Hybrids like the Toyota Prius may not be enough to reduce global oil consumption. (image: trustmymechanic.com)

The good news: hybrid cars save their drivers money with great fuel efficiency. The bad news: hybrid cars aren’t going to save much on the world’s oil consumption, reports the New York Times.

A report by J. Marshall Adkins and Pavel Molchanov, analysts for the financial services firm Raymond James, say that even under high-growth assumptions, where hybrids account for a third of all new car sales in 2020, the savings would be just 200,000 barrels of oil per day, or about 1 percent of the country’s current oil demand.

And, making hybrid owners feel even worse, the report asserted that “from the oil market’s standpoint, hybrids will be irrelevant as far as the eye can see.”

But the report makes an assumption that may or may not be correct: it uses an average fuel efficiency of 27 miles per gallon for regular vehicles versus 40 miles per gallon, on average, for hybrids, which could be giving too much credit to regular vehicles and not enough to hybrids.

Hybrids make up about 3 percent of the country’s market share of vehicles. About 290,000 hybrids were sold in the US in 2009, approximately the same as in 2008 and a drop from a high of 347,000 in 2007.

Global economic recovery in 2010 will boost oil prices—moderately or majorly is the question. (image: scientificamerican.com)

Financial heavy hitters Citigroup, Merrill Lynch, and Round Earth Capital all recently weighed in with crude oil price predictions for the current year.

At Citigroup, the prediction is that oil prices will rise to $90 a barrel initially, but then settle down closer to $80 as the year progresses, reports the Financial Post.

“We project a tightening in capacity usage and an increase in the call on OPEC crude of some 3.8-million barrels a day by 2013,” analyst Faisel Khan wrote in a note to clients. He added that after 2014, the increase in Iraqi oil production within OPEC will complicate the global crude market.

Over at Merrill Lynch, predictions are that oil may rise to over $100 a barrel next year as the economy improves, reports Business Week. Analyst Francisco Blanch sees prices “potentially breaking through $100 a barrel as we enter 2011,” and will average $78.50 a barrel in the first six months of this year.

With the current cold temperatures in the U.S. and Europe boosting demand for heating fuel, oil prices have risen for four weeks in a row, reaching a 15-month high (however that trend ended this week). If the cold snap continues, Blanch’s report said, prices will continue to be high, at least in the short term.

The Business and Media Institute reports that John Kilduff of Round Earth Capital agrees with Merrill’s predictions of $100 per barrel, saying that a global economic recovery and China’s growth will be the major reasons for it.

“The good news is oil prices are up because there’s an absolute recovery under way,” Kilduff said, and added that China’s exploding economy will also be a factor.

Regardless of specific price predictions, all forecasts agree that the main factor that will determine oil prices in 2010 and 2011 will how much and how quickly global demand for oil recovers following the global recession. For a roundup of different expectations for global demand, take a look at this post from last week.

Sawdust: the unlikely commodity sought after by the biofuel and wood products industries. (image: thedailygreen.com)

In the world of government subsidies, there are good intentions and unintended consequences. The good intention was Congress’s Biomass Crop Assistance Program, designed to convert wood shavings and plant waste into renewable energy. The unintended consequences are pitting sawmill and lumber wholesalers against composite wood manufacturers for cheap wood byproducts, reports the Washington Post.

The Biomass Crop Assistance Program, a relatively small provision that was a part of Congress’s 2008 farm bill, has grown into a half-a-billion dollar subsidy that provides an incentive for sawmills and lumber mills to sell their leftovers wood byproducts to be converted into biofuel. So-called second-generation biofuels, like biofuel made from wood scraps or cellulosic ethanol made from the husks and leaves of corn, are extremely promising because they does not compete with any food source, unlike corn ethanol or soy-based biofuel.

However, the biomass subsidy is causing grief to the country’s composite wood manufacturers, who use wood byproducts to make items such as home entertainment centers and kitchen cabinets out of particle board and composite panels.

“It’s not right. It’s not serving any purpose,” said Bob Jordan, president of Jordan Lumber & Supply in North Carolina, who acknowledged that under the program his mill’s sawdust might fetch twice as much as it does now. “The best thing they could do is forget about it. All it’s doing is driving the price of wood up.”

T.J. Rosengarth, the vice president and chief operating officer of Flakeboard, the largest composite panel producer in North America, said that the biomass subsidy program could eliminate them. “You can say, ‘I’ve made more alternative energy,’ but at what expense?”

