Tankers in English Bay & Canada's Confidence

The Oilholic headed to downtown Vancouver from the suburbs this afternoon, up on Burrard Street, turning right on Davie Street, down Jervis Street straight through to Sunset Beach in order to get a look in at the English Bay which is quite a sight. Standing bang in the middle of the beach, to your left would be Granville Island, the Burrard Bridge overlooking it and Granville Bridge reaching out to it.

To your right would be two more beaches and Stanley Park on the Vancouver Downtown Peninsula and looking out to the horizon you’ll see pristine waters of the Bay littered with tankers (see image above on the left, click to enlarge). The view is a vindication of Western Canada’s growing crude credentials and its clout in the world of oil & gas exports. Yours truly and other onlookers would often spot the odd oil or LNG tanker on the horizon making its way to or from Vancouver Harbour and docking bays on the inlet towards Port Moody. However, this afternoon the Oilholic counted 12 tankers - the most yours truly has ever counted on five previous visits to the Bay!

There is a new found confidence in the Canadian energy business and a palpable shift in the balance of economic prowess from a manufacturing-led East Coast/Eastern dominated macroeconomic dynamic of the 1950s to a natural resources-led West Coast/Western dominated economy since 2005 or thereabouts. Furthermore, an ever mobile financial services sector with its hubs in Montreal and Toronto now looks increasingly Westwards. Law firms and advisory firms are increasing their presence in Western Canada by expanding practices and a network of partners in Calgary and Vancouver.

Calgary now has more corporate headquarters than Montreal. Of the top 20 most profitable Canadian companies by exchange filings in 2010, eight were natural resources companies with a Western Canadian slant (viz. Suncor, Barrick, Imperial Oil, PCS, Teck, CNR, Goldcorp and EnCana).

A recently spurned merger between natural resources and banking sector(s) dominated stock exchanges of London (LSE) and Toronto (TSX) would have been ideal. But much to the dismay of the Oilholic, the Canadians involved wanted to go it alone and whether you agree or not. In more ways than one LSE and TSX are rivals, especially when it comes to attracting mining companies.

Switching tack to big shots in Ottawa – well to begin with Prime Minister Stephen Harper is an Alberta man. Bank of Canada governor Mark Carney, Chief Justice Beverley McLachlin and the inimitable Rt. Hon. Joe Oliver – the country’s Natural Resources Minister and the most vocal among his G7 peers with an identical ministerial portfolio – are all ‘Western’ Canadians.

Having visited Canada on an annual basis since 2001, the Oilholic has seen the transformation of Canadian politics and the country’s economy first hand and it has been extraordinary in a positive sense. Harper’s “ocean of oil soaked sand” in Northern Alberta has more of the crude stuff than any other crude exporting country bar Saudi Arabia. Let’s not forget the Saudis’ reserves position has been verified by Aramco, Canada’s has been subjected to scrutiny by half world’s independent verifiers of different political leanings and persuasions.

The total value Canada’s natural resources according to various estimates at 2009 prices comes in at US$1.1 trillion to US$1.6 trillion, with the bituminous bit and shale alone accounting for at least 45% per cent of that depending on which financial analyst or economist you speak to.

“Canada’s biggest advantage as an oil exporter in the eyes of the world is that it’s no Saudi Arabia. Furthermore, in a business full of unsavoury characters, dealing with Canadians makes for a welcome change,” quips one patriotic analyst on condition of anonymity.

In the oil business there are no moral absolutes and no linear path to the Promised ‘Crude’ Land. Canada will have its fair share of challenges related to extracting, refining and marketing the oil. The will to do so is certainly there and so are the buyers. The Oilholic’s timber trade analogy has won him quite a few beers from Canadians and pragmatic macro analysts who loved it. There is an unassailable truth here – American dithering and often unjust punitive action against Canadian timber exports in the 1990s lead a Liberal party-governed Canada to look Eastwards to Japan and China.

Fast forward to 2011-2012 and history is repeating itself with President Obama’s dithering over Keystone XL (although TransCanada’s reputation in relation to leaks has not helped either). Akin to the 1990s, there are other buyers in town for the Canadian crude stuff, with India joining the tussle for Canadian attention along with Japan, South Korea and China.

