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As the global middle class rapidly expands, so too does the worldwide demand for energy and its subsequent carbon footprint. Global climate change will be one of the greatest, if not the single greatest, challenges of this next century, and one of the few feasible solutions that is generally agreed upon by scientists and politicians alike is a wide-scale transition from the use of traditional fossil fuels to renewable energy resources.

Around the world, there is a race among researchers to more efficiently and cost-effectively implement renewable energy as a long-term solution to global climate change, and there is even a concerted effort to switch Europe’s energy consumption to 100 percent renewable energy as soon as the year 2050. However, even if Europe achieves this target and takes the lead as the rest of the world follows down a path toward 100 percent renewable energy, we still would not be living in a completely sustainable, green energy utopia–there is a considerable downside to this seemingly perfect plan.

Even renewable energy relies on certain decidedly non-renewable resources. Even the eco-friendliest solutions such as solar panels can’t be made without the use of finite rare earth elements. Batteries, too, are completely dependent on finite earth-sourced materials for their fabrication. What’s more, China currently has an overwhelming monopoly on a great number of these rare earth elements (although not all are as rare as this label implies). This means that in a renewable energy-based world, energy security could become a major issue. In addition to rare earth elements, there are myriad other non-renewable materials used in the production of renewable energy. Currently, the one that has everyone talking is lithium.

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The Overlooked Catalyst That Will Send Energy Demand Soaring

January 14, 2019

The Overlooked Catalyst That Will Send Energy Demand Soaring

As the earth gets hotter, energy demand will increase significantly along with global temperatures. Now a team of researchers in China has determined in a recent study that by the end of this century, peak energy demand in China will increase by a minimum of 72 percent. For every degree Celsius that the global mean surface temperature (GMST) increases, average Chinese residential energy use is projected to raise 9 percent, while peak electricity use will increase 36 percent per degree Celsius.

It is projected that the mean surface temperature of the earth will be 2-5 C hotter by 2099. Calculating based off of current consumption patterns in China, this means that the most conservative estimates show average Chinese residential electricity demand would rise by 18 percent. At the high end, average Chinese residential electricity demand would rise by a whopping 55 percent. Meanwhile peak usage, on the low end, would increase by at least 72 percent.

These findings will have major implications for energy grid planning and other infrastructure in China, where energy use has already been booming thanks to a rapidly expanding middle class. As Chinese incomes increase, even without the added impact of climate change, the electricity consumption of the average Chinese household is expected to double by 2040. Libo Wu, one of the authors of this recent study and professor and director of the Center for Energy Economics and Strategies Studies at Fudan University in China, says that his team’s findings “contribute solid evidence supporting China’s low-carbon policy by showing how important increasing demand from the residential sector will be.”

As part of the study, researchers examined how Chinese energy users responded to daily fluctuations in temperature by analyzing data gathered from more than 800,000 residential customers in the Pudong district of Shanghai between 2014 and 2016.

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Canada’s Crude Oil Production Cuts Are Unsustainable

January 13, 2019

Canada’s Crude Oil Production Cuts Are Unsustainable

In an attempt to combat a ballooning oil glut and dramatically plummeting prices, the premier of Alberta Rachel Notley introduced an unprecedented measure at the beginning of December when she is mandating that oil companies in her province cut production. This directive was particularly surprising in the context of Canada’s free market economy, where oil production is rarely so directly regulated.

Canada’s recent oil glut woes are not due to a lack of demand, but rather a severe lack of pipeline infrastructure. There is plenty of demand, and more than enough supply, but no way to get the oil flowing where it needs to go. Canada’s pipelines are running at maximum capacity, storage facilities are filled to bursting, and the pipeline bottleneck has only continued to worsen. Now, in an effort to alleviate the struggling industry, Alberta’s oil production has been cut 8.7 percent according to the mandate set by the province’s government under Rachel Notley with the objective of cutting out around 325,000 barrels per day from the Canadian market.

Even before the government stepped in, some private oil companies had already self-imposed production caps in order to combat the ever-expanding glut and bottomed-out oil prices. Cenovus Energy, Canadian Natural Resource, Devon Energy, Athabasca Oil, and others announced curtailments that totaled around 140,000 barrels a day and Cenovus Energy, one of Canada’s major producers, even went so far as to plead with the government to impose production caps late last year.

So far, the government-imposed productive caps have been extremely successful. In October Canadian oil prices were so depressed that the Canadian benchmark oil Western Canadian Select (WCS) was trading at a whopping $50 per barrel less than United States benchmark oil West Texas Intermediate (WTI). now, in the wake of production cuts, the price gap between WCS and WTI has diminished by a dramatic margin to a difference of just under $13 per barrel.

