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Author: Ryan Ray & Ellen Wald

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Ellen Wald and Ryan Ray discuss the week's events in energy, and what it all means to you.
184 Episodes
Natural-Gas Prices Surge, and Winter Is Still Months Away historically speaking crude oil prices actually do warrant new drilling but companies aren't.- Why aren't companies drilling more? Lack of money? Why isn't the money interested?Oil falls as storm-hit U.S. supply trickles back into market Will Europe be forced to turn to burning fuel oil this winter for electricity when natural gas and coal are too expensive and will that push oil prices up?- Change in policy could dampen sentiment for movement.Equinor to pump up gas supply for tight European market Can Norway save the day for Europe? Perhaps.Trade group wants restrictions on U.S. natural gas exports Will restricting LNG exports help curb US natural gas prices?- IECA says US natural gas prices would need to double from where they are now to spur more drilling. Chemicals, Food, Materials could become more expensive or face shortages.- Government intervention in terms of promoting natural gas drilling.Oil giant Shell sets sights on sustainable aviation fuel take-off How big of a "thing" is this? Crops could be used to feed people - industrial agriculture is NOT sustainable.China faces a potential Lehman moment. Wall Street is unfazed’s Evergrande Moment Is Looking More LTCM Than Minsky is China going to do? Ryan's Read: China will do whatever it has to. Can't seperate this story from Taiwan.Dr. Dean Foreman and API Monthly Statistical ReportGlobal natural gas issues:- For this time of year we have never had higher prices- Reflects Russian gas inventories are historically low, wind is underperforming & gas needed to prevent brownouts and LNG shipments being snapped up like crazy- Global natural gas market? Not yet because still so much less being trading internationally than oil- Rush to get cargoes available.Domestic natural gas:- Baker Hughes rig counts have actually gone down despite higher prices- Should be able to drill all day and make money- Producers in Gulf Coast have access to premium markets and should be able to export to internationally markets- Producers in PA, etc. don't have access to global value chainAre exports to blame for US prices?- actually exports motivate production. Haynesville is good example. On the margin there is some and it is creating pressure. Seek to place blame, consumer anger.- We have rolled back prices to before the shale revolution.- Should be able to drill profitably in every major basin so what's the problem? EIA modelled a healthy drilling response and we haven't seen that. Supply chain issues, risk tolerance issues, workforce issues, policy environment, debt taken on my companies- Pipeline capacity isn't really an issue. There are some isolated areas that have bottlenecks and there is flaring, but mostly not.Summer oil demand:- 23 million bpd of oil demand - higher than 2019. - Fuels may be switched around (more gasoline and distillate than jet fuel)- Other oils: intermediate oils naphtha and propylene, etc. historically have been 1/4 of demand, now it's over 30%. In August just under 28%.- Drilling responsiveness isn't there. What are the odds that we will get 1.8 million bpd of production growth in US between now and end of year? Note likely, especially with how rig counts haven't been growing.- Some price issues should recede as supply chain issues resolve but with oil and gas, it's a different issue. If the economy remains on track, we will see serious pressure on oil and gas in next year. Lack of investment, long lead time for projects outside the US.- EIA says global projected highs for oil demand are higher than 2019. IEA has a more bearish view on fossil fuels.- If supply can't keep up with economic growth then it could push prices up which will stifle demand.- Numbers economically are scorching hot - so much stimulus and it has had an impact. Even if price inflation overshoots, we will still see a lot of growth.- Global capital investment has significantly declined. Drilling activity has been muted.
Economic Costs Accumulate as Countries Worried by Delta Variant Extend Border Closures the Delta wave over? Or has it not hit the Northeast?Can we assume that economic activity and travel isn't going to go back down?City in China restricts movement amid outbreak closures will impact gasoline and jet fuel in ChinaOil prices in the low $70s put pressure on Chinese economyNearly 185,000 b/d of US Gulf oil production returns as Ida recovery continues 50% of offshore production offlineShell having particular difficulties getting things back onlineEconomic Costs Accumulate as Countries Worried by Delta Variant Extend Border Closures Power SituationAnalysis: Expensive winter ahead as Europe's power prices surge Prices in Europe Hit Records After Wind Stops Blowing Power, Carbon Rise to Record on Soaring Gas Prices is pumping a lot less natural gas to Europe all of a sudden — and it is not clear why points for electric cars will be preset to turn off for NINE HOURS a day amid fears they will cause blackouts if government hits target for phasing out petrol and diesel Is Gazprom deliberately putting the squeeze on the European Union to get Nord Stream II started up?- Consumers don't have extra money to pay prices?
