Presentation Transcript

1. Modern Energy Plansand Solutions

   Lecture 7
2. Energy, Pollution and Politics Cuyahoga River Fire http://www.youtube.com/watch?v=c8ju9xcmxhM Three Mile Island http://www.youtube.com/watch?v=eGI7VymjSho Love Canal http://www.youtube.com/watch?v=3iSFgZ-SlaU Exxon Valdez http://www.youtube.com/watch?v=daW_pTAD7Bc BP Oil Spill http://www.youtube.com/watch?v=pJNyA4WmJyY
3. The facts! Finding simple truths about our energy reserves and America’s position in future energy markets is relatively hard. Too many vested interests are spinning public policy into public relations issues No surprise, but much of the information is politically motivated and polarized
4. What does the US Offer The continental US, Canada, and Mexico have shown to contain the largest concentrated reserves of crude oil in the world In addition the continental US is in the unique position of containing the largest coal and natural gas deposits found to date – anywhere!!
5. What does the US Offer Geographically, the continental US has the largest free spaces that are most conducive for solar and wind production in the northern hemisphere. (the Great Plains (wind), Texas/Oklahoma wind corridor, Arizona/Nevada/California Desert (wind/solar) * To date, the future power generation potential of these areas has not been adequately assessed
6. What does the US Offer Since the “Three Mile Island” nuclear spill in the late 1970’s; public policy, nuclear regulatory policy, and environmental laws have made nuclear generation of US power the safest and most environmentally friendly option in our entire energy portfolio
7. What does the US Offer With a large river system, inland oceans, and thousands of miles of shoreline the potential for hydro-electric power generation is also unlimited. Aside from traditional water dam generation, other options have not been adequately assessed What “other” options exist?
8. Transportation Related Energy Sources Crude oil Most free flowing US oil reserves have been already tapped and depleted. However, those same regions that supported free flowing reserves years ago still have billions of barrels of oil trapped in tar sands, oil shale, and deep offshore underwater deposits.
9. Crude oil The US net imports about 8.5 million barrel/day (“net” because we export as well). This tally includes both crude and refined products such as gasoline and bio fuels This net import figure has been decreasing since the mid-1990’s That’s a good thing!
10. Crude oil With a new oil/gas boom beginning in the early 2000’s, experts believe new extraction methods such as hydraulic fracturing and thermal liquefaction could make the US energy independent by 2020. The US is expected to be the world’s leading energy producer by 2035
11. So who developed the oil industry? The current refining and distribution system is based on an innovative model developed by the father of the US oil industry – John D. Rockefeller
12. The Rockefeller System Rockefeller formed Standard Oil after the Civil War, and it’s primary product was kerosene for lamps. Most importantly, Rockefeller sold directly to the local consumers; he by-passed traditional middlemen and brokers., and shipped by rail to local markets directly. Standard Oil owned its own rail cars, tank farms, distribution channels, and local wholesale/retail networks. With the development of the automobile and the onset of the American Industrial Revolution, Standard Oil became the largest refiner of gasoline and petroleum products in the nation
13. The Rockefeller System John D. Rockefeller invented and devised the modern pipeline system to distribute crude and gasoline in an effort to circumvent competition and profiteering from the railroads That system, although expansive was built to support only the needs of Standard Oil; not the needs of the nation.
14. The Rockefeller System When Standard Oil was disbanded through TR’s anti-trust initiatives, the pipeline system was only expanded in stepwise fashion – most notably to support WWII . Ironically, the breakup of Standard Oil made Rockefeller one of the three richest men that ever lived (in today’s money; $600+ Billion) (ranked with Ali Khan and Cosimo De’ Medici) To meet demand during WWII, the government encouraged independent refiners to produce for the war effort. Result - large capacity increase in refinery output all based on Rockefeller’s exploration, refining, and delivery models. Pipeline systems were used primarily to move crude from the source to refineries along the coasts. However, congestion, politics, and environmental concerns limited pipelines along the east coast
15. Rockefeller meets Getty Post WWII expanding American Industry was a beneficiary of the refining capacity of WWII – cheap plentiful gas!! American influence saw the expansion of exploration in the middle east. Whereas Rockefeller devised the US system, it was Jean Paul Getty that initially developed the Arabian oil fields and the associated international oil market. Result – cheap imported oil and gasoline for American industry and consumers In the 1950’s, it became cheaper to import oil than to explore new wells, or to extract from dwindling free flowing wells in the US.
