Keystone XL Pipeline

[AquaMan]

Interesting paper from the period that supports my claims. It is also very cool to see the thinking at the time as to why the crisis emerged.

http://www2.epa.gov/aboutepa/epas-position-energy-crisis

"Return on investment by the petroleum industry has been greater in Europe and Japan than in the U.S. The industry's return on investment was 9-10 percent in Europe and about 6 percent in the U.S. in 1972."

That would imply that Cities' roi in 1974 was quite good.

[Red Arrow]

Interesting paper from the period that supports my claims. It is also very cool to see the thinking at the time as to why the crisis emerged.

http://www2.epa.gov/aboutepa/epas-position-energy-crisis

"Return on investment by the petroleum industry has been greater in Europe and Japan than in the U.S. The industry's return on investment was 9-10 percent in Europe and about 6 percent in the U.S. in 1972."

That would imply that Cities' roi in 1974 was quite good.

I have found the discrepancy.  You believe that 6% is "quite good".

As was true on the demand side, economic factors have been at the root of the problems with supply.

The oil import quota system constrained crude oil imports and provided a disincentive to construct domestic refineries and petroleum facilities until the system was discontinued in April 1973. Since that time construction of over a million barrels per day of new refinery capacity has been announced by the industry, though the current international situation has caused some of these plans to be held in abeyance.

Natural gas price regulations have kept prices far below their free market value. This means that the industry has had a low incentive to explore for or produce natural gas for interstate markets.

Return on investment by the petroleum industry has been greater in Europe and Japan than in the U.S. The industry's return on investment was 9-10 percent in Europe and about 6 percent in the U.S. in 1972.

[AquaMan]

Well, we could pull quotes out of that article all day long to bolster our opinions of how and why our oil crises keep reappearing. Another quote blamed it in part on our stubborn resistance to eliminating the oil depletion allowance which artificially effects price. Forty years later its still deemed necessary.

I am not an economics major but I would guess the roi for the time might be better viewed in terms of that period's inflation, and other industry's comparative roi's. In the oil industry, 10% was an excellent roi in 1973/74.

[Red Arrow]

Well, we could pull quotes out of that article all day long to bolster our opinions of how and why our oil crises keep reappearing. Another quote blamed it in part on our stubborn resistance to eliminating the oil depletion allowance which artificially effects price. Forty years later its still deemed necessary.

I am not an economics major but I would guess the roi for the time might be better viewed in terms of that period's inflation, and other industry's comparative roi's. In the oil industry, 10% was an excellent roi in 1973/74.

I only used that quote for the purpose of saying that the economic factor of 6% ROI in the US was considered a problem, not a quite good ROI.  Comparison to other industries ROI was my original intent. 

It looks like inflation in that era was about 6% to 8% with a spike between 1973 and 1974 of 11%.  I used the CPI inflation calculator for $1. for a span of 1 year.
http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=1.00&year1=1973&year2=1974

[AquaMan]

We are so smart! As long as the really smart guys are out shopping

I would have been thrilled with a 10% raise that year. That spike in 73/74 no doubt was due to gas prices skyrocketing.

[Red Arrow]

We are so smart! As long as the really smart guys are out shopping

I would have been thrilled with a 10% raise that year. That spike in 73/74 no doubt was due to gas prices skyrocketing.

I agree the 73/74 spike was probably due to gas prices.  That's why I checked a few surrounding years.

I would be thrilled with a 10% raise most years (except the latter part of Jimmy Carter's administration).  The problem with a 10% raise caused by inflation is that inflation likely chewed most or all of it up.   

[heironymouspasparagus]

At $9.00 a barrel in the early 1980’s it was unprofitable for smaller producers. That’s why so many marginal wells were shut in at that time. It cost more to get it to the surface and transported off the lease than it was worth.

Enhanced extraction methods like steam flood or fracking and horizontal drilling are more expensive processes than conventional drilling.  If oil prices ever dropped below $50/bbl you would see a lot of the supply shut off until prices went back up. 

Not really.

