Tar Sands: The Oil Junkie's Last Fix, Part 1

For this week's article, I collaborated with energy journalist Roel Mayer, a freelance writer on earth, energy and economy, based in Canada. Roel is a keen observer on energy, and the Canadian tar sands in particular, so he was a natural research partner for this short study on the state of oil production from tar sands.

He was also the one who coined "The Law of Receding Horizons." For those who missed my previous articles on receding horizons, it is a simple concept: as the cost of energy rises, the cost of everything else made with energy (like building materials) also rises. So an energy project which was expected to be profitable when energy costs were x amount higher than today, turns out to still be uneconomical when you get there.

And the tar sands of Alberta are shaping up to be the oil industry's poster child of this phenomenon. With oil well over $60 today, the low-grade sludge called bitumen that we recover from tar sand--actually more like a putty, at room temperature, which is why I refuse to use the whitewashing term "oil sands--should be highly profitable.

But paradoxically, the impending decline of global crude oil production, which is now coming clearly into view, has led to a mad rush to produce the tar sands. And this, in turn, has led to skyrocketing costs...such that now, the real "profit" in producing the tar sands seems to be in government tax breaks, not in actual profit on the resource itself.

In fact, the Canadian tar sands operations are facing a whole host of challenges, beyond economic--so much so, that one wonders why we try to harvest them at all.

But trying we are: according to the respected energy analytics firm Wood Mackenzie (WoodMac), about $117 billion is going to be spent on the tar sands by 2015.

Let's look at some of the challenges.

Cost Inflation

In a fine demonstration of the receding horizons paradox, WoodMac issued a report in March entitled "The Cost of Playing in the Oil Sands," which showed a 55% cost increase since 2005 for a peak flowing barrel of oil derived from the tar sands.

They further noted that in 2006 alone, many of the large tar sands developers announced cost increases and project delays, as they experienced an average 32% cost increase for integrated mining projects, and a 26% increase for in situ projects.

For example, last year Shell Canada shook investors when it revealed that its Athabascan tar sands operation would cost $11 billion Canadian to expand its operation by only 100,000 barrels per day-six times the original cost estimate, which was made only about eight years earlier.

Around the same time, a research report by Merrill Lynch said the cost increase would mean that the Athabasca project would only make about a 10% return on its investment if oil were to remain at least $50 per barrel!

WoodMac analyst Conor Bint issued a clear warning about the tar sands' receding profitability horizon, saying, "Companies in the oil sands will have to control capital expenditures going forward to ensure that project breakeven prices do not exceed current levels in order to remain profitable."

And what are the cost-inflating culprits, according to Bint?

The usual litany: labor shortages and skyrocketing material costs. "With the sheer number of oil sands projects together with the future arctic pipelines and conventional oil and gas developments in Alberta, labour demands in Canada will be pushed to their limits."

Which sort of calls bullshit on their helpful tip that good project management and contractor scheduling will help keep costs in line. No doubt, you must carefully watch your labor hours when your typical field hand is pulling down "combat pay" in the six figures. But that isn't going to help you a bit when tires, steel, machines, and basic metals are all going through the roof under the crush of increasing global demand, primarily driven by Asia, and primarily due to high oil costs. For example, the price of steel is up 70% in just the last five years.

In a recent essay on the cost inflation of conventional oil projects ("Upstream Economics and the Future Oil Supply"), oil analyst Dave Cohen made the shrewd observation that "the situation presents a classic Catch-22," where "the cure for industry inflation is a slowdown in upstream activity, whereas the initial goal was to accelerate upstream development to meet growing global oil demand."

Cohen notes that the cost of finding and producing oil has outpaced the growth in the price of oil. While oil has risen about 32% since 2005, costs have increased about 79%.

Given that the cost of finding and producing conventional oil is in the neighborhood of one-fifth that of producing tar sands, this is not an investment-friendly scenario.

Finance

Naturally, the aforementioned factors are leading to questions about the long-term viability of the tar sands industry, and slowing the pace of financing for its projects.

For not only are costs rising, they're rising faster every year, across the board: for labor, materials, and energy. And in all likelihood, taxes and pollution-related costs will soon join the list.

For example, Canadian Natural Resources Ltd. said in March it wouldn't move forward with its plans to build an upgrader plant due to runaway costs, and Synenco Energy Inc. shelved its upgrader in May. Likewise, last year France's Total SA announced that it was pushing its tar sands project back by three years, again due to soaring costs for labor and materials.

"I don't think it's an anomaly," says Mark Friesen, a Calgary-based analyst at FirstEnergy Capital Corp. "I think it's an indication of how difficult the environment is. If we're not careful, more projects may end up being delayed or cancelled."

Delays are now becoming endemic to tar sands operations. Major equipment such as cokers and metallurgical towers now have waiting times of two years or more, more than double the wait of three years ago. (Now there's an obvious investment opportunity.)

A shifting landscape of taxation also dogs tar sands ambitions. The removal this year of a significant tax advantage for Canada's income trusts, which have been among the largest backers of tar sands projects, caused Canadian Oil Sands, one of the largest trusts, to post its first net loss in its 10-year history.

An accelerated capital cost allowance that was initially offered to drive investment in the sands has also been removed this year, which should net the federal government an additional $1.4 billion or so.

But perhaps the biggest financial threat is a change in the royalty rates. For over a decade, Alberta sought to attract financing by offering a mere 1% royalty rate until the initial costs of the projects are paid off, at which point the rate reverts to 25%.

It's no surprise then that tar sands developers appear to be gaming the system by extending their "initial" investment in phases over a period of years, effectively stretching out the time they can take advantage of the 1% rate.

That rate typically translates to less than 50 cents on a $70 barrel for Alberta's coffers. On the roughly $15 billion in tar sand revenue in 2004, Alberta took home only $700 million. And the $905 million that Alberta took in last year was actually less than it garnered from lotteries.

Consequently, Alberta is eyeing some additional changes to its tax structure for tar sands. It doesn't want to be accused of bait-and-switch tactics, but it's also facing the aforementioned increasing costs for all public services. At the same time, it is looking at an overall decline in income, due to the winding down of its conventional oil and gas operations, which pay up to 40% in royalty rates.

And let's face it: given the immense challenges ahead of us for liquid fuels, thanks to peak oil, and the desperation of oil companies to find anything worth investing in at this point, a 1% royalty rate seems an outright steal of natural capital from the people of Canada. No wonder that a public consultation process on the taxation of tar sands projects is now under way.

If the royalties on the tar sands were allowed to rise to anywhere near the normal levels for oil-around 40%, not 1%-the entire industry would cease to be. The profit would vanish, simple as that.

Next week, we'll look at the rest of the tar sands' troubles: water, energy, labor, and the environment.

For my big picture view at the world of energy, and tips on how to separate the hype from the happenin', join us for the Angel Research "Profit From the Peak" Summit in Philadelphia next month. I'll be sharing what I believe are the truly viable investments for the future of energy. It's not too late to sign up for the conference.

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Stricter U.S. refinery emission rules not needed: EPA

Health risks linked with toxic air pollution from crude oil refineries are "acceptably low" and don't justify tighter federal rules, the U.S. Environmental Protection Agency said on Thursday.

The EPA was required to review its policy on refinery pollutants by a settlement reached in 2006 with environmental groups like the Sierra Club, who had sued the agency in 2005 for missing a 2003 deadline for issuing its review.

In a policy statement, the EPA declined to update refinery emission rules it issued in 1995 because "the risks to human health and the environment are low enough that no further controls are warranted."

Environmental groups said the rules would put the 90 million Americans who live within 30 miles of an oil refinery at increased risk of cancer and other health hazards due to higher exposure to chemicals like naphthalene, toluene and hexane, which the EPA defines as "hazardous air pollutants."

The lifetime cancer risk from exposure to refinery emissions from the proposal - 70 per one million -- is 70 times higher than federal limits, according to the Natural Resources Defense Council.

"We will strongly oppose the Bush administration EPA's do-nothing approach to cancer-causing pollution from oil refineries and urge them to require clean-up measures that will protect the public," said John Walke, an attorney at the environmental group.

The Sierra Club said the EPA was ignoring improvements in emission-reduction equipment since the EPA issued its rules in 1995 to comply with the Clean Air Act.

"The scientific evidence shows that these standards are not protective of public health as required under the Clean Air Act," said Alice McKeown at the Sierra Club.

The EPA said the 1995 standards have reduced emissions from refineries nationwide by about 53,000 tons per year.

The rules were a subject of an August 2 meeting at the White House Office of Management and Budget, which included industry representatives from the American Petroleum Institute, American Chemistry Council and the National Petrochemical and Refiners Association.

"We appreciate the collaborative effort with the EPA to ensure that the risk information reviewed was accurate," said Bill Holbrook, a spokesman for the refinery group, which lobbies for big U.S. refiners like Valero Energy Corp.

EPA said it could still require reductions from storage vessels and wastewater treatment plants at refineries, which could reduce toxic air emissions at 153 facilities by up to 4,600 tons per year.

The agency action is the end result of a risk-analysis process the EPA must conduct on refinery emissions every eight years to comply with the Clean Air Act.

The EPA is still weighing separate but related rules proposed in April to expand pollution controls on the nation's aging oil refineries, forcing companies to install emission-reduction equipment if they build or expand.