When a Liberal-led Canadian federal government looked elsewhere in the 1990s to market and sell its dominant natural resource at the time, if the US government thinks a present-day Conservative government with a parliamentary majority and a forceful character like Stephen Harper at the helm won’t do likewise (and sooner) when it comes to oil, then they are kidding themselves more than anyone else.

The presence of Korean, Indian and Chinese NOCs can be felt alongside top 20 IOCs in Calgary. Not a single oil major worth its weight in crude oil has chosen to ignore the oil sands, just as onlookers at Sunset Beach can’t ignore tankers on the English Bay horizon. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Oil & LNG tankers on the English Bay horizon, British Columbia, Canada © Gaurav Sharma 2012.

Canadian & Russian supply risk scenarios

Happy Easter folks! Following on from California, the Oilholic is once again back in Beautiful British Columbia, as vehicle licence plates from the province would point out, should you need reminding in these serene picturesque surroundings. When talking non-OPEC supply of the crude stuff – Russia and Canada always figure prominently in recent discussions, the latter more so than ever.

In fact, when it comes to holding exposure to oil price sensitivity, as recommended by some analysts for the next two quarters, via mixed bag of investments – Russian equities and “natural resources linked” (and not yet showing signs of Dutch disease) Forex including the Russian Rouble and the Canadian dollar are flagged-up more often than ever. In fact the Canadian Dollar, often called south of the border by Americans as the “Loonie” (based on a common bird on the CAD$1 coin), is proving pricier and more worthy than the world’s reserve currency itself in the post-Global financial crisis years.

Between Russia and Canada, given that the latter has a more diverse range of exports, the Russians have a bigger problem when it comes to oil price swings. In fact, ratings agency S&P reckons that a sustained fall in the price of oil could damage the Russian economy and public finances and consequently lead to a cut of the long-term sovereign rating.

"We estimate that a US$10 decline in oil prices will directly and indirectly lead to a 1.4% of GDP decline in government revenues. In a severe stress scenario, where a barrel of Urals oil drops to, and stays at, an average US$60, we would expect the general government to post a deficit above 8% of GDP. In that scenario, the long-term ratings on the Russian Federation could drop by up to three notches," says S&P credit analyst Kai Stukenbrock.

The rise in oil prices over the past decade has supported an expansionary fiscal policy, while still allowing the country to build up fiscal reserves. Still, fiscal expansion, not least significant countercyclical spending during the recent crisis, has led to a significant increase in expenditures relative to GDP.

As a result, despite record revenues from oil in 2011, S&P estimates the general Russian government surplus at merely 0.8% of GDP. To balance the budget in 2012, the agency thinks the government will require an average oil price of US$120 per barrel.

While former Russian finance minister Alexei Kudrin has also expressed fears of Russian over reliance on the price of oil, most analysts have a base price range of US$90 to 100 for 2012. So a fear it may well be; it remains what it is – a fear! Another ratings agency – Moody’s noted last month that as a result of financial flexibility built up over the past two years, rated Russian integrated oil & gas companies will be able to accommodate volatility in oil prices and other emerging challenges in 2012 within their current rating categories.

"In 2011, rated Russian players continued to demonstrate strong operating and financial results, underpinned by elevated oil prices," says Victoria Maisuradze, an Associate Managing Director in Moody's Corporate Finance Group. "Indeed, operating profits are likely to remain stable in 2012 as an increased tax and tariff burden will offset the benefits of high crude oil prices. All issuers have stable outlooks and our outlook for the sector is stable."

Nevertheless, developing reserves in new regions remains a major challenge for Russia as traditional production areas deplete; a problem which the Canadians don’t have to contend with. In 2006, Prime Minister Stephen Harper, whose hand is now politically more stronger than ever, told an audience in London that Canada was ranked third in the world for gas production, seventh in oil production, the market leader in hydroelectricity and uranium. He described it six years ago as “just the beginning.”

Harper’s journey to make Canada an ‘energy superpower’ is well and truly underway. The Oilholic charted the view from Calgary on his visit to Alberta last year and has followed the shenanigans related to the US ‘dis’-approval of Keystone XL pipeline project over the course of 2011-12. Over the coming days, yours truly would revisit the subject with a take on prospective exports to Asia via British Columbia.

