September Industry Affairs

Climate Group: Natural Gas, Not Renewables, Is Largest Factor In Emissions Decline          September 12, 2017  James Taylor  Forbes

Natural gas’s growing share of electricity production has been the largest driver of declining U.S. carbon dioxide emissions, the climate advocacy group Carbon Brief reports. Carbon Brief points out that U.S. carbon dioxide emissions have declined 14 percent since 2005, with natural gas as the single largest reason.

Electricity generation is the largest source of U.S. carbon dioxide emissions, Carbon Brief observes. Fundamental changes in electricity markets since 2005 have transformed the U.S. electricity sector from one of growing emissions to one of declining emissions.

“Before 2005, U.S. carbon emissions were marching upwards year after year, with little sign of slowing down,” Carbon Brief noted. “After this point, they fell quickly, declining 14% from their peak by the end of 2016.”

“Increases in [natural] gas electricity generation is the largest driver, accounting for 33% of the total emissions reduction in 2016,” Carbon Brief reported. “Gas is far from zero-carbon, but reduces CO2 in the U.S. because it mostly displaces high-carbon coal.”

In its report, Carbon Brief linked to an article by Yale Climate Communications, a global warming activist organization, which pointed out that “carbon dioxide emissions from new gas power plants are as much as 66 percent lower than those of existing coal power plants.”

According to Yale Climate Communications, “About half of this [66-percent] reduction is due to differing carbon intensities of the fuels (natural gas emits 40 percent less carbon than coal per unit of heat). The other half is due to the higher generation efficiency of natural gas (new natural gas plants convert heat to power at upwards of 50 percent efficiency, while typical coal plants only operate at about 33 percent efficiency).”

According to Carbon Brief, natural gas has reduced 50% more emissions since 2005 than wind and solar power combined.

Carbon Brief identifies low natural gas prices as a key component in the growth of natural gas electricity generation. Low natural gas prices are one reason Carbon Brief projects U.S. emissions to continue declining under the Trump administration. Low natural gas prices will likely induce more power producers to switch from coal power to natural gas.

According to the U.S. Energy Information Administration, natural gas’s share of U.S. electricity generation has risen from 21% to 34% during the past decade. At the same time, coal’s share has dropped from 48% to 30%. With natural gas prices so low, inflation-adjusted electricity prices have declined along with emissions of carbon dioxide and air pollutants.

Unless politics interfere with the ongoing conversion to natural gas electricity, expect carbon dioxide emissions and electricity prices to continue declining together.

 

Oil Advances as IEA and OPEC Boost Demand Growth Estimates
September 13, 2017                 Jessica Summers         Bloomberg     
 

Oil climbed as the International Energy Agency forecast the strongest demand growth in two years, while OPEC was said to discuss prolonging output cuts further into 2018.

Futures advanced as much as 1.5 percent in New York. The IEA raised its forecast for 2017 on stronger-than-expected consumption in Europe and the U.S. OPEC and its allies are said to be considering an extension of their output cuts beyond March, while the cartel also boosted its estimates for demand in 2018. Meanwhile, data from the Energy Information Administration showed that U.S. gasoline inventories tumbled by the most on record, while crude stockpiles increased by the most since March as Hurricane Harvey-led refinery shutdowns affected the energy complex.

Higher demand estimates and talk of an extension of production cuts is a positive for oil prices, Rob Thummel, managing director and portfolio manager at Tortoise Capital Advisors LLC, which manages $16 billion in energy-related assets, said by telephone. “You’ve got to look at the EIA report and how much is Harvey in here and how much is not. It’s hard to really evaluate that.”

Oil in New York has averaged about $49 a barrel this year as efforts to drain a global glut by the Organization of Petroleum Exporting Countries and partners including Russia confront rising shale output. One option that OPEC and its allies are considering is a six-month extension to supply curbs from the end of March, according to a person familiar with the matter.

West Texas Intermediate for October delivery rose 69 cents to $48.92 a barrel at 11:10 a.m. on the New York Mercantile Exchange. Total volume traded was about 7 percent above the 100-day average. Prices climbed 16 cents to $48.23 on Tuesday.

See also: Hurricane Irma Could Be America’s Fourth Most Expensive Storm

Brent for November settlement increased 49 cents to $54.76 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $5.37 to November WTI.

Brent’s larger premium over the U.S. benchmark “is the most telling signal that U.S. crude oil markets need more time to return to normal in the wake of Hurricane Harvey,” IHS Markit said in a note Wednesday.

In the midst of unstable refinery operations due to Harvey, nationwide gasoline stockpiles slid by 8.43 million to 218.3 million barrels last week, the lowest level since December 2015, the EIA data showed. At the same time, crude inventories climbed by 5.89 million barrels to 468.2 million, while refinery utilization sunk. Cushing, Oklahoma supplies rose by the most since March, while oil production climbed by the most since 2012.

OPEC’s Cuts

OPEC members are discussing prolonging the cuts ahead of a ministerial meeting scheduled for late November in Vienna, with a three-month extension seen as the minimum, the people said. The duration will depend on multiple variables, including the level of compliance, the pace of the output recovery in Libya and Nigeria, U.S. shale supply and the strength of global demand.

“The longer they can keep the cuts in place, the greater the chance that they will make reasonable inroads into the current inventory overhang,” said Ric Spooner, an analyst at CMC Markets in Sydney. “It’s hard to say whether they’ll go through with it at this moment. It would seem logical to continue.