Tom Whipple and Steve Andrews, Editors
Quotes of the Week
“And when you start from scratch, where you need to drive millions of jobs into the economy to get the United States on a more stable economic footing, you ought to be thinking about where you want to go, not where we used to be. Let’s not recreate our fossil fuel-based economy that we know is creating the climate crisis before us. Let’s start investing in clean energy.”-Gina McCarthy, national climate advisor for the Biden administration
“There is no scenario where hydrocarbons disappear.”-Lorenzo Simonelli, CEO of Baker Hughes at the company’s annual meeting
Graphic of the Week
1. Energy prices and production
Oil: Brent closed on Friday at $59.44—close to the benchmark’s $60 psychological threshold. Last week at this time, the spot price for Brent was just $55.04. The near $5 gain is due to a combination of factors, including a large crude oil inventory decrease in the US, continuing OPEC+ production restraint, Aramco’s price hike to crude for Europe, US traders drunk on stimulus chatter, and whispers of an overall tightening oil market. But can this uptrend last amid lockdown extensions and oil demand that just isn’t there yet?
Crude oil prices fell slightly on Wednesday after the EIA reported a crude oil inventory draw of 1 million barrels for the last week of January. Fuel inventories were mixed. The American Petroleum Institute (API) estimated crude oil inventories had fallen by 4.26 million barrels in the reporting period a day earlier. The EIA’s weekly stocks report is based on legally required reports from oil storage facilities across the country. The API report, which sometimes is at odds with the EIA report, frequently leads to sharp spikes in oil prices as it is released earlier than the official EIA report. The government goes to considerable efforts to keep its commodity reports secret until the official release time.
Crude oil exports from the only deep-water port in the US, the Louisiana Offshore Oil Port, doubled in January from December to a record high, driven by robust demand from Asian refiners. Bloomberg reported a total of eight tankers departed for India, China, and South Korea in January. Those tankers, most of them supertankers, shipped a total of 15 million barrels of oil from the Louisiana oil export terminal last month — a record-high for the terminal.
ExxonMobil booked its first annual loss in at least 40 years after the pandemic crushed oil demand and prices, leading to a substantial domestic gas asset impairment. On Tuesday, the company reported a loss of $22.44 billion for 2020, compared to earnings of $14.34 billion for 2019, due to the lower oil and gas prices and after-tax fourth-quarter impairment charges of $19.3 billion. ExxonMobil expects 2021 capital expenditures to decline 11-25% from 2020 levels as the company focuses on projects with lower break evens amid an uncertain price environment. Company guidance now shows 2021 capital expenditures to range from $16 billion to $19 billion, down from a full-year 2020 Capex spend of $21.4 billion.
Texas Governor Greg Abbott announced that he had issued an executive order relating to Texas’s energy industry’s protection from federal overreach. Under the order, Abbott directed every state agency to use all lawful powers and tools to challenge any federal action “that threatens the continued strength, vitality, and independence of the energy industry. Each state agency should work to identify potential litigation, notice-and-comment opportunities, and any other means of preventing federal overreach within the law.”
For years, environmental advocates have argued petroleum producers pay too little for the privilege of drilling on federally controlled lands — under rates initially set in the 1920s during the Woodrow Wilson administration. A significant but underappreciated part of Biden’s far-reaching climate action is a review of just how much money federal and state governments make from private companies’ oil and gas from public lands. However, oil companies are pushing back on the notion of higher fees at a time when so much of the industry is still reeling from the pandemic-fueled downturn.
Royalties were set at a minimum of 12.5 percent with the Mineral Leasing Act in 1920 —and hasn’t budged up since, even as drilling for oil became more lucrative and less risky over time. By comparison, drillers working on state-owned land in Texas pay as much as 25 percent of revenue from oil and gas sales to the state, with companies keeping the rest. The royalties for state leases in Colorado, Montana, New Mexico, North Dakota, Utah, and Wyoming all are typically higher than the federal rate, too, according to the Center for American Progress.
OPEC: The Joint Ministerial Monitoring Committee (JMMC) of the OPEC+ group did not recommend changing the oil production levels of the alliance. The JMMC meeting this month was more of a formality rather than the disagreements and bargaining of the previous meeting. OPEC+ decided in January how it would proceed with the production cuts for February and March. OPEC+ expects global oil demand to rise by 5.6 million b/d this year—lower than OPEC’s assessment of a 5.9-million-b/d demand increase less than three weeks ago.
Shale Oil: Rising oil prices are testing once again the US shale industry’s resolve to spend within their means and prioritize profitability over production growth. US prices above $55 a barrel are also testing investors’ patience with American oil producers. Investors hope that this time around, shale firms will keep, for a change, their promises to stay disciplined in drilling spend. The higher the price of oil, the greater the temptation to plow more cash into new wells.
