Sunday, April 5, 2009

Oil drips and discharges - 5 April 2008

Oil industry narrows focus on deep water. This is bad news for Louisiana. Deepwater Exploration and Production was THE hottest area in the oil biz for the past decade and Louisiana was a big beneficiary of that. Little coastal cities like Morgan City had a sustained boom coming from well-paid oil service workers. Now, it's dropping off a cliff. The oil companies are cutting way back and the service companies are taking the brunt of it. I've heard that the oil service companies have taken a lot of their workers, who had been working 80-hour weeks [paying them handsomely in the process] and cutting their hours down to 32 hours a week. I've heard some service companies complaining it's just the majors trying to squeeze lower rates out of the service companies. Others claim it's fear of what sort of taxes Obama might place on the oil industry. Dunno, just know it looks bad. Morgan City used to have the lowest unemployment rate of any city in the country. Give it a year and I guarantee that won't be true.

Not only will Louisiana start getting hit with lower employment, but lease sales are getting colder and colder. These lease sales are critical to plugging the budget gap and financing coastal restoration. Keep in mind a lot of companies have been sitting on unused leases, so there's little incentive to splurge on new lease sales.

A lot of people are pinning their hopes for "energy independence" on the Canadian Tar Sands. Couple of interesting pieces: Two Canadian Giants merge in an effort to cut costs. National Geographic just ran a huge expose on the tar sands operation. Here's a good roundup of the reactions and articles. Worth clicking through to read a few. Lots of jobs, but at a staggering environmental impact. Don't forget that any increase in oil production will depend on 2 things: cheap heating of steam (through natural gas) and large volumes of water, way beyond what they have access to right now.

Other quick hits:
Why oil prices will rise again. Underinvestment will lead to an energy crunch when the economy gets back on track.

Latest fashion craze in Iraq: buying civilian Hummers. H2's and H3's in bright colors are all the rage. Oh, the irony. On a serious note, rising internal consumption cuts off future oil exports. Keep that in the back of your head...

Volcanos and Oil: a bad combination. Somebody send a memo to Chevron. CC Bobby Jindal.

Why did oil hit $147 a barrel then crash? It might be because of a Goldman Sachs short squeeze. Note to those that want to "blame the speculators" on the entire run up on prices: the short squeeze didn't start until oil was more than $100/barrel.

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