Thomko Petro Chemical Blog

Chavez Says E.U. Countries That Back Migrant Law Won't Get Oil   

Venezuelan President Hugo Chavez said he'll prohibit sales of oil to European Union countries that apply a new law approved by the E.U. parliament that allows undocumented workers to be detained. Chavez has also stated that Venezuela also won't accept foreign investment from those European countries.

Venezuela won't attend a meeting of oil producers and consumers this weekend in Saudi Arabia, and sees no need to increase crude output, the country's oil and energy.

Venezuela has no plans to increase its oil output, Minister Rafael Ramirez told reporters today in Maracaibo.  The Organization of Petroleum Exporting Countries doesn't need to meet again before its next scheduled event in September, and says that oil production levels aren't behind the increase in prices.

More news out of Venezuela . . .  

Chavez isn't content with nationalizing the countries oil - today he has formally taken control of the cement industry by decree, and has given three foreign companies 60 days to negotiate a fair price for their assets. Should they fail to reach an agreement, he stated Venezuela will start expropriating shares.

According to the decree, the government will take at least a 60% stake in the Venezuelan subsidiaries of Mexico-based Cemex SAB, Switzerland- based Holcim Ltd. and France-based Lafarge SA.

Chavez is using a windfall from oil exports to increase state control of the economy. Since the beginning of 2007, he has nationalized four crude oil ventures as well as the country's biggest telephone company and electricity provider.

Source: Bloomberg

Consumer Energy Alliance Efforts

The Air Transport Association of America (ATA), the industry trade organization for the major U.S. airlines, is echoing the call of the Consumer Energy Alliance to secure a balanced and comprehensive U.S. energy policy that increases U.S. energy independence and results in a more stable energy supply and predictable costs.

The ATA points out that nearly 30 cities across the country have completely lost scheduled air service in the past year, with more service cuts and job losses inevitable as airlines attempt to cope with soaring fuel prices.

Eight U.S. airlines have shut down operations since the end of 2007 and another has filed for bankruptcy protection. More than 9,000 U.S. airline employees have lost their jobs so far this year, with additional cuts being announced as the year continues.

The ATA is proposing that the government make barrels available from the Strategic Petroleum Reserve and the Northeast Home Heating Oil Reserve in the event of supply disruptions or price spikes; invest proceeds in energy infrastructure.

It calls for curtailing commodity index speculation and close regulatory loopholes in trading of commodity futures (e.g., crude oil, heating oil); create equal playing field across exchanges and increase transparency of activity It also calls for pressuring U.S. refiners to increase utilization, which has fallen to abnormally low levels.

ATA supports streamlining National Environmental Policy Act (NEPA), permitting requirements to allow expedited siting of new and improved refining capacity to meet surging demand for middle distillates (e.g., diesel, heating oil, jet fuel).

ATA also supports facilitating environmentally responsible crude oil exploration, refinery production, nuclear energy investment, wind power or other sources of energy through changes in tax policy, regulation or fiscal incentives and increasing R&D for alternative aviation fuels and for carbon capture and sequestration technologies.

For more information, visit www.airlines.org

While Alaska has lots of oil money, residents of many remote villages are living with a cruel irony - they cannot afford to heat their homes because their fuel bills are 2 - 3 times the national average.

U.S. nationwide home heating fuel averages $3.30 a gallon, but averages $4.30 a gallon in Alaska - and in the remote villages the cost is $9 a gallon. Gasoline is now averaging just over $3 a gallon nationally, but averages $4.54 in Alaska, and jumps to $7 a gallon in the remote areas!

The cost of shipping oil to the remote areas of Alaska by plane or barge is steep - despite the state's vast oil wealth. Most of the oil must be shipped as crude to the West Coast to be refined, and then sent back to Alaska.

The state's lawmakers are looking at offering hundreds of dollars in rebates to help remote villages offset their home heating bills - but they only have a short time to address this issue before the legislative session ends - and Hugo Chavez steps in to embarrass them once again.  

It seems in the past Chavez has been far quicker to come to the aid of Alaska's remote village residents. Last year Venezuelan oil company Citgo donated $5 million of free heating oil to poor communities in Alaska.

Arctic Village is one such community where fuel has to be flown in because this remote community is hundreds of miles off the normal roadways, and this village cannot be reached by barge. The residents in these areas depend on fuel to travel by snowmobile, ATV or boat to hunt and fish.

