December 2010 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate crude oil jumped by $4.90 (5.8 percent) in December, to $89.04 per barrel. That price increase occurred despite a slightly stronger dollar, a noticeable drop in consumption of 568,000 barrels per day (BPD) -- to 18.9 million BPD -- during October, but coincided with an equally noticeable drop in crude stocks.
 

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The Environmental Protection Agency (EPA) announced on December 23 that it will regulate greenhouse gas emissions from power plants and oil refineries in 2011. The move highlights the Obama administration's intent to press ahead with curbs on carbon despite congressional resistance, and comes as part of a legal settlement with several states, local governments and environmental groups that sued the Bush-era EPA for failing to cut those emissions.

Collectively, electric utilities and oil refineries account for almost 40 percent of U.S. greenhouse gas emissions: Power plants generate more than 2.3 billion tons of carbon dioxide emissions each year, more than any other industry; oil refineries emit more than 200 million tons of carbon dioxide annually.

Under the settlement, EPA will propose new performance standards for power plants in July 2011 and for refineries in December 2011. Final standards will be issued in May 2012 and November 2012, respectively.

The economic impact of these regulations will not be known until the procedural details are proposed; nonetheless, we think it is fairly safe to assume energy prices will rise as companies pass the added regulatory costs on to consumers.