1. Oil and the Global Economy
Oil prices continued their month-long fall last week, just below $91 a barrel in NY and $106 in London. With few developments in the Iran confrontation or the EU debt crisis last week the markets fell on general concerns about Greece departing the Eurozone and weak demand. New data on Chinese industrial production show that its economy is not doing well in the first half of the year. A downturn in real estate and exports, and declining consumer confidence, have combined to create a "sharp slowdown in the economy." Some believe the economy which has been humming along at 9+ percent for several years is barely growing in 2012. The implications for increasing oil imports are obvious.

NY gasoline futures fell another 5 cents during the week to close out at 2.89, down some 60 cents a gallon since late March. Steadily falling gasoline prices gave a boost to the US consumer confidence index which usually moves opposite from gasoline prices movements.

Natural gas prices fell sharply on Thursday and Friday after a month of steady gains, closing down about 15 cents per million at $2.56 on Friday. This was due to milder weather forecasts reducing the demand for air conditioning and reports that electric utilities were becoming so overloaded with cheaper-than-normal coal that they will have to resume burning more coal again. Natural gas futures are still up by nearly 60 cents per million in the last month, however.

With retail gasoline prices now down to $3.65 a gallon (except on the West Coast where they are still about $4.25), MasterCard is reporting that US gasoline consumption is picking up a bit and is now down less than 1 percent from this time last year.

2. The EU Crisis
Greece's public finances are poised to collapse in the next week or so, as the debate over whether to create Eurobonds that would be used to bailout whoever needs bailing out across the EU continues. Since the elections many Greeks have stopped paying taxes and are withdrawing money from Greek banks adding to the turmoil. With the government out of cash, it may have to resort to short term borrowing to pay its staff and other bills. Public sentiment in the country may be shifting as the realization sets in that there will be anarchy unless they cooperate with the EU's austerity demands.

Things are little better in Spain where the government may use money from the ECB to finance a €19 billion bail out of Bankia, the country's third largest bank as the capital markets would be too expensive for the floundering bank. This move would violate ECB conditions for the loans which are supposed to be for short term purposes. In the meantime, lending to small and medium sized companies across Spain has nearly dried up.

Although the concept of issuing Eurobonds which would be backed by the treasuries of Germany and the credit-worthy northern European countries enjoys wide support, the Germans and the other potential backers remain vehemently opposed. The bonds would in effect use unlimited German money to bail out faltering Eurozone countries -- likely a non-starter.

It is little wonder that the OECD sees the ever growing euro crisis as a threat to world recovery and has slashed its Eurozone growth forecast. There seems little doubt that the EU's demand for oil will be weaker going forward.

3. Iran
The meeting in Baghdad last week between Iran and the Group of 6 is generally deemed to have been unsuccessful although another meeting is scheduled for Moscow on 18 June. Prior to the meeting, Tehran did agree with reservations that the IAEA could conduct additional inspections of some suspect weapons related areas, but over the weekend announced that it would not halt its 20 percent enrichment program, a key western demand. Until the announcement, the West believed that the offer to stop 20 percent enrichment was on the table as it is only useful for one aging medical reactor and as a step towards weapons-grade uranium.

So far the talks have been mostly jockeying for position and the need to save face before domestic audiences on both sides. Some say the talks have become so ensnared in Washington politics that the US is paralyzed so that the EU will have to take a leading role in working out a compromise.

Harsher sanctions are due to take effect on July 1st which is only another five weeks away. Until then we might no see much more progress. At some point it is easy to see the "war risk" returning to oil prices which will resume climbing.

4. Retail gasoline prices
Here are ten countries where high gas prices are the norm, according to British insurance firm Staveley Head.
1. Norway - $10.12/gallon
2. Turkey - $9.99/gallon
3. Netherlands - $9.13/gallon
4. Italy - $9.01/gallon
5. Greece - $8.95/gallon
6. Denmark - $8.82/gallon
7. United Kingdom - $8.76/gallon
8. Sweden - $8.70/gallon
9. Eritrea - $8.70/gallon
10. Belgium [¢G1.40/L] - $8.64/gallon

Quote of the week
"The return of low prices was taken, by some, as proof that oil will continue to be as cheap and abundant as ever. As a quick return to the triple-digit range for oil prices indicates, however, that's clearly not the case."
- Jeff Rubin