Alaska's state revenue will benefit a surplus of $3 -$4 million this year because of high oil prices, along with a recent hike in oil taxes. But lawmakers are looking at a steady 6% drop in production at the North Slope oil fields.

So it's a choice between giving some of that money as rebates to the poor, or keeping some of the surplus which will help tide the state over until the North Slope project is finished - but that's at least 10 years away.

Tell that to Ed Littlefield, a Vietnam veteran who suffers from diabetes, lives on disability, and looks for wood to chop so he can heat his home. He's gone without fuel for days. He says, " Everybody hates Hugo Chavez, but we thank him for the fuel that lasted about 3-4 months last year".

Republican Bill Thomas represents nearly 50 small communities in the state's southeast panhandle, he suggests a $500 payout to state residents, at a cost of about $360 million that would be paid from the profits of the state's oil wealth savings account - a $38 billion Alaska Permanent Fund.

But fellow lawmakers do not want to touch the earnings fearing Alaskans would perceive it as a raid on the fund that pays them an annual dividend - $1,654 for nearly every man, woman and child last year.

Other lawmakers caution against putting money into assistance programs that will just have to be cut in the leaner years, along with giving the perception of Alaska as a free loader state with "cash giveaways" - especially after the infamous "bridge to nowhere" federal earmark.

So while the lawmakers quarrel about what to do, residents may still have to depend on Venezuela this year to help them heat their homes and provide fuel for transportation.

Source: AP

Iraqis face the dire prospect of losing up to $200bn of the wealth of their country if an American-inspired plan to hand over development of its oil reserves to US and British multinationals comes into force next year.

A report produced by American and British pressure groups warns Iraq will be caught in an "old colonial trap" if it allows foreign companies to take a share of its vast energy reserves

The report is certain to reawaken fears that the real purpose of the 2003 war on Iraq was to ensure its oil came under Western control.

The Iraqi government has announced plans to seek foreign investment to exploit its oil reserves after the general election, which will be held this month. Iraq has 115 billion barrels of proved oil reserves, the third largest in the world.

According to the report, from groups including War on Want and the New Economics Foundation (NEF), the new Iraqi constitution opened the way for greater foreign investment.

Negotiations with oil companies are already under way ahead of this month's election and before legislation is passed.

Source:
http://www.independent.co.uk/news/world/middle-east/iraqs-oil-the-spoils-of-war-516400.html
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Iran Opens Oil Bourse to Sidestep U.S. Sanctions

Iran opened an exchange for crude and petrochemicals Sunday, an effort that encourages private investment in the nation’s prominent energy sector. See our previous posting Iran Kish Island Opens Oil Bourse

"The bourse provides an economic opportunity for Iranians, other countries, and foreign customers,"
The primary trade currency used by the bourse will be the euro, thereby establishing a euro-based oil marker if successful. Iran first floated the idea of trading oil in euros several years ago, but a weak dollar has breathed new life into the concept.

Iran Opens Oil Bourse to Sidestep U.S. Sanctions

January's payrolls decline underscores a troubling trend—the U.S. economy's ability to generate new jobs is fading fast

Like lava flowing from a volcano, creative destruction—the economic notion that old companies and industries have to be wiped out before new ones can be born, first popularized by economist Joseph Schumpeter—is scary but beautiful.

In the New Economy of the late 1990s, this phenomenon turned the U.S. into an amazing job-generating machine, because the rapid destruction of companies and jobs in flagging industries was outpaced by even more rapid creation of new jobs in growing sectors. From the bottom of the 1991 recession through the economy's peak in early 2001, the U.S. created 24 million jobs.

Read full article at Business Week

On the global world market, the United States is for sale - and at discount prices.

A Saudi conglomerate buys a Massachusetts plastics maker last year. A French company starts a new factory in Michigan at the end of last year, and a British company buys up a New Jersey cough syrup maker.

A German company broke ground in last November in Alabama on a $3.7 billion stainless steel plant  - all the while touting about the low cost of production in the United States and the chance to reach many millions of customers - in particular because NAFTA allows goods to flow into Mexico and Canada free of duty.

The weakened American dollar has made our companies and properties cheaper on the global market - especially for European and Canadians.

And while our economic growth is weak, other countries like Russia, Saudi Arabia, China and Germany have strong growth and one key economic factor the U.S. does not have - strong exports.  

