Energy and Environment News

Energy and Environment News

August 13, 2015

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Oil.  The Wall Street Journal notes that refining margins continue to rise in 2015, exceeding expectations and helping to cushion the impact of low oil prices for integrated oil and gas companies.  The demand for oil products has benefited from lower prices more than experts predicted —  particularly in the U.S., where average daily gasoline demand is more than 5% higher than last year and measures of “vehicle miles traveled” have also steadily risen.  WSJ

Energy Outlook.  The Energy Information Administration reports that increased Iranian crude oil production resulting from the nuclear accord will contribute to large inventory builds next year and consequently lower oil prices more than previously expected.  Further, EIA’s outlook for U.S. crude production has been revised downward by 400,000 barrels per day in 2016, and the agency expects that the biggest declines in production among non-OPEC producers will occur beyond 2016 for producers in areas outside of the U.S. shale plays. EIA

Oil.  Industry analysts report that the world’s biggest oil producers will need to slash investments by an additional $26 billion — or 10% of current expenditures — in order to meet dividend commitments amid the continued price slump.  Oil producers have mitigated the impact of the price downturn by tightening operating costs, cutting capital expenditures, and even increasing their share of natural gas output in order to reduce exposure to low prices; looking ahead, analysts estimate that majors will need Brent prices at $82 per barrel next year in order to balance cash flow between operations and investments.  Bloomberg

EPA.  After a contractor for the EPA accidentally caused a mine to burst during a field investigation last week in Colorado, the agency has halted all similar investigations until further notice.  The EPA is still seeking an independent review of the cause of the spill, and officials have not yet determined what health risks, if any, the incident poses.  NY Times

Energy and Environment News

Energy and Environment News

August 12, 2015

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Oil.  According to the International Energy Agency, demand for oil is increasing at its fastest pace in five years, driven largely by a consumer response to lower oil prices and improving macroeconomic prospects.   The organization predicts that while global demand grew by 1.6 million barrels a day this year, the supply glut will likely persist through 2016 — causing many industry participants to adopt the mantra “lower for longer.”  WSJ

EPA.  EPA Administrator Gina McCarthy apologized yesterday for a mine spill caused by her agency in Colorado last week.  An EPA cleanup crew accidentally released three million gallons of toxic substance in an abandoned gold mine, and has been criticized for lacking an adequate network in the region to respond to the disaster quickly and efficiently.  WSJ

Oil.  The price for crude oil from Canada’s Alberta oil sands region has fallen to $23 per barrel — the lowest level for international crude prices in 12 years.  While this type of crude is already the world’s cheapest grade of oil, steadily rising production from existing projects, pipeline constraints, and refinery disruptions have driven prices even lower for Canadian producers.  FT

Energy Outlook.  The U.S. Energy Information Administration cut its outlook for U.S. crude production through 2016 amid a sharp reduction in the number of oil rigs since the price downturn.  Despite the downward revision, however, U.S. crude oil production is still on track to reach its highest level since 1972 as drillers continue to implement new techniques that boost the productivity of active wells.  Bloomberg

Climate Change.  Ken Silverstein of Forbes argues that although firms in U.S. “coal country” attribute industry failures and bankruptcies to the Obama administration’s “War on Coal,” these woes are largely due to the availability of cheaper and cleaner fuels and “having made some bad bets.”  He specifically points to newfound supplies of natural gas — a resource that could replace coal’s economic contributions and is far less labor-intensive.  Forbes

Energy and Environment News

Energy and Environment News

August 11, 2015

Top Stories

Oil.  According to OPEC’s monthly oil market report, the cartel’s production rose to its highest level in more than three years in July, despite global oversupply and tumbling prices.  Specifically, the organization’s 12 members pumped 31.5 million barrels per day last month — the highest level since May 2012 and a month-on-month increase of 101,000 barrels per day — in efforts to protect market share.  WSJ

Energy Outlook.  Japan has restarted its nuclear reactors in order to reduce dependence on imported energy, ending a nearly two-year offline period during which the country utilized coal, liquefied natural gas, and oil for nearly 90% of its power needs.  Japan has 43 operable reactors, all of which have been inactive since September 2013 due to strict regulations introduced after the March 2011 earthquake and tsunami that struck the Fukushima Daiichi power plant.  WSJ

