News and views on the coming collapse
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Folks started driving again – including those who used to take mass-transit. But jet fuel demand is still in collapse-mode. And overall consumption remains way down.
Ridership on San Francisco’s Bay Area Rapid Transit (BART) trains was still down 89% in June, compared to June last year, according to BART. Not because the Bay Area economy has collapsed by 89% — it has not — but because many people are working from home, and those people who do go to work are driving to avoid the infection risks associated with riding on a commuter train. Driving-instead-of-taking-mass-transit is playing out across the US. And we’re seeing some of that in gasoline demand. But jet fuel consumption is still in collapse mode. And diesel consumption has been down sharply for over a year.
Starting in mid-March, demand for gasoline collapsed in a historic manner. By now 32 million people are claiming unemployment compensation under state and federal programs, and many others switched to work from home, and both groups quit driving to work. Gasoline consumption at the low point in the week ended April 3 plunged by -48% year-over-year, to just 6.7 million barrels per day, the lowest in the EIA’s data going back to 1991.
Folks started driving again, bit by bit, to go to work, and because it’s summer driving season. In the week ended July 17, gasoline consumption, at 8.55 million barrels per day, was down 11.6% year-over-year, according to EIA data. Consumption of gasoline has been in the minus-6% to minus-12% range now for the fifth week in a row, with the latest week being the steepest decline:
The EIA tracks consumption in terms of product supplied by refineries, blenders, etc., and not by retail sales at gas stations.
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No “V-shaped recovery back to normal.”
Demand for gasoline collapsed in a stunning and historic manner, starting in mid-March when the measures to slow down the spread of the pandemic took effect, when working from home became the new thing, and when millions of people lost their jobs on a weekly basis and stopped driving to work. Gasoline consumption, after bottoming out in the week ended April 3 with a year-over-year plunge of -48%, to 6.7 million barrels per day, the lowest in the EIA’s data going back to 1991, the great recovery began – and fizzled.
Gasoline consumption in the week ended June 12, at 7.87 million barrels per day, was still down 20.7% year-over-year, according to data reported by the EIA today. It has been about the same 20% year-over-year decline four weeks in a row:
The EIA measures weekly consumption in terms of product supplied, such as by refineries and blenders, and not by retail sales at gas stations.
The level of gasoline consumption of 7.87 million barrels per day is still below any pre-pandemic consumption levels since the week in September 2001 after the 9/11 attacks. The WTF moment came in late March and April, when gasoline consumption collapsed. Even now, gasoline consumption remains below the low points during the Great Recession. And this is the beginning of driving season!
Gasoline hasn’t been exactly a booming business since around 2005. The decline in consumption during the Great Recession was followed by a recovery and finally new records starting in 2016. In other words, no growth for a decade.
Jet fuel.
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It started in mid-February for jet fuel and in mid-March for gasoline.
Oil companies are reporting financial fiascos every day: Today Exxon reported its first quarterly loss since 1999 ($610 million), on a “market-related” $2.9 billion write-down. “We’ve never seen anything like what the world is facing today,” CEO Darren Woods said.
On Thursday, Texas-based shale-driller Concho Resources reported a quarterly loss of $9.3 billion, after writing down the value of its oil and gas assets by $12.6 billion.
Also on Thursday, it was reported that Oklahoma-based Chesapeake Energy, a pioneer in shale-drilling, was preparing to file for bankruptcy (what’s taking so long?).
Still on Thursday, Royal Dutch Shell shocked the markets when it announced that it would reduce its dividend for the first time since 1945 (by 66% from $0.47 to $0.16). “The duration of these impacts remains unclear with the expectation that the weaker conditions will likely extend beyond 2020,” the statement said. The already beaten-up shares plunged another 17% in two days. Shares are down 47% year to date.
Earlier in April, among the oil companies that have already filed for bankruptcy, were two high-profile oil drillers, Whiting Petroleum and Diamond Offshore Drilling.
The drama is centered on the collapse in demand for crude oil. Crude oil is primarily used for two purposes: transportation fuel and as feedstock for the chemical industry. Even before the crisis, demand growth has been weak, particularly as transportation fuel in developed countries. But production has been surging, and amid ample and growing supply, prices were already weak, when the coronavirus hit.
Demand for transportation fuel in the US collapsed.
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In a recent post, Antonio Turiel proposed that the global peak of diesel fuel production was reached three years ago, in 2018. Turiel’s idea is especially interesting since it takes into account the fact that what we call “oil” is actually a wide variety of liquids of different characteristics. The current boom of the extraction of tight oil (known also as “shale oil”) in the United States has avoided, so far, the decline of the total volume of oil produced worldwide (“peak oil”).