Connect with our guest: steadies as Hurricane Ida weakens, OPEC+ in focus refineries slammed by Hurricane Ida Pipeline expects to resume service after assessing Ida’s impact As far as hurricanes go, not as much damage to oil infrastructure and refining as we have seen in the past- Refining issues could persist due to power outages and lack of feedstock- Unclear when any of that can restart given the fact that Louisiana is experiencing severe power outages and many refineries may have to contend with flooding conditions which can keep them offline for quite awhile and can cause damage.- Gasoline prices are up 2% in anticipation, although the storm comes right as summer demand for gasoline is starting to wane.- Some good news from ExxonMobil's Baton Rouge refinery - reported no significant damage from the hurricane. But they are still shutting down units and flaring gas. Once they have access to necessary feedstocks and support from third-party utilities they expect to return to normal production.OPEC+ faces mixed market signals after US pressure to increase oil supplies could reconsider output increase, says Kuwaiti oil minister Unlikely for OPEC to change its plans to increase oil production by 400,000 bpd - Kuwait suggested this might be possible, but unlikely given that Brent is still above $70Climate Change to Be Treated as Public-Health Issue plan to reduce GHG emissions from the healthcare system??Interview with GasBuddyGuy Patrick DeHaan:- tremendous recovery with gasoline demand this summer- driving season remained resilient despite Delta variant- demand starting to slip as driving season coming to an end- EIA implied demand last week 9.7 million bpd, GasBuddy slightly lower 9.3 million bpd- News about Covid cases surging hasn't impacted gasoline consumption distribution- Power outages from Hurricane Ida are very extensive, refining down due to power outages and no RVP wavers given out by EPA. Would allow refiners to distribute fall gasoline early (before Sept 15).- Bottlenecks due to Ida at various levels will persist for days or longer. Refineries need power, nitrogen, oxygen, etc. We could see sizable inventory draws in PADD3- Could see crude oil inventories rising due to refineries offline.- Colonial temporarily shut down 2 lines, could squeeze PADD1 inventories- Gasoline from Great Lakes may go south or east to make up for losses there.- Even before storm well formed, inbound gasoline deliveries to PADD1 seen and will continue now that Louisiana refineries offline.- Products and blending components may be diverted to areas in the US- Expect to see abnormal numbers in EIA data for weeks, 3 or 4 weeks but contingent on how long it takes refineries to start churning out products again.- Will also depend on how long it takes for products to start flowing through pipelines
Oil jumps 4% on weaker dollar after seven days of losses Oil Surges; Rebounding After Torrid Week Can oil really hit $80 by the end of the year?- Last week's selloff was overdone, so oil is rebounding now.- Plenty of reasons to see demand suffering due to coronavirus- Sentiment is a real thing with the oil market. Perception of how coronavirus will impact demand has a real impact.California's clean grid may lean on oil, gas to avoid summer blackouts Irony of building "temporary" natural gas plants to keep the lights on in California, which claims to have a "clean" grid- could the governor recall impactUS nears proposal of biofuel targets for 2021-22 biofuel mandates could be lowered for 2021 and 2022- is the RFS really worthwhile at this point?Hydrogen lobbyist quits, slams oil companies’ “false claims” about blue hydrogen Blue hydrogen is only less carbon intensive if carbon is captured at every step of the way, and that is unlikely.- just because you don't see the pollution at the end result doesn't mean its not a carbon intensive processCarbon taxes could hurt Russia more than sanctions, says oil tsar border adjustment taxes for carbon on aluminum, iron ore, pipes, electricity, cement could have major impact on Russian exports.Nord Stream 2: Russia must not use gas pipeline as weapon, says Merkel Is the concern over Russia's threat to the EU overblown? Is Europe really afraid of Russia?- Is it mostly a Ukrainian-Russian issue and western Europe isn't concerned?- If the EU is confident about doing businesses with Russia to the extent that they are willing to rely on Russia for 40% of their natural gas, then why is the US afraid of Russia?
