Author: Vincent Fernando

There's some incredible new oil extraction technology being investigated over at Nuclearhydrocarbons.com.

Essentially, the U.S. has a lot of spent nuclear fuel (SNF) rods from nuclear reactors, which need to be disposed off in deep, protected underground sites. Yet these rods give off massive amounts of heat as they slowly cool.

Jumping to oil extraction challenges, there are massive amounts of oil locked in U.S. shale formations, which could equal three times the proven reserves of Saudi Arabia even using relatively conservative extraction estimates. Problem is, they require inordinate amounts of energy to heat up, liquefy, and then extract; which makes them too expensive to be worthwhile based on established technology.

Thus there might be an excellent use for spent nuclear fuel rods which are otherwise be left to rot -- use the heat they produce, in an environmentally-protected fashion, to liquefy hard to get U.S. oil reserves.

Yes it sounds completely crazy at first. It's the kind of story an environmental opposition would have a field day creating scare stories with, but it might actually make sense.

If proven viable, using spent fuel rods to assist in oil extraction could actually be a cheaper and cleaner way to turn the U.S. into an oil production behemoth. It would also financially incentivize nuclear waste away from terrorists, since the price of such waste would rise given the substantially increased economic usefulness.

Nuclearhydrocarbons.com While oil shale is found in many places worldwide, by far the largest deposits in the world are found in the United States in the Green River Formation. Estimates of the oil resource in place within the Green River Formation 6 range from 1.2 to 1.8 trillion barrels. Not all resources in place are recoverable; however, even a moderate estimate of 800 billion barrels of recoverable oil from oil shale in the Green River Formation 6 is three times greater than the proven oil reserves of Saudi Arabia. 

Present U.S. demand for petroleum products is about 20 million barrels per day. If oil shale could be used to meet a quarter of that demand, the estimated 800 billion barrels of recoverable oil from the Green River Formation 6 would last for more than 400 years..

...

It is an objective of this invention to use the global inventory of SNF as a heat resource for the production of the oil shale deposits shown in FIG. 1. This is the surest way the United States can prevent the plutonium contained in foreign sourced waste from ever being used to construct a nuclear weapon for use against it.

This technology could also unlock cheaper oil from Canadian tar sands. Metal Miner, who alerted us to this technology, highlights how Suncor Energy could, for example, reduce its financial and potential environmental costs by using SNF-assisted extraction:

Metal Miner: Suncor Energy, one of the country’s largest oil sands operators, announced quarterly results, which were a disappointment to its investors. Taking into account the Energy Return on Investment for SAGD extraction techniques at current prices roughly $15 worth of energy is used to produce a barrel of bitumen. If Suncor/Petro-Canada had produced the 318,200 bpd it reported in its last quarter using the Nuclear Assisted Hydrocarbon Production Method they could have increased their profits by some US$430m -almost double what they did make – and would have produced zero CO2 and polluted not one gallon of surface water.

It's further proof that available oil remains more a function of technology rather than physical limitation.

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See Also:

• Cancer Fears Plague America's Shale Gas Revolution
• Energy Giant Total Drops $800 Million On Chesapeake's American Shale Revolution
• New York City Kills The Shale Gas Revolution

Toyota is now recalling half a million hybrid vehicles across the world, including the Prius. They’ve received over 200 complaints from Japan in the U.S. over a software glitch related to brake systems.

Undoubtedly Toyota is being extremely cautious here. They are willing to take it on the chin financially in the short term in order to staunch the bleeding of their long-term reputation.

At least their president is finally showing his face and acting like the leader of a global corporation:

Guardian:

“I apologise for causing trouble and worries for many customers over the quality and safety of Toyota,” its embattled president, Akio Toyoda, told reporters in Tokyo today, his second public apology in less than a week.

“We sincerely acknowledge safety concerns from our customers. We have decided to recall as we regard safety for our customers as our foremost priority. We will redouble our commitment to quality as a lifeline of our company. We will do everything in our power to regain the confidence of our customers.”

