June 28, 2012 archive

Black Gold

Shell gears up for new Arctic quest

By Jennifer A. Dlouhy, Houston Chronicle

Sunday, June 24, 2012

In Valdez, about 800 miles from Shell’s planned Arctic wells, the company has spent weeks training recruits how to deploy inflatable booms to corral floating crude so skimmers can suck it up.



But while federal regulators have approved Shell’s broad drilling plans and signed off on the company’s emergency plans for the region, the technology for sopping up spilled oil hasn’t been tested publicly in U.S. Arctic waters in 12 years, and the results weren’t encouraging.

During that earlier test, skimmers failed and floating ice slipped under booms meant to corral crude.

Shell tries to contain skepticism in Arctic

By Jennifer A. Dlouhy, Houston Chronicle

Sunday, June 24, 2012

Shell’s sizable armada doesn’t carry enough equipment to satisfy environmentalists who argue that existing technology can sop up only a small percentage of spilled crude, even from calm, warm seas. They warn that the equipment’s success rate might be worse in the Arctic, especially if waters are slushy or covered in ice.

Federal regulators have approved Shell’s oil spill response plans for the region, which describe a scenario for recovering 95 percent of the oil spilled. It would use an under-water containment system including a capping stack – an array of valves and other equipment that would be lowered to the ocean floor to plug a gushing well – along with skimmers, booms, chemical dispersants and burn-off of floating crude.

Mike LeVine, the Pacific senior counsel for the conservation group Oceana, scoffed at the 95 percent target.

He noted that only 8 percent of the oil was removed after the Exxon Valdez spill and 10 percent from spills in the Gulf of Mexico.

“The idea they could somehow magically get to 10 times that seems absurd to us,” LeVine said.

Oil Trades Below $80 for a Third Day on Economic Outlook

By Sherry Su and Ben Sharples, Bloomberg News

Jun 25, 2012 7:58 AM ET

Oil traded below $80 a barrel for a third day in New York amid concern that Europe’s debt crisis will curb demand for fuels.

Futures slid as much as 1.2 percent as George Soros warned that a failure by European Union leaders meeting this week to produce drastic measures could spell the demise of the bloc’s shared currency. Developed economies are running into the limits of monetary policy, the Bank for International Settlements said in its annual report yesterday. Oil earlier rose as much as 1.2 percent after Tropical Storm Debby approached oil and gas installations in the Gulf of Mexico.

“The outlook for oil remains negative while concerns remain about the economic outlook in Europe weigh on demand,” Michael Hewson, a London-based analyst at CMC Markets, which handles about $240 million a day in U.S. crude contracts, said today in an e-mail. “Investors remain skeptical that EU leaders will be able to agree on anything tangible to alleviate the current crisis.”

TransCanada wins 1 of 3 US nods for Keystone line

Reuters

Wed Jun 27, 2012 12:07am IST

CALGARY, Alberta, June 26 (Reuters) – The U.S. Army Corps of Engineers has granted TransCanada Corp one of three permits it needs to build the $2.3 billion southern section of the Keystone XL pipeline, a project President Barack Obama had pledged to move forward quickly.



The southern section would carry 830,000 barrels a day of crude to Texas refineries from the glutted Cushing, Oklahoma, storage hub with the aims of helping to raise deeply discounted prices and providing the region more secure oil supplies.

My emphasis.

Cartnoon

On Topic – Division of Power – Interest Groups 3:48

On This Day In History June 28

Cross posted from The Stars Hollow Gazette

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

Click on images to enlarge.

June 28 is the 179th day of the year (180th in leap years) in the Gregorian calendar. There are 186 days remaining until the end of the year.

In common years it is always in ISO week 26.

This date is the only date each year where both the month and day are different perfect numbers, June 6 being the only date where the month and day are the same perfect number.

On this day in 1919, Keynes predicts economic chaos

At the Palace of Versailles outside Paris, Germany signs the Treaty of Versailles with the Allies, officially ending World War I. The English economist John Maynard Keynes, who had attended the peace conference but then left in protest of the treaty, was one of the most outspoken critics of the punitive agreement. In his The Economic Consequences of the Peace, published in December 1919, Keynes predicted that the stiff war reparations and other harsh terms imposed on Germany by the treaty would lead to the financial collapse of the country, which in turn would have serious economic and political repercussions on Europe and the world.

snip

A decade later, Hitler would exploit this continuing bitterness among Germans to seize control of the German state. In the 1930s, the Treaty of Versailles was significantly revised and altered in Germany’s favor, but this belated amendment could not stop the rise of German militarism and the subsequent outbreak of World War II.

In the late 1930s, John Maynard Keynes gained a reputation as the world’s foremost economist by advocating large-scale government economic planning to keep unemployment low and markets healthy. Today, all major capitalist nations adhere to the key principles of Keynesian economics. He died in 1946.

