Frontline Profit Falls 26 Percent

by Alaric Nightingale

Frontline Ltd., the world's biggest oil-tanker company by carrying capacity, said first-quarter profit fell 26 percent after ship-hire rates dropped because of OPEC production cuts and the warmest winter on record.

Net income declined to $158.8 million, or $2.12 a share, from a restated $214 million, or $2.86 a share, a year earlier, Hamilton, Bermuda-based Frontline said today in a statement to the Oslo Stock Exchange. That beat the $100.3 million median estimate of 10 analysts surveyed by Bloomberg.

``Underlying trading looks a bit better than we expected,'' said Robin Byde, an analyst for HSBC Securities in London who has an ``underweight'' recommendation on the shares. Earnings ``look like a small positive,'' he said in an interview.

December to February was the warmest winter period on record, according to the U.S. National Oceanic and Atmospheric Administration, lowering refinery demand for crude oil. Tanker bookings also were curbed by the 1 million-barrel-a-day output cut that members of the Organization of Petroleum Exporting Countries started implementing in the fourth quarter of 2006.

Shares of Frontline climbed 0.5 Norwegian kroner, or 0.2 percent, to close at 255 kroner in Oslo, valuing the company at 19 billion kroner ($3.2 billion). They have climbed 37 percent this year. The profit included a $39.8 million gain from the sale of shares in Sea Production Ltd., a company that converts aging tankers into storage-and-production ships. Stripping out that gain, profit still beat analysts' estimates by $18.7 million.

Frontline deferred a gain of $155 million from the sale of shares of another company, Sea Lift Ltd., which will convert tankers to transport oil rigs, rig parts, bridges and other ships. Sales fell 25 percent to $362 million.

The profit decline was Frontline's first in three quarters. It reported a 0.6 percent increase in earnings in the fourth quarter after selling two vessels for gains of $73.2 million.

Frontline declared a cash dividend for the quarter of $1.50 a share. The payout is ``slightly disappointing,'' said Arne Roenning, an analyst for Fondsfinans AS in Oslo.

Earnings from Frontline's very large crude carriers, or VLCCs, slumped 31 percent to $50,200 a day while those from its 1 million-barrel carriers declined 29 percent to $34,900 a day. Break-even levels are $29,500 and $22,000 a day respectively.

Declines in freight rates are being exacerbated by a surge in shipbuilding, led by China and South Korea. Vessels equivalent to 34 percent of the world's existing tanker fleet are under construction, Frontline, led by Norwegian billionaire John Fredriksen, said today. The expansion ``gives some reason for concern,'' it said in the statement.

Employment of the global supertanker fleet may decline this year to 93 percent, from 96 percent last year, according to London-based shipbroker Galbraith's Ltd.

OPEC cut production by 1 million barrels a day by February as part of its commitment to trim excess supplies. OPEC is pumping enough crude to satisfy world consumption and has no need to review quotas before its September meeting, group president Mohamed al-Hamli said May 15.

Forecasters Predict Five Major Hurricanes

By Courtney Dentch (Bloomberg)

Colorado State University forecasters said five major hurricanes will form this season, and there's a 74 percent chance a storm will make landfall in the U.S.

The forecast released today reiterates the team's April prediction for above-average tropical activity during the Atlantic season, which officially starts tomorrow. Ten storms and six hurricanes have formed, on average, during the June-November season over the last 50 years.

Five major hurricanes, with winds of at least 111 mph (179 kilometers per hour), will grow out of the 17 total storms expected to form, researchers Philip Klotzbach and William Gray said in their outlook. Nine of the storms will become hurricanes, with winds of at least 74 mph, they said.

``We expect an above-average hurricane season with El Nino-Southern Oscillation conditions on the cool side, which will help increase the likelihood of major storm activity in the Atlantic,'' Klotzbach said in a statement.

Cooling Pacific Ocean temperatures, part of La Nina conditions, are expected to drive storm formation, while warm Atlantic waters will provide fuel. La Nina is the opposite of El Nino, when Pacific temperatures rise above historical averages, and both conditions can affect weather patterns around the globe.

The Colorado State report echoes other predictions for a more active tropical season this year, after outlooks overestimated last year's near-normal activity. Experts forecast an average of 16 storms and four major hurricanes.

One system, Andrea, formed off the southeastern U.S. coast about three weeks before the official start of the season, although it didn't strike land.

The forecast comes as a Mason-Dixon poll found that 53 percent of residents along the U.S. Gulf and East coasts don't feel vulnerable to a hurricane or related flooding, and 88 percent haven't taken steps to reinforce their homes. The survey included 1,100 adults from May 10 to 15, and was commissioned by the National Hurricane Survival Initiative.

``Nearly two years after Hurricane Katrina shocked and horrified the nation, far too many residents are still unprepared for storms,'' said Bill Proenza, director of the Miami-based National Hurricane Center. ``Last year's below-normal hurricane season may have resulted in coastal residents being lulled into a false sense of complacency.''