Continuing with non-OPEC supplies, the Oilholic’s old contact in Warsaw – Arkadiusz Wicik, Director of Energy, Utilities and Regulation at Fitch Ratings – believes Shale gas in Poland could still be a game changer for the country's energy sector despite the disappointing shale gas reserve estimate published in March by the Polish Geological Institute (PGI).

PGI assessed most likely recoverable shale gas reserves to be between 0.35 and 0.77 trillion cubic meters (tcm), which is about one-tenth the 5.3 tcm estimated by the US Energy Information Administration in April 2011. PGI estimates maximum recoverable shale gas reserves at 1.92 tcm.

Wicik believes it is still too early to make any meaningful assumptions about the future of shale gas in Poland, believed to have one of the highest development potentials in Europe. “Less than 20 exploration wells have been drilled by domestic and foreign companies, in many cases with disappointing results. From a credit perspective, we view shale gas exploration as high risk and capital intensive. Partnerships among domestic companies to share exploration risks and costs, or more participation by foreigners would be positive,” he says.

Exploration by Poland's energy companies at an early stage gives them a chance to become major players should the commercial availability of gas be proven over the next several years. This was not the case in the US, where the shale gas industry was developed by a number of smaller, independent players as the Oilholic noted in a special report for Infrastructure Journal. Large US oil and gas companies have only recently started to be active in the sector, mostly through acquisitions.

Wicik notes, “We do not expect that the success in the US, which led to about a 50% decrease in US gas prices between 2008 and 2011, will be easily replicated in Poland. Commercial production in the first five to 10 years is unlikely to substantially lower gas prices given high breakeven costs. Also, Poland and the US differ both in terms of shale formations and the gas market structure.”

A number of foreign companies already have exploration concessions for shale gas in Poland, including ExxonMobil, Chevron, ConocoPhillips (through a service agreement with Lane Energy), Marathon Oil and Eni. Local players that have been granted exploration concessions include PGNiG, PKN Orlen, Grupa Lotos and Petrolinvest.

Another three large domestic companies - PGE, Tauron, and KGHM - also plan to enter shale gas exploration. In January 2012, they signed three separate letters of intent with PGNiG regarding cooperation in shale gas projects. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo: Oil Refinery, Quebec, Canada © Michael Melford / National Geographic.

Crude market’s health & farewell to the Bay Area

It’s nearly time to say goodbye to the Bay Area head north of the border to British Columbia, Canada but not before some crude market conjecture and savouring the view of Alcatraz Island Prison from Fisherman’s Wharf. A local politician told yours truly it would be an ideal home for speculators, at which point the owner of the cafe ‘with a portfolio’ where we were sitting quipped that politicians could join them too! That’s what one loves about the Bay Area – everyone has a jolly frank opinion.

Unfortunately for debaters on the subject of market speculation, Alcatraz (pictured left) often called “The Rock” and once home to the likes of Al Capone and Machin Gun Kelly was decommissioned in 1963 can no longer be home to either speculators or politicians, though it seems quite a few seagulls kind of like it!

Not blaming speculators or politcians and with market trends remaining largely bullish, selected local commentators here, those back home in the City of London and indeed those the Oilholic is about to meet in Vancouver BC are near unanimous in their belief about holding exposure to oil price sensitivity over the next two quarters via a mixed bag of energy stocks, Russian equities, natural resources linked Forex (especially the Australian and Canadian dollar) and last but not the least an “intelligent play” on the futures market.

Nonetheless the second quarter opened on Monday in negative territory as WTI crude oil slid lower to retest the US$102 per barrel area, while Brent has been under pressure trading just above US$122 per barrel level on the ICE. “The European equity markets are also trading lower as risk appetite has been limited,” notes Myrto Sokou, Sucden Financial Research.

Protecting one’s portfolio from short-dated volatility would be a challenge worth embracing and Société Générale recommends “buying (cheap) short-dated volatility to protect portfolios from escalating political risk in Iran.” (Click on benchmarks graph to enlarge)

Mike Wittner, a veteran oil market commentator at Société Générale, remains bullish along with many of his peers and with some justification. OPEC and Saudi spare capacity is already tight, and will soon become even tighter, due to sanctions on Iran, says Wittner, and the already very bullish scenario would continue to be driven by fundamental.

