Prices Up Equals Demand Down For 2008

When oil flows ... freedom grows here in the United States. Image from an animation showing how oil is retrieved through processes used on an offshore oil drilling rig. Image Credit: Still from video provided by the API (2008)

Prices Up Equals Demand Down For 2008

U.S. oil demand was significantly down for the first six months of 2008, API said today in its Monthly Statistical Report. While U.S. refiners churned out record and near-record amounts of oil products, imports – especially product imports -- fell substantially.

What is the most interesting detail in these stats is what is not stated … that this demand fell without any U.S. Government intervention. These figures fell due to the forces of supply and demand when the overlay of a sudden price increase takes effect.

API statistics manager Ron Planting said, “At 20.08 million barrels per day, total demand was the lowest in five years. And the decline in gasoline demand was the first significant one recorded in 17 years. Higher pump prices and a slowing economy were undoubtedly factors.”

This excerpted from a press release from the American Petroleum Institute -

U.S. oil demand drops in first half of 2008
Bill Bush - API (American Petroleum Institute) - Updated:July 18, 2008

Deliveries of all oil products – a measure of demand – fell 3.0 percent compared with the same first-half-year period in 2007, with gasoline deliveries slipping 1.7 percent. For the preceding three years, oil demand had essentially held steady.
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At 2.0 percent, the second-quarter decline in demand for gasoline was even greater than for the first six months. However, the 1.8 percent decline for all products for the last three months, compared with the same period a year ago, was less in part because of a 2.1 percent increase in demand for distillates, which includes diesel fuels and home heating oil.
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Overall U.S. oil imports, including crude oil and oil products, sank to their lowest first-half level since 2003, at less than 13 million barrels per day.

Crude oil inventories declined to 301 million barrels at the end of June, down 54 million barrels from last year’s recent-year record and the lowest mid-year level since 2003. Consistent with relatively stronger demand for diesel fuel than for gasoline, gasoline inventories ended June up from a year ago while diesel inventories were down. U.S. crude oil production fell by 2.2 percent for the first half of 2008 compared with 2007.
Reference Here>>

If Energy = Freedom … does this mean that the demand for freedom is down as well?

One wonders what will happen to our hard fought freedoms now that our Democrat leaders in Congress have declared their "No-Drill" petroleum policy to coincide with their intended desire to attack the oil companies with a windfall profits TAX.

The Truth Behind Oil Windfall Profits Tax Vote Failure

The world has a supply of oil, but will the United States ever be allowed to grow beyond being the third largest producer of oil in the world? Image Credit: Daniel Taghioff - Writing on the Wall

The Truth Behind Oil Windfall Profits Tax Vote Failure

Yesterday, all day, the news services were broadcasting and printing the following headline:

Republicans block Democrats' attempt to

impose windfall profits tax on oil companies

In several respects, this is not a clear picture of what really happened.

Sure, the Republican members of the Senate began debate on the Democrat proposal to impose a 25% tax upon the subjective “UNREASONABLE” profits of the five largest United States based oil companies – and the Democrats could not raise enough votes to stop the debate.

The truth behind the failure begins with the Democrats who hold a voting majority if all of the Senators showed up to vote, had seven additional Republican Senators willing to vote to stop debate.

One prominent Democrat that was not in attendance to vote with the majority was Barack Obama.

Senator Obama, the presumptive Democrat Party nominee for President issued a statement after all action on the bill was ended and one wonders, WHY? If one does not show up to participate and vote, do they really have anything constructive and informed by the process of failure to communicate?

Blah, Blah, Blah!

The Senate has 49 Democrats, 49 Republicans, and one Independent that votes Democrat, giving the Democrats the leadership of the Senate. If ALL Democrats had showed up to vote and all voting Democrats and 1 Independent voted for the bill, added to the 7 Republicans that crossed party lines and against the wishes of the Republican leadership … the vote would have been 57 Yes and (who cares) No … still not the 60 votes needed for the bill to pass – REGARDLESS.

This excerpted and edited from Associated Press -

Republicans block Democrats' attempt to impose windfall profits tax on oil companies
The Associated Press - Published: June 11, 2008

Republicans, however, have said the bill would do nothing to ease soaring gasoline prices in the United States.

