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    Revisiting The Strategic Petroleum Reserve (SPR)

    The prospect for conflict in the Middle East, pending collapse of production in Venezuela, and turmoil in North Africa all remind us the world oil market still faces substantial threats of disruption.  The North American petroleum renaissance, which has lifted U.S. oil production to the point where net exports are rapidly moving into positive territory, has also opened opportunities for  Congress to sell off a substantial volume of strategic stocks to fund a range of domestic programs. EPRINC has argued that while some adjustments to the reserve size may be justified, on balance, it still plays a critical role in the security of the United States and decisions on the size of the SPR should take the long view. The SPR remains an important strategic asset.

    Given the current geopolitical environment, we are highlighting some previous EPRINC papers published on this topic.  In addition, our friend and colleague, Dr. Carmine Difiglio, has shared with us his insightful analysis of the value of strategic stocks in sustaining economic growth. Professor Difiglio, formerly with the U.S. Department of Energy, is Director of the Istanbul International Center for Energy and Climate (IICEC) at Sabanci Univerity.

    For links to the reports on the SPR, click here

    John Shages, former Deputy Assistant Secretary for Strategic Reserves, writes on Policy Challenges in Managing the Nation’s Strategic Oil Stock  (July 2014).

    For access to the report, click here

    Lucian Pugliaresi of EPRINC and Fred Beach of UT, Austin debate the value of the SPR in the Wall Street  Journal (November 2015).

    For access to the report, click here

    Larry Goldstein and Lucian Pugliaresi of EPRINC comment on Congress’s initiative  to fund health care by reducing the size of the SPR  in Politico (July 2015)

    For access to the report, click here

    Carmine Difiglio’s extensive analysis of the negative consequences of world economic growth from oil supply disruptions. Oil, economic growth and strategic petroleum stocks, Energy Strategy Reviews (2014).

    For access to the report, click here

    Michael Lynch, EPRINC Distinguished Fellow and President of Strategic Energy and Economic Research, Inc. presents a retrospective on the 1979 oil disruption and the role uncertainty and hoarding can play is amplifying the cost of an oil supply disruption. The article was recently published in Forbes and can be found here

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    EPRINC Releases Report on Mexico’s Petroleum Future

    The energy reform measures implemented in Mexico over the last few years, also known as the New Energy Model, offer considerable potential to lift oil and gas production, increase employment and deliver technological advances, and crucially additional revenues for federal, state, and local governments. These reforms, if fully implemented, will also enhance long-term energy security for Mexico and North America. Energy reform in Mexico is contributing to the likelihood that North America will become a sustained net exporter to world markets in both petroleum (crude oil and refined products) and natural gas in the coming years. In a just-released EPRINC assessment, Michael Lynch, EPRINC Distinguished Fellow, presents his findings on the economic value to Mexico of the energy reforms in the petroleum sector. A link to the full report can be found here. A Spanish translation of the report will be posted on the EPRINC’s website in early January 2019.

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    The Permian Basin Produces Gas, Too

    This report by EPRINC Non-Resident Fellow Trisha Curtis is part of the Energy Policy Research Foundation’s multi-year research program evaluating the scale and scope of the North American petroleum renaissance. As U.S. producers expand production to meet domestic requirements and the rapidly growing market for pipeline exports and Liquefied Natural Gas (LNG), it is essential that policy makers have a full understanding of the sustainability of the U.S. natural gas production platform. This report addresses the range of challenges and opportunities for expanding U.S. production of natural gas for both domestic uses and export markets through an in depth look at North America’s most prolific oil and gas basin, the Permian. The report can be found here.

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    Hedging Haircuts and Big Basis Moves

    EPRINC trustee Ben Montalbano and non-Resident Fellow Trisha Curtis, both co-founders of PetroNerds, have just completed an assessment of oil hedging positions of 25 major oil producers in the Permian Basin.  Hedging is a valuable tool for distributing risk and allowing producers to protect revenue streams from price volatility. Hedges protect producers revenues when oil prices fall, but also limit gains when prices rise.  In addition, when oil prices rise it may limit the supply response if a large volume of unconventional production is hedged. Ben and Trisha’s assessment shows the percent of total production that producers hedge varies, but heading into Q1of 2018 producers hedged about 20% of total output. A copy of their assessment can be found here.

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  • Shale Drill

    Advances in Well Completion Design Sustain Advances in Shale Oil Productivity

    EPRINC Non-Resident Fellow Trisha Curtis and Trustee Ben Montalbano build on some of their previous work concerning US shale productivity in their recent paper entitled “Completion Design and the Impact on US Shale Well Productivity.”They identify the factors contributing to sustained productivity growth in several US shale plays and examine some of the economic constraints facing well efficiency. As the nation adjusts to relatively stable and depressed oil and gas prices, Trisha and Ben’s paper outlines the current industry environment and highlights future challenges to increasing shale productivity. Their paper can be downloaded by clicking here.

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Lucian Pugliaresi and Max Pyziur Write Op-Ed on the RFS Program and Its Effect on Gasoline Prices

EPRINC’s Lucian Pugliaresi and Max Pyziur have crafted an op-ed that was published in InsideSources in response to a study published by the Renewable Fuels Association that was written by Philip Verleger which stated that the Renewable Fuel Standard (RFS) has lowered U.S. gasoline prices. According to EPRINC’s analysis of the RFS, the problem with U.S. fuels policy is not ethanol, but the RFS mandate. And that is what drives the cost of transportation fuels up, not down as Philip Verleger contends.

