Prices and production
This week oil prices continued the climb which began two weeks ago closing at $79.28 on Wednesday. The weekly stocks report showed a roughly 3 million barrel drop in West Coast inventories and a 1.5 million barrel increase east of the Rockies for an overall decline of 1.5 million barrels. Cold weather in the US’s Northeast continues to draw down heating oil and propane supplies.

Interestingly, US gasoline consumption for last four weeks is 1.1 percent higher than last year despite gasoline selling for almost $1 a gallon more and a considerable contraction in economic activity during the past year. This suggests that US motorists are continuing to drive personal vehicles at close to traditional rates despite widespread unemployment and economic hardships.

The Russians loaded the first oil tanker at their Pacific oil terminal, signaling the opening of the new Siberia-Pacific Ocean pipeline. Moscow is also scheduling oil and gas shipments across the Arctic next summer now that the polar ice cap has melted enough to allow such shipments. The Russians will have cheap access to the growing oil markets of Asia and will be less dependent on selling to Western Europe.

Iran
In the wake of the weekend anti-government riots, Tehran is lashing out at the West, accusing it of instigating the protests. The US is preparing new, carefully-targeted sanctions against Tehran which would be intended to hurt the regime without alienating the Iranian people. This would seem to rule out efforts to create a gasoline embargo that could do severe damage to the Iranian economy.

Outside observers are noting a major shift in the nature of the Iranian protest movement; it has gone from demanding fair elections six months ago to demanding the ouster of Ayatollah Khomeini and his Islamic regime. Thus far the protests seem to have had little impact on Iranian oil exports, but the situation has the potential to become a major oil supply crisis if the protests continue or if Tehran’s nuclear enrichment efforts persist.

China
In an interview on Sunday, Premier Wu reiterated that China will stick to the pro-growth economic policies that have proved so effective during the last year -- and could result in increasing oil imports during 2010. However, in an unusual admission, Wu acknowledged that China had unspecified economic problems. In the meantime, China’s National Bureau of Statistics has lashed out at Western economists who have been busy pointing out anomalies in Beijing’s growth claims. Rather than attempting to explain the numerous statistical conflicts, the Bureau simply attacked the validity of US and European statistics.

Petrochina won approval for the acquisition of a $1.8 billion stake in the Canadian tar sands. Chinese oil companies have now spent at least $13 billion on the acquisition of foreign assets at rock bottom prices this year.