TIME Saudi Arabia

Saudi Arabia Won’t Cut Oil Production to Boost Prices

Ali Ibrahim Naimi
Saudi Arabia's Minister of Petroleum and Mineral Resources Ali al-Naimi attends the opening day of 10th Arab Energy Conference in Abu Dhabi on Dec. 21, 2014 Kamran Jebreili—AP

Global oil prices are tanking, but OPEC is holding firm on not slashing production to buoy prices

Saudi Arabia will not cut oil production to boost depressed prices, a reversal in the kingdom’s usual policy of moderating supply to control prices and sending a strong message about the Organization of the Petroleum Exporting Countries’ (OPEC) strategy for dealing with a slumped oil market.

Saudi Minister of Petroleum and Mineral Resources Ali al-Naimi told reporters on Sunday that even if non-OPEC countries cut production, Saudi Arabia would not follow them, Reuters reports. Other ministers, including from Kuwait and Iraq, repeated the Saudi minister’s insistence on retaining steady production levels.

A boom in U.S. shale-gas production has flooded the global oil market and sent gas prices tanking.

The Wall Street Journal reports that Saudi Arabia’s refusal to cut oil production has led to speculation that the world’s top petroleum exporter could be seeking to knock gas prices even lower, testing U.S. shale-gas producers resolve to keep pumping. Saudi Arabia has denied any such plot and American officials have reiterated that the U.S. maintains close and friendly relations with the kingdom.

[Reuters]

TIME energy

Gas Stations in 24 States Drop Prices to $2 a Gallon

Mark Monaham, owner of the Raceway gas station in McComb, Miss., changes his fuel price billboard, Friday, Dec. 19, 2014. Gas prices throughout the region continue to fall as oil prices plummet.
Mark Monaham, owner of the Raceway gas station in McComb, Miss., changes his fuel price billboard on Dec. 19, 2014. Daniel Lin—AP

Christmas comes early for many commuters

An oil boom has pushed gas prices at some stations, as of Saturday, down to as little as $2 a gallon.

Price tracking service GasBuddy.com found that pockets of low prices below $2 have also cropped up across the country, while average prices across the U.S. are tracking at $2.43 a gallon.

“As of this morning, there are 24 states with prices under $2 a gallon,” GasBuddy’s senior petroleum analyst told USA Today.

Commuters in Missouri have reaped the biggest windfalls, with gas dropping to $1.96 a gallon in Springfield–and even lower in some outlying towns.

With Saudi Arabia’s announcement in September that it would keep the oil flowing, despite falling prices, analysts predict that gas prices have not bottomed out just yet. American Automobile Association analysts expect prices to fall by another seven cents, just in time for Christmas.

Read more at USA Today.

TIME energy

New York Bans Fracking

After years of debate in the state over the controversial drilling technique

The administration of New York Governor Andrew Cuomo announced Wednesday that the controversial drilling technique known as fracking will be banned in the state, citing concerns over risk of contamination to the state’s air and water.

“I cannot support high volume hydraulic fracturing in the great state of New York,” acting Health Commissioner Howard Zucker said. The announcement comes after years of debate over the practice, during which New York has had a defacto fracking ban in place, the New York Times reports.

Fracking employs chemicals and underground explosions to release oil and gas trapped in shale deposits that are inaccessible by conventional drilling techniques. Some environmentalists contend that fracking contaminates groundwater and can contribute to seismic activity, and that increased drilling activity can contribute to air pollution and other environmental problems.

[NYT]

TIME Economy

#TheBrief: Why Gas Prices Are Falling

The reason you're paying less at the pump

You may have noticed a lower number on your gas station receipts. The average price of gas in the U.S. is now $2.55 per gallon, the lowest it’s been since 2009. We’re told to never question a good thing, but why are these prices falling?

Watch The Brief to find out why you’re spending less than usual at the pump.

