Archive for April, 2009
Gazprom, Is It Time to Hit the Reset Button?
This EPRINC report, “Gazprom, Is It Time to Hit the Reset Button?,” (Download PDF) examines natural gas pricing and transportation costs in the European market. The article appears in a slightly abridged format in the March 9, 2009 edition of the Oil and Gas Journal.
Diversification away from Russian gas has been a major theme, not necessarily faithfully implemented, of European energy security policy over the last 20 years. The view that “excessive” dependence on Russian gas would place Europe in a vulnerable position has been a central theme in U.S. foreign policy which has encouraged the Europeans to seek alternatives to Russian gas, through greater production from the North Sea, imports of LNG, alternative fuels, and direct pipeline links to the gas reserves in Central Asia. The Russian-Ukrainian “gas” war that took place for 20 days in January 2009 and the disruption in December 2005 have reinforced European and American concerns regarding the reliability of Gazprom as a major gas supplier. The European Union’s foreign policy chief, Javier Solana, stated that Europe had paid a heavy price from the disruption and would review its energy relations with Russia and Ukraine as a result of the interruption in gas supplies and that efforts to further diversify energy sources would move to the top of the agenda.
It is EPRINC’s assessment that the current environment of rising transit risks for European gas Read More >>>
Will Ethanol Increase the Price of Transportation Fuels?
This EPRINC report (Download PDF) evaluates the consequences to the U.S. transportation fuel sector of increasing the volume of ethanol in the U.S. gasoline pool above current volumes - now approaching 10 percent of the fuel supply. Additional volumetric increases in ethanol use are mandated by federal law. As federal mandates take the U.S. gasoline pool above 10 percent ethanol blend, and ultimately to higher levels through E-85, the value of additional ethanol supplies is likely to decline dramatically. This cost can only be recovered through higher prices for E-10 and distillate, and depending on a wide range of factors, the mandated volumes could easily drive gasoline and distillate prices up by 10-25 cents/gallon over the next 2-3 years as compared to a scenario without the fuel mandates.
Ethanol has contributed to the U.S. fuel supply and reduced net petroleum imports. If wholesale gasoline prices had remained above $3.00/gallon and were accompanied by rising demand for gasoline, the ethanol volumes mandated by Congress could have been accommodated into the market at a relatively modest cost. However, we are now entering a period of low (or even negative) demand growth for transportation fuels, and more importantly, wholesale gasoline prices remain well below $1.50/gallon. In this market environment, accommodating increasing volumes of ethanol into the gasoline pool will likely require substantial increases in the price of E-10 and diesel fuels as refiners and marketers face the higher costs of meeting the Read More >>>