Last year was the first time since 2001 and the 11th time since 1945 that no hurricane made landfall in the U.S. Three tropical storms did come ashore, causing at least five deaths and $500 million in damage, according to the center.

It was expected to be an active season, although less active than 2005, when 28 storms formed, including Hurricanes Katrina, Rita and Wilma. A late El Nino weather pattern in the Pacific Ocean, where equatorial waters warmed patterns of air circulation, and dryness in the tropical Atlantic atmosphere curtailed storm formation.

U.S. Growth Weakest in Over 4 Years

U.S. Economic Growth Weakest in Over 4 Years
By Jeremy W. Peters
May 31st, 2007
NYT

The government cut in half its estimate of economic growth in the first quarter, reporting the slowest rate of expansion since the end of 2002.

Before today’s numbers were released by the Commerce Department, it was clear the economy was downshifting from the rapid 5.6 percent expansion of the first quarter last year. But the new data reinforced how significant the slowdown has been.

Growth advanced just 0.6 percent, compared with an initial estimate of 1.3 percent. IThe chief reasons for the revisions were adjustments to the estimates of imports and business inventories. Imports, which subtract from the gross domestic product, were stronger than the government first thought. At the same time, businesses cut production and accumulated smaller inventory stockpiles.

Despite the adjustments to the growth figures, inflation in the first quarter was essentially unrevised. Prices excluding food and energy, a measure preferred by the Federal Reserve, advanced by 2.2 percent in the first quarter, still above what the central bank has said it considers acceptable.

But there were some revisions to the numbers that economists said they found to be encouraging. Consumer spending, the staple of economic growth for the last decade, was revised higher. It advanced 4.4 percent in the first quarter, compared with an initial estimate of 3.8 percent. And the drag from the collapse in residential real estate was slightly less than the government first reported.

Most economists agree that the first quarter was probably a low point for the last several years, and they expect the economy has regained some strength in the second quarter. Although consumer spending has probably slowed since the first quarter and the correction in the housing market is continuing, economists expect demand from overseas — given an added lift because of a weaker dollar — to help businesses in the United States.

“We know that the world economy is growing,” said Ken Mayland of ClearView Economics. “It doesn’t seem realistic that our exports will be dead in the water. And in the context of an even cheaper dollar, they’re even more competitive now.”

A new report today found that some American businesses are indeed seeing faster growth. The National Association of Purchasing Management said that its measure of manufacturing activity in the Chicago area rose far above the level economists expected in May. Its barometer rose to 61.7 from 52.9 in April. Readings above 50 indicate growth.

Another significant factor that will determine how much the economy grows during the rest of the year is the labor market. And today there were signs that it has so far avoided hitting the skid that many economists have predicted. The Labor Department said today that the four-week moving average of Americans filing state unemployment claims for the first time fell to 304,500, the lowest level in more than a year. Initial jobless claims dropped by 4,000, to 310,000, in the week ended May 26. Tomorrow, the Labor Department will report job growth and unemployment statistics for May, shedding more light on the health of the labor market.

The housing market, meanwhile, continued to weather its slowdown. In a separate report today, the Commerce Department said that construction spending rose 0.1 percent in April after a 0.6 percent gain in March. At the same time, spending on residential construction fell again.

The Coal Trap

May 30, 2007
Editorial
The Coal Trap
NYT

There is a rule for judging solutions to the twin problems of energy dependence and global warming: A policy designed to solve one problem should not make the other worse. But that is a likely outcome of the many “energy independence” bills circulating in Congress that aim to build a whole new generation of coal-to-liquid plants to convert coal into automotive fuel.

These bills have already acquired an enthusiastic constituency and will be offered as amendments to what is now a relatively simple and sound energy bill designed to increase the fuel efficiency of cars and light trucks, encourage the production of biofuels and provide research and development money for the capture and storage of carbon dioxide emissions from power plants.

There are, of course, ways to make this bill better. Senator Jeff Bingaman will offer a useful amendment to require utilities to generate a percentage of their electricity from renewable sources like wind. But there are also ways to make the bill a lot worse. One of them is to require the expenditure of billions of dollars in loans, tax incentives and price guarantees to lock in a technology that could end up doing more harm than good.

Coal is far and away America’s most abundant fuel. It provides more than half the country’s electricity. And there is no doubt that it could substitute for foreign oil, although how much and at what price is not clear. In addition, the technology to convert coal into liquid fuels is well established. But it is also true that between the production process and burning it in cars, coal-to-liquid fuel produces more than twice the greenhouse gas emissions as gasoline and nearly twice the emissions of ordinary diesel. These are terrible ratios.