Toyota informed the transport ministry of the recall of 223,000 hybrid cars in Japan across four models: about 200,000 of the 2010 Prius model and much smaller numbers of the Prius plug-in hybrid, the SAI and the Lexus HS250h luxury car.

Read more here >

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See Also:

• Unsafe At Any Emissions: Toyota Set To Announce Massive 2010 Prius Recall
• Toyota Dealers Outraged By ABC News Death-Pedal Reports, Pull Ads From ABC
• Blame Toyota’s Disaster On Japanese Corporate Culture

Speculators are roaring back into commodities according to Citi investment Research's Alan Heap. Developed nation demand could be the next growth story to boost prices, finally rebounding post crisis. Developing nations will continue their demand growth as well.

Alan Heap @ Citi: End Uses are Improving. In the USA the major end uses – auto production, construction, housing starts, packaging, appliances, housing are improving, with autos in the vanguard, housing the laggard. So it’s all in front of us. We expect demand to turn positive in coming months and the restocking amplifier, after two years of inventory drawdown, will be powerful.

For commodities overall, net long positions are rising, as shown by the black line below.

Moreover, Oil has attracted massive long-biased interest. Oil's net long position is near the highest level it has been all decade, as shown by the yellow line below.

Finally, gold traders remain massively net long. 'Gold is surging' according to Alan Heap. Net long positions could soon achieve a new high.

Add my twitter for more research analysis like this: @vincefernando

(Via: Citi, 'Commodity Heap', Alan Heap, 5 February 2010.)

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See Also:

• Citi Loses Two Bankers To Hedge Funds Over Prop Trading Concerns
• Citi: Gold Will Be Annihilated If Inflation Doesn't Pick Up Soon
• Gartman: Commodity Markets Are Looking Very Strong, But There's An Insane Amount Of Corn Out There

Jeff Kingston of Temple University in Japan thinks the entire Toyota disaster has its roots in Japan’s deferential corporate culture. Essentially, design problems weren’t sufficiently challenged and critical information wasn’t relayed properly to management due to Toyota’s traditional Japanese corporate culture.

He’s careful to remind that every nation shares the communication problems present within traditional Japanese companies too some degree. Obviously its easy to accuse any criticism of Japanese culture in this matter as horrendously simplistic and perhaps ignorant of what Japan is like.

Yet Mr. Kingston makes the point that he’s rarely seen a Japanese company perform well during a crisis, due to the same old problems — information takes too long to flow through the company since employees don’t want to tell their boss what he doesn’t want to hear, and because Japanese companies have a tendency to try and squash bad stories before they get to press.

WSJ: Initially, the safety defects were portrayed as a made-in-America problem, but now the design defects have hit home, raising new questions about Toyota’s famous quality control circles. Had this story not come out in the U.S. it is doubtful whether Toyota would have even considered a recall at home. But now, as international coverage of quality problems expand, the domestic media here have their backs covered and are likely to start asking some of the same questions and raising some of the same issues, if more politely.

Much is at stake for the company and the nation as Toyota tries to restore its reputation. There have been an alarming number of cases in recent years in which Japanese products have not met the high quality standards that the world and its own people expect of it. In some quarters this is seen as a barometer of a nation in decline, one that is adrift and slipping.

Thus to me what the entire Toyota saga shows is that if any company wants to be a world-class business, it has to be world-class through and through.

Many Japanese companies became extremely competitive based on world-class manufacturing processes. Yet perhaps they lagged when it came to corporate culture. Some might have thought this didn’t matter, Toyota isn’t in the media or consulting industry after all, it doesn’t need ‘soft’ competitive advantages as long as its cars are well built.

But what we’ve recently seen is that it indeed does need these things if it wants to not only become a global leader, but then remain one as well.

No manufacturer can claim to be world class if its soft assets aren’t handled just as efficiently as its inventory. Toyota (hopefully) has learned this the hard way.

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See Also:

• Japan’s Shrinking Population Puts It On The Ratings Downgrade Path To Banana Republic Status
• Japan’s Revival Lies In Becoming A Giant Toyota
• Next Up: Japan’s Nikkei Off 1.6% In Early Trading

Some might say that Toyota’s current crisis is a result of enormously bad luck, and they might be partly right.

