USA Expects Crude To Shoot Back Up!

NEW YORK (CNNMoney.com) -- Despite the recent rout in oil prices, the government expects crude to shoot back up over the long term. That is expected to result in a drastic drop in oil imports and a greater use of renewable energy.

U.S. expects big drop in oil imports

Despite the recent drop in crude prices, the rising cost of a barrel of oil will boost the use of renewable energy and help slow greenhouse gas emissions.
By Steve Hargreaves, CNNMoney.com staff writer
Last Updated: December 17, 2008: 4:32 PM ET

NEW YORK (CNNMoney.com) -- Despite the recent rout in oil prices, the government expects crude to shoot back up over the long term. That is expected to result in a drastic drop in oil imports and a greater use of renewable energy.

Oil imports - which currently make up 60% of all the oil consumed in the U.S. - should drop to about 40%, the Energy Information Administration said in its long-term energy outlook on Tuesday.

The drop will largely be the result of higher oil prices encouraging conservation and an expanded use of home-grown biofuels.

In making its predictions, EIA used an average crude price of $130 a barrel in 2030. That price is nearly double the projections for 2030 made last year - $70 a barrel.

Although the report was not meant to predict oil prices, EIA analysts say increased demand and limited access to new supplies will push crude prices up in the long term, despite crude's recent plunge.

The upward revision in price is a major shift in the government's long-term views on oil supply and demand. Limited access to new oil sources - particularly in OPEC countries - is a major reason why prices should increase.
Renewables on the rise

"People are becoming aware of the fact that conventional supplies of oil outside of OPEC are quite limited," said Robert Kaufmann, director of Boston University's Center for Energy & Environmental Studies. "It's getting harder and harder to tell the story that oil prices will remain low forever."

EIA's higher price estimate could give ammunition to policymakers seeking a big push into alternative fuels, or those seeking a more hawkish foreign policy, or both, said Kaufmann.

He said non-OPEC production peaked in 2004, and OPEC countries are expected to provide a greater share of the world's oil going forward.

But OPEC has little incentive to increase its ability to pump oil. The cartel has seen the world is willing and able to pay over $100 for oil, and many OPEC countries have become accustomed to revenues generated from those high prices. For them, the higher the price the better - so long as it doesn't kill the global economy or spur a mass shift away from oil.

EIA's price revision is in-line with predictions made earlier this year by the International Energy Agency (IEA), a similar group to EIA that has a more global focus.

The IEA drastically lowered its long-term world oil supply forecast this spring -from nearly 120 million barrels a day to maybe 100 million per day by 2030 - citing access to resources as a major concern.

In making its predictions, EIA does factor in the growth of supplies from "nonconventional" oil, like oil from tar sands or biofuels made from plants. It also makes its projections based on current policy, which does not include things like laws restricting greenhouse gas emissions, which could potentially drive up the cost of fossil fuels.

Higher oil prices, combined with some government mandates, are expected to yield a boost in renewable energy use as well.

Renewables should account for 21% of all energy used in the U.S. by 2030, the agency said, up from about 15% currently. Last year EIA said renewable use would remain flat at 15% in 2030.

Under current policies, EIA predicts energy-related carbon dioxide emissions will slow in the years ahead, but will increase about 7% by 2030. Last year the agency said carbon dioxide emissions should grow by 15% by 2030.

Most climate scientists say the world needs to cut its carbon dioxide emissions by about 80% by 2050 if it is to avoid the worst effects of global warming. During the presidential campaign, President-elect Barack Obama pledged to cut U.S. emissions by that amount.

The EIA estimates that if the country were to cut its greenhouse gas emissions by 40% in 2030, electricity prices would rise by about 10% due to the costs of switching from cheap coal to more expensive wind or natural gas sources to produce electricity. The agency does not have projections for an 80% reduction by 2050. To top of page
First Published: December 17, 2008: 2:28 PM ET

TSX Data Transmission Halts Trading

Wall Street lower after Fed rate easing
Dec 17, 2008 12:52 PM
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Malcolm Morrison
THE CANADIAN PRESS

The Toronto stock exchange is down – meaning today that its computers are not conducting trades, and have not been all morning.

"We've halted the Toronto stock exchange and TSX Venture Exchange and we will update you as soon as we are able," said Caroline Quick, director of communications at market operator TMX Group Inc. (TSX: X).

"It's a technical issue", she added, declining to elaborate.

Judging by the performance of Canadian bellwether stocks in New York, financials are a weight while energy stocks advanced.

Royal Bank was down 77 cents to US$28.33 while EnCana Corp. was ahead 37 cents to US$48.18 as the January crude contract on the New York Mercantile Exchange was off 70 cents at US$42.90.

The slippage in crude prices came even as the Organization of Petroleum Exporting Countries cut its output quotas by 2.2 million barrels a day. It's the largest-ever one-time reduction as the cartel struggles to support prices that have fallen from a peak of US$147 a barrel in July.

The Canadian dollar moved down 0.17 of a cent to 83.04 cents US after gaining two cents Tuesday.

New York stock markets moved lower, giving back a chunk of the previous day's gains that followed the U.S. Federal Reserve's cut in its key interest rate to between zero and 0.25 per cent to deal with a rapidly worsening economy.

The Dow Jones industrial average declined 108.2 points to 8,816 following a 359-point jump.

The Nasdaq composite index lost 19.63 points to 1,570.26 while the S&P 500 index declined 10.55 points to 902.65.

Traders digested much worse than expected results from Morgan Stanley, which lost US$2.37 billion as it endured a wide range of setbacks in one of the roughest quarters ever for investment banks. The loss of $2.34 per share was far below analyst expectations of a loss of 34 cents a share.

The February bullion contract in New York rose $27.50 to US$870.20 an ounce.

In corporate news, the Globe and Mail reported that Canadian Pacific Railway Co. (TSX: CP) plans to cut 600 union jobs and reduce other spending in tough times.

And insurer Kingsway Financial Services Inc. (TSX: KFS), under pressure from a major shareholder, says it is cutting costs by US$20 million next year.

Quebecor World Inc. (TSX: IQW) says Pierre Karl Peladeau and Erik Peladeau, heirs of founder Pierre Peladeau, have resigned from the commercial printer's board. This comes as former parent company Quebecor Inc., headed by the Peladeaus, sues Quebecor World, which is restructuring under bankruptcy protection.

On the earnings front, pharmaceutical company MDS Inc. (TSX: MDS) reported a fourth-quarter loss of US$255 million on a big after-tax writedown related to the troubled Maple medical-isotope reactor project. The results are preliminary and do not include another writedown of between $270 million and $370 million related to goodwill at its MDS Pharma Services division.

Transat AT Inc. (TSX: TRZ) said non-cash and non-operating items drove the travel operator into the red for its 2008 financial year, with a net loss of $50 million. Transat took a $45.7-million writedown on asset-backed commercial paper and a $2.3-million foreign exchange hit.

In the United States, Securities and Exchange Commission chairman Christopher Cox blamed regulators for a decade-long failure to investigate Wall Street money manager Bernard Madoff, now accused of a US$50-billion Ponzi scheme.

Markets overseas were mixed.

Japan's Nikkei stock average rose 0.5 per cent, while Hong Kong's Hang Seng index closed with a gain of 2.2 per cent.

The FTSE 100 declined 0.6 per cent in afternoon trading in London, while Germany's DAX index was off 0.5 per cent and France's CAC-40 was down 0.95 per cent.

Shares of BNP Paribas plunged 16 per cent after the French bank said extreme market volatility triggered a loss of US$972 million over the first 11 months of the year due to carnage in investment banking over the last two months.