The op-ed can be found on InsideSource’s website here and the unabridged version can be found in PDF format here.

Revisiting The Strategic Petroleum Reserve (SPR)

The prospect for conflict in the Middle East, pending collapse of production in Venezuela, and turmoil in North Africa all remind us the world oil market still faces substantial threats of disruption.  The North American petroleum renaissance, which has lifted U.S. oil production to the point where net exports are rapidly moving into positive territory, has also opened opportunities for  Congress to sell off a substantial volume of strategic stocks to fund a range of domestic programs. EPRINC has argued that while some adjustments to the reserve size may be justified, on balance, it still plays a critical role in the security of the United States and decisions on the size of the SPR should take the long view. The SPR remains an important strategic asset.

Given the current geopolitical environment, we are highlighting some previous EPRINC papers published on this topic.  In addition, our friend and colleague, Dr. Carmine Difiglio, has shared with us his insightful analysis of the value of strategic stocks in sustaining economic growth. Professor Difiglio, formerly with the U.S. Department of Energy, is Director of the Istanbul International Center for Energy and Climate (IICEC) at Sabanci Univerity.

For links to the reports on the SPR, click here

John Shages, former Deputy Assistant Secretary for Strategic Reserves, writes on Policy Challenges in Managing the Nation’s Strategic Oil Stock  (July 2014).

For access to the report, click here

Lucian Pugliaresi of EPRINC and Fred Beach of UT, Austin debate the value of the SPR in the Wall Street  Journal (November 2015).

For access to the report, click here

Larry Goldstein and Lucian Pugliaresi of EPRINC comment on Congress’s initiative  to fund health care by reducing the size of the SPR  in Politico (July 2015)

For access to the report, click here

Carmine Difiglio’s extensive analysis of the negative consequences of world economic growth from oil supply disruptions. Oil, economic growth and strategic petroleum stocks, Energy Strategy Reviews (2014).

For access to the report, click here

Michael Lynch, EPRINC Distinguished Fellow and President of Strategic Energy and Economic Research, Inc. presents a retrospective on the 1979 oil disruption and the role uncertainty and hoarding can play is amplifying the cost of an oil supply disruption. The article was recently published in Forbes and can be found here

 

 

 

EPRINC Welcomes Rafael Sandrea as a Distinguished Fellow

EPRINC is excited to announce the addition of Rafael Sandrea as a Distinguished Fellow. Rafael is President of IPC Petroleum Consultants, Inc., a Tulsa based international petroleum consulting firm which specializes in oil and gas reserves appraisals and risk analysis for international upstream petroleum investments.  He is very active giving Webinars, Masterclasses online, and speaking on the themes of reserves, IOR/EOR, shale oil and gas assessment, and global oil & gas supply, around the world. More of Rafael’s background can be found here.

Emily Medina Crafts Mexico Gasoline and Diesel Market Overview

EPRINC Non-Resident Fellow Emily Medina has crafted a primer on the Mexican Gasoline and Diesel Market as part of the EPRINC Mexico Initiative.

The U.S.-Mexico-Canada Agreement (USMCA) contributes to both the strength and sustainability of the North American petroleum renaissance. North American cross-border energy trade is extensive and the movement of crude oil, refined petroleum products, and natural gas contributes to the expanding national economies in the USMCA.

An essential element to ensure efficient energy production throughout the production platform is allowing energy flows to move unimpeded. The expanding trade in petroleum products, especially gasoline and diesel, is a case in point. This trade has been beneficial to the U.S. refining industry by allowing processing facilities to operate efficiently at high volume. Mexican consumers benefit from product exports from the U.S. (and Canada) by gaining access to secure and competitively priced gasoline and diesel fuel. Some Mexican officials have raised energy security concerns arguing that Mexico is too dependent on U.S. supplies and that domestic production should be encouraged or subsidized as a substitute for imports.

Addressing energy security concerns is a complicated issue and will be the subject of a more in- depth treatment of the Mexican petroleum products market in a subsequent report. This policy brief presents an overview of the current gasoline and diesel market in Mexico.

Click here to access the paper.

A Report on Resource Pessimism by EPRINC Distinguished Fellow Michael Lynch

EPRINC Distinguished Fellow Michael Lynch has penned a report on resource pessimism. A summary of the report is as follows:

The modern era has seen two major threads of neo-Malthusian thought: fears that agriculture cannot sustain the future population and concerns about possible scarcity of nonrenewable resources like minerals and energy. This has caused various governments to undertake population control policies, crash programs to develop substitute fuels, and even suggestions that exploitation of asteroids for their mineral resources might soon be necessary. The proposed Green New Deal was seen to be motivated in part by a concern for the finite nature of resources.

But the various apocalyptic predictions based on these theories have virtually all failed, although proponents insist that only their timing is in error, not the concept. This report finds that most neo-Malthusian arguments are based on an incorrect understanding of resource estimates, including the nature and terminology, leading to the use of woefully conservative figures which then generate the apocalyptic warnings. Combined with the assumption that, since technological advances can’t be predicted, technological progress should not be assumed, arguments that consumption must be curtailed and even that economic growth should cease are based on fallacious notions.

This paper argues that neo-Malthusians suffer from an underspecified model, not just bad input parameters but omitted variables that guarantee the pessimistic, and invalid, predictions.

Correcting these errors results in a much better understanding of resources and a more optimistic outlook for the global economy and hopefully less economic waste.

The report can be found here.

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