By Richard Reese on Saturday, October 14, 2000 - 02:08 pm:
ENERGY UPDATE
Snippets from recent news stories
Rough water is straight ahead for the local tourism industry, real estate developers, and resort projects -- not to mention the global economy.
Following a gasoline price spike in May, the Mackinac Bridge Authority has reported a decline of bridge crossings, compared to 1999 crossings. May crossings were down 5.0%, June down 4%, July down 7%, August down 4.5%, September down 3.6%.
http://www.mackinacbridge.org/news/index.phtml
There have been three previous spikes in oil prices -- 1973 (Arab oil embargo), 1979 (fall of the Shah), and 1991 (invasion of Kuwait). All three were followed, 12 to 18 months later, by recessions. All three crises were primarily political in nature. The price spike of 2000 is primarily being driven by real problems with the actual supply of energy.
http://www.iea.org/pubs/omr/files/high.pdf [Adobe Acrobat Reader required.]
International Energy Agency - Monthly Oil Market Report
10 October 2000
BETWEEN A ROCK AND A HARD … SPOT MARKET
Prices have moved down in response to commitments to add supply made by OPEC, Saudi Arabia and the US government. Backwardation in the futures markets has eased, speculators have rotated out of crude positions, crude and product stocks are beginning to build and refining margins have improved, encouraging throughputs. All positive developments, and yet the market remains nervous. Why?
Simply put, the system is stretched and lacks flexibility. Marine freight rates have surged on increased demand for charters. Refinery utilisation in key markets is running close to capacity, with discretionary maintenance deferred. Major crude oil and product pipelines are full. The system is strained and running hard just to keep even. Extremely low stocks exacerbate this situation and there is precious little room for contingencies. And yet, the question on everyone’s mind is what will the winter bring. Will we have mild or unseasonably cold winter in North America, Europe and Asia? Will heating oil stocks be sufficient to meet peak regional demand? Will Russian supplies be available and adequate to replenish depleted stocks?
North American natural gas prices are climbing on concerns about deliverability. In a tight market, in the midst of a cold spell, will deliverability factors force fuel switching to crude oil? Can the fuel and heating oil market absorb increased demand? Will refineries be able to operate at maximum capacity? What happens if there is a major refinery outage or a pressure-down of a key crude or product pipeline? And then there is rhetoric out of Iraq and the threat of a political supply disruption.
Low crude and product stocks create instability, exposing the market to potential disruptions and the threat of regional supply imbalances. Refiners can only process so much crude; ships, barges and pipelines can only transport so much product. The market needs time to adjust. Fundamentals are tight and the market is fragile. Forcing more crude into a capacity constrained system won’t correct a situation created by producer output restrictions overnight. The global energy market is coming to grips with the reality that there are physical limits on what can be accomplished before the winter.
Vigilance is the order of the day, along with coaxing spare capacity out of a constrained system. If everything runs smoothly then we will get through the winter without major disruptions and all the nervousness and anxiety will be for naught. But for the moment the market remains on edge, and
prices are responding accordingly.
http://www.latimes.com/news/nation/20001013/t000097696.html
A Wintery Winter in the Forecast for Most
Los Angeles Times Friday, October 13, 2000
The National Weather Service warned that the recent string of warm winters may be at an end. "Americans must be careful this winter and prepare for a little bit of everything," weather service director Jack Kelly said. "We've probably forgotten over the last three years what a normal winter is like," said D. James Baker, head of the National Oceanic and Atmospheric Administration.
http://www.guardianunlimited.co.uk/Print/0,3858,4075977,00.html
Traders' panic sends oil prices skyward
Charlotte Denny
The Guardian (UK) Friday October 13, 2000
US heating oil prices broke 10-year records yesterday… The US department of energy reported yesterday that national heating oil stocks fell 1.3m barrels last week to 46.6m barrels, more than a third lower then a year ago. One analyst warned that, with most big oil exporters already pumping at capacity, any disruption to production could drive prices above $100 a barrel.