The Democrats failed, 51-43, to get the 60 votes needed to overcome a Republican filibuster — a procedural tactic to delay debate on a bill — and bring the energy package up for consideration.

The defeat affords Democrats another opportunity, going into the November congressional and presidential elections, to try to cast Republicans as siding with the oil companies at a time of record gasoline prices.
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But Republican leaders said the Democrats' plan would do harm rather than good — and they kept the legislation from being brought up for debate and amendments.
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At the Capitol, Democratic leaders needed 60 votes and they got only 51 senators' support, including seven Republicans who bucked their party leaders.
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Republican opponents argued that little was to be gained by imposing new taxes on the five U.S. oil giants: Exxon Mobil Corp., Chevron Corp., Shell Oil Co., BP America Inc. and Conoco-Philips Co.

While these companies may be huge, they do not set world oil prices and raising their taxes would discourage domestic oil production, the Republicans said of the Democrats' plan.

"In the middle of what some are calling the biggest energy shock in a generation ... they proposed as a solution, of all things, a windfall profits tax," Republican leader Mitch McConnell of Kentucky chided the Democrats. He called their proposal "a gimmick" that would not lower gasoline prices and only hold back domestic oil production.
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Neither Republican presidential candidate John McCain nor his Democratic rival, Barack Obama, were in Washington to cast votes on the energy issue on Tuesday.

Obama, in a statement, said Republicans had "turned a blind eye to the plight of America's working families" by refusing to take up the energy legislation. Obama has supported additional taxes on the oil companies [and did not attend the debate]. McCain is opposed to such taxes and has proposed across-the-aboard tax reductions for industry as a way to help the economy [and did not attend the debate].

Election-year politics hung over the debate. Democrats know their energy package has no chance of becoming law. Even it were to overcome a Senate Republican filibuster — a longshot at best — and the House acted, President George W. Bush has made clear he would veto it.
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In addition to the proposed windfall profits tax, the Democrats' bill also would have rescinded tax breaks that are expected to save the oil companies $17 billion over the next 10 years. The money would have been used to provide tax incentives for producers of wind, solar and other alternative energy sources as well as for energy conservation.
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After Tuesday's defeat, Democrats did not rule out pushing the issue again.

"This was politics at its worst," complained Democratic Sen. Claire McCaskill. "This was a refusal to debate the biggest problem confronting the American people. ... That takes nerve."
Reference Here>>

The "real politics at its worst" (as stated by Democratic Sen. Claire McCaskill) on this subject is the irrational support for the NO NUKES for power stance the environmentalists hold and the Democrats (and leftists) back without debate.

Let us, here at MAXINE, not mention the refusal to allow oil field exploration, drilling, extraction, transportation, refinement, and sale of any NEW OIL here in the United States ... for the last four decades.

If only we could restrict the world's oil supply and reproduce long lines at the gas pumps, then we could all experience what Barack Obama and the Democrat Party would bring to the country if elected ... Carter's Second Term.

Cruising On Corn E85 – Not A Smooth Ride

Dan Kallal of rural Chesterfield in Macoupin County, who co-owns and operates Kallal Brothers Inc., where they raise grain and livestock, holds a 6-week-old crossbred pig. Image Credit: The Telegraph/MARGIE M. BARNES

Cruising On Corn E85 – Not A Smooth Ride

The average vehicle driving American would dearly love to be able to do their level best to reduce our dependence on oil and the geopolitical pressures its use presents our country.

It would be nice that ALL cars were FlexFuel capable (able to use both gasoline and E85 for ease of transition to the use of renewable biofuel) and every fuel station provided an E85 fuel pump.

The average city living American, however, may be uninformed as to how difficult a proposition this switch can be. Many believe that all we have to do is “just do it” and everything will be fine – but this pursuit of reduced dependence on fossil fuels has its domino effect on the infrastructures that are already dependent on the easy cellular-fiber sources that exist.

Further, it takes energy to convert fiber to fuel so the question has to be asked, is this move to E85 really economically feasible?

