Daily Archives: April 10, 2012

Gas prices explained, part II

Found the link (in InstaPundit) to that article I mentioned earlier. “The story behind U.S. Higher Gas Pain” from Mining.com

With production up and demand down, the basics of supply and demand indicate that oil prices should be falling. Americans should be paying less at the pump.

Instead, the average US price at the pump reached US$3.80 per gallon on March 5, after 27 consecutive days of gains. That’s 26.7¢ above the old record for March 5, set last year. The price of gasoline has climbed 32¢ or 9.3% since February 1; analysts expect prices to continue rising, reaching a national average of something like US$4.25 per gallon.

What gives? Is it all about Iran? Are speculators manipulating the market? Do any politicians have good ideas on how to “fix” the high cost of gasoline? And is there relief on the horizon?

What gives is a combination of forces. Rising tensions in the Middle East are part of the problem, but so are deficiencies in North America’s oil infrastructure that are causing price discrepancies across the nation. Some of the refineries being forced to pay premium prices for oil are shutting down, and that limits gasoline supplies in parts of the country. Speculation is also a factor, as it is an ingrained part of the market, but it is not the driving force behind America’s fuel-price problems.

If you’re wondering, there aren’t any politicians with novel, sound ideas on how to reduce fuel prices. Newt Gingrich’s promise to bring prices below $2.50 a gallon is as attainable as Michelle Bachmann’s plucked-out-of-the-air promise of $2 gasoline.

Thankfully though, there is some relief on the horizon. First, we’ll tackle the issues. Then we’ll outline some developments that should ease the pain.

A Two-Part Problem

Two main forces are driving fuel prices upward in the United States: high global oil prices and the state of the US oil transportation and refining industry.

High oil prices are the more obvious part of the problem and are certainly the part that attracts the most attention. Tensions in the Middle East have been elevated since Tunisia’s revolution kick-started the Arab Spring in January 2011. Subsequent revolutions in Egypt and Libya as well as the oftentimes violent suppression of dissent in Bahrain, Jordan, and now Syria have kept questions about the stability of supplies from the oil-important Middle East front and center all year.

Now, of course, it’s Iran that is keeping oil traders up at night. Between oil embargoes against the country and threats from Iran to block the Strait of Hormuz (a maritime passageway vital to the oil industry), the growing rift between Iran and the Western world is threatening supplies from the world’s fourth-largest producer. That’s a surefire way to push oil prices skyward.

The result: Brent North Sea (the pricing benchmark for crude oil traded in Europe) climbed above US$100 per barrel a year ago and hasn’t looked back. Since last February Brent crude has traded above US$110 per barrel more often than not, and has regularly topped US$120 per barrel.

The Middle East’s ongoing tensions also lifted crude prices in North America: After sitting comfortably near US$80 per barrel for most of 2010, the price for West Texas Intermediate (WTI) rose above US$100 several times during 2011 and averaged close to US$90. Yes, it moved much less than did Brent; moreover, not all crude oils in North America had similar boosts. To understand that situation, we have to delve into America’s oil transportation and refining system.

The US is divided into five oil districts, which were originally designed to ensure energy security during World War II. Things have certainly evolved since then, but the districts remain less connected than you might think. Crude oil cannot necessarily flow from one side of the country to the other or from one producing region to another refining area. The system’s disconnectedness means that refiners in different regions are forced to pay whatever the price may be for the crude oil they can access – and those prices differ significantly.

East-Coast refiners have traditionally relied on imported oil from Europe and West Africa, which means they pay Brent pricing for most of their crude. As such, Brent’s surging price has dealt a blow to East-Coast refiners, hitting several so hard that they are shutting down. No fewer than four refineries serving the East Coast are going or have gone offline since 2010, eliminating almost half of the gasoline previously supplied to the US Northeast. Knowing that, high gasoline prices in the Northeast start to make a bit more sense: Refiners’ costs have been sky high, and refinery shutdowns have eliminated a huge chunk of supply.

Similarly, refiners on the West Coast receive some supply from Alaska but depend on internationally priced crude for the bulk of their input. Their need to pay Brent pricing explains why gas prices in California are regularly among the highest in the nation.

