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Oil prices fell below $70 per barrel Thursday for the first time in two weeks following the announcement of the death of al-Qaida’s leader in  Iraq, Abu Musab al-Zarqawi.

Word by Nigerian militants that they would release foreign hostages and an easing of world tensions over        Iran also calmed markets, which were already on a downward course after U.S. data showed ample crude and gasoline supplies.

“The hope is that with the removal of the terror leader in Iraq, the Iraqi situation will stabilize faster and future oil supply could increase,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

A Jordanian-born militant, al-Zarqawi led a campaign of suicide bombings, kidnappings and other violence. Insurgents have also sabotaged pipelines numerous times.

Light sweet crude for July delivery on the New York Mercantile Exchange fell more than a dollar on the announcement in Baghdad that al-Zarqawi had been killed in an air raid. It was down $1.32 at $69.50 a barrel in electronic trading by afternoon in Europe.

July Brent crude futures on London’s ICE Futures exchange fell 88 cents to $68.31 a barrel.

Thursday’s slide in oil prices continued a two-day trend as the market adjusted to U.S. government data showing higher crude oil and gas inventories and some easing of tensions over Iran’s nuclear program.

“If there are indications of a rapid diplomatic solution, prices could fall quite quickly to the mid-60s (per barrel),” Shum said. “But the general market feeling is that it will still take weeks to resolve the issue.”

Iran has said it would study a package of incentives by world powers hoping to curb its nuclear program.

For Nigeria, Vienna’s PVM Oil Associates noted that “following months of attacks and kidnappings some 611,000 barrels a day of Nigerian crude remains shut in.” Still, tension there also ebbed Thursday, with militants in the oil-rich delta region saying they would release five kidnapped South Korean oil workers.

Despite the geopolitical jitters, the oil market remains well-supplied.

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I always find this strange.  Why do oil prices drop after someone like al-Zarqawi makes a statement or dies? Explain to me again, who exactly did al-Zarqawi in life or now in death actually have anything to do with oil?  I mean seriously.  He doesn’t have anything to do with oil pricing… he was a terrorist.  This small drop will be immediately followed by a price increase.

Its 1982 and Canada has just passed its new “Liberal” governments budget. Petro Canada, being the product of the Canadian government’s attempt to emulate the rash of 1970′s style third world countries. Commenced the nationalization of petroleum assets. Venezuela, Mexico’s Pemex and Libya were the prototypical examples that the Canadian government used to nationalize the Canadian oil and gas industry under Petro Canada’s “management”. Under the premis of a “back-in” Petro Canada was handed many of the most handsome oil and gas properties in the country. The fact that they were owned by other companies was not an issue. And as is the case with other third world nations, why would Petro Canada assume things are different in 2006.

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I was reading another blog and found an article on Petro Canada and some unfair Canadian Government practices.  I thought that this article made for an interesting read.  Check it out.

BP is facing a criminal grand jury investigation into the biggest oil spill ever on US soil – a corroded transit line that leaked up to 270,000 gallons of crude in Prudhoe Bay, Alaska, triggering investigations by federal and state agencies.

If the investigation goes against BP the company will face prosecution which – in the worst case scenario – could result in prison terms, significant fines and tighter restrictions around BP’s operations.

The Financial Times on Wednesday obtained an e-mail from Steve Marshall, president of BP Alaska, telling staff the UK company had received on April 26 a subpoena from a federal grand jury in Alaska. The grand jury, he said, had asked for “a variety of documents and data from BP Alaska concerning the transit line and certain other operational areas.” He urged them to treat the matter as confidential.

The investigation is not only highly unusual for a major oil company but embarrassing for BP and could result in legal proceedings against the company and individuals. The company has denied claims it failed to maintain the transit line, saying it had “manageable corrosion rates” in the pipeline.

Mr Marshall said BP was fully committed to cooperating and told staff they may be contacted to assist in helping BP answer the subpoena, also urging them to cooperate.

Daren Beaudo, BP spokesman, confirmed the message, noting that Mr Marshall had said: “I believe that the information we provide will show that the actions of BP Alaska were, at all times, proper.”

The grand jury investigation comes as BP’s US operations are under heightened scrutiny following a string of accidents and regulatory violations – most notably the March spill in Alaska and an explosion last year at its Texas City refinery that killed 15 people and injured an estimated 500.

BP is already facing a grand jury probe in Texas for that accident – at the company’s biggest refinery – meaning it could face legal retributions from two of its biggest US operations.

Ronnie Chappell, BP’s Texas spokesman, declined to comment on the investigation of the Texas refinery, at which the US Department of Labor uncovered more than 300 violations, leading to a settlement to improve processes and pay a maximum allowable $21m fine.

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If BP has done anything wrong they need to pay.  I guess the point is that mistakes happen, but mistakes shouldn’t happen when you follow the rules that are in place and if the rules were not followed there should be remunerations made. 

