Weekly World Energy News Update - 31st August 2012

Category 1 Hurricane Isaac's offensive through the Gulf of Mexico and an explosion and fire at Venezuela's biggest refinery were key drivers of energy prices this week. Over 70% of Gulf natural gas output suspended due to infrastructure flooding concerns at Isaac raged. Gas futures rallied at first, but in the end, not even Isaac was a match for strong supplies and a booming market. Overall, gas futures have dropped 18% this month to under $2.70.

By the time of writing on Friday, Venezuela's refinery remained offline, with production halted, after an explosion earlier in the week claimed the lives of 48 people and the ensuing fire was unrelenting. Hundreds of people were left homeless in the incident. The refinery was responsible for 645,000 barrels per day and the cause of the explosion remains under investigation. 

On the policy front, it was good news for "alternative" vehicles this week, with the Obama administration's release of the finalized Corporate Average Fuel Economy (CAFÉ) rules-the culmination of over a year of negotiations with auto manufacturers and interest groups. The new rules raise CAFÉ standards to 54.5 mpg by 2025. They also include some added incentives for manufacturers of electric, hybrid and natural-gas-powered vehicles, including the option to sell fuel-economy surplus to manufacturers who fail to meet their own targets. Honda will benefit the most as the only seller of natural-gas-powered vehicles in the US.  Republicans have called the new rules "excessive".

There was also a good deal of chatter emanating from the White House this week and last about tapping into US strategic oil and gas reserves, though this failed to materialize. Hurricane Isaac would have been the most fitting moment to attempt this maneuver, but the danger has now largely passed. It is unlikely at this point that the US would draw down on strategic reserves, though the White House is keeping the option on the table.

Republicans would jump on this immediately as a political move intended to temporarily bring down gas prices ahead of the 6 November presidential vote.

For Oilprice.com's investment report this week, we bring you a common bacterium that is being genetically manipulated by MIT scientists to produce isobutanol, a biofuel that can directly replace gasoline or be blended with gasoline without alterations. The end result is, well, a lot like milking a microbe that is self-replenishing. The next step in this amazing breakthrough is making it happen on an industrial scale.  Click here to access the report (Free registration required)

By. Oilprice.com Analysts