Yet Toyota’s problems also appear to have been the result of a series of tiny flops, over and over, ranging from quality control to public relations disasters.

For example, it shouldn’t have taken until today for its CEO to address its safety matters in public

99% of your hard work is meaningless when 1% of the time you’re a complete joke.

We’ve put together a quick guide to the amazingly unfortunate serious of events that put Toyota into its current situation.

Here’s how Toyota destroyed itself >

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See Also:

• Ray LaHood: WHOOPS, What I Really Meant To Say Is That You Should Get Your Toyota Fixed
• Here’s How Safety Problems Savaged Toyota Shareholders
• Apple Founder Woz: My Toyota Prius Accelerates To 97 MPH On Its Own, Scares The Hell Out Of Me

Just when Dubai's finances were looking disastrous, the emirate's ruler Sheikh Mohammed bin Rashid al-Maktoum announces a potentially huge new oil discovery right in his backyard. Saved.

But don't take our word for it, take his:

More from Maktoob Business:

Dalton Garis, associate professor of economics and petroleum markets behaviour at Abu Dhabi-based Petroleum Institute, told Maktoob News: "This is very good news, the reason being it will provide Dubai to a large extent, to a small extent, to some extent, a new source of revenue".

...

Garis said if the oilfield, discovered east of the emirate’s Rashid field, is feasible for production it means Dubai can borrow money on low interest over a 20-year period and pay some of its crippling short-term, high-interest debt taken to fuel its real estate and tourism sectors, which fell prey to the global economic recession.

The oilfield "would enable Dubai to earn cash every month," Garis said. "Dubai would have a cash source not dependent on the vagaries of the tourist market."

Garis, however, warned that the oilfield would still depend on "the vagaries of the world’s economic recovery and global demand".

For some history, see why Dubai was the most obvious bubble ever >

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See Also:

• Why Dubai Was The Most Obvious Bubble Ever
• Dubai Was Always Destined For Disaster When Money Came Cheap
• First international Bloomingdale's opens in Dubai

Will the pain ever stop for Toyota shareholders?

Now, above and beyond all the accelerator pedal uproar, the U.S. Transportation Department is investigating the company’s Prius brakes.

It could result in a Prius recall, on top of all the others.

BBC:

The investigation will look into allegations of momentary loss of braking power while travel ling over uneven road surfaces.

As depressing the brakes further activated normal braking, Toyota said the glitch was not legally a safety hazard and said it had received no reports of any accidents related to it.

‘Very disappointed’

Mr Fonseca told the BBC that the braking problem was “not a defect, but a characteristic of the way the ABS system is tuned”, before adding that there had been “no issues with this in the UK”. However, he did say that “we are very disappointed to have let customers down and accept that we could have handled [the problem] better.”

Read more here >

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See Also:

• Here’s How Safety Problems Savaged Toyota Shareholders
• Battered Toyota Reports 8.7% Sales Decline From Last Year’s Horrible Numbers
• Even Toyota’s Hardcore Japanese Fans Have Lost Faith In Its Quality

Goldman’s David Greely is making a near-term bullish case for oil. His optimism is driven by A) The strong U.S. ISM Manufacturing data we had two days back, B) the fact that renewed Nigerian violence threatens supply, and C) the reduction in overhang caused by oil hoarded at sea in tankers (floating storage).

While the relationship appears far from perfect, he argues that U.S. oil demand tends to track ISM Manufacturing Index readings:

Most interestingly for short-term traders, Falling floating storage implies a tighter market, since less supply is basically out there ready to be sold into the market.

David Greely @ Goldman: [emphasis added] The area where the improvement in near-term fundamentals has been most pronounced in recent weeks is in the amount of oil in floating storage. The use of tankers to store excess supplies of crude oil and gasoil over the past year has been emblematic of the weakness in supply-demand fundamentals during the recession, and the unloading of these tankers has been broadly viewed as a necessary precursor to a cleanup over the overall oil market. Consequently, reports that anywhere from 0 to 50 million barrels of the total oil in floating storage has been recently unloaded have suggested a potential turn around in oil market fundamentals.