According to research firm Thomson Financial, foreign investors poured $414 billion last year into securing stakes in American companies, factories - and other properties through private deals, and purchases of public traded stocks. 

That staggering amount accounts to more than one-fourth of all deals announced for the entire year. And during the first two weeks of 2008, foreign businesses have invested $22.6 billion in American companies.

Canada is the leading country buying stakes in American companies spending more than $65 billion in 2007, but other countries' purchases are growing rapidly. South Korea's investments were totaled to more than $10.4 billion last year; Russia invested $572 million; and India $3.3 billion.

If the dollar continues to drop, look for more foreign companies buying up U.S. assets at even more bargain prices.

While State officials and government officials in Washington are courting more and more foreign money in an effort to convence Americans that the economy is indeed growing, there are also concerns about foreign countries gaining an influence over U.S. financial systems and military related technology. But even with these concerns, vast pools of money are still being courted from China to the Middle East. It's a Catch 22 situation because all this foreign investment may be preventing the U.S. from sinking deeper into financial crisis.

Wall Street is benefiting because banks like Merrill Lynch, Citigroup and Morgan Stanley have sold stakes to government controlled funds in Asia and the Middle East to compensate for huge losses on subprime mortgages.

Some American workers are also benefiting. Five million Americans now work for foreign companies set up in the United States, and those jobs pay 30% more than similar work at domestic companies. Almost a third of these jobs are in manufacturing, which explains why many States are looking for more foreign investment.

Bottom line - The U.S. has lost more than three million manufacturing jobs since 2001, with foreign trade often taking the blame. Foreign-made goods now account for roughly one-third of all wares consumed in the United States, and now our economy is vulnerable to decisions made very far from our shores.

Source: New York Times - by Peter S. Goodman and Louise Story 

Caging - a voter suppression tactic whereby a political campaign sends mail marked “do not forward” to a targeted group of eligible voters. A more aggressive version involves sending mail to a targeted group of voters with instructions to sign and return an acknowledgment card. The campaign then creates a list of those whose mail was returned undelivered and challenges the right of those citizens to vote — on the ground that the voter does not live at the registered address.

Have you ever heard of caging? I admit I hadn't until I read this article . . . Amazing what you learn about our "democracy" during this political season - CT  

House Judiciary Committee Chairman John Conyers (D-MI) yesterday introduced the Caging Prohibition Act of 2008, which would outlaw the practice of voter caging.

Just over a decade after scientists cloned the first animal, the last major barrier to selling meat and milk from clones has fallen: The U.S. government declared this food safe Tuesday. Now, will people buy it?

Consumer anxiety about cloning is serious enough that several major food companies, including the big dairy producer Dean Foods Co. and Smithfield Foods Inc., say they aren't planning to sell products from cloned animals.

And the industry says most Americans would never eat a cloned animal for sheer economic reasons: At $10,000 to $20,000 per cloned cow — compared with $1,000 for an ordinary steer — they're too valuable.

They would be used primarily for breeding, to produce a steady supply of cattle that are particularly tender, for instance, or for prize dairy cows. It would be offspring of clones that consumers would eat.

Read full article 

Ethanol's Environmental & Economic Concerns

The push for more corn based ethanol is raising environmental and economic concerns.

A new energy bill was passed by Congress last week, but instead of looking at additional alternative fuels, the bill is more concentrated on ethanol as the alternative fuel of choice.

The ethanol boom in the Midwest by corn farmers is already having a negative impact on the environement and the economy - and this new energy bill calls for double the corn ethanol output.

One of the main environmental concerns is the use of nitrogen based fertilizers, which runs off the cornfields into the Mississippi River, and eventually reaches the Gulf of Mexico.

The nitrogen based fertilizer has already been linked to what is called a "dead zone" in the Gulf. Almost 8,000 miles along the northern and western Gulf area has been depleted of oxygen, which kills of fish and other sea life.

As for the economic impact, we already see that in the grocery store with rising food prices. Currently the price of corn is about $4, double the price of five years ago. Farmers have more incentive to grow more corn, and neglect the growing of other crops. Since their are fewer crops, this is causing a boost in the price of those products.

Cows and chickens are fed corn based feed, and since the price of feed is rising, so is the cost of meat. And this also affects the price of all processed foods which contain corn based sweetners.

