Where are we going in 2012?
The current outlook
US and European Union economic crisis caused significant decrease in liquid fuel consumption resulting in refinery closures, and reduction in shipping capacity due to weakened trade.
Forecast for 2012: Prices will stay mostly flat with some oscillations around the 2011 mean because of political uncertainty:
in US, with elections in November 2012 and uncertain Democratic or Republican outcome with radically different energy agendas, and the same with the French presidential elections in April, everybody will wait for the results, and nothing significant will occur in 2012, short of a new war in the Middle East.
For marine bunkers, the situation is slightly different:
In 2012, the weak trade forced a reduction in container lines shipping capacity, which results in a temporary softening of prices.
However, any improvement in the economic climate and increased trade, probably starting in early 2013 will lead to a significant (huge?) in crease in the marine bunker prices. Why? Because with fewer existing refineries, increase in refinery capacity for more profitable deep conversion (resid destruction), and no interest whatsover in desulfurizing residue, there will be a shortage of residue which will drive up the bunker prices.
In addition, the requirements for 1%S for ECA's and 0.1%S for EU/NA port berthing will put pressure on prices and survival of shipowners because of approximately US$300/ton price differentials, which translates into millions more in additional fuel expenses...
On the positive side, the big news is hydraulic fracturing (or "fracking") of shale gas and oil formations, essentially opening up an unimaginable, immense quantities of hydrocarbons just about anywhere in the world. In the case of natural gas-essentially methane-can be used directly in transportation, or indirectly via Gas To Liquids (GTL) conversion, a la Fischer-Tropsch into gasoline and diesel fuel. This has the potential to cut in half the price of gasoline and diesel, but for the politicians...
What is stopping us from "fracking"? The same corrupt and inept politicians bickering and fighting for their own gain at the expense of the population. The so-called Middle Class is an "endangered species" in US and the EU Mediterranean countries...
Elections! In US, France, etc....so politicians are worried about re-elections...and will be more flexible towards the electorate...and hopefully result in less ridiculous regulations.
On the negative side, the economic depression in US and EU, coupled with incompetent and corrupt political leadership resulted in decreased consumption of transportation fuels, affecting all of us, refiners, blenders, traders, and consumers.
In the US and EU, the consumption between 2008-2011 decreased by 5 to 7%, and a number of refineries closed because of negative profit margins. In addition, US and EU regulators, ignoring the economic crisis and high unemployment, are going crazy with new more stringent environmental rules which will make it very difficult and expensive to stay in business.
If you think that the BRIC countries or the Middle East are immune to all of this, they are not , because a significant part of their output goes to the "relatively" economically depressed countries (US, EU), which currently are buying less.
Other Trends
Renewables are taking a "hit". After all the propaganda and untold billions of dollars spent, they are still a minuscule part, and besides high costs and not so low pollution levels, enthusiasm is starting to wane. In the US, we just missed the RFS2 target, and it will get worse in the next 2 years when we hit the Ethanol "Blend Wall"!..
Same with electric cars, solar power, and windmills...See the 2011 US National Research Council report on renewables....A good picture of the energy flows in the US is the study by Lawrence Livermore Lab (energy research as backup for their nuclear weapons work!): 4 quads biomass vs. 98 total energy consumption!
To get a copy of the report, click below.
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