Not only might the subsidy drive up costs but it could also take a serious toll on the composite wood industry, which has about 21,000 employees and annual sales of $7.9 billion, vastly outflanking the biomass industry, which has been struggling since its inception in the 1970s. That was when the federal government required that utilities get a portion of their resources from independent power producers. Many of those producers’ contracts have now expired, and without a boost in funding, the biomass industry would be in dire straits.

Subsidies play a critical role in the biomass industry, as well as other alternative energy industries. Bob Cleaves, the Biomass Power Association president, says that they are critical to supporting a sector that supplies half of the nation’s renewable energy, and that seven of Maine’s ten biomass energy plants would have closed without the new funds.

“The industry needs help,” Cleaves said. “Is the country not prepared to spend half a billion dollars on half the country’s renewable energy resources?”

Regardless of what happens, the money is moving. Last fall, the Obama administration sent $23 million to the state offices of the Farm Service Agency and will soon be sending another $514 million.

Correction: The original post misstated the annual sales figure of the composite wood industry.

A recovery in oil demand will absorb the current supply glut, says DeMargerie. (image: proactiveinvestors.co.uk)

It’s a brand new year and the oil price predictions are rolling in. The latest prediction comes from the chief executive of French oil company Total SA, MarketWatch reported on Saturday.

In an interview published in the French weekly Le Journal du Dimanche, Total CEO Christoper DeMargerie does not predict specific prices, but that oil will be extremely volatile, and range from $60 to $100 per barrel.

Although prices are down now, due to the current oversupply and low demand, the expectations of an economic recovery will change the scenario, says DeMargerie.

“The market thinks there won’t be enough oil for the recovery, therefore every sign of recovery gives it a reason to push prices higher,” he explains. Oil is also becoming more expensive to produce because of environmental concerns and restrictions, DeMargerie added.

If the economic rebound occurs, as many insiders are anticipating, demand for oil may very well outstrip the abundant supply soon.

An offshore rig of Kuwait Petroleum, which has cut prices in response to low oil demand in Asia. (image: kpc.com)

In Kuwait, at least, oil prices are reflecting classic economics: With lowered demand for oil, Kuwait cut its prices. Although that’s how we typically expect prices to work, that hasn’t been the case for oil prices in the US.

Bloomberg is reporting that Kuwait Petroleum Corp. reduced its official February selling price for crude oil to Asia. In the face of shrinking demand, the Kuwaiti company’s official February selling price was the lowest in five months.

Japanese and South Korean refiners have cut back on their processing in response to low oil demand, much the same way US refiners have tried to preserve some profit by closing some refineries and operating below capacity.

In the US, however low demand hasn’t necessarily meant lower prices. Oil prices climbed in 2009 despite paltry demand, supported by speculation and investment.

Gov. Rendell’s announcement will bring welcome relief to Pennsylvania residents this winter. (image: infrastructurist.com)

Pennsylvania Governor Ed Rendell recently announced an extension of the Low-Income Home Energy Assistance Program, or LIHEAP, reports the York Dispatch. Officials say they hope the extension will help an additional 80,000 families throughout the state. Across the country, states have seen a steady rise in the need for assistance with heating costs.

The increase is due to the federal government’s $5.1 billion funding of the program, said Stacey Witalec, spokeswoman for the PA Department of Welfare, which submitted two state LIHEAP spending plans to the federal government: one for $3.1 billion and one for $5.1 billion. The higher funding, said Witalec, allowed the state to extend the program and increase the average for cash grants payments from $226 to $326 per household.

The program is now extended from March 15 to April 2, and eligible residents can receive an additional $100 for heating bills and up to $400 in crisis grants.

To be eligible for the program depends on family size, type of heating fuel, geographical residence, and annual income. A family of four would be eligible at $33,075.

Cash grants are available for residents who are in danger of having their heat shut off and for a refilling their supplies of heating oil, propane and kerosene. Crisis grants, on the other hand, provide funds for repairs and emergency heating oil shortages.

To obtain assistance, applicants must provide proof of income, residency, citizenship, birth dates, and Social Security numbers for all household members. A recent utility bill or statement from a customer’s heating fuel provider that verifies customer status and the type of fuel used must be also be shown.

Pennsylvania residents can apply online at www.compass.state.pa.us. Applicants may also call 866-857-7095. The program’s crisis grants became available Monday, January 4, 2010.

Click here to read how to apply for assistance in your state.