Watch us on YouTube: to Inside the War Room: prices drop amid faltering demand outlook in China Is it Delta variant? Is is lockdowns? Is it crackdowns on independent refiners?- Are there larger economic forces at play in Chinese demand?- Can China put pressure on OPEC to provide what they want?OPEC+ sees no need to speed up oil cuts easing despite U.S. calls Doesn't cost Biden any political capital to call for lower oil prices- No surprise that OPEC said no- OPEC is already increasing productionChina Has Thousands of Hydropower Projects It Doesn't Want government planning is not as great as people make it out to be- going to have to fix these dams- China can pull off a lot of amazing projects but also does a lot of really idiotic stuffModi says India will soon unveil $1.35 trln infrastructure plan infrastructure spending plan will increase oil demand- have to generate economic growth after killing medium and small businessesRosneft to chase production growth future is still oil for Russia- Rosneft is expanding its oil production capacityDr. Dean Foreman on the Monthly Statistical Report- Demand is back, and so is the economy! Summer travel and pent up demand for travel- Comparing summer demand to November 2019 demand is still a little off, but If compare July 2021 to July 2019 only off a little bit.- Gasoline demand is strong into August- Lowest crude oil inventories since December 2019. Drawn down 16% year on year. A little under 7% of lowest point of last 5 years.- Refinery utilization is very strong (91%). ONly 2019 did we average higher. Exports are down. Still a net exporter for refined products, though more crude oil imports.- Distillate economic indicator - overheating economy and facing inflationary pressures. This is correlated with Univ Michigan consumer sentiment survey,- Petrochemicals have been the strongest area of sustained growth for US oil. Continuing need for plastics. Record demand in July. 5.6 million bpd consumed.- Creeping up of oil directed rigs this year. Have generally been range bound in production in US and only just broke out of that range for June and July - 11.3 million bpd. Good sign for where crude oil production might go, but will take awhile. Natural gas is another story. 6 month future prices are $4/million btu and would indicate more natural gas drilling activity. Why aren't we seeing this? Capital constraints and people constraints. - If you are in Appalachia and want to drill you are finding yourself constrained by a variety of factors including no way to export it and pipeline constraints bringing it to domestic markets.- There is a real cost to being a net importer again. falls in biggest weekly decline in months on demand worries Is the $80 oil call under threat?- Oil company stocks are holing pretty steady, despite good earnings and falling oil- Is it Delta? What IS Delta, and why do we need to know?Oil majors tread cautiously in Permian shale pioneer not expecting to do any major acquisitions - How much is ESG, Covid, fear of OPEC, paying down debt, Biden admin fear, fear of uncertaintyUtilities Eye Mini Nuclear Reactors as Climate Concerns Grow 345 megawatt reactor will cost $1 billion, $50 to $60 range per megawatt-hourClimate chief warns of ‘catastrophe’ and then backs oil and coal plans posts nearly 300% leap in second-quarter profit on global demand recovery Oil Shipped as Dakota Access Pipeline Expansion Starts pipeline expansion is going through, rate of oil increasingInfrastructure Bill Has Big Wins for Oil, Climate Advocates Say big oil wins $10 billion for carbon capture and LNG plant in Alaska wins loan guarantees, $8 billion for hydrogen but not necessarily green and blue- $21.5 billion to create an Office of Clean Energy Demonstrations!'This is no way to make policy': Cryptocurrency advocates express frustration with bipartisan infrastructure language Provision will expand number of cryptocurrency users who would have report filings to the IRS
Subscribe to the YouTube Channel - this episode of the Energy Week Podcast, Ryan Ray and Ellen Wald talk about Chinese demand, Q2 earnings, and the cost of solar. Oil prices slide on worries over China economy and higher crude output highest gasoline consumption- broke record for TSA screenings showing Americans are on the move- Chinese economy slowing based on higher raw material costs, flooding issues and other- Can we expect China to keep having double digit growthVitol's Muller expects China to release 25-30 mil bbls from strategic oil reserves in Q4 China’s way of saying oil prices are too high for them- will it help cool off oil prices?- How long can China play the SPR game?Exxon, Chevron Beat Q2 Forecasts But Contrast On Paying Shareholders More both companies beat expectations but share prices fell- when will they put money into capex?Behind the Rise of U.S. Solar Power, a Mountain of Chinese Coal People want to buy the cheaper solar panels even if they are produced using lots of coal fired energyU.S. Blames Iran for Drone Attack on Israeli-Linked Tanker gasoline prices signal trouble for climate change action higher prices mean people don’t want to pay for renewables, EVs‘Greenflation’ threatens to derail climate change action All of the products we need to combat climate change like copper and aluminum are getting too expensive because demand for producing them is up.