The fact that US oil companies consist of large publicly traded corporations and small privately held firms is not making the industry’s pitch to regain investor confidence easier. The more significant listed firms continue to vow discipline and sustainable products. Simultaneously, some private companies are set to continue outspending cash flows to boost production at these higher oil prices.
The US oil industry has a message to President Biden’s recent climate executive orders involving the oil and gas sector—restricting America’s oil production would increase its reliance on imports of oil with more emissions than the crude pumped from America’s oilfields. The oil industry argues that the suspension of new drilling on federal lands and waters would undermine environmental progress. It would increase US dependence on foreign oil imports from countries with lower environmental standards and replace oil produced with fewer US emissions with higher-emission crude pumped elsewhere.
This argument ignores the rapid growth of wind and solar power generation in the US and pledges from GM and automotive manufacturers in Europe to stop producing internal combustion vehicles.
Natural Gas: Weather doesn’t always follow traders’ hopes and expectations. However, it sometimes exceeds them. December and January saw a surge in Asia’s natural gas prices as a cold spell caused a boom in electricity and heating demand. Now, US gas prices are also enjoying an improvement, albeit a lot more moderate than the $30 per million Btu the Asian spot market saw last month. The front-month Henry Hub contract for natural gas topped $3 last week after the year’s first Nor’easter brought snow and low temperatures to the US Northeast.
With the polar vortex dumping frigid weather into the northern US, natural gas prices bumped up last Monday by 10%. By week’s end, natural gas was settling at $3.43 per million Btu, its highest price since March 2019.
According to the Panama Canal authority, a new monthly record was set in January for LNG tanker transits of the canal, as US shipments to Asia surged. Fifty-eight LNG vessels transited through the Neopanamax Locks last month, breaking the previous monthly record of 54 transits in January 2020. This month, wait times for LNG tankers passing through without a reservation have eased; the average wait for those vessels stood at six days in both directions on Feb. 3rd.
Prognosis: Many people have known for years that to curb the impact of perpetually rising carbon emissions, we would have to radically disrupt the global fossil fuel industry and change the way we live. Until the advent of the coronavirus pandemic, the inertia of business as usual and the bottom line had time and again proven themselves to be stronger than all of the world’s scientific community, environmentalists, and melting polar ice caps put together. Now, the world has divided into two camps – those that produce exportable amounts of fossil fuels and those that buy and use them
In some countries, such as in the Middle East and Russia, there is little economy other than the export of fossil fuels. Other regions such as in most of Europe there is little oil, gas, and coal left to use or export, so the climate problem is taken much more seriously. The US is somewhere in the middle on the fossil fuel vs. climate issue. As we have seen, elections can bring about drastic shifts in official policy on global emissions. At the minute, environmentalists’ concern about carbon emissions has the upper hand, but this can change every other year with the November elections.
In addition to global warming, the economics of fossil fuels are changing. As we drill and mine more deeply into the earth and in more remote locations, fossil fuels become more expensive to extract. For the last decade, mostly uneconomical US shale oil has been produced at a pace to keep global oil demand satisfied, but this is changing. Renewables are already price-competitive with fossil fuels, and the gap looks likely to grow. Oil powered vehicles are gradually on their way out—a transition that will still take decades.
The pandemic of 2020-21 cut the demand for fossil fuels. Many producers have been badly hurt. The earnings of major oil companies, both private and state-owned, have fallen so much that capital spending has been slashed. Exxon has reduced its capital expenditure to a record low this year and plans to cut some $50 billion from its planned spending over the next five years. Most other oil companies are doing likewise.
Some are saying the coming year will define the rest of the decade for the energy industry. The implication is that oil production will be less and prices higher as the decade rolls on. Indeed, the major forecasters such as the EIA and IEA are already quietly saying this is so. Significantly higher prices will only accelerate the movement to renewables and electric vehicles.
2. Geopolitical instability
(These are the situations that reduce the world’s energy supplies or have the potential to do so.)
Iran: President Biden is eyeing a restoration of the international nuclear deal with Iran as a first step to deal with a range of threats from that country, new national security adviser Jake Sullivan said Friday. Sullivan did not mention Biden’s oft-stated precondition that Iran makes the first move by rolling back nuclear activities to come back into compliance with terms of the 2015 deal. Iran is closer to building a bomb now than when President Trump pulled the US out of the agreement, Sullivan said.
