Quote of the Week
"At our conference, producers largely did not provide specifics on what capex/ production would look like at $35/bbl of oil. Instead, producers spoke largely of their agility to spend within cash flow and … ramp up when needed. Commentary suggested $50 per barrel WTI is now where producers would raise activity."
Goldman Sachs, in a note to investors
1. Oil and the Global Economy
Crude futures settled below $30 a barrel on Friday with New York closing at $29.42, down 10.5 percent for the week, and London closing at $28.82, down 13.7 percent for the week. The global oil glut, a stronger dollar, and reports that the sanctions on Iran were about to be lifted contributed to the move. The now familiar factors of a circa 1.5 million b/d surplus in global oil production; a strong US dollar, up 20 percent since mid-2014; the Chinese economy continuing to slacken; and problems on the horizon for US growth were the main reasons behind the price slump. A couple of new concerns have arisen lately. Analysts are worried about the optimism being expressed by US shale oil producers over the likelihood of higher oil prices just ahead. Many US drillers are not trying to cut back on production but simply tying to hold things together until later this year. Another factor is reduction in demand for diesel used to drill and frack oil wells which is down by nearly 50 percent in the last 18 months. The drop in demand for diesel along with warm weather is leading to large surpluses of distillates.
Adding to the problem is the fact that much of the world’s oil production is being sold at prices well below the London and US futures benchmarks which are now around $29 a barrel. This because most oil is of lower quality than the benchmark specifications or that there are large shipping costs involved in getting the oil to refineries. OPEC announced, before the most recent price drops, that its members were getting an average of $25.69 for their oil. Dubai crude which is the benchmark for much of the oil going to Asia from the Middle East was at $25.88 on Wednesday. Oil sold at the wellhead in the Bakken shale is now down to $20 a barrel, and low grade oil from western Canada is going for $15.
The consensus of government agencies, oil analysts, and traders is that we still have a way to go before oil prices bottom out. There is still nothing on the horizon that suggests anything other than increasing production from Iran, and weakening demand from China and its suppliers. This situation has led to several investment banks coming up with worst possible cases for the bottom of the oil price slide. Last fall, many laughed at Goldman Sachs’ assertion that oil could fall as low as $20 a barrel this year. With Brent now going for less than $29 a barrel, this no longer seems particularly outlandish. It the past week, Morgan Stanley joined Sachs in talking about $20 oil. The Royal Bank of Scotland suggested that oil may go to $16 and Standard Charter topped them all by saying “prices could fall as low as $10.”
The EIA forecast last week that the oil glut will continue until late 2017 and that global production will likely rise by another 800,000 b/d from 95.9 b/d in 2016 to 96.7 b/d next year. The Energy Department expects that prices will stay below $50 for the next year or two. With exception of some in the shale oil business, who are trying to get bank loans extended, most observers are not forecasting higher prices within the next 18 months. US oil production may slip from 9.5 million b/d in 2015 to 8.5 million in 2017 as the EIA recently forecast, but the Iranians insist that they will be able to bring another 1 million b/d to market offsetting any drop in US production.
There has been much discussion in the financial press recently on the ill-effects of $30 a barrel oil. Obviously many bank loans are not being repaid and bankers are scrambling to absorb defaults. Some are saying that between one third and one half of the smaller oil producers will be bankrupted in the next 18 months if oil stays anywhere near current prices. BHP Billiton announced that it was taking $7.2 billion write-off on its US shale assets. S&P is warning of mass downgrades of oil and gas firms in the next couple of months. State tax revenues are being squeezed. In Texas, revenues from energy production are down 50 percent year over year. While Texas may have a large and diverse enough economy to survive, other such as North Dakota are in trouble.
While the next couple of years seems to be headed towards low prices and overproduction, it is the longer term that is more of a question. A recent analysis concludes that in the last 18 months some $400 billion in oil exploration and production projects have been postponed awaiting higher prices. These projects were intended to produce some 27 billion barrels of oil at an eventual rate of 2.9 million b/d. The production of this oil will now be delayed by at least 2-3 years and possibly much longer if prices do not rebound to levels at which it can be produced at a profit. It is numbers like this which are raising of question as to whether the world is at or is approaching peak oil.