see the story at this link
Natural gas prices soar to record
Bloomberg News Thursday, October 12, 2000
Natural gas prices soared more than 7 per cent yesterday to a record after an industry report showed U.S. inventories rose too little to ensure adequate supply for the winter heating season. Inventories rose 2.5 per cent last week, the American Gas Association reported. While the gain was close to expectations, storage depots hold 13 per cent less than a year ago with the start of the peak-demand winter season just weeks away. Prices have more than doubled this year on concern that inventories will be too low this winter. The U.S. government predicted on Friday that Americans can expect to spend 44 per cent more to heat their homes with gas this winter.
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High gas prices could cause price controls, taxes
But gas prices are expected to increase this winter in most of the northern consuming states. Residential gas customers can expect price hikes of 20-40%, and industrial users will be hit with 100% or higher jumps in their bills.
http://www.nytimes.com/aponline/national/AP-Heating-Oil.html
[Heating oil stocks are also low in Europe, and US oil companies are exporting heating oil to Europe, despite the fact that US heating oil stocks are currently lower than average, and fears that there may be shortages in the US this winter. RR]
Heating Oil Export Ban Sought
WASHINGTON (AP)-- Five congressmen from the Northeast called on President Clinton on Tuesday to issue an executive order banning the export of heating oil, saying the fuel "should not be sent to Europe" when U.S. supplies are low. While hard statistics are scarce, there has been growing evidence that refiners in September stepped up exports of heating oil to take advantage of higher prices in Europe
http://www.ottawacitizen.com/business/001006/4643011.html
Economists say oil production near peak, as demand continues to rise
Eric Beauchesne
The Ottawa Citizen Friday 6 October 2000
"After rising for 140 years, world oil production is about to peak," according to a sobering new study by economists at CIBC World Markets released yesterday. Even with the recent spike in energy prices, world demand is still rising at a rate that will exceed supply. "With only about two million barrels of spare OPEC capacity left, the global economy is hurtling towards an oil supply wall at alarming speed," the report says. At the present rate of consumption, the report warns that "demand will exhaust potential global supply of around 80 million barrels a day in two years." "When it does, oil prices will ... explode."
http://www.ottawacitizen.com/business/000906/4095510.html
No oil price relief in sight: analysts
Stephen Ewart
Citizen Special (Ottawa Citizen) Wednesday 6 September 2000
CALGARY -- A school of thought is emerging in the oil world that regardless of what pledges might be made in Vienna this weekend, no new OPEC production is coming to market any time soon. There simply aren't enough extra tankers available to get significantly more oil from the Persian Gulf -- where Saudi Arabia and others could pump more oil -- to consumers in the United States, Europe and Japan, analysts said yesterday. "The tanker market is fairly close to capacity," said Julian Lee, an analyst at the Centre for Global Energy Studies in London. "There doesn't appear to be a lot of spare tankers around to move the stuff to market."
There are about 3,100 oil tankers in the world. Tanker freight rates, one indicator of a tight market, climbed three-fold this year before falling off in the past week. For example, tanker moving 500,000 barrels of crude from OPEC-member Venezuela to the U.S. Gulf Coast would have cost $330,000 in late 1999, but the cost shot up past $880,000 in August.
By Walt Anderson on Saturday, October 14, 2000 - 01:59 pm:
Jeff,
Thank you for the opportunity to draw more attention to "special uses" and "permitted uses".
You said an RS designation would open the hill to all sorts of commercial development.
Not necessarily. Under RS, a shopping center is a "special use" and would be subject to public hearings. In addition, a shopping center would be subject to "a market analysis in order
to establish evidence of a need..."(page 22)
There are other "recreational uses" listed under the correctly spelled, special uses under RS zoning. And as I said earlier, a golf course is one such special use, subject to a public hearing.
True, if a ski resort becomes item #12 under RS, it apparently would not be subject to public hearings, as it would fall under "permitted uses".
As I understand it, only "special use" dsignations are subject to hearings.