The Balearic Minister for Development, Ana Pastor, is calling for travel prices (airline tickets, car fuel etc.) to be reduced because of record low crude oil costs (Daily B Friday). A major cause of the drop is the increase in production in North America by the new technique called fracking. As her government is opposed to this technique I presume she would favour restricting imports from there and, to be consistent, from countries with off shore production which they also oppose. This may lead to an increase in price for a crude oil whose type of extraction is acceptable to our highly principled politicians.
But let me be cynical for a moment and suppose that political hypocrisy is still alive and that they ignore their scruples. What could be expected in price reduction? Sra. Pastor quotes $45/barrel now. Crude oil peaked around $120 in 2011 when petrol was about €1.30/litre but the 62% drop in crude will not equate to the same in petrol. Do not expect to filling up your car tomorrow at 49 cents/liter! The $75 drop for a barrel equates to 39 cents/liter so the best you can expect at the petrol station is 91 cents - not quite the same. 49 cents/litre could be achieved by Sra. Pastor easily by taking her fair share of the fall and accepting a 62% hit on state taxes which are the greatest factor in the crude, transport, refining & marketing equation which makes up the forecourt price!
Not wanting to spoil the Ministers week end completely Saturday’s Daily B refers to Repsol’s ending its exploration off shore Canary Islands because of finding only uneconomic deposits. Note they found oil but not enough. Note also that they have only been looking since 18 November so probably they’ve only drilled one hole – not a very comprehensive search! Little doubt fracking is again the real cause – it has helped half the price of crude and at a stroke doubled the size of a discovery necessary to be economic. Possibly if the price of crude had been $45 a couple of years ago none of this exploration would have been done.
Cairn Energy, not Repsol, is the Oil Company with a legal exploration contract for our off shore. As Michael Caine might have said - not a lot of people know this but the sea between our islands and the mainland are peppered with known oil fields too small to cover the costs of producing them. This seems even more likely now with any new discoveries. Good news for Sra. Pastor and her colleagues maybe but not 100%. If Cairn has already decided (secretly) not to continue but the Balearics succeed in banning them they will be entitled to substantial compensation which if they pull out voluntarily not only they will not cash in but have all exploration costs to write off as well.
Which way will our politicians jump?
Playa de Palma
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