2. The Middle East & North Africa
Iran: Now that the sanctions are lifted, the question of how much Iran can increase its production in the coming year and how much oil can it sell into a global market is coming to the fore. Although Iranian officials have repeatedly said that they can increase production by 500,000 b/d immediately and by 1 million b/d within six months, many foreign observers are skeptical of these claims. Iran was producing 4 million b/d back in 2008, but this was down to 3.6 million just before the sanctions were imposed. Recently they have been producing 2.9 million b/d. Since the sanctions were imposed, little maintenance has been done on the aging wells and drilling new ones will take several years. Some believe that an increase in Iranian exports has already been priced into the current low oil prices so we should not expect the lifting to result in much lower prices immediately.
The median estimate in a recent survey of foreign observers of Iran’s oil situation was that the country can add about 680,000 b/d to the oil supply by the end of the year. The most pessimistic of those surveyed said that the Iranians can only increase production by 150,000 b/d in the next six months and by 250,000 b/d by the end of the year. The 680,000 b/d figure is higher than the amount that the IEA says non-OPEC countries will cut production in 2016, suggesting that over production could grow.
For the last few months, Tehran has been quite active in attempting to find customers for any increased oil production. First it has to unload the 7 to 50 million barrels (depending on the estimate) stored aboard tankers, and find steady customers for the increased supply. The Iranian Tanker Company says it expects to start transporting 200,000 b/d to traditional Iranian customers in Europe and another 200,000 b/d to India. The Iranians have said several times that they expect the other OPEC members to cut production so that they can regain their rightful share of the markets. With Dubai crude, the benchmark for middle eastern oil, already down to $25 a barrel, Tehran is not going to be getting much for its oil especially if it has to sell at deep discounts to regain market share. Iran’s Oil Ministry, however, claims that its costs of production are only $10 a barrel so that it has plenty of room to bargain and still make some kind of profit.
There is already talk of the Iranians offering to barter their oil for foreign produced goods, which would at least prevent the actual sales price at which they are “selling” their oil from becoming public. Another way to unload oil would be for Tehran to trade oil for stakes in foreign refineries, with the understanding that the refinery would take Iranian oil under long-term contracts. This way oil could be “sold” without revealing the size of the discount to other customers who would demand the same prices.
Syria/Iraq: Over one million civilians are facing starvation in Syrian towns that have been surrounded and cut off from food supplies by the fighting. Some 400,000 are blocked from getting regular food supplies, some 180,000 are besieged by government forces, 12,000 are besieged by rebel groups, and 200,000 are trapped by the Islamic State’s siege of Deir al-Zor. Some relief convoys are getting through, but these are no where near enough to solve the pending disaster. The UN Security council will take up the issue next week.
ISIL is making a renewed push to capture the Syrian city of Deir al-Zor which is on the road and river between Raqqa and Ramadi. Several sources are reporting a massacre of government supporters and their families is taking place as ISIL forces push into the city. Some are saying that those being executed could run into the hundreds.
In Iraq, fears are increasing that the Mosel dam, which is back under government control but not receiving the maintenance necessary to keep it from failing, is in danger of collapse. Should this happen suddenly, 500,000 Iraqis living downstream could be killed in the resulting flood and more than a million made homeless.
In southern Iraq clashes among Shiite tribes have broken out around Basra, forcing the army to send an armored division to the city to restore order and disarm the tribal militias. Security forces backed by helicopters entered Basra, raiding homes and seizing large quantities of weapons stored there. As Basra and its oil are the backbone of Iraq’s economy its security is a top government priority. Forces had been deployed earlier to restore calm to rural areas north of the city near the West Qurna and Majnoon oilfields. Local officials are assuring the foreign oil companies that their equipment and facilities are secure. On Saturday, an executive of the South Oil Company said that the tribal clashes have not affected oil production and that so far in January exports have been running at 3.3 million b/d which is higher than in December.
In Kurdistan, the government is suffering from low oil prices. The government is four months in arrears on its bills and deep in debt. Erbil is unable to meet a bloated government payroll, take care of thousands of refugees that have swarmed into its territory and fund the salaries of the Peshmerga which is the frontline of the forces opposing ISIL. The Kurds have ramped up independent exports of 600,000 b/d, but the low prices still leave the Kurdish government with a monthly deficit of $717 million. A deal last year to export most of the oil produced in Kurdistan through the government in Baghdad’s marketing organization never got off the ground as Baghdad had higher priorities than sharing its reduced revenue flow with the Kurds.
There does not seem to any political reconciliation between the Kurds, and Baghdad in sight. The Kurds who are supposed to play a role in the capture of Mosel do not believe the government can get its act together for an offensive this year.