At the other end of the spectrum are refiners in the Midwest. The oil hub at Cushing, Oklahoma, is being increasingly inundated with crude oil as production ramps up in North Dakota’s Bakken formation and in Canada’s oil sands. Crude from both of those rapidly-expanding oil regions flows primarily to Cushing, where refineries process as much as they can. Those refiners are able to buy at WTI pricing, which has held a roughly 20% discount to Brent crude for the last year. That helps keep gasoline prices in the Midwest a little lower.

However, Midwest refineries are generally designed to process light, sweet oil, which means they can handle output from the Bakken but are not up to processing heavy oil from the sands. Oil-sands crude needs to go to the Gulf Coast, where an army of sophisticated refineries are thirsty for heavy oil. All that is lacking is a pipeline to connect supply with demand, but at the moment there is no such pipe; thus, the supply glut at Cushing has discounted heavy oil significantly. Western Canada Select, the benchmark crude oil coming out of Canada’s oil sands, closed at US$74.73 per barrel on March 5, a 30% discount to WTI and a 40% discount to Brent.

There is cheap oil available in the United States. You just have to be able to transport the crude from Cushing to your personal refinery to take advantage of it.

One final element is making matters worse: Refineries are currently starting to shift to producing spring-summer gasoline blends, which are lighter and therefore usually cost about 10¢ more per gallon than fall-winter blends. And this year, the quick refinery shutdowns needed to enact the seasonal shift are creating slight supply gaps because some of the “swing” refineries that usually help bridge the gap are no longer operating. For example, the Hovensa refinery in the US Virgin Islands – a joint venture between Hess Corp. (NYSE.HES) and Petroleos de Venezuela – used to produce extra volume during the seasonal transition, but it was closed down a few weeks ago after losing $1.3 billion over the last three years.

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“Koch Brothers muppets!”, says Dollar Bill

Hurry, the water's rising!

Former astronauts slam NASA for its “extreme” global warming position.

Nearly 50 former NASA scientists, astronauts and technologists are chastising NASA for its position on man-made climate change.

In a March 28 letter addressed to NASA Administrator Charles Bolden, the group of 49 former employees ask NASA and the Goddard Institute for Space Studies to “refrain from including unproven remarks in public releases and websites” because “it is clear that the science is NOT settled.”

“As former NASA employees, we feel that NASA’s advocacy of an extreme position, prior to a thorough study of the possible overwhelming impact of natural climate drivers is inappropriate,” the letter reads.

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Always close to useless, Henry Blodget’s Business Insider has lost even its entertainment value

You know what an intern costs me? Nothing - so what's your point?

And now it’s just annoying. I’ve been reading (and linking to) Business Insider for a while now, if only because it has a constant stream of articles by “experts” each contradicting the other, all on the same day, so it sheds light on the thinking that’s supposed to be going on down on Wall Street.

But the little reporting it actually does for itself has been turned over to interns who are  absolutely unexposed to knowledge and, teamed with their slacker editors, are producing worthless crap.

Here’s a story from a twelve-year old intern today, for instance, expressing shock that among English financial firms, big deals call for “trophies called tombstones”. Eek, gross, says the little girl, “that’s like, so creepy, you know?” These boastful self-congratulatory icons can be found on both sides of the Atlantic, dear, and probably Asia too. And they’ve been around since at least 1965, when I began reading the WSJ.

But what really set me off is this“article” , ” Here’s why Mat Damon and these 6 celebs are anti-fracking”. “Okay”, says I, always curious, “let’s see their reasons”. But clicking through to the report yields nothing more substantive than a montage of movie star publicity pics and nothing more. These celebrities have gone on record as being against fracking and for, one assumes, bestiality and gay marriage, and that’s enough for this Business Insider youngster – no further information is sought or supplied.  And that’s enough for me, too.

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Losing half our refineries in the east

Financial Times report here. There was an excellent article on the same topic in some mining journal but now I can’t find it. The problem seems to be that the refineries capable of handling cheap heavy crude are in Texas, while eastern refineries have to use imported oil and a much higher price. Add in the lack of pipelines connecting the country (let alone Canada), EPA regulations and ethanol mandates and it’s pretty clear that we aren’t going to see $2 gallon gasoline again, Newt, Sarah and Obummer notwithstanding.