Congressional and industry proponents of coal-to-liquid plants argue that the same technologies that may someday capture and store emissions from coal-fired plants will also be available to coal-to-liquid plants. But that deals with only half of the problem. According to the Environmental Protection Agency, coal-based automobile fuel would still be marginally dirtier than ordinary gasoline and only marginally cleaner than conventional diesel.

What this means is that the country would be investing billions to produce fuels that, from a global warming perspective, leave us at best treading water. That is unacceptable at a time when mainstream scientists are warning that greenhouse gases must be cut by 60 percent or better over the next half-century to avert the worst consequences of global warming.

Researchers at M.I.T. estimate that it will cost $70 billion to build enough coal-to-liquid plants to replace 10 percent of American gasoline consumption. A similar investment in biofuels like cellulosic or sugar-based ethanol — which could yield substantial reductions in greenhouse gases — would seem a lot smarter.

Given the dimensions of our energy problems, new ideas must be explored. But it makes little sense to shackle the country now to a coal-based technology of such uncertain promise.

Russian Exports

Russian exports from IEA OMR May 2007 - page 25

Chavez Threatens Second TV Shutdown

Chavez Threatens Second TV Shutdown as Protests Mount
By Guillermo Parra-Bernal and Alex Kennedy
May 29 (Bloomberg)

Chavez said he had ``no fear'' of criticism he might face for closing Globovision, a 24-hour news channel that he accused of trying to instigate his assassination. The threat follows the May 27 shutdown of Radio Caracas Television, Venezuela's most- watched TV network.

Venezuelan President Hugo Chavez threatened to shut down the country's last opposition television station as students took to the streets for a third day, protesting what they say is a crackdown on free speech.

``They're trying to light the streets on fire and justify violence,'' Chavez said in a speech to supporters televised from Vargas state. ``I call on the people in the slums to be alert to defend the revolution.''

The three days of disorder in Caracas and other major cities marks the longest stretch of anti-Chavez demonstrations since March 2004, when opposition-led protests demanding a recall referendum left nine dead. Clashes across Venezuela between the police and marchers injured at least 40 yesterday, Globovision reported.

The yield on the 2019 government bond, known as TICC, jumped 4 basis points to 4.86 percent, the highest since March 26, according to Econoinvest Casa de Bolsa CA prices. The price dropped 0.4 to 103.50 cents on the dollar at 5 p.m. New York time.

The cost of buying protection on $10 million of Venezuela's bonds for five years had its biggest jump since Jan. 9, surging 17 percent to $198,000, according Credit Market Analysis. Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on the ability of countries or companies to repay debt. An increase in price suggests deterioration in credit quality.

University students gathered in eastern Caracas while Chavez supporters rallied downtown to support the government's refusal to renew the license of RCTV, as the country's oldest broadcaster was known.

Communications and Information Minister William Lara added pressure on non-state television outlets yesterday, asking for an attorney-general's probe of Globovision Tele CA and Time Warner Inc.'s Cable Network News for allegedly inciting violence. Globovision, founded in 1994, is owned by an investor group called Corporacion GV Inversiones CA.

RCTV, which had a national distribution, and Globovision, available only in Caracas and Carabobo state, were the only prominent stations critical of the government. xxx Coup xxx In an interview yesterday, Globovision General Manager Alberto Federico Ravell called the accusations ``ridiculous.''

``Chavez has just gone too far this time,'' Ruben Briceno, 22, a Central University of Venezuela student majoring in social work, said in an interview. ``First it was the shutdown of Radio Caracas. What will come next?''

Chavez said today the students are being manipulated by people he didn't cite. National Assembly Vice President Roberto Hernandez said the protests are organized by opposition parties seeking to overthrow Chavez.

``They will not succeed in weakening this government,'' Hernandez told reporters in Caracas Interior and Justice Minister Pedro Carreno said state intelligence and police services were prepared to quell any effort to destabilize the county.

In the days leading up to the RCTV shutdown, Chavez said the company's executives had used the network to help incite a coup that ousted him from office for two days in 2002. While RCTV covered his ouster without interruption, it failed to report his government's return to power and ran cartoon shows.

During the coup and strike, the four biggest private stations -- RCTV, Venevision, Televen and Globovision -- ran commercials calling for Chavez to resign, said Daniel Hellinger a professor of political science at Webster University in St. Louis and author of several books about Chavez. ``They say I'm a tyrant,'' Chavez said today. ``Who accuses me? Serpents.''

Globovision television station showed students putting up barricades on the streets of El Junquito, a town about 20 kilometers (12 miles) east of Caracas. Another group blocked traffic for a time on the Prados del Este highway in Caracas, creating logjams, it said.

Groups of RCTV supporters held a demonstration in front of the Organization of American States' local offices. The police deployed 4,000 officers to protect the surroundings of the OAS offices.

RCTV's shutdown, coupled with the probes of CNN and Globovision, will intensify international scrutiny of free speech in Venezuela, Miguel Henrique Otero, editor-president of Caracas-based El Nacional, the nation's second-most read newspaper, said in an interview yesterday.