Add my twitter for a filter of analysis-only like this: @vincefernando

(Via Goldman Sachs, Energy Weekly, David Greely, 3 February 2010)

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See Also:

• Oil Giant Shell Says Demand Is Weak, Outlook Is Uncertain, And That It’s Going To Be Giving Out More Pink Slips
• Forget Becoming An Oil Power, Iraq Is Actually A Toxic Nuclear Wasteland
• Mid-day: Markets Still Up, Oil Still On Fire

OPEC's Secretary General Abdalla Salem El-Badri has told the BBC that his cartel's production quote compliance has sunk to just somewhere between 50 - 56%.

He finds the development 'worrying', which is a bit of an understatement:

BBC:

"The risk is you see a lot of oil in the market and no one is buying it. Then the price will come down."

...

"We need a price where we can invest in new capacity, new supply and also cater for the wealth of our people. Anything below $70 will not permit us to invest."

Stubbornly trying to defend $70 oil has its consequences, especially during hard economic times when most producer countries want all the income they can get. When compliance hovers around just 50%, one has to imagine that the institution's continued enforcement credibility is put in question.

Add my twitter for more like this: @vincefernando

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See Also:

• IEA Says Developed-World Oil Demand Already Looking Weaker Than Expected
• Foreign State-Owned Energy Companies Dominating Iraq's Oil Revolution, Leaving U.S. Ambitions In The Dust
• Iraq Gunning To Blow Away Saudi Arabia's Oil Leadership Within Seven Years

Iraq’s vast oil potential presents a game changer for oil markets given that the country could one day rival in terms of oil production.

Many would claim that unlocking Iraq’s oil potential was the primary goal of the U.S. invasion, and one would be naive to think that oil wasn’t at least part of the invasion calculus.

Yet the Iraqi oil revolution isn’t unfolding as many U.S. critics, or even U.S. war planners, imagined according to Professor Michael Schwartz, author of War Without End: The Iraq War in Context.

Post-invasion, Iraq is actually hard-bargaining their oil deals, offering relatively meager returns to winning bidders and keeping much of the profit potential to itself. The U.S. has been mostly left out as a result.

History News Network: The proposed contracts did not, in fact, offer them the kind of control over development and production that the Cheney task force had envisioned back in 2001. Instead, they would be hired to finance, plan, and implement a vast expansion of the country’s production capacity. After repaying their initial investment, the government would reward them at a rate of no more than two dollars for every additional barrel of oil extracted from the fields they worked on. With oil prices expected to remain above $70 a barrel, this meant, once initial costs were repaid, the Iraqi government could expect to take in more than $60 per barrel, which promised a resolution to the country’s ongoing financial crisis.

The result of such low-return investment opportunities has been a relative dearth of oil & gas multinationals involved in the bidding process. Multinationals didn’t stand a chance bidding for low returns against government-owned energy companies who are less interested in profit and more interested in simply securing oil supplies for their nations.

The major international oil companies initially rejected these terms out of hand, demanding instead complete control over production and payments of approximately $25 per barrel. This initial resistance began to erode, however, when the Chinese National Petroleum Corporation (CNPC), a government-owned operation, induced its partner, BP, the huge British oil company, to accept government terms for expanding the Rumaila field near Basra in southern Iraq to one million barrels a day.

The Chinese company, experts believed, could afford to accept such meager returns because of Beijing’s desire to establish a long-term energy relationship with Iraq. This foot-in-the-door contract, China’s leaders evidently hoped, would lead to yet more contracts to explore Iraq’s vast, undeveloped (and possibly as yet undiscovered) oil reserves.

Hence Iraq became a huge land grab for state-owned energy companies of all stripes, each willing to accept Iraq’s paltry returns on investment. The threat of Chinese domination, in particular, set off a stampede from other nations.