Analysts point to one or more of the following: 

• Compared to three months ago, fears of a very bearish tail risk have subsided to an extent (e.g. Eurozone, US data) and macro environment is gradually turning supportive.
• Concurrently, risks of a very bullish tail risk remain (e.g. war against Iran or the Straits of Hormuz situation).
• OECD crude oil inventory levels are at five year lows.
• OPEC spare capacity is quite low at 1.9 million barrels per day (bpd), of which 1.6 million bpd is in Saudi Arabia alone.
• Ongoing significant non-OPEC supply disruptions in South Sudan, Syria, and Yemen thought to be in the circa of 0.6 million bpd.
• Broad based appetite for risk assets has been strong.
• Low interest rate and high liquidity environment is bullish.

On the economy front, in its latest quarterly Global Economic Outlook (GEO), Fitch Ratings forecasts the economic growth of major advanced economies to remain weak at 1.1% in 2012, followed by modest acceleration to 1.8% in 2013. While the baseline remains a modest recovery, short-term risks to the global economy have eased over the past few months.

Compared with the previous Fitch GEO in December 2011, the agency has only marginally revised its global GDP forecasts. The agency forecasts global growth, based on market exchange rates, at 2.3% for 2012 and 2.9% in 2013, compared with 2.4% and 3.0% previously.

"Fitch expects the eurozone to have the weakest performance among major advanced economies. Real GDP is projected to contract 0.2% in 2012, and grow by only 1.1% in 2013. Sizeable fiscal austerity measures and the more persistent effect of tighter credit conditions on the broader economy remain key obstacles to growth," says Gergely Kiss, Director in Fitch's Sovereign team.

In contrast to problems in Europe, the recovery in the US has gained momentum over past quarters. Growth is supported by the stronger-than-expected improvement in labour market conditions and indicators pointing to strengthening business and household confidence.

In line with the underlying improvement in fundamentals Fitch has upgraded its 2012 US growth forecast to 2.2% from 1.8%, whilst keeping the 2013 forecast unchanged at 2.6%. For Japan and the UK, Fitch forecasts GDP to increase 1.9% and 0.5% respectively for 2012.

Economic growth of the BRIC countries is expected to remain robust over the forecast horizon, at 6.3% in 2012 and 6.6% in 2013, well above MAE or global growth rates. Nevertheless, Brazil in particular, but also China and India slowed during 2011 and China is expected to slow further this year.

While on the subject of economics, Wittner of Société Générale, regards a shutdown of the Strait of Hormuz as a low-probability but high-impact scenario with Brent potentially spiking to US$150-$200. “In such a scenario, the equity markets would correct sharply. As a rule of thumb, a permanent US$10/barrel increase in the oil price would shave around 0.2% from global GDP growth in the first year after the shock,” he concludes.

That’s all for the moment folks! The Oilholic leaves you with a view of driving on Golden Gate Bridge on a sunny day and downtown San Francisco as he dashes off to catch a flight to Vancouver. Yours truly will be examining Canada’s role as a geopolitically stable non-OPEC supplier of crude while there. Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Graph: World crude oil benchmarks © Société Générale. Photo 1: Alcatraz Island. Photo 2: Downtown San Francisco. Photo 3: Driving on the Golden Gate Bridge, California, USA. © Gaurav Sharma.

A Californian emission law, refiners & Muir woods

When in town, spending a few hours watching shipping lanes in the San Francisco bay area is an old pastime of the Oilholic’s, especially when it comes to spotting oil tankers which bring in some of the crude stuff to the area's refiners.

This morning, while sitting on Pier 39, yours truly spotted three pass by along with a few loaded containers - all following a well practised drill moving along a designated route under the Golden Gate Bridge, past Alcatraz Island before turning away left. Away from eye-view and the rather tranquil shipping lanes, there is local trouble at the mill for the already beleaguered refiners who have to contend with overcapacity and stunted margins.

It comes in the shape of a gradual but steady implementation of California's (relatively) new environmental regulations by 2020. This piece of regulation is known as California's Global Warming Solutions Act a.k.a. the AB 32, the central objective of which is to reduce Californian greenhouse gas emissions to 1990 levels by 2020.