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Well I did warn you

On Thursday I predicted that 20 West End Avenue’s new price of $619,000 would cause it to go before day’s end. It wasn’t quite that fast but only because the sellers received numerous offers and went to sealed bid. It’s gone now.

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After 879 DOM, it may be time to give up

A two-bedroom unit at 25 West Elm has reduced its price again and is now at $855,000 after starting at $1.1 milion in 2009. The owners paid $800,000 in 2006 and put additional money into renovations but 25 W. Elm is a hard sell these days. Great location – a block off the Avenue – but I guess there have been some long-deferred repairs made and there’s a special assessment on each unit that really kills their affordability. In this case, that’s $643 per month on top of a monthly tax bill of $478 plus, I assume, normal condo fees. Add a mortgage payment to all that and you can probably find a cheaper, nicer unit in another condo. Until unit prices drop enough to accommodate this special assessment, I suspect the apartments for sale – and there are many – will continue to languish. And should just one or two owners toss in the towel and drop their prices, watch out below.

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How much has a Parsonage Road acre gone up in value since 2001?

(representative picture)

We’re about to find out. 105 Parsonage, a 1.2 acre building lot, has been listed for sale at $1.525 million, a 74% increase from its 2001 purchase price of $875,000. On its face, $1.525 doesn’t strike me as completely unreasonable, so if this land goes for anywhere near that, and I think it might, that says something about what’s happened to land values, if not the houses that sit on them, over the past eleven years.

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Repeal the Eisenhower tax cuts!

I got mine, Jack, now piss off!

Geroge Clooney will host a dinner at his home for the very top of the 1% – $40,000 per head, all proceeds to go to the Koch Brothers Obummer. How rich do you have to be to have a house large enough to host 150 dinner guests (plus Secret Service) anyway? This wouldn’t be possible were it not for Eisenhower’s tax cut for Hollywood.

The host, by the way, says that Occupy Wall Street’s protest against corporate greed “sounds great”. These people are so narcissistic they can’t even imagine the depth of their hypocrisy.

I’ll bet you that Clooney pays at a lower tax rate than his make-up girl.

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Catch a falling knife

The Lyon Farm condominiums continue their decline. 29 E. Lyon sold today for $775,000, down from its $995,000 asking price of last July and also down from the $1,000,000 paid for it in 2005. It sold for $539,000 in 1994 and I wonder if we’ll see that price again when this resells down the road. Someone – EOS, I believe – pointed out that there are newer, more modern projects now, in more convenient locations. I think that’s right.

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Straying off the leash?

Self-portrait by Jerry Dumas

For reasons best known to itself, the Greenwich Historical Society is sponsoring a “Dog Safety Day” down at the Bush Holly House this Sunday.

Veterinarian Marcus Suppo will share advice on the best ways to keep your pet safe from a health perspective, while Greenwich Emergency Medical Services will demonstrate pet first aid and CPR. Bandilane Canine Center will show how the whole family can contribute to raising a well behaved dog, and animal specialist Cathryn Long, a pro used to handling animals under all kinds of circumstances from ad shoots to operas, will give tips on traveling with the family pet and interacting safely with strangers.

Greenwich Police K-9 Unit Officer Mike Macchia and canine “officer” Tyro will go through their paces demonstrating how working dogs contribute to the safety of our community. The folks from Adopt-A-Dog will also be on hand to explain how to adopt the right pet for your family.

There will be pet-related crafts for all ages.

Sunday, April 15, 2012. Drop in any time from 2:00-4:00 pm

$10 for members; $15 for nonmembers

Vanderbilt Education Center, 39 Strickland Road, Cos Cob, CT

To sign up, visit www.greenwichhistory

or call 203-869-6899, Ext. 10.

