America’s Addiction to Foreign Uranium

America’s Addiction to Foreign Uranium

Posted courtesy of our trading partners at Casey Research.........

What most Americans don't realize is that dependence on foreign oil isn't the main obstacle to US energy autonomy. If you think America's energy supply issues begin and end with the Middle East, think again. One of the most critical sources of foreign energy is due to dry up this year, and the results could mean spiking electricity prices across the country.


In 2011, the US used 4,128 billion kilowatt hours (kWh) of electricity. Nuclear power provided 790.2 billion kWh, or 19% of the total electrical output in the US. Few people know that one in five US households is powered by nuclear energy, and that the price of that nuclear power has been artificially stabilized. Unfortunately for us, the vast majority of the fuel used for powering our homes must be imported.
In the chart below, you see where most of our uranium comes from:

The overwhelming majority of that Russian uranium comes from a 20-year-old agreement called "Megatons to Megawatts" that allows weapons-grade, highly enriched uranium (HEU) to be converted to reactor-grade, low enriched uranium (LEU).

By December 2012, "Megatons to Megawatts" had produced 13,603 metric tons of LEU for US consumption and provided the fuel for nearly half of the US electricity generated from nuclear power.
In December 2013, that agreement expires, and Russia will be free to put its uranium out on the open market and demand higher prices. With 17 nuclear reactors in China and 20 in India – not to mention Japan, France, Germany, and others all vying for nuclear fuel – competitive bids are poised to drive prices higher, and early investors stand to make spectacular gains.

If this information is news to you, you are not alone. While the mainstream media focus on the US's "Middle Eastern energy dependence," the real story remains unnoticed. That's why Casey Research invited the field's top experts – including former US Secretary of Energy Spencer Abraham and Chairman Emeritus of the UK Atomic Energy Authority Lady Barbara Judge – for a frank discussion of what we think is America's greatest energy challenge.

Join us on Tuesday, May 21 at 2 p.m. EDT for the premiere of The Myth of American Energy Independence: Is Nuclear the Ultimate Contrarian Investment? to learn how the end of "Megatons to "Megawatts" will affect the US energy sector and how you can position yourself for outsized profits. Attendance is free – click here to register.



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Phil Flynn: Excessive Risk Assumption!

In the battle over speculation, I truly believe that many do not understand what is going on. Perhaps it is the word “speculation” that is causing some of the confusion. When the word “speculator” is used it conjures up the images of Wall Street Fat Cats in a sushi filled room hatching evil, deceptive plans to corner a market and doom us all. The truth is that the only reason the economy exist is because we have people who are willing speculate because it carries considerable financial risk with the hopes of making a profit.

Farmers speculate that when they plant a crop that it will grow and they will have someone who will want to buy it from them. Airlines speculate everyday hoping that people will want to travel and they can charge enough for their plane tickets to cover food costs. Even the guy who delivers your pizza speculates that you will tip him enough to cover the cost of his gas. Some speculations carry little risk and some carry considerably more and the potential for profit and the size of profit are all tied back to the amount of risk the speculator assumes by his actions.

Now sometimes these speculative thoughts may not pan out especially if the guy who delivers the pizza gets a cheapskate and thus no tip. Or the farmer that either can’t grow the crop due to drought or perhaps he chose to grow what ended up being the wrong crop a particular year where demand was not what he tonight it might be. Or an airline that fails to get as many passengers as wanted because of stiff competition or surging fuel costs. Every one of these speculators is taking a risk because if this event happens or that event doesn't happen, they could go out of business. Read Phil's entire article.......

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Residual Fuel Consumption in the U.S. Continues to Decline

After reaching a high point of over three million barrels per day (bbl/d) in the late 1970s, demand for residual fuel oil in the United States has steadily declined (product supplied as seen in the chart above is a proxy for demand). Residual fuel is used as fuel for large ships and for electricity generation, industrial process and space heating, and other industrial purposes. Between 2000 and 2010, average annual residual fuel use fell from approximately 900,000 bbl/d to 500,000 bbl/d. It averaged nearly three times that in the 1940s and 1950s. As its name implies, residual fuel oil is the remaining fraction resulting from the crude oil refining process. Because residual fuel is a heavy product, it has limited uses and relatively high emissions.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Note: Product supplied is a proxy for demand.
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Changes on both the residual fuel supply and demand side of the equation are contributing to the downward trend.

Demand The demand-side landscape for residual fuel has changed over the course of the past few decades, particularly in the electric power sector. From 2000 to 2005, natural gas and oil prices tracked closely. Since 2006, the prices of these two fuels decoupled, as rapidly increasing supply drove natural gas prices down. As a result, the power sector began relying more on natural gas and less on residual fuel, except in circumstances where spot natural gas prices soared due to weather-related constraints. Other exceptions include Hawaii, which relies on residual fuel for much of its power generation (58% in 2010). To a lesser degree, Alaska and Florida use residual fuel, and in-city generators in New York City must use a minimum of residual fuel to meet reliability requirements. Other factors accounting for declining generation at residual-fired plants include: the availability of more efficient natural gas combined-cycle units, increased stringency of air emissions, and at times rising sulfur dioxide emissions costs.

Aside from the electricity sector, other major demand sectors, such as transportation, have not seen much change in residual demand over the same period. Residual fuel, often called bunker fuel in this context, continues to power large ships.

