Below you can link to an article I published the in May 2012 issue of Oil & Energy Magazine on the importance of Safety in the industry. In my mind, it is critical to prioritize safety and compliance in order to foster not just a safety program, but a Safety Culture. In the article, I run through why I think Safety is so critical, a little about how we created and fostered the strong Safety Culture present at Dennis K Burke, and how our company and employees have benefitted.
The April 2012 Issue of Oil & Energy Magazine features an article by yours truly on the East Coast refinery closures, and what expected future impact may be. You can read the full article here: Oil & Energy Magazine (or if you prefer, open it as a PDF by clicking here )
Factoring into the closures, and the soon-to-be resultant price increases is the Northeast's traditional import of Brent crude vs WTI. Historically, Brent and WTI have traded fairly close, so the price impact at the refinery level was essentially equivalent. However, due to geopolitical and other factors, the crack spread on Brent vs WTI has been trending wide, as shown by these real time tickers:
Lets put it in actual dollars - as of May 2nd, WTI is trading around 105ish, Brent 118ish... to figure out what that equates to in dollars per gallon (what refiners work on) we look at the crack spread. The crack is essentially “what do I get per gallon for every barrel coming in?”
So how do you know the crack spread? You calculate it this way:
($ per barrel/ 42 (gal per barrel)= X).. you then take current trading price of HO (~3.14) and subtract X. Then you multiply by 42 to get gain or loss per barrel.
($ per barrel/42 gal per barrel= X)
(Current HO trading $ - X)*42 = gain/loss per barrel
Refiners will say they need at least a $5 crack to operate. To put it in real numbers, the current WTI crack is around $26.88 a barrel; the current Brent crack is around $13.88. Here’s how we get that:
WTI= $105/42g=2.50 base cost for crude to make HO at refinery
JUN HO= ~3.14
Equates to = .64 margin on current economic conditions (3.2018-2.5238=.64)
Multiply that by 42 gallons per barrel and you get $26.88 profit for every barrel of HO produced from WTI crude.
Do the same math for Brent:
Brent = $118/42=2.8095
JUN HO= ~3.14
(3.2018-2.976=.3305 x 42= $13.881 per barrel)
[Interestingly, the same math on these two products in April yielded a WTI crack spread of $28 to Brent's $9.50. (JP Morgan has predicted that the spread will drop further, before widening to new records as reported in the Economic Times Here )]
Which product would YOU rather have access to?
There is a massive push to not only improve the pipeline system in the US but the rail system as well, in order to take advantage of this crack spread. If you’re a northeast refiner and have access to WTI, you have a huge advantage vs. your competitor in the Northeast because they’re based on Brent.
I wrote an article in March's issue of Oil & Energy Magazine adressing the issue of RIN Fraud and the impact the EPA crackdown on the fraud is having in the biodiesel world.
Ironically, 2011 was a pretty great year in a lot of ways for biodiesel and biodiesel producers - production was up, green jobs were being created, we were making progress. RIN Fraud hitting the news late in the year really shook things up however, understandably, considering the fines and penalties at play and the difficulty facing smaller firms currently who have legitimate RIN credits to trade and are facing a marketplace full of cautious (at best) buyers.
Long story short, there have certainly been ripples throughout the industry over the fraud, with more to come likely. It will be interesting to see how it all shakes out.
January 1 2012 saw the expiration of the Volumetric Ethanol Excise Tax Credit (VEET).
For the end gasoline user (non retail), this would have been the 4.5 cent per gallon discount on the invoice you recieved for all gas purchased product that featured the standard 10% Ethanol blend.
For the retail end user filling up at the station, this credit was a large part of what allowed you to fill your Ford or GMC Flex Fuel car or truck with E85 at a substantial savings over standard E10.
However, if you had purchased E85, the credit would have been 38.25 cents per gallon (due to the 85% Ethanol).
What happens when youre a high volume E85 retailer or dealer and you stop getting 38.25 cents back on the gallon? This credit was critical to maintaining the price spread between E85 and RBOB, or regular unleaded gasoline, especially at the retail level. The spread has been what has really fueled the growth of E85 use, as flex fuel vehicle drivers, who can fuel their vehicles on either E85 or standard E10 gasoline can literally choose which product to fill their car with at the pump, depending on the pricing.