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The Real Implications Of The New Permian Estimates

December 10, 2018

The Real Implications Of The New Permian Estimates

This week the United States Geological Survey (USGS) announced a groundbreaking oil and gas discovery in West Texas’ Permian Basin. According to the organization’s recent press release, a whopping 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids are now believed to lie untapped in the Wolfcamp Shale and overlying Bone Spring Formation area of Texas and New Mexico’s Permian Basin.

Major players in the energy industry already have a significant presence in Wolfcamp and Bone Spring, including Occidental Petroleum Corp. and Pioneer Natural Resources Co. It was already well known and well documented that these fields were remarkably fertile grounds for oil extraction, but the jaw-dropping extent of the new figures released this week by the USGS has made the massive crude and shale reserves of the Permian Basin freshly headline-worthy. The figures in this week’s press release are in fact, in the case of Wolfcamp Shale, more than double the previous resource assessment.

(Click to enlarge)

Source: USGS

The USGS assessed the area more than two years ago in 2016, and has officially determined that it contained the largest estimated quantity of continuous oil in the entire United States. “Christmas came a few weeks early this year,” said U.S. Secretary of the Interior Ryan Zinke in response to these momentous figures. “American strength flows from American energy, and as it turns out, we have a lot of American energy. Before this assessment came down, I was bullish on oil and gas production in the United States. Now, I know for a fact that American energy dominance is within our grasp as a nation.”

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Canada’s Crude Crisis Is Accelerating

November 16, 2018

Canada’s Crude Crisis Is Accelerating

Canadian oil producers are in an increasingly tough predicament. With high and increasing oil demand around the globe over the last year, Canadian oil production has increased accordingly. All of this is simple and predictable economics, but now Canadian oil has hit a massive roadblock. Producers have the supply, and they have more than enough demand, but they don’t have the means to make the connection. Canadian export pipelines simply don’t have the capacity to keep up with either the supply or the demand.

Canadian oil producers have now maxed out their storage capacity, and the Canadian glut continues to grow while they wait for a solution to the pipeline problem to materialize. As pipeline space is at a premium and storage has hit maximum capacity, oil prices have fallen dramatically, and the differentials that had previously been hitting heavy oil hard in Canada (now at below $18 a barrel for the first time since 2016) have now spread to light oil and upgraded synthetic oil sands crude as well, leaving overall Canadian oil prices at record lows.

(Click to enlarge)

Now, adding to the problem, growth in oil demand has begun to slow in the wake of skyrocketing United States production and the weakening of U.S.-imposed sanctions on Iranian oil. Fist, the U.S. granted waivers to eight nations to continue buying Iranian oil despite strong rhetoric, and now the European Union has undermined the sanctions even further.

In an effort to correct the pricing drop, some Canadian drillers have been cutting production levels, turning to more expensive forms of transportation like railways to ship their oil, and in some cases even using trucks to move their product.

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World’s Cheapest Natural Gas Market Could Be Facing A Shortage

November 1, 2018

World’s Cheapest Natural Gas Market Could Be Facing A Shortage

A natural gas shortage in Canada is expected to last through the winter months, forcing gas users ranging from industrial forces to local governments to seek alternative fuel sources and strategies for slashing consumption and conserving the gas they have. The shortage stems from this month’s pipeline explosion near Prince George, British Columbia.

In the aftermath of the explosion, FortisBC, one of British Columbia’s largest utilities, says that their supply of natural gas will be reduced by a whopping 50 to 80 percent throughout the coldest months of the year. This sudden squeeze will necessitate a lot of unforeseen expenditures on alternative fuel sources. This is a cost that will be passed directly onto consumers, affecting everything from the price of gas and heating to even the price of vegetables, among other subsequent price hikes.

Natural gas has service has already been restored to the province in the wake of the October 9th disaster, and pipeline owner Enbridge says that it will have the section of the pipeline that ruptured back online by the middle of November. The National Energy Board, however, has mandated that Enbridge limit pressure in the ruptured line, and a smaller line nearby will also remain running below capacity until the spring of next year. As a safety measure, pressure levels will be kept at 80 percent along the entire length of the damaged pipeline up to the United States border.

The shortage is occurring in what is one of the cheapest natural gas markets in the world. Canadian gas has been hit hard by competition from the United States and limited pipeline infrastructure, which has only been made worse by the Prince George explosion. After the announcement that FortisBC’s pipes would remain running under capacity through the winter, gas prices fell to a five-month low last week.

