Comments by John Miller Subscribe

On An Ill-Conceived Tax Idea

Geoffrey, as you are well aware President Obama continuously claims to support the Middle Working Class, but his actions are often inconsistent with his political speeches.  You know that this $10 per barrel tax is just another form of a constantly proposed new ‘carbon tax’, which will ultimately be paid for by average Consumers; i.e. primarily the Middle Class.  Yes, Upstream U.S. Oil Producers that aren’t encouraged to export their crude oil to take advantage of this apparent proposed loophole, will pass the increased cost on to Downstream U.S. Refiners, who will be forced to pass the increased tax cost to Retailers-and-Consumers.

With this pattern of possibly attempting to hide new taxes from Consumers, one can sometimes perceive we are being turned into another European Union Country; that normally implements very large Value Added taxes (VAT’s) on most commodities beginning with petroleum motor fuels.  VAT’s politically are a safer form of Consumer taxes since they aren’t as transparent as U.S. State & Federal motor fuels taxes, which are posted on every fuel pump in each U.S. service station.  Of course the biggest difference currently between EU and the U.S. is that European motor fuels (diesel & gasoline) VAT’s have resulted in EU Consumers paying on average twice the retail price per unit volume of fuel than what U.S. Consumers have paid for decades.

The likelihood of Congress passing a $10 per barrel crude oil carbon tax or VAT is probably zero.  Do you think President Obama will try to implement the tax through another Executive Action?

February 9, 2016    View Comment    

On Will the U.S. Comply with President Obama's Paris COP21 INDC Pledge?

Mark, you are probably correct when it comes to the developing COP21 agreement.  It may have some level of unanimous political support by the Paris negotiation attendees, but its legally binding status will be highly questionable.

November 22, 2015    View Comment    

On Will the U.S. Comply with President Obama's Paris COP21 INDC Pledge?

Mark, in the case of the Iranian Nuclear Non-proliferation Treaty, the UN Inspector’s performance has been highly questionable-to-ineffective, agreed.  In the case of many international ‘Trade Treaties’ and the follow-up performance & verification, this (non-UN related) performance has been historically much better.  The same has been generally true of most international financial markets operated and managed by major Developed Countries’ Banking systems.  But, agreed, the UN’s and the UNFCCC’s performance has not been very good or reliable.  How should or is it feasible that these international UN organizations can be trusted to ever do their jobs effectively?  This being the case, the probability that the pending Paris COP21 and future negotiations will ever accomplish their promised commitments is probably very small.  The next major COP21 negotiation issue becomes the funding of Developing Countries’ abilities to directionally help them to control/reduce their future GHG emissions.  This issue and the political priority of persuading/requiring Developed Countries to provide substantial $Billions in future (free) funding will likely become a very continuous COP21 negotiation topic within a couple weeks.

November 22, 2015    View Comment    

On Will the U.S. Comply with President Obama's Paris COP21 INDC Pledge?

Mark, let’s hope someday the UNFCCC and participating Countries take actions to ensure credible and verifiable carbon credit related actions actually reduce future GHG emissions as advertised.  This probably means having a professional/non-political organization auditing future flexible mechanisms and associated carbon credits in order to guarantee that world GHG emissions projects and regulatory actions are real.  Even in the U.S. the EPA has done a substandard job of verifying some GHG emission regulations such as advanced sugar cane biofuels (ethanol).  In this case the EPA has unfortunately over-predicted actual full lifecycle GHG emissions reductions compared to the displaced petroleum gasoline’s consumption.  This has resulted in U.S. Motor Fuels Marketers being forced to overpay for advanced biofuels (Renewable Fuel Standard (RFS2) volumes) credits or ‘renewable identification number’ (RINs) certificates that are not fully incompliance with the reduced GHG emissions that the U.S. RFS2 is supposed to accomplish.

November 21, 2015    View Comment    

On Will the U.S. Comply with President Obama's Paris COP21 INDC Pledge?

Another problem with China and other Developing Countries inaccurately reporting their past and future fossil fuels consumption and associated carbon emissions is that such actions will very effectively invalidate UNFCCC’s Clean Development Mechanisms (CDM) programs/actions.  The CDM is one of the Flexible Mechanisms approved under the Kyoto Protocol which enabled the generation of ‘Certified Emission Reduction’ units or carbon credits to be generated, traded, and purchased/sold to enable Developed Counties (primarily the EU) to meet their GHG emission reduction commitment targets.  Many of these carbon credits were created by Developed Country’s funding projects such as (in theory) more efficient China coal power plants, which were supposed to ‘reduce the level of future carbon emission increases’.  Under reporting or not reporting actual coal consumption and associated GHG emissions such as China has apparently done in the past and could do in the future makes these past UNFCCC ‘certified’ carbon credits worthless and inhibits the World’s ability to actually reduce total global future GHG emissions.