The problem becomes global as we continue to use more corn to fuel cars, there is less food available to feed the rest of the world.

So, as we try to find alternative fuels to wean ourselves from the dependence on oil, we need to be mindful of the environmental, economic and global problems associated with becoming dependent on yet another fuel source. 

As we have become solely dependent on oil, we should look at more biofuel sources such as sugarcane, citrus and other plants - rather than a dependence on corn which is a much needed food product. 

Iraqi Kurds self rule their own oil-rich northern territory,and have signed at least eight oil contracts, and 20 additional contracts for oil exploration and production are expected to be signed by mid 2008.

Announcement of these new contracts bring more tension to the already tense situation as to how Iraq's oil and gas reserves should be managed. Iraq's oil minister has accused the Kurds of using military force in order to prevent Baghdad from developing oil fields in the north. The Kurds however say that there is no true to the oil minister's statement.

The new Kurdish contracts come as tension escalates in Iraq over how the country's massive oil and gas resources should be managed, with the central government - backed by the U.S. administration - pushing for more centralized control.

The Kurds enacted their own oil law last fall which controls the oil sector in the northern region - and this did not set well with the central government in Badhdad.

One of the contracts the Kurds have signed is with a Russian company (TNK BP.RS) of which BP holds a 50% interest. Iraq's oil minister calls these contracts illegal, but the Kurds say the current constitution allows them to be a federal region, and they do not need the approval of Iraq's oil minister and cabinet.  

The Kurdish government has declined to announce other contracts or release names of the oil companies, but many of the companies are smaller, rather than the big players. Once these contracts are signed, this will double the number of oil companies in the Northern Iraq, and produce approximately $10 billion in exploration and production investment. The Kurds are planning to invest some of the oil money to solve the fuel and power shortages in the region.

Chevron and ExxonMobil are trying to avoid alienating the Iraq oil minister by concentrating on lucrative oil contracts in southern Iraq, and not pursue oil contracts with the Kurds.

The larger companies are also trying to avoid the legal problems with the new hydrocarbon law, which will establish federal rules for the oil and gas industry. And any oil that will be shipped from the Kurdish region will require a permit, which raises other legal issues.

So, why are the smaller companies signing contracts with the Kurds with unknown legal issues that may be looming? Well for one, the Kurds are more willing to give foreign companies better terms than Baghdad. The Kurds maintain that their contract agreements will actually give a better rate of return. Many of the larger projects are expected to run over budget, along with schedules, and in the end may produce less profit for the country as a whole - at least that the Kurdish spin.

Currently the Kurds and the central Iraqi government are obviously at odds. Baghdad has even threatened to blacklist the companies that sign with the Kurds. So only time will tell if the Kurds win out with the smaller oil companies, or if the central government in Iraq wins out with the larger, major oil players.

Most of the oil in Iraq is concentrated in the north by the Kurds, and in the southern region controlled by the Shiites - which presents an opportunity for more violence between the Shiites and Sunni's. So it's still very much a three way fight inside Iraq for the oil, and then the U.S. is pushing Baghdad for a national reconciliation, and of course oil contracts too.   

What ever the outcome - It is about oil and profits for everyone involved.

U.S. Senator Richard Lugar of Indiana has named Carl and Lorrie Lisek of St. John as the October 2007 Lugar Energy Patriots.

The Liseks are co-coordinators of South Shore Clean Cities Inc., which is part of a nationwide network that develops public/private partnerships to promote alternative fuels and advanced vehicles.

Clean Cities is a nationwide network sponsored by the Department of Energy of approximately 90 volunteer coalitions that develop public/private partnerships to promote alternative fuels and advanced vehicles, fuel blends, fuel economy, hybrid vehicles, and idle reduction.

Read full story at Indiana Business

The Fed's interest rate cut did little to boost the U.S. dollar on the global market.

And the latest winners in the global currency game are the usual suspects - the euro just hit another high against the dollar, even though it retreated slightly by closing on Wednesday. The British pound also held its 26 year high against the greenback. And our neighbors north of the border are still making gains, and a little history - the Canadian dollar is at its highest level against the dollar since the 1800's.

But there is some good news for the greenback - it did strengthen against the Japanese yen - one of the cheapest global currency. Investors in foreign currencies are making out like bandits because they have long used the Japanese yen to purchase other higher rated currencies.