``Press relations with governments with authoritarian inclinations are always difficult,'' said Paul Knox, chair of school of journalism at Ryerson University in Toronto. ``At this point, it's fair to say that the Chavez government has an authoritarian inclination.''

Saudi sees no need for raising production

Saudi Arabia sees no need for raising crude oil production
05.28.07
RIYADH (Thomson Financial)

The surge in oil prices is being driven by political factors and there is no need for additional crude supplies, Saudi Arabia's assistant oil minister said on Monday.

'What brings prices up is politics, what brings them down is politics,' Prince Abdul Aziz bin Salman bin Abdul Aziz told Agence France-Presse, referring to tensions in major crude producers Nigeria, Iraq, Iran and Venezuela.

'We have a well-supplied market,' he said on the sidelines of a European-Gulf forum today. 'We have always said, and OPEC has always committed itself to keep the market well-supplied and balanced. Never has this market been more balanced with crude than today,' said Prince Abdul Aziz, who is assistant oil minister for petroleum affairs.

He said that while there was no need for additional crude supplies, there is a problem with refining capacity. He was referring to what Saudi officials say is a need to invest in expanding refining capacity in consumer countries.

OPEC kingpin Saudi Arabia was sticking to its output quota of 8.5 mbpd, he said.

Asia Oil-Product Tanker Rates

Asia Oil-Product Tanker Rates Trade Near 4-Month High on Korea
By Will Kennedy
May 28 (Bloomberg)

The cost of shipping gasoline and other clean petroleum products in Asia remained close to a four-month high as South Korean exports boost demand.

Rates to carry 30,000 tons of fuel on the benchmark route from Singapore to Japan have gained 49 percent to Worldscale 253.64 from March 11, when they were at the lowest this year, according to London's Baltic Exchange. Rates reached Worldscale 257.27 on May 17, the highest since Jan. 16.

Exports from refineries in South Korea to other Asian countries and across the Pacific to the U.S. have increased demand for tankers. Gasoline imports into the U.S. West Coast have averaged 96,000 barrels a day this year, more than double the amount in the year-earlier period. South Korea's plants can produce gasoline to meet California's strict emissions rules.

``Singapore has also seen a very stable week with 30,000 tons Singapore-Japan remaining at Worldscale 250-255 levels with little sign of change at the moment,'' London-based shipbroker E.A. Gibson Ltd. said in a May 25 note to clients. ``Korean back-haul cargoes have remained busy and continue to improve owners' returns in the Far East.''

The tanker Siteam Leopard was hired last week to load 30,000 tons of fuel in South Korea on May 27 and ship it to the U.S. West Coast, according to data compiled by Bloomberg. The company hiring the ship or the rate wasn't given.

Three more tankers are scheduled to load 30,000-ton fuel cargoes each in South Korea this week bound for other Asian countries, Bloomberg data shows. These are called back-haul cargoes because they run against the normal pattern of trade from Singapore to Northeast Asia.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com

Oil Execs see trend of declining reserves

60 percent of oil and gas execs believe trend of declining reserves is irreversible
May 11, 2007
PRNewswire

Oil and Gas Executives say government involvement in supporting the development of renewable energy sources is necessary to alleviate the problem of declining oil reserves, according to the results of a survey conducted by KPMG LLP, the audit, tax and advisory firm.

In the KPMG survey, which polled 553 financial executives from oil and gas companies in April 2007, twenty-five percent of the respondents said that at least 75 percent of government funding into energy should be directed at the renewable sources sector and a further 44 percent said that at least 50 percent of funding should be allocated in the same way. These feelings stem from the overwhelming majority, or 82 percent, citing declining oil reserves as a concern.

"These executives are deeply concerned about declining oil reserves, a situation they see as irreversible and worsening," said Bill Kimble, National Line of Business Leader, Industrial Markets for KPMG LLP. "They see renewable energy sources as a lifeline but our survey shows that the execs recognize they cannot count on them as a solution in the short-term. Consequently, oil and gas companies are sending a clear signal to the government that intervention is needed."

While oil and gas executives are keen to see renewable energy sources becoming a mass produced reality, 60 percent say that will not be possible by 2010. Of those that believe it will, 18 percent say ethanol is the most viable for mass production by then, 13 percent say biodiesel and only 3 percent say cellulosic ethanol.

Sixty percent of the executives believe that the trend of declining oil reserves is irreversible. And, when asked about the impact of emerging markets, such as China, will have on declining oil reserves, almost 70 percent of the executives said that it would lead the situation to worsen.

The executives also clearly see that there are steps that individuals can take to alleviate the issue of declining oil reserves.

"One-third of oil and gas executives questioned said that the next time they are purchasing a family car they would consider one that consumes less gasoline, such as a hybrid," said Kimble. "They clearly see demand-side as part of the solution to declining oil reserves."

