Following is a summary of top stories in the energy sector Tuesday afternoon.
Oil Prices Sag After Turks Leave Iraq
Oil prices fell after Kurdish officials said Turkish troops that entered Iraq early Tuesday to pursue Kurdish guerrillas returned to Turkey, reducing worries that the conflict would cut oil supplies from the region.
Light, sweet crude for January delivery fell 14 cents to settle at $90.49 a barrel on the New York Mercantile Exchange after trading as low as $88.88 when the Turkish withdrawal was announced. Analysts attributed some of Tuesday's price volatility to the January contract's expiration. February crude fell 97 cents to settle at $90.08 a barrel on the Nymex.
Iraq exports about 1.5 million barrels of oil a day, most of it to Asian customers. Exports have not been seriously disrupted since 2003, when the war in Iraq began _ although the Energy Department says the country's main oil pipeline has been a constant target of insurgents.
Some analysts, such as Oppenheimer & Co.'s Fadel Gheit, have said speculators trying to drive up the price of oil have exaggerated threats to Iraqi oil.
January heating oil futures lost 4.25 cents to settle at $2.5554 a gallon on the Nymex, while January gasoline futures gave up 3.11 cents to settle at $2.3043 a gallon.
Natural gas rose 10.6 cents to $7.141 per 1,000 cubic feet.
New Mileage and Ethanol Rules to Become Law
The energy bill is on its way to the White House for President Bush's signature after Congress approved it by a wide margin.
Among the highlights:
_Automakers must improve fuel economy of cars and small trucks, including SUVs, by 40 percent to an industry average of 35 miles per gallon by 2020.
_A sixfold increase in the use of ethanol as a motor fuel to 36 billion gallons a year by 2022, with 21 billion gallons to be cellulosic ethanol from feedstock like prairie grass and wood chips.
_Requires more energy efficient lighting and appliances, and more energy-efficient federal and commercial buildings.
Provisions eliminating tax breaks for big oil companies and expanding tax credits for renewable energy sources did not make it into the final version.
Budget Bill Has $8 Billion for Clean Coal
Also in Washington, the House passed a budget package which includes $8 billion in loan guarantees for clean coal and coal-to-liquids projects through September 2009.
Coal company shares rose. Consol Energy added $1.50, or 2.3 percent, to $67.25. Arch Coal gained 71 cents to $40.37. Peabody Energy rose 29 cents to $58.08.
FutureGen Goes to Mattoon, Ill.
Mattoon, Ill., will be the site of the $1.5 billion experimental, low-pollution FutureGen coal-fired power plant.
The FutureGen Alliance, comprised of a dozen U.S. and foreign companies _ including American Electric Power Co. Inc., Southern Co. and Peabody Energy _ picked Mattoon over another Illinois town and two Texas locations without a go-ahead from the Energy Department, which will fund 75 percent of the plant's construction.
An Energy Department official last week told FutureGen Alliance Chief Executive Michael Mudd the department needed more time to review public comments on the four sites that were in the running.
The developers thought the government had plenty of time to assess the sites, but the project concerns some congressmen because of delays and the rising amount of taxpayer dollars going to the project.
The FutureGen plant will use advanced technology to virtually eliminate carbon dioxide emissions by trapping the greenhouse gas and storing it underground.
Crude Inventories Expected to Shrink Again
The Energy Department releases its weekly petroleum inventories report Wednesday. Analysts surveyed by Dow Jones Newswires expect crude inventories to fall for a fifth consecutive week. The mean estimate is for a draw of 1.3 million barrels. Another decline in total crude inventories will not necessarily support oil prices. Traders will also take a close look at inventories at the Cushing, Okla., terminal, the prime delivery point for Nymex crude futures. Inventories there have risen in recent weeks.
Analysts think gasoline stockpiles will add 700,000 barrels. Distillates _ including heating oil and diesel fuel _ are expected to drop by 300,000 barrels.
Refinery usage is expected to rise 0.2 percent to 89 percent of capacity.
Analysts participating in the survey generally base their estimates on an "average" week for the industry. Unexpected factors often skew the actual numbers.
As Refining Margins Rise, Consumers Pay More
Bear Stearns analyst Nicole Decker said refining margins rose in most parts of the country last week, the Midwest being the exception.
Despite refiner and investor concern about weak margins in recent months, Decker pointed out that refining margins year-to-date averaged $16.07 per barrel compared to $12.68 per barrel a year ago. "Holding all else equal, consumers have had to absorb a $9.40 per barrel (22 cents per gallon) increase in the price of a barrel of gasoline, diesel fuel and heating oil in 2007, at a total estimated cost of $47 billion based on average 2007 demand," she said.
Since 2002, total costs have risen $291 billion. "The good news is that the cost increase in 2007 was the lowest on a year-over-year basis since 2003. The bad news is that higher costs for items such as transportation and blending have further burdened the consumer," Decker said.
Weather Drives Up Gasoline Demand
Motorists filled their tanks last week as snow and ice storms lashed the Midwest and the Northeast. The latest survey from MasterCard SpendingPulse for the week ending Dec. 14 showed retail demand at the pump rose 3.4 percent _ to 67.3 million barrels _ from the week before and was up by the same percentage from the comparable week in 2006.
"It's a substantial increase, the largest since the middle of August," said study author Michael McNamara. "But we think most of the increase is weather-related. A series of winter storms crossed the country, and prestorm pumping tended to inflate the numbers for the week."
McNamara said demand at the pump gets a 5 percent to 15 percent boost ahead of winter storms as drivers fill up.
The average retail price for regular gasoline fell 4 cents per gallon compared to the previous week, down 1.3 percent. At $2.99 per gallon, the U.S. average price is up 30.6 percent compared to the comparable week in 2006. It is the first week since the beginning of November that prices slipped below the $3 mark.
SpendingPulse is a macroeconomic indicator of national retail sales based on aggregate sales activity in the MasterCard payments network, together with estimates for all other payment forms, including cash and check. MasterCard SpendingPulse does not represent MasterCard financial performance.
GE Enters Offshore Drilling
General Electric Co. will invest $54 million and arrange for $259 million in debt financing for a deepwater drilling ship for Brazil offshore oil exploration.
The Peregrine I is currently under contract to Petrobras, Brazil's state oil company. Mike Mullen Energy Equipment Resource Inc., a Dallas-based offshore assets investor, will acquire the ship from Houston-based oil services company Transocean Inc.
The investment is GE's first in offshore drilling. GE affiliates will arrange and underwrite $259 million in senior debt for the vessel's purchase. WestLB AG will be the other lead arranger.
Mike Mullen and Pareto World Wide Offshore, a Norwegian private-equity fund, will also invest funds in the ship, which can drill in 5,200 feet of water to a depth of 25,000 feet. Etesco Construcoes E Comercio Ltd., a Brazilian offshore rig company, will operate the vessel.
--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.
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