Libya: It now appears that the formation of a new UN-mandated government by January 17th will not take place as many in the two existing governments are opposed to the agreement. The new unity government is supposed to eliminate the second national oil company which is trying wrest control from the established oil company in Tripoli. It is further hoped that a unity government would be able to attract military support from the European powers to deal with the growing threat from the Islamic State, which two weeks ago attacked and set fire to seven oil storage tanks at the Ras Lanuf and El Sider oil terminals. These terminals lie between Sirte, which is controlled by the Islamic State, and Benghazi. Efforts by Tripoli to send tankers to empty the endangered oil tanks at Ras Lanuf was been blocked by local security forces loyal to the Tobruk government. Last week the major oil pipeline supplying the Ras Lanuf terminal was blown up; however, the pipeline has not been operational for two years.
Libya is currently producing less than 400,000 b/d which is about a quarter of the country’s pre-uprising production. Production in the eastern part of the country, however, has remained relatively stable. The Arabian Gulf Oil Company which operates the region, says it exported 64 million barrels of oil last year.
In the meantime, the threat to Libya’s oil industry from the Islamic State is growing. European intervention is possible at some point, but for now everyone seems to waiting for a new government to be formed. If this proves to be impossible we may be back to square one. At some point the threat of the Islamic State may become so serious that foreign intervention will be inevitable.
Saudi Arabia: Concerns about the long-term future of Saudi Arabia are starting to appear with increasing frequency in the media. The Saudis’ proxy wars with Iran in Yemen and Syria are not going well. Its arch-enemy, Iran, just achieved a negotiated end to nuclear sanctions and is now free to grow stronger and compete with the Saudis for a bigger share of the oil market. Saudi efforts to drive American shale oil producers out of business is turning out to be much more expensive than planned and the low oil prices, which are partially the fault of Saudi policies, are forcing Riyadh to burn through its financial reserves. Net foreign assets are down by $100 billion in the last 15 months.
Last week Riyadh announced that it has established a new sovereign wealth fund to diversify its investments. It has asked investment banks and consultants for proposals. The new fund could affect some of the world’s largest assets managers, particularly in the US where the Saudis keep most of their money. The growing rift with Washington could be one of the reasons for the move.
The fiscal situation is becoming serious and large cuts in the state budget have been announced. These cutbacks may threaten the social stability of the country which has been maintained for years by large government spending and subsidies to keep its growing populace quiescent. Outside of oil and gas exports, the country has few other sources of revenue. Global warming is forcing the desert country to spend an increasing share of its oil production on keeping cool in the summer and the Gulf states will be among the first to suffer serious consequences from rising temperatures.
While Riyadh spends vast sums on the latest military hardware, its military power is relatively weak compared to its neighbors. In the interests of safeguarding the royal family, Saudi military leadership is heavily politicized and certainly no match for Iran and probably not even the Houthis in a direct military confrontation. In Yemen, it has not committed its own ground forces from fear of taking casualties, but has relied on mercenaries from the other Gulf states. While there does not seem to be any immediate threat to the kingdom or its oil exports on the horizon, the trends are not good.
There has been much discussion as to what the Saudis might sell if they put a piece of Saudi Aramco Oil Company up for sale to raise money. Many believe that the Saudis could group the down stream parts of Aramco, mainly refineries, into a separate company and then offer shares in this entity to the public. The oilfields and production could remain completely in Saudi hands. However, the company’s chairman said in an interview that potential sale of shares in its state-owned oil giant could include listing at least part of its exploration and production assets, countering speculation that any IPO would focus solely on its refining and petrochemical arms. (1/12)
Beijing’s demand for oil imports has remained more robust than expected in the past year, with December imports hitting a record. Much of the increase in imports can either be attributed to opportunistic buying for strategic reserves or for refining into oil products for exports which have been increasing rapidly in recent years. A new study by Barclays, however, says that the bank can detect the beginning of a contraction in demand as the industrial portion of China’s economy slows. While actual oil consumption in China is not published and is difficult to calculate, Barclays believes that implied oil demand in November was 2 percent lower than in November 2014 as the use of diesel for industrial production declined. The study concludes that China’s demand for oil will grow by 300,000 b/d in 2016 as compared to 510,000 last year.
Last week was a bad one for Chinese stock markets as they slid to the point where they may break through the lows seen during the market crash last summer. The Shanghai market now is down 18 percent this year and 20 percent from the December 22nd high. Many expect that the “National Team,” which is the way the Chinese government intervenes to keep the market from crashing totally, will be back in business this week. Even after the recent decline, shares on Chinese stock markets are still trading at 24 to 33 times earnings as compared to 15 to 16 times earnings in the US and Europe. This suggests that the markets still have considerable potential to fall before prices come back into reality. Fears are rising, however, that a major drop in the Chinese stock markets will have serious repercussions in the rest of the world’s equity markets.
