Energy Security, Not Independence, Should Be The Goal

Posted by Ed Burke on Mar 27, 2014 12:36:40 PM

Crude oil terminal

We've discussed previously the debate about lifting the Crude export ban in the wake of the shale oil boom in the US. Last year alone the reduction in US imports (down 9%) and the increase in exports (up 11%) accounted for a $63 billion dollar reduction in the overall trade deficit.

Next year the US is expected to become the world's biggest exporter, and oil production is continuing to increase - analysts predict that by 2020 the US will be a net exporter, and the boom could create a net 4.7 million jobs by 2020 as well. 

The continued economic success of the oil boom however will be greatly impacted by whether or not the Crude ban is overturned. Without a growing export market to support the increased production, prices become depressed due to limited refinery capacity until the infrastructure catches up to the supply, which is never the goal, realistically.

The thought is that the US will be capable of being virtually self sufficient in oil production by that 2020 horizon, although that's not necessarily the practical goal. Trade relationships are often a positive for nations, and the thought is we get a better energy security by maintaining relationships than setting the goal as an isolated, completely energy independent nation. For example, we currently get almost half our oil imports from Canada and Mexico, and the Keystone pipeline would enhance our ability to get Canadian oil into the market and strengthen our relationship with Canada. There is a school of thought that an energy alliance between Canada and the US, or Canada, the US and Mexico would be a much better solution for all three countries' energy security and economic opportunities than being a completely independent country would.   

Exporting will have an enormously positive impact on the trade deficit, and US supply would keep downward pressure on global pricing. In terms of energy security, the availability of alternative crude sources for other nations is a positive as well - being that its a global market, political and other issues in oil-producing nations will always affect one another, but with varied supply an issue in one nation isn't neccessarily a catastrophe for others. For example, as we are seeing in the Russia/Ukraine situation, Europe is in a tight spot given that a huge percentage of their energy supply comes from Russia. That sort of limits their ability to enforce tough sanctions because they risk an economic mess if Russia decides to push their prices higher in retaliation. As we all know - energy prices have huge impacts on almost all sectors of a nations economy.  

Political ramifications and implications of Energy policy and security aren't the only issues at play in the debate, obviously. Environmental groups strongly oppose exporting crude because it will likely make renewable energy even less cost effective in the wake of plentiful oil supply, and reduce the pressure to find alternative, non-fossil fuel energy sources. 

I wrote an article on this topic for the March issue of Oil & Energy Magazine - you can read that article in their online magazine here: http://oilandenergyonline.com/how-energy-independent-is-america/ 

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Topics: Energy Independence, US Crude Exports, US Energy Boom, Keystone XL, russia, ukraine,

Emergency Preparedness for Hospitals Post Sandy

Posted by Ed Burke on Mar 12, 2014 12:40:55 PM

Dennis K. Burke refueling truck performing an emergency refueling at night

Federal Officials with the Department of Health and Human Services are putting forth new regulations on Hospitals, Urgent Care Facilities, and other inpatient care environments that would require them to have plans on maintaining necessary functions for patient health and safety. This includes new regulation on emergency backup generators and generator fueling.  According to the AHA this means they must "develop and maintain and comprehensive emergency preparedness program that...utilizes an all-hazards approach...developing capacities and capabilities critical to preparedness for a full spectrum of emergencies or disasters.. not managing seperate planning initiatives for a multitude of threat scenarios" 

HHS cited severe issues that had arisen during Hurricane Katrina, Hurricane Sandy, and other disaster scenarios, (including the estimated 215 hospital patients who died in Katrina's aftermath) and declared that comprehensive emergency preparedness plans are an "Urgent Public Health Issue" (You can read more about this in today's New York Times article here: http://nyti.ms/1fndiuP )

One of the more controversial federal requirements is that each emergency generator must be tested annually, for at least four hours under a full load (based on what the estimated power needs of the facility would be in the event of an emergency need). A written record of inspections, testing, and repairs is required to accompany the new testing requirements as well. The old regulation only required such testing every 3 years. The thought is that there are oftentimes issues with generator performance when the need strikes, and proper testing and maintenance annually will go a long way in preventing those failures going forward. 