Perhaps threatened by the possibility that Chinese companies might accumulate the bulk of the contracts for Iraq’s richest oil fields, leaving other international firms in the dust, by December a veritable stampede had begun to bid for contracts. In the end, the major winners were state-owned firms from Russia, Japan, Norway, Turkey, South Korea, Angola, and — of course — China. The Malaysian national company, Petronas, set a record by participating with six different partners in four of the seven new contracts the Maliki government gave out. Shell and Exxon were the only major oil companies to participate in winning bids; the others were outbid by consortia led by state-owned firms. These results suggest that national oil companies, unlike their profit-maximizing private competitors, were more willing to forego immediate windfalls in exchange for long-term access to Iraqi oil.

Thus the U.S. invasion indeed unlocked Iraq’s oil production potential as many critics said had been the plan all along, but in the end the U.S. won’t have much control over it.

On paper, these contracts hold the potential to satisfy one aspect of Washington’s oil hunger, while frustrating another. If fully implemented, they could collectively boost Iraqi production from 2.5 million to 8 million barrels per day in just a few years. They would not, however, deliver control over production (or the bulk of the revenues) to foreign companies, so that Iraq and OPEC could continue, if they wished, to limit production, keep prices high, and wield power on the world stage.

In terms of reducing oil prices, more Iraqi production is good news nonetheless. Iraq’s desire to rebuild itself likely means that they’ll be trying to maximize oil income for years to come rather than restrict production to the extent OPEC may want. It’s just that state-owned energy companies with political interests will be producing most of it. Read the full Iraqi oil piece here >

For a cut of analysis-only like this, add my twitter: @vincefernando

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See Also:

• China Guarantees Future Stronghold In Iraq After Forgiving Saddam’s Debt
• Iraq Gunning To Blow Away Saudi Arabia’s Oil Leadership Within Seven Years
• Exxon Locks-In Iraq Deal To Produce 20% Of Saudi Arabia Out Of A Single Reserve

Oil traders appear blind to the fact that developed nations’ oil consumption growth has most likely ended forever, given that oil prices remain pretty high historically speaking.

Some oil bulls might be betting that a global recovery will generate sufficient emerging-markets oil demand to make up for the developed world consumption growth and increase total global demand at the same time.

Let’s just hope that substantial U.S. oil consumption growth isn’t part of their equation. That’s because there’s increasing evidence that the U.S. economy has already made a critical shift towards spending less on fuel, as recently highlighted in Stephen Schork’s Schork Report, via Alphaville. As he puts it: oil demand has been “wiped off the map” and it’s never coming back.

Mr. Schork’s chart below shows how at similar gasoline prices in the past (in orange, look at 2005 – 2007 vs. 2009), Americans used to spend a higher percentage of income on gas (Look at PCE Gasoline/Nondurable Goods, the white circles).

Thus a sharply lower percentage of expenditure, as just happened, isn’t simply due to the fact that gas prices fell since early 2008. It’s also likely caused by Americans using less gas.

Schork: “Without this end demand for product, crude prices are fundamentally crippled on the upper bound. Whether the bulls realize that (and yesterday’s price action indicates they don’t) is another matter. More to the point, the bulls probably do realize how bad the fundamentals are for crude oil, but they probably just don’t care.”

Read more here >

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See Also:

• IEA Says Developed-World Oil Demand Already Looking Weaker Than Expected
• Why Oil Dependence Was Always Going To Screw Dubai
• Analyst: Oil Is Off Its Rocker

Fallout from Toyota’s accelerator pedal disaster is already slamming Toyota’s financials.

Tatsu Yoshide, a UBS auto analyst in Tokyo believes that lost sales are currently running at $155 million per week. In addition, the recall of 4.5 million vehicles globally could cost another $900 million.

Toyota’s a large company with a $125 billion market cap, but we can probably forecast that lost sales from this disaster will stretch out for years.

Even if they end up averaging $100 million a week of lost sales for two years, it would still amount to a $10.4 billion gouge before considering the recall and new manufacturing expenses needed to overhaul their production processes. For example, they’re adding a new feature that cuts off the accelerator pedal if the brakes are pressed simultaneously. That has to cost something to implement quickly.