In addition to the volatility in China’s stock markets, the 6 percent decline in the value of the yuan in the past five months is becoming another cause for concern. While the decline may not sound like much, it comes amidst herculean efforts on the part of banking authorities in Beijing to stabilize the currency. To prop up its currency, the Bank of China has spent more that half a trillion dollars of its foreign reserves in the last 12 months, cutting them to a mere $3.3 trillion. The fear is that capital outflows, which Bloomberg calculated to be approaching $1 trillion last year, could turn into a rout creating problems across the global economy.
Some see China’s debt to GDP ratio which has gone from 147 percent in 2007 to 231 percent today as a pending disaster. China has very little room to borrow more money to finance the transition from an export oriented industrial economy to one driven by domestic consumer services. All this seems to say that from several perspectives there are trends that could wreak serious trouble on China’s economy in the next few years and cut its demand for oil.
Falling oil prices and their impact on Russia’s economy continues to dominate the news. With the ruble deep in all-time low territory as it approaches 78 to the dollar, Moscow continues to scramble in bring its 2016 budget into line with resources. Last week the government announced another round of budget cuts, this time by 10 percent. The 2016 budget had been based on an average crude price of $50 per barrel which is looking rather quaint as prices slide past $30 and could see $25 or lower.
Russian stocks fell by the most since 2012 last week as oil broke through the $30 psychological barrier. The Bank of Scotland says that the ruble may drop to 80 rubles to the dollar should Brent crude fall to $26 a barrel. There are new fears that foreign investors may start pulling their money out of Russia contributing to a further fall in the ruble.
Last week Prime Minister Medvedev said that “the oil price declines of the last few days creates serious risks for the budget.” The government could burn through its $50 billion reserve fund as early as this year if serious cuts to the budget are not made and oil prices remain low. The new cuts, however, donot include the military and social services. Military costs have skyrocketed in the past year due to the interventions in the Ukraine and Syria. In October the government cut back on an earlier plan to reduce the defense budget for this year as the costs of the Syrian venture ballooned.
5. The Briefs
OPEC’s average price for a basket of crudes from their producers fell to $25 a barrel on Thursday even before unrestrained exports from Iran hit the market. Benchmark global oil prices took a fresh hit on Friday with the market bracing for more supplies from Iran earlier than expected. (1/16)
Bahrain and Oman on Tuesday reduced government subsidies on gasoline, becoming the latest Gulf Arab countries to try to cut back on spending and offset the effect of oil prices, which have fallen to their lowest level since 2003. (1/13)
China’s state-run oil refiner Sinopec Corp has purchased its first ever batch of US crude oil for export, a landmark transaction after the ending of a four-decade ban on domestic exports. The cargo, due to be loaded from a Gulf Coast port in March, may mark the start of a sustained flow of US oil to China, the world’s second-largest buyer, which is eager to diversify its energy sources. (1/15)
China is forecast to overtake the U.S. as the world’s biggest crude importer in 2016 and that’s largely thanks to a group of buyers—independent privately-held refineries known as teapots—who weren’t allowed to purchase foreign oil a year ago. (1/13)
China’s government, worried that energy has gotten too cheap, said it will tighten its hold over domestic prices for gasoline and other products in response to a slide in global crude-oil prices. Price adjustments for oil products such as gasoline and diesel will be suspended when global crude prices are below $40 a barrel. (1/14)
Demand for LNG from Asian economies that are the world’s biggest gas importers dropped in 2015, according to a report published Wednesday, including a first-ever decline in China’s imports. Global production of the super-chilled natural gas rose 1.6 percent. The increase in supply comes amid a steep drop in spot market prices in Asia over the past year to below $7 per million BTUs. Prices may remain depressed with the start of shipments this year from the US Gulf Coast and a ramp-up in gas exports from Australia. (1/13)