TIME Know Right Now

Know Right Now: From California’s Pineapple Express to Another Shutdown Drama

Watch this week's #KnowRightNow to catch up on all the latest stories

The House passed a $1.1 trillion spending package late Thursday to ensure that the government will avoid another damaging shutdown. “This compromise proposal merits bipartisan support on Capitol Hill and hopefully will arrive on the President’s desk in the next few days, and if it does, he will sign it,” stated White House Press Secretary Josh Earnest.

A tropical storm called the Pineapple Express pummeled the Pacific Northwest on Thursday. In drought-stricken California, flooding and mudslides prompted rare school closures in the north of the state. Powerful winds knocked out power to more than 150,000 homes in Washington.

Gas prices hit a 4-year low this week, with the average price of gas in the United States sinking to $2.72 per gallon. That’s the lowest gas prices have been since November 2010. Prices are dropping due to higher North American oil production and less demand. New Mexico has the lowest gas prices at $2.38 per gallon, and San Francisco has the highest gas prices at $3.04 per gallon.

And lastly, on Wednesday, TIME Magazine chose the Ebola fighters as 2014’s Person of the Year. “They risked and persisted, sacrificed, and saved,” TIME editor Nancy Gibbs wrote.

TIME Know Right Now

Know Right Now: Why Gas Prices Are at the Lowest Point in 4 Years

Gas prices have dropped significantly for Americans, and several factors are driving the change in prices

American drivers may have noticed a smaller bill at the pump recently– that’s because the average price of U.S. regular gas has recently reached $2.72 a gallon, the lowest it’s been in four years.

In the last two weeks alone, the average price has dropped 12 cents. But what is the reason for these dropping prices? Watch this video to find out what’s causing the cheaper fuel, and where you can find the most affordable gas in the country.

TIME

Morning Must Reads: December 8

Capitol
The early morning sun rises behind the US Capitol Building in Washington, DC. Mark Wilson—Getty Images

California Protests Turn Violent

A second night of protest against police killings in Missouri and New York City turned violent again in Berkeley, Calif., as some demonstrators threw explosives at officers, assaulted each other and shut down a freeway, police said

Why Dealing With Uncertainty is Easier for Some People

A study identifies personality traits that may distinguish those who are better or worse at waiting — some of which, thankfully, may be adaptable

Behind the Rescue Op in Yemen

Navy SEALs flew into southern Yemen early on Saturday to rescue American captive Luke Somers, but they only succeeded in rescuing his body

U.S. Gas Prices Hit 4-Year Low

The average price of a gallon of regular gasoline has dropped 12¢ over the past two weeks, reaching a four-year low, a new survey finds. The falloff is attributed to a spike in crude-oil production in North America, a slowdown in demand and a strong dollar

Hunger Games: Mockingjay Tops Box-Office for Third Week

Mockingjay benefits from star power, family friendliness and established popularity. But even so, its box-office power is less attributable to esteem for the franchise than to the fact that it doesn’t have much competition right now

Ebola Patient Reveals Identity

A doctor who contracted Ebola while treating patients in Sierra Leone and was evacuated to the U.S. for care in September has revealed his identity. The viral load in his blood was 100 times that of the facility’s other patients

Prince William and Kate Arrive in New York City

Prince William and Kate arrived in New York City on Sunday night for a three-day trip, the most anticipated royal visit since the glory days of Diana. “The level of excitement in New York has been absolutely phenomenal,” said the British consul general

U.S. Transfers 6 Guantanamo Detainees

The men were moved from Guantanamo Bay to Uruguay, marking the largest group to depart the prison since 2009 and first resettle in South America. The detainees include four Syrians, a Tunisian and a Palestinian

Democrats Sink in the South

The fall of Sen. Mary Landrieu means Louisiana won’t have a Democratic statewide elected official for the first time since 1876. The Republican Party will control every Senate seat, governor’s mansion and legislative chamber from the Carolinas to Texas