The early 80's is when the economy tanked and the oilman's prayer became, "Please, Lord, give us just one more oil boom.....and this time we promise not to piss it all away!".  Oil was up to about $6 when we entered the 80's, increasing from about $3 a decade earlier holding in the 20's until 1986, when it dipped for a very short time - March thru Sept, it was below $15, staying at $11 and above.  Any $9 was the heavy, sour stuff.  Not Texas sweet....

No producers lost money on oil during the 80's.  Guys trying to expand drilling got into a "tulip" frenzy, losing control of their costs, but focused on $12 to $15, and above, oil, but it was not oil going down to $11 or 12 that bankrupted them.


In 1998, we had prices as low as about $9 a barrel, and while the oils were screaming bloody murder, they certainly weren't even close to losing money.

http://www.wtrg.com/prices.htm

And this one is more localized, and the prices seem to be just a touch low, but the detail is intense.

http://www.ioga.com/Special/crudeoil_Hist.htm

In 1969, I was wandering around northwest Arkansas and found one of those 'gas wars' that was so popular at the time - trying to get people to buy more gas - and I filled up at $ 0.129 per gallon.  12.9 cents.  Good times.  (Tulsa was selling at about $0.279 at the time, but they gave you a free glass with a fill up!!)

Absolutely right about shutting supply off if the price isn't high enough.  That's exactly what is done.  But the other direction doesn't seem to work out that way.  Production is currently at a high, but prices aren't softening much.  How does that work in the "law of supply and demand" theory?  It doesn't.  It is "law of manipulation and collusion".

[AquaMan]

I think we may have worked at the same oil company! That is pretty accurate, though our numbers varied somewhat at Cities. And that is a point worth making. If you were a smaller company, a wild catter, investing in strippers, distribution, or whatever, you were still in the oil business and may have suffered if you were not vertically integrated like we were.

The big, long term, guys don't lose money, they make more or less, and they pretty much control the market since their hands are alternately on the valves of production or squeezing the nuts of government.

[Conan71]

Southern part of the proposed Keystone XL starts pumping to Houston refineries:

The southern leg of the Keystone XL pipeline began moving oil out of Cushing on Wednesday.

Developer TransCanada Corp. bills the $2.3 billion project as the “safest pipeline built in America to date,” while opponents insist it is an accident waiting to happen, citing previous pipeline spills involving oil from Canada's oil sands.

The 487-mile pipeline between Cushing and refineries near Houston is expected to relieve the glut of oil stored at the hub where West Texas Intermediate crude is priced.

“The completion of the pipeline does provide a safe and direct connection between an important oil hub, probably the most important oil hub on this continent, in Cushing, Oklahoma, and the world's most efficient refiners in the U.S. Gulf Coast,” TransCanada CEO Russ Girling said Wednesday at a news conference in Calgary.

The pipeline, dubbed the Gulf Coast Project by TransCanada, was built over the past 18 months after the Obama administration refused to grant a permit for the full Keystone XL line.

Keystone XL needs a presidential permit since it would cross the boundary between the United States and Canada. It would move crude from Canada's oil sands and the Bakken formation in North Dakota and Montana to refiners along the Gulf Coast.

TransCanada has renewed its application for the full transcontinental pipeline, but the State Department has not made a decision on it.

While that project remains on hold, Girling hailed the completion of the Gulf Coast pipeline.

“It's an import milestone for Canada. It's an important milestone for customers and the workers and companies that helped us build this project, but it's also very important as a milestone for all Americans who will benefit from enhanced energy security and enhanced reliability of that supply,” he said.

Girling said oil transported on the new pipeline will be processed by American refiners, who now will have access to cheaper domestic crude.

Neighborhood watch-style plan

Critics complain that refined products made from crude delivered by Keystone likely will be exported. Some also have questioned the integrity of the new pipeline.

East Texas landowner Julia Trigg Crawford said she saw crews working on part of the line over the weekend. She has been fighting in court against TransCanada's use of eminent domain to gain access to her land for the pipeline.

Crawford and other Texas residents have formed a neighborhood watch-style program to monitor the pipeline for leaks.