Governments ignore Keynes at their own peril.

Housing Market’s Irrational Exuberance

Cross posted from The Stars Hollow Gazette

… how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions…

– Alan Greenspan, Dec. 5, 1996

“Irrational exuberance”, “unrealistic expectations” accurately describe some of the reports about the alleged rebound in the housing market, such as this report on the increase in housing prices:

Home prices rose in nearly all major U.S. cities in April from March, further evidence that the housing market is slowly improving even while the job market slumps.

The Standard & Poor’s/Case-Shiller home price index shows increases in 19 of the 20 cities tracked. That’s the second straight month that prices have risen in a majority of U.S. cities.

And a measure of national prices rose 1.3 per cent in April from March, the first increase in seven months.

San Francisco, Washington and Phoenix posted the biggest increases. Prices fell 3.6 per cent in Detroit, the only city to record a drop.

The month-to-month prices aren’t adjusted for seasonal factors. Still, prices in half of the cities are up over the past 12 months.

Then there was this news in Bloomberg about the increase in demand for new homes:

Demand for new U.S. homes rose more than forecast in May as mortgage rates dropped, bolstering the residential real-estate market while other parts of the world’s largest economy cool.

Purchases climbed to a 369,000 annual rate, the most since April 2010 and up 7.6 percent from the prior month, the Commerce Department reported today in Washington. The median estimate in a Bloomberg News survey of 67 economists was 347,000. The number of houses on the market held near a record low.

The problem with this rise in housing prices and an increase in new home sales is that its a poor indicator of the real “health” of the housing market. Even Yale Prof. Robert Shiller, co-creator of the quoted Case-Shiller house price index, takes a cautious view of these optimistic predictions of a housing recovery:

MUCH hope has been pinned on the recovery in home prices that began about a year ago. A long-lasting housing recovery might provide a balm to households, mortgage lenders and the entire United States economy. But will the recovery be sustained? [..]

The most obvious reason for hope is that, unlike stock prices, home prices tend to show a great deal of momentum. Correcting for seasonal effects, home prices as measured by the S.&P./Case-Shiller 10-City Home Price Index increased each month from June 1995 to April 2006, then decreased almost every month to May 2009. Since then, they have risen through January, the latest month for which data is available.

So, because home prices have been climbing of late, isn’t it plausible that they’ll keep doing so?

If only it were that simple.

Home price booms and busts do end, sometimes quite suddenly, as was the case for the boom of 1995 to 2006 and the bust of 2006 to 2009. Today, we need to worry about strong headwinds, as the government begins to withdraw its support of a still-troubled lending industry and as foreclosures are dumping millions of homes onto the market.

Michael Olenick explains at naked capitalism:

Yale Prof. Robert Shiller, co-creator of the well-known Case-Shiller house price index, takes a more sober approach. Shiller argues in the New York Times until meaningful principal reductions are put in place that house prices are hosed. Pricing may bump up on artificial scarcity caused by the relatively low number of foreclosures after the robo-signing scandal, but in the long run underwater borrowers are likely to drown. Further, because of sky-high loss severities in foreclosures – my own data shows it is not at all uncommon for investors to lose the entire face value of a mortgage in a foreclosure – principal reductions make good business sense.

Shiller embraces an idea being floated about lately; having municipalities use eminent domain to “take” mortgages at fair market value. Databases like the one I’ve been compiling clearly show the loss severity of similar mortgages in similar ZIP codes, allowing municipalities to ascertain fair market value of the mortgages, as opposed to the houses. In bubble-states, where negative equity issues are most pronounced, fair market value of most mortgage would be no more than 20-percent of the face value of the first mortgages – and oftentimes far less; no more than a few cents on the dollar – while second liens would be worthless.

Assuming this approach is only used with the consent of the homeowner, I’d suspect that one last call the servicer before implementation would magically result in an almost immediate modification: no lost paperwork, no transfers to the offshore call center, no capitalized interest.

That’s too rational for anyone to heed.

Late Night Karaoke

My Little Town 20120627 – Special Edition: RIP Jace

I normally do not write about current events in this series, but this is actually related to experiences that I had when I was little.  Many of you who read this regular series are familiar with the people to whom I refer to as The Girl and The Little Girl, two people extremely dear to me.

The Girl is 19, and her beautiful daughter is three.  Their family had two cats, Bella (whom I call Lal after the Star Trek: The Next Generation episode “The Offspring” where Data named the android that he created that from the Hindi word for “beloved”), and Jace.  Jace was a tom Tabby (actually more likely a Maine Coon Cat) who both girls lived dearly.

The girls were out of town Friday when I got a call from The Girl’s mum asking me to come and pick up Jace’s body from the street in front of their house.  He had been run over by a car, and by the looks of things died instantly because of massive head trauma.  I do not think that he was even aware that his demise was in progress.