Excerpts from The Telegraph (Alton, Illinois), originally published in two parts -

1) Ethanol demands send farmers scrambling & 2) Ethanol push has livestock producers worried
Becoming less reliant on foreign oil has become the favorite sound bite for politicians.
By MAGGIE BORMAN - The Telegraph - 02/26/2007

From the president to the governor, leaders are putting taxpayer money where their mouths are, subsidizing production of ethanol from the heartland's golden corn crop.

Ethanol, the colorless, flammable liquid produced by the fermentation of sugars from corn and other plants, puts the kick in alcoholic beverages, the pop in popcorn and is used in foods from cereal to soda pop.

Most of the ethanol used as a gasoline additive in the U.S. comes from corn grown in a few Midwest states known as the Corn Belt. Illinois is the nation's No. 2 ethanol producer and the No. 2 biodiesel producer.

In 2007, Illinois' 10 ethanol plants will produce more than one billion gallons, and three biodiesel plants will produce more than 120 million gallons.

The governor has supported a rapid expansion of the E85 infrastructure.
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The governor's plan, among other things, would invest $25 million to help build five biodiesel plants, boosting the state's production by 200 percent to 400 million gallons per year, or the equivalent of 25 percent of the state's annual diesel fuel needs by 2017.

Although his means of financing are far from clear, Blagojevich wants to invest $100 million over the next five years to build up to 20 ethanol plants across Illinois, with an additional $100 million over the next 10 years to build four plants in Downstate Illinois using new technology to create ethanol from plant waste materials such as corn husks and wood pulp.
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Ethanol has many supposed benefits - weaning Americans off foreign oil, increasing local industry and jobs, reducing global warming and aiding grain producers, among them.

But many people question the validity of the rush to subsidize the ethanol industry. They want to know if America has the ability to produce enough ethanol to become totally foreign-oil free. Ethanol is placing, in particular, a lot of burden on corn supplies, which affects livestock producers, world food banks and corn food products.

Where will all the corn come from?

In December, Chuck Hartke, director of the Illinois Department of Agriculture, said Illinois produced about 1.7 billion bushels of corn last year. The U.S. Department of Agriculture's year-end statistics released last week estimated the 2006 corn production at 10.5 billion bushels, the third largest on record, but still a 5 percent decrease from 2005.

More than 70 million acres of corn were planted for grain production. Corn acres are expected to increase dramatically this year, due in large part to the rapid increase in fuel ethanol production capacity.

The U.S. ethanol industry has a capacity to produce about 5 billion gallons per year, but more than 4.5 billion gallons of capacity is under construction, according to Ethanol Producer Magazine. The USDA planting estimate for this year forecasts an increase in the range of seven million to 10 million acres of corn.

"Currently we are using about 400 million bushels of corn to produce ethanol in Illinois, and by the end of 2008 we should be consuming close to a billion bushels to produce ethanol," Hartke told the Chicago Tribune in December.
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Here is an easy formula to remember: 1 ton of corn equals 39.4 bushels, which equals 110 gallons of ethanol.
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All this would increase the corn needed for distilleries to 139 million tons, Brown said. This would yield nearly 15 billion gallons of ethanol, satisfying only 6 percent of U.S. auto fuel needs (this estimate does not include any plants started after June 30 that would come online in time to draw on the 2008 harvest).

At the end of January, the Illinois Farm Bureau said Illinois farmers might expand corn production acres by at least 9 percent over the 2006 levels, according to a survey conducted at the Corn and Soybean Classic meetings around the state. If realized, Illinois farmers would plant about 12.6 million acres in corn this spring - the highest corn acreage since records began in 1866.
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Ethanol push has livestock producers worried

No one questions the need to reduce the nation’s reliance on foreign oil. But pushing ethanol as the solution has people like pig farmer Ken Doyle worried.

Doyle, who runs Hickory Grove Pork Farm between Carlinville and Gillespie, said production of ethanol stands to deplete the corn stock that livestock farmers count on to feed the animals that feed much of the world.

"Those of us that are well-fed and warm at night don’t consider the impact an increase in feed prices will have globally," Doyle said. "That is a rather sobering aspect of this that the press isn’t covering. Right now we have all these politicians beating on their chests speaking about how wonderful it is to have alternative energy, but there is a downside for the hungry of the world that is quite frightening."

Controversy remains over the use of America’s fertile cornfields as the best and most economical means to replace gasoline. The demands are having an impact on livestock producers, consumer food prices, exports and world food banks.

