In order to find the "untapped" oil, legislation passed in the House and Senate during the week of 22 July supplied $14.5 billion worth of subsidies for energy exploration. The provision too extends daylight saving time in the United States.
Wall Street analysts in July 2005 are breathing a sigh of relief that $60 per barrel prices (and more) are no longer shocking consumers, which analysts translate to mean another $12 or $15 per barrel spike may be acceptable in time without a negative impact on Wall Street. Increased profits for energy companies, tied to rising oil prices as evident in July, is good for investors as well.
Europe however has been hit hard by rising oil prices in 2005. As oil is traded in U.S. dollars, the rate in which the Euro advanced against the dollar in 2004 actually reduced gasoline prices across Europe. But now that the dollar has gained 10 percent against the Euro, oil price hikes have negatively impacted consumer spending and economic growth.
Sweden's University of Uppsala says oil production levels will peak in 2015, or 20 years earlier than originally thought. Less pessimistic observations by the Intergovernmental Panel on Climate Change (IPCC) resulted in part to the Kyoto Protocol, an agreement obliging nations to cut CO2 emissions and reduce dependence upon oil. The United States opposed the measures and did not sign. Uppsala predicts oil reserves stand about 3.5 trillion barrels, and IPCC gives a much wider range of between 5 trillion and 18 trillion barrels.
But the U.S. Department of Energy does not agree with an absolute end to oil production anytime soon. Production forecasts for non-OPEC nations, essentially "Third World" countries, have yet to be tapped or resourced, and thus forecasts continue to be revised higher as more exploration comes to pass, according to the energy department.
Trillions of exploration dollars and decades of research are still required to understand the world's natural supply of oil said Robert Hirsch, for a study at the U.S. Department of Energy. In March 2005, Hirsch wrote, "The challenges and uncertainties need to be much better understood. Technologies exist to mitigate the problem. Timely, aggressive risk management will be essential."
The supply is still there, says one energy consulting firm. It is increasingly difficult to access and deliver, but investors are jumping into oil futures market for big returns. "We're not running out of oil in the ground," says James Burkhard, director of market research for consulting firm Cambridge Energy Research Associates. "But above ground political, environmental, and economic trends will shape the future of oil prices," Burkhard told the Associated Press.
With an estimated 112 billion barrels of oil available from Iraq, it alone could supply the world demand at present consumption rate for five years; however, consumption rates in 2005 do not take into account a dramatic rise in demand from China. It is a given that consumption in the United States, the world's largest oil consumer, is in check, and will rise within controllable rates. China and India however are wildcards. Conservative estimates put increased demand for China and India at double rates in the next 20 years, surpassing demand in the United States.
In the week leading up to 30 July, oil traded around $60 per barrel and closed at $60.57. Higher prices for trading translates into more exploration funds as well, say analysts; however, new exploration is going to be tied to riskier regions of the world.
The industry has suffered from lack of investment for two decades, said Simmons & Co., and energy consulting company. The firm predicts global demand to reach 86 million barrels per day by the end of 2005, which exceeds supply by 2 million. It is therefore urgent for energy companies to re-invest in exploration, Simmons says.
ExxonMobil Corp., the largest publicly traded oil producer, reported second-quarter net income rose 32 percent to $7.64 billion due in part to expanding economies of Asia and a rise in North America's consumption.
ConocoPhillips reported a 51 percent spike in second-quarter profit to $3.1 billion; Kerr-McGee's earnings tripled to $371 million; and Amerada Hess' profits rose 3.8 percent to $299 million.
Lowering gasoline prices or reducing dependence upon imported oil (60 percent of national consumption) is not part of legislation passed by the House and Senate in the week of 22 July. President George W Bush intends to sign the bill. Tax breaks, subsidies, and loan guarantees provided include a $14.5 billion provision for oil and gas drilling and to build new nuclear power reactors and wind turbines.
The new bill expands federal authority for citing liquefied natural gas import terminals and electric transmission lines on the national power grid.
Despite 66 percent of the public saying that switching clocks twice a year by 1 hour in April and again in October is a rule they would prefer to eliminate; the new energy bill expands daylight saving time by 7 weeks. Spring "forward" will be 3 weeks earlier and extend into Thanksgiving (November) weekend, beginning in 2007.
Provisions of the new energy bill include consumer tax credits for hybrid-electric cars and tax refunds for energy conservation improvements in the home. The legislation calls for doubling ethanol use as an additive to gasoline by 7.5 billion gallons before year 2012. Refiners no longer need to include oxygenate in gasoline.
Sen. John Kerry (D-MA) called the bill "short of what is needed" to address "climate change" and did not encourage increasing fuel efficiency of automobiles.
President George W Bush's main goal is to open the Arctic National Wildlife Refuge for oil drilling in Alaska, but it was not part of the bill. Republicans said they would take up the arctic drilling proposal in late-2005.
Republicans dropped provisions in the bill eliminate liability to makers of gasoline additive MTBE, a chemical known to contaminate underground water.
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