When executives were asked about their upstream capital spending in the 2006 survey, the majority indicated that investment will be a factor in helping them manage declining oil reserves. Sixty-nine percent said that it would increase by more than 10 percent, a jump of 49 percent over 2005. The 2007 survey suggests that increases in spending are flattening, with 35 percent saying they expect and increase of more than 10 percent, 19 percent saying they expect an increase of up to ten percent, and 38 percent say it will stay the same. Only seven percent expect to see a decrease.

Mergers and acquisitions continue to be a trend, with 24 percent of the executives saying that they expect their company to be involved in one in the next year - a three percent increase over last year's survey. Sixty eight percent of respondents expect private equity to play a larger role over the next year than it has in previous years.

As financial executives, the respondents put a great deal of their focus on the risks facing their companies. Forty-four percent say that the biggest risk facing their company at this time is financial; such as satisfying news regulatory requirements and shareholder demands. The next biggest risks cited, at nine percent each, were "political unrest in certain countries in which your company has operations" and "insufficient access to drilling rigs".

Gasoline $3.20

Some of these latest pieces on Gasoline are getting a little bit dicey. Both Thursday and Friday all network evening newscasts had major stories on the "Pain at the Pump. I'm guessing about the third each night. But it's a reasonable assumption. My DVR only records two channels. So it was ABC and CBS with Katie Couric one night, and ABC and NBC in HD the next. The Big Number was $4.38. I forget which broadcast carried that theory. Anyway, Gasoline is all the rage now. So here's a sampling of what the "experts" are saying.

Stuart Staniford says

So then the question is whether 2mbpd in missing Saudi oil production is enough to account for the $0.70 increase that can reasonably be attributed to crude, rather than refinery tightness. Well, that's a $0.70/$1.90 ~ 35% increase. Given a gasoline price elasticity of -0.05 during the period of interest, it would only take a 35/20 = 1.75% reduction in global gasoline supplies to do the job. Since the missing Saudi production is 2/84 = 2.4% of oil supply, it would appear that, had this not happened, we would have had little or none of the 35% crude-based increase in gasoline prices since 2004.

James D. Hamilton discusses the problems involved in constructing the first new US refinery since 1976 in Arizona.

What if we'd had this refinery's planned 85,000 barrels/day of gasoline online right now? That would represent a little less than 1% of total U.S. demand. In an environment like the present in which refining capacity may be the determining factor driving retail prices at the margin, with a short-run demand elasticity of 1/3, a 1% increase in quantity supplied would translate into a 3% reduction in price, or 9 cents per gallon using the current U.S. average retail price of $3.16 a gallon.

Admittedly, that calculation is a bit misleading, because it ignores the potential significant smoothing of price fluctuations that should come from adjustment of inventories and imports. But it does highlight the fact that, when those adjustments are working imperfectly (as they appear to be at the moment), even one more refinery could make a lot of difference.

Tom Whipple is concerned

The next important point about gasoline stockpiles is that not all of it is useable. As gasoline is largely delivered by pipeline, barge and coastal tankers these days, a lot of gasoline is tied up in transit. Thus the amount of gasoline “trapped” in transport is substantial. This“trapped” gasoline is known as the “minimum operating level.” [...]

If stockpiles – on either coast – drop much more, we are going to find out, the hard way, exactly where the minimal operating level is, for that will be the day the shortages develop. [...]

Total US gasoline inventory increased by 1.5 million barrels last week to 196.7 million barrels, still well below normal and still a cause for concern given the increased demand and the proximity of the summer driving season.[...]

There is still a good possibility of trouble ahead; last week’s stockpile increase certainly was not enough to prepare us for a Gulf hurricane, or any other kind of major disruption, but it may be enough to get us through the first part of the summer driving season without shortages. These issues are how much we continue to consume and whether imports will stay high. We will know shortly. The distribution of the US stockpiles is still not good with the Midwest and East Coast being the most vulnerable to shortages.[...]

Large US imports of gasoline, mainly from Europe, are starting to raise questions. Last weekend gasoline in Germany went over $7 per gallon and analysts are talking about the possibility of $8 gasoline later this summer. The Europeans note that the US is now importing roughly 1 out of every 8 gallons of gasoline consumed and that there is no end to this imbalance in sight. Some Europeans are beginning to ask whether their governments should be taking action to slow the exports to the US.[...]

Tom Kloza says.

I’m still holding to my prediction that we’ll see some moderation or perhaps a “giveback” in retail prices between now and the July 4th holiday. Most of the drops should occur in markets that have the most excessive prices - Oregon, Washington, the Rockies, Great Plains, and Great Lakes states. But once the Weather Channel starts showing those “cones” that indicate the probability of storm paths, we’ll bounce higher on the fear that comes with Hurricane season.

