The U.S. Energy Information Administration (EIA) said in a report that the U.S. dry natural gas production has increased since late 2005 due mainly to rapid growth in production from shale gas resources. However, there have been two notable instances (see red ovals in the chart) in the last seven years when natural gas production leveled off during a period of falling spot natural gas prices.
The first was during the recent economic recession and the latest began in the fourth quarter of 2011 and continued through the first quarter of 2012.
Weather events (see green ovals) have also affected U.S. natural gas production.
The major events over the past seven years that have caused dry gas output to level off or even decline include:
- Hurricanes Katrina and Rita (Sep-Oct 2005) – Disrupted up to 12.2 billion cubic feet per day (Bcf/d) in offshore natural gas production.
- Hurricanes Gustav and Ike (Sep 2008) – Disrupted up to 9.5 Bcf/d in offshore natural gas production.
- Economic recession and falling prices (Oct 2008- Sep 2009) – Reduced industrial and manufacturing activity, and lower electricity use eased demand for natural gas as a feedstock and a power generation fuel. Natural gas prices fell sharply as a result.
- Winter well freeze-offs (Feb 2011) – Disrupted up to 7.5 Bcf/d in natural gas production from Texas to Arizona, when water froze inside wellheads during extremely cold weather and blocked gas flows.
- Supply overhang and falling natural gas prices (Oct 2011-Mar 2012) – A warm winter that reduced heating fuel demand and record high gas inventories resulted in a nearly 50% drop in gas prices, causing some energy companies to postpone new drilling and cut back on some existing operations.
Natural gas production was relatively flat between October 2011 and March 2012, when Henry Hub spot gas prices declined from just above $3.50 to around $2.00 per million British thermal units in March. Preliminary EIA data indicate a slight drop in production during March, according to the Natural Gas Monthly report released on May 31.
Of the five large gas-producing states tracked monthly by EIA—Texas, Louisiana, New Mexico, Oklahoma, and Wyoming—New Mexico had the highest percentage decline in its March gross natural gas production, down 2.2 percent from the previous month, while Texas had the largest volumetric drop, down 150 million cubic feet per day. States that EIA does not presently track on a monthly basis, such as Pennsylvania, may have seen their gas output increase during March.
- EIA: U.S. Surpassed Russia in Dry Gas Production in 2009 and 2010 (mb50.wordpress.com)
- Natural gas boosted by short covering (business.financialpost.com)
- Natural gas: What are the bulls thinking? (business.financialpost.com)
Graphic source: Hot Air (click to enlarge)
For starters, what is the Strategic Petroleum Reserve (SPR)?
The SPR was created in the United States after the Arab oil embargo that occurred between 1973 and 1974. It holds over 700 million gallons of crude oil and was initially to provide crude oil during any major supply interruption to the US.
Its mandate was expanded by Congress later to include potential release to address a severe spike in oil prices. It is in effect a national security tool for a president!
There is not however any legal rationale to tap the SPR for use as a political tool, which is what a release decision by President Obama at this point in time would seem to be.
If however some incident along the lines of Iran preventing shipments through the Strait of Hormuz were to occur, that would be an entirely different story.
Forgetting for a moment about the SPR, what about the reserves that the Obama administration has refused to tap?
It is an absolute truism that any release from the SPR designed to effect a decrease in crude oil prices would be a short-lived one at best as the country currently consumes over 18 million barrels a day. The last sale out of the SPR was 30 million barrels in 2011 or less than a two-day supply!
Another even more important truism is provided by examining the graphic above.
This graphic shows that the moves made by this President, instead of lowering energy prices and boosting jobs and the economy, will instead have the effect of higher crude oil prices, less jobs and a slower economy.
It all makes one wonder, yet again, about some of the choices of this White House.
I think that it is fair to say that basically any way you slice it, for this President most if not all decisions are about politics and an administration doing whatever is necessary to try and get a 2nd-term in office.
A belief in letting the chips fall where they may as long as any political benefit may exist!
Finally, to provide some historical perspective about the use of the SPR consider:
SPR releases through time!
* June 2011 Libya war – Sold 30 million barrels.
* Sept 2005 Hurricane Katrina – Sold 11 million barrels.
* 1996-97 Nonemergency sales – Sold 28.1 million barrels (5.1 million in Weeks Island sale to pay for decommissioning of storage site and transfer of its oil; 12.8 million to reduce the federal budget deficit; 10.2 million to pay for the cost of operating the SPR).
* 1990-91 Iraqi invasion of Kuwait – Sold 21 million barrels (3.9 million in Oct 1990 test sale; 17.2 million in Jan 1991 drawdown ordered by president).
* Nov 1985 Test sale – Sold 967,000 barrels.
* Sept 2008 – Loaned 5.4 million barrels of crude to five oil companies after hurricanes Gustav and Ike cut supplies.