According to the California Air Resources Board, in 2013 it will begin enforcing a state-wide cap on greenhouse gas emissions. The cap-and-trade programme coupled with the Low Carbon Fuel Standard would give California some of the most stringent air quality and emissions laws in the USA, although a spokesperson refused to describe it as such.

Ratings agency Moody’s believes refining and marketing (R&M) companies Tesoro, Alon USA, Phillips 66 and Valero are particularly exposed to the gradual implementation of the new environmental rules.

"California's increasingly stringent environmental regulations will challenge refiners over the next decade, increasing operating costs and negatively impacting refined product demand. These new rules will reduce cash flow that could be used for debt repayment or strategic growth and could discourage refiners from investing in California," says Gretchen French, a senior analyst and Vice President at Moody’s.

Among the majors, Chevron which has a significant refinery capacity in California, is likely to feel the impact most among its peers. Nonetheless as ratings agencies generally tend to rate integrated oil & gas companies higher than R&M only companies, Chevron should have no immediate concerns. The company's long-term debt is rated by Moody’s Aa1 with a stable outlook according to a communiqué dated March 27th.

The agency believes Chevron's ratings reflect its significant scale and globally integrated operations, its diversified upstream reserves and production portfolio, and a strong financial profile, which is underpinned by strong cash flow coverage metrics, low financial leverage, robust capital returns, and a conservative approach to shareholder rewards.

Furthermore, Chevron's strong liquidity profile is characterised by free cash flow generation, ongoing asset sales proceeds, and a large cash position. Chevron's liquidity is further supported by US$6 billion of unused committed credit facilities due in December 2016. Moody's does not expect the new rules to affect the ratings for Tesoro, Alon, Phillips 66 or Valero either over the near to medium term, but the new standards could limit credit accretion.

"Well diversified companies with high financial flexibility and strong liquidity will shoulder the new burdens and weaker demand most easily. Refiners with efficient cost structures and high distillate yields will retain the greatest advantage," French says.

Additionally, a pool of commentators here in the Bay Area seem to suggest that most players – especially Tesoro and Valero – have had a fair bit of time to indulge in regulatory risk mitigation. This piece of legislation was to be expected as California has admirably been a state keen on conservation, forestry and the environment.

The “Father of the US National Parks” – John Muir – an author, naturist and an early advocate of preservation of wilderness in the USA did most of his life’s important work here in California’s Sierra Nevada mountain range. In 1908, Muir who also founded one the country’s most important conservation organisation – the Sierra Club – had a national park named after him. This amazing redwood forest - the Muir Woods National Monument near San Francisco - now provides joy to countless visitors among whom the Oilholic was one this afternoon.

More than six miles of trails are open for visitors to experience an easy walk on the valley floor through the primeval redwood forest. Though the forest is naturally quiet, the Oilholic is in agreement with the US National Park Service, that people are key to preserving the ancient tranquillity of an old-growth forest in our noisy, modern world. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo 1: Oil Tanker in the San Francisco Bay Area shipping lane. Photo 2: Valero Pump. Photo 3: Collage of Muir Woods National Monument, California, USA © Gaurav Sharma.

‘Crude’ views from across the pond

The view on the left is that of the Point Reyes Lighthouse, but more on that later. The Oilholic landed in California on Wednesday to begin yet another North American adventure and instantly noted the annoyance in our American cousins’ voices about rising gasoline prices at the pump.

The extent to which the average American is miffed depends on where he/she buys gasoline which is comfortably in excess of US$4 per gallon with regional and national disparities. For instance in Sunnyvale and Santa Clara CA, gasoline is retailing in the region of US$4.19 to US$4.49 per gallon.

However, head to downtown San Francisco and it jumps by at least 10 cents on average and cross the Golden Gate Bridge towards outlying gas stations and it jumps another 15 cents on top of the Bay Area price. In an election year, President Obama does not want his voters to be miffed, especially as Republican opponents are conjuring up uncosted phantasmal visions of prices at the pump of US$2.50 per gallon.

The President’s answer, based on a credible rumour mill and the US media, might involve diving (again) into the US Strategic Petroleum Reserves (SPR). The signs are all there – grumbling American motorists, Obama discussing releasing strategic stockpiles with British PM David Cameron, Iranians issuing threats about closing the Strait of Hormuz and overall bullish trends in crude markets.