While ethanol-related industries and the National Corn Growers Association have asserted that corn-guzzling ethanol demands outlined under President George Bush’s energy plan can be done, even the president recognizes it may be difficult to meet his goal of 7.5 billion gallons of ethanol by 2012.

"Ethanol produced today comes from corn, and we’ve got hog growers and chicken growers that need corn to feed their animals," Bush said while speaking at a DuPont plant in Delaware last month. "Therefore it’s going to be kind of a strain at some point in time on the capacity for us to have enough ethanol to make us less dependent on oil."
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Steve Ring, general manager of Hog Inc. in Greenfield, a Greene County-based cooperative composed of about 100 pork producers whose principal business is the manufacture of feed for hogs, said many pork producers were not counting on how quickly the market would respond to the ethanol boom.

"We are facing a new dilemma. In 2006, the country raised the third-largest corn crop in history. Because of the current and projected demand from the ethanol industry, corn prices are the highest they have been in 10 years," Ring said.

In October 2005, Ring said the average his cooperative paid for corn was $1.65 a bushel. In October 2006, the price averaged $2.85, and in December 2006, the average was $3.65. The price as of Jan. 26 was $3.78.

"So our price of corn has jumped 72.7 percent from October 2005 to October 2006. It jumped 121 percent from October 2005 to December 2006, and 129 percent (on Jan. 26)," Ring said. "That is one heck of a change in a short period of time."
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It takes about 10 bushels of corn to raise and finish a hog to market. Utilizing the current price of corn, it represents an increase of $21.30 per hog, Ring said, noting that most other ingredients have also increased.
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Ring said Hog Inc. has had a few hog producers that have already discussed dropping their hog operations and only raising grain. If hog producers have older buildings, for example, that need to be replaced within a few years, "it is difficult for them to pencil out a profit with current corn prices that may well increase."

"As the ethanol industry grows, it will require more corn," Ring said. "While there is talk out of Washington about cellulose crops (another means of ethanol production), the technology for corn and the tax incentives will keep pressure on to grow corn-based ethanol."

The ethanol industry has a 51-cent-per-gallon tax advantage while the livestock industry has no tax incentives.
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"I have read several reports that estimate the ethanol industry can pay $4.05 per bushel for corn when crude oil is $50 per barrel. The higher crude oil goes, the more the ethanol industry can afford to pay," Ring said.

Ring supports the use of ethanol and less reliance on foreign oil. He owns a flex-fuel vehicle and purchases E85 on a regular basis.
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Ring’s final concern is the impact corn-based ethanol would have on U.S. consumer food product costs and corn for export to the world’s hungry.

"My sincere hope is that legislators will have an open discussion on the positive and negative aspects of an aggressive expansion of the ethanol industry.
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Dan Kallal, who lives in the rural area outside the Macoupin County town of Chesterfield, and his brother, Dave, own and operate Kallal Brothers Inc., where they raise grain and livestock.
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"We are shifting to growing as much corn as we can, as price will be a factor if we have to buy corn," Dan Kallal said. "Feed costs are about 60 to 70 percent of our production cost so if we have to buy $4 corn, it will definitely affect us."

Kallal said the demand for corn-based ethanol production would have a global effect as well; there won’t be as much corn meal to donate to the World Food Bank for other countries, nor will there be enough corn for export.

"It is a global market, and if we are competitive we can export; if we aren’t, someone else will pick up the market."

Doyle, who along with his family runs the Hickory Grove Pork Farm, a farrow-to-finish swine facility that includes a breeding herd and a market herd, said his farm purchases all of its corn.

"Feed costs are about 60 percent of our operation and it takes about 10 bushels of corn to create a market weight," Doyle said. "With a dollar and a half increase on corn it equates to about $15 per pig increase."
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"The outlook for our industry in 2007 is not positive. When you are dealing with a global economy, this doesn’t just affect our operation but every operation in the world," Doyle said. "In a world market, it is demand for feed grains -- not just corn -- that has gone up."

The price of feed grains in time will affect the cereal, dairy, eggs, beef and pork products Doyle said, as well as the World Food Program, which feeds more hungry people than any other agency.
References Here & Here>>