Negotiations at a distance have already started. Iran’s Supreme Leader Ayatollah Ali Khamenei said on Sunday that the US should lift all sanctions if Washington wants Tehran to reverse its nuclear steps. “Iran has fulfilled all its obligations under the 2015 nuclear deal, not the United States and the three European countries … If they want Iran to return to its commitments, the United States must lift all sanctions first,” Khamenei wrote on Twitter. “After verifying whether all sanctions have been lifted, then we will return to full compliance,” he wrote.
A key complicating factor in the conjecture over the US and Iran’s re-opening of talks is that Iran has its Presidential Election scheduled for Jun 18th. With President Hassan Rouhani constitutionally prohibited from running again, this presidential election will essentially be a referendum on whether the Iranian people want to stick with a relatively more West-leaning, reformist government or if it wants a return to the more anti-West, hardline government.
Israel’s energy minister said last week it would take Iran around six months to produce enough fissile material for a single nuclear weapon, a timeline almost twice as long as that anticipated by a senior member of the Biden administration. Israel is wary of the Biden administration’s intent to reenter the 2015 Iranian nuclear deal and has long opposed the agreement.
Iran tested a new rocket on Monday with improved technology that could be used in its missile program, its latest attempt to raise the stakes for the Biden administration ahead of potential negotiations over a new nuclear deal. Iran, over the past 18 months, has sought relief from US sanctions. President Biden has said he intends to rejoin the nuclear deal as a basis for follow-on discussions. Foreign Minister Zarif in January said Iran’s missile program isn’t up for negotiation.
Iraq: Oil exports increased slightly in January compared to December, suggesting that Iraq is again looking to maximize oil revenues at the risk of busting its OPEC+ compliance. Iraq, OPEC’s second-largest producer and the biggest laggard in complying with the OPEC+ group’s production cuts, saw its crude oil exports increase by 22,000 b/d to 2.868 million b/d in January, nearly all of it exported via southern terminals at Basra.
Libya: According to Turkish media, General Haftar is selling oil pumped in eastern Libya areas under the control of his forces through illegal corporations. Turkey supports the UN-recognized Government of National Accord, which has been fighting with Haftar’s forces for control of Libya and its oil riches. Haftar has signed an agreement to form a parallel company to sell oil from Libya, security sources told the Turkish IHA news agency. Haftar’s corporation is reportedly selling the oil to a company in the United Arab Emirates. UN-sponsored talks produced a new interim government for Libya last week to resolve a decade of chaos by holding national elections later this year.
Venezuela: Average crude output by Venezuela’s PDVSA and its foreign partners in January rose to 520,000 b/d or 100,000 b/d more than December. The average production of PDVSA and partners in the Orinoco Belt rose to 290,000 b/d or 70,000 b/d more than reported volume in December, due to a plan to accelerate the repair of shut-down wells.
Yemen: President Biden announced an end to US support for Saudi Arabia’s military campaign in Yemen. Biden said the war had “created a humanitarian and strategic catastrophe.” He also said he would work to revive dormant peace talks and announced a special envoy for Yemen. On Friday, the US said it intends to revoke the terrorist designation for Yemen’s Houthi movement in response to the country’s humanitarian crisis, reversing one of the most criticized last-minute Trump administration decisions.
3. Climate change
London’s Financial Times noted that America’s new president wasted little time to address the climate change challenge his Democratic predecessor, Barack Obama, called the greatest threat to future generations. Within days of taking office, President Biden unveiled a series of measures to start redressing the four years of climate inaction by the Trump administration. His initial steps foreshadow a far more ambitious climate plan than Obama attempted, yet they contain some conspicuous omissions that underline the political effort that will be required to turn policy into reality.
China’s re-appointment of veteran climate negotiator Xie Zhenhua — a key architect of the Paris Agreement and the country’s plan to end carbon emissions by 2060 — signaled that Beijing is looking to engage the Biden administration on the issue. Xie’s return as a special envoy for climate affairs after a two-year hiatus was announced by Vice Foreign Minister Luo Zhaohui during an environmental seminar Tuesday. While Luo did not elaborate on Xie’s portfolio, the title suggests he will lead international climate negotiations and bilateral talks on the topic. Since Xie, 71, has exceeded the Communist Party’s retirement age for officials of his rank, the norm-breaking appointment shows China sees climate change as an area of cooperation with President Biden. The new administration has highlighted the issue as a place the two sides can work together despite an escalating series of disputes during former President Trump’s term.
The new Senate Committee on Energy and Natural Resources met last week for its first hearing with Democratic Senator Joe Manchin of West Virginia at the helm. The hearing’s stated purpose was to establish a “baseline of global climate facts” for the committee to build on to advance climate solutions. However, by the end of the more than two-hour hearing, the only facts the assembled senators appeared to agree on were that climate change is real and “largely” caused by humans. The discussion came nowhere close to touching on a clean energy standard, one of President Biden’s critical climate policies campaigned on. Instead, the benefits of renewable energy were up for debate.