Additionally, hospitals that maintain an on site fuel source for their generators must maintain a quantity of fuel on hand that would be capable of sustaining through the emergency, or until likely resupply could occur. After all - your generator isnt of any use if you run out of fuel. 

The controversy about these parts of the regulation is cost, obviously. The American Hospital Association estimates first year costs at $225 million dollars, according to the New York Times. However,  NYU Langone Medical Center alone reported over a billion dollars in damages and lost revenue in the wake of Hurricane Sandy - so it would seem big picture, that a lack of willingness to pay upfront costs could be "penny wise but pound foolish" in the event of a disaster. 

What are your thoughts on the new proposed regulations? 

(By the way - if you're in the healthcare industry and would like a detailed explanation of the proposed outlines and how they specifically need to be implemented in hospital settings, the ACA has an excellent slideshow online at www.aha.org )

If you'd like more information about our generator fueling program, you can get it here: http://www.burkeoil.com/fuel-and-gasoline/generator-fuel-program

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Topics: Emergency Generator Program, Emergency Fuel

Energy Issues Top the Political Agenda for 2014

Posted by Ed Burke on Feb 25, 2014 12:52:00 PM

Main energy topics in the headlines for 2014 include the Crude Export Ban, the Keystone Pipeline, the Climate Change Action Task Force, RFS Volumes, and an expected final ruling on the Tier III mandate from the EPA. 

State of the Union 2014
(Photo Credit: Amanda Lucidon, WhiteHouse.gov Official Photo)

There is a lot of work to be done on energy infrastructure in the US - something that became especially clear with record breaking spikes in Natural Gas pricing to the New England and New York markets on the heels of the Polar Vortex. This topic is supposed to be the highlight of the Administrations Quadrennial Energy Review. However, the most obvious energy infrastructure and transport improvement - the Keystone XL pipeline is still bogged down in its 5+ years of paperwork, with no decision in sight, even following the most recent Environmental Study which found there would be no major negative impact environmentally from the project. The State Department review was expected after the President's State of the Union Speech, with a Presidential decision to follow but so far as of late February we haven't seen any movement on the issue. 

Renewables are also on the table - The EPA's expected final RFS volume reductions should be out this month (the first time the EPA will have used waiver power to decrease, not increase, volumes). The tax credits for Biodiesel and Cellulosic Biofuels also expired at the end of 2013, but if you recall, last time these were reinstated retroactively. The EPA is also expected to release its final ruling on Tier 3 Gasoline Standards, which would affect the sulfur content of gasoline vehicle emissions.

I wrote a more comprehensive article for the February issue of Oil & Energy Magazine on the topics on the Energy Agenda for 2014, you can read that article by clicking here 

What do you think the priority items on the Energy Agenda should be?    

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Topics: Energy Independence, Biodiesel Tax Credit, Cellulosic Ethanol, RFS 2, EPA Mandate, Keystone XL, US Crude Exports, President Obama Address

Is Ethanol Even Green?

Posted by Ed Burke on Jan 21, 2014 2:08:00 PM

Grassy Hillsides plowed into crop rows. Millions of acres of conservation land converted to corn fields. Fertilizer runoff polluting lakes and streams. All to produce a "green" fuel source.... Or that's the picture painted by an AP article slash expose anyway. 

The ethanol industry renounced the AP article as a "smear campaign" pointing out that fertilizer runoff and associated issues occur regardless of the end point of the corn produced. Another issue with the AP article is that the "conservation" land converted to corn fields wasn't exactly "conservation land" in the usual sense - essentially, much of it was designated conservation under an initiative that seemingly has less to do with conserving land than it does with boosting crop prices for farmers. While those points may be true, there is no doubt that corn based ethanol has environmental impacts, and there's even question on how much benefit to the environment the fuel itself produces, with the revelation that ethanol may be only about 16% "greener" than gasoline, which would technically disqualify it as a green alternative to gas.

