise.

Boy, people can really be idiots. Here’s a wave of my middle finger at you, too. You’re basically perpetuating the same dynamic that created September’s gas crisis. You’re like children who stomp your little feet and cwy if you can’t have your toys.

Grow up, people. Quit acting like children. You know better. You can’t have your pudding if you won’t eat your meat.

>Drill, Baby, Drill!

>Hey, the Republicans came up with it first. We just had no idea they meant it literally:

Report: Sex links government, oil company execs

By The Associated Press
Wednesday, September 10, 2008

WASHINGTON – Government officials handling billions of dollars in oil royalties engaged in illicit sex with employees of energy companies they were dealing with and received numerous gifts from them, federal investigators said Wednesday.

The alleged transgressions involve 13 Interior Department employees in Denver and Washington. Their alleged improprieties include rigging contracts, working part-time as private oil consultants, and having sexual relationships with – and accepting golf and ski trips and dinners from – oil company employees, according to three reports released Wednesday by the Interior Department’s inspector general.

The investigations reveal a “culture of substance abuse and promiscuity” by a small group of individuals “wholly lacking in acceptance of or adherence to government ethical standards,” wrote Inspector General Earl E. Devaney.

The reports describe a fraternity house atmosphere inside the Denver Minerals Management Service office responsible for marketing the oil and gas that energy companies barter to the government instead of making cash royalty payments for drilling on federal lands. The government received $4.3 billion in such Royalty-in-Kind payments last year. The oil is then resold to energy companies or put in the nation’s emergency stockpile.

Between 2002 and 2006, nearly a third of the 55-person staff in the Denver office received gifts and gratuities from oil and gas companies, the investigators found.

Devaney said the former head of the Denver Royalty-in-Kind office, Gregory W. Smith, used illegal drugs and had sex with subordinates. The report said Smith also steered government contracts to a consulting business that was employing him part-time.

Heh. And here you thought the price of oil was all “supply and demand” with a few Gulf hurricanes or Middle Eastern terrorist plots thrown into the mix.

You forgot all about the extra charges for sex-and-drugs for oil and gas traders, the rigged contracts, the ski trips for government workers and such. So that’s what they meant by “in kind”!