The EPA has also issued rules governing the amount of cancer-causing benzene in gasoline.

Is $100 Oil Coming? $200 Anyone?

Analysts at Goldman and CIBC say $100 oil may be just months away.

The $100-a-barrel oil that Goldman Sachs Group Inc. said would prevail by 2009 may be only a few months away.

Jeffrey Currie, a London-based commodity analyst at the world's biggest securities firm, says $95 crude is likely this year unless OPEC unexpectedly increases production, and declining inventories are raising the chances for $100 oil. Jeff Rubin at CIBC World Markets predicts $100 a barrel as soon as next year.

Higher prices will increase revenue for energy producers from Exxon Mobil Corp. to PetroChina Co., while eroding profit at airlines including EasyJet Plc and railroads such as Union Pacific Corp. The U.S. and other oil-importing nations risk accelerating inflation, while higher energy costs threaten to restrain growth.

Benchmark crude oil futures ended last week at $75.57 a barrel on the New York Mercantile Exchange, up 51 percent since mid- January and twice the level of early 2003. A record number of options have been sold that give the buyer the right to buy crude oil at $100. The contracts, covering 50 million barrels, only pay off should oil go above the target price.

A National Petroleum Council study led by former Exxon Mobil chairman Lee Raymond, released last week, predicted a growing gap between production and demand for oil and gas during the next two decades. As recently as 2005, Raymond said oil prices had probably peaked and dismissed the possibility that supply and demand could not be brought back into balance.

"There are questions about whether the oil industry can keep up with demand," U.S. Energy Secretary Samuel Bodman said last week, commenting on the Petroleum Council report.

Oil prices could triple in three months to more than $200 a barrel, given the right circumstances, according to Matthew Simmons, chairman of Simmons & Co., a Houston investment bank.

Gasoline pump prices averaging more than $3 a gallon across the U.S., the consumer of 25 percent of the world's oil, haven't dented sales. Deliveries of gasoline were a record 9.23 million barrels a day in the first half of this year, according to a July 18 report from the American Petroleum Institute in Washington.

"It appears that high prices are acceptable to the American consumer," said Robert Ebel, chairman of the energy program at the Center for Strategic and International Studies in Washington. "People want the house with a yard and white-picket fence so they are moving further and further out of the cities. They have to just get up earlier and drive further."

A pullout from Iraq may be the event that pushes oil to $100 a barrel, according to Boone Pickens, the Dallas hedge fund manager who has joined Forbes Magazine's list of billionaires because of his bullish bets on energy prices. Pickens predicted a year ago that $100 oil would probably occur by now. Today he is looking for $80 within six months, and he says growing chaos in Iraq would be a bad sign. "That could run prices pretty high," he said.

Goldman Sachs's Currie also notes similarities to a year ago, with global inventories at about the same level and U.S. government data showing an increasing bet on higher prices.

"At face value this market is strikingly similar to a year ago," Currie said. "What is different? Supply is down a million barrels a day, demand is up a million barrels a day. The market is in a deficit."

If Bush is dumb enough to invade Iran, $200 could come in a hurry. But the idea that oil surges on a U.S. pullback from Iraq is debatable. The sooner we leave Iraq, the sooner Iraq will recover (I might add just as Vietnam did), and the less jet fuel we will be wasting on needless missions.

Could there be a short term spike when we leave Iraq? Perhaps, but the long term benefits of us getting the hell out will be enormous.

Gasoline Demand Is Inelastic

It's not so much that "high prices are acceptable to the American consumer" as opposed to the fact that the demand for gasoline is relatively inelastic. Consider the plight of taxi drivers and the Chicago Tribune article Pinched taxi drivers hope to fare better by organizing.

His fares for the last two days were dismal and now halfway through the day, Khalid al Hag had only $20 in his pocket.

At this rate, he figured he would have to dip into savings to make his $520 weekly payment to the cab company for use of the car.

"I'm going to have to work at least 12 or 14 hours today and still I won't get by," he said, gulping down a meal so he could get back into his cab, which lately he has been driving seven days a week.

Other cabbies -- independents who have to pay out of their pockets for gasoline and other expenses and benefits -- flitted through the restaurant with the same laments. At $3.46 for a gallon of regular gas, high fuel prices are swallowing their thin profit margins.

The drivers' distress is why Sampat thinks an effort to organize many of Chicago's nearly 11,000 cab drivers, including 2,500 who own their own cabs, will succeed. Similar efforts are ongoing across the country.

The organizing efforts are more of a cry for rights and recognition waged largely on behalf of thousands of immigrants who have quietly slipped behind the steering wheels of most the nation's cabs.

Why are cabbies the focus of organizing efforts? Taxis are today's Ellis Island for many immigrants, statistics show. And cab driver is the first line of work in the U.S. for many without good language skills and without credentials to land easier, safer and better-paying jobs.

The last fare hike in Chicago was in 2005. Soon after that, Chicago ranked 18th out of 23 cities in the U.S. for the price of an average cab ride, according to an industry study that city officials said still is relevant.

The organizers presented figures compiled from a handful of drivers, showing that the drivers were spending an average $44 a day on gas last month and were earning $6 an hour when all of their expenses were deducted.

But Ald. Thomas Allen (38th), chairman of the Committee on Transportation and Public Way, said he doesn't sense any support within the City Council or from city officials for a surcharge. "Gas prices have kind of settled," he added.

"Every day when I go home, I ask myself the same question, 'When am I going to stop being a cab driver?' And every day I say I'm going find something better, but I can't," grumbled Omar Shire, 29, a Somali refugee, who has been driving for the last three years in Chicago.

"I work 14 hours a day, seven days a week. That's all I do," he said, his voice rising in anger, his eyes wide. The city does not limit how many hours cabbies can drive.

Is there a real choice here? The bottom line is you have to drive and you have to eat. While one can cut back eating expenses by switching from steak to hot dogs, there is no cheaper substitute for gasoline.

Monthly Crude Trendline Still Intact

The weekly chart has had a few busted trendlines but the monthly still looks great. But there is a looming US recession and liquidity crunch that is likely to bust an enormous number of trendlines and test the resolve of more than a few energy bulls.

ConocoPhillips sees 2008 capex up on higher costs

ConocoPhillips (COP.N: Quote, Profile, Research), the third-largest U.S. oil company, said on Wednesday it expects to increase its capital spending in 2008 as costs to drill for oil and gas rise sharply.

Chief Executive Jim Mulva said he believes capital spending will probably be in the range of $14 billion to $15 billion in 2008, up from $13.5 billion projected for 2007.

"We have got some pretty significant opportunities that we are going to be adding to the program, and we also see quite a bit of cost pressures on existing commitments," Mulva said on a company conference call.

According to a Cambridge Energy Research Associates study released in February, oil and gas production costs have risen 67 percent since 2000 on high demand for steel, drilling rigs and other materials used in production.

"Everything is costing us more than we thought it was going to cost," Mulva said.

ConocoPhillips posted much higher-than-expected earnings on Wednesday as profits from its oil refineries rose 38 percent.

Excluding a $4.5 billion charge related to Venezuela's move to take over ConocoPhillips operations in the country, it posted earnings of $2.90 a share. The result was well ahead of Wall Street's average expectation of $2.68 a share, according to Reuters Estimates.

The company recently announced a $15 billion share repurchase plan that runs through the end of 2008, nearly quadrupling its previous program.

U.S. oil companies have been buying back huge amounts of stock to pass on the windfall from soaring oil and natural gas prices to investors.

Mulva said one reason the company stepped up its share buybacks is because he believes acquisitions are currently very expensive and difficult to complete for political reasons.

"It is also a direct communication ... when we buy back this amount of shares, that we don't contemplate doing large M&A deals," Mulva said.

He said the company plans to complete the full buyback over the term regardless of changes to energy prices, even if the company needs to tap debt markets.

"We do recognize that the marketplace may or may not be at $70 oil," Mulva said.

"We have a very strong financial position that we can fund this share repurchase program and our capital program. If debt goes up a little bit, we still have a very strong financial structure," he said.

Conoco CEO calls for new fuel incentives

ConocoPhillips (COP.N: Quote, Profile, Research) on Thursday warned the U.S. Congress against imposing new taxes on big oil companies, and called for federal incentives to encourage new types of fuel production.

In a wide-ranging policy speech at the U.S. Chamber of Commerce, James Mulva, chairman of the third-biggest U.S. oil company, said tax hikes being weighed by Congress would hurt consumers by discouraging production from U.S. oil basins.

"Too often our government works to punish American companies," Mulva said, warning that such proposals would "cut into the funds needed for investment by the very companies that can lead the way on energy development."

Democrats in the House of Representatives want to offer about $16 billion worth of incentives to produce energy from renewable sources like solar and wind. Big Oil would foot most of the bill in the form of higher taxes, and a repeal of some favorable tax treatment.

Instead, for companies that build plants to get liquid fuel from coal, oil shale, methane hydrates or other unconventional liquid fuel sources, Congress should extend federal price guarantees over 10 years up to a limit of 1 million barrels per day of production, Mulva said. The United States currently uses about 9 million bpd of gasoline.

"This would offer the fiscal certainty that would enable new projects to be built," Mulva said.

Mulva also warned Congress against pressing ahead with a Senate-approved plan that would allow the federal government to sue the OPEC producers group for price manipulation. "We should not antagonize or threaten these countries," Mulva said.

