The Daily Bulletin - February 28, 2014
TODAY'S TAKEAWAY: WITHOUT ENERGY, WE'D BE DEAD IN THE WATER
The U.S. Chamber of Commerce has published a remarkable graph, featured in today's Charticle, showing the shape of the recovery. To be brief, without the energy sector we'd be dead in the water. Job growth in the non-farm sector is still in negative territory and shows no signs of improving. Meanwhile, employment in the energy sector has exploded by 40 percent since 2007 and is still growing. "In just two years, the number of pipe fitters, welders, electricians and other skilled workers in the Gulf Coast will grow from roughly 62,000 to more than 103,000, driven in part by receipt and export terminals now under development by companies like Sempra Energy in Louisiana and Freeport LNG in Texas," reports FoxNews. Moreover, the surge of cheaper energy is driving down prices and reviving investment in major industries. "The American Chemistry Council announced that 'potential U.S. chemical industry investment has now topped $100 billion' with 'more than half of the investment dollars come from firms based outside the U.S.' which will lead to high-paying jobs. In addition, access to more affordable energy is spurring job creation by helping to revitalize America's manufacturing base," reports the Chamber. Hooray for Barack Obama, the Energy President. Now if he would just approve that Keystone Pipeline . . .
WHAT HAPPENED TO ALL THAT GREEN ENERGY?
How about all that green energy that was supposed to replace fossil fuels? Well, The Economist reports that it is still "short of puff." "EUROPEAN climate policy has spent vast amounts of public money, sent power utilities to the brink and done little to reduce emissions of carbon dioxide, an impressive display of multi-pronged incompetence. But might all that money at least have built a robust, world-beating European renewables industry? Not yet. European makers of solar panels have been largely wiped out by a combination of the financial crisis and competition from cheaper Chinese rivals. Q-Cells of Germany, once the world's largest solar manufacturer, went bust in 2012. SolarWorld, Germany's largest remaining maker, begged successfully for investors' patience to avoid bankruptcy late last year. The EU, like America, is bringing anti-dumping complaints against Chinese firms, but even if these were to succeed it is clear that the future of solar-panel manufacturing lies beyond Europe." Well, it has employed lots of academics and think tank specialists turning out study after study about how renewables will soon be running the planet.
WHAKO CLAIM OF THE DAY: STANFORD'S MARK JACOBSON
Mark Jacobson is some kind of specialist at Stanford who regularly draws crowds of naïve college enthusiasts by claiming he has proved the world can run on 100 percent renewable energy. In one widely circulated debate, nuclear supporter Steward Brand asks Jacobsen is asked how renewables can run a modern-day grid and Jacobsen blandly replies that when the sun isn't shining the wind is usually blowing. The students voted Jacobsen as the more believable. Three years ago he put out a study showing that New York State could run on all renewables by 2050 that even the Natural Resources Defense Council found unbelievable. Now he's claiming the same for the whole country. We're not even going to put up the story because it isn't worthy of RealClearEnergy but you can access it here. Jacobson comes in second place with a claim in the study that massive offshore wind farms could "knock down" hurricanes by sapping their strength. The far more likely outcome would be that hurricanes would knock down the wind farms.
ARE GAS PRICES DIMMING ASIA'S HOPES FOR EXPORTS?
Asia is desperate for American gas. Japan has shut down its nuclear component and lost its two-decade-old positive trade balance within two years by importing billions in LNG. Korea is in the same resource-poor position and of course China is scouring the globe for energy supplies. The Japanese are so eager for American gas exports that they have just invested in an LNG loading facility in Freeport, TX that has received a license to ship. But now the brutal winter and the run-up in American gas prices are dimming that hope. "'The recent volatility in Henry Hub has certainly introduced an additional discussion point in the general debate as to how long oil-indexation will be prevalent in Asia, which we say will be sustained for quite some time' said Anthony Barker, general manager of BG Singapore Gas Marketing," reports The Wall Street Journal. "Despite its high price now, the fundamentals for importing U.S. gas to Asia remain intact, although the price differential has narrowed. Citi Research forecasts that long-term U.S. gas prices are likely to settle in the mid-$5 per mmBtu range, making the U.S. a competitive LNG exporter. 'U.S. LNG exports are expected to redefine pricing and structure in the global LNG markets,' Citi's Anthony Yuen said." All this and trying to run America's electrical grid on gas as well. Somebody's going to be disappointed somewhere.
CAN NATURAL GAS VEHICLES SURVIVE THE PRICE RUN-UP?
Looking around for candidates, you can't help notice the growing conviction that we can run large portions of our transport sector on natural gas. FuelFix has this upbeat story: "The number of light-duty vehicles running on natural gas will more than double over the next decade to 39.8 million traveling on roads worldwide, according to a new report by research firm Navigant," writes Simone Sebastian. "Despite the rapid growth, natural gas will continue to have a modest market share compared to gasoline and diesel in 2023, fueling just 2.6 percent of the cars and light-duty trucks on the road, Navigant projects. A significant number of natural gas vehicles are already on the road in Brazil, Pakistan, Argentina and India, the report notes. But popularity is growing in North America, as well, driven by the relatively low price of natural gas and stricter vehicle emissions rules." But is anybody taking account that all these other proposed uses may drive up the price?
THE IRREPRESIBLE MCCLENDON RISES AGAIN
Aubrey McClendon may be kicked out of his baby, Chesapeake Energy, but his Oklahoma City Thunder is still leading the NBA and he's back in the gas business. "Like a man on fire, Aubrey McClendon is working feverishly to orchestrate a comeback for the ages," reports Christopher Helman in Forbes. "In the past six months McClendon, through his American Energy Partners, has raised nearly $3.6 billion in investor capital and gobbled up hundreds of thousands of acres of land in Ohio and Oklahoma. McClendon, the ousted founder of Chesapeake Energy CHK +1.13%, launched American Energy last fall with a $1.25 billion equity infusion from Energy & Minerals Group and First Reserve. He's also secured $950 million in loans from GSO, the credit arm of Blackstone Group. And earlier this month he raised $750 million in a convertible bond offering (at a 3.5% yield) that promises its buyers a 15% equity stake in American Energy when (and if) McClendon takes it public. And this week McClendon topped off his remarkable fundraising run with another capital injection: $500 million in equity and $180 million in bank loans to buy up 120,000 acres in the Woodford shale and Mississippi Lime plays of Oklahoma." You can't keep a good entrepreneur down.