There has been a birage of news recently on global warming. We are hearing far too often that the “science” is “settled”, and that it is mankind’s contribution to the natural CO2 in the atmosphere that has been the principal cause of an increasing “Greenhouse Effect”, which is the root “cause” of global warming. It is my contention that the science is not settled and that it will be proven that the alarmists are wrong and the entire issue was politcally motivated. I would like to mention three recent occurrences that appeared in some of the media that are very unsettling. The first occurred in June with the following story:

This story was published by Richard Morrison of the Competitive Enerprise Institute (CEI) on June 26, 2009. The article said the following:  The Competitive Enterprise Institute is today making public an internal study on climate science which was suppressed by the Environmental Protection Agency. Internal EPA email messages, released by CEI earlier in the week, indicate that the report was kept under wraps and its author silenced because of pressure to support the Administration’s agenda of regulating carbon dioxide. The report finds that the EPA, by adopting the United Nations’ 2007 “Fourth Assessment” report, is relying on outdated research and is ignoring major new developments. Those developments include a continued decline in global temperatures, a new consensus that future hurricanes will not be more frequent or intense, and new findings that water vapor will moderate, rather than exacerbate, temperature. New data also indicate that ocean cycles are probably the most important single factor in explaining temperature fluctuations, though solar cycles may play a role as well, and that reliable satellite data undercut the likelihood of endangerment from greenhouse gases. All of this demonstrates EPA should independently analyze the science, rather than just adopt the conclusions of outside organizations. The released report is a draft version, prepared under EPA’s unusually short internal review schedule, and thus may contain inaccuracies which were corrected in the final report. “While we hoped that EPA would release the final report, we’re tired of waiting for this agency to become transparent, even though its Administrator has been talking transparency since she took office. So we are releasing a draft version of the report ourselves, today,” said CEI General Counsel Sam Kazman.

The second news item which has been ignored by the mainstream media was the hacked e-mail messages from the University of East Anglia’s Climate Research Unit in Norwich England. The following story by Noel Sheppard is alarming:

E-mail messages between high-ranking scientists appear to indicate a conspiracy by some of the world’s leading global warming alarmists to falsify temperature data in order to exaggerate global averages. Those involved allegedly include: James Hansen, Director of NASA’s Goddard Institute for Space Studies; Michael Mann, famous for Mann’s “Hockey Stick”; Gavin Schmidt, NASA climate modeler, and; Stephen Schneider, Stanford professor and Al Gore confidant. A statement released Friday by the alarmist website RealClimate has confirmed that e-mail servers at the University of East Anglia’s Climate Research Unit (CRU) in Norwich, England, were hacked recently with contents illegally made available over the Internet. Although the authenticity of all these e-mail messages has yet to be proven, what’s currently available points to a coordinated attempt to manipulate climate data by those directly involved in advancing the theory of anthropogenic global warming.

Other related stories:

The third and final news item was released today by the WSJ about the EPA’s announcement:

Officials gather in Copenhagen this week for an international climate summit, but business leaders are focusing even more on Washington, where the Obama administration is expected as early as Monday to formally declare carbon dioxide a dangerous pollutant. An “endangerment” finding by the Environmental Protection Agency could pave the way for the government to require businesses that emit carbon dioxide and five other greenhouse gases to make costly changes in machinery to reduce emissions — even if Congress doesn’t pass pending climate-change legislation. EPA action to regulate emissions could affect the U.S. economy more directly, and more quickly, than any global deal inked in the Danish capital, where no binding agreement is expected.

More Commentary: I am not a journalist, but it seems that these recent chain of events would make most jouralists salivate at the mouth and want to know more. Of course, today’s mainstream media jouralists are content to just carry the water for the current administration. Why has Al Gore cancelled his lecture at the Copenhagen Global Warming Conference? Did he catch cold? Again, it is my contention that the science is not settled and that it will be proven that the alarmists are wrong and the entire issue was a politcal scam. All americans should be outraged at these news stories and demand that the government along with independent organizations conduct investigations into “global climategate”.

