James Van Blaricum - Gas Reaches $3.50, With Little Hope for Relief

Gasoline prices surpassed $3.50 a gallon nationwide for the first time and oil jumped to a record on Monday as the long rise of energy prices showed little evidence of giving way to recession fears.

The national average price for regular gasoline is up 22 percent from a year earlier, according to AAA, the automobile club. Some analysts expect it to approach $4 a gallon this summer, when demand is at a peak. Diesel fuel prices reached a record $4.20 a gallon on Monday, on average, compared with $2.93 a gallon a year earlier.

In trading on the New York Mercantile Exchange, crude oil for next-month delivery settled Monday at $117.48 a barrel, up 79 cents, a new high. Oil prices have more than quadrupled in the last five years, and some analysts say that oil will reach $125 a barrel this year.

The latest rise in energy prices was prompted by reports that a Nigerian rebel group had blown up pipelines in the Niger Delta. An earlier attack on a pipeline, last week, forced Royal Dutch Shell to curtail exports by 169,000 barrels a day.

Because there is little spare capacity worldwide and supplies are tight, slight disruptions in oil production anywhere can push up prices.

Further rattling the market, a Japanese oil tanker was damaged Monday when it was attacked by a small boat off the coast of Yemen, the tanker’s owner, Nippon Yusen, said. The tanker, the Takayama, was hit by a projectile. No details were provided.

Adding to worries about supplies, Mexico’s state-owned oil company indicated that its output had dropped 7.8 percent, to 2.91 million barrels a day, in the first three months of the year from the comparable period of 2007.

Pemex, as the company is widely known, has experienced a sharp decline at its largest oil field, Cantarell, where output dropped 8.5 percent in that period.

Speaking at a major meeting of energy officials in Rome on Monday, Japan’s economy minister, Akira Amari, expressed alarm at the rising energy costs.

But despite urgent pleas, members of the OPEC cartel reiterated their position that they saw no reason to increase production quotas.

“Oil prices are at an extraordinary high level today,” Mr. Amari said. “I have been repeatedly stating my strong sense of crisis that the global economy would suffer a setback if these conditions are left as they are.”

Investors have been buying commodities like oil to hedge against inflationary pressures. The falling value of the American currency has exacerbated the rise in oil prices, which are denominated in dollars. A weak dollar reduces the value of oil exports for producers, leading them to seek higher prices to make up for the loss. The dollar is near a low against the euro, settling in New York late Monday at 1.5916.

“If the dollar continues its slide, I can see prices go up,” Iran’s oil minister, Gholam Hossein Nozari, told reporters in Rome.

Oil consumption is expected to grow 1.5 percent this year. But given signs of slowing economic growth worldwide, the International Energy Agency, an advisory group to industrial nations, recently reduced its forecast for demand by 300,000 barrels a day. It said that all the growth in oil demand should come from developing nations, the engine behind rising energy prices in the last six years. Oil consumption in industrial nations is expected to drop slightly this year.

In the United States, the combination of steadily rising gasoline prices and a slowing economy has cut into gasoline consumption. As a result, demand for gasoline is headed for its first annual drop in 17 years, according to forecasts by the Energy Information Administration, an Energy Department agency.

This year, American drivers are expected to use an average of 9.26 million barrels of gasoline a day, compared with 9.29 million barrels a day in 2007. While so modest a decline, about 0.3 percent, does not sound like much, gasoline demand typically increases by 1 to 2 percent a year.

Overall oil consumption in this country is projected at 20.61 million barrels a day this year, down from 20.70 million barrels in 2007.

“What we’re seeing is a combination of a recession and some conservation efforts,” said Mark Cooper, research director of the Consumer Federation of America.

In 2007, spending on petroleum products, including gasoline, accounted for 5.3 percent of the nation’s total economic output. That was well short of the peak reached in 1980, of 8.5 percent, but considerably higher than the share in 1998, a period of record low prices, when petroleum spending represented only 2.7 percent of economic output.

Little relief is expected from the oil producers. In fact, the meeting of producing and consuming nations in Rome showed that a perception gap about the oil market seems to be widening.

Industrial nations fear that the run-up in prices may derail the global economy. But OPEC members, which account for about 40 percent of the world’s oil exports, will not pump more oil, fearing that any hasty move on its part would lead to plummeting prices.

Nobuo Tanaka, executive director of the International Energy Agency, said: “When I spoke from the podium I asked the ministers, ‘Do you agree with me that current prices are too high?’ ” He said the response was “totally quiet.”

Outside the meeting, some ministers of the Organization of the Petroleum Exporting Countries were not shy about expressing their unwillingness to step up production.

“OPEC has put the maximum supply on the market,” Venezuela’s oil minister, Rafael Ramírez, was quoted by Reuters as saying. “This is not a problem of supply, it’s a problem that is very connected to the financial problems in the U.S. economy.” He alluded to economic problems that have helped drive down the dollar.

Mohammad-Ali Zainy, a senior energy economist at the Center for Global Energy Studies in London, said OPEC should increase its output to allow global oil inventories to build up and provide a safety cushion.

At the beginning of the year, global stocks could meet daily oil demand for 67 days, five days less than at the start of 2007. In the late 1990s, global stocks covered 90 days’ worth of demand.

James Van Blaricum

James Van Blaricum 

 James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

James Van Blaricum

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James Van Blaricum - Lifting and Well Treatment

Once the well is completed, it may begin to produce natural gas. In some instances, the hydrocarbons that exist in pressurized formations will naturally rise up through the well to the surface. This is most commonly the case with natural gas. Since natural gas is lighter than air, once a conduit to the surface is opened, the pressurized gas will rise to the surface with little or no interference. This is most common for formations containing natural gas alone, or with a light condensate. In these scenarios, once the christmas tree is installed, the natural gas will flow to the surface on its own. James Van Blaricum

In order to more fully understand the nature of the well, a potential test is typically run in the early days of production. This test allows well engineers to determine the maximum amount of natural gas that the well can produce in a 24 hour period. From this, and other knowledge of the formation, the engineer may make an estimation on what the MER, or 'most efficient recovery rate' will be. The MER is the rate at which the greatest amount of natural gas may be extracted without harming the formation itself. Another important aspect of producing wells is the 'decline rate'. When a well is first drilled, the formation is under pressure and produces natural gas at a very high rate. However, as more and more natural gas is extracted from the formation, the production rate of the well decreases. This is known as the decline rate. Certain techniques, including lifting equipment and well stimulation, can increase the production rate of a well. James Van Blaricum

James Van Blaricum , in some natural gas wells, and oil wells that have associated natural gas, it is more difficult to ensure an efficient flow of hydrocarbons up the well. The underground formation may be very 'tight', making the movement of petroleum through the formation and up the well a very slow and inefficient process. In these cases, lifting equipment or well treatment is required.

James Van Blaricum , lifting equipment consists of a variety of specialized equipment used to help 'lift' petroleum out of a formation. This is most commonly used to extract oil from a formation. Because oil is found as a viscous liquid, it takes some coaxing to extract it from underground. Various types of lifting equipment are available, but the most common lifting method is known as 'rod pumping'. Rod pumping is powered by a surface pump that moves a cable and rod up and down in the well, providing the lifting pressure required to bring the oil to the surface. The most common type of cable rod lifting equipment is the 'horse head' or conventional beam pump. These pumps are recognizable by the distinctive shape of the cable feeding fixture, which resembles a horse's head.