“This will be a network of people that have skin in the game,” Crawford said Wednesday in a conference call.

Like many members of Texas Pipeline Watch, Crawford said she plans to walk the pipeline's route through her property regularly because she doesn't trust TransCanada's monitoring technology.

Up to 830,000 barrels a day

The Gulf Coast pipeline will transport up to 520,000 barrels of oil a day in its first year of operation. It eventually will be able to move up to 830,000 barrels a day.

Jane Kleeb, executive director of Keystone XL opposition group Bold Nebraska, said pipeline opponents will continue their fight against the project.

“Citizens are not stopping,” she said. “Citizens are watching this pipeline like a hawk.”

http://newsok.com/pipeline-begins-moving-oil-out-of-cushing/article/3926293

[Gaspar]

Kinda funny in that opening this leg of the pipeline removes 4,150 tanker trucks and rail cars each day! (standard tanker holds 200 barrels)

One would assume that environmental risk and carbon footprint thousands of tankers driven by this guy

would be more significant to the opposition than the risk associated with possible pipeline leaks.

Logically, environmental groups should be celebrating, but then again, it's difficult apply logic to many of those groups.

 

[Conan71]

Kinda funny in that opening this leg of the pipeline removes 4,150 tanker trucks and rail cars each day! (standard tanker holds 200 barrels)

One would assume that environmental risk and carbon footprint thousands of tankers driven by this guy

would be more significant to the opposition than the risk associated with possible pipeline leaks.

Logically, environmental groups should be celebrating, but then again, it's difficult apply logic to many of those groups.

 

I keep trying to find the downside.  It's all based on a pretty irrational fear.  There's probably as much likelihood of a SW Airlines 737 landing in their backyard as there is an oil leak from the pipeline.

Could you imagine what would have happened if the Alaska Pipeline had never been built?

[Townsend]

I keep trying to find the downside.  It's all based on a pretty irrational fear.  There's probably as much likelihood of a SW Airlines 737 landing in their backyard as there is an oil leak from the pipeline.

Could you imagine what would have happened if the Alaska Pipeline had never been built?

Alternatives

[Red Arrow]

Alternatives

Everyone would have heated and cooled homes.  Unfortunately that would be heated in the summer and cooled in the winter.  Better leg muscles, everyone would be walking because no one could afford the new modes of transportation since the Alternative Fuel Cartel would make OPEC look like a bunch of amateurs.  Food would be unaffordable to all except the 1%ers.  It would be like the French Revolution.  Who would be the present day Marie Antoinette?  Who would be the present day Louis XVI? 

[Gaspar]

We are a successful species because we continue to be capable of extracting the most energy from the least amount of resources in increasingly efficient ways. Just a few hundred years ago we relied on wind, solar, and hydro for our energy. Our mills ran on wind and water and our homes were heated by wood grown over decades with sunshine.  

Only a very small percentage of the energy in these resources could be extracted, and an even smaller percentage converted into energy.  Drop a modern liberal in those times, and they would decry that we were depleting our resources, destroying our environment and engineering our own doom.  

Fast forward a few hundred years and we will be extracting energy from heavy water, and the bonds between the atoms themselves. Nothing will change. There will still be politically motivated folks birthing hobgoblins to keep us alarmed.  They will claim we should go back to more "natural" and less efficient forms of energy, and in spite of them we will continue to progress.  I'm just not sure what they will chain themselves to?

[Red Arrow]

We are a successful species because we continue to be capable of extracting the most energy from the least amount of resources in increasingly efficient ways. Just a few hundred years ago we relied on wind, solar, and hydro for our energy. Our mills ran on wind and water and our homes were heated by wood grown over decades with sunshine.

Don't forget we lit our homes and businesses with lamps using whale oil.  I doubt that would be acceptable now.  Coal was used for home heating even in the 1950s.  My aunt, uncle and cousin lived in a rural area near Phila.  They had a coal fired boiler for the house heat.  So, basically, petroleum is the alternative energy of the last hundred years or so.
 

I'm just not sure what they will chain themselves to?

Synthetic trees.