Much of the hearing was taken up by Republican-led discussions that cast doubt that replacing fossil fuels with renewable energy reduces emissions. Mark Mills, a senior fellow at the Manhattan Institute, a conservative think tank, testified that cutting down on fossil fuel production in the US wouldn’t make much of a difference in global greenhouse gas emissions since there will still be demand for oil and other countries will step in to fill in the gap.
Climate change is causing oceans to rise quicker than scientists’ most pessimistic forecasts, resulting in earlier flood risks to coastal economies. The revised estimates published last week in Ocean Science impact the two-fifths of the Earth’s population who live near coastlines. Insured property worth trillions of dollars could face even greater danger from floods, superstorms, and tidal surges. The research suggests that countries will have to rein in their greenhouse gas emissions even more than expected to keep sea levels checked.
China was likely the only major economy that grew last year after swiftly containing the coronavirus. It’s also the only major economy that saw carbon emissions rise. In December, emissions surpassed 2019 levels for the first time all year according to data from Carbon Monitor, a collaborative effort that offers near real-time monitoring. Emissions in China for 2020 rose to 10.5 billion metric tons of carbon dioxide, 0.5% higher than the year before.
The New York Times editorial board says that General Motors’ announcement last week that it will stop making gas-powered cars, trucks, and sport utility vehicles by 2035 is even bolder than it sounds. The repercussions will ripple broadly across the economy, accelerating the transition to a broader electric future powered by renewable energy. The nation’s largest automaker’s pledge to phase out internal combustion engines puts pressure on other auto companies, like Ford and Toyota, to make equally ambitious public commitments.
4. The global economy and the coronavirus
The pace at which Covi-19 vaccines can be produced and inoculated has become key to economic and energy demand recovery in the immediate future. Bloomberg has calculated that at the current pace of vaccinations, the US will not reach the 70%-85% coverage needed to return life to normal until the end of the year. In the world as a whole, where many countries have not even started to vaccinate, it will take seven years to achieve herd immunity at present vaccination rates.
However, there is much research going on to speed vaccinations worldwide. Trials will examine if the various vaccines that have been developed can be mixed and whether one-dose vaccines, some of which need little refrigeration, will speed vaccinations in the underdeveloped world.
United States: About 37 million doses of the coronavirus vaccine have been administered in the US so far. The FDA said it would propose guidelines on how manufacturers of coronavirus vaccines should deal with new variants of the virus. The administration’s acting commissioner noted that the FDA anticipated the emergence of variants and does not believe there will be “the need to start at square one with any of these products.” Johnson & Johnson applied for emergency-use authorization after its single-shot vaccine proved to be “robustly effective” against illness in a global trial, especially at preventing severe disease and death.
The addition of J&J’s vaccine could jump-start a US mass-vaccination campaign that has been choppy since it began in December. There has been a limited supply of the first two vaccines from Moderna and Pfizer, and distribution roadblocks have caused a slower-than-expected vaccination pace. J&J’s shot would both boost the overall supply of Covid-19 vaccine doses and also simplify vaccinations for many because it is given in one dose. J&J’s vaccine also can be kept at higher refrigerator temperatures for a longer period than the first two vaccines.
America’s employers added few jobs last month, underscoring the pandemic’s ongoing grip on the economy. This news will likely add momentum to the Biden administration’s push for a bold rescue aid package. The increase of just 49,000 positions in January made scarcely any dent in the nearly 10 million jobs that remain lost since the virus intensified almost a year ago. The tepid increase followed a decline of 227,000 jobs in December, the first loss since April. The unemployment rate fell sharply in January from 6.7% to 6.3%, the Labor Department said Friday. Most of the drop in unemployment occurred because many people out of work stopped looking for work and were no longer counted as unemployed.
The nation’s unemployment rate may not return to its pre-pandemic levels through the rest of this decade. This suggests that millions could be out of work even after vaccines are widely distributed, according to a projection last week by the nonpartisan Congressional Budget Office. The CBO also projected a faster-than-expected rebound in economic growth. This year, the US economy is expected to grow by 4.6% before returning to more typical growth levels of slightly above 2% by 2023. Last year represented the worst year for the gross domestic product since World War II, with the pandemic leading to a 3.5% contraction in the economy.
China: The world’s largest polluter launched an emissions trading scheme last week as part of its efforts to become a carbon-neutral economy by 2060. The authorities introduced a set of rules for carbon emissions trading management, a step toward creating a nationwide unified emissions trading system. As many as 2,225 power companies in China will have carbon dioxide emission caps; they can now trade their emission quotas via the system. Under the emissions trading scheme, firms that have exceeded their emission caps will be able to buy emission quotas from companies with lower emissions that haven’t reached their caps yet. China aims to have its emissions peak by 2030 and to be carbon neutral by 2060. Experts, however, are concerned that China continues to expand its coal production.