What’s sad is that this could have all been avoided, including alleged injuries, by the addition of a piece of metal no larger than a postage stamp:

ABC News:

Toyota apologized to its customers Monday and said a piece of steel about the size of a postage stamp will fix the gas pedal problem. Repairs will take about a half-hour and will start in a matter of days, the company said.

…

Meanwhile, Dennis Dukes of Stony Point, N.C., and his wife, said they wouldn’t drive their 2010 Camry again, even with the repair. His wife ran into the back of a truck in August in their first Camry, a crash Dukes said happened after she hit the brakes and the car kept going.

“I am absolutely not going to drive that vehicle again,” Dukes said. “Whether it fixes the Camry or not, the damage has been done. It is not going to fix things mentally for us.”

One wonders how many years of future sales have been reduced given emotions such as the above. Would you drive a Toyota now if given the choice between it and a different, similarly priced vehicle?

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See Also:

• New Twist In Toyota’s Sticky Pedal Problem
• Toyota Announcing Death-Pedal Fix, Scrambles To Staunch The Bleeding With Huge Marketing Blitz
• Toyota Accelerator Pedal Disaster Won’t Come Unstuck As Shares Keep Crashing

Iraq's oil minister Hussain al-Shahristani just made it clear at a press conference that Iraq is gunning to knock Saudi Arabia out of the top slot for oil production.

Markets won't to wait too long for this to happen either, and OPEC better not try to stop them:

Hellenic Shipping News: “We can’t find a reason to prevent Iraqi production becoming higher than any other Opec state or even states outside Opec. We expect that to happen in the next six to seven years with co-ordination and agreement with other Opec producers,” he said. Iraq has signed a series of oilfield development deals with global oil firms – which bid on prime fields at two energy auctions last year – in a nation with the world’s third largest crude reserves, emerging from years of conflict and sanctions.

Unlike Opec’s 11 other members, Baghdad is not subject to the output targets the group uses to set supply levels. Opec exempted Iraq in the 1990s, when it was under sanctions. “Iraq has been deprived of having a fair export level over the last years, during which we were not able to produce or export oil while other states got benefit from this and were able to export at higher levels,” Shahristani told reporters.

“Opec should put into consideration Iraq’s need for oil revenues to rebuild its economy and country. Iraq has a definite need for these revenues.”

Read more here >

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See Also:

• Exxon Locks-In Iraq Deal To Produce 20% Of Saudi Arabia Out Of A Single Reserve
• Shell, Petronas Ink Mammoth Deal For 1.8 Million Barrel-Per-Day Iraqi Oil Field
• How The Kurdistan Problem Could Torpedo The Iraq Energy Comeback

The amount of oil held in tankers at sea has halved from its April 2009 peak of 90 million barrels according to ship broker ICAP.

Given that much of this oil was held in order to arbitrage current vs. future oil prices, a reduction in floating storage implies a tightening of the oil market.

WSJ: ICAP said there were currently 21 trading VLCCs offshore with some 43 million barrels of crude. Seven of these are expected to discharge in February and one more in March. So far, it appeared those discharged cargoes wouldn't be replaced by new ones.

"I haven't seen any fixtures for VLCC storage in the last two weeks," said Simon Newman, ICAP's senior tanker analyst. "That would imply that storage looks set to fall in the short term."

Assuming there are no new fixtures, the amount of crude in storage could sink to 27 million barrels by March, the lowest level since the current contango play began in late 2008.

Read more here >

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See Also:

• Bush's Oil Cronies: Where Are They Now?
• IEA Says Developed-World Oil Demand Already Looking Weaker Than Expected
• Blistering Cold Sends Oil To $83

Such is the perilous state of Toyota's reputation right now that even its most loyal Japanese fans are beginning to question the company's quality:

LA Times: For 15 years, Tokyo taxi driver Kiyomi Hashimoto has been a loyal Toyota man. Not once has he considered changing brands or even the possibility of car problems. But now, sitting in his black Prius, pondering the news of Toyota's recent U.S. recalls, there are cracks in his once armor-plated confidence in the world's biggest automaker. "I never once thought I'd have a problem before," he said. "Now, I'm not so sure."