I’m not at all sure what this has to do with history of any sort, let alone Greenwich’s, but dogs are always fun. I might be tempted to show up to see how “Tyro” is doing in his training. When my mother got loose some months ago Tyro or a dog that looked like him led his handler right past the house my mother was in, up the road a half-mile and then lost the scent he was following, whoever’s scent that was. After ma was found (and not by Tyro), a number of the searchers gathered in Pal Nancy’s apartment while Ma was checked out and Nancy overheard one cop ask another whether he was carrying his gun.

“Sure, why?”

“I’m gonna shoot the dog.”

Hoo hoo hoo. Anyway, all ended well and I’m sure Tyro is drawing nearer to mastering his trade with each passing month.

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Open house tour Tuesday

145 Parsonage

Didn’t see that many but 145 Parsonage Road would be the star of the tour on any day. Parsonage Road, especially this (western) end of it, is one of my favorite roads in Greenwich. It doesn’t serve as a particularly useful cut-through so it’s quiet, and the dead and the dying are all located much further east. The house itself is a 1954 home on 2 1/2 acres, completely gutted and redone, with wings added, in 2002 so everything is as close to new as you need it to be – fixtures, mechanicals, the whole package. It’s just a beautiful house done with incredible taste so hats off to the architect and the owners. And I’m especially impressed by Leslie McElwreath, the listing agent, for pricing this at $4.995 million. Leslie told me she wanted a price that would set this house above its competition so that buyers would see the value and buy, rather than just look. A daring, innovative concept that, but one I think might work. Certainly there’s nothing better in this price range and I can’t think of any that come close. Warning, though: the house has “low” ceilings, as was the norm in 1954. Doesn’t detract from its appeal or beauty at all, in my opinion, but I know there are buyers out there who will object. Their loss.

Not so well received by my peers (but priced $700,000 less) is Citicorp head’s house at 144 Pecksland Road, asking $4.3 million. Nothing at all wrong with the house, it just didn’t stand out as anything exceptional – if I had to guess, I’d suspect that this is not the gentleman’s primary residence and so not all that much has been done to it since he bought it. But he paid $4.1 million for it in June, 2001 and his asking price does show that he’s under no illusions as to what’s happened to the real estate market (and the world, come to think of it) since then.

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We’re gonna miss them when they’re gone

Mexicans returning home and we’re down to zero net migration. Industrious, hard working and hungry for education, these could have been the next generation that would support us oldsters who were hoping they’d save the Social Security scheme from bankruptcy. Now we’re left with a dwindling, aging population and the dregs of the Mexican exodus, the dopers and gang bangers clogging our jails. Not so good.

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Close to a bargain?

Maybe – 49 Pecksland Road took another price cut today and is now asking $2.087 million, down considerably from the $3.850 million (!) the sellers wanted in 2008. They paid $1.650 million for it in 2004, which was probably ill-advised, because while the location is good, the property itself is basically swampland and that’s not a popular feature. After perhaps over-paying, the owners compounded their mistake by undertaking a massive renovation, taking the house down to its studs and building anew while increasing its size 60% from 3,461 sq. ft. to 5,650. The result is very nice but the land remains as it was – oh were this the 1960’s, when a swamp could be eradicated with a few culverts and an excavator, but it’s not, so the swamp endures.

All that said, there’s a decent front yard and side yards and the house is pretty much brand-spanking-new. At its new price and maybe with some additional dickering, this could work.

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Phew! Turns out that even in Riverside, there’s a limit

24 and 26 Marks Road, two spec houses by Kali-Naagy, have each been reduced in price from $3.999 million to $3.840. That’s not much of a cut but I was wondering whether Riverside buyers were willing to pay anything for new construction, no matter how small, no matter how cramped the lot. Apparently not.

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Child molestors evicted from New Haven Green

Danielle DiGirolamo

Long overdue. You may recall that the last time we visited this subject we outed “Occupy Spokesman” Ed Culligan as a convicted child molester who was actually living in a homeless shelter across from the Green.

Here’s a more typical protestor, we hope, who, before being quoted as a New Haven Occupier in today’s paper, was profiled both on YouTube from back in the Wall Street days and even the Daily News: Meet Danielle DiGirolamo, 23-years-old, “a hemp advocate who lives with her pet squirrel in Manhattan’s Zucotti Park”. Danielle has something on her mind, even if she can’t articulate it:

What are her demands – and who is she demanding them from?