Turiel’s proposal has raised a considerable debate among the experts, with several of them challenging Turiel’s interpretation. Turiel himself and Gail Tverberg (of the “our finite world” blog) discussed the validity of the data and their meaning. Below, I reproduce the exchange with their kind permission. As you will see, the matter is complex and at the present stage it is not possible to arrive at a definitive conclusion.
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Bloomberg reports Europe’s Diesel Woes Deepen as Strike Halts French Oil Refinery.
Total SA, France’s biggest refiner, is in the process of shutting its largest plant in the country, the 247,000-barrel-a-day Gonfreville facility in Normandy, due to a labor dispute, a spokeswoman for the company said on Tuesday. A few hundred miles away, in the Netherlands, retail fuel stations are running out of supplies because of shipping constraints on the Rhine, according to Royal Dutch Shell Plc.
Shell said Nov. 20 that it cut production at its Rheinland refining site, the biggest complex of its kind in Germany, due to low water levels on the Rhine. In a tweet on Tuesday, the company said that it was temporarily unable to supply some unmanned fuel stations in the Netherlands.
Gas stations in Germany had already been running dry due to the situation on the Rhine, a major petroleum product transportation corridor that runs northwest from the Swiss Alps all the way to the Netherlands. Switzerland released emergency fuel stockpiles because of the situation on the river.
The premium per barrel of diesel over Brent crude – another indicator of market strength – was at $15.96 on Tuesday, the highest for the time of year in six years.
Diesel Price Poised to Soar
This shutdown cannot possibly come at a worse time for French President Emmanuel Macron.
Macron is already reeling over a protest of his diesel tax.
Diesel Tax Turns Violent
People from across France went to Paris to let the president know how they feel about the taxes in general and the tax on diesel. The [Diesel Tax Protests](Diesel Protests in France Turn Violent) then turned violent.
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At the beginning, the idea of “peak oil” seemed to be relatively uncomplicated: we would climb from one side and then go down the other side. But no, the story turned out to be devilishly complex. For one thing, there is no such a thing as “oil” intended as a combustible liquid — there are tens, perhaps hundreds, of varieties of the stuff: light, heavy, sour, sweet, shale, tight, dumbbell, and more. And each variety has its story, its peculiarities, its trajectory over time. Eventually, all the oil curves have to end to zero but, in the meantime, there is a lot of wiggling up and down that continues to take us by surprise. Mostly, we didn’t realize how rabidly the system would deny the physical reality of depletion, much preferring to “legislate scarcity” on the basis of pollution.
Here, Antonio Turiel writes a fascinating post telling us how the peak is coming “from below,” affecting first the heavy fraction of crude oil: diesel and fuel oil. That’s already causing enormous problems for the world’s transportation system, as well as for the owners of diesel cars, and the situation will become much more difficult in the near future. The light fraction, the one that produces gasoline, seems to be still immune from peaking, but that will come, too.(U.B.)
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The new ship fuel regulations coming into force at the start of 2020 are set to create an initial confusion on the refining market and crude oil and oil product trade flows, analysts and industry experts say.
We are now just 14 months away from January 1, 2020—the start date which the International Maritime Organization (IMO) has set for the new rules on using only 0.5-percent or lower sulfur fuel oil on ships, unless said ships have installed the so-called scrubbers—systems that remove sulfur from exhaust gas emitted by bunkers.
Analysts, experts, and industry representatives are divided as to how great of an impact those new rules will be and whether there will be enough middle distillates—which include diesel and the lower sulfur marine gasoil—to meet demand for both land use, in road transportation, agricultural machinery and industry, and for use on ships at sea.
One way to comply with the IMO rules is to have scrubbers installed, which requires upfront costs, but later these would pay off with the expected much lower price of high-sulfur fuel oil.
The other way is using fuel that contains 0.5 percent sulfur. These fuels are basically in the same middle distillate product category like road diesel or jet fuel.
Some analysts have started to warn that the competition for those middle distillates could lead to shortages of diesel, resulting in price spikes. The other camp says that with diesel demand slowing in Europe and possibly reaching plateau in demand in China, there will be enough middle distillates around.
Amid expectations of fuel prices spikes in a presidential election year, the Trump Administration is seeking to slow down the 2020 introduction of the new ship fuel rules.
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Diesel powered electricity generation is a niche common on isolated island grids like El Hierro and in certain countries, like the UK, recently adopted as peaking plants. They have the advantage that they can quickly and easily be switched on and off and the disadvantage that they are expensive to run. Answering some of the questions below for diesel is a bit tricky. For example, when it comes to fatalities we need to consider fatal accidents in the Global oil production and refining industries. But diesel for power generation uses only a tiny fraction of global oil production (<1%?). Power diesel accidents therefore need to be pro-rated accordingly but then adjusted to the amount of electricity produced. Not an easy task to scale in your head.