Oil falls as coronavirus, slower China imports hit demand how much impact will floods in China actually have on demand?- and what about the teapots? their quotes are down in H2Chinese oil companies fill void in Iraq But do Chinese companies provide the quality needed? In Iran, largely unsatisfied. Will Iraq suffer similar issues?EV Batteries: The Next Victim of High Commodity Prices? China controls 40% of supply chain when it comes to components of EV battery manufacturing. Big Oil Companies Push Hydrogen as Green Alternative, but Obstacles Remain it's expensive and really hard to do with alternative or renewable energy.US rethinks sanctions approach reviewing sanctions policy is probably a good idea since they haven't achieved anything, and what were they designed to achieve anyway?U.S. weighs crackdown on China's import of Iranian oil Would this really do much to pressure Iran anyway?Opec+ issues August, September quotas gasoline demand up last week, but have we reached the limit of how much gasoline demand we will see this year?
Dr. Dean Foreman and June MSR validating what we’ve seen- Urban driving activity on the gasoline side + tourism- Jet fuel demand is up, June is the strongest month so far. 4th straight month of increase for jet fuel. 8% increase from May. Still 1/5 below where it was in 2019. International travel hasn’t picked up yet.- petrochemicals: medical plastics and packing plastics demand continuing from last year. double digit gains from last year.- Total demand for distillates has basically peaked, but on growth on a year to year basis its showing strong economic activity and industrial growth. Strong sign of growth.- Refining picking up, inventories there, ready to be used. Crude oil inventories are edging down. Indication that supply for crude oil isn’t keeping up with demand. We are importing more of what we need. We have an issue looking out over next year. When we consider demand growth with drilling activity even with strong productivity at well level, we need to see more drilling activity than we’ve been seeing to keep up.- Inventories are at the bottom of the 5 year band. Relatively low. But the upper end of the band was expanded with major inventory builds in 2020.- Permian doesn’t have pipeline constraints but other basins have pipeline constraints so there may be hesitancy to invest in more production. But they can all be profitable at recent prices.- Pickup in crude oil exports from US in June. Pull from international demand. Exports will soon be blamed for lifting prices in the US. - Inflation: Federal reserve needs to look harder at oil and gas and inflation, especially impact on consumers. EIA has assumed that domestic drilling would be and will be stronger than it has been.- Natural gas outlook: drilling activity low, spot prices for natural gas high, futures curve, would seen like its economic to do dedicated natural gas drilling. There is some pick up in Ohio and Pennsylvania drilling but lack of associated natural gas from fracking.www.api.orgBuilding Solar Farms May Not Build the Middle Class operating solar and wind plants aren’t the same as oil, gas and nuclear plants and don’t require the same type of skilled workers or as many so when plants shut down, workers are losing jobsEuropean aircraft movements rising: Eurocontrol flights are up to 23,000 compared to 36,000 on the same day in 2019.Emissions could hit new record by 2023 without more spending on clean energy even with more spending on clean energy emissions will riseOil firms after slide but COVID-19 and supply concerns remain
U.S. Refineries Eye Week of Strong Gasoline Demand With Caution summer is in full swing and so is gasoline demand- Was July 4 the height of gasoline demand? Is is downhill from here? Or will we see another surge when people go back to work/office in September?'s quest for cheap gasoline tests his climate goals Did Biden really try to get OPEC+ to increase production?- Is Biden really concerned about higher gasoline prices right now?Higher Inflation Is Here to Stay for Years, Economists Forecast 3.9% inflation in May excluding energy and food. 3.9% including food and energy. - But energy impacts everything over the line- Fed still thinks inflation is transitory due to bottlenecks and hiring difficulties.- But lots of industries are having issues that aren’t related to CovidOPEC+ yet to make progress in resolving impasse, sources say Will OPEC get its act together? Analysis: Big Oil keeps brakes on spending even with crude rally windfall Report Tries To Explain What Really Happened to Energy Markets in 2020 China to the rescue when it comes to natural gas demand in 2020- Will natural gas prices decline or increase as we get into winter?
