Posted by Max Dunn
Wed, 07 Jul 2010 03:36:35 GMT | no comments
I have long heard that oil companies get a lot of special tax breaks, but no-one has ever been able to explain clearly what those tax breaks actually are. Now an article in the New York Times As Oil Industry Fights a Tax, It Reaps Subsidies provides the best explanation I have seen. Some of these tax breaks are:
- Moving corporate headquarters offshore to avoid taxes in the US
- Capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general
- Leasing rigs, like the Deepwater Horizon, to take advantage of a special oil industry tax break that allows them to write off 70% of the leasing cost
- A lingering provision from the Tariff Act of 1913 that allows many small and midsize oil companies based in the United States to claim deductions for the lost value of tapped oil fields far beyond the amount the companies actually paid for the oil rights
- Reclassifying the royalties charged by foreign governments to American oil drillers as taxes which entitles the companies to subtract those payments from their American tax bills
While some of these ploys are also employed by other industries, like moving their headquarters outside the US, the US tax code makes it especially easy and profitable for oil companies to employ these tactics.
Furthermore, many of these tax breaks no longer have any valid reason for existence since they were enacted a century ago to encourage oil exploration in the fledgling industry and then later in the 50s to decrease Soviet influence in the Middle East.
It is estimated that these tax breaks averaged $12 billion from 2006 to 2008. While this is a large number, it is only a small fraction of the $280 billion the oil industry was taxed in this period.
Nonetheless, with a growing deficit, dismantling these archaic tax breaks for the oil industry would raise badly needed revenue and help reduce the unfair advantage that the oil industry holds over cleaner forms of sustainable energy.
Posted in Peak Oil, Sustainable Energy
Posted by Max Dunn
Mon, 12 Apr 2010 15:18:10 GMT | 1 comment
The US military has warned that surplus oil production capacity could disappear within two years and there could be serious shortages by 2015 with a significant economic and political impact.
“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,” says the Joint Operating Environment report from the US Joint Forces Command.
It adds: “While it is difficult to predict precisely what economic, political, and strategic effects such a shortfall might produce, it surely would reduce the prospects for growth in both the developing and developed worlds. Such an economic slowdown would exacerbate other unresolved tensions, push fragile and failing states further down the path toward collapse, and perhaps have serious economic impact on both China and India.”
(From: guardian.co.uk)
Posted in Peak Oil
Posted by Max Dunn
Sun, 28 Mar 2010 15:32:54 GMT | 3 comments
There was an interesting article today on The Oil Drum today titled Using heat to refine kerogen from oil shale. The basic idea is that in order to get oil out of shale you need to heat it up, but then the oil can flow away and water can flow in. So first, it is necessary to create an ice wall around the site.
However, both the freezing and the heating takes tremendous amounts of energy. The article states:
“It has been suggested that the technology would need a dedicated power source of some 1.2 gigawatts, in order to yield a production of 100,000 bd.”
Let’s look at these numbers: 100,000 barrels of oil contains 4.2 million gallons of oil and if this were all converted to gas and used in standard cars that get 20 miles per gallon, it would power cars 84 million miles.
However, a 1.2 GW power plant would produce about 28 million kWh of electricity per day and if used for a standard electric vehicle (EV) which gets about 3 miles per kWh (plant to wheels) then it would power cars for 86 million miles.
So why spend all that effort and energy to extract oil from shale when the same amount of energy would power EVs farther?
Posted in Electric Vehicles, Peak Oil
Posted by Max Dunn
Sun, 07 Mar 2010 06:10:06 GMT | no comments
I have often thought that the recession was really caused by the high price of oil and not by subprime mortgages. However, I haven’t seen any credible source to back this up until I read a post by Jeff Rubin today called: We’re all PIGS now.
Rubin worked for nearly 20 years as the chief economist of CIBC World Markets and here is what he believes:
It wasn’t subprime mortgages but triple-digit oil prices that brought down the world economy.
And unless that economy started to wean itself off an ever-depleting supply of affordable oil, there would be other recessions to follow as economic recoveries would simply push oil prices right back into triple-digit range.
While I took exception with a lot of what Rubin said in Why Your World is About to Get a Whole Lot Smaller, here he is in the territory he knows best – economics – and I think his conclusion that record oil prices caused the recession is right on the money.