Still, he stressed that U.S. oil companies are increasingly competing against national oil companies that benefit from the friendly policies of their own governments.

TALKS CONTINUE WITH VENEZUELA

ConocoPhillips felt the effects of "resource nationalism" first-hand in Venezuela, where President Hugo Chavez pushed the company and Exxon Mobil Corp. (XOM.N: Quote, Profile, Research) out of their oil operations there after they failed to strike deals to stay in huge projects that the anti-U.S. leader wanted to take over.

Before the speech, Mulva told reporters he would negotiate with Venezuela over compensation for the seized Orinoco Belt assets and turn to arbitration only as a "last resort."

Mulva also suggested in his speech that the government phase out a 54-cent-per-gallon tariff on imported ethanol, saying such a move would allow more ethanol supplies to reach the East Coast.

Gas and Oil Futures Rally on Surprise Inventory Report

Energy Department's Energy Information Administration said gasoline inventories dropped by 2.3 million barrels last week, countering analyst predictions of a 560,000-barrel increase.

"They weren't expecting that whatsoever," said Jack Hunter, an energy trader at FC Stone Group, in Kansas City.

In response, August gasoline rose 9.46 cents to settle at $2.1953 a gallon on the New York Mercantile Exchange. Light, sweet crude for August delivery gained $1.03 to settle at $75.05 a barrel on the Nymex, a front-month contract's first close over $75 since Aug. 9.

Prices also got a boost after the American Petroleum Institute said a record 388 million gallons of gasoline on average every day was consumed during the first half of the year, up 1.5 percent from last year, despite higher prices.

James Cordier, president of Liberty Trading Group in Tampa, Fla., called Wednesday's rally a "knee-jerk" reaction to the gasoline inventory number. He thinks the large investment funds that often sway commodities markets are looking much more closely at refinery utilization rates, which rose 0.8 percent to 91 percent. Analysts surveyed by Dow Jones Newswires, on average, had expected an 0.5 percent increase.

"That's the entire key to prices going forward," Cordier said.

Gas futures have fallen nearly 27 cents over the last five sessions, since last week's inventory report showed growth in both gas inventories and refinery utilization.

At the pump, meanwhile, retail gas prices fell another 0.9 cent overnight to a national average of $3.031 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have fallen since the weekend after having been driven higher by Midwest refinery outages. Gas prices peaked at $3.227 a gallon in late May.

Brent crude futures for September rose $1.23 to settle at $76.76 on London's ICE Futures exchange.

Wednesday's report also showed crude oil inventories fell by 500,000 barrels in the week ended July 13, below analyst expectations for a 760,000-barrel decrease. Distillate stocks, which include heating oil and diesel fuel, fell by 200,000 barrels. Analysts had expected an increase of 780,000 barrels.

A big drop in imports and a decline in gasoline production were behind the shrinking gas inventories. Gasoline imports plummeted by 508,000 barrels a day to an average of 915,000 barrels a day last week. Gas production fell by 64,000 barrels to 9.2 million barrels a day.

Imports of crude oil grew by 350,000 barrels per day to an average of 10.4 million barrels a day.

Demand for gasoline, meanwhile, grew 1.3 percent over a year ago.

Gasoline futures also found support Wednesday when Valero Energy Corp. shut down a piece of gasoline production equipment after a malfunction, Hunter said. But Valero later said the equipment would be quickly returned to service, and that gasoline production will not be affected.

Crude oil has rallied in recent days despite the decline in gas futures. Analysts blame speculative buying, but concede that supply concerns are also a factor. An opposition group in Nigeria, Africa's largest oil producer and a key supplier to the U.S., is calling for the shutdown of an oil pipeline. And Japan may need to increase its use of oil to compensate for the loss of power from a nuclear plant shut down after Monday's earthquake.

Still, many analysts doubt the rally can continue. While gasoline futures were up Wednesday, they're still off sharply from a week ago.

"Everyone knows the funds are selling," said Hunter.

Utilizado en:
Mente = Inversion, Psique = Especulacion

Repsol comunica a la SEC una reducción de sus reservas de crudo del 9,1% en 2006

Se repite la pesadilla. La petrolera, como hizo el año pasado a raíz del episodio de nacionalización de Bolivia, ha vuelto a reducir el nivel de sus reservas demostrables de crudo. Repsol YPF ha declarado ante el regulador del mercado estadounidense (SEC, Securities and Exchange Commission) unas reservas probadas en 2006 de 1.059 millones de barriles de crudo, lo que supone un descenso del 9,1% con respecto a 2005.

La compañía presidida por Antonio Brufau registró hoy el formulario '20-F' ante el regulador, en el que repasa su actividad en 2005 y 2006. Este documento fue revisado en marzo por la SEC sin requerir modificaciones ni correcciones sobre el documento, según informó el mes pasado la propia Repsol.

En el informe, Repsol YPF explica que el 91,7% de sus reservas probadas se encuentran en países de Iberoamérica, y advierte de que "algunos de ellos podrían ser política o económicamente poco estables".

Por este motivo, considera que las reservas en los países en desarrollo "podrían estar sujetas a riesgos", entre ellos los relacionados con el aumento de impuestos y cánones, el establecimiento de límites a la producción y a la exportación, la renegociación de contratos, la nacionalización de activos, cambios políticos a nivel local, retrasos en pagos o, incluso, "impagos en operaciones provocados por acciones de grupos insurgentes".

Repsol YPF afirma que el cálculo de sus reservas ha sido estimado conforme a los criterios de la SEC. El resultado puede registrar variación conforme a las pruebas de exploración y otros factores como los relacionados con adquisiciones y ventas.

Además, relaciona el volumen de las reservas con el comportamiento de los precios del crudo en los mercados internacionales. "Un descenso en el precio del crudo y del gas podría hacer que las reservas dejen de ser económicamente viables para su explotación", advierte.

El formulario viene acompañado de los informes de supervisión de cinco auditoras, que son Deloitte, Pricewaterhousecoopers, Gaffney Cline, Ryder Scott y Degolyer and Macnaughton, así como de una carta de Brufau y de otros directivos de la compañía en la que se da fe de la veracidad de la documentación aportada.

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Según Crudele, África rebosa petróleo

El Secreto de los Especuladores de Petroleo

Wall Street está dispuesta a reaccionar con cada noticia de refinerias de gasolina que tenga algún problema en el Caribe que pueda producir algún corte en el suministro. Esto se debe a que los especuladores tienen grandes y muy lucrativas apuestas sobre el precio del petroleo y la gasolina que afectan al precio.

Yo voy a contarte la parte de la historia que los especuladores no quieren que conozcas - relacionado con grandes cantidades de petroleo recien descubiertas en remotos rincones de Africa.

El pasado mes de diciembre viajé a Uganda, en la zona este de Africa donde me entrevisté con Daudi Migereko, el Ministro de Petroleo de ese feo pais.

Migereko me habló en exclusividad sobre las bolsas de petroleo recien descubiertas unos meses antes en su pais.
“tienen que ser realmente grandes bolsas, por lo que se ha encontrado en (su vecino) Sudan y lo que estamos encontrando en Uganda”.

Tony Eccles, analista de Investec Plc en Londres, comentaba que las reservas de 250 millones de barriles encontradas y listas en Uganda “son solamente la punta del iceberg.”

“Es una jugada excitante,” comentaba. Ademas, las acciones de la compañia (cotizada en Londers) Tullow Oil Plc, que es la exploradora en Uganda, subia un 3.5% la pasada semana por los descubrimientos.

Eccles comentaba que para finales de año, las previsiones son de estar produciendo unos 1.5 billones de barriles de petroleo.

“La gente encuentra mas y mas. Y el Ministro de Petroleo piensa que encontrarán mas aun”, comentaba una fuente anónima de la U.S. Energy Information Administration.

Curioso, verdad, lo poco que hemos oido acerca de estos descubrimientos en Africa.
Por supuesto que es verdad.

Pero no piensan que un descubrimiento como este, que puede poner a la OPEC en su lugar mereceria un poco mas de atencion en una nación como la nuestra (USA) donde consumimos petroleo como ningún otro.

Los nuevos descubrimientos africanos son solo una parte de lo que tiene que ocurrir con el verdadero precio del petroleo durante los próximos años, que tiene que bajar.

La llave del precio del petroleo, por supuesto, está en la parte de la demanda.

Yo busco con curiosidad por qué los especuladores de energia no han cambiado de canción en los últimos meses.

Geopolítica energética en Asia

7. Recursos energéticos (petróleo y carbón)

“El petróleo es el combustible mas versátil que conocemos; se ha posicionado en el centro de la moderna economía industrial, pese a la rivalidad del gas natural y de la energía nuclear, ha conservado su preeminencia principalmente por tratarse de la única fuente de energía multiuso, que además no tiene rival para el sector del transporte”, afirma Edward L. Morse. Según Michael T. Klare, en el 2020 el petróleo se mantendrá como principal fuente de energía, aportando un 37% del consumo mundial de energía.

Para mantener el crecimiento sostenido de estas fulgurantes economías ”petrodependientes”, Asia necesita ingentes cantidades de crudo y gas natural. La demanda voraz de estos tres países crece desmesuradamente, mientras que surgen alarmantes señales del “ocaso del petróleo”, del “peak oil”, sobre el agotamiento a largo plazo del petróleo y otros combustibles fósiles, según la “teoría del pico” del geofísico M. King Hubbert.