I spoke with CSP regarding this issue in a recent article they published. My view is that the spread between E85 and RBOB needs to be in the vicinity of 25% in order to fuel growth, unless you see larger segments of municipal fleet type end users, which may make the spread less critical. To read the whole article you can go here: http://www.cspnet.com/news/fuels/articles/e85s-price-crunch
Below is a shot of our biofuels center before the opening, and a shot of us trying to figure out this whole flex fuel vehicle thing way back in probably 2005/early 2006 with a loaner GMC "live green go yellow" Impala
A lot has changed in the world over the past 50 years and in no area is this more apparent than technology. Its amazing to look back and think "how did we do this 25 years ago?" - how did we adapt to computers, ipads, tweeting our every move.. Keeping up on technology is such a constant process its tempting to think of it as automatic. But is it really? Are we really optimizing our results and efficiency through technology?
We recently launched a new financial & accounting system and its really amazing to think that all the automated data feeds, customer tracking, alerts, and resource planning we now tend to view as standard were really akin to the flying car even just a decade ago.
I wrote a short article for Oil & Energy Magazine recently reflecting on these issues and how we've specifically addressed them at Dennis K Burke.
I'm excited to let everyone know that we will be debuting our EV Charging Station at our Chelsea MA Headquarters on November 18th (this friday) at 1:30pm. The ceremony will be emceed by Chelsea City Manager Jay Ash and special guests including the Massachusetts Clean Cities Manager Stephen Russell, and Mark Sylvia, the Commissioner of the Massachusetts Department of Energy Resources.
We will be the home of the first EV Charging system in Chelsea MA. Im excited to be adding the station to a list of environmentally conscious steps we’ve taken. We were the first at the pump retailers of Biodiesel and E85 in the Commonwealth, and in 2009 we completed a photovoltaic solar power system at our headquarters as well. Now you can charge your car from solar generated power – pretty cool stuff!
The industry buzz at the Northeast Bioheat Workshop this year in Pittsburg centered on the aggressive advertising campaign by the Natural Gas industry that promotes its product as the lower cost, domestically produced and more environmentally friendly solution to conventional oil heat.
NORA president John Huber took issue with the claims to environmental benefits, pointing out that “Methane is one of the world’s worst greenhouse gases, but the natural gas industry has ignored that.” (Methane is the primary component of natural gas and the largest source for greenhouse gas emissions. Methane is lost in all phases of natural gas production and distribution)
Massachusetts Oilheat Council President Michael Ferrante noted that the commercials were largely accurate, but struck a nerve. Ferrante said that the Oilheat market needs the environmental and efficiency benefits of biodiesel in order to compete with natural gas.
Bioheat blended with ULSD at the B20 level clearly outperforms domestic natural gas. However, heating systems are currently only approved at a B5 level. It is estimated that there are between 6 to 7 million Oilheat furnaces in residential homes. Expecting these homeowners to switch to new burners so they can run higher blends of Bioheat is not realistic, so it is critical that Bioheat’s impact on older equipment is assessed.
Michael Devine from the National Biodiesel Board spoke about the extensive marketing campaign underway in New York City to garner market acceptance for Bioheat, saying “Bioheat is the evolution of oil heat.”
Home heat dealers say that establishing legacy safe limits and bringing equipment approved for higher bioheat blends seems slow in coming. The industry is poised, waiting for state mandates to bring bioheat infrastructure forward. Although state mandates put fuel dealers all on a level playing field, it does not with other energy sources. How soon will we see equipment approvals and bioheat mandates to higher blends move forward?
This month's issue of Biodiesel Magazine features an article from yours truly regarding Bioheat and Off-Road Bio usage from water taxis to municipal heating. Pretty interesting the way Biodiesel has gained strength in areas one wouldnt normally associate with it, especially in the off road arena.
While still in the winter of 2011 we return to a season of discontent. Oil prices are soaring, food prices are soaring, as well as other commodities. The recent Biodiesel Conference was very much counter seasonal with many warm summer breezes:
the tax credit of 1.00/gallon came back
RIN values have risen dramatically making biodiesel competitive to petroleum diesel in price
Many argue that Massachusetts was very wise to insist on waste feedstock for biodiesel, which takes the food price argument off the table.
Massachusetts has demonstrated a very successful program, so successful that the Massachusetts state mandate may be postponed indefinitely to rely on voluntary efforts.
As energy independence and reducing spending (especially on foreign energy spending) dominates the news, it is great to have a great story in biodiesel.
I happen to be especially proud of Massachusetts – remember, Massachusetts is where America started!