The Externalities of Energy Production Systems (Day 1 Coal)
Energy Externalities Day 2: Gas-fired-CCGT
Energy Externalities Day 3: Biomass-Fired-Electricity
Energy Externalities Day 4: Nuclear Power
Energy Externalities Day 5: Wind Power
Energy Externalities Day 6: Hydroelectric Power
Energy Externalities Day 7: Solar Photo Voltaics
I am proposing to use 12 metrics to measure costs and benefits:
For the following 12 electricity generating systems
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Britain to ban sale of all diesel and petrol cars and vans from 2040
So says the Guardian.
Which follows on from:
France to ban sales of petrol and diesel cars by 2040
This follows Norway, The Netherlands, Germany and now – the big Daddy…
China plans to ban sales of fossil fuel cars entirely
China is the world’s largest auto market, with 28.03 million vehicles sold last year, a boost in demand of 13.7 percent vs. 2015 sales numbers. The nation has already done a lot to incentivize manufacturers to develop and sell new EVs, including allowing foreign automakers to create a third joint venture with local automakers (a standard requirement for doing business in the country for auto OEMs) so long as it’s dedicated to the creation of EVs exclusively.
CO2 emissions from EVs are substantially lower than their fossil-fuel-guzzling cousins. And since most of us prefer swallowing our air without having to chew it first, the appeal is as easy to understand as Cameron Diaz in a bikini.
Here’s an excellent chart which you can go and play around with which shows vehicle emissions. The yellow are the EVs (click the chart):
This news has tree-hugging beardies everywhere rejoicing because they will, once and for all, get rid of all those ghastly baby-seal-murdering bastard oil and gas executives.
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Heavy-duty diesel-engine trucks (agricultural, cargo, mining, logging, construction, garbage, cement, 18-wheelers) are the main engines of civilization. Without them, no goods would be delivered, no food planted or harvested, no garbage picked up, no minerals mined, no concrete made, or oil and gas drilled to keep them all rolling. If trucks stopped running, gas stations, grocery stores, factories, pharmacies, and manufacturers would shut down within a week.
Since oil, coal, and natural gas are finite, and biomass doesn’t scale up, clearly someday trucks will need to run on wind, solar, hydro, and geothermal generated electricity. Yet even batteries for autos aren’t yet cheap, long-lasting, light-weight, or powerful enough for most Americans to replace their current gas-guzzlers with. And given the distribution of wealth, few Americans may ever be able to afford an electric car, since two-thirds of Americans would have trouble finding even $1,000 for an emergency.
Trucks that matter — that haul 30 tons of goods, pour cement, haul mining ore, and so on can weigh 40 times more than an average car. So scaling batteries up for heavy-duty trucks (NRC 2014) is impossible now given the state of battery technology. For example, a truck capable of going 621 miles hauling 59,525 pounds, the maximum allowable cargo weight, would need a battery weighing 55,116 pounds, and could only carry about 4,400 pounds of cargo (den Boer et al. 2013). And because a heavy-duty truck battery is so heavy and large, charging takes too long — typically 12 hours or more.
And car battery development is hitting the brick-walls of the laws of physics and thermodynamics, yet truck batteries need to be even more powerful, durable, and long-lasting.
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Recently, word leaked out that Norway may ban the sale of diesel- and gasoline-powered vehicles by 2025. The move toward electric vehicles is part of a dream shared by those concerned about climate change and about fossil fuel depletion (especially oil depletion), namely, to turn the world into one big all-electric paradise by running everything we can on electricity.
Theoretically, this is possible, but getting there won’t be easy. First, such a transition will take time. In the Norwegian example cited above, the transition to an all-electric private car fleet would take about 15 years based on Norwegian new private car registrations in 2015 and the current total number of registered private cars.
But the ban wouldn’t take effect until 2025. While Norwegian electric car registrations are rising, so are total car registrations. Even if we generously assume that the rise in electric car registrations between now and 2025 will shave five years off the transition, that still means Norway won’t achieve an all-electric private automobile fleet until 2035. And, Norway is already a leader in the move toward all-electric transportation. Other countries lag far behind.
The Norwegian example points out a second difficulty in the transition to an all-electric world. Norway gets 95.9 percent of its electricity from hydroelectric dams. It gets another 1.6 percent from wind turbines. Only 2.5 percent of its electricity comes from thermal power plants, the kind that burn fossil fuels such as coal and natural gas and that provide 66 percent of the world’s electricity.
Transitioning to electric transportation in places that primarily burn coal, natural gas and/or diesel fuel to produce electricity would undermine the goal of lowering greenhouse gas emissions. In thermal power plants, the ones that burn fossil fuels, two-thirds of the energy produced is lost in the form of heat. Only one-third is turned into electricity.
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