BP has recently had a string of bad luck and it will be interesting to see if the bad luck has been created because they have cut corners.  I like the fact that publicly BP is willing to work with the investigators.

Former Federal Reserve Chairman Alan Greenspan on Wednesday offered a grim view of the world’s rising vulnerability to high crude oil prices, saying he was skeptical that oil producers can pump enough crude to meet future demand.

Since the 1940s, U.S. consumers have shown an uncanny ability to shoulder rising energy prices, but consumers’ immunity to oil price shocks is running out, Greenspan said.

“The United States, especially, has been able to absorb the huge implicit tax of rising oil prices so far,” Greenspan told the Senate Foreign Relations Committee in his first congressional testimony since leaving the U.S. central bank earlier this year. “However, recent data indicate we may finally be experiencing some impact.”
Greenspan was appointed Fed chairman by President Ronald Reagan in 1987, and served until January 31 of this year.

Lawmakers would occasionally call on Greenspan to speak on energy issues when he was chairman, but his comments are still highly sought-after on Capitol Hill.

“Nobody speaks with greater authority on the U.S. economy,” Foreign Relations Committee chairman Richard Lugar said.

Since 2004, crude oil prices have doubled. Since the start of 2002 the cost of a barrel of oil has soared by $50.

Crude oil prices have stubbornly stayed above $70 a barrel despite the fact that OPEC and other world producers are pumping to maximum capacity. Prices are still within striking distance of their $75.35 a barrel record hit in U.S. futures in April.

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With Alan Greenspan starting to make noise, which makes me think that it is time for the American government to start looking at ways to fix this issue.  I really respect the work of Alan Greenspan, he is one of the best economists the US has ever had in government and when he speaks, policy makers need to listen.

The US and Canadian governments need to step up to the plate and start working towards new energy solutions now before it becomes absolutely necessary.  Gas prices in North America may be cheaper then in Europe, but the European governments have been doing more to get smaller cars on the roads and more to develop new technologies then we have over here.

Jessica Alba’s beauty is not disputed in Hollywood.  This is a women who just turned 25, she is gorgeous, and has the world at her finger tip and even with all this she made sure to make mention of hybrid vehicles.  I was surprised to hear someone who is young, care free and financially well off making a statement. 

Jay Leno joked back saying that his corvette was hybrid as well, when he is driving around town the corvette uses gas, when it is on the highway it uses more gas….

Jessica Alba explained that she purchased a Lexus hybrid for herself and also purchased the Prius for her parents.  She also went on to explain how bio-diesel is a great energy alternative.

When Ludacris came on later he tried to poke fun at Jessica when he mentioned a Forumla 1 racing event he attended but Jessica Alba stuck up for herself.

I am impressed.  Most young people, who have lots of money, fame and free time, spend it drinking, doing drugs or wasting time.  Jessica is informed and willing to take a stand.

I hope more celebrities take the time to speak out on this issue!

Oil slipped on Tuesday after Iran said world powers had made positive proposals to end a crisis over its nuclear program, opening the door to more talks.

Oil swept to a record $75.35 in April as the dispute between Iran and the United States rumbled on. On Sunday, Iran’s Supreme Leader Ayatollah Ali Khamenei said oil flows from the Gulf would be endangered if Washington made a “wrong move.”

But there was a more conciliatory tone on Tuesday when Iran took delivery of a package of incentives put together by Britain, France and Germany then approved by the United States, China and Russia.

“The proposals had some positive steps in them and some ambiguities which should be removed,” Ali Larijani, secretary of Iran’s Supreme National Security Council, said after meeting European Union foreign policy chief Javier Solana.

“We hope, after we study the proposal in detail, we will have another round of talks and negotiations to achieve a balanced and logical conclusion.”

U.S. crude oil last traded 10 cents lower at $72.50 a barrel, after falling as low as $71.35 in intraday activity. London Brent lost 55 cents to trade at $70.82.

Strong oil prices have sparked concerns that demand growth may stall. But the U.S. Energy Information Administration on Tuesday said consumers were adjusting to higher prices and revised demand projections upward.

Investors and analysts said the oil price would be hostage to Iran headlines for the foreseeable future. The dispute over Iran’s nuclear program has added impetus to a rally that has taken oil from $20 in January 2002

Read more on the talks >>

Do not get too excited as the volatile oil markets come down.  Do not expect to see any changes in the gas prices you pay at the pumps as there is sure to be a lot of posturing and political positioning done by Iran in the next few months.  This is just a red herring and we will not see prices drop significantly enough to notice a price change at the pumps.

Oil prices of 100 dollars a barrel or more are a possibility that would seriously threaten airlines, IATA chief economist Brian Pearce told AFP.