The Senate has even introduced a bill to eliminate the ethanol portion of the RFS. This happened in December, just as the EPA announced it would reduce the ethanol blending goals in the standard. Not a good month for the Ethanol Industry, I would say. Senators Feinstein and Coburn - another unlikely alliance, cosponsored the bill. Both cited increased food costs as a result of diversion of corn into fuel supply, and the issues oil companies face with the blend wall - their inability to blend more ethanol into fuel without risking damage to consumer vehicles (that was the issue behind the EPAs reduction as well). [You can read a little more detail about the bill in my most recent Oil & Energy Article by clicking here]

So what does this all mean anyways? Its not likely ethanol will "go away" but both of these actions make it a little less burdensome on refiners and companies and protect the blend wall. It will be interesting to see how it shakes out over 2014 - the Obama administration strongly supports the corn based ethanol on the basis that it encourages biofuel adaptation in general and ethanol is a good starting point. There is no doubt that the mandate for corn based ethanol is extremely costly however, and with the undeniable impacts on food prices for both the industry and consumers, given the recent questions on the reality of its environmental impact, it seems to be time for politicians to really sit down and repair broken and costly regulations.  

 

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Topics: E85, RINs, Biofuels, EPA, Ethanol, RFS 2, EPA Mandate, Blend Wall

Environmentalists & Oil Exec's Unite on RFS Volume Reduction

Posted by Kelly Burke on Jan 14, 2014 9:47:00 AM

A surprisingly unusual coalition of folks have united to support the EPA's reduction of RFS Volume Requirements including food industry leaders, environmental groups, humanitarian groups and oil industry groups. Why is that? 

Everyone involved has concerns about different impacts they believe are created or exascerbated by the mandate, especially if the volumes hold or increase. Refiners, for example are concerned about their ability to breach the "blend wall", where every gallon of gasoline would contain the required 10% - once thats hit it will be extremely difficult for refiners to generate the neccessary RINs, largely because of concerns about moving past an E10 blend.

Refiners and Motorist groups like AAA argue that E15 is not approved for use in a large portion of vehicles, and 13 major car manufacturers will even void warranty coverage in vehicles running E15. That's a huge issue for folks with cars that are not model 2014. Even the Ethanol groups numbers on this issue leave approximately 250 million vehicles on the road that cannot run properly on E15 - that's not good news for Joe Six Pack.

So why are Environmental groups throwing their support behind a Volume Reduction? Isnt Ethanol supposed to be "green"? Well, maybe not. Original numbers put ethanol at 16% greener than gasoline, and then theres the more obvious environmental impacts. An estimated 5 million acres of land that had previously been set aside for conservation have been converted into farm land for corn for ethanol. Fertilizer run offs have worsened a "dead zone" in the Gulf of Mexico, and contaminated some local water supplies as well, according to an AP investigation. 

Food producers oppose the mandate on the basis that diversion of corn for use in fuel versus the food supply has driven up the cost of animal feed, as well as corn used in processing itself. 

Beyond just supporting the Volume Reductions, the groups in question support a full repeal of the RFS in many cases. 

I wrote an article for Oil & Energy Magazine that gets a little more detailed on the RFS Reduction, you can read it here if you are interested: Oil & Energy Magazine 

What are your thoughts on the RFS Mandate and potential Volume Reductions?

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Topics: Oil & Energy Magazine, Biofuels, EPA, Ethanol, RFS 2, EPA Mandate

Would CRUDE Exporting Increase Your Pain at the Pump? Not Necessarily

Posted by Ed Burke on Jan 7, 2014 1:43:00 PM

As we’ve discussed, proponents of overturning the ban on US Crude Exports cite the economic gain to be had, including jobs to be created.

An objection to lifting the ban on US Crude exporting is that given that US consumers are paying record prices for at-the-pump gasoline, it’s tough to see exporting the raw material to produce that gasoline. 

Gasoline prices, however are determined by global markets not domestic supply per se, although there is an influence. 

What's important to remember concerning the Crude Export ban is really two key factors:

It is permissible under US Law to export refined oils - ie finished products. If the argument for maintaining the ban is that it will negatively impact domestic gas supply, thats not really true as one could, today, export finished gasoline. In fact, the US is one of the world's largest exporters of finished (refined) diesel & gasoline. 

Secondly, and more importantly perhaps - the US refinery infrastructure has understandably not been able to keep up with the boom in production of crude, in both refinery capacity and transportation ability. This is resulting in downward pressure on the prices producers can get from refineries for their Crude, making it less profitable. Continued downward pressure could remove the incentive to produce in the first place.