On Politics - Romney

Funniest Political Piece of the Week goes to Bruce Reed's

"They All Look Alike" on Slate

http://www.slate.com/id/2166674?nav=tap3

Foreign Affairs on Ethanol

http://www.foreignaffairs.org/20070501faessay86305/c-ford-runge-benjamin-senauer/how-biofuels-could-starve-the-poor.html

The Iowa Imperative: Ethanol

The Iowa Imperative: Ethanol
By Robert Bryce
March 6, 2007
Energy Tribune

When looking for a root cause of the ongoing ethanol scam, look no further than Iowa. Indeed, the dearth of rationality in America’s choice of motor fuels can be blamed on a single fact: the Iowa Caucus is the first presidential primary. That accident of the calendar has led to some of the most egregious examples of flip-flopping, pandering, and groupthink in modern American political history. The Iowa imperative has also allowed the U.S. to continue tariff policies that are blatantly protectionist and anti-consumer. The ethanol madness now underway is largely due to the economic needs of a state with less than 1 percent of the U.S. population – or to be more precise, the economic desires of a tiny subgroup of that 1 percent: Iowa’s corn farmers and ethanol producers.

There’s plenty of evidence of the way the ethanol lobby made Iowa the make-or-break state for presidential contenders. Back in the 1990s, former New Jersey senator Bill Bradley was a leading critic of ethanol, saying the ethanol subsidy meant higher gasoline prices for his New Jersey constituents. But once Bradley began eyeing the White House, he became an ethanol convert. Thus in 1999 and 2000, he campaigned in Iowa claiming he had changed his mind on ethanol, stating that the U.S. had to “help our family farmers get a bigger chunk of the food dollar.” During the 2000 presidential race, every candidate who campaigned in Iowa supported the ethanol subsidy. The only candidate opposing it: Republican John McCain, who refused to campaign in Iowa.

During the 2000 race, the campaign coverage made much of the ethanol issue, with several newspapers taking a dim view of it. The San Diego Union-Tribune, in a January 2000 editorial, wrote that there was “simply no justification” for the continued ethanol subsidies. Esquire magazine lauded Bradley’s opposition to ethanol prior to the Iowa causes, calling the subsidies a “preposterous boondoggle.”As the primaries ended, the late, great Texas columnist Molly Ivins declared the ethanol subsidy was “a useless piece of junk” and a “total failure.”

But now eight years later, with energy independence as key buzzwords in Washington, ethanol subsidies are alive and well, the media is largely prostrate, and old opponents of the corn-based fuel are flip-flopping like a fish on a hook. Why? The numbers explain it: Iowa produces about one-third of all of the ethanol in the U.S. Since 2002, the amount of Iowa corn going into ethanol production has tripled. The state has 21 producing ethanol plants and another 23 plants are planned or under construction. About 2,500 jobs in Iowa are directly related to ethanol production and another 14,000 have jobs – according to IowaCorn.org – that are “affected” by ethanol.

For John McCain, it appears that genuflecting before Iowa’s ethanol interests is now more important than sticking to his long-held belief that ethanol is a bad deal for taxpayers. Back in 2002, the Republican senator from Arizona declared that ethanol is a “giveaway to special interests in corn-growing states at the expense of the rest of the country.” In 2003, McCain declared that ethanol wouldn’t exist if Congress hadn’t “[created] an artificial market for it.” He also said it “does nothing to reduce fuel consumption, nothing to increase our energy independence, nothing to improve air quality.” In 2005, McCain voted against the big energy bill that passed Congress because its ethanol mandates would “result in higher gasoline costs for states, like Arizona, that do not have an abundant in-state supply” of ethanol.

That was the old McCain. The new McCain, who has his eyes on the Oval Office, loves the stuff. In August 2006 during a speech in Grinnell, Iowa, he said ethanol is “a vital alternative energy source not only because of our dependency on foreign oil but its greenhouse gas reduction effects.”

The same flipping and flopping is afflicting Hillary Clinton, who as senator from New York voted against ethanol some 17 times. In 2002, she signed a letter saying that the ethanol subsidies were “equivalent to a new tax” on gasoline and that there is “no sound public policy reason for mandating the use of ethanol.” But in January, during a visit to Des Moines, Clinton said that the U.S. needs to work on “limiting our dependence on foreign oil. And we have a perfect example right here in Iowa about how it can work with all of the ethanol that’s being produced here.”

Then there are the protectionists, a group that includes another presidential contender, Barack Obama. Last year the Democrat from Illinois, along with four other farm-state senators, sent a letter to President Bush asking him to ignore calls to reduce tariffs on Brazilian sugarcane-based ethanol. Lowering the tariff, they said, would make the U.S. dependent on foreign ethanol. “Our focus must be on building energy security through domestically produced renewable fuels,” they wrote. Perhaps it’s just a coincidence, but during his first year in office, Obama twice used corporate jets belonging to agribusiness giant ADM, the world’s biggest producer of corn-based ethanol.