“It is a possibility. It is a scenario I recognize,” Pearce said on the sidelines of the International Air Transport Association’s annual general assembly.

“It is fear that takes fuel prices up. If there is a disaster in the Middle East and a real shortage of oil, then it is possible.”

Crude oil prices have now climbed to around 70 dollars a barrel even though there is no shortage of oil, Pearce noted.

“A 70-dollar barrel has been sustainable so far because airlines cut costs and have considerably gained in efficiency,” he said, adding that an increase of 30 dollars more would be tough for the industry to handle.

“There is a danger if we saw another big hike of fuel prices, it could cause an economic slowdown and deprive airlines of strong traffic revenues” which help to offset higher fuel costs.

“It will therefore represent a real danger for the aviation industry.”

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This comes as no surprise.  Airlines have been struggling for a number of years now.  It is a real difficult task to provide daily scheduled routes to all major destinations when in most cases the aircraft may not be full for the flight.  It is a real tough position airlines are in, providing the convenience of numerous flights a day to one destination and scaling back to be more profitable.  The oil prices are going to hurt all forms of travel in the not so distant future.  Do not be surprised to hear about Taxi Cab companies, Trucking companies and mass transit systems all starting to feel the pinch. 

Oil prices jumped above $73 a barrel Monday after Iran’s supreme leader threatened that his nation could jeopardize the world’s oil supply if the West punishes Tehran over its nuclear program.

Iran’s supreme leader Ayatollah Ali Khamenei _ who has the final say on all state matters _ told Western nations in a speech Sunday that “If you make any mistake (punish or attack Iran), definitely shipment of energy from this region will be seriously jeopardized.”

Khamenei said the United States and its allies would be unable to secure oil shipments passing out of the Persian Gulf through the strategic Strait of Hormuz to the Indian Ocean.

Iran is the world’s fourth-largest oil exporter and has the second- largest reserves in the Organization of Petroleum Exporting Countries.

Light, sweet crude for July delivery on the New York Mercantile Exchange rose $1.24 to $73.57 a barrel in electronic trading by afternoon in Europe.

“The price surge is a knee-jerk reaction to the remarks made by Iran’s supreme leader,” said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

He noted, however, that Iranian President Mahmoud Ahmadinejad had indicated a breakthrough in negotiations was possible, but rejected a precondition to talks. Contrary to Khamenei’s remarks, other Iranian officials have repeatedly ruled out using oil as weapon.

The July contract had risen to $72.33 Friday following the kidnapping of eight foreigners working on a rig off the coast of Nigeria. The workers were released Sunday. The kidnappings in Nigeria also reminded traders that the nation’s oil supply is not secure.

“These geopolitical events support high prices in the near term,” Shum said.

Oil prices gained last week despite rising U.S. inventories combined with an expected decision by the Organization of Petroleum Exporting Countries to leave its output quotas steady at 28 million barrels a day.

Saudi Arabia’s Oil Minister Ali Naimi confirmed in an interview with the Wall Street Journal that his country’s crude output has declined in recent months, but said it was due to a drop in demand and denied the kingdom is trying to limit supply.

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This is just all the more reason for a person to investigate alternative fuel sources.  Hybrid vehicles will start to take over the auto industry sales in the near future.  I would really like to see some progress with either the electric car or even a hydrogen vehicle in the next few years.  An increase to $73 a barrel on the oil market just because some crackpot threatens us, is simply crazy. 

Oil rose on Monday after major exporter Iran warned that flows from the Gulf, which pumps nearly a quarter of the world’s crude, would be endangered if Washington made a “wrong move” over Iran.
The remarks from Supreme Leader Ayatollah Ali Khamenei raised fears the world’s fourth biggest oil exporter might halt crude shipments over its nuclear standoff with the West.

Iranian officials previously have said Tehran would not use oil as a weapon.
U.S. crude traded 32 cents higher at $72.65 a barrel in afternoon activity after touching $73.84 earlier trading. London Brent rose 53 cents to $71.56.

“The threat, whilst remote, would be serious in the context of global oil markets operating with little more than 2 million barrels per day of spare capacity,” a Citigroup report said.

Tension between Iran and the West over Tehran’s nuclear program has helped drive oil’s 20 percent rally this year.

U.S. Secretary of State Condoleezza Rice reacted to Khamenei’s comments by counseling a wait-and-see approach.

Washington offered to join European countries in talks with Iran about its atomic work, but said Tehran must first suspend uranium enrichment. Iran so far has rejected the demand, saying enrichment is a national right.

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The market place is giving Ayatollah Ali Khamenei way too much influence.  It would be better if the major players in the financial market place did not jump every time Ayatollah Ali Khamenei makes a threat.  When we immediately raise the oil prices after a threat, it gives Ayatollah Ali Khamenei a feeling of power and only solidifies his belief that he can bully the world.