More from Ryan: with Ellen: Hickin with S&P Global Platts @GramscianPaulUndersea gas pipeline rupture causes fire in Gulf of Mexico PEMEX fault, not “capitalism”- Mexico actually the first country to nationalize its subsoil resources- PEMEX doesn’t maintain infrastructure well and chronically underfundedExplosion rocks Caspian Sea near Azerbaijan gas field oil minister highlights need to extend Opec+ deal Arabia pushes back on UAE opposition to OPEC+ deal Iraq committed to OPEC+ deal, doesn’t want a price war- Favors extendedPaul Hickin with S&P Global Platts @GramscianPaul- OPEC and OPEC+ — different situation from Saudi/Russia spat last year- When UAE first raised baseline issue, prices were only in $40 range. Different scenario now- UAE made more sacrifices than other members- UAE looking to go up to 5 mbpd by 2030- Is it realistic to change the baselines? Would be hard is only some baselines change.- Prices have surged a bit - perhaps likelihood of no new deal? Or an OPEC fudge?- China’s oil storage: little bit of a black box- Has gone from 50 days cover in imports 5 years ago to 100 days of imports. Puts China on par with IEA countries, which have to cover 90 days- Shows how important China views oil, still.- 2 million bpd in refining/petrochemical capacity to come online- If China wants to play a role as a swing consumer, it could do this using its oil stocks. - China buys when crude is cheap, less keen when crude is higher, but still buy a lot because of domestic demand. Oil security means won’t draw down too far into reserves.
Upbeat US shale sector still not primed for growth lack of new capital for oil and gas investments could hamstring production in coming years.- 1/400 investors seems willing to provide fundingAhead of talks, OPEC forecasts point to oil supply deficit in August Is there REALLY an oil supply deficit? How much is in storage?- OPEC will have returned 5.8 million bpd to the market of the 9.7 million bpd they took off last year. Saudi Aramco bets on blue hydrogen exports ramping up from 2030 $1 billion just to capture the carbon for every million tons of blue ammonia producedTrump’s Thwarted Oil Buy Would’ve Given Biden $6 Billion Bonanza Court rules in favor of refiners on exemptions from renewable fuel obligations's ticking climate clock Dark Side of Solar Power
Column - Global passenger aviation’s uneven recovery from the pandemic: domestic travel in the US is up - TSA screened 2.1 million travelers on Sunday- business travel people will put up with the restrictions and possibly getting stuck. Leisure won't pick up until the covid protocols go awayClimate Policies Could Hand Power and Profits Back to OPEC NOCs are in position to make a lot of money as oil prices trend higher and western companies divest from fossil fuels- balance of power is shifting towards Saudi Arabia, Russia, UAE, etc.- Are shale producers de facto cahooting with OPEC by not producing more- will investors continue to keep out of oil companies as oil prices get higher?Why oil prices may shoot at least 15% higher: Goldman Sachs Natural-Gas Glut Has Evaporated, Driving Prices Higher Less drilling, drought meaning the demand for natural gas is up and the supply isn't keeping upDr. Dean Foreman - API Monthly Statistical Report- The economy is coming back! The data show. Demand in April and May is within a hair of where it was in 2019, the highest demand in 11 years.- $20 trillion of economic stimulus is doing something, perhaps, in a broad sense. Causing price inflation and showing up in petroleum demand- Urban commuting picking up- Trend that contrast is when we look at capex, investment and drilling activity- NEVER been lower, even during Great Financial crisis in 2008.- Many companies say they are "people limited" have to find employees.- Is it just a US issue? - MENA region is also not showing growth. Sovereign level too.- Record demand recovery and also need to replace natural decline in oil wells. Record low - Policy really matters - in Colorado new setback rules have pushed drilling to the edges of the basin. This is why breakeven price has risen there.- Bakken basin shift isn't related to regulatory activity- Private companies vs. public companies drilling: less questioning for private companies so they can ramp up faster. Public companies more capital discipline.- Will US drilling be as nimble as they have been?- Drilling activity isn't keeping up with EIA model for US drilling. They expect over 1 million bpd more from US and it doesn't look like that's happening. - Brent/WTI price differential is less than $1 per barrel. Tells us that there's a pull for US crude as opposed to Brent and that is pushing the price differential down. - Consumers aren't planning for continued rise in prices. Federal leasing moratorium, tax proposals, state regulations are factoring into price expectations in futures markets and that factors into our prices today.- we know that people are driving less and flying less, but shift towards freight shipping is picking up the slack in oil consumption- naphtha and other products are WAY up. enduring need for medical plastics and packaging to support online retailing.- Instead of 13 million bpd of production in 2019, US is only around 11 million bpd and the difference is coming from imports.- Even though we have very high oil exports in May, we're still importing more oil.- We need more investment and policies that enable that. We are seeing the result of less investment in oil and gas resources right now.