* Jan 2006 – Loaned 767,000 barrels of sour crude to Total Petrochemicals USA after the Sabine Neches ship channel closed and deliveries stopped to Texas refineries.
* Sept/Oct 2005 – Loaned 9.8 million barrels of sweet and sour crude after Hurricane Katrina disrupted Gulf of Mexico production and damaged terminals, pipelines and refineries.
* Sept 2004 – Loaned 5.4 million barrels of sweet crude due to disruptions in the Gulf of Mexico caused by Hurricane Ivan.
* Oct 2002 – Loaned 98,000 barrels to Shell’s Capline Pipeline to keep storage tanks full to withstand Hurricane Lili’s winds.
* Oct 2000 – Loaned 30 million barrels to boost winter heating oil supplies in the Northeast.
* Aug 2000 – Exchanged 2.8 million barrels of crude oil for 2 million barrels of heating oil to create Northeast Home Heating Oil Reserve.
* June 2000 – Loaned 500,000 barrels each to Citgo and Conoco after the Calcasieu Ship Channel closed and blocked crude oil shipments to Louisiana refineries.
* Dec 1998 to Feb 2000 – Exchanged 11 million barrels of lower-quality heavy crude in SPR with Mexico’s PEMEX for 8.5 million barrels of higher-quality sweet crude more suitable for U.S. refineries.
* April 1996 – Loaned 900,000 barrels of SPR crude to ARCO after company’s pipeline to Cushing, Oklahoma, had blockage. (Source)
- Tapping oil from the SPR may be trickier than ever (business.financialpost.com)
- A Brief History of the U.S. Strategic Petroleum Reserve [OIL LOANS, OIL SALES] (ibtimes.com)
- Is The SPR Release Already Priced Into Oil Prices? (zerohedge.com)
by STEVE HUNTLEY
That’s a mighty wind blowing from the east. No, I’m not talking about Hurricane Irene. It’s the blustery gusts stirred up long before Irene by the constant whining from the Obama White House: Everything but the administration’s own policies are responsible for the faltering economy.
Irene is only the latest of the “head winds” White House officials blame for feeble economic growth and persistent high unemployment. There was the earthquake/tsunami in Japan, the fiscal crisis in Greece, the civil war in Libya on top of Arab Spring uprisings in other Arab countries and, of course, Republicans refusing to go along with President Barack Obama’s spending binge, er, “investments.” One adviser even found head winds from the East Coast earthquake, though its most notable damage appeared to be cracks in the foundation of the Washington Monument.
No doubt these events did create drag for the economy. But Democrats never cut that kind of slack for President George W. Bush. They constantly talk about him inheriting a surplus from the Clinton years but ignore that he also inherited a deteriorating economy that produced a recession in March of 2011 just weeks after he was sworn in.
Liberals ignore the economic devastation of the Sept. 11, 2001, terror attacks in New York and Washington. Air traffic was grounded for days, commerce came practically to a halt. But none of that was allowed to intrude into the left’s narrative of Bush squandering the surplus.
Hurricane Katrina was a convenient cudgel to pound Bush over the failure of government to respond effectively to the disaster, though it was the Democratic-run governments of New Orleans and Louisiana, the first responders, that were the most guilty. Here again the Democratic narrative leaves out the economic consequences of Katrina.
The point is that any president has to deal with “head winds” to the economy from unexpected and uncontrollable events domestic and foreign. What’s remarkable about this presidency is the never-ending whining about them.
This finger-pointing is just passing the buck to avoid responsibility for policies that have failed to revive the economy and, worse, served to prolong the economic suffering.
There’s the nearly trillion-dollar stimulus that failed its goal of keeping unemployment from breaching 8 percent. ObamaCare and the new financial regulatory law have bureaucrats working overtime writing new regulations. That’s frozen investment by businesses large and small worried about the yet-to-be-determined costs of the new rules.
Obama and his advisers never flinch from anti-business rhetoric, further undermining investment. They rail about millionaires and billionaires but their tax proposals would hit small businesses earning far less than a million dollars.
Democrats sneer at the Texas job growth story by pointing out that a significant part of it is based in the oil and gas industry, revealing left-wing job-killing hostility to developing traditional energy resources. A study by the business analysis firm IHS Global Insight asserts increased offshore energy production could produce nearly 230,000 jobs, add $44 billion to the economy and provide nearly $12 billion in tax and royalty revenues to state and federal governments.
But documents released by Sen. David Vitter (R-La.) show that the administration’s campaign against deepwater drilling in the Gulf of Mexico caused 10 oil rigs to leave for better opportunities in waters off Egypt, Congo and other places — including Brazil where, ironically, Obama has promoted the ocean exploration he frustrates at home.
Meanwhile the administration pursues alternative energy jobs, though the New York Times reported this month that “federal and state efforts to stimulate creation of green jobs have largely failed.”
All the finger pointing, whining and passing the buck can’t hide the failure of Obamanomics.