For its worth, when Obama dived into the SPR last summer, he had the IEA’s support – something which he does not have at the moment. The Oilholic believes it was a silly idea then and would be a silly idea now. Although it pains one to say so, grumbling American motorists do not constitute a genuine emergency like the Gulf War(s) or Hurricane Katrina (in 2005); there is no supply shock of a catastrophic proportion or shall we say a ‘strategic’ need. North Sea Maintenance work, Sudanese tiffs, Nigeria and minor market jitters do not qualify were it not for an US presidential election year.

Besides, a release of IEA’s strategic pool of reserves collectively did very little to curb the price rise last summer. In its wake, price dropped momentarily but rose back to previous levels in a relatively short period of time. On this occasion driven by Asian consumption, a drive to seek alternative supplies away from Iran by consuming nations and short term supply constriction will do exactly that - were its SPR to be raided again by the US.

In fact, most contacts in financial circles on the West Coast share the Oilholic’s viewpoint; even though the WTI closed lower at US$103.22 a barrel on persistent talk of strategic reserve releases in the US media on Friday. The price also breached support in the US$104.20 to US$103.78 circa. Respite will be temporary; Moody’s raised its price assumptions for benchmarks WTI and Brent for 2012 and 2013, on Wednesday (while lowering assumptions for the benchmark Henry Hub natural gas).

The agency assumes an average WTI price of US$95 per barrel for crude in 2012, and US$90 per barrel in 2013. Brent will rise by US$10 per barrel from the agency’s previous assumption, with average prices of US$105 per barrel in 2012 and US$100 per barrel in 2013. That – says Moody’s – is due to the higher risk of a potential supply squeeze caused by the Iran embargo and continued strong demand from China.

Meanwhile, with customary aplomb in an election year, President Obama, “authorised” the usage of new sanctions on buyers of Iranian oil with punitive actions against those who continue to trade in Iranian crude. In a nutshell, if a country or one of its banks, trading houses or oil companies tries to source oil from the Iranian central bank then, at least in theory, they could face being cut off from the US banking system should they not comply by June 28.

However, following on from a law signed in December, Obama admitted that the US has had to make exceptions to countries like Japan, who have already made moves to cut back on Iranian oil. Some like India and China will find innovative ways to get around the sanctions as the Oilholic blogged from Delhi earlier in the year.

One does find it rather humorous that in order to defend his stance on Iran, Obama said US allies boycotting Iranian oil would not suffer negative consequences because there was "enough" oil in the world market and that he would continue to monitor the global market closely to ensure it could handle a reduction of oil purchases from Iran.

A statement from the White House acknowledged that "a series of production disruptions in South Sudan, Syria, Yemen, Nigeria and the North Sea have removed oil from the market" over Q1 2012. "Nonetheless, there currently appears to be sufficient supply of non-Iranian oil to permit foreign countries to significantly reduce their import of Iranian oil. In fact, many purchasers of Iranian crude oil have already reduced their purchases or announced they are in productive discussions with alternative suppliers," it adds.

Good, then that settles the argument about the need to raid the SPR (or not?). Meanwhile, Moody’s (and others) also reckon the short term scenario is positive for the E&P industry, at least for the next 12-18 months since the global demand for oil that led to a strong price rally for crude and natural gas liquids (NGLs) shows little sign of abating.

In addition, E&P companies could benefit further from heightened geopolitical risk. Moody's crude assumptions hinge on reduced deliveries in Iran beginning mid-summer, when an embargo takes effect, but crude prices could move even higher if Saudi Arabia fails to fill in the supply shortfall. On the flipside, the industry faces some risk from the fragile European economy and could face lower demand if the euro area destabilises in 2012 and 2013.

Meanwhile, back home in the UK, there have been several crude developments. First panic buying ensued when Government issued advice to British motorists that they ought to stock-up in case oil tanker drivers go on strike leading to long queues at the pump. Then the government issued advice not to “panic.”

Now the petrol station owners’ lobby group is demanding talks, according to the BBC. Seven crude hauliers at the heart of the tanker drivers’ dispute are Wincanton, DHL, BP, Hoyer, JW Suckling, Norbert Dentressangle and Turners. They are responsible for supplying 90% of the UK's petrol stations and some of the country's airports. Workers at DHL and JW Suckling voted against strike action but backed action short of a strike in a dispute over “safety and work conditions”.