Además, en opinión del Centro de Política y Legislación sobre Energía de la Universidad de Dundee, China, India y Japón supondrán también una fuerte demanda de consumo energético de carbón, de alto nivel contaminante. China, con un 70% de demanda mundial, India un 55% y Japón, con Corea del Sur, un 24%.

Según estadísticas de BP, Asia-Pacífico consumió 1.650 mtep de carbón, 1.116 millones de toneladas de petróleo y 366 mtep de gas natural. Es autosuficiente en carbón, ya que su producción ascendió a 1.645 mtep y en un 90% en gas natural, pero la producción de petróleo fue de apenas 382 millones de toneladas, esto es, la región tuvo que importar dos terceras partes de sus necesidades de petróleo.

Al mismo tiempo, la demanda mundial de energía continuará creciendo, con un aumento previsto del 3,1% en el consumo en 2007, liderado por China, el segundo consumidor mundial, detrás de Estados Unidos, el mayor consumidor de petróleo del mundo, al absorber el 25% de la producción mundial.

Según la Agencia Internacional de la Energía (AIE), China importó en 2004, 123 millones de toneladas de crudo para completar su producción nacional de 170 millones, sin que con ello alcanzara a cubrir la demanda total de 308 millones.

El déficit del gigante asiático no ha hecho nada más que empezar. El FMI sostiene que de 2005 a 2013, las economías emergentes supondrán casi tres cuartas partes del incremento de la demanda energética y que China representará un tercio de la demanda total. El país asiático duplicará con creces su consumo y triplicará sus importaciones de petróleo en los próximos diez años. Se prevé que para 2025, importará un total de 10,2 millones de b/d (en comparación con los 4,1 mbd de 2005).

A esto hay que añadir que la demanda energética de Japón fue de 11 millones b/d en 2004 y se estima que alcance los 12 millones en 2030 La importación de crudo del “país del sol naciente”, carente de recursos petrolíferos, fue de 5,7 mbd en 2005 y se estima se situará en 4 mbd para 2025.

Cabe señalar a China e India como protagonistas destacados de la competencia global por el crudo. India sigue a China en el ritmo de crecimiento de la demanda de crudo más alta de todas las economías del mundo. Juntos, representarán un 17% del total mundial, superando la estimación prevista de un 5% para Japón.

India sexto consumidor de energía del mundo, cuenta con refinerías de petróleo, si bien tiene escasos recursos de metano y petróleo. Importa el 70% de su demanda petrolífera. La previsión de crecimiento de crudo se estima en un 10% anual.

Las previsiones de crecimiento de la EIA indican que entre 2002 y 2025 el consumo de petróleo aumentará a una tasa anual media del 4,5% en China (3,5% en la India, 1,4% en EEUU, 0% en Japón, 1,3% en Corea del Sur y 1,9% en el mundo).

8. Recursos energéticos (gas)

La escasez del petróleo y la teórica mayor limpieza medioambiental del gas ha hecho que la demanda mundial de gas natural ha crecido exponencialmente, incluyendo la demanda de los países de nuestro estudio: China, India y Japón.

Concretamente, China consumió 12 millones de toneladas equivalentes de petróleo (Mtoe) en 1990, 33 en 2004 y se prevé llegar a 59 millones de toneladas en 2015, India 6 millones de toneladas en 1990, 9 en 2004 y previstos 18 en 2015 y Japón, 15 millones de toneladas en 1990, 27 en 2004 y previstos 32 en 2015 .

Se estima que las reservas probadas de gas natural del mundo eran, a finales de 2005, de unos 180.000 millones de toneladas equivalentes de petróleo (Mtep). La producción mundial fue en 2005 de 2487 Mtep.

El gas natural está muy concentrado en unas pocas áreas. El 56% de las reservas mundiales están situadas en sólo tres países (Federación Rusa, 26,7%, Irán, 15,3% y Qatar, 14,4%) en tanto que Arabia Saudí, cuarto país por reservas, no llega al 4%.

En las últimas tres décadas el crecimiento de su uso ha sido moderado, un 3,5% anual, y en la última década se ha reducido hasta el 2,6%. Tres factores podrían acelerarlo de nuevo: las crecientes necesidades de energía de los países emergentes, especialmente de China e India, por su enorme población; la menor disponibilidad de crudo, especialmente de los tipos más ligeros, y la presión para reducir las emisiones de CO2 a la atmósfera que se deriva del Protocolo de Kyoto, 2001, circunstancias que, previsiblemente, se agudizarán en los próximos años.

El gas natural está llamado a cubrir un hueco importante en el panorama energético del futuro, por las menores emisiones que comporta su consumo respecto a otros combustibles fósiles y, concretamente, el gas natural licuado (GNL) cumplirá un papel relevante, por las ventajas que presenta su transporte frente a los gasoductos.

La importancia que concede Rusia a este valioso producto energético ha motivado a Putin a liderar la creación de un poderoso cártel de los principales productores de este combustible, la posible “OPEP del gas”. Una iniciativa en la que toma parte activa Irán, Argelia, Qatar y Venezuela, que en conjunto controlan el 73% de las reservas de gas natural del planeta y que puede crear de nuevo problemas para los países dependientes.

Rusia es ya una superpotencia energética. Gracias a la subida de los precios del petróleo y del gas, ha recobrado su poder, reclamando su posición preferente en el escenario mundial como potencia independiente. Esto podría fomentar la escalada futura de viejas y nuevas rivalidades, especialmente con Estados Unidos, que parece indeciso sobre si sus relaciones con Rusia deben ser consideradas como potencia rival o como un socio difícil .

Estados Unidos, Europa y nuestros gigantes asiáticos, ven alarmados cómo cobra fuerza este poderoso cartel gasista, una concentración de poder en el negocio energético, que puede suponer una seria amenaza para sus intereses energéticos, que ya soportan la fuerte presión del cartel petrolero OPEP.

Más de un 25% del gas que consume Europa proviene de Rusia. Argelia, uno de los cinco países que formaría la “nueva OPEP del gas”, es también importante suministrador de España, que importa 33.118 millones de m3 de este país.

Reacciones contrarias a este todavía incierto proyecto a medio plazo, no se han hecho esperar. El Comisario para la Energía de la Unión Europea, amenazó con impulsar, como alternativas, el desarrollo de la energía nuclear y el “carbón limpio” si Argelia y Rusia llegan a constituir el referido cartel. Cabe añadir que una posible alianza con Irán podría ser considerada por Estados Unidos y la Unión Europea como una amenaza para Occidente.

AFRICA'S HUGE CRUDE RESERVES THREATEN OPEC'S POWER

WALL Street is quick to react to every gasoline refinery that has to shut down and every ill wind in the Caribbean that might cause a disruption in energy supplies.

That's because speculators predominantly have huge and very lucrative bets on the price of oil and gasoline rising in price.

I'm going to tell you the side of the story that the speculators don't want you to hear - the tale of huge amounts of oil being discovered right now in some remote corners of Africa.

Last December I happened to be traveling through Uganda in East Africa when I chanced upon a guy named Daudi Migereko, the oil minister of that poor country.

Migereko told me exclusively in an interview back then that the oil fields discovered just months before in his country "are going to be really big fields based on what they found in (neighboring) Sudan and what we are finding in Uganda."

I published the energy minister's remarks in columns on Jan. 9 and Jan. 11, the latter of which also had Migereko indicating that he might not join OPEC, the Middle East oil cartel, if the discoveries were the size he believed they were.

Guess what?

Migereko wasn't full of it. And right now excitement over the oil finds in Uganda, the Sudan and even in the Congo could kick conventional wisdom about scarce petroleum reserves in the heinie.

Tony Eccles, an analyst with Investec Plc in London, says reserves of 250 million barrels have already been found in Uganda and "that's just the tip of the iceberg."

"It's an exciting play," he says. So exciting, in fact, that the stock of London-based Tullow Oil Plc, which is exploring in Uganda, rose 3.5 percent one day last week because of the discoveries.

Eccles says that three key Ugandan wells that will be drilled by the end of the year are showing close to 1.5 billion barrels of oil.

"People are finding more and more. And the oil ministry there thinks they will find even more," says a source close to the U.S. Energy Information Administration.

And not only in Uganda but also in the whole area adjacent to and under Lake Albert in an area called the Rift Valley that geologically is shared by the three African countries.

"There appears to be quite a bit of oil," says the EIA source.

Curious then, isn't it, that we've heard so little about these discoveries in this country.

It's true, of course, that we don't pay much attention to Africa, unless it's the version portrayed in a Disney movie.

But you'd think that an oil discovery that could put OPEC in its place might get a little more attention in a nation like ours that gloms oil like no other.

While it's much too early to know for sure, the experts are guessing that the oil deposits under East Africa won't be as large as those in the Middle East.

But they don't have to be to change the price structure for world oil.

The new African discoveries are only part of what could bring the real price of oil down in years to come and the speculative price down right now.

Also important are the technological advances that could make it more profitable to wring oil out of Canadian tar sands - deposits that could rival the Middle East.

The key to oil pricing, of course, is still on the demand side.