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U.S. Doubles Down On Ethanol Despite Glut

October 27, 2018

U.S. Doubles Down On Ethanol Despite Glut

Despite finding itself the midst of a massive glut, the United States ethanol industry is set to see three new plants come online over the next year, adding a combined annual production of 270 million gallons to the nation’s already ballooning ethanol oversupply. The industry has been plagued by overproduction and low demand since 2015.

Over the past 5 years, ethanol production has increased by 10.5 percent, rising from 14.3 billion gallons in 2014 to 15.8 billion gallons in 2017. This is despite the fact that only one new ethanol plant began production in the years between 2015 and 2018. The increase is in large part due to more efficient means of production, allowing producers to get more fuel out of each kernel of corn, and the expansion of existing plants in lieu of building new plants from the ground up.

Now there will be three new plants coming online all within a span of mere months. Atlantic, Iowa will be home to 120-million-gallon-a-year dry mill ethanol plant Elite Octane, LLC before the end of 2018. Ring-Neck Energy & Feed, LLC will go online in Onida, South Dakota in early 2019, and ELEMENT, Inc., a 70-million-gallon-a-year ethanol plant, is currently under construction in Colwich, Kansas.

In an effort to reduce the U.S. ethanol glut, which is undeniably about to skyrocket even higher, the industry has been strategizing aggressive campaigns to boost demand. It has become abundantly clear that in order to return to its strong profit margins of 2013-2014, the U.S. ethanol industry will need to look overseas. Part of the ethanol industry’s auto-resuscitation plan involves increasing its market share of liquid fuel in the U.S. by promoting higher ethanol blends like E15 (15 percent ethanol to a gallon of gas), E30 (30 percent), and E85 (85 percent), but this angle alone will not produce nearly enough demand to contend with supply.

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The Great Biofuel Swindle

October 24, 2018

The Great Biofuel Swindle

Over the past decade, “biofuel” has been a major buzz word in the world of clean energy and environmental science. As the topic of advanced biofuels continued to trend over the years, investments and studies ballooned accordingly. Now, however, with a bit of hindsight it has become clear that the vast majority of chatter and speculation about the “next big biofuel” set to change the energy landscape was just hot air.

Many claims made by energy startups, blogs, and think tanks were a bit short of credible, to put it lightly. A laundry list of companies over time claimed that they would be able to efficiently convert biomass like straw, wood chips, algae, and other organics into biofuel in an economically viable way. Some of these hopefuls even claimed to be able to do so for as little as a dollar per gallon.

Investors and taxpayers alike funneled money into ventures that had little to no chance of success. Investment went to technologies that had been abandoned decades before, due to economic impracticality. The most striking example can be found in the case of cellulosic ethanol. Converting straw into ethanol is a prohibitively expensive venture, but companies continued–and still continue–to try. What’s more, despite the fact that “commercial” cellulosic ethanol is only being produced at a very small fraction of the projected volumes, it’s currently being sold into the fuel supply, in large part thanks to heavy subsidization from the Renewable Fuel Standard.

Coming in second, only behind cellulosic ethanol, as the most overhyped biofuel is biomass sourced from algae. The concept is not nearly as far-fetched as producing fuel from straw. Some species of algae do produce oils that can be converted into fuel, and crude oil itself is essentially prehistoric algae and plankton.

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Why Can’t Japan Kick Coal And Nuclear?

September 15, 2018

Why Can’t Japan Kick Coal And Nuclear?

Earlier this year we reported on a startling anomaly in the global energy market that even the experts couldn’t have predicted. Just one nation, alone against the greening tides, was turning back to coal–Japan. Now, half a year later, a newly released report shows that Japanese financial institutions have funneled US$92 billion into coal and nuclear development—a sum bigger than the gross domestic product of Sri Lanka – in the months between January 2013 and July 2018 alone.

Energy Finance in Japan 2018: Funding Climate Change and Nuclear Risk was commissioned by a climate change-focused non-government organization (NGO) called 350.org based in the United States. The study found that the Japanese finance industry gave US$80 billion in loans and underwriting services, the majority (50 percent) of which went straight to coal development, with the other half split between nuclear and other fossil fuel resource companies. The other US$12 billion went to bonds and shares in the same industries.

Among the 151 Japanese financial institutions analyzed in the Energy Finance in Japan 2018study, only 38 of them were not involved with coal or nuclear energy projects. A similar 350.org study from last year shows that Japanese insurance companies represent a large proportion of investors in domestic and international coal industries. Japan’s single biggest investor in coal for the five-year period studied was Mitsubishi UFJ Financial Group (MUFG), followed by Nippon Life Insurance (NLI) and Nomura Holdings.

