President George W. Bush urged Congress this week to end a ban on offshore oil drilling, responding to consumer anxiety over soaring gasoline prices. Bush said opening federal lands off the U.S. coast — where oil drilling has been banned by both a presidential executive order and a congressional moratorium — could yield about 18 billion barrels of oil. That would meet current U.S. consumption for about 2 1/2 years, but it would likely take a decade or more to find the oil and produce it.

The following is a map showing the offshore areas at issue. Click here for a more detailed, high-resolution version from the U.S. Minerals Management Service, which manages the nation’s natural gas, oil and other mineral resources on the outer continental shelf.

More coverage
FACTBOX-Five questions about US offshore oil drilling
Offshore US drilling could help oil cos, drillers

Retail fuel prices in the United States have smashed the records and show no signs of reversing course — bad news for drivers heading into the summer vacation season.

The explanation is fairly easy — crude oil prices have quintupled since 2002 because of rising global demand and constraints on supply, and fuel prices have risen in turn. But there are also some eyebrow-raising oddities of note.

Among them, gasoline prices are at a record even though supplies are brimming at levels not seen since 1993. Back in 1993, a you could get a gallon of gas for 99 cents if you put a little effort into it. In fact, supplies are so high right now that oil refiners like Valero are even slowing production because they’re having a hard time making money with the cost of crude eating away at the bottom line. While the swelling inventories are of little comfort to people paying up at the pumps, it could be worse. Lower supplies would almost certainly raise gasoline prices further.

Another oddity: diesel is WAY more expensive than gasoline. This is odd because diesel has traditionally been the cheaper of the two fuels in the United States as it has been easier to produce and there has been relatively less demand for it. But recent environmental regulations slashing sulfur content in diesel alongside rising consumption of the fuel in places like Europe and Asia have changed the dynamics, pushing up the cost of production and the level of exports to overseas markets. The surge in diesel prices is not just a headache for people with diesel Volkswagens. It is a huge problem for trucking companies, major courier services, and other industries. Also, because of the close relationship between diesel and jet fuel, airlines have been taking a severe hit.

Another outwardly bizarre situation in the energy markets is the fact that OPEC — which only a few years ago said it wanted to keep oil in a range between $22 and $28 per barrel — has declined repeatedly to raise production with crude in triple-digit territory. Part of the concern, they say, is the uncertainty of future demand with the U.S. economy slowing down. Probably a reasonable worry, after the cartel got burned a decade ago in similar circumstance, raising output to head off a looming recession only to see crude prices fall to historic lows a couple of years later.

    Relations between the U.S. Agriculture Department and the Humane Society of the United States are a little strained right now.
    In January, the Humane Society released the shocking videos of workers at a California meat plant workers using all manner of abusive tactics to get unfit cattle into the slaughterhouse.
    This week at the USDA’s annual outlook conference, Agriculture Secretary Ed Schafer complained that that the animal rights group held on to the video for four months before making it public.  Could this be sour grapes that the USDA itself did not expose the grusome conditions at the plant?
    “They had a big, huge impact on this issue because they were not forthcoming with the information,” said Schafer, who was concerned about the department’s relationship with the animal-rights group.
    “I’m looking forward to visiting with them because we should be partners in our common mission of the humane treatment of animals.”
    Schafer said that by holding on to the video, the Humane Society of the United States failed to prevent four months of meat production from entering the marketplace that was later recalled. It’s failure to release the video also was surprising for a body that claims to promote the safe treatment of animals, he said.
    Humane Society President Wayne Pacelle fired back that it took time to conduct the investigation, analyze the information, check laws and work with authorities conducting a criminal investigation.
   “They are attempting to divert attention from their own shortcomings,” said Pacelle. “He keeps misrepresenting the timeline on this.”
    The shocking undercover video (beware!)  showed Hallmark/Westland Meat Packing Co workers using a variety of abusive techniques to force sick and injured cattle into the slaughterhouse so they could be processed into food for human consumption. 
   This week, Hallmark/Westland announced it was recalling 143 million lbs of meat, mostly beef, from the plant where the abuse occurred.  It was by far the largest meat recall ever and some of the meat  from the plant ended up in school lunch programs, which the USDA oversees. 

 – Christopher Doering, Washington  

By the looks of the $3-a-gallon prices at the U.S. pumps, you’d think gasoline supplies were running out. Oddly enough, they’re brimming. The latest data from the Energy Information Administration shows inventories have grown to their highest level since 1994, when a gallon of the fuel went for a buck.

Before you become outraged…

The increase in inventories IS expected to push prices lower over the winter, possibly by as much as 50 cents, experts said on Wednesday. The main reason prices are pointing lower and supplies are pointing higher is that Americans — pressured by recent high energy costs and an uncertain economy — appear to be reducing their consumption.  