The run on petrol retail outlets could continue until Easter Monday according to some sources. Continuing with the UK, Total’s leak from the Elgin gas platform, 150 miles off Aberdeen, which has been leaking gas for the past three days is rumoured to be costing the French giant US$1.5 million per day.

Total is the operator (46.17% stake) of the Elgin/Franklin complex, with Eni and BG Energy holding 21.9% and 14.1% interests respectively. Production on the Elgin, Franklin and West Franklin fields, which averages 130,000 barrel of oil equivalent per day (boepd), is now temporarily shut but ratings agencies Fitch Rating’s and Moody’s believe it is not another “Deepwater Horizon.”

“We have not factored into the company's ratings any catastrophic accident on the platform resulting in an explosion, or a dramatic worsening of the current situation. However, we have considered a "worse-than-base-case" scenario where Total may have to shut down the Elgin field to stop the gas leak. This would imply the loss of a producing field that is worth, in net present value terms, €5.7 billion according to third party valuations. Were the field to become permanently unusable it would cost Total €2.6 billion - its share in Elgin - and the company might have to compensate its partners for the remaining €3.1 billion,” notes a Fitch statement.

Total had around €14 billion in cash on balance sheet at December 2011, and about €10 billion in available unused credit lines. Elsewhere, Petrobras' average oil and natural gas output in Brazil and abroad was 2,700,814 barrels of oil equivalent per day (boepd) in February. Considering only the fields in Brazil, production added up to 2,455,636 boepd. In February, oil output exclusively from domestic fields reached 2,098,064 barrels per day, while natural gas production totaled 56,849,000 cubic meters.

Finally, the Oilholic leaves you with a view of the windiest place on the Pacific Coast and the second foggiest place on the North American continent – Point Reyes and its lighthouse built in 1870.

According to the US National Park Service, weeks of fog, especially during the summer months, frequently reduce visibility to hundreds of feet and the historic lighthouse has warned mariners of danger for more than a hundred years.

A US Park Ranger on duty at the Lighthouse said the lens in the Point Reyes Lighthouse is a "first order" Fresnel lens, the largest size of Fresnel lens courtesy Augustin Jean Fresnel of France who revolutionised optics theories with his new lens design in 1823.

Before Fresnel developed this lens, lighthouses used mirrors to reflect light out to sea. The most effective lighthouses could only be seen eight to twelve miles away. After his invention, the brightest lighthouses – including this one – could be seen all the way to the horizon, about twenty-four miles. The Point Reyes Headlands, which jut 10 miles out to sea, pose a threat to each ship entering or leaving San Francisco Bay (click on map to enlarge).

The Lighthouse was retired from service in 1975 when the US Coast Guard installed an automated light. They then transferred ownership of the lighthouse to the National Park Service, which has taken on the job of preserving this fine specimen of American heritage. It is an amazing site and it was a privilege to have seen it and the famous fog.

The area also has a very British connection. The road leading up the rocky shoreline where the lighthouse is situated is named – Sir Francis Drake Boulevard – after the legendary British Navy Vice Admiral and a Crown explorer of the seas. It is thought that Sir Francis’ ship The Golden Hinde landed somewhere along the Pacific coast of North America in 1579, claiming the area for England as "Nova Albion."

The road itself is an east to west traffic linkage in Marin County, California, running just west of the Richmond-San Rafael Bridge to the trailhead for the Lighthouse right at the end of the Point Reyes Peninsula. His landing place has often been theorised to be at what is now called Drakes Bay on Point Reyes, the western terminus for the boulevard. That’s all for the moment folks! Keep reading, keep it ‘crude’!

© Gaurav Sharma 2012. Photo 1: Oilholic at the Point Reyes Lighthouse, California, USA. Photo 2: Valero Gas Station Price Board, Sunnyvale, California, USA. Photo 3: Point Reyes Lighthouse © Gaurav Sharma. Photo 4: Archive photo of Point Reyes Lighthouse in 1870. Photo 5: Map of Point Reyes © Point Reyes Visitor Center / US National Parks Service. Photo 6: Oilholic on Sir Francis Drake Boulevard © Gaurav Sharma.