ExxonMobil might change its tune on regulatory mattersWTI Oil Hits $70 for First Time Since 2018 as Market Tightens China importing less oil now. 11.34 mbpd in May 2020, 9.86 mbpd in May 2021- OPEC deciding not to increase production more than planned- Anticipated Iranian oil didn’t come back on the market- Demand rising, especially in USOptions Traders Bet on Return of $100 Oil Goldman Sachs still says $80 by Q3U.S. conservatives stake claim to climate activism with Miami rally what actually IS conservative policy on climate?- carbon tax is supported by old time Republicans but not by Liberals anymoreSquare will invest $5 million to build solar-powered bitcoin mining facility El Salvador will accept bitcoin as legal tender.- New Cold War of bitcoin: economies that accept bitcoin and make it totally legal vs. economies that make bitcoin illegal or very difficult to use bitcoin. Bitcoin-bloc and the anti-bitcoin-bloc. Developing nations might be interesting.ANALYSIS: Asia hopes it can revive love affair with Iranian crude sooner than later
COVID 19 IMPACT ON EUROPEAN AVIATION travel within Europe is down 57% — because of lockdowns as opposed to fear?- intra-Europe flow as increased 16% over 2 weeks but intra-Europe flight are still down 63% compared to 2019.Are Vaccinated Americans Powering the Economy? Not Yet, Data Show The vaccine isn’t getting rid of fear and fear needs to be overcome before the economy can recover.Oil to stay below $70/bbl if Iran sanctions lifted -Indian refiner HPCL controlling the narrative about Iranian oil is a part of the deal. India wants sub-$70/oil and Iranian oil badly.Goldman sees oil hitting $80/bbl despite likely return of Iran supply Goldman is clinging to its $80/barrel call at all cost- Say that even if there’s robust Iranian exports, there will still be $80/barrel by Q4.Lack of truck drivers could lead to fuel shortage this summer between 20-25% of tank trucks in the fleet are parked. That is a lot of trucks that aren’t in use.- Saying the drivers are retired or moved to other industries.China's construction boom is sending CO2 emissions through the roof China’s plan is to build its way out of pandemic economic issues is also pushing its carbon emissions to record highs.- 9 % higher than their emissions in 2019- 60% of the uptick in coal usage came from power structure- 70% of the growth in emissions in Q1 came from increased coal useChina’s Latest Crackdown on Bitcoin, Other Cryptocurrencies Shakes Market is cryptomining draining the power grid?- or is China trying to push people into its “official” cryptocurrency?Listen to pipelines and cyber security here:
Check out Ellen’s new column: Green Energy Solutions Start at Factory Gates Threaten Entire U.S. West This Summer as Heat Awaits the issue is that coal and gas powered plants are closing and not being replaced, not the rapidly changing climate. Demand is outpacing supply and wildfires make it even more difficult.- Sweden also had less spare capacity because they are closing nuclear plants. Curbing electricity exports.Solar panels are key to Biden's energy plan. But the global supply chain may rely on forced labor from China Report “In Broad Daylight: Uyghur Forced Labor and Global Solar Supply Chains- components for solar energy “may be created with dirty coal and forced labor”APIEnergy Monthly Statistical Report- demand is almost back but not nearly- 19.6 million bpd for April, up 2.5% from March- crude oil production: wavered between 10.5 million bpd and 11 million bpd despite structural downturn in drilling.- despite high prices, drilling is historically long- ramifications for EIA’s outlook. This week’s EIA weekly petroleum status report has 1 million bpd downgrade in natural gas liquids. But this data has been there since February and they are just beginning to reflect on it. More supply pressures in the data than has been shown. Retroactive changes.- If the expectation is for record oil demand growth for next 2 years, EIA expects US to supply 30% of the supply to meet that. But drilling activity isn’t picking up right now to match that.- US economic growth plus lack of oil production growth means we are a net importer.- Refinery throughput was 15.5 mbpd in April, increase of 6.6% from March. Inventories in good shape going into Colonial Pipeline issue last week. But its not back from where it was. EIA data showed 2.5 million bpd drop in exports before Colonial Pipeline. Refiners are gearing up but we have to watch May carefully to see where we are heading for the summer.- Jet fuel: jet fuel delivery is up 7.7% from March, but 31.2% below April 2019. We are adding a lot of domestic flights back, but not so many international flights.- Can the sudden pick up in jet fuel demand be met by supply chain?