Interest in the environment is something the Chinese government is trying to cultivate in young children. It pursues wide-ranging reforms to eliminate its net emissions of carbon dioxide by 2060. But the nation’s state-led approach to climate change is less tolerant of public debate over how it’s going to get there. In other words, the authorities want children to support its green campaigns but would prefer their activism stop at lowering their own carbon footprints.
Students learn the basic facts in school: human activities have damaged the environment, and greenhouse gas emissions are harmful because they trap heat and accelerate global warming. The lessons revolved around President Xi Jinping’s campaign to make China an “eco-civilization,” a concept that’s led to a range of policies including mandated recycling, building green cities, and banning single-use plastic straws. But the conversation stops there. There’s no discussion of China’s net-zero goal or the outsized influence the world’s biggest polluter has on the planet’s climate.
Chinese state oil and gas company CNOOC will boost its capital spending this year to the highest in seven years, thanks to a 5-percent increase in domestic output. Reuters reports CNOOC aims to spend $13.9 to $15.5 billion this year, mainly on boosting domestic oil and gas exploration and production, which last year hit 528 million barrels of oil equivalent.
China’s independent refineries imported 4.3 million b/d of crude and bitumen in January, a 35.1% month-over-month jump, as these privately held companies started to actively discharge the oil off tankers that had been floating near Shandong ports since December.
Crude oil inventories in China have accelerated their decline in recent weeks. At this time last year, Chinese stocks stood at 856 million barrels, according to Kayrros, which compiles and analyzes satellite data. At the start of this month, inventories stood at around 990 million barrels, down from a peak of 1 billion barrels last September. In recent weeks, the decline in crude oil stocks is bullish for oil prices as it suggests that the market has accelerated the inventory drawdown.
Europe: The Eurozone economy shrank at the end of 2020, raising fears of a double-dip recession and demonstrating that the pandemic is likely to remain a force for at least a few months more. According to a preliminary estimate by the European Union’s official statistics agency, economic output in the 19 countries that belong to the eurozone fell 0.7% in the fourth quarter from the previous quarter. For the full year, overall output fell 5.1%.
Europe is now likely to suffer continued economic contraction over the first three months of 2021 and perhaps into the early part of the next quarter, as governments are forced to maintain restrictions on commercial life, according to a report released Tuesday by Oxford Economics in London. “There is a risk that vaccine distribution continues to be disappointing,” said Tomas Dvorak, a eurozone economist with Oxford Economics. “There is the risk that the second quarter will also get quite bad.”
European governments’ failure to get vaccines to their citizens could create a political backlash, fueling resentment toward Brussels and souring the already uneasy relations among the 27 countries that belong to the EU. Competition for vaccines has already strained the bloc’s ties with Britain, which is on track to give the first shot of a two-dose coronavirus vaccine to its entire population by the end of June.
New data highlight an economic gap between the eurozone and the US and China that is likely to widen this year. The US is proceeding more quickly than the EU in rolling out vaccines, and China remains mostly free of the virus. Since the start of the pandemic, European policymakers have sought to balance saving lives and support businesses but have generally pursued more draconian restrictions to stop the virus’s spread than the US. Nonetheless, the death toll in Europe is approaching that of the US, while its economic performance—already lagging behind the US before the pandemic—has been much worse than other advanced economies. Many economists expect the eurozone to re-enter recession in the coming months.
A fault occurred at a substation in Croatia and caused an overload in parts of the grid, which spread beyond the country’s borders. This created a domino effect that caused a blackout and prompted electricity supply reductions as far as France and Italy. The problem was dealt with, but it’s only a matter of time before more issues like this occur. The problem could well be the rise of renewables in the energy mix. While no one would directly blame the blackout and the increased risk of more blackouts on renewables, it is evident that Europe’s change in the energy mix is raising this risk.
Russia: The Biden Administration has signaled for the first time that it could be willing to discuss with Germany the lifting of the American sanctions on the Nord Stream 2 gas pipeline project if Germany offers solutions to ensure Europe’s energy security. The US expects Germany to propose ways to protect Europe’s energy security and Ukraine’s interests. The Germans have to offer a package of solutions. Otherwise, the US may not be able to get past its concerns with Nord Stream 2.
Russia could turn to a national or contract jurisdiction court to protect its interests against interference against the completion of the Nord Stream 2 gas pipeline project. The final stretch of the controversial pipeline from Russia to Germany now looks even more uncertain. Even Gazprom has warned investors that the Nord Stream 2 project could be suspended or entirely discontinued. The Nord Stream 2 gas pipeline project from Russia to Germany should be abandoned, according to a senior French government official.