“There’s so many demands, to even start having a list, it’s too much. If we just had one list, it would narrow us down, because it’s so much more than just a list, it’s a way of life that we want that they can’t give us, the people that are in charge and everybody, they’re just all about greed and they just want more and more to consume whatever they want.”

That said, she does have a few specific demands in mind.

“I want the Federal Reserve to be shut down.”

“And we need to really, really better educate our students, starting at young ages and putting more money and more emphasis in children and their schools.”

How she feels when she looks at Zuccotti Park:

“I see a bunch of intelligent people who know what’s really going on and they see past all the media circus stuff and all the mainstream things.”

I’m not really picking on a sweet little 23-year-old nitwit from the hinterlands of Connecticut – she’s got older, more-educated peers who deserve our true scorn (where’s Dollar Bill these days?), but just because she’s a simpleton doesn’t mean we or the media need to listen to or respect her, cute pet squirrel “Hazelnut” or not.

Hazelnut does New haven

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Still for sale

The King on his throne

41 Alpine Road, 8 acres, 12-year-old mansion, is still available and still asking $19 million  and is again on the open house tour today. It’s been for sale on and off since 2005 with a price that dips and rises over time, from $21 million to $18.5 and then back again. There’s a slim market for houses in this price range so it’s not surprising that it has yet to sell, but its longevity on the market does give me the opportunity to revisit its listing from time to time and re-post one of my favorite, if oddest “features”: EVERY NOISE, VIBRATION OR ACT OF NATURE IS ANTICIPATED & SQUELCHED. IT’S BUILT FOR A KING.  So far, no one has appeared who is so concerned about squelching his acts of nature that he’ll pay this kind of money to achieve it but eventually, …

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Anyone out there been infected by “Text Enhancer”?

Something by that name has grabbed hold of my computer and is automatically linking words I write and read to advertising. If you’ve heard of it, do you know how to get rid of it and maybe the address of the invader so I can firebomb their offices?

UPDATE: Found these instructions. I’ll try them

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Here’s a relative bargain

25 Sherwood Avenue, 14 acres, renovated mansion, is back up for sale today after failing to sell last year for, first, $18.9 million and eventually $16.9. Today it can be yours for $12 and change. Of some interest to Cos Cob residents may be the fact that this sold in 2009 for $18.9 million in one of those “secret sales’, where the price was agreed on in advance, then the property was “listed” (for $21 million) simultaneously with its reported sales price. One assumes that the buyer thought he was achieving a bargain by snatching this up before it hit the real market but today’s price cut would indicate he did not. I think the word “sucker” would be inappropriate and unprofessional here so let’s just call this an unfortunate buying decision.

But a buying opportunity now for someone else.

UPDATE: WTF??!! Some damn ad ware has infected my blog so that the word “bargain” is converted into a link to an advertiser. Jesus Christ – I’m working on ending that now – until then, don’t click on “bargain”. (I’ll just misspell it in the future, if that’s what it takes)

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Building permit applications up

Back to the feeding frenzy, maybe. Now that the average time to build a new home has stretched past two years (thank you, Planning & Zoning) builders and private homeowners seem to be getting ready. I know just from my limited exposure to clients that there’s a general frustration out there over finding a suitable house and some folks are just deciding to buy a tear down and build what they want. Which is fine; I doubt we’ll miss many of the houses slated for disappearing, but if your home is being eyed for its land value only, all those improvements you put in over the years: a deck, central a/c, new kitchen, etc., may be worth nothing. Make improvements for yourself, not resale value, is my advice.

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A different era

Why do I suspect that Mat Lauer won’t be buying this? Andy Rooney’s Rowayton home is for sale ($789,000, ask).

The 2,474-square-foot, four bedroom, one bath Tudor style home was built in 1882 and is situated atop a hill, within walking distance of the village and train station. The Rooney’s purchased the home in the 1950s and raised their four children there.

One bathroom shared by six people? These days you’d be brought up on child abuse charges.

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