While the world doesn't seem inclined to drive less, advances in car engines - hybrids as well as hydrogen-powered vehicles - are making inroads without even much government help.

I do find it curious that energy speculators have had to change their tune in recent months.

Nowadays you hear very little about a shortage of oil - mainly because it's so ridiculous - and more about the world's lack of ability to refine oil into gasoline.

And yet there is plenty of gasoline sitting in tanks, so refining doesn't seem to be an issue either.

I'm curious what the folks who are trying to keep gasoline prices high will do if Uganda, Sudan and the Congo suddenly decide to open refineries of their own?

My guess: They'll probably just try to ignore the important news coming from that part of the world.

And so far the bad guys have been pretty successful at that.

*

As the stock market got clobbered yesterday because of the Bear Stearns sub-prime mortgage fiasco, the big question is: who is dumber?

Is it the gullible people who took out mortgages to buy homes they couldn't afford just because interest rates were low?

Or are the really dumb ones the brains on Wall Street who decided that these less than prime mortgages were really good investments.

It's one of those tree-fall-in-the-forest puzzles, so don't bother answering.

Unless someone re-liquefies the housing market so people can sell their homes there is plenty more trouble ahead.

My solution: Allow people to use retirement money to purchase a home without incurring a tax penalty

ConocoPhillips boss says vast new oil areas needed

The head of US oil giant ConocoPhillips has said 'vast new areas' will have to be opened up to meet a projected 40 pct growth in demand for oil in just over two decades.

Chairman and chief executive James Mulva said: 'By 2030 we would have to bring on line 105 million barrels a day of new production. To meet this challenge, vast new areas will need to be opened and explored.'

He told the two-day Asia Oil and Gas Conference here: 'New technology will be needed to access resources that are in more remote locations, or trapped in unconventional reservoirs.'

According to the Paris-based International Energy Agency, the world will require 120 million barrels per day by 2030 compared to 85 mln currently.

The scale of investment required is enormous, Mulva said, noting the IEA had estimated that 20 trln usd in cumulative energy investment would be needed through to 2030.

Even so, international oil firms may not be allowed to invest in the right places, he said, adding they are currently unable to gain rights to two-thirds of the world's oil resources.

Mulva said the industry is seeking out non-traditional oil suppliers, especially in the Asia-Pacific region, which will lead the demand for oil.

By 2030, the region will consume one-third of the world's oil supply but will have less than five pct of global production, he said.

The IEA has projected that the demand for natural gas will grow at an even faster pace than oil, increasing by 66 pct by 2030.

'Regional gas markets are growing and price realisations are rising. These factors now make gas a prime exploration target, instead of merely an adjunct to the search for oil,' Mulva said.

The chief executive also said global energy demand growth was unsustainable unless enough resources were committed to overcome environmental concerns over issues such as carbon dioxide emissions.

Un grupo de científicos alerta de que el petróleo puede acabarse antes de 40 años

Un grupo de científicos ha criticado el estudio estadístico de la energía mundial publicado el miércoles por la compañía petrolera BP, según el cual las reservas "demostradas" de crudo bastan para cubrir cuarenta años de consumo al ritmo actual, al considerar que pueden acabarse antes.

Los científicos críticos, dirigidos por el Oil Depletion Analysis Centre, de Londres, señalan que la producción mundial de petróleo alcanzará su cota máxima en los próximos cuatro años antes de comenzar a caer de modo drástico, lo que tendrá fuertes consecuencias para la economía mundial y el estilo de vida.

Según el director de ese centro, el geólogo Colin Campbell, ex vicepresidente de varias compañías petrolera como BP, Shell, Fina, Exxon y Chevron Texaco, citado hoy por el diario 'The Independent', la producción del petróleo más barato y fácil de extraer llegó ya en el 2005 a su punto más alto y está en declive.

Aún si se tienen en cuenta para el análisis el petróleo pesado de más difícil extracción, las reservas de las profundidades marinas, los yacimientos polares y el líquido extraído del gas, el techo de producción se alcanzará en el 2011.

El principal analista económico de BP, Peter Davies, citado igualmente por 'The Independent', no está en absoluto de acuerdo: "No creemos que haya problemas absolutos de recursos. Cuando se produzca esa situación, puede que se deba lo mismo a un fuerte incremento del consumo o a una nueva política por el cambio climático que al hecho de que la producción haya llegado a un techo".

Jeremy Leggert, geólogo convertido en conservacionista al igual que Colin Campbell y autor de un libro sobre la crisis energética mundial, señaló al periódico que lo que ocurre con el petróleo recuerda la resistencia de muchos durante años a prestar atención a quienes advertían del calentamiento del planeta.

En 1999 las reservas petroleras del Reino Unido en el mar del Norte llegaron a un tope, pero durante dos años después de que se hiciese evidente esa situación, explicar abiertamente lo que pasaba equivalía casi "a una herejía", agregó Leggert.

El análisis de BP sobre las reservas mundiales -Statistical Review of World Energy - es el utilizado más ampliamente en el sector, pero, según el director del Oil Depletion Analysis Centre, se trata de un sumario de cálculos muy políticos que aportan gobiernos y compañías. "Cuando yo estaba al frente de una compañía petrolera, nunca decía la verdad. No formaba parte del juego", explica Campbell.

Chesapeake trata de bloquear la construcción de térmicas de carbón en Texas

Chesapeake Energy and a coalition of consumer groups want the Oklahoma Supreme Court to stop state regulators from considering a proposed 950-megawatt coal-fired electrical plant.

It's the latest effort to stop a coal-fired plant by Oklahoma City-based Chesapeake, which is the nation's third-largest independent natural gas producer.

Chesapeake wants the Supreme Court to block pre-approval hearings on the plant that the state Corporation Commission has scheduled for tomorrow.

The company was part of a coalition that bought more than one million dollars in newspaper advertising earlier this year to question plans for coal-fired plants in Texas.

The Public Service Company of Oklahoma would own half of the proposed Oklahoma plant, while Oklahoma Gas and Electric would operate the facility and own 42%. The Oklahoma Municipal Power Authority would own the remaining eight percent.

La gasolina y el gasóleo en España marcaron al cierre de mayo sus máximos del año

La gasolina sin plomo de 95 octanos y el gasóleo de automoción han marcado en el mes de mayo sus precios más altos en lo que va de año, al situarse en 1,096 euros y 96,3 céntimos de euros el litro, respectivamente, según datos extraídos del Boletín Petrolero de la Unión Europea (UE).

En concreto, la gasolina ha subido un 13% con respecto a los 96,54 céntimos de euro por litro con los que cerró el pasado ejercicio, mientras que el precio del gasóleo se ha incrementado un 5,9% sobre los 90,92 céntimos el litro de finales de 2006.

Con respecto al mes de abril el precio de la gasolina subió un 3,1%, mientras que el del gasóleo se incrementó un 1,8%. A finales de ese mes, el precio de la gasolina, impuestos incluidos, era de 1,063 euros el litro, mientras que el gasóleo ascendía a 94,6 céntimos de euro.

La tendencia bajista iniciada por estos combustibles desde septiembre de 2006 cambió el pasado mes de febrero, después de haber registrado a finales de enero los precios más bajos desde mayo de 2005, con 94,1 y 88,4 céntimos de euro por litro, respectivamente.

De esta manera, los precios de la gasolina y el gasóleo se acercan a los niveles de principios de la segunda mitad del pasado año, cuando ambos se situaron por encima del euro (1,137 euros y 1,006 euros por litro).

Los precios bajan menos en Españan que en la UE

Por otro lado, en los últimos tres meses los precios de la gasolina sin plomo y del gasóleo de automoción bajaron menos en España que en la media de la zona UE, según datos del Ministerio de Industria, Turismo y Comercio.

En concreto, en España los precios antes de impuestos de la gasolina sin plomo bajaron un 5,09% en el periodo, mientras que en la UE lo hicieron en un 5,69%. En ambos casos, eso sí, por encima del descenso de la cotización internacional (3,83%).

El margen de comercialización de la gasolina sin plomo disminuyó en España 0,98 céntimos por litro, mientras que en la eurozona lo hizo en 1,23 céntimos por litro.

Mientras, los precios antes de impuestos del gasóleo de automoción en nuestro país cayeron en el período interanual un 7,94% y en la UE un 8,02%, frente al descenso del 12,07% de su cotización internacional, dando lugar a una subida de los márgenes de comercialización de 0,86 céntimos por litro en España y de 0,84 céntimos por litro en la eurozona.

Spread entre Brent y Texas en máximos, por atasco en Cushing

The crude market may be trying to tell us something, and here's the biggest hint: The price difference between crude traded on the New York Mercantile Exchange and the IntercontinentalExchange has touched its widest level ever.

Despite concerns over tight-gasoline supplies and production uncertainties related to the Middle East and Nigeria, crude futures on Nymex fell almost 5% during the month of May, with the July contract unable to climb past $68 a barrel.

But prices for July Brent crude climbed as high as $71.80 that month.

"There has never been a time in history when the spread has been as wide as it is now," said Bernard Picchi, a senior managing director at Wall Street Access.

Normally, Brent crude costs $1-$2 less than WTI crude, according to James Williams, an economist at WTRG Economics. At its peak, the price spread between the two topped $5, according to his data.