Wheat futures are making new ground above $9 a bushel in Chicago - track the rise in red in the chart above with the broader CRB commodities index in black. The rise in basic food ingredients like wheat isn’t making things any easier for central bankers trying to keep the credit markets from freezing up. Wheat prices are the stand-out example of “agflation”, Veronica Brown and Nigel Hunt reported here. Prices have more than doubled to record highs this year in the U.S. and Europe. Crop pressures, red-hot emerging market demand and the biofuels revolution are the drivers.

The International Energy Agency said Tuesday that high oil prices were starting to cut into global energy demand growth, a factor that fed into oil’s dramatic sell-off of about $8 from last week’s all-time high.

Have you found ways of cutting your energy use, either by cutting road travel, opting for a smaller car, or turning down your thermostat?

The skyrocketing price of U.S. heating oil– at an average of $3.11 per gallon– has caught many Americans unprepared for the winter.  It’s the first time ever that U.S. consumers are paying more than $3 per gallon for both heating oil and gasoline.  

“We’ve never seen a year like this…people are scared,” said Susan Kooperstien of the Action for Boston Community Development, a nonprofit that helps low-income families get fuel assistance.  So far, ABCD estimates 16,000 families have inquired about the assistance.

Although the federal and state governments do provide assistance to low-income families, those funds cover only a portion of heating costs, and many who need it don’t meet the income qualifications, experts say.

Free heating oil, courtesy of Citgo (the Venezuelan national oil company of Hugo Chavez),  has been a popular alternative.  For example, last year, low-income cooperatives in New York City received about $800,000 in heating oil from the program, according to the Urban Homesteading Assistance Board.

Are you worried about keeping your home warm for the winter? How do you plan to cover costs?

The Cleveland Indians, celebrating with a $447.25 per barrel beer….

Oil’s record run to near $100 a barrel has brought it within striking distance of the price for the equivalent volume of Coca Cola, but it’s still a bargain compared to Jack Daniels whiskey and Chanel No. 5.

                                     
PRODUCT                  Â Â Â Â US$/BARREL
Gasoline #                     Â Â Â Â Â Â Â Â Â Â Â 103.50
Coca Cola                                  126.45
Milk                                            163.38
Snapple                  Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â  237.72
Perrier Mineral Water                 300.61
Tropicana Orange Juice             307.44
Budweiser Beer                         447.25
Scope Mouthwash                 Â Â Â Â 682.34
Starbucks Venti Latte               954.24
Pinot Grigio Wine                    2,117.75
Bertoli Olive Oil                    Â Â Â  2,370.71
Jack Daniels Whiskey             4,237.6 3
McIlhenny Tabasco Sauce        6,155.52
Visine A.C. Eye Drops             39,728.64
FLONASE Nasal Spray           902,304.00
Chanel No.5 Parfum             1,666,560.00

* SOURCE: John S. Herold, Inc. report from May 25, 2007, except # Gasoline, based on a Reuters calculation.

      …the gold bone is connected to the grain bone and the grain bone is connected to the…
    In their Daily Grain Comment on Thursday, analysts at AG Edwards helped illustrate the connectedness of energy prices and grains, something that was not typical just a couple of years ago. (pdf here?)
    Prices for commodities are increasingly rising and falling in unison. Investment funds have diversified their portfolios into commodities in recent years, looking at metals, grains and energy futures as more of a single asset class that can add balance to the traditional mix of stocks and bonds.
    Traditionally, gold and corn for instance, or crude and soybean oil, had little or no connection when markets moved. Now, its not unusual to see everything move togethe, as investment managers shift money into or out of the sector. What were unrelated markets can appear to have dependence, although there is plenty of capital shifting between individual commodities as well. It is not unusual to hear a grain trader cite gold, or oil futures as a feature of their markets.
    Ags and energy markets have also been linked by the increased use of biofuels made from farm commodities.
    Thursday was a case in point.
    Chicago Board of Trade corn, wheat and soybean futures had finished overnight trading with gains, thanks to a rally in crude oil past a record high $96 a barrel, gold was at a 28-year high and the weak dollar was helping grain exports.
    The overnight trend, more often than not, sets the stage for trading in the more active dayside session.
    So, traders, ‘called’ CBOT corn futures to open 2 to 3 cents a bushel higher, soybeans 7 to 10 cents higher and wheat 10 to 12 cents higher in keeping with the overnight trend.
    But as it got closer to opening time (9.30 a.m. CDT), doubts began to creep in. Why? Because crude oil began falling in a bout of profit-taking after it’s rise to a record high.
    And gold began retreating after breaching the $800-an-ounce mark. The stock market was down more than 200 points on its way to a 362 point shakeout for the day.
    CBOT grain traders changed their calls, now seeing corn opening mixed - either 2 cents a bushel higher or 2 cents lower. They scaled back the wheat call to 3 to 5 cents higher, and soybeans also 3 to 5 cents higher.
    At the opening bell, all three commodities opened down, and ended lower on the day, as did oil and gold.   

– K.T. Arasu