Gazprom said its gas sales in Europe and Turkey rose to their highest ever level for January, reaching 19.4 Bcm. Last month, European gas demand was buoyed by cold weather across the continent, with several countries seeing extremely low temperatures during the month. In January, pipeline supplies were partly constrained by lower booked capacity via Ukraine, but the company more than offset the reduced flows by selling more from European storage.
Saudi Arabia: More shares in Saudi Aramco may be released for sale to the public if conditions are right, said the Governor of Saudi Arabia’s sovereign wealth fund last week. This idea was later confirmed by Saudi Arabia’s de facto ruler, Crown Prince Mohammed bin Salman. The first initial public offering was poorly received by international investors in the run-up to its eventual listing on 11 December 2019. Given that Saudi Arabia’s various authorities had to go to draconian lengths to sell even the 1.5% stake (cut down from an initial 5% stake) finally offered, it might reasonably be conjectured that the conditions will not be right for a very long time.
India: The number of coronavirus patients in hospitals around the country dropped markedly in recent weeks. The coronavirus’s apparent retreat in India, the world’s second-most populous nation, is a mystery that is crucial to the pandemic’s future course. Just months ago, India was adding nearly 100,000 cases a day — more than any other country. On Tuesday, it reported only 8,635. That’s about the number recorded the same day by New York state, where the population is less than 2 percent of India’s.
Epidemiologists in India say that there is only one likely explanation for the decrease in new cases: The virus is finding it harder to spread because a significant proportion of the population, at least in cities, already has been infected. The decline is not related to a lack of opportunities for transmission. India has fully reopened its economy, with elementary schools being the only major exception.
India has reported 10.8 million coronavirus cases in total, although that is likely to be a vast undercount. The results of a nationwide antibody survey of 28,600 people by the government released last week indicated that more than 1 in 5 Indians — about 270 million people — had been exposed to the virus as of early January. In major cities, infection rates are even higher. The health minister for Delhi announced that a recent study of 28,000 people in India’s capital found 56 percent had coronavirus antibodies. Earlier antibody surveys of specific neighborhoods in Mumbai and Pune also found that many residents had been infected.
India’s big cities probably have “reached the threshold of population immunity,” said Giridhar Babu, an epidemiologist at India’s Public Health Foundation. He added that the virus would continue to spread, but “the quantum of infected cases will not be the same.” Epidemiologists are quick to add notes of caution. How new variants of the virus will affect infections in India is unclear, and vaccination remains critical to warding off a possible second wave. The variant first detected in Britain is already in circulation, and experts say India needs to expand its genetic surveillance of cases to understand how mutations are spreading.
Protesting farmers imposed a nationwide road blockade on Saturday seeking a repeal of new agricultural laws. Tens of thousands of farmers have camped out on New Delhi’s outskirts for more than two months, blocking key roads and demonstrating against the laws they say will benefit large private buyers at their expense. Authorities have shut down the mobile internet in parts of the national capital and heavily barricaded border roads to prevent protesters from coming into the city.
5. Renewables and new technologies
For most of the past century, geopolitical power was intimately connected to fossil fuels. The fear of an oil embargo or a gas shortage was enough to forge alliances or start wars, and access to oil deposits conferred great wealth. In the world of clean energy, a new set of winners and losers will emerge. Countries or regions that master clean technology, export green energy, or import less fossil fuel stand to gain from the new system. Those that rely on exporting fossil fuels — such as the Middle East or Russia — could see their power decline.
Olafur Ragnar Grimsson, chair of the Global Commission on the Geopolitics of Energy Transformation, says that the clean energy transition will birth a new type of politics. The shift is happening “faster, and more thoroughly, than anyone expected,” he says. “As fossil fuels gradually go out of the energy system . . . the old geopolitical model of power centers that dominate relations between states also goes out the window. Gradually the power of those states that were big players in the world of the fossil-fuel economies, or big corporates like the oil companies, will fritter away.”
A recent report by Bloomberg New Energy Finance (BNEF) says that the renewable energy sector has remained mostly immune to the ravages of Covid-19, with global energy transition investments in 2020 reaching a record $501.3 billion. The report reveals that the clean energy boom is heavily lopsided in favor of electric vehicles.