The price differences could imply that either Nymex crude, also known as West Texas Intermediate light, sweet crude, is undervalued, or Brent crude traded in London is overvalued. Which is it?

WTI's faults

WTI usually trades at a premium to Brent "because of the slightly higher quality, and the extra journey" oil tankers have to take to get the oil to the U.S., according to Amanda Lee, a strategist at Deutsche Bank.

So "WTI minus dated Brent should be roughly equal to the freight rate," she said.

Indeed, "crude-oil prices usually depend on two things: quality and location," said Williams. "The greater the distance from the major exporters, the greater the price."

Brent and WTI at Cushing, Okla., are really of similar quality, he said. But Brent has traded at discount to similar crude in the U.S. because oil from the Middle East or Africa costs less to ship to Europe than it does to the U.S.

So the price spread saw pressure from both sides, with geopolitics supporting Brent and the inventory overhang at Cushing, the delivery point for the Nymex contract, "punish[ing]" WTI, Lee said.

"The problem is that Cushing is landlocked, and when some major refineries that buy their oil from Cushing went down, the crude oil started to back up," explained Phil Flynn, a senior analyst at Alaron Trading.

The situation was exacerbated by the contango in the futures market, a situation where prices for the more distant futures contracts exceed spot prices.

"With prices higher out in the later future-contract months, it paid for many speculators to buy oil and deliver it in later months which, in turn, tied up storage space at Cushing," and prices became depressed, said Flynn.

So because of some refining outages and landlocked oil at Cushing, "there are so many historical relationships that are out of whack," he said.

At the same time, Brent was more responsive to geopolitical tensions in the Middle East and Africa than WTI, according to Thorsten Fischer, senior economic adviser for the Royal Bank of Scotland Group.

Also, with U.S. demand growth for gasoline robust, the U.S. continues to import European gasoline cargoes to meet demand, thereby driving gasoline prices higher in Europe, which then supports European crude, he said.

Global following

As far as which type of crude is truly the global benchmark, experts disagreed.

Alaron's Flynn was quick to point out: "Nymex crude is out of whack with the realities of global demand" and "Brent crude is more of a reflection of worldwide demand right now."

Matthew Parry, an economist at Moody's Economy.com, agreed. "Brent tends to more accurately reflect 'true market' conditions," and is "probably the slightly more widely accepted."

"WTI sometimes seems a little pre-occupied with the weekly U.S. stock [supply] numbers," he said.

But Darin Newsom, an analyst at Omaha, Neb.-based DTN, said that with the U.S. pegged as the world's top oil-consuming and importing nation, "it may be the Nymex market that better reflects world supply and demand."

True, "WTI reflects an important portion of global demand growth, namely demand growth in the U.S," said Fischer. But Brent is still more of a global benchmark, he said.

And John Person, president of NationalFutures.com, said that Nymex crude reflects U.S. demand, not really the realities of global demand. It's just one of the Organization of the Petroleum Exporting Countries' basket of seven different grades of oil, he said.

All told, the WTI and Brent contracts actually "reflect underlying local conditions," said John Kilduff, an analyst at Man Financial. Nymex crude is lower because of the "overwhelming supply in the USA refining corridor," while production concerns in Europe and Africa have inflated Brent.

Either way, few expect the wide price spread to last much longer.

Opportunity knocks, or not

"There are certainly profit opportunities here, but they are not risk free," warned Fischer.

"Investors can bet on a widening or narrowing spread, he said. He points out that a WTI-Brent bullet swap is trading on Nymex.

The WTI-Brent spread is a widely used transaction by energy-market traders, according to Nymex. Read more about it.

"For those who have been trading the spread between Brent and WTI, and doing it correctly, money has been made," said Newsom.

But what, exactly, is safer to assume in a market like this?

The run up in gasoline prices is something the energy market has seen before, but it's unlike other times in the past "mainly because of what hasn't rallied with it" -- WTI crude, said Flynn.

The gasoline crack, the amount a refiner gets for turning crude into gasoline, has touched record highs so you'd think that refiners would pay a hefty price to get their hands on that light, sweet crude, he said.

"We would expect to see [WTI] crude oil trading in the $70 range," he said. July crude closed Thursday around $64.01, while Brent crude trades above $68.

The biggest reason for the discrepancy is that landlocked crude at Cushing, said Flynn. "As time goes on, the backlog in Cushing should start to work itself out .... [and] with gasoline demand hanging tough with prices already near all-time highs, the demand for the sweet crude should reappear."

After all, "Brent is lower quality and selling at higher prices. That tells you that higher-quality WTI is undervalued," he said.

So "as refiners start to come on line, the truth will become known that the sweet crude is undervalued," he said. "In fact, due to worldwide demand, I think the sweet crude is the most undervalued commodity on the board."

On a technical level, Newsom points out that "a sell signal may be set to occur on the long-term continuous monthly chart" in the Brent market. "A trader might try to use this as an opportunity to put the spread on the opposite way [long WTI/short Bent] to try to take advantage of the spread moving to a more 'normal' price relationship," he said.

The current wide spread is "unsustainable," according to Deutsche Bank's Lee, though she admits that it is difficult to predict where it'll go next in the short term.

"The market can stay irrational longer than you can stay liquid," according to Adam Sieminski, Deutsche Bank's chief energy economist, who says that this well-worn advice has to be relearned from time to time.

"The problem is really in Cushing with WTI -- [there's] just too much crude there and the answer is likely to be found in some new pipeline projects, and a lot of small fixes to the crude slates at mid-continent refineries," he said.

Lee recommends avoiding "the front-end [contracts] and prefer to position ourselves in the longer-dated [contracts] and hedge the spread with a long position in WTI contango."

Of course, there's an even more subtle investment implication visible here, according to Wall Street Access' Picchi.

"Nearly every oil analyst begins his or her financial models with a forecast of WTI -- and then applies discounts to that benchmark vs. Brent," he said. "Now we have to add premiums."

"That means that most analysts' forecasts of earnings and cash flow for most international oil-producing companies are too low," Picchi explained. "So the stocks are probably even cheaper than we think they are."

Petroleras, la opción defensiva más barata

Ahora está lejos de los titulares. La rentabilidad media de la industria del gas y el petróleo es sólo del 4%, casi la mitad de lo que gana el Stoxx 600. Pero para Merrill Lynch, la apuesta por la industria petrolera está más que clara. 'Buscamos valores defensivos baratos, que cada vez son más difíciles de encontrar', explica Merrill Lynch. 'Si la historia sirve de guía, el sector petrolero está correlacionado negativamente con el apetito por el riesgo y lo hace bien cada vez que los inversores se ponen nerviosos', añade el banco. 'El petróleo es un lugar seguro donde esconderse en momentos de volatilidad', concluye el banco de inversión.

La cuestión es que hace tiempo que el mercado descuenta un escenario de desaceleración económica, pero la incertidumbre está en el grado del ajuste. Los inversores también están esperando un notable descenso en el ritmo de los beneficios empresariales, toda vez que el ratio de crecimiento de los resultados ha superado los dos dígitos durante varios años. En el momento que estos escenarios se materialicen, la volatilidad crecerá y los inversores buscarán refugio en algunos valores ajenos al ciclo económico.

Los sectores tradicionalmente defensivos son alimentación, servicios públicos (como eléctricas y empresas de gestión del agua), salud, bancos, seguros y consumo minorista. Merrill Lynch subraya que la industria del petróleo no sólo es poco cíclica, sino que además es una de los más baratas por valoración.

El PER (la relación entre el precio de las acciones y los beneficios esperados) del subíndice Stoxx de Petróleo y Gas arroja un promedio de 11,5 veces, por debajo de índices como el Stoxx 600 (15,95 veces), el Euro Stoxx 50 (13,8), el Cac de París (16,9), el Footsie de Londres (17), el Ibex (15,15) y el Dax (16,6).

El valor español más representativo del sector, Repsol, empezó el año con muchos problemas, pero en los dos últimos meses ha logrado una recuperación del 16,2%. Repsol está controlada por La Caixa, que entre participaciones directas e indirectas posee un 23% de la compañía, y por Sacyr, que tiene un 20%. Las especulaciones sobre lo que harán estas dos compañías con la petrolera es lo que está dando aire a la cotización, que ya está en positivo y gana en el año un 2,1%.

El empuje del barril

Un factor determinante en el caso del petróleo es la trayectoria del crudo, que ha cobrado un nuevo impulso. Tras un descenso en picado entre agosto y diciembre del año pasado. El crudo lleva una trayectoria ascendente ininterrumpida, que le ha hecho ganar más de un 38% desde los mínimos de enero.

En el caso del petróleo Brent, el crudo de referencia en Europa, no sólo ha vuelto ha superar los 70 dólares por primera vez desde agosto de 2006. Todas las perspectivas indican que la trayectoria alcista se agudizará. 'El mundo necesita más petróleo del que la OPEP tiene voluntad de suministrar, haciendo que cada vez sea más difícil evitar un nuevo resurgimiento del precio del petróleo este verano', confirma el Centro de Estudios Globales de la Energía.

La cotización de los futuros del petróleo, que sirve como indicio de lo que espera el mercado, está descontando precios superiores a los 70 dólares por barril hasta bien entrado el año 2008.

Claves de la industria

Barato. Merrill Lynch explica que el sector es el segundo más barato de Europa en cuestión de ratios de PER, dividendos y flujos libres de caja.