According to Sahit Muja of the NY Economy and Politics Examiner, China has an insatiable appetite for the world’s natural resources to sustain an economic boom that powers ahead despite the global downturn. The quest for raw materials is the central goal of the country’s foreign policy. And virtually every natural resource imaginable is found just over the border. Russia has large reserves of natural gas, oil, diamonds and gold, while millions of square miles of birch and pine provide supplies of timber. China is the world’s fastest-growing major economy and consumes more than a third of the world’s aluminum output, a quarter of its copper production, almost a tenth of its oil and accounts for more than half of trading in iron ore. Last year, China bought $211 billion worth of iron ore, refined copper, crude oil and alumina, according to government data.

China Petrochemical Corp., the country’s second-biggest oil company, in June agreed to buy Geneva-based Addax Petroleum Corp. for $7.6 billion in China’s biggest overseas takeover to date. Purchasing Addax, which has oil reserves in Iraq’s Kurdish territory, shows Chinese oil companies are “going for bigger transactions. Australia has signed a record 41.3 billion US dollar deal to supply Chinese energy giant PetroChina with liquefied natural gas, officials said. The agreement, which represents the biggest foreign investment in Australia, is for PetroChina to buy 2.25 million tonnes a year over the next two decades from ExxonMobil’s Gorgon gas field. China has also extended huge sums of credit, including a $25-billion loan to Russian companies, to pay off debt and develop the East Siberia Pacific Ocean pipeline in exchange for 300,000 barrels a day of oil. The Chinese Development Bank lent Brazil’s Petrobras $10 billion to help with its $170-billion, five-year plan to increase its crude output. In exchange, Petrobras agreed to give the Chinese 200,000 barrels a day of oil exports. China extended a $4-billion loan to Venezuela to expand various oil projects, according to the Energy Information Administration. Chinese companies are also reportedly eyeing new oil deals in Nigeria and Ghana.

The state-owned China National Offshore Oil Corp., or CNOOC, reportedly is negotiating the purchase of leases owned by the Norwegian StatoilHydro in U.S. waters in the Gulf of Mexico, the source of about a quarter of U.S. crude oil production. China’s push to enter U.S. turf comes four years after CNOOC’s $18.5-billion bid to buy Unocal Corp. was scuttled by Congress on national security grounds.

Commentary – China is being aggressive. But some analysts are saying that buying natural resources such as oil is a way for China to diversify holdings that are heavily concentrated in US securities. This may be true, but I believe that China is implementing a very long range plan to meet their projected energy needs. China has faced problems with energy shortages in the past as a result of the growth in its manufacturing economy and pollution problems created by its reliance on coal. According to some reports, China imports 40% of its oil requirements and these oil imports have been growing at 30% per year. They are currently dependent on coal for about 65% of its energy. China wants to change this situation such that more of their energy needs are met with oil and gas, and non-carbon sources such as nuclear power, hydro and wind.

As reported in the Oil and Gas Journal, proposed legislation (Waxman-Markey climate bill HR 2454) on carbon capture and sequestration potentially could cost US refiners $100 billion/year, threatening the sustainability of the domestic refining industry and giving undue favor to non-US refiners.  Carbon capture is a means of mitigating the contribution of fossil fuel emissions to global warming, based on capturing carbon dioxide (CO2) from power plants. Carbon sequestration is a technique for the long-term storage of carbon dioxide or other forms of carbon by injecting the CO2 below the surface of the earth. The proposed Senate climate change and energy legislation has even more stringent emissions targets than the hotly debated Waxman-Markey bill.

Commentary – Currently carbon capture and sequestration technology is being developed and not commercially viable. If this legislation is passed, these costs will be passed on to consumers, otherwise US refiners will be out of business and we will be importing all of our gasoline needs. Either way get ready for $4.00/gallon prices or higher. In my opinion, “cap and trade” is a convoluted form of tax increase and may not even reduce emissions. If the government really wanted to save all this legislation and bureaucracy, all they needed to do is pass a carbon tax on gasoline, except that wouldn’t provide the politicians and administration with cover. They want you to blame private industry for high prices because they are causing global warming.