The world’s installed offshore wind capacity rose by 15% in 2020, reaching 31.9 gigawatts (GW) at year-end, from 27.7 GW at the end of 2019, according to Rystad Energy estimates. China was the main contributor in 2020, accounting for 39% of last year’s additions, followed by the Netherlands (18%) and the UK (17%). Rystad Energy expects the global installed offshore wind capacity to increase by 43.7 GW this year, a 37% step up from 2020’s increase. Gina McCarthy, the national climate adviser for President Biden, said the energy storage industry must craft a better deployment strategy and do more to raise awareness of its role as a solution that will allow for greater integration of renewable energy.
An in-depth study of the electric vehicle industry says that these vehicles cannot succeed without developing a nationwide network of fast-charging networks. Current EV business models are doomed unless manufacturers that have bet their futures on them, such as General Motors and VW, invest in or coordinate on a robust supercharger network. Tesla built a sufficiently large network of high-speed charging stations before they sold too many cars. About 4,000 high-voltage super-fast charging stations are in the US, and many of them are available only to Tesla vehicles.
An EU plan for a fifty-fold increase in electric cars this decade will require a $96.5 billion investment in charging points to support it, power industry group Eurelectric said last week. The EU says it needs 30 million or more zero-emission cars on its roads by 2030 as part of efforts to cut emissions by at least 55% this decade versus 1990 levels. The bloc had about 615,000 such vehicles at the end of 2019. Britain will need to install electric-vehicle charging points five times faster during this decade to prepare for a ban on the sale of new gasoline and diesel cars from 2030. According to a report by the Policy Exchange think tank, installations need to increase to 35,000 points a year, from 7,000 now. Expanding at the current speed will lead to black spots in rural areas.
6. The Briefs (date of the article in the Daily Energy Bulletin is in parentheses)
In Nigeria, Shell’s persistent issues with theft and sabotage in the Niger Delta, including a successful lawsuit against the company by two Nigerian farmers claiming damages from leaks, could prompt Shell to take a hard look at its operations onshore. (2/6)
In Argentina, fracking activity in Vaca Muerta shot up in January to its highest level in 17 months as demand recovers from an eight-month lockdown for the coronavirus pandemic, and pricing incentives spur drilling for natural gas. (2/4)
In the offshore Guyana-Suriname Basin, the break-even price could eventually be as low as $23 per barrel, making operations highly profitable even at $55 per barrel Brent. That compares to $46 to $52 per barrel for the major US shale oil basins and a 2021 fiscal break-even price of just under $68 a barrel for Saudi Arabia. (2/2)
Alberta may seek compensation from the US after newly inaugurated President Joe Biden moved to nix the Keystone XL Pipeline. Alberta has spent $1.2 billion on the project and may look to the North American Free Trade Agreement to help it recoup some of those costs. (2/5)
The US oil rig count increased by 4 to 299, while gas rigs increased by 4 to 92, according to Baker Hughes data. Offshore rigs remained flat at 16. Canada’s oil rig count slid by 3 to 95 while their gas rig count remained flat at 76.
In northern Alaska, new upstream petroleum projects under development on federal lands will not be immediately affected by the Biden administration’s executive order pausing oil and gas approvals. Still, expansions of those projects could be impaired. (2/5)
Exxon Mobil and Chevron, the two largest descendants of Rockefeller’s Standard Oil monopoly, discussed a potential merger last year, The Wall Street Journal reported. (2/2)
Shell reported a 71 percent drop in profits to $4.8bn during 2020 versus $16.5bn in 2019. This is the lowest, at least since the unification of Royal Dutch and Shell Transport into one parent company in 2005. (2/4)
CNG truck order: Amazon.com ordered more than 1,000 truck engines that run on compressed natural gas as it seeks to shift its US fleet away from heavier polluting trucks. (2/6)
Passenger air traffic plummeted 66% year on year in 2020, and the near-term outlook is one of continuing stagnation, the International Air Transport Association said Feb. 3. (2/4)
Jet fuel price pinch: the highest oil prices in a year are set to raise jet fuel costs for the industry suffering a lot from the lockdowns, flight bans, and border closures. (2/5)
US coal exports fell to a four-year low of 62.66 million tons in 2020, down 25.6% from 2019 and the second-lowest figure in the last 11 years. (2/6)
Unwanted coal record: Northern Appalachia coal production tumbled to 77.95 million st in 2020, down 26.7% from 2019 and the lowest on record, dating back to 1984. (2/4)
Powder River Basin coal production totaled over 42.1 million st in the fourth quarter of 2020, down 29.6% from the previous quarter and down 41.7% from the year-ago quarter. (2/2)
UK okays new coal mine: Despite pressure from environmentalists and the UK’s climate change advisors, Prime Minister Boris Johnson’s office says it will not intervene in Cumbria County Council’s decision to approve the country’s first new deep coal mine in 30 years. (2/4 and 2/5)