Defensivo. En los últimos 20 años el sector se ha comportado bien cuando el resto de la Bolsa iba mal.

Al alza. El crudo gana un 16% en el que es su sexto año consecutivo de subida.

De puente con la gasolina en máximos

Hoy es Memorial Day, un día de fiesta que oficiosamente marca el principio del verano. La previsión meteorológica es buena y muchos americanos harán lo mismo que en años anteriores: ir en coche a una playa, un parque temático o cualquier lugar donde disfrutar de un fin de semana de tres días. Otra previsión indica que este año el impacto de la escapada en el bolsillo va a ser muy memorable. ¿El culpable? La gasolina.

El precio no deja de subir. El jueves se llegó al récord histórico de 3,227 dólares el galón (3,78 litros). Desde marzo de 1981, los conductores de EE UU no habían pagado tanto por el combustible. Entonces, el galón costaba 1,42 dólares, que hoy, ajustados a la inflación, serían 3,29, según el Departamento de Energía.

De acuerdo con el Servicio de Información de Precios del Petróleo, el gasto diario en gasolina es de cerca de 1.250 millones actualmente, cuando en febrero era 800 millones.

De momento, la demanda de gasolina es un 2% mayor que en el mismo periodo del año pasado (¿alguien dijo que EE UU era adicto al petróleo?).

Lo que puede ocurrir es que estos precios sigan así durante meses, justo ahora que empieza la llamada 'temporada de conducción' y que dura todo el verano. La semana pasada las autoridades del Departamento de Energía dijeron que calculaban que junio no fuera muy distinto a mayo, porque el motivo por el que los precios se han disparado no va a cambiar rápidamente.

Y esta vez no es porque el petróleo esté irregularmente disparado o haya tensión en la oferta. La causa está en la propia gasolina.

EE UU importa, sobre todo en Europa, el 14% de la gasolina que consume, y estas compras están a la baja. Además, últimamente ha habido parones técnicos en las refinerías nacionales, por lo que los inventarios siguen bajando. La demanda es tan alta y la oferta tan ajustada, que los parones en una planta de Tejas y otra de Luisiana la semana pasada fueron suficientes para seguir alimentando el alza de precios en el surtidor.

Y no hay muchos planes de abrir nuevas refinerías. La política de potenciación del etanol (un biocombustible) por parte de la Casa Blanca ha disuadido a las empresas de refino a ampliar su capacidad, según The New York Times.

El problema es que todo esto impacta al consumidor americano, ese gran motor de la economía y las exportaciones europeas y asiáticas. Según las asociaciones de consumidores, el año pasado los hogares pagaron por combustible un 78% más que en 2001, cuando sus sueldos no han subido en semejante porcentaje. Y eso es un dinero que no se dedicará a otras compras. La subida del precio de la gasolina es inoportuna porque, justo ahora que los precios de las viviendas están pinchando, los consumidores se sienten más vulnerables.

Aunque los planes de este fin de semana hayan sido inamovibles, los comercios ya notan negativamente el precio de la gasolina en sus cuentas.

Gasoline hits record high for 2nd week

Energy Information Administration says average price jumped 11.5 cents to $3.22 a gallon.

U.S. retail gasoline prices hit a record high for the second week in a row and matched the inflation-adjusted peak reached in the early 1980s during the Iran-Iraq war, the government said on Monday, as concern about low motor fuel supplies pushed up pump costs.

The average price for regular unleaded gasoline soared 11.5 cents over the past week to a fresh record of $3.22 a gallon, according to the federal Energy Information Administration's nationwide survey of 800 service stations.

The much larger Lundberg industry survey of 7,000 stations showed the national price of gasoline jumped 11.4 cents over the past two weeks to a record $3.18 a gallon.

The latest EIA pump price also equals the all-time high fuel cost of $3.22 a gallon, when adjusted for inflation, reached in March 1981 after war erupted between Iran and Iraq.

Guy Caruso, who heads the EIA, said on Monday that consumers should not see gasoline prices begin falling until next month.

"We are expecting that things should improve in June," he said. "We still have some more of the wholesale [gasoline] prices to pass through [to the pump]. We're not at the peak yet."

Gas prices: Worse than '81 oil shock

Gasoline prices have skyrocketed $1.05 a gallon since the beginning of February and are up 33 cents from a year ago.

With several large refineries down this spring for maintenance or shut by problems, gasoline production has been reduced, cutting into available supplies.

"The main effect on gasoline prices this year is ... there's been a significant amount of refineries offline," Caruso said.

However, the high pump prices are attracting gasoline imports, which recently hit the fifth-highest weekly level ever at 1.5 million barrels a day.

Caruso said he expected imports to remain strong, which will boost supplies and, as more refineries return to operations, put downward pressure on pump prices later this summer.

Why gasoline prices are rising while oil isn't

Many U.S. consumers, especially low-income families, are being hurt financially by the record gasoline costs.

"High gas prices are hitting families hard, but they're also causing our economy to stall and sputter like a jalopy," Rep. Edward Markey of Massachusetts said on Monday. He said the mileage requirements for U.S. vehicles must be increased to reduce gasoline demand and prices in the long term.

In the EIA's new weekly survey, West Coast service stations had the most expensive fuel by region, down 0.6 cents at $3.37 a gallon. Among major cities, San Francisco had the highest gasoline costs at $3.51 a gallon, down 2.4 cents.

The Central Atlantic states had the lowest regional price at $3.08 a gallon, up 7.1 cents. Houston had the best deal at the pump at $2.98 a gallon, up 13.9 cents.

The EIA also reported gasoline prices were down 1.5 cents at $3.42 in Los Angeles, down 0.6 cents at $3.42 in Seattle, up 16.5 cents at $3.53 in Chicago, up 8.6 cents at $3.30 in Denver, up 6.7 cents at $3.21 in Cleveland, up 8.5 cents at $3.17 in Miami and up 5.6 cents at $3.10 in New York City.

Gas prices affect the revenues of such companies as BP (Charts), Exxon Mobil (Charts, Fortune 500), Chevron (Charts, Fortune 500) and ConocoPhillips (Charts, Fortune 500)

Pumping Cash, Not Oil

Exxon's risk-averse stock-buyback strategy is the new profit model

With gas prices hitting record highs, Exxon Mobil (XOM ) Corp. ought to be drilling like mad and refining more of that black gold, right? As it turns out, the world's largest oil producer thinks it is smarter to use more of its resources to buy back stock. The indirect result: increased pain at the pump for consumers.

It's Big Oil's new formula for making money. Last year, Exxon pumped out $49 billion in operating cash flow on sales of $365 billion. It's the world's most profitable company, but Exxon is plowing a smaller percentage of its spare cash back into the business. Although capital expenditures have risen from $11 billion at the start of the decade to nearly $20 billion, that spending amounts to roughly 40% of cash flow, down from 50% in 2000. Meanwhile, overall production has barely budged since its megamerger in 1999.

Instead, Exxon is bingeing on buybacks to help boost profits, which also benefit from higher commodity prices. Repurchases have been part of Exxon's strategy for decades, but they've exploded in recent years. Exxon spent 60%, or $29 billion, of its cash flow on repurchases in 2006, more than any other company in the Standard & Poor's 500-stock index and a tenfold increase since 2000. The company has retired 16% of shares in the past five years, adding an estimated 88 cents to earnings of $6.68 per share. With Exxon's stock handily beating the market and peers with a 15% annual return over the past decade, others in the oil patch are catching on to the strategy. "They don't need to grow production in order to generate shareholder returns," says energy consultant Richard Gordon.

Exxon takes pride in its fiscal restraint. At a three-hour-long meeting with Wall Street analysts in March, top brass used the word "discipline" no fewer than 29 times. In Exxon parlance, that refers to a sharp focus on returns. It means not chasing marginally profitable oil wells, not pouring money into costly new refineries, and not staffing up aggressively. Exxon employs 82,000 people, 10,000 fewer than in 2002. "Our business model," Chairman and CEO Rex W. Tillerson told analysts, "begins with discipline."



GETTING BURNED
That mantra traces back to the early 1980s. Like many oil producers, Exxon tried to diversify during the 1970s boom, pouring billions into unsuccessful forays such as an attempt to produce oil from shale deposits in Colorado and the acquisition of Reliance Electric, an electric motor manufacturer. "We had huge cash flow and not many good investments to put it into," then-CEO Clifford C. Garvin Jr. said at the time, according to The Prize, Daniel H. Yergin's Pulitzer-winning book about the industry.

If anything, it's even more challenging for Exxon to find opportunities today. For one, there are issues with access to oil fields. In April, Venezuela President Hugo Chávez nationalized a number of large oil fields in that country, including Exxon's. Exxon also must compete for hot prospects with government-sponsored oil companies that don't have to worry about pleasing Wall Street. Plus, the really juicy fields are located thousands of feet underwater off the coast of Africa or in remote parts of the former Soviet Union, locales that require years of spadework to start producing. "An investment of any consequence takes a minimum of six years," says Kenneth P. Cohen, Exxon's vice-president for public affairs.