Boyhood Wins Another Top Prize

The Los Angeles Film Critics Association has awarded Boyhood four prizes, including Best Picture, in the latest coup for the coming-of-age movie. Just a day earlier, the Boston Society of Film Critics honored the film with five awards, also including Best Picture

New Delhi Bans Uber Following Rape Accusation

The city of New Delhi banned popular ride-sharing service Uber on Monday afternoon, a few days after a 27-year-old female passenger accused one of its drivers of sexually assaulting her. However the ban is not in connection with the alleged attack but rather transport laws

Inventor of First Gaming Console Dies

Ralph Baer, the man known for creating the first-ever video-game console, which still serves as a blueprint for the Xboxes and PlayStations of today, has passed away aged 92. Over the course of his career, he accumulated over 150 patents and won many awards and honors

Get TIME’s The Brief e-mail every morning in your inbox

 

MONEY Taxes

As Gas Prices Go Down, Likelihood of Higher Gas Taxes Goes Up

It's no wonder that many are calling for higher gas taxes lately: Gas prices are the cheapest they've been in years, so a hike in gas taxes is less likely to drive drivers nuts.

Raising taxes is never popular. But if there was ever a way to make a tax increase more palatable to Americans, it would be with a tax hike that didn’t seem like much of a tax hike. Like, say, one that was optimally planned so that even after the tax increase was instituted, the average household wouldn’t feel like it was paying much more out of pocket than it was in the recent past.

Just such a rare opportunity is now upon us. Gas prices have plummeted—dipping under $2 per gallon in some markets, with further decreases likely—and some want to take advantage of the situation by jacking up the gas tax at both the state and federal levels. Depending on how high taxes are raised, drivers might very well still be paying less to fill up than they were a few months or a year ago. So in a way, at least theoretically, this is a tax hike that wouldn’t feel like a typical tax hike.

A recent Washington Post column pointed out that the federal gas tax has been stuck at a flat 18.4¢ since 1993. At the time, the price of a gallon of regular was about $1. “It’s been a generation since gas taxes were increased at all,” Paul Bledsoe, a senior fellow on energy at the German Marshall Fund, told the Post. “So they are incredibly low by historic levels.”

Over the years, many have called for increases to the federal gas tax, which has not kept up with inflation. “Inflation has effectively reduced the [gas] tax rate by about one third” over the last two decades, the nonpartisan Tax Foundation noted earlier this year. Most states have flat gas taxes as well, and critics say the revenues collected are falling well short of what’s needed to address our nation’s crumbling infrastructure. “At the state and local levels, gas taxes cover less than half of state and local transportation spending,” said Tax Foundation economist Joseph Henchman.

Again, there’s nothing really new about calls to raise more funds to fix roads and other infrastructure needs at the national and state levels. What is new, however, is that gas is the cheapest it’s been in years, and that projections indicate per-gallon prices will remain well under $3 indefinitely. Predictions call for a national average of $2.94 per gallon next year, which would be roughly 45¢ less than 2014 and 70¢ less what drivers typically paid in 2012.

Hence the fresh push to raise gas taxes while prices at the pump are inexpensive. As Elaine S. Povich of the Pew Charitable Trusts observed recently:

“Cheap gasoline makes such levies more politically palatable, since consumers are less likely to notice the extra burden when they are filling up.”

It must be noted that while the federal gas tax hasn’t budged in two decades, state gas taxes (and other local taxes that help support roads and infrastructure) have been increased fairly regularly. Pennsylvania, Wyoming, and West Virginia are among the states where gas taxes were hiked this year or last, and discussions are in the works to raise state gas taxes in Iowa, Utah, Michigan, New Jersey, Oregon, and beyond. Data from the American Petroleum Institute shows that nationally, drivers pay an average of 49.28¢ per gallon when state and federal levies are added up.

While it’s unsurprising that environmental supporters and academics such as Mississippi State’s Sid Salter are renewing cries for gas tax hikes while gas prices are cheap, it’s particularly noteworthy that some Republicans seem in favor of tax increases at this opportune moment in time as well.