What does that mean for pump prices? It means the incentive to produce and sell domestic crude to be refined into gasoline is not really there. Which, in turn, means the banning of exporting crude is not some automatic way to increase the domestic supply of refined gasoline. Without a large increase in supply, you dont get a decrease in price. 

So what about pricing if the ban is lifted? 

Again, gas prices are largely globally influenced, however exporting to nations that have refinery capacity will drive up the total supply and potentially lower prices.

Outside of this, the economic benefits to the US are estimated to be in the billions - and with an improving economy, if gasoline prices remain stagnant they become a lower percentage of expense for individuals which essentially has the same impact as a price drop in a stagnant economy. 

 

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Topics: Energy Independence, Fracking, CRUDE

Tier 3 Gasoline Standard Ruling to be released by February

Posted by Ed Burke on Dec 10, 2013 8:57:00 AM

The EPA has announced it will release the final rule on the Tier 3 gasoline standard by February of this coming year, after revising the timeline due to the volume of responses received. The standard  is set to be in effect by 2017, with the stated purpose of reducing harmful vehicle emissions and pollution generated by cars and light duty trucks by dropping the sulfur content of gasoline from its present 30 parts per million down to 10 parts per million. (If you recall, Tier 2 dropped gasolines sulfur content from 300 PPM to the current 30PPM) 

The EPA estimates the cost impact of Tier 3 should be around a penny per gallon, but refiners believe that it could be more like 9 cents per gallon. This is because of the overhaul needed at approximately 66 major US refineries to make their existing hydrotrating equipment meet the new standards, and the fear that there is not enough excess in supply to cover demand while the upgrades happen could shoot the price at the pump up.  

The EPA says that by the year 2030 the program should cost about 3.4 billion annually, that they claim is more than offset by the projected monetized health benefits of somewhere between 8 and 23 billion. 

I wrote an article for NEFI's Oil & Energy Magazine that goes into more detail on the standard and how it works, you can read that article here: Oil & Energy Magazine  or in PDF Form by clicking here 

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Topics: Refinery Closures, EPA, EPA Mandate, Tier 3 Gasoline Standard, Gasoline Supply Crunch

Is it Time to Overturn the US Crude Export Ban?

Posted by Ed Burke on Nov 8, 2013 3:33:00 PM

Congress is reportedly considering overturning laws banning US Oil Producers from exporting Crude. The law originally went into place in the 1970’s largely in reaction to embargoes that raised “scarcity” concerns – essentially, blocking export is supposed to safeguard from scarcity in domestic supply.  This is timely on their part – as we have seen for the first time since 1995, US Crude production has exceeded imports. What do they have to do with each other? In the absence of an export potential, or at least one not slowed and more expensive due to refining, US crude production will hit a plateau or worse. But why?

Refined oil  (gasoline and diesel) can be exported under current US law, and exports have grown substantially in recent years. The issue is, however, that the shale oil boom is producing huge volumes of light crude. In order to export, these huge amounts of crude need to be refined, which is difficult, costly and will ultimately slow production over time. The Council on Foreign Relations sums the issue up nicely in the following quote:

“Restrictions on crude oil exports are already beginning to undermine the efficiency of US oil economy. Much of the country’s rapidly growing production of light crude oil… comes from either areas where refiners are not interested in or able to process it, given that many US refineries are configured to run on lower-quality crude oil, or in parts of the country with inadequate transportation infrastructure. With few viable domestic buyers, producers are forced to choose between leaving oil in the ground and pumping it at depressed prices. The artificially low prices slow additional US Crude production. New refineries currently under construction will help remedy some of these market distortions over time, but a simpler, more cost effective solution would include allowing US Crude to be exported

(CFR Policy Innovation Memorandum No. 34 – you can read the whole thing by clicking here )

The CFR also estimates that Crude Oil exports could generate upward of $15 billion in annual revenue by 2017. Revenue to be made from export should also serve to stimulate continued investment in infrastructure, move technology forward, increase profitability for domestically based producers, not to mention create thousands of permanent, high paying jobs for Americans. 