Many of the neoconservatives who pushed for the war in Iraq and are now pushing for the U.S. to decrease its imports of foreign oil, are trying to get the import tariffs on ethanol removed. In January, one of that group’s leaders, Ariel Cohen, a prominent neocon who works at the Heritage Foundation, lauded Bush’s State of the Union speech, in which he laid out a plan to reduce American gasoline consumption. Cohen claims that imported oil is a “dire geopolitical threat.” But he complained that Bush’s proposals do not “address the need to bring into the U.S. the most competitive ethanol, sugar-cane ethanol, which is now penalized with punitive tariffs.”

Those tariffs are going to stay in place for one simple reason: they protect the Iowa ethanol business. That point was made clear by Iowa Senator Charles Grassley, a Republican, shortly after Bush’s speech. “Lifting the ethanol tariff would undermine faith in the domestic renewable fuels industry,” Grassley declared. “We need to continue the current supportive policies of the domestic industry….Lifting the tariff would only undercut our domestic efforts, virtually eliminate any chance of developing ethanol from other sources, and potentially leave us dependent on foreign sources for our ethanol.”

Thus, for Iowans like Grassley, and for the leading candidates for the White House, foreign oil is bad. But foreign ethanol is even worse. And that worldview is going to get a lot of play between now and January 18 – the date of the Iowa Caucus.

http://www.energytribune.com/articles.cfm?aid=404

Aframax Tanker Rates From Indonesia

Aframax Tanker Rates From Indonesia May Rise on Utility Demand
By Christian Schmollinger
May 23 (Bloomberg)

The cost of shipping 80,000 tons of crude oil from Indonesia to Japan may increase on demand from power utilities.

The rate for so-called Aframax tankers sailing from Indonesia to Japan remained at Worldscale 147.5 for a tenth day, according to data compiled by Bloomberg. That pegs the cost of shipping a barrel of oil on the route at $1.73.

Charters are hiring more ships to transport Duri crude from Indonesia to Japan, where utilities burn the oil in their power plants, ship broker Kats Nishikawa said. South Korean demand for the grade for refining into low-sulfur fuel oil has grown on power demand, PVM Oil Associates Ltd. said in a report today.

``The market is firming up some,'' Nishikawa, general manager with Tokyo-based ship broker Matsui & Co. said in an interview yesterday. ``Especially for early June, you're seeing a lot of cargoes going from Indonesia to Japan and Korea.''

SK Corp., South Korea's biggest refiner, hired the KWK Esteem for June 4 to travel from Senipah port in Indonesia to Ulsan at Worldscale 148.5, said a report today from brokers Seatown Shipbroking Ltd.

GS Caltex Corp. and Hyundai Oilbank Ltd. hired Aframax tankers to sail from Dumai in Indonesia to South Korea at rates between Worldscale 149 and 150, said Seatown.

Kuwait to Singapore

The rate for so-called Aframax tankers to Singapore from Kuwait was unchanged at Worldscale 139.42, according to the London-based Baltic Exchange. The cost of shipping on the route has fallen 5.5 percent since May 14.

Inventories of fuel oil in Singapore have surged to 15.2 million barrels, a six-month high, in the week ending May 16, according to government data. Imports of the product to Asia from the Middle East, called arbitrage shipments, have fallen as buyer demand has declined.

Shipping cost of gasoline and other clean petroleum products to Asia gained, according to the Baltic Exchange.

Shipping costs for 55,000 tons of products on the route to Japan from the Middle East rose to Worldscale 200 from 199.15, the highest in four months.

The rate to carry 75,000 tons of gasoline, naphtha or jet fuel from Singapore to Japan rose to Worldscale 139.17 from 138.13, the third straight day of gains, according to the Baltic Exchange.

The cost to ship 30,000 tons of oil products from Singapore to Japan remained at Worldscale 256.25, unchanged from the day before.

Asian Fuel-Tanker Rates Rise a 9th Day

Asian Fuel-Tanker Rates Rise a Ninth Day on Ship Supply Squeeze
By Katherine Espina
May 17 (Bloomberg)

The cost of hiring tankers to ship 30,000 tons of gasoline, diesel and other so-called clean petroleum products on Asian routes rose for a ninth day because of a lack of vessels.

Rates to transport a 30,000 metric-ton cargo on the benchmark route from Singapore to Japan climbed 2.2 percent to Worldscale 257.08 yesterday, the highest in four months, the London-based Baltic Exchange said. Shipping a gallon of fuel on the route costs 7 cents, according to calculations based on Bloomberg data.

``There still seems some upwards potential for the MR class with the market getting tighter,'' said Norway-based shipbroker Lorentzen & Stemoco AS in its latest report. So-called medium- range, or MR, tankers typically carry 30,000 ton cargoes.