Colonial Pipeline- if things get fixed by Tuesday shouldn’t have problems. - If it goes on longer could really see problems- some reports that Motiva shut crude oil units due to this, but could be it was duet o a power outageUS passes emergency waiver over fuel pipeline cyber-attack Pipeline Shutdown Exposes Cyber Threat to Energy Sector Pipeline May Stay Shut for Days, Raising Concerns About Fuel Supply Gulf gasoline coursing to the US Atlantic coast’s greenhouse gas emissions exceed those of U.S. and developed countries combined, report says China is now responsible for more than 27% of global emissions- US responsible for 11%- India responsible for 6.6%- EU responsible for 6.4%Everyone else is responsible for at least half of the emissions.Biden's Paris Agreement commitment will be tough on Americans — and ineffective crude oil production rises in April, on surges from Iran,Russia: Platts survey OPEC is 111% compliant but Iran’s oil production is up to 2.43 million bpd
Eliminating natural gas in housing could cost $5.9B backs coal with $1.2M threat to sue other states San Francisco gets 60% of its electricity from the Hetch Hetchy dam- Even switching away from natural gas won’t eliminate enough emissions to actually make a difference.Surging oil profits could actually be good for the clean energy race BP tried to paint its Q1 earnings as a good showing by its green portfolio but really it was due to higher price of oil and also the oil and gas trading unit.Oil rises to $67 as demand hopes counter India concern Oil should be higher except India?- We don’t really know what the situation in India is when it comes to oil demand — mobility data can be flawed.Indian oil imports: Saudi claws back No.2 supplier status from U.S. Denies Any Deal With Iran to Ease Sanctions, Swap Prisoners Is there anything new in this deal?- Do we inflate Iran’s place in the world? Goes back to GWB? Goes back even further.United Arab Emirates investment fund to acquire Israeli deep gas project as ties between the two countries strengthen The more more cross-boarder investment that happens the less conflict there is- First step, will see more energy collaboration between the twoView: Sorry, Aramco. Reliance just isn’t that into you, Chevron Put Permian in Cruise Control Both Exxon and Chevron have plans to increase investment in the Permian and increase production by 2025.
Oil demand to buckle in India as COVID-19 surge wreaks havoc runs, oil demand feel pain as India's COVID-19 crisis hits like never before Is Covid in India going to destroy oil demand?- India consumes 4 million bpd- Percapita oil use isn’t that much- Run cuts might not be substantial because India can sell unused products to others in the region- How will this impact OPEC+ later this week?Newsom, State Attorney General among those challenging sale of oil and gas leases in Kern will this go through if Newsom is renewedProf. James Coleman- fossil fuel subsidies mean different things to different people- IMF study used in many news reports that give a value on how much oil companies should be taxed on carbon - How much income in theory does the company have and how much should they pay based on corporate income tax rate? Are we letting them take deductions on this?- How are they taxed compared to other industries?- If goal of tax system is to be neutral, does it meet that neutrality standard?- It is pretty neutral - there are some incentives but not larger than any other industry. But are they taxed at their full income level?- President Biden says he wants agencies to “get rid of fossil fuel subsidies” (whatever that means)- Federal agencies do things that impact profitability of oil companies, but don’t do the taxes. Real issue is Congress. Have tried to change it over past 70 years and have been changes to make it less favorable to fossil fuel companies. - What is meant by oil and gas companies? - There is a lot that could impact this on the margins — - Severance taxes could be reduced. They have been reduced before on shale wells and that amounts to a subsidy. A severance tax goes over all other taxes. Wind and solar don’t have a severance tax, for example. Similar to royalties. Biden admin can have a lot of influence on how royalties are calculated on Federal Land. When come out of “leasing pause” they may have new policies. On older leases they can change how the royalty is calculated based on interpretations, etc.- US royalty system is VERY antiquated. Leaves a lot of corners where its not very rational.- Individual landowners have much more sophisticated process for extracting revenue from oil and gas companies than the federal government does.