Last month, U.S. Sen. John Thune (R-SD) actually criticized President Obama for refusing to consider a gas tax increase over the years. “I always thought that was ironic, that he’s willing to raise every other tax,” Thune said to the Rapid City Journal. “And then the one that actually pays for something you can see a direct benefit from, he doesn’t want to talk about it.”

More recently, Congressman Tom Petri (R-WI), who is retiring soon, it must be noted, announced he is sponsoring a bill to raise the federal gas tax by 15¢ to 33¢ by 2013. “No one likes taxes,” Petri said in a Huffington Post interview in early December:

“But the issue is whether we should pay for transportation, or cut back on spending and transportation and have less roads and poorer infrastructure, or borrow it from our kids — debt financing it and hoping someone pays the debt off at a future date. And of those choices, it seems to me that the most responsible long-term approach is to do the thing that is unpopular but necessary.”

It helps that the move won’t be quite as unpopular as it would be had the gas tax hike been introduced back when the average driver was paying $3.50 or $3.75 per gallon.

TIME energy

China Strengthening Claim to South China Sea Oil and Gas

Cranes stand on a drilling platform construction site at the yard of Offshore Oil Engineering Co., a unit of CNOOC Ltd., in the Zhuhai Gaolan Port Economic Zone in Zhuhai, Guangdong province, China on Nov. 13, 2014.
Cranes stand on a drilling platform construction site at the yard of Offshore Oil Engineering Co. in the Zhuhai Gaolan Port Economic Zone in Zhuhai, Guangdong province, China on Nov. 13, 2014. Bloomberg—Bloomberg via Getty Images

China’s most recent undertaking in the Spratly island chain is not their first – the last 18 months have already seen three reclamation projects

This post originally appeared on OilPrice.com.

Not gone and not forgotten, China is ready to solidify its claim to the South China Sea (SCS). Recent satellite imagery confirms China is conducting significant land reclamation operations in the Spratly Islands in the SCS. The SCS is an important fishing ground and is believed to hold large amounts of oil and gas. Undermining the United States’ influence in the region, China intends to play the shepherd in one of the world’s busiest trade routes.

map
BBC

The Spratly Islands along with the Paracel Islands and several maritime boundaries in the SCS have been hotly disputed for several centuries. The conflict includes Brunei, China, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam and has predominantly centered on historical and cultural claims. Though offering very little in the way of land or resources, the islands serve as a tangible marker. As such, parties to the conflict have been quick to occupy them.

Related: Has The PRC Decided On Its Global Strategic Posture?

China’s most recent undertaking in the Spratly island chain is not their first – the last 18 months have already seen three reclamation projects. However, at more than 3,000 meters and counting Fiery Cross Reef is their grandest venture yet and appears destined to house an airstrip and harbor, both capable of supporting military hardware. The Philippines, Malaysia, and Vietnam already operate airstrips in the Spratlys, but can only support smaller, prop-based aircraft.

As it pursues expansion, China has been hesitant to engage in multilateral negotiations and meaningful dialogue on the SCS was relegated to the sidelines at the recent APEC and ASEAN summits. Instead, China – demanding an in-house solution to the convoluted matter – is content to flex its superior political and military might to limited opposition. Reluctant to step on any toes and with its feet in multiple courts, the United States is short on political recourse, and that’s how China likes it.

Though China’s aims are long-term, control of the Spratlies and Paracels is not subsidiary to any prize that may lie beneath. Chinese President Xi Jinping’s “Asian security concept” calls for Asian solutions to Asian problems and seeks to limit Western influence in such “domestic” affairs. Unchecked dominance in the SCS, whether through direct force or intimidation, would be a remarkable victory in this regard.