Bad LNG timing: Chevron Corp. said it is on track to export the first cargo of liquefied natural gas from its Australian Gorgon project – the world’s most expensive – early this year. Natural gas supplies from the $54 billion project will come to market just as a raft of other Australian projects come on line and the US is due to export its first cargo from abundant shale gas supplies. Prices for the fuel in Asia have plummeted as slowing economic growth has dented demand growth. (1/15)
In Nigeria, a government official said the way to get Nigeria back on track economically is to direct attention to the production of natural gas. In particular, this would support chemical, agricultural and electric generation sectors. (1/16)
Petrobras’s finances have come under intense strain since a multibillion-dollar bribery scandal emerged at the company in 2014. With about $104 billion in net debt — the highest for any company in the energy sector and a fourfold increase since 2010 — Petrobras has sought to sell assets and reduce spending. The company has stopped paying dividends. The company said on Tuesday that its planned cuts in capital spending would probably reduce its expected oil output in Brazil this year from 2.185m b/day to 2.145m. (1/13)
Venezuela on Friday released its first economic data in more than a year, showing its economy contracting by 7.1 percent during the most recent quarter and inflation at an historic high of 141.5 percent. Ahead of the surprise data release, President Nicolas Maduro said he would declare an economic emergency giving him 60 days to unilaterally enact sweeping reforms. The decree includes tax increases and puts emergency measures in place to pay for welfare services and food imports. (1/16)
Oil sands: Think oil in the $20s is bad? Canadian oil sands producers are feeling pain as bitumen hit a low of $8.35 on Tuesday, down from as much as $80 less than two years ago. Producers are losing money with each barrel they produce. (1/14)
In British Columbia, the provincial government said it did not support efforts by pipeline company Kinder Morgan to triple the capacity of a regional crude oil network to 890,000 b/d. The government said it wasn’t confident the company had done enough to address spill potential from the system. (1/13)
The US oil rig count declined by one rig last week to 515, Baker Hughes Inc. said. That is 851 fewer oil rigs from the 1,366 oil rigs operating in same week a year ago. Drillers cut on average over 16 oil rigs per week in 2015. Additionally, rigs drilling for natural gas declined by 13 to 135 last week, down 175 from one year ago. (1/16)
Mid-sized oil producing companies are proving more resilient against weak oil prices than expected as they are able to slash more costs, allowing them to press ahead with projects that are set to add even more barrels to a global supply glut. British-listed oil producer Tullow surprised analysts on Wednesday with a smaller-than-expected rise in debt to $4 billion. (1/14)
US oil exports: The ink is barely dry on legislation to lift a 40-year-old ban on exporting US crude and energy companies already are jockeying to ship American oil overseas. Two tankers filled with freely traded US oil have pulled out of Texas ports in the past two weeks, with more shipments expected. The first American oil sales abroad are flowing to Europe but, in the longer term, Latin America and Asia could become natural markets. (1/14)
$$ losers: North American oil-and-gas producers are losing nearly $2 billion every week at current prices, according to a forthcoming report from AlixPartners, a consulting firm. (1/12)
Half of US shale oil producers could go bankrupt before the crude market reaches equilibrium, Fadel Gheit said Monday. The senior oil and gas analyst at Oppenheimer & Co. ultimately sees crude prices stabilizing near $60, but it could be more than two years before that happens. By then it will be too late for many marginal U.S. drillers. (1/12)
CAPEX slashed: Oil and gas projects worth $380 billion have been postponed or cancelled since 2014 as firms slash costs to survive the oil price crash, including $170 billion of projects planned between 2016 and 2020, energy consultancy Wood Mackenzie said. Oil and gas firms were being forced into survival mode as oil prices fell 70 percent from around $100 to just under $30 on Friday. (1/14)
Permits down: A Texas state energy regulator said 51 percent as many original drilling permits were issued for December (727) than for the same month in 2014.