Rates on the Singapore to Japan route have surged 20 percent in the last nine days as the number of cargoes for shipment gained after the end of holidays in China and Japan earlier this month. A series of ships hired to carry fuel from Asia to the U.S. has added to the shortage of vessels.

Tesoro Corp., the second-largest refinery in the U.S. West, has hired a vessel to move 30,000 tons of clean oil products on June 5 to the U.S. West Coast from South Korea for $1.44 million, Trade Sea Shipbroking Pte Ltd. in Singapore said in its market report today. No details were available on the ship and fuel.

Rates to ship 55,000 tons of oil products to Japan from the Middle East rose 1.7 percent to Worldscale 197.31, the ninth day of gains, according to the Baltic Exchange.

Japan Bound

The cost of shipping 75,000 tons of clean petroleum products to Japan from the Middle East fell for a second day, losing 0.8 percent to Worldscale 138.33.

The cost to hire a tanker to move 80,000 tons of oil to Singapore from Kuwait fell 3.5 percent to Worldscale 142.88 yesterday. The rate of hiring the same type of vessel to Japan from Indonesia was unchanged for a fifth day at Worldscale 140, according to Bloomberg data.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com/

Asian Tanker Rates Set for 4th Week of Gains

Asian Oil Product Tanker Rates Set for Fourth Week of Gains
By Katherine Espina
May 11 (Bloomberg)

The cost of hiring tankers to ship gasoline, diesel and other so-called clean petroleum products on Asian routes is set for a fourth weekly gain as demand for ships in the Atlantic draws vessels away from the Far East.

This week, four fixtures were made to ship a total of 148,000 tons of oil products to the U.S. Atlantic Coast from Europe, according to Bloomberg data. Exports have increased this year as U.S. gasoline demand outstripped supply. Gasoline supplies in the week ended May 4 were 8 percent below the five- year average, the U.S. Energy Department said yesterday.

Rates to transport a 30,000 metric ton cargo on the benchmark route from Singapore to Japan rose a fifth day, gaining 3.3 percent to Worldscale 235.83 yesterday, the London-based Baltic Exchange said. Shipping a gallon of fuel on the route costs 6 cents, according to calculations based on data compiled by Bloomberg.

Itochu Corp., Japan's fourth-largest trading company, hired an oil-products tanker to ship 30,000 tons of fuel to Korea and Japan from Mumbai on May 21, Singapore-based Trade Sea Shipbroking Pte Ltd. sad in its daily market report today.

The Singapore broker didn't say how much was paid to hire the Da Qing 451. The double-hull vessel was built by Dalian Shipyard Co. Ltd. in 2001.

Itochu also hired a tanker to carry 30,000 tons of oil products from South Korea to Subic Bay in the northern Philippines at end of the month, a report by shipbroker Odin Marine Inc.(Singapore) Pte said.

The double-hulled Pacific Serenity, built in 2003, is currently sailing to the Port of Hazira in India from off the shores of Singapore.

Rates to ship 55,000 tons of oil products to Japan from the Middle East rose 2.2 percent to Worldscale 188.46, the fifth day in a row that it's gained, according to the Baltic Exchange.

The cost of shipping 75,000 tons of clean petroleum products to Japan from the Middle East climbed 2 percent to Worldscale 137.92.

I've moved Oil Tanker coverage to a new address:

http://oiltankers.blogspot.com/

Supertanker Prices May Stay Near Record

By Katherine Espina
May 14 (Bloomberg)

The price of supertankers able to ship 2 million barrels of oil may stay near records because of demand for vessels, shipbroker Poten & Partners said.

The demand for shipyard slots to build very large crude carriers hasn't slipped as prices have risen to more than $130 million, the New York-based shipbroker said in a May 11 report. The rate to hire a tanker on the benchmark route from the Persian Gulf to Japan has gained 67 percent this year.

``With charter rates firm and continued demand for ships strong it is likely that asset prices will be high for quite some time,'' said Poten & Partners. ``Any softening in freight rates may slow the momentum of orders, but will likely have little effect on the asset prices in the near term.''

Prices have risen to records as ship owners compete for space at yards. Record earnings for bulk carriers that ship coal, iron ore and other commodities has increased investment in that sector, taking potential berths for tanker building.

Ships equal to 30 percent of the current fleet of 490 VLCCs are on order, according to Poten & Partners.

I've moved Oil Tanker coverage to a new address:
http://oiltankers.blogspot.com/

Intrade Airstrike-Iran Options (Update 1)

Airstrike.Iran.Jun07 : $5.00
Airstrike.Iran.Sep07 : $9.60
Airstrike.Iran.Dec07 : $17.00

Average : $10.50, down from $22.00 on March 29th.

Selling all 10 Jun07 options, 0 left.
Buying 30 more Sep07 options, 40 total.
Buying 20 more Dec07 options, 30 total.

Account value: $894 in options, $3762 in cash = $4656(-7%)