Oil Glut Watch #3--What Google Knows....

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Here we are again, crude still bopping around under $60 and the market still glutty. Where is it coming from? A clue: The Middle Eastern Economic Review reports that OPEC is admitting that its members are cheating on their quotas, releasing probably an extra million barrels of oil a day into the market than the 24.8, they've agreed to.

Meanwhile, the analysts over at Sanford Bernstein have apparently been poking around on Google Earth and have determined that China has been importing an extra 400,000 barrels of oil a day since November and sticking some of that in above ground tanks as their version of our Strategic Petroleum Reserve. This is certainly a better time to buy oil and put it in a reserve than 2003 and 2004, when prices were rising and the US was filling our reserve.

However, above ground reserves don't come cheap. The US spends about 20 cents a barrel keeping our 700 million plus barrels in salt caverns near the Gulf Coast. Japan reportedly spends $10 a barrel keeping theirs above ground. 

And when will the glut end? The International Energy Agency says not soon, but when it does, prices will rise fast, simply because no one's investing in expanding production. 

So this is what worries me: The moment we start to slither out of this recession, we'll be hit by higher gas prices, throwing moderate income households for yet another loop. As I wrote in the NYT last weekend, this is a memo that policy makers seem not to have received, and so they've come up with a cash-for-clunkers bill that points consumers in the wrong direction.

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Lisa Margonelli is a writer on energy and environment. She spent four years and traveled 100,000 miles to write her book, "Oil On the Brain: Petroleum's Long Strange Trip to Your Tank." More

Lisa Margonelli directs the New America Foundation's Energy Productivity Initiative, which works to promote energy efficiency as a way of ensuring energy security, greenhouse gas emissions reductions, and economic security for American families. She spent roughly four years and traveled 100,000 miles to report her book about the oil supply chain, Oil On the Brain: Petroleum's Long Strange Trip to Your Tank, which the American Library Association named one of the 25 Notable Books of 2007. She spent her childhood in Maine where, during the energy crisis of the 1970s, her family heated the house with wood hauled by a horse. Later, fortunately, they got a tractor. The experience instilled a strong appreciation for the convenience of fossil fuels.

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