16. Rockefeller meets Getty Getty’s exploration and international oil shipping model became so successful that the US could import oil cheaper than to develop reserves domestically. The US became “addicted to cheap imported oil”. However, cheap gasoline was still produced by many local independent refiners due to the refining capacity glut created during WWII.
17. Old Rockefeller System Consolidates Although Standard Oil was broken up by the 1911 supreme court Sherman Anti-Trust Act decision, the name of the resultant companies are familiar. Esso/Exxon, Mobil, Chevron, Amoco, ARCO, Conoco, Sohio, Marathon, etc. These companies started to consolidate again in the 1960’s through the end of the century.
18. Old Rockefeller System Consolidates These “old Standard oil” companies merged and consolidated their hold over the US oil market by a simple method; cut out those “pesky” independent refiners that were created during WWII They rightly saw refining capacity as THE competitive advantage in maximizing profit – WHY?
19. Old Rockefeller System Consolidates Theories abound, but it’s generally accepted that starting in 1960’s the large refiners used the burgeoning environmental movement as a tool to lobby politicians and the public to get independents out of the refining business This policy has not changed – today we have only a few large consolidated oil companies; most are legacy Rockefeller SO companies that control most of the retail, distribution, and refining capacity in the United States.
20. Oil Crisis and Dept. of Energy In 1973, in retaliation for US support for Israel during the 1973 Yom Kippur war, Arab producers (OAPEC, now OPEC) cut supplies of cheap crude to the US. In response to crude oil fluctuations and rising energy concerns Pres. Carter created the Dept. of Energy in 1977. These actions gave further impetus to the old Rockefeller companies to consolidate more quickly – WHY?
21. Oil Crisis and Dept. of Energy “To control a large part of the energy agenda of the United States” Without consolidation and political influence, the oil companies feared that they could loose control of the energy business in favor of alternative fuels and government control of the oil industry Hence they set about to effectively disrupt ANY comprehensive US energy policy that did not exclusively favor oil They have effectively used the Dept. of Energy to keep comprehensive energy policies in flux Both Conservatives and Liberals have been well served by these policies – but not necessarily the American people
22. Game Changers!! This state of flux in the national energy debate and the crude oil energy industry has been the norm for almost four decades. The result: Gas prices held relatively steady until two things occurred in the early 2000’s Spot oil/gasoline market open up to speculation Hydraulic Fracturing technology re-invigorates the US energy market
23. Oil Speculation Oil is traded on an International energy exchange which sets secondary pricing on crude, gasoline, and other refined petroleum products OPEC is a cartel, that effectively sets quotas on crude oil production among its member states; hence it’s the primary pricing authority for most of the oil coming from the middle east This OPEC alliance is fading as many new sources are developed elsewhere, and OPEC members in-fight because they are not content with the influence of Saudi-Arabian agendas
24. Oil Speculation Besides OPEC, other major sources of oil pricing are Alaskan crude, West Texas Intermediate (WTI) this includes Canadian oil, and North Sea Brent Each is priced differently on the international and domestic energy exchanges Until the 2000’s the spot energy markets were only used by energy traders to buy/sell for their respective wholesale/retail energy companies Then in the early 2000’s the energy market opened up to hedge funds and energy speculators akin to the US stock market trading system
25. Oil Speculation Almost immediately, the energy markets were flooded with trades that had little to do with the actual demand of energy, but increasingly with futures trading based on global geo-politics, socio-economic inter-dependencies, and large hedge fund manipulations trading between the traditional stock market and the newly created energy markets.
26. Homework Identify the US energy trading exchanges How do they operate? How do they interact with foreign exchanges to trade internationally? Be prepared to discuss these topics in class next week.