The Daily Bulletin: July 17, 2015
WHAT’S GOING ON IN GERMANY?
Trying to evaluate Germany’s Energiewende is a bit of a puzzle. Some news stories say it’s going well. Others say Germany is on the brink of an energy crisis. Some say Germans pay the highest energy costs in Europe. Others report that coal and gas plants are going out of business because the price of energy is too low. Some say Germany imports more than half its energy. Others say Germany is Europe’s largest exporter. RealClearEnergy’s William Tucker tries to wade through all this conflicting information to the truth. It turns out it all has to do with renewable energy’s intermittent quality. Sometimes it produces too much energy, sometimes not enough. “A recent report from a government environmental panel stated that under the new regime there will be ‘no room for baseload power plants like nuclear and coal-fired power plants that have to be run at full power for technical or economic reasons.’ In other words, if you can’t compete in this new topsy-turvy world where reliability has no value, you’re out of luck.” Are the Germans digging themselves a hole that it will eventually be hard to climb out of? Read this report and see for yourself.
AUSTRALIA’S STRANGE ATTACK ON THE WIND SECTOR
A couple of years back Australia tried to impose a carbon tax under former Prime Minister Julia Gillard. She was defeated by conservative Tony Abbott and the carbon tax was quickly repealed. But Abbott didn’t stop there. He’s now trying to end the renewable effort altogether. RealClearEnergy David Holmes reports: “The confirmation by Trade Minister Andrew Robb that the Clean Energy Finance Corporation (CEFC) has been ordered to cease future investments in wind power is a major setback to renewable energy, investment and delivery. It also further isolates Australia as not only having abolished a price on carbon, but one that has scaled back its renewable energy target and now is winding back the wind power sector. The directive, which was revealed by Fairfax Media only this weekend, was jointly issued by Treasurer Joe Hockey and Finance Minister Mathias Cormann late last month. It rediverts funds from the A$10 billion “green bank” away from wind and into long-term research and development (R&D). The move is the Coalition’s next-best scenario to actually abolishing the CEFC, which it has sought to do twice now only to be blocked in the Senate. This constitutes a genuine trigger for a double dissolution if it is needed. Labor, which was party to downsizing the size of the Renewable Energy Target, labelled it as an attempt to sabotage the renewable sector altogether.” To every action there is an equal and opposite reaction.
SILT-CLOGGED WATERWAYS AND PORTS COULD STALL LNG EXPORTS
The Department of Energy’s willingness to approve LNG ports for export has been regarded as one of the great triumphs for a free-market approach to energy. But now there’s a snag. The DOE is warning that siltation of port areas and key waterways could block the use of the huge tanker vessels necessary for an export trade. Nick Snow of Oil & Gas Journal reports: “Silt, which is increasingly filling US waterways and ports, potentially could limit US LNG exports if it is not dredged soon, a top US Department of Energy official warned. Sedimentary deposits in Louisiana’s Calcasieu Ship Channel, ‘where many LNG exports would be moving,’ could reach a point where tankers moving in different directions won’t be able to pass each other, said Melanie Kenderdine, who directs DOE’s Energy Policy and Systems Analysis Office. ‘These, by and large, are federal responsibilities,’ Kenderdine noted during a presentation on the Quadrennial Energy Review and energy security at the Center for Strategic and International Studies. ‘That makes funding projects difficult under sequestration and budget caps.’” It’s been a long time since we engaged in this kind of international trade.
OIL MARKET FORECASTS LIKELY TO BE OFF-TARGET
The unpredictability of oil prices has challenged even the best analysts for years, and the latest forecasts are expected to be no different says Matt Piotrowski at Fuse. “Last year at this time, when oil prices were still hanging above the $100 level, virtually none in the analyst community were predicting the market to be in the $50s in the middle of 2015, even among the most bearish of forecasters. Since the surprising price rally of 2004, many forecasts have proven completely outdated mere days or weeks after publication. Major forecasters such as the U.S. Energy Information Administration (EIA), the International Energy Agency (IEA) and OPEC have just released their projections through 2016, and if history is any guide, they are likely to be off-target once again. Last year, for example, not one of the three anticipated last year’s oil price collapse. Additionally, all three are inherently conservative in their forecasts, with each having their own biases: The IEA backs the major oil consuming countries, OPEC looks out for producers, and the EIA—a government agency—tends to reflect current trends to avoid giving ammunition to any one side.”
SUMMER GASOLINE PRICES ARE LOWEST IN YEARS
A confluence of benevolent forces has conspired to help US driver for the first time in roughly a decade as the most recent government forecast by the Energy Information Administration (EIA) finds the summer driving season may be the strongest in years. “Driving this summer (as measured by vehicle miles traveled) is expected to be 2.2% higher than last summer, the largest year-over-year summer increase in 11 years. The increase in highway travel is not just a response to the drop in gasoline prices. Real disposable income is projected to be 3.6% higher than last summer, the largest year-over-year increase in nine years. Nonfarm employment is projected to rise 2.1%, the largest such increase since 2000.” Such trends will be supported by weakening crude prices as the Iranian nuclear agreement ushers in more supplies.
STUDY FINDS UTICA SHALE LARGER THAN PREVIOUSLY ESTIMATED
The size of the Utica shale play’s technically recoverable resources is larger than previously thought, a recent study by West Virginia University (WVU) has found. Rigzone’s Karen Boman says that WVU found that the Utica play contains technically recoverable resources of 782 trillion cubic feet (Tcf) of natural gas and around 1.9 billion barrels of oil. That’s higher than the U.S. Geological Survey’s (USGS) 2012 estimate of technically recoverable resources at 38 Tcf of gas and 940 million barrels of oil. Most of the Utica play lies beneath the Marcellus, the country's largest shale gas play that covers much of Pennsylvania and upstate New York as well as Ohio and West Virginia. The drilling depth of the Utica ranges from less than 4,000 feet in Ohio to more than 12,000 feet in West Virginia, which is over two miles below the surface.”