- Hard to believe that Fed gov will get more money without a complete overall. But if the goal is to end fossil fuel production then just slap more severance taxes on it.- For upstream oil and gas, they get to deduct intangible costs of building wells sooner. But there are so many tax incentives allowing companies to deduct expenditures sooner that this special provision for oil and gas isn’t really all that necessary. Reason for it was that when you used to drill a well you didn’t know if it would produce enough to cover costs. But now with technology we have a much better idea of whether it will produce.- Is there any tax benefit to not completing a well (DUC)? As soon as get income, have to pay tax, but want income. Going to get the deduction when you have the income. No reason to worry about deductions if not paying tax. But if you want to carry forward deduction from an investment. Have to choose whether will capitalize expense or not, but must do it by end of year.- Congress is constantly playing with these. - You are allowed to deduct a percentage of your income because oil from well has been sold and its not longer there. But those are very limited fo big oil companies. Most of the provisions just benefit small companies and independent producers. Depletion deduction percentage has gone down from 27% to 15% recently. But very hard to get rid of depletion percentage overall because it applies to all manufacturers.Follow him @EnergyLawProf on twitter and Clubhouse
Top official says asking China to do more on climate is "not very realistic" we want to partner with China on how they regulate things at all?China probably won’t institute what we can China to do on climate change?China commits to peak emissions by 2030, which is totally unrealistic unless they totally stop manufacturing steel.What about border adjustments for climate taxesIndia may build new coal plants due to low cost despite climate change of India’s annual power output comes from coalIn 2019 and 2020 coal’s contribution to electricity actually fell, but this trend doesn’t seem to be continuing.Earthquake in southern Iran disrupts oil production: state media is now exporting over 1.5 million bpd of oil anyway, and they only want to get up to 2.3 million bpdCould this earthquake impact that? Perhaps. What about the Vienna talks?For more on Iranian oil situation, read: oil glut amassed during the pandemic is almost gone potential risk baked in?Does this mean the price is over-inflated now?Dr. Dean Foreman and API Monthly Statistical Report- economic recovery driving demand NOT just seasonality- especially rural gasoline demand picked up- but rig activity hasn’t picked up nearly enough to EIA production estimate by the end of this year. EIA saying 900,000 bpd increase but not happening yet.- What are the issues: lack of personnel, budgets already set, capital isn’t there- Jet fuel: more cargo going by air than before but still lower due to lack of people traveling. But supply of jet fuel has gone way down to only 4% of a barrel of oil. Jet fuel has been converted. - petrochemicals are still leading because demand for personal plastics and PPE is continuing. Still high. Usually its 25-27%, but now its up to 30% - Propane also had a winter element to it- Propane demand picked up over the winter but it’s ALSO a contributor to propalyne which is used to make medical plastics. Will it normalize? - Propane distribution has been disrupted a big. - Are we really back down to “normal” inventory? Well, it can be sketchy. API data says we’re still a little high on crude oil, especially with refining disruptions.- We’re not back up to 85% refinery utilization which is really good.- From a 5 year range perspective, US petroleum deliveries are at the top of the 5 year range, which is a very bullish sign. But weekly data have a lot of variation in them.- Market could remain slightly short but as OPEC puts more barrels back on the market will cap prices. But resumption in US supply of 900,000 bpd by end of year is baked into this and might not happen. Will be lucky to meet half that, and if you don’t get 900,000 bpd, opens door for OPEC but also for higher prices given growth in world economy.- Investment isn’t in place to meet demand next year.- Breakeven estimates for Bakken and Denver have risen from $60 to $80 per barrel making them un-producable. State regulation and also impact of DAPL potentially being taken offline.- Biden admin policies are “quietly tectonic”- Tax provisions in infrastructure bill would put upward pressure on consumer gasoline prices.- Sandwich of federal and state regulations could push prices up.
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