Posted in Peak Oil
Posted by Max Dunn
Tue, 09 Feb 2010 16:51:56 GMT | 2 comments
The CEO of Petrobras gave a presentation in December of 2009 which shows world oil capacity peaking in 2010 because new oil projects won’t be able to offset the decline in existing oil fields.
These statements are in line with other oil company like Aramco that believes world oil production is on a peak plateau, and Total that doesn’t see global oil production ever exceeding 89 mbd.
(Reference: The Oil Drum: World Oil Capacity to Peak in 2010 Says Petrobras CEO)
Posted in Peak Oil
Posted by Max Dunn
Wed, 25 Nov 2009 16:21:40 GMT | no comments
Oil demand is predicted to rise by 1.3 million barrels per day (bpd) next year to 85.9 million bpd, according to a Reuters poll of the ten top oil-tracking analysts and organizations. This bodes ill for the prospect of meeting the world’s oil demand, which is feared to erode the huge crude stockpiles which resulted from the global recession.
Even though major US crude ETFs like the United States Oil Fund LP (NYSE: USO) and oil companies like Exxon Mobil Corporation (NYSE: XOM) are not showing robust results today, if the demand curve beats the supply curve next year, these stocks will see a major upgrade. "The key question for prices is supply," Barclays Capital analyst Costanzo Jacazio said.
Investment banks Goldman Sachs and BofA-Merrill Lynch have the most bullish outlook for demand, projecting 86.4 million bpd and 86.7 million bpd respectively. This is good news for the likes of USO and XOM.
(Posted on 11/24/09 at 1:45pm by Ed Liston on Benzinga: The Stock Idea Network. Demand For Oil Will Likely Beat Supply Next Year)
Posted in Peak Oil
Posted by Max Dunn
Tue, 12 May 2009 15:55:33 GMT | no comments
by Steven Kopits, Managing Director, Douglas-Westwood, New York, 5/11/2009
NEW YORK: In seeking to explain the run up in oil prices from 2004 to 2008, commentators often turn to “speculation” as the primary cause. While speculation – or at least a kind of piling-on – may have explained the very late stages of the oil price rally, the willingness to attribute oil prices primarily to financial investors – as the CBS news show ‘60 Minutes’ did a few months back – risks drawing the wrong lesson from the period. Let’s re-wind the clock and recall the events of the time.
Read more...
Posted in Peak Oil
Posted by Max Dunn
Mon, 09 Mar 2009 22:25:54 GMT | 3 comments
Sometimes people talk about "running out of oil", but the world will never completely run out of oil. There will always be some oil remaining somewhere that can be scavenged from old fields, reclaimed from tar sands or stripped from oil shale.
There is, however, a limit to how fast we can pull oil out of the ground. Peak Oil will occur when the world hits this peak in production – and this will likely happen soon!
Read more...
Posted in Peak Oil
Posted by Max Dunn
Sun, 08 Mar 2009 05:22:16 GMT | no comments
Previously, I posted a table showing how oil in the US is used. Here is a graph that shows the same information in a prettier form:
(Reference: Year 2000 data from Ending the Oil Age)
Posted in Peak Oil
Posted by Max Dunn
Wed, 28 Jan 2009 01:44:29 GMT | 1 comment
The price we pay for a gallon of gas at the pump doesn’t include all the costs associated with it, like environmental costs and tax subsidies. One older study found that if we included all of these, we would be paying and extra $5 to $14 per gallon!
However, if we look at just the cost spent on military defense of oil in the Persian Gulf, it would be less than this.
One rough estimate would be to assume that 15% of the $430 billion DoD budget was spent on defending our oil interests in the Persian Gulf. Spread over the 142 billion gallons of gas we use each year, it works out to $0.46 per gallon.
Of course the hard number to determine is how much of the military budget goes to just protecting oil in the Persian Gulf. The $65 billion seems to fall in the middle range of what is spent on that region, but there is a lot of differences in opinion over how much spending would be reduced if we didn’t need to protect the oil there.
Here are some of the studies and what they determined we would need to add to the price of a gallon of gas to cover the cost of protecting oil in the Persian Gulf:
So don’t assume the price you pay at the pump is the true cost of gasoline. There are a lot more costs hidden away in making that gasoline available and in the environmental problems it causes that you pay for elsewhere.
Posted in Peak Oil, Sustainable Energy