These numbers mark a stunning turnaround for Japan, which at one point was almost entirely dependent on nuclear, a far cleaner, more efficient energy source than coal. So why the about turn? There is actually a very clear source of Japan’s changing energy attitudes: the Fukushima Daiichi nuclear disaster.

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Old Fields Die Hard

March 12, 2018

Old Fields Die Hard

Oil is setting up for a turbulent year.

In an industry that is always full of contradictions, 2018 has been a particularly complicated and divisive year for the global oil markets–and it looks like it won’t be letting up any time soon.

For months, the Organization of Petroleum Exporting Countries (OPEC) has been pushing for a dramatic decrease in production in the interest of bolstering prices at the pump. They’ve even managed to get major OPEC outsiders like Russia and the oil cartel to agree to production cuts. While the original deal is due to expire at the end of March, 2018, OPEC has just extended the production caps to the end of the year in an attempt to counterbalance the global glut of crude oil.

However, despite OPEC’s best efforts, some countries are not stemming the flow of crude, and some are even ramping up production and even opening new major oil fields. Nigeria, for example, is talking out of both sides of its mouth, promising compliance with OPEC in the same year that it has pushed its output to the highest level in more than two years and is set to start up production in a new large-scale oil field by the end of the year, their first in half a decade.

Now, another major issue has arisen. British Petroleum (BP), which has long expected their mature oil fields to naturally plateau and then decrease in production, has now announced that their legacy fields are increasing output, to the great surprise of experts in the field and BP executives alike. An astonished Bob Dudley, BP’s chief executive officer, told an interviewer at the CERAWeek by IHS Markit energy conference in Houston that he, “cannot remember ever in my career having seen a negative decline rate.”

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Is Infinite Clean Energy Near?

October 30, 2017

Is Infinite Clean Energy Near?

After decades of research and planning, a group of scientists in France are attempting to achieve the impossible: harnessing the heavens.

They are building a tokamak, a donut-shaped, man-made, artificial star that has the potential to bring the universe down to earth and provide millions of years of clean energy. Is this the dawn of a new era, in which we dominate nuclear fusion and solve the energy dilemma for millennia, or is it just a crackpot pipe dream? Every year we seem to be getting closer to the former.

While it once seemed impossible that we would be able to create, control, and confine plasma hotter than the sun, the development of tokamaks has created, for the first time, a viable avenue for nuclear fusion. Scientists have already been able to create plasma at the necessary ultra hot temperatures necessary. Now they just need to refine the process until they can create more energy than is consumed by the process to create the reactions—something that has never yet been achieved, but is growing closer to becoming a reality each year, thanks to international projects like the one currently taking place in France.

The International Thermonuclear Experimental Reactor (ITER), the massive tokamak fusion reactor under construction in Southern France, has been internationally funded with $14 Billion dollars (a number that will continue to rise) in capital. It’s a combined effort by many nations in the European Union along with the United States, Russia, China, India, Japan, and South Korea. The scientists involved anticipate that the groundbreaking machine will make its inaugural run in 2025, 40 years after its inception, which was initiated after a fateful handshakebetween President Ronald Reagan and Soviet leader Mikhail Gorbachev in 1985.

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Today’s Stunted Oil Prices Could Cause Oil Price Shock In 2020

May 22, 2017

Today’s Stunted Oil Prices Could Cause Oil Price Shock In 2020

As oil prices remain unsteady and OPEC continues to make headlines every hour, the world is focused on oil’s immediate future. As Saudi Arabia announces plans to slash production and move their economy away from oil dependency, many industry insiders are predicting that the now over-saturated market will reach an equilibrium with higher commodity prices by 2018 and U.S. shale production will continue to grow along with global demand.

Robert Johnston, the CEO of one of the world’s biggest political risk consultancies, is unconvinced. In a speech made at the Association of International Petroleum Negotiators’ 2017 International Petroleum Summit, Johnston laid out his concerns for the future of oil.

“What I don’t hear people asking is, ‘then what?’ Are the Saudis going to maintain these production cuts forever, or at some point do they have to start reversing that? I think in 2018 they will be reversing those production cuts,” he said. These important questions aren’t getting enough attention according to Johnston, whose firm Eurasia Group foresees a fast-approaching supply gap that Saudi Arabia and U.S. oil may not be able to fill.

Eurasia Group forecasts about 7 million barrels per day (MMbbl/d) of new crude supply by 2022. This includes about 5 MMbbl/d of U.S. shale growth and about 2 MMbbl/d from oil sands and deepwater extraction. But by the year 2022, another 15 MMbbl/d of new supply may be needed, as demand trends predict an annual growth rate of about 1 MMbbl/d. With this kind of impending discrepancy between supply and demand, the industry needs to start looking for new sources of oil, and quickly.

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