News that the preeminent icon of Japanese industry had halted U.S. sales of eight popular models because of a design defect -- after issuing recalls of 7.6 million cars and trucks in the U.S. in the last few months -- has had a sickening effect on the national psyche.

Read more here >

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See Also:

• Toyota Accelerator Pedal Disaster Won't Come Unstuck As Shares Keep Crashing
• Toyota's Over-Expansion Glaringly Obvious As Production Halts For Eight Models
• Japan's Revival Lies In Becoming A Giant Toyota

Ford and GM are wasting little time to hit Toyota while it’s down.

They’re offering incentives to Toyota owners, in the hopes that customers will make the switch back to the American cars they used to buy.

Fresnobee: General Motors and Ford both announced discounts and special financing offers this week in hopes of knocking the Japanese automaker off its perch as the top-selling make in the U.S.

…

“There are people out there with [Toyotas] that aren’t going to want to drive them, and they need a vehicle.” Hedrick said dealers of all makes have been counting on pent-up demand to fuel sales following two years of recession that kept many would-be car buyers on the sidelines.

To make matters worse for the Japanese auto giant, the U.S. government plans to join the Toyota-take-down fray as well since the House of Representatives has just announced an investigation into Toyota’s accelerator pedal controversy:

Times: A month from now Toyota will face a cross-examination from the House Committee on Energy and Commerce over whether it responded soon enough to reports that accelerator pedals could become stuck.

The committee has sent letters to Toyota’s American subsidiary requesting documents and e-mails related to the matter.

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See Also:

• Toyota Accelerator Pedal Disaster Won’t Come Unstuck As Shares Keep Crashing
• Toyota’s Over-Expansion Glaringly Obvious As Production Halts For Eight Models
• Japan’s Revival Lies In Becoming A Giant Toyota

While drilling techniques for natural gas from American shale formations continue to appear safe overall, many are questioning the reliability and objectivity of current environmental assessments.

Statements such as the following only cause confusion and distrust:

Dallas News: Nearly one-fourth of the sites monitored in North Texas' Barnett Shale natural-gas region had levels of cancer-causing benzene in the air that could raise health concerns, state regulators said Wednesday.

They emphasized, however, that gas companies have fixed the worst emission problems and are working on less-serious sites where the state still wants benzene levels to come down.

"We don't have a widespread air-quality issue, at least according to the data," said John Sadlier, the Texas Commission on Environmental Quality's deputy director for compliance and enforcement.

Mayor Calvin Tillman of the tiny Denton County town of Dish criticized the study for not including enough tests in residential areas or enough long-term sampling. The town commissioned its own monitoring last year that found extremely high benzene levels.

"I don't think they want to find anything in a populated area, and I think their sampling reflects that," Tillman said.

The shale gas drilling (and frakking) safety tests of today will have huge ramifications for tomorrow, given that current drilling only scratches the surface of the U.S.'s potential shale-derived natural gas reserves.

Still, given the major commitments in American shale gas made by Exxon (via its recent XTO acquisition) and France's Total (via its Chesapeake tie-up), it seems highly likely that shale's environmental concerns will eventually be managed. In the end there's likely a way to extract the gas safely without too much added cost, if it already isn't safe enough. Note Total just closed its $2.25 billion Chesapeake joint-venture deal. Regardless, Chesapeake shares are falling.

The author owns shares in Chesapeake Energy (CHK).

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See Also:

• T. Boone Pickens Hates Natural Gas This Year
• Chavez Running Out Of Scapegoats As Huge Natural Gas Auction Ends Without A Single Company Bidding

2009 was a banner year for American wind power, thanks to Recovery Act incentives according to the American Wind Energy Association (AWEA).

Total installed capacity leapt 40% to 35,159 megawatts, solidifying its lead as the nation with the most wind power capacity. The next largest producer, Germany, only grew its capacity about 20% in 2009 to 25,000 megawatts.