The Energy Information Administration’s (EIA) estimates of proved reserves of natural gas and crude oil as of the end of 2008 tell very different stories about apparent changes in the availability of these two energy resources in the United States. Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved reserves of natural gas rose enough not only to replace production, but also to grow by almost 3 percent over 2007, largely due to continued development of unconventional gas from shales. In contrast, even though discoveries of crude oil rose for the third year in a row, proved reserves of crude oil fell by more than 10 percent.

Total U.S. proved reserves of dry natural gas rose by 7.0 trillion cubic feet (Tcf) from 237.7 Tcf at year-end 2007 to 244.7 Tcf year-end 2008. Total natural gas discoveries in 2008 was 29.5 Tcf which represented the sixth consecutive yearly increase and were the highest level of discoveries in the 32 years EIA has published proved reserves estimates. In 2008, 90 percent of total discoveries came from extensions of existing fields. Natural gas produced during a year is subtracted from proved reserves. Production of dry natural gas in 2008 totaled 20.5 Tcf, up 5.4 percent from 2007, marking the third consecutive annual increase in U.S. natural gas production.

Total U.S proved crude oil reserves declined 10.3% from 21.3 billion barrels (bil. bbls) at the end of 2007 to 19.1 bil. bbls year-end 2008. The changes included 1.1 bil. bbls of new discoveries, downward revisions of 1.6 billion barrels and production of 1.9 bil. bbls. EIA also collects reserves estimates of natural gas liquids (NGL) which are hydrocarbons in natural gas that are extracted (as liquids) at the surface in gas processing or cycling plants. Year-end 2008 proved reserves of NGL were 9.3 billion barrels, an increase of 1.4 percent over 2007.

Commentary - A notable source of new crude oil discoveries was North Dakota, which added 167 million barrels. These discoveries represent rapid growth in reserves in the Bakken shale and the underlying Three Forks formation. Operators can produce oil from the Bakken using the same horizontal drilling and hydraulic fracturing techniques used so widely for natural gas shale production. The production of oil from the layers of shale within the Bakken Formation is different from the extraction of oil from oil shale plays such as the Canadian oil sands

According to the Energy Information Administration (EIA) approximately 5 billion gallons of ethanol was produced in the U.S. in the first 6 months of 2009. The US also imported 79 million gallons of ethanol during this same period. Based on the first 6 months of production it is estimated that 10.5 billion gallons will be consumed in 2009. The imported volumes from Brazil and the Caribbean for 2009 are estimated to be 157 million gallons.

Current ethanol production capacity stands at 13 billion gallons. The idle production is a result of the financial crisis when some ethanol plants went into bankruptcy. The capacity is being put back into service as they come out of bankruptcy. Ethanol producers were squeezed by escalating corn prices and overcapacity as the industry overbuilt. In late 2008, most producers were at breakeven levels or worse as ethanol prices fell significantly in tandem with crude oil.

Commentary – The ethanol industry was created by the U.S. government by subsidizing it. They protected it from imports by putting tariffs on ethanol from Brazil and other countries. To create demand the government then mandated its use as an additive in gasoline and this triggered the rapid growth of the ethanol industry. In 2008, ethanol has displaced only 3% of our oil usage. The Obama Administration is pushing a big expansion in ethanol, including a mandate to increase the share of the corn-based fuel required in gasoline to 15% from 10%. Apparently no one in the Administration has read a pair of new studies, one from its own EPA, that expose ethanol as a bad deal for consumers with little environmental benefit. A second study — by the Environmental Protection Agency’s Office of Transportation and Air Quality — explains that the reduction in CO2 emissions from burning ethanol are minimal and maybe negative. The government has put a maximum on the amount of ethanol that can be produced from corn at 15 billion gallons. All ethanol is made by the fermentation of corn. To meet the new mandated volumes of 36 billion gallons by 2022 without exceeding the 15 billion gallons of corn-based ethanol, the ethanol industry will be challenged to commercialize cellulosic ethanol technology.

The EIA says gasoline retailers and wholesalers account for about 13% of the total cost of gasoline. Refiners get another 7% and taxes eat up 16%. The remaining 64% is crude oil. Based on a price of $2.55 per gallon the breakdown is as follows: Crude oil – $1.63, Taxes – 41 cents, Refining - 18 cents and Distribution/Marketing – 33 cents.