Source: U.S. Energy Information Administration, Fuel Oil and Kerosene Sales.
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Supply The supply of residual fuel oil from domestic refining has also declined. U.S. refinery yield for residual fuel oil dropped from 5.8% in 1993 to 3.8% in 2010. Refinery yield represents what finished petroleum products are made from crude oil run through refineries' crude distillate units and other downstream processes. Lighter petroleum products, such as motor gasoline and ultra low sulfur distillate, command higher market prices. Therefore, refineries focus their operations to maximize production of those products. By investing in more sophisticated downstream unit capacity, refineries can increase the amount of lighter products from each barrel of crude, and, as a result, lessen the production of heavier products such as residual fuel oil.

Due to rising gross exports and falling gross imports, the United States became a net exporter of residual fuel oil in 2008 (see chart below). U.S. gross exports of residual fuel oil increased steadily since the early 1990s. Additionally, after a sharp decline in gross imports from a high of more than 1,800 thousand barrels per day in 1973 to a low of less than 200 thousand barrels per day in 1995, gross imports have averaged about 350 thousand barrels per day over the last 10 years.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly.
Download CSV Data

Rigzone: Crude Oil Climbs to a Three Week High in Tuesdays Trading

Crude futures climbed to a three week high Tuesday as concerns eased over Europe's debt crisis.

July's oil prices gained $2.11 Tuesday before settling at $102.70 a barrel on the New York Mercantile Exchange. The greenback fell against the euro as the European Union debated on sending additional financial aid to boost Greece's economy. Luxembourg Prime Minister Jean-Claude Juncker said a new aid package will be decided on by the end of June. A weaker dollar increases the appeal of the dollar denominated commodities making it cheaper for foreign buyers.

After noticing a 40 barrel spill at a pump station in Kansas, TransCanada temporary closed down its Keystone pipeline further pressuring oil prices Tuesday. The Keystone pipeline carries half a million barrels of crude per day from Alberta to Cushing, Okla., the largest oil storage hub in the U.S.

Oil prices peaked at $103.39 a barrel and bottomed out at $99.60 on Tuesday.

Natural gas for July delivery traded up Tuesday, adding 15 cents to settle at $4.67 per thousand cubic feet. Prices rose to their highest in four weeks on forecasts predicting above average weather. Hotter weather increases demand for fuel which is required for air conditioning. The intraday range for natural gas was $4.525 to $4.71 per thousand cubic feet.

Gasoline prices also ended higher Tuesday. After fluctuating between $3.07 and $3.165, gasoline settled at $3.15 a gallon, 5.84 cents higher from the previous trading session.


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Crude Oil Rises, Topping $81, After U.S. Loses Fewer Jobs Than Predicted

Crude oil surged and gasoline rose to a 17-month high after U.S. employment declined less than forecast in February, bolstering optimism that fuel demand will climb in the world’s biggest energy consuming country.

Oil rose as much as 2.3 percent after the Labor Department reported that payrolls dropped 36,000 last month. The total was forecast to fall by 68,000, according to economists surveyed by Bloomberg News. U.S. fuel use, averaged over the past four weeks, was 19.3 million barrels, up 3 percent from a year earlier, an Energy Department report on March 3 showed.

“The employment numbers were quite good relative to expectations, so I’m surprised the market isn’t responding more,” said Michael Fitzpatrick, vice president of energy at MF Global in New York.

Crude oil for April delivery rose $1.26, or 1.6 percent, to $81.47 a barrel at 12:09 p.m. on the New York Mercantile Exchange. Futures reached $82.07, the highest level since Jan. 12. The contract is up 2.3 percent this week.

Gasoline for April delivery increased 3.13 cents, or 1.4 percent, to $2.265 a gallon in New York. The fuel touched $2.2831, the highest price since Oct. 3, 2008.

The Standard & Poor’s 500 Index gained 10.83, or 1 percent, to 1,133.80. The Dow Jones Industrial Average rose 81.25 points to 10,525.39.

“We had a nice spike up on the jobless report,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Whenever we get above $80 the bids seem to dry up. I will have to see us close above $80 for a few more days before I’m convinced we’re going to test $84.96.”

The April oil contract surged to $84.96 a barrel on Jan. 11, the highest level since October 2008.....Read the entire article.


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MF Global: Oil Rally May Falter at $82

Crude oil’s rally to a two month high may sputter around $82 a barrel as the commodity’s relative strength index signals that gains have been excessive, according to technical analysis by MF Global Ltd. Oil advanced for an eighth day in New York today, trading above $81 a barrel for the first time since November, as freezing temperatures around the Northern Hemisphere bolstered the outlook for fuel demand. The surge will probably founder before it reaches last year’s peak of $82 a barrel, MF Global said in a report.

The relative strength index for crude oil indicates that prices may have overshot, according to the brokerage. An asset’s RSI is a ratio based on daily closing prices that measures how far prices have advanced or dropped during a specified period. An RSI reading of 70 or above typically suggests an asset has risen too far, too fast. The last 14 day reading for crude was 67.8, the highest since October. “Technically, most complexes are approaching the upper bands of the trading range,” said Edward Meir, an MF Global analyst in Connecticut. “Crude is approaching overbought territory. We find it unlikely that prices will take out $80.50- $82 resistance”.....Read the entire article.

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Crude Oil, Gasoline Rise as Earnings Signal Recession Is Easing

Crude oil rose and gasoline climbed a sixth day, the longest stretch since January, as better than expected earnings at Caterpillar Inc. signaled the recession may be easing in the world’s biggest fuel consuming country. Oil increased as stimulus programs and improved credit markets bolstered profits at the biggest maker of earth moving equipment. Per share earnings beat projections by an average of 14 percent for the 70 companies in the S&P 500 that reported quarterly results since July 8. U.S. crude oil supplies probably fell last week.....Complete Story