In North Dakota, the number of active oil rigs dropped to 49, the fewest since Aug. 2009. The state’s industry produced 1.18 million barrels a day during November, up`10,000 b/d from October. (1/16)
Pulling Exxon’s chain: New York’s state pension fund and the Church of England, both investors in Exxon Mobil Corp., plan to file a shareholder resolution demanding the largest US oil company assess the impact on its business of climate change policy. The resolution is evidence of a growing trend in Europe crossing the Atlantic–large European investment companies have become increasingly vocal about climate change business. (1/16)
Shell offshore Alaska: A group of environmental activists filed a challenge to leases held by Royal Dutch Shell in Alaskan waters, citing the need to act on behalf of the climate. (1/15)
In Oklahoma, 14 residents of Edmond filed a lawsuit against 12 energy companies, claiming their fracking operations contributed to a string of earthquakes that hit central Oklahoma in recent weeks. The plaintiffs are specifically targeting the companies’ wastewater disposal wells, alleging that the injection of fracking wastewater into these wells “caused or contributed” to earthquakes and constituted an “ultra hazardous activity.” (1/16)
The amount of oil hauled on US railways has declined steeply in the past year as refineries swallow more foreign supplies in the face of falling domestic crude output. Tank cars, once feverishly ordered during the US shale boom, are sitting on sidings. Lessors are obtaining car rents 20-30 per cent below early 2015. From a peak in January 2015 to last October, movements of crude by rail declined more than a fifth. The spot market for crude delivered by rail from North Dakota’s Bakken region “is at a near standstill.” (1/11)
LNG glitch: Cheniere’s first shipment of LNG from its Sabine Pass plant in southwest Louisiana has been delayed at least one month. Cheniere said the shipment has been postponed until late February or March, citing “instrumentation issues“ uncovered during the final phases of the commissioning of the first of its five so-called trains, or refrigeration units. (1/15)
States squeezed: In Texas, the nation’s top oil producer, tax revenues from energy are down about 50 percent year-on-year, though overall economic diversification means resulting budget cuts may be minor. In North Dakota oil tax revenues dropped 43 percent to $2 billion as a result of lower crude oil prices. For the first five months of the 2015-2017 budget, total revenues were off nearly 9 percent below the state’s forecast. In Alaska, tax revenue has fallen further and faster than other states in part because tax policies emphasize the income from energy companies rather than the amount of oil extracted. Last year, Alaska received "practically no revenue" from the sector. (1/14)
IHS has agreed to acquire Oil Price Information Service, a pricing-reporting agency for the oil, natural gas and biofuels industries, for $650 million. (1/12)
Dog days for coal: The US Interior Department said Friday it is halting most new leases for coal mining on federal lands and launching a review that could result in higher costs on coal companies and greater scrutiny of carbon emissions. Coal production on federal lands accounts for about 40% of US coal production. (1/16)
Peak coal here? Chinese coal use peaked back in 2013, as Climate Progress first reported in May. China was responsible for some 80 percent of the growth in global demand since 2000. Additionally, the U.S. and most of the industrialized world have also started cutting coal use. Goldman Sachs concluded in September that “Peak coal is coming sooner than expected.” Goldman projects global demand for coal used in electricity generation will drop from a peak of 6.15 billion metric tons in 2013 to 5.98 billion in 2019. (1/16)
Climate tax? New York and four other states are exploring ways to put a price on the air pollution spewing from cars, trucks, trains and other vehicles — the source of more than a third of greenhouse-gas emissions in the northeastern U.S. The result may eventually be new taxes, tolls or a pollution-trading system that could raise $3 billion a year or more for mass transit, electric-vehicle rebates and other climate-friendly projects. (1/12)
RE surviving: The slump in oil prices that’s brought upheaval and cost-cutting to the traditional energy industry spared renewables such as solar and wind, which raked in a record $329.3 billion of investment last year. The 4 percent increase in clean energy technology spending from 2014 reflected tumbling prices for photovoltaics and wind turbines as well as a few big financings for offshore wind farms on the drawing board for years, according to research from Bloomberg New Energy Finance. (1/14)
U.S. auto executives, convinced that low oil prices are here to stay, shrugged off concerns about a potential plateau in global automobile demand, issuing bullish forecasts for 2016 and pledging billions of dollars in additional proceeds for shareholders. (1/14)
Auto MPG standards: The next U.S. president will decide the fate of Obama’s goal of boosting average fuel efficiency to 54.5 miles per gallon (23.2 km per liter) by 2025. A decision on whether the final 2021-2025 regulations are feasible is due by April 2018, under a new president. The average fuel economy of new vehicles sold in the United States has improved over the past few years, standing at 24.9 mpg in December. It is down 0.9 mpg from the peak reached in August 2014, but still up 4.8 mpg since October 2007. (1/11)
Driverless cars: The Obama administration is hoping to accelerate testing of fully autonomous vehicles in the US by creating a “consistent national policy”, threatening to override a patchwork of state rules around driverless cars. The US secretary of transportation told the Detroit Auto Show on Thursday that it would propose new principles of “safe operation for fully autonomous vehicles” within six months. (1/15)
Chindia car sales: After a slow start last year, China’s car sales picked up pace to increase by 4.7 percent, averaging well over 2 million new private vehicles a month. Growth this year is forecast at 6 percent. Much of the recent growth in sales has been pegged to generous tax breaks for car buyers but current tax breaks are due to expire on Jan. 1, 2017, which should cool sales. In India, passenger car sales have been growing at an even faster pace, and are forecast to increase by more than 10 percent in the year to March, providing another strong pillar of fuel demand. (1/14)