Energy Policy.  Philip Wallach of the Brookings Institute argues that the Clean Power Plan is unlikely to swing the 2016 Presidential Election, largely due to the risk involved for both parties in “battling” the issue of climate change.  Should climate change turn out to be a critical campaign issue, Wallach notes that the Clean Power Plan could serve as an effective campaign strategy for Republicans critical of executive branch overreach — particularly in swing states with high targets under the regulation. Brookings

Energy Outlook.  Europe is likely to be a market for Iranian natural gas exports following the recent nuclear accord.  Moses Rahnama discusses the challenges Iran will likely face in exporting its most abundant commodity, including an oversupply of liquefied natural gas, growing competition from other producer countries, weakness in demand, and issues with domestic infrastructure.  FT

Energy and Environment News

Energy and Environment News

August 10, 2015

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Energy Policy.  Industry and Congressional leaders are pushing to lift the U.S. oil-export ban as early as September — a move that would have been unthinkable not long ago given that the U.S. has banned crude exports since the shock of the 1973 Arab oil embargo.   The Wall Street Journal predicts that the change in policy will not cause much of an economic stir, given that oil prices are hovering below $50 a barrel and the U.S. is already exporting more than a half-million barrels a day to Canada, the biggest exemption under the ban.  WSJ

Energy Outlook.  The Russian economy is in a dangerous situation amid the sustained fall in energy prices, as energy is the largest single sector in the Russian economy, energy exports account for roughly 70% of Russian trade, and oil and gas revenues account for roughly half of the government’s official budget.  Nick Butler of the Financial Times writes that the downward energy cycle could take years to play out — and suggests that economic discontent will likely give way to the kind of political instability that has pushed the country into past wars.  FT

Energy Policy.  Iranian critics of the nuclear deal reached in July are becoming increasingly vocal, underscoring the sharp divide within the country over how it should move forward.  While Iranian youth and a broad section of the business class support strengthening ties with Western countries by opening the Iranian economy to foreign investment and products, others are skeptical that a path toward liberalization is incongruent with Iran’s strategic interests.  WSJ

Energy Outlook.  The Adaptive Energy Technology Development (AETD) program — a follow-up to the successful Adaptive Versatile Engine Technology (ADVENT) program — is currently developing the first ever “adaptive engine” for military jets that will optimize both speed and fuel efficiency, unlike current designs that emphasize one at the expense of the other.   While the technology is costly, it could result in 25 percent lower fuel consumption. Brookings

Energy and Environment News

Energy and Environment News

August 7, 2015

Top Stories

Oil Outlook.   The Wall Street Journal notes that American energy producers have found it difficult to scale back production levels despite cutbacks on spending and idle drilling rigs.  Industry analysts say that U.S. firms need to cut output by at least 500,000 barrels per day to curtail oversupply on the market, but companies remain incentivized to make up for lost revenues by increasing production in the short term.  WSJ

Coal.  James Stewart of the New York Times writes that market forces — rather than a political “war on coal” — will be the coal industry’s downfall moving forward.  Specifically, Stewart argues that coal majors are being driven to bankruptcy because of collapsing prices and heavy debt loads while cleaner, more efficient alternatives such as natural gas take up market share.  NY Times

Energy Outlook.  After nearly two decades of actively seeking investments in foreign energy projects, Chinese state oil firms have begun to focus on managing current assets and cutting costs, rather than seeking new acquisitions.  Analysts note that this shift tracks with a general pattern of highly cyclical Chinese investment behavior, which suggests that Chinese investors will resume seeking foreign energy projects again as soon as 2017.  Reuters

Energy Policy.  Philip Wallach of the Brookings Institute discusses the legal challenges likely to be made against the EPA’s Clean Power Plan.  He notes that while EPA appears to be on firmer legal ground due to several notable changes made between the draft and final rules, challenges regarding EPA’s legal authority to regulate power plants represent the greatest threat to the rule’s legal viability.  Brookings