British Petroleum (now known as simply BP) has found a way to dodge around a Great Lakes anti-pollution law. The law, written in 1970, set a limit on the amount of waste sludge and ammonia that could be dumped into Lake Michigan, as the level of pollution in the lake was getting way out of hand. A clause in the law stated that if a company was dumping at an amount under the limit, they could not increase their pollution, even if it was still under the primary limit.

Well, due to the extra-crude oil from Canada, BP is now processing at its Whiting, Indiana refinery, they don't know what to do with all the extra sludge (concentrated heavy metals) and ammonia (which causes algae blooms that kill fish). They therefore managed to get a water permit to pump 35 percent more sludge and 54 percent more ammonia into the lake, right up to the limit set by the '70s pollution law.

The refinery in question has had a large expansion added to handle the new process and needed capacity, though the original refinery - much of which is still in operation - was built in 1889 by the big man John D. Rockefeller's Standard Oil Co. Nifty as that is, the fact of the matter is that just three miles southeast of the Illinois/Indiana border, BP has a pipeline from the refinery to the lake 200 feet off shore, with an agitator at the bottom to mix the daily 1,584 pounds of ammonia and 4,925 pounds of sludge with the water. Is that worth the supposed 80 jobs this new permit has enabled BP to create, which supposedly is what justified the exemption? Sounds [dead] fishy to me.

[Source: Chicago Tribune]

In conjunction with other measures to protect the U.S. from crude oil price shocks such as promoting alternative fuel research and production, President Bush has announced an expansion of the U.S. Strategic Petroleum Reserves. The reserves, which were established in 1975 following the Arab oil embargo, are assets designed to limit the effects of severe supply disruption.

Currently the Strategic Petroleum Reserves hold around 691 million barrels of crude oil, which equates to approximately 55 days of net imports. This is to be expanded to 1.5 billion barrels, or approximately 97 day supply of net import, over the next two decades. The reserves were recently used in the aftermath of Hurricanes Katrina and Rita to supply the U.S. while Gulf of Mexico oil facilities were patched up and brought back on-line.

Analysis: I would argue that the fastest way to increase the relative value of the reserves is to rapidly increase fuel economy. Vehicle taxes linked to official mpg ratings and a healthy cash injection into lightweight composite body panel manufacturing capacity would be a lot less expensive than buying up 809 million barrels of oil as well.

Related:

• The Department of Energy has $17 million for battery and ethanol research
• The Department of Energy has over $19 million on hand to fund hydrogen research

[Source: Department of Energy]

Falling oil prices are starting to claim some biofuel casualties in India, with biodiesel not being able to compete at the pump. With crude oil dropping to around $50 per barrel, diesel in India currently costs around Rs 36 per litre (US$3.10 per gallon) which makes biodiesel at Rs 41 per litre ex-factory plus taxes look very expensive. The India Times quotes the managing director of a biodiesel company in Maharashtra as saying, "With such a stark difference, we have no option but to shut down production for now."

As ever, the final price of biodiesel comes down to the price of your feedstock and Indian farmers can currently produce jatropha curcas seed for Rs 12,000 per tonne. It is expected that this will have to fall to Rs 10,000 per tonne before biodiesel is economical again. Jatropha can only become cheaper if more farmers grow it, but the three-year lag between planting and the first harvest is too long for small farmers to survive.

In South America, Dow Jones Newswires is reporting that the Brazilian Energy Minister has predicted that Brazilian companies and other investors are likely to invest an estimated 17.4 billion Brazilian reals (US$8.1 billion) in the country's biofuels sector over the next four years. This investment should yield a confirmed 77 new ethanol mills and 46 new biodiesel plants by 2010.

The investment will increase Brazil's biofuels output to 23.3 billion liters / 6.1 billion gallons of ethanol, and 3.34 billion liters / 882 million gallons of biodiesel. This represents a 33 percent increase in ethanol production and a four-fold increase in biodiesel production over 2006/2007 levels. State-owned oil firm Petrobras SA is leading the charge with massive investment in both ethanol and biodiesel facilities.

Analysis: Clearly Petrobras has the muscle to forge ahead with biofuels in the face of lower oil prices where small, Indian farmers do not. Petrobras themselves are a huge oil producer so they win either way. Arguably the true cost, including environmental concerns, of petroleum fuels is not reflected by cheap oil, but knowing that doesn't improve the bottom line for smaller biofuels producers.

Related:

• State of the Union - I'm guessing Bush couldn't pronounce "cellulosic ethanol"
• Animal fat biodiesel to top half billion gallons by 2012?
• Cargill profit jumps 34 percent on back of biofuels surge

[Source: India Times & Cattle Network]

With all the talk and rumors over the last month, we expected to see OPEC cut oil production by 1 million barrels per day. However, according to Reuters, Friday's announcement of the deeper than expected cut of 1.2 million barrels seemed to send an intended message to buyers on the oil market: if the price of oil does not stabilize, OPEC would be open to even deeper cuts.

Unofficial talk of further production cuts seems to be lurking from many different sources and those cuts may come as soon as December. Qatar energy minister Abdullah bin Hamid Al-Attiyah said that the cartel's members are not excluding further cuts while the Dow Jones Newswire reported that OPEC president Edmund Daukoru said that the possible need of a further half million barrel cut was "in line with my own thinking."

By the end of the day, the price of light sweet crude oil rose 47 cents to 58.97.

Related:

• OPEC cuts output, OPEC doesn't cut output. Rumors abound, oil prices on the rise

[Source: Reuters via MSNBC]