 

On a state-by-state basis, Texas leads the nation in wind power capacity:

Yet there's a huge catch. Despite having its best year of growth ever, the industry still experienced net job losses. Its outlook also remains uncertain -- unless more government incentives are doled out:

AWEA: the continuing lack of a long-term policy and market signal allowed total investment in the manufacturing sector to drop compared to 2008, with one-third fewer online, announced and expanded wind power manufacturing facilities in 2009. The result was net job losses in the manufacturing sector, which were compounded by low orders due to high inventory. Looking forward, the critical Recovery Act manufacturing incentives that were announced only at the start of this year will also need to be supplemented with the hard targets of a national Renewable Electricity Standard.

The underlying problem remains that wind power is far too dependent on taxpayer subsidies. Thus it can't stand on its own feet, yet is growing like mad. That's the definition of a bubble.

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See Also:

• Bankers Eyeing Offshore Wind Energy
• Why The U.S. Needs More Wind Farms
• Wind Power Up 39% In 2009

Iraq's shake-up of global energy markets is picking up steam.

Exxon (XOM) and Shell just finalized their deal with the Iraqi government to increase the output of the massive West Qurna 1 field by seven-fold.

The field has the capacity to produce more oil than the entire nation of Nigeria, which only produces 2.17 million barrels per day, and more than 20% of Saudi Arabia which produces 10.78 million per day based on the CIA World Factbook.

AFP: "The oil ministry signed the contract for West Qurna-1 with Exxon Mobil and Shell," ministry spokesman Assem Jihad said in a statement.

"This contract will increase production from 285,000 barrels-per-day to 2,325,000 barrels-per-day."

West Qurna-1 in southern Iraq has reserves of around 8.5 billion barrels, according to oil ministry figures. Exxon Mobil and Shell will receive 1.90 dollars per additional barrel extracted from West Qurna 1.

There's still far more to come. Iraq is expected to eventually ramp up its total oil production from 2.4 million barrels per day now to potentially as much as 12 million, which is more than Saudi Arabia.

I consider this a high-priority post. Add my twitter for a filter of more like this: @vincefernando

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See Also:

• For Just $8.50 A Barrel, Exxon Made New American Oil Appear Out Of Thin Air
• Natural Gas Companies Fleeing Back To Oil After Exxon Dives Into Their Turf
• Congress Weighs Anti-Fracking Law That Could Demolish The Exxon-XTO Deal

2009 was the first year in modern history that the number of U.S. cars shrank, as previously highlighted here. Car scrapping exceeded new car sales in 2009. Scrapping was undoubtedly helped along by the massive Cash for Clunkers program used to stimulate the U.S. auto economy in the short-term.

What's funny though is that Cash for Clunkers juiced an industry facing long-term structural decline. After 2009's historic U.S. auto decline, the total number of U.S. cars is now expected to decline through the year 2020 even without the help of future Cash for Clunkers programs. Urbanization, oil price volatility, traffic congestion, climate concerns, and a marked distaste for car ownership by young people have all contributed to this long-term expected deterioration.

Which makes U.S. auto bailouts in all shapes and forms even more ludicrous. Not only have they provided hand-outs to auto-related interest groups, but they have even thrown good money after an industry that's naturally set to become a smaller and smaller portion of the U.S. economy.

Earth Policy Institute: Between 1950 and 2008 more cars were added to our roads virtually every year as the total fleet expanded steadily from 49 million to 250 million vehicles. In 2009, however, 14 million cars were scrapped while only 10 million cars were sold, shrinking the fleet by 4 million vehicles, or nearly 2 percent. With record numbers of cars set to reach retirement age between now and 2020, the fleet could shrink by some 10 percent, dropping from the all-time high of 250 million in 2008 to 225 million in 2020.

It's not something to shed tears over either. The U.S. can shrink its auto market substantially and still have one car per person. Thus the decline is more about things having gotten out of hand previously rather than the end of U.S. driving.

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See Also:

• Electric Cars Have A Huge Hill To Climb
• Warren Buffett's Chinese Cars Will Start Killing The US Auto Industry As Soon As This Year
• U.S. Car Ownership Takes Biggest Dive Since 1960