The Briefs (clips from recent Peak Oil News dailies are indicated by date and item #)

• Plans for Iraq's semiautonomous Kurdish region to build an oil pipeline to Turkey point to a major political and economic realignment in the Middle East that will impact heavily on Iraq. (5/23, #14) (5/25, #7)
• ExxonMobil is continuing its development of the six exploration blocks it signed with the Kurdistan Regional Government last October, despite demands by the central government to hold off. The company is in the early stages of soliciting bids from drilling companies. (5/21, #9)
• The Syrian government has lost about $4 billion since September because of sanctions placed on oil exports. (5/25, #9)
• Spanish oil company Repsol says an offshore block near Brazil's coast contains at least 1.2 billion barrels of oil equivalent, one of the largest finds this year. (5/25, #10)
• India's crude-oil imports in April declined 7.1 percent due to lower demand following shutdowns at some refineries. April imports totaled 14.62 million metric tons, compared with 15.74 million tons in April 2011. (5/25, #12)
• India's move to raise gasoline prices could signal the government's intention to start improving its finances, but doesn't address the bigger problems of a large fiscal deficit and a widening current-account gap. (5/25, #13)
• The continuing meltdown of Arctic sea ice and permafrost is allowing more and more of the potent greenhouse gas methane to seep into the atmosphere, spurring global warming. (5/24, #6)
• Eni has made a big oil discovery in the Western Desert of Egypt. The discovery, at the Emry Deep exploration prospect, located in the Meleiha Concession 290 kilometers south west of Alexandria, is estimated at 150-250 million barrels of oil in place and will require further appraisal drilling. (5/24, #12)
• Nigerian crude oil exports are set to hold above 2 million b/d and above the average for the first six months of 2012 as new production has boosted output. (5/24, #14)
• The Nigeria National Petroleum Corporation has said that the volume of gas currently flared in the country has dropped from 19 per cent in December, 2011 to 14 per cent in January. (5/21, #11)<.li>
• BP PLC said it has agreed to add $400 million in pollution controls at its refinery in Whiting, Ind., to address environmental concerns about an expansion of the facility. (5/24, #26)
• Kinder Morgan Energy Partners KMP-N has reduced the size of a planned expansion of its pipeline to the Pacific Coast after fewer shippers than expected signed 20-year contracts that would allow Canadian oil supplies to be shipped to Asia. (5/24, #27)
• Ghana could soon freeze future exports of its crude oil in order to meet local consumption needs. (5/23, #15)
• Chesapeake Energy said it stands by its plan to expand its oil production, saying it will spend nearly all of its 2013 capital budget on drilling in oil fields. (5/23, #20)
• Natural gas coaxed from British shale deposits is likely not the game-changer once expected for the country's energy sector. (5/23, #23)
• Natural-gas prices have jumped as much as 44 percent since sinking to decade lows last month. Much of that rally had been powered by rising demand from utilities, which had taken advantage of the low prices by using more natural gas instead of coal. But the higher prices are making coal competitive once again. (5/22, #15)
• A further 1 million b/d of European refining capacity needs to shut down to trim the region's growing surplus capacity and return refinery run rates to historical averages of around 85%. The European refining sector has already seen a combined 1 million b/d of plant closures since 2009, as chronic overcapacity has forced many smaller, less profitable refineries to shut. (5/22, #20)
• Canadian Natural Resources has rolled out two key numbers: 85 and 75. Real Cusson, the company's senior vice president of marketing, told investors where the price of oil must trade in order for energy companies to make a go of it in the oil sands and shale gas formations. (5/21, #17)
• With both gasoline and diesel engines having their own particular advantages and disadvantages, automotive component manufacturer Delphi is looking for a best-of-both-worlds solution with a gasoline-powered engine that uses diesel engine-like technology for increased fuel efficiency. (5/21, #23)
• Iran increased its output of enriched uranium that world powers are concerned may eventually be used for a nuclear weapon, according to International Atomic Energy Agency inspectors. (5/26, #7)
• Turkey says waters off the coast of war-divided Cyprus where Greek Cypriots plan to explore for natural gas lie within its continental shelf, sharpening multi-sided disputes over major fields under the eastern Mediterranean.(5/26, #8)
• Japanese companies are buying natural gas assets and fields around the world, setting the nation on course to be the first of the 10 largest energy users to bet its future on a less-polluting fuel than oil or coal. (5/26, #10)