No-nuke France? The IEA recently released a long-awaited report about France’s future electricity industry. One scenario envisioned that 100% renewable energy is “technically possible” by 2060 in France. This implies that the country would potentially no longer need nuclear power to meet its domestic demand. The atomic sector accounts for around 70% of today’s French electricity mix. Needless to say, France’s nuclear industry was not pleased. (2/2)
Denmark has agreed to build an island in the North Sea to gather and distribute electricity from wind energy farms. The $34 billion artificial island—Denmark’s largest-ever construction project—will be created about 80 kilometers off the country’s west coast and connect to several European countries. (2/5)
South Korea’s big wind move: South Korea will invest $43 billion in constructing what is to be the world’s largest offshore wind farm. The project should be completed by 2030. The plan is part of the country’s Green New Deal announced in May 2020; under it, total renewable energy generation capacity would increase to 40 percent of the country’s energy mix by 2034. (2/6)
RE: China is expected to add 140 gigawatts of renewable energy power generation this year as its electricity consumption continues to grow. Last year, China added 191 GW of new power generation capacity, of which 133 GW was hydropower, wind power, and solar power. New solar should make up between 55 and 65 GW—over 1/3 of the world’s total. (2/3 and 2/5)
Aussie big battery move: Australia plans another giant grid-scale battery as the global rollout of super-sized energy storage projects accelerates. The 1,200 MW project will be three times larger than the current No. 1 battery in California and should be completed by 2023. (2/6)
EV’s batteries: In 2020, a total of 134.5 GWh of passenger EV battery capacity was deployed globally into newly sold passenger BEVs, PHEVs, and HEVs, an increase of 39.6% over the year prior, according to a bottom-up model-by-model analysis by Adamas Intelligence. (2/5)
Fed EV push: If President Joe Biden’s administration replaces the entire federal fleet with EVs, it will need 645,000 vehicles, two-thirds of which are trucks and vans. But the majority of the vehicles Uncle Sam needs simply aren’t yet available in electric models. (2/6)
Washington state EV push: The Washington state legislature held a public hearing on Clean Cars 2030. The bill would require all model year 2030 or later passenger and light-duty vehicles sold in Washington state to be EVs. Since the bill was introduced last year as the first-of-its-kind in the US to set a deadline for the transition to EVs, California, Massachusetts, and New Jersey have announced 2035 targets for ending sales of new internal combustion engine cars. (2/2)
Apple EV push: Kia Corp. has approached potential partners about a plan to assemble Apple Inc.’s long-awaited electric car in Georgia. (2/6)
African EVs? As the developed world focuses on the electrification of transportation, Sub-Saharan Africa lags. Adopting EVs faces many problems, such as the need for reliable power at reasonable electricity prices; this is not available in most countries. (2/2)
Push for fuel cell standard: A European consortium consisting of 25 organizations in the hydrogen sector has formed to define, develop and test the first European standard for fuel-cell modules for heavy-duty applications. (2/5)
Automakers have abandoned their legal fight for a Trump-era rule blocking California from setting emissions standards as the industry pushes President Biden to accept a compromise with weaker fuel economy requirements than Biden helped chart almost a decade ago. (2/3)
Severe parts problem: General Motors has ordered a shutdown at three plants and slowed production at a fourth as it grapples with a global shortage of semiconductors. The Detroit carmaker said that its 2021 production targets were under threat as a result. Ford expects its first-quarter truck production to be slashed by 20% due to the chip shortage. (2/4 and 2/5)
Houston’s office problem: For all the talk of workers fleeing pricey coastal cities such as New York and San Francisco, one of the most troubled spots in the US commercial real estate market is deep in the heart of Texas. Houston ended last year with a 24% office-vacancy rate, the highest of any major US city. (2/4)
Climate policy reversals: President Joe Biden’s team is hurrying to reverse dozens of Trump administration rollbacks of rules meant to confront the changing climate. (2/2)
Undercounting CO2: About three-quarters of fossil-fuel CO₂ pollution comes from cities. At least 48 US cities undercount their CO2 pollution by nearly 20%, says a new study that compares local disclosures against a national database that can estimate the same info. (2/3)
Pump and dump? In Wyoming, for three decades, Exxon Mobil has been pumping up natural gas, helium, and carbon dioxide from the Madison formation, separating them, selling some, and dumping the remainder into the atmosphere. Exxon produces more CO₂ than it can sell or use, so it lets a lot float away—as much as 300,000 cars’ worth of emissions a year. The budget to build a project to cut that emission was put on pause last April. (2/4)
According to the China Electricity Council, China Energy Investment Corp. finished production of a plant that will capture 150,000 tons of carbon dioxide emissions a year at a 90% capture rate. But it’s a minnow compared to some of the largest operations in the world. (2/3)