Can our government put a good spin on this as we move into the Christmas season? Are we really going to hear that the economy is strong, and things are moving along just fine? Well, don't buy that crap, cause things are not looking good for anyone holding the greenback - with the exception of those smart currency traders.

Lower interest rates are supposed to jump-start the economy and the currency, but when things are really bad - lower rates obviously weaken a currency because the investors go elsewhere looking for higher returns. Americans need to realize that our economy, along with our dollar is in such bad shape that even the so called financial experts here and abroad remain uncertain and anxious about where the U.S. economy and currency will end up in the current global economic market. But I think it is reasonable to predict that the euro will remain strong throughout this year, and into the first quarter - unless something magical happens.

Back in September the Fed cut a half point off interest rates, and now on top of that, we have a cut to 4.5%. Unlike here, the outlook for the European economy is looking upbeat. The data on the U.S. employment and manufacturing sectors are due out next week, but few have faith these numbers will really make a difference. Add to that news resports on Tuesday which stated U.S. consumer confidence had ebbed to its lowest in two years.

It's going to be a long winter folks.

US House Democrats are bracing for a battle with the White House over energy legislation. They intend to advance an energy bill that includes provisions which President Bush has threatened to veto, including those that would take billions of dollars of tax incentives away from major oil companies.

"The president has said he is going to veto" the bill the Democrats intend to send him because "it's too tough on the oil industry," Representative Edward Markey, a Massachusetts Democrat, told reporters at a press briefing on Capitol Hill. "We welcome the battle with the White House. With prices at $88/barrel, this is not the time for the president to do more for oil companies. It's time for the president to do more for the American people."

Source: Platts

With their approval record of 11%, Congress needs to keep pushing this bill, along with the health care bill for children. They need to take Gravel's advice, and keep bringing these bills to the floor. If they would have the guts to do this rather than giving in, revising or watering down important house bills, then perhaps the American people will finally force these politicians to realize who they work for, and who pays their salaries. It's so past time for the people to take back this government! - CT

There are more untapped oil and gas reserves in the Arctic than almost anywhere else in the world—and with the ice melting, the race to get to them is about to turn ugly.

By James Ridgeway -  

It's estimated that one quarter of the world's untapped oil and gas reserves lie in the Arctic. The region has become the center of an international skirmish, with Russian interests going so far as to plant an underwater flag in order to at least symbolically claim reserves presumed to exist beneath the North Pole's Lomonosov Ridge (which, they say, is connected to Russian territory by a submerged shelf).

Even the U.S. government, which for decades has resisted signing an international treaty called the U.N. Convention on the Law of the Sea—which establishes rules for national sovereignty over portions of the earth's oceans and seas, along with the resources beneath them—suddenly supports ratifying the treaty.

Read the full article

Central geru banker Alan Greenspan is on the media circuit marketing his new book, "The Age of Turbulence". Ahh, when Greenspan talks everyone listens. So what's the geru have to say?

"I'm saddened that it is politically inconvenient to acknowledge what everyone knows -- the Iraq war is largely about oil." Republicans in Congress, he writes, "swapped principle for power. They ended up with neither." Well nothing new there - CT

Greenspan, a lifelong Republican, writes that he advised the White House to veto some bills to curb "out-of-control" spending while the Republicans controlled Congress. And he also says that he had no idea that the subprime mortgage sector was in such bad shape. Tell us something we don't know! CT

While the media has been all over these statements, here's the REAL news . . . AP News - Germany

Former U.S. Federal Reserve chairman Alan Greenspan said it is possible that the euro could replace the U.S. dollar as the reserve currency of choice. Now THAT's news - Why didn't he talk about that in his 60 Minutes interview Sunday? - CT

According to an advance copy of an interview to be published in Thursday's edition of the German magazine Stern, Greenspan said that the dollar is still slightly ahead in its use as a reserve currency, but added that "it doesn't have all that much of an advantage" anymore.

The euro has been soaring against the U.S. currency in recent weeks, hitting all-time high of US$1.3927 last week as the dollar has fallen on turbulent market conditions stemming from the ongoing U.S. subprime crisis. The Fed meets this week and is expected to lower its benchmark interest rate from the current 5.25%.   Read full article


Read All of Thomko Previous Postings on the Euro Dollar vs. U.S. Dollar

Now that the government is going to approve blowing off the tops of mountains - it's time for a message from Dr. Thinks A Little who will present "Innovations in Energy"