From January 2003 to October 2009, oil prices have increased 125% while gasoline prices have risen 75% (Based on data from the Energy Information Administration). For the most part, the price increases for both crude oil and gasoline track reasonably well. But during the period September 2007 to October 2008 they started deviating with crude oil price increases accelerating faster than gasoline prices.  It appears that in the past 3 months crude oil prices and gasoline prices are starting to deviate again.

Commentary – I believe the explanation for the deviation in price increases was a result of decreased demand. Consumers cut back on their gasoline usage and the refiners and retail outlets responded by not increasing prices despite the fact that crude oil prices were still rising. This has been proven out by lower refiner profit margins. It appears that the deviation is starting again. Strictly based on the chart above it appears that we are either going to see crude prices decline or gasoline prices are going higher. Refining margins are already low, so this time I believe gasoline prices will go higher. If crude oil price increases continue, we may see $4.00 gasoline again.

According to a new study by the Interstate Natural Gas Association of America (INGAA) projected growth in North American natural gas supplies and market growth in the U.S. and Canada will require billions of dollars of additional investment in pipeline, storage and other midstream infrastructure through 2030. The study analyzed future natural gas infrastructure requirements under different market scenarios and came up with a range of investment from $133 to$210 billion over the next 20 years.These investments would be required to bring increased domestic natural gas production from unconventional shale basins and tight sands to the pipeline network.

By 2030, the U.S. and Canada will need approximately 29,000 to 62,000 miles of additional natural gas pipelines, 370 to 600 billion cubic feet (Bcf) of additional storage capacity, 6.6 to 11.6 million horsepower of new gas transmission pipeline compression, 20 to 38 Bcf per day of new natural gas processing capacity and 3.5 Bcf per day of new LNG import terminal capacity in order to meet market requirements. About three-fourths of the market growth occurs in the power sector. The growth rate of natural gas consumption in the electric generation sector is the predominant determinant of the growth rate of the entire natural gas market.  Electric load growth, timing and development of renewable generation technologies, clean coal with carbon capture and sequestration, and expansion of nuclear generation are areas of uncertainty.

Commentary - The study seems to rely heavily on the growth rate of natural gas use in electrical generation. I am assuming that this is due to the belief that natural gas fired power plants will replace coal-fired power plants in the future. They might want to check with the coal industry lobbies before they put to much faith in their study. If the study is accurate in its assumptions, these investments would create many new jobs within the natural gas industry and create many new opportunities for midstream pipeline companies

A national survey was released this week by the Pew Research Center for the People & the Press. According to the survey, the number of Americans who believe there is solid evidence that the Earth is warming because of pollution is at its lowest point in three years. The poll of 1,500 adults found that only 57 percent believe there is strong scientific evidence that the Earth has gotten warmer and is attributed to humans. The poll’s results differ from previous surveys which have shown an overwhelming majority of Americans believe global warming is happening.

Commentary – These polling results show that the public is beginning to catch on to the scam Al Gore and his cohorts have been perpetuating. Maybe an informed citizenry will show their opposition to the carbon tax Congress is about to impose on a struggling economy.

El Paso Corporation is an energy company, which operates in the natural gas transmission and exploration and production sectors of the energy industry. The Company owns or has interests in North America’s interstate pipeline system, which has approximately 42,000 miles of pipe that connect North America’s producing basins to its consuming markets. It also provides approximately 230 billion cubic feet (Bcf) of storage capacity and has a liquefied natural gas (LNG) receiving terminal and related facilities in Elba Island, Georgia.

The El Paso Corp. has decided to reenter the natural gas gathering and processing business to link its interstate pipelines with the new supplies of gas from Louisiana’s Haynesville Shale and other areas of growing natural gas production. El Paso said that it will form a new “midstream” segment that will acquire and possibly build facilities to treat gas after it is extracted from the wells and transport it to interstate pipelines. El Paso sold its remaining interests in gathering and processing assets in 2005 to affiliates of privately held EPCO Inc., a Houston company.

Commentary – Shale plays have attracted interest from pipeline companies and private investors. Analysts have said that El Paso could acquire gathering and processing assets connected to the Haynesville Shale and to the Eagle Ford Shale in Texas.