Before we assume it’s a cut and dry decision however, there are several compelling arguments against dropping restrictions on Crude export, from economic concerns to environmental ones. Since this is a big and somewhat complex topic however, I will address them in subsequent posts.

What are your intial thoughts on US crude export policy? Do you favor a change?

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Topics: Energy Independence, CRUDE, US Crude Exports, US Energy Boom

How Effective is Your Safety Program?

Posted by Ed Burke on Sep 30, 2013 8:01:00 AM

We run a big fleet of trucks, including tankers, straightjobs, box trucks and a fleet of company vehicles driven by our sales team - so we have put a LOT of thought into safety program effectiveness. 

One of the main things we've learned is - It works if its working Proactively.

So how do you implement a proactive program? Think big picture. There are dozens of areas that when you think about it, ought to require a policy or procedure to avoid future issues. For example, we implement company policy on the following items, and make sure that all drivers and operations department personell are fully trained and informed on the policies so we are all on the same page. We have a full time Safety Manager and Operations Department that tracks and enforces all the variables, which may or may not work for your organization depending on size and need - but either way, if you run a trucking company, most or all of these items ought to be on your radar 

    • Rigorous Pre Employment Screening

    • Training - 15 days of documented training for new hires partnered with a senior driver or trainer

    • Distracted Driving Policy

    • Drug and Alcohol Testing Policy

    • Emergency Procedures - breakdowns, roll-overs, spills, etc. 

    • Vehicle Safety Compliance Policies

    • 90% max tank fill policy for site deliveries

    • Daily, documented pre and post trip vehicle inspections

    • Hours of Service Logs and Policy

    • Safety Meetings

    • Safety Bonuses

    • Full compliance with local, state and federal ordinances, laws and mandates

    • Tracking KPI's on DOT, CSA, and OSHA metrics, as well as tracking insurance variances, fines, and cost changes

     

    The list goes on, but these are the mission criticals. I get into a little more detail on each of the items in Septembers Oil & Energy Article (you can read that by clicking here)  

    What areas does your business focus on, and how do you measure your Safety Programs success?

 

 

 

 

 

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Topics: Oil & Energy Magazine, Safety, Safe Driving Policy

Solving for the Customer with Remote Wireless Fuel Tank Monitoring

Posted by Ed Burke on Aug 29, 2013 12:25:00 PM

In a world of ever appearing new technology the promises the world for your business, how do you decide what options justify the intense time and money investments? For us it comes down to a single two-part question, “Does this streamline our operations for our business and make our employees jobs better and more efficient?” And more importantly: “How does this enhance our customers’ experience?”

One of the technologies we’ve adapted over the past few years that delivers on both these criteria is wireless remote tank monitoring. If you’re unfamiliar, these are essentially small wireless transmitters that are installed on a fuel tank and push notifications on fuel levels periodically. The notifications go to a secure, cloud based platform.

This has been fantastic for both our dispatchers and drivers. Dispatchers are able to see levels on monitored customers’ tanks, so they are able to plan delivery routes out further and they are able to maximize delivery gallons as well (a 75% fill over a time based automatic that would typically be around 50%).  This makes drivers more efficient, and delivering more gallons in less time allows us to keep costs and therefore prices down. The monitoring also helps our customer service department by reducing the number of same-day urgent run out calls.

Certain industries have wide swings in product usage depending on different factors – a particularly busy marina weekend, an unexpected snow storm for a DPW, an unusually cold weekend, or a power outage kicking on your generator… I’ve been in the dispatch and driver seat on these kind of urgent calls and its extremely stressful – I don’t doubt its infinitely more so for the customer, and for a lot of people, being remotely monitored essentially takes this entire scenario off the table.  That allows you to focus on your business and your customers, rather than sticking a tank, calculating your usage, etc.

I wrote an article for Oil & Energy Magazine on wireless remote tank monitoring that gets a little more into the details, if you would like, you can read it here: Oil & Energy Magazine Online. If you’d like more info on our remote tank monitoring and other inventory controls, you can click HERE , or shoot us a comment or email.

Are any of you on remote monitoring currently? How has it helped (or not helped) your operations? 


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Topics: Marinas, customer service, remote tank monitoring

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