November 20, 2015    View Comment    

On Could Congress's Lifting the Crude Oil Export Ban Threaten U.S. Energy Security?

Mark, your statement that increased “U.S. exports would drive more U.S. production and displace production and exports overseas” has proven to not be representative of current markets’ behaviors.  Referring back to my Figure 1 data, U.S. ‘net’ imports have declined by over 7 million barrels per day or 60% since 2007.  This drop in U.S. imports has increased world supplies by equivalent volumes over the past seven years.  Yes, some foreign producers have had to cut their production, including voluntary reductions, peaking-reduced domestic production (Mexico), and the result of U.S. & EU sanctions (Iran and Russia).  However, instead of balancing world markets supply-demand by reducing Foreign export volumes as experienced historically in order to maintain relatively high crude oil market prices, major OPEC countries such as Saudi Arabia decided not to cut production and instead to maintain their export volumes and market shares.  This resulted in the 50%+ reduction in world crude oil market prices last year and into this year.  Refer to an article and analysis I published last year.  This action has (temporarily?) stopped the growth in U.S. domestic production (i.e. made it incrementally uneconomic) and will likely lead to significant reductions in the near future.  This of course reduces the amount of U.S. domestic production available for any increased future exports if Congress were to lift the ban or the Administration decides to approve further exports.

October 6, 2015    View Comment    

On Could Congress's Lifting the Crude Oil Export Ban Threaten U.S. Energy Security?

Bob, agreed that many studies are influenced by special interests sometimes, but they are also influenced by major assumptions and the studies’ timing.  The non-profits you listed above should be more neutral than the generally for-profit API & IHS.  The problem with the API/IHS is that these organizations are dominated by ‘Upstream’ Oil Producers/interests.  A more balanced GAO report would have also included input from a national ‘Downstream’ Oil Refining Organization such as the AFPM.  The AFPM recently completed an Oil Refining survey and analysis, and reported many of the Downstream Industries’ concerns and impacts of lifting the export ban.  Unlike the other studies that assume that the recent boom in Shale Oil has created a national light, sweet oversupplied crude oil domestic market, the AFPM covers some of the changes the Oil Refining sector has made in order to increase their facilities’ capabilities to process increasing volumes of domestic production.

Another problem with the GAO study is ‘timing’.  The GAO report and referenced studies were developed early 2014 or before the full impacts of the recent huge drop in world crude oil market prices fully developed.  As I stated above EIA future projections of U.S. domestic oil production has changed from a significant growth up to 2020 (re. the AEO 2015 report) to a projected decline beginning next year (re. the STEO report).  This difference in actual and future domestic crude oil production forecasts makes the GAO report’s referenced non-/for-profit studies and conclusions directionally obsolete.  These changes in future U.S. domestic production and exports of lifting the ban and the associated impacts on world carbon emissions is possibly a bit different from the 3 to 22 MMT/yr. projections you reference.

Interestingly, the GAO report also focuses on the SPR and recommends further study to evaluate the current SPR inventory capacity and logistics; similar to my above analysis and recommendations.

October 4, 2015    View Comment    

On Could Congress's Lifting the Crude Oil Export Ban Threaten U.S. Energy Security?

Bob, there is no question that cheaper energy encourages increased demand.  However, in the case of lifting the U.S. crude oil export ban, unless the U.S. Oil Refining sector’s production and exports decline substantially the impact on total world supply-demand balances will be very small-to-insignificant.  As I wrote above, this conclusion is based on the reasonable assumption that increased U.S. crude oil exports will be offset with increased U.S. crude oil imports for a net change in world supply-demand balances of zero; which will have no impact on world market supply, demand or prices.  The only way that your referenced government and other market analysts can reasonably come to the conclusion that increased U.S. crude oil exports will increase the current world’s oversupplied market, would be if the U.S. Oil Refining sector reduced their crude oil imports and petroleum oil/products exports and/or U.S. domestic production increased substantially.  This of course assumes a very significant decline in the U.S. Oil Refining sector utilization and contributions to the U.S. economy, and, that the DOE/EIA latest STEO prediction of declining U.S. domestic production (based on current depressed crude oil prcies of $40-$50/Bbl.) is not reasonably accurate.

