PeakTrader.com

[administrator]

PeakTrader said...

Natural gas is much cheaper in the U.S. than in Europe or Japan:

US natural gas prices fall to decade low
January 19, 2012

US natural gas now costs a third of prices in Europe and a sixth of natural gas in Japan.

Chart from another article:

http://gailtheactuary.files.wordpress.com/2012/03/natural-gas-prices-in-us-europe-japan.png

******

It looks like a severe E.U. recession from its austerity policies, high oil prices, and high natural gas prices.

Reuters, 2/27/12

Oil rose to a 10-month high above $125 a barrel on Friday in dollar terms, though oil prices remain some $20 a barrel short of their 2008 record of $147.

But in euro terms, Brent crude rose to an all-time high of 93.60 euros last week, topping its 2008 record.

******

Euro zone slips into recession on growth revision
March 7, 2012

The euro zone economy slowed at the end of last year and is now in a "mild recession", EU officials said.

The latest data and comment from the European Union point to a so-called double-dip recession within three years for the 17-nation euro zone, still struggling to overcome the debt crisis.

******

The article states: "Gasoline Prices Are Not Rising, the Dollar Is Falling"

Speculators are preventing shortages through higher prices (or slowing demand, including in Asia and Latin America).

Measured in median family income, the price of gasoline is higher than the 2008 peak.

U.S. Consumers Spent Record on Gasoline in 2011

The average U.S. household spent more than $4,000 on gasoline this year. That represents about 8.4 percent of the median household income...It was as low as 3.9 percent (since 2000) as recently as 2002.

Chart

http://energypolicyinfo.com/wp-content/uploads/2011/12/Median-Household-Income-Spent-on-Gasoline1.png

It's even worse in Europe:

Reuters, 2/27/12

In euro terms, Brent crude rose to an all-time high of 93.60 euros last week, topping its 2008 record.

******

It seems, the E.U.-17 had a weaker economic recovery than the U.S.:

E.U.-17 Real GDP Growth

2008 0.4
2009 -4.3
2010 1.9
2011 1.4

And the E.U. is in recession again:

Euro zone slips into recession on growth revision
March 7, 2012

The euro zone economy slowed at the end of last year and is now in a "mild recession", EU officials said.

The latest data and comment from the European Union point to a so-called double-dip recession within three years for the 17-nation euro zone, still struggling to overcome the debt crisis.

******

It seems, while Asia demands tens of millions of more autos and the U.S. shifts to smaller autos, more people in the E.U. will be riding bicycles.

Natural gas and oil:

Why Europe is Experiencing Higher Oil Prices than the US
06 March 2012

Lower heating and utility costs (from low U.S. natural gas prices) help offset the rising price of oil (natural gas prices in the U.S. falling towards $2 per mbtu, while in Europe rising towards $12 per mbtu).

The low price of natural gas also makes the cost of refining heavy oil less expensive in the United States than elsewhere, because natural gas is used by complex refineries that refine heavy oil, both as a feedstock, and to fire the furnace that heats the crude oil.

This makes the United States a sought out destination for refining heavy crude oil, and helps add jobs to the US economy.

For example, nearly half of crude oil imported from Mexico to the US is exported back to Mexico as oil products, according to EIA data.

EIA data also shows that we import crude and export a smaller amount of products back to Canada, Brazil, Ecuador, and Venezuela.

The low price of natural gas is thus a reason US product exports, such as diesel and gasoline, have been increasing recently, even though the United States continues to be a big importer of crude oil.

The Eurozone includes 17 countries that have adopted the Euro. It does not include the major oil-producing countries of Norway and the United Kingdom, and it does not include Switzerland.

The oil supply situation for the Eurozone is very poor... the natural gas supply situation is only a bit better. It is pretty much entirely dependent on imports.

The world is presently sharing a limited supply of oil. When oil prices rise, oil production doesn’t rise very much, if at all.

Europe, and in particular the Eurozone, is the area of the world getting hit the hardest by high oil prices.

If the nations of the world are sharing a virtually flat oil supply, it is difficult for very much economic growth to take place.

******

Hydra says: "If oil is a commodity traded on world markets, then why is the eurozone hit any harder by rising prices?"

1. The Eurozone imports almost all its oil.

2. A weaker Euro means exports are cheaper and imports are more expensive (and high natural gas prices mean it's more expensive to export processed imports).

3. The world's three biggest economic regions, North America, Europe, and Asia are competing for a fixed, or flat, supply of oil. Europe is the weakest economy. Yet, it has to pay the most.

******

http://ourfiniteworld.com/

******

Hydra, the U.S. pays less for oil, because it also produces a lot of oil, which is cheaper (up to $20 a barrel) than the Brent crude the Eurozone pays.

The Eurozone has to buy more foreign oil, because it produces very little oil, and in terms of Euros, the price of Brent crude is higher than the 2008 peak.

The Eurozone is being hit hard by two shocks:

1. High oil prices and the need to import.

2. High natural gas prices and the need to import.

The Eurozone economy was already weak before the energy shocks.

The new Eurozone recession is a mechanism to free up oil for stronger regions, e.g. North America and Asia.

******

Hydra, 20% of 100 is more than 20% of 80.

Also, the Eurozone economic recovery has been weaker than the U.S. economic recovery.

Moreover, the Eurozone implemented austerity policies, unlike U.S. expansionary fiscal policy that offset higher oil prices.

I suspect, Eurozone consumers and producers are paying a larger proportion of their (lower) incomes on (higher priced) oil and natural gas.

******

U.S. domestic oil is $40 a barrel lower than the peak in 2008.

E.U. Brent crude is higher in euros than the peak in 2008.

******

http://www.blogger.com/comment.g?blogID=28997633&postID=1271517860462947777

--------

From someone else:

Since Jan '10, Brent crude rose 60% and West Texas Intermediate rose 30%:

http://research.stlouisfed.org/fred2/graph/?g=5EC