But sometimes it's important to take a little risk. Despite the failed ventures during the 1970s, that boom period also produced world-class fields in the North Sea and Alaska's Prudhoe Bay that appeared speculative at the time but are now critical sources of supply. Exxon seems to be shying away from such risks today. Citing higher-than-anticipated costs, it backed out of a project in February that would have converted natural gas in Qatar into diesel fuel for export. Similarly, Alaskan politicians have been begging oil companies to build a new pipeline to carry natural gas to the 48 continental states. Exxon says it would pursue the project only if the tax situation in the state is favorable. CEO Tillerson has also indicated publicly that he won't build a new refinery in the U.S., pointing to internal research that domestic gasoline consumption will plateau in coming years as ethanol and energy-efficiency measures crimp demand. Indeed, there's plenty of legislation in Congress right now aimed at curbing consumers' appetite for gasoline. So Exxon is partnering with two companies, one Chinese and one Saudi Arabian, to build a $3.5 billion refinery in China, where demand seems more assured.

Currently, Exxon pumps out 4.4 million barrels of oil and natural gas a day, roughly the same as its output seven years ago. The company's production of gasoline, jet fuel, and other refined products is 5.7 million barrels a day, modestly higher than 2000. Exxon says it has added 130,000 barrels of capacity but also divested plants to improve profitability.

Exxon isn't the only big company facing essentially flat output. Oil and gas volumes slid 1% last year at Royal Dutch Shell (RDS ) PLC. After adjusting for recent acquisitions, they were flat at BP (BP ), Chevron (CX ), and ConocoPhillips (COP ). "Companies say, 'There are fewer places we can find big oil,' and there's some truth to that," says Amy Myers Jaffe, who heads the Baker Institute Energy Forum at Rice University in Houston. "Wall Street has to ask itself whether it made sense to create these big oil companies when some smaller, nimbler players are doing better [at finding opportunities]."

Although Exxon has said it will increase oil and gas production from 4.4 million barrels to just under 5 million barrels by 2010, it has a poor record, like other oil majors, of generating such growth. It's also unclear whether it really makes sense from a profit standpoint. After all, Exxon has proved that buybacks enhance earnings nicely. And management doesn't seem to be easing up. In the first quarter, Exxon repurchased $7.8 billion worth of stock.



'RELIEF VALVE'
Exxon is not alone. Chevron, which also says it plans to increase production, bought back some $4.5 billion of its stock in 2006, vs. $2.6 billion the prior year. Overall, the industry spent $52.4 billion on buybacks last year, nearly double the amount in 2005. "Exxon has established the path most companies are following," says Arthur L. Smith, chairman of industry researcher John S. Herold Inc. "The profound fear is that prices are going to fall again, and the relief valve is stock buyback."

But as gas soars past $3.10, politicians and others are increasingly scrutinizing the way Big Oil does business. On May 9 a handful of lawmakers held court at an Exxon station near the Capitol to offer their prescription for lower prices. Senator Maria Cantwell (D-Wash.) is promoting an "anti-gouging" bill aimed at oil companies. Senator Bernie Sanders (I-Vt.) wants a windfall tax on outsize profits such as Exxon's and hopes to break up the massive oil companies formed through mergers, which he says have curbed competition.

Still, even Sanders concedes that his proposals are a long shot. "Economists tell us high prices should send the signal for Exxon to invest [in growing production]," says Tyson Slocum, director of the energy program at the consumer group Public Citizen. "But that's not happening. They're transferring that money from the wallets of consumers to shareholders."

7 ways to invest in the oil boom

Since January, the price of oil has risen from $50 to $65 a barrel. Didn't notice? For casual investors that's understandable. After all, the last time this happened - back in the summer of 2005 - soaring energy costs were front-page news.

Unhappy consumers were accusing gas stations of price gouging. Oil company CEOs were pointing fingers at hedge funds. Economists predicted that $3 gasoline would tip the U.S. economy into recession. And most notable for our purposes, oil company shares went absolutely crazy: The S&P energy index rose 24 percent in four months.

By comparison, this latest run in oil prices has been a ho-hummer. "When gasoline first hit $3, we all complained and said consumers can't afford it," says David Ginther, manager of the Waddell & Reed Advisors Dividend Income fund. "Well, now gas is back to $3, and suddenly it's no longer on CNBC. The fact there's no pushback from consumers tells me prices will continue to go higher."

While Ginther is betting on rising prices - he has 20 percent of his fund in energy stocks - he seems to be in the minority. Yes, oil stocks have rallied from their January lows, but big-name stocks like ConocoPhillips (Charts, Fortune 500) and Exxon Mobil (Charts, Fortune 500) still trail the S&P 500 in year-to-date performance.

Overall, the S&P Energy index's price/earnings ratio is 12, well below its ten-year average of 19, reflecting a belief that oil will soon head lower. How else do you explain the P/E of a stock like Transocean? The deep-water driller is projected to boost earnings 157 percent this year (on the heels of 90 percent in 2006), yet its stock trades at a mere 12 times 2007 earnings, according to Baseline.

Exxon does it again

In fact, a return to $70 oil seems a better bet than a fallback to $50. That's especially true near-term as we head into summer driving and the hurricane season soon thereafter.

The supply-and-demand picture points higher too. Global oil demand is forecast to increase by 1.43 million barrels a day in 2007, according to Barclays Capital, even as supply increases only 1.18 million barrels. That's a recipe for higher prices. Indeed, the latest trading on the NYMEX has September oil futures trading at $66 a barrel and May 2008 futures at $70.

So what's the best way for investors to play oil right now? We'd start with the stocks that appear the most glaringly undervalued - offshore drillers like the aforementioned Transocean, Diamond Offshore, GlobalSantaFe, Noble and Rowan Cos.

Those companies own and operate offshore-drilling rigs and lease them to the likes of Chevron and Exxon Mobil for rates that, for deep-water rigs, can exceed $500,000 a day. As a group, drillers boast the stock market's best combination of low valuation and high earnings growth. Their average PEG ratio - P/E divided by projected growth rate - is 0.4, vs. an average of 2.0 for the S&P.

We made a similar case for drillers last December in Fortune's 2007 Investor's Guide. Our favorite driller then was Diamond Offshore (Charts), based in part on expectations of a gaudy special dividend (which turned out to be $4 a share, paid in March).

All in all, Diamond has produced a 15 percent total return in the five months since we recommended it. We still love it, but if you're an investor who favors price appreciation over dividends, a good alternative is Transocean (Charts). While Diamond is pouring its windfall profits into dividends, Transocean is buying back stock - $3.4 billion worth since October 2005.

In any event, both companies benefit from their deep-water focus. There's been a rig-building boom of late, which could potentially threaten driller profits. However, according to Michael Hoover, portfolio manager of the Excelsior Energy and Natural Resources fund, a disproportionate amount of the new rigs are "jack-ups," which operate in 200 or 300 feet of water, not in thousands. "The deep-water rigs are much more expensive and difficult to duplicate," says Hoover.

For fund investors there's now an exchange-traded fund, Oil Services HOLDRS (Charts) (OIH, $161), that owns all the major drillers. It also has heavy exposure to oil-services companies, which is another oil niche where the growth rates and valuations are compelling.

The leading oil-services company is Schlumberger (Charts), which provides well testing, reservoir imaging and seismic surveying, among other essentials. Especially dominant in the oil-rich Middle East, Schlumberger is a favorite of many of the energy stock investors we talked to, including Hoover, Ginther, T. Rowe Price energy analyst Tim Parker and Robb Parlanti, an energy analyst at Turner Investment Partners.

Schlumberger is oil services' safest choice, but investors willing to swing for the fences might consider Cameron International (Charts). Cameron produces an array of subsea valves, wellheads and blowout protectors that are in high demand right now. The company raised earnings estimates in April, and analysts now expect Cameron's profits to climb 39 percent this year - excellent for a stock that trades at 17 times 2007 earnings. To top it all off, Parlanti thinks it's a takeover candidate.

Another stock we like is refining giant Valero (Charts, Fortune 500). The dearth of new refining capacity used to be mainly a U.S. story, with commentators pointing out that there hasn't been a new refinery built here since 1976. The upshot seemed to be that more gasoline would have to be imported from countries where local opposition and construction costs were less of an impediment to refinery construction. Well, refining is fast becoming a global bottleneck, not just an American one. Kuwait, for example, recently canceled plans for a new 615,000-barrel-a-day refinery when construction bids came in at $15 billion - $9 billion more than expected.

Big Oil's money machine

Needless to say, the lack of new refining capacity bodes very well for refiners' profit margins, says Valero fan Bob Doll, chief investment officer for equities with BlackRock Funds. He calls Valero "the largest, purest, and most leveraged play on the refinery business."

Our final pick - XTO Energy (Charts, Fortune 500) - amounts to a straight bet on natural gas. Historically, gas markets have been tied to seasonal demand for heating and cooling. Prices rose in winter and summer and fell in the spring and fall. This spring, however, gas prices have held up unexpectedly well, with prices staying near $7.50 per million BTUs. A key driver has been commercial and industrial demand, up 8 percent in January and February, according to the Energy Information Administration.

One surprising explanation is the ethanol boom. Most of the new ethanol plants dotting the Midwest are gas-fired. In addition, corn growers are using much more fertilizer, which is produced using natural gas. "That's why we're seeing $7-plus natural gas now," says Parlanti. XTO, an independent gas producer, has a P/E of 12 and is projected to increase profits 11 percent this year