My previous analysis shows that the greatest threat to increasing the current oversupplied world market is the Iranian Nuclear Non-Proliferation Treaty, which will rapidly flood the world crude oil market supplies with at least an additional 700,000 barrels per day.  This level is a magnitude greater increase than what the U.S. could feasibly deliver into the world market for numerous years, if ever.

October 4, 2015    View Comment    

On Could Congress's Lifting the Crude Oil Export Ban Threaten U.S. Energy Security?

JE, yes the White House recently stated they oppose Congress’s considering passing a new bill to lift the 40-year old crude oil export ban.  The Administration’s Commerce Department does apparently have the authority further lift the export ban following their latest approval of trading crude oil with Mexico.  As far as how much U.S. Energy Security is President Obama’s priority, recent Administration actions are mixed.

In 2011, the President authorized release of 30 million barrels of SPR inventory in coordination with other countries to address concerns of instabilities in Libya and the Middle East, and rapidly rising world crude oil market prices.  While to effectiveness of this SPR release on world oil prices is debatable, the President has yet to restore the 30 MBbl. SPR inventory since its release.

 

Another potential Federal Government threat to U.S. Energy Security is a proposal made in Congress to fund the Highway Trust Fund with revenues from selling SPR inventory.  Such an action is very inconsistent with maintaining current levels of Energy Security.

October 3, 2015    View Comment    

On Could Congress's Lifting the Crude Oil Export Ban Threaten U.S. Energy Security?

Bob, lifting the crude oil export ban is only potentially a good idea if it is fully managed to control the level of exports and mitigate the potential Energy Security and economic impacts.  As far as its environmental impacts, yes increasing U.S. crude oil exports and increasing imports by equivalent volumes will directionally increase world carbon emissions due to the increased petroleum motor fuels consumed in marine shipments vs. within existing U.S. Lower-48 States oil transportation infrastructures.

As far as ‘environmental security’ changes, existing U.S. pipeline infrastructures are historically less risky compared to marine tankers.  If your point is that increased U.S. oil exports will somehow influence and further reduce world crude and petroleum oil market prices, which will encourage increased world consumption, I don’t believe the impact will be very significant.

If you point is that somehow restraining U.S. exports will influence current petroleum oil consumption, I don’t believe this impact will be significant either.  Environmental security of increase or decreased petroleum (world or U.S.) consumptions depends on other factors such as increased consumption efficiency (CAFE standards for example in the U.S.), fuels switching (oil-to-natural gas, petroleum motor fuels-to-EV’s, etc.).  Replacing petroleum energy supply-consumption with alternative lower carbon/renewable energy and increased efficiency will be the primary drivers for future increased ‘environment security’; based on this source of carbon GHG emissions.

October 3, 2015    View Comment    

On Why Are California’s Gasoline Prices So High?

Severin, other factors that affect alternative CARB motor fuels supply sources and availability include the  time of year (summer lower RVP/inventories vs. higher winter RVP/inventory management; particularly in the spring prior to switching from winter to summer RVP spec’s), inventory levels (pre-building inventory prior to planned maintenance shutdowns vs. unplanned outages or reducing inventory prior to seasonal RVP changes), limited Gulf Coast-to-West Coast petroleum fuel tankers availability (Jones Act constraints), and the in-state disincentives of modifying/expanding refining process units, which normally subject the Refinery-Owners to substantially onerous added environmental controls upgrade costs (that aren’t required until a modification is made to existing Refinery processing unit(s)).  With growing CA fixed unit/facilities carbon emission regulations that will further increase Refiner’s future capital and operating costs, CA Refiners have little or no motivation to better balance in-state supply-demand, and are economically punished for making upgrades to better balance in-state supply-demand.

Since the energy shortages of the 1970’s (beginning with the 1973 Arab OPEC oil embargo), Refiners and Oil Companies have been accused and investigated of price collusion and market manipulations numerous times.  For decades numerous State and Federal Agencies have invested the rapid rise in market prices following a major supply outage and market shortage (ignoring market fundamentals 101 of course), and guess how many times the Refining and Marketing Oil Companies have been found guilty of manipulating any market prices?  Zero!

September 29, 2015    View Comment    

On Will the Iranian Nuclear Non-Proliferation Treaty become a Threat to U.S. Energy Security?

Lewis, per your suggestion, some edits have been made.  Thanks for your input.

August 29, 2015    View Comment