And to the victor go the spoils, which in this case are still pretty unclear, a side effect of the conflict itself. The Energy Information Administration estimates the SCS holds approximately 11 billion barrels (bbl) of oil and 190 trillion cubic feet (Tcf) of natural gas. That estimate jumps to as much as 22 bbl of oil and 290 Tcf of natural gas according to a U.S. Geological Survey study. Chinese National Offshore Oil Company (CNOOC) is perhaps the most optimistic and estimates undiscovered resources of oil and gas in the SCS total 125 bbl and 500 Tcf respectively.

Related: China’s Emissions Could Negate Global Efforts Against Climate Change

map

To date, the SCS nations have been relatively successful drilling in their near-offshore waters. Malaysia and Thailand for example, have created Joint Development Agreements to expedite production without addressing territorial disputes. For its part, China has largely played the provocateur. In 2011 and 2012, China offered a slew of oil and gas blocks to foreign bidders; the blocks – in contested waters – received no bids. More recently in May, China stationed its new deepwater drilling rig within Vietnam’s Exclusive Economic Zone setting off a series of violent protests in Vietnam.

Disregarding today’s low commodity prices, the SCS is a tough sell for Western majors unwilling to take sides. Shell and ExxonMobil have been the most active in conflict-free waters and any multilateral resolution favors their size and deepwater drilling experience.

Despite the uncertainty of the resources below the surface, there is quantifiable wealth above. Approximately 14 million barrels of crude oil and over half of the global LNG trade pass through the SCS daily. In all, $5.3 trillion in total trade moves annually through the SCS. With an aim to control no less than 80 percent of the sea, China may soon be able to impose its will on global trade patterns.

More Top Reads From Oilprice.com:

MONEY Gas

Gas Under $2 a Gallon as Gas Stations Launch Price Wars

A sign displays the price for E-10 gasoline for $1.99 at the OnCue convenience store and gas station, Wednesday, Dec. 3, 2014, in Oklahoma City.
A sign displays the price for E-10 gasoline for $1.99 at the OnCue convenience store and gas station, Wednesday, Dec. 3, 2014, in Oklahoma City. Paul B. Southerland—AP

Gas station price wars have pushed the cost of a gallon of regular below $2 in one U.S. city, and similar price wars are expected in other metro areas around the country.

Less than a week ago, gas price analysts were forecasting that gas stations in some part(s) of the country would probably drop prices below $2 per gallon sometime in the near future—most likely “by Christmas.” Turns out it didn’t take nearly that long to dip under the $2 mark.

Less than one month after the national average dropped below $3 per gallon, a gas station in Oklahoma City apparently became the first in the country to plunge beneath $2. It happened sometime on Wednesday, and as Bloomberg News reported, within a few hours several other gas stations in the Oklahoma City area had engaged in a price war, with per-gallon costs falling from $2.11, to $2.03, to $1.99, to $1.98, and at least one reaching $1.95. As of Thursday morning, drivers in the Oklahoma City area are reporting four gas stations where a gallon of regular starts under $2, according to GasBuddy.

This doesn’t mean that all drivers in Oklahoma, or even in the capital city area, can expect to see such low gas prices. According to AAA, the statewide average in Oklahoma is $2.51, and GasBuddy estimates the average in greater Oklahoma City is around $2.42. It’s just that some stations are being particularly aggressive on pricing in order to attract drivers. They’re not making much if any money on sub-$2 gas, but the stations hope that customers grab coffee, snacks, and other purchases while they’re filling up.

Meanwhile, the latest press release from AAA notes that gas prices nationally have dropped 69 days in a row and have fallen nearly $1 from the 2014 high in late April, when the average was $3.70.

Based on the way things are going, prices at the pump should only get cheaper, indefinitely. “The holiday joy should continue as gas prices drop even further in the weeks ahead,” AAA spokesperson Avery Ash noted in the release. “We could see prices drop to the lowest levels since the Great Recession if the cost of crude oil continues to set multi-year lows.”

Another likely prediction is that Oklahoma City won’t be the only metro area where drivers will enjoy the financial benefits of gas price wars. Look for similar pricing competitions at a gas station near you, coming soon.

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser