UPI Energy Watch

Hurricane Gustav holds up oil prices

The storm is threatening oil production in the Gulf of Mexico.

Despite a temporary resolution in the Russian-Georgian conflict and a strengthening U.S. dollar, the price of a barrel of crude oil climbed again Tuesday, as traders and market analysts assessed the hurricane's potential threat to oil supplies.

It is estimated that more than a fifth of U.S. oil production comes from the Gulf of Mexico, U.K. OilVoice reported.

This is the third storm threat to production in the region this summer. Gustav follows Eduardo and most recently Fay, which left Florida only this week.

Prices have risen and fallen based on whether Gustav is strengthening or weakening.

Royal Dutch Shell already has begun evacuating some staff from its Gulf oil platforms as a safety precaution.

"Given the current track for Gustav and the expectation that it might enter the Gulf of Mexico this weekend, we are making logistical arrangements to evacuate staff who are not essential to production or drilling operations," Shell said in a statement.

U.N. urges nations to drop fuel subsidies

A recent report by the U.N. Environment Program suggests that by getting rid of subsidies for fossil fuels, countries that currently offer them could play a vital role in curbing greenhouse gas emissions and helping the global economy.

The report, "Reforming Energy Subsidies: Opportunities to Contribute to the Climate Change Agenda," released Tuesday in Nairobi, Kenya, suggests that fossil fuel subsidies do not actually help the poor as they are meant to, Chinese news agency Xinhua reported. According to the report, those funds, about $300 billion worldwide, could be much better spent on programs that aid the impoverished.

China just recently debated dropping its subsidy, which was artificially keeping fuel cheaper than global prices. The pricing mechanism was hurting refiners, who had to pay the true price and were not getting enough money back.

The United Nations estimates that by getting rid of fossil fuel subsidies, greenhouse gas emissions could be cut by as much as 6 percent a year and contribute 0.1 percent to global gross domestic product.

ONGC, Imperial Energy settle on deal

India's Oil and Natural Gas Corp. agreed to buy Imperial Energy for $2.8 billion in its first significant acquisition of a foreign exploration and production company.

The $25-per-share cash deal reflects 62 percent of British-based Imperial Energy's share prices as of July 11. That is the day before any bids for the company were announced, as the price has fluctuated since then.

ONGC will acquire Imperial's exploration sites and reserves in Siberia and Russia, outbidding China's Sinopec.

According to one insider, the deal was viewed positively by shareholders but will still face regulatory approval in Russia.

ONGC's goal is to secure enough domestic and international oil and gas resources to fuel India's rapidly growing demand. The firm has bought large oil blocks from other producers but not an acquisition of this scale.

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Closing oil prices, Aug. 27, 3 p.m. London

Brent crude oil: $113.90

West Texas Intermediate crude oil: $116.97

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(e-mail: energy@upi.com)