Fossil Fuels: Economics of Oil and Natural Gas

[LFC]

Gasoline and diesel prices have been rising for a while. Now natural gas prices have jumped.

U.S. natural gas futures climbed more than 2% to a seven-year high on Tuesday as record global gas prices keep demand for U.S. liquefied natural gas (LNG) exports strong.

Traders noted prices were volatile - rising over 10% early in the session for a second day in a row - since volumes were thin with the front-month October contract expiring on Tuesday. They also noted prices rose despite forecasts for milder weather and lower demand than previously expected over the next two weeks.

Gas prices in Europe and Asia traded about four times over U.S. gas due to insatiable demand for the fuel in Asia and low stockpiles in Europe ahead of the winter heating season, when demand peaks.

On the last day as the front month, gas futures for October delivery rose 13.5 cents, or 2.4%, to settle at $5.841 per million British thermal units (mmBtu), the highest close since February 2014 for a second day in a row.

November futures , which will soon be the front-month, were up about 13 cents to $5.85 per mmBtu.

[LFC]

Here's a look at natural gas prices in the U.S. It's going to be an expensive winter for some people.

Prices for natural gas, the most common way to heat homes and a leading fuel source for generating electricity, have surged more than 180% over the past 12 months to $5.90 per million British thermal units. Natural gas hasn't been this expensive since February 2014.

The risk is that an early winter or extremely cold fall temperatures will force households to crank up the heat. That would further shrink the nation's below-average stockpiles of natural gas and could lift prices even higher.

"If we get an early frost, it could get ugly. It could get ugly fast," said Robert Yawger, director of energy futures at Mizuho Securities.

The natural gas spike is exacerbating the United States' first brush with inflation in more than a dozen years. Families are already dealing with surging prices on everything from used cars and gasoline to bacon.

The inflation surge is forcing the Federal Reserve to consider curtailing its ongoing support of the economy and leading some moderate lawmakers to question the need for the White House's ambitious spending plans. Meanwhile the energy crunch is making global investors nervous about economic growth and high prices.

"This would be bad enough even in normal times. But now there is this general fear about inflation," said Robert McNally, president of consulting firm Rapidan Energy Group.

About half of US households use natural gas for home and water heating, according to the US Energy Information Administration.

The American Gas Association, which represents natural gas utilities like Con Edison, noted that "natural gas utility customers are not paying the day-to-day prices for natural gas that we see in the headlines," spokesperson Jake Rubin said in a statement.
That's because, AGA stressed, its members buy gas through long-term contracts that lock in prices and shield customers from some of the volatility. Rubin added that utilities augment winter supplies with storage of gas purchased months earlier.

Europe and Asia have it even worse. It doesn't help that there's multiple causes including low stockpiles, unplanned outages, Hurricane Ida shutting down U.S. Gulf production, and of course the speculators.

[LFC]

Oil prices are really high. So are American oil exports.

Energy and commodities writer Javier Blas at Bloomberg News revealed that, this week, the United States hit an all-time record of crude and refined oil products it is exporting.

Only twice in history has the number jumped above 10 million barrels per day and this week captured one of those days, setting the record.

This happens at a time that Republicans have complained that there is an energy crisis. According to the GOP leaders, there is an oil shortage that is causing the increase in gas prices while blaming President Joe Biden for restricting drilling.

"If Americans entrust House Republicans with the majority, we will focus on real solutions to lower gas prices, not ridiculous political spin that won’t solve our energy crisis," claimed House Republican Leader Kevin McCarthy (CA). He didn't explain what that plan was, however. It's unknown if the GOP would return to purchasing Russian oil if they take over the House and Senate in November.

[LFC]

Oil companies aren't increasing output because they're afraid prices will drop. (Here's a non-paywalled link if you need it.)

Executives at 141 oil companies surveyed by the Federal Reserve Bank of Dallas in mid-March offered several reasons that they weren’t pumping more oil. They said they were short of workers and sand, which is used to fracture shale fields to coax oil out of rock. But the most salient reason — the one offered by 60 percent of respondents — was that investors don’t want companies to produce a lot more oil, fearing that it will hasten the end of high oil prices.

The Dallas Fed survey found that U.S. companies need oil prices to average just $56 a barrel to break even, a little more than half the current price. But some are worried that the price could fall to as little as $50 by the end of the year.

[LFC]

And this is why we need to reduce our dependency on fossil fuels. OPEC+ is brimming with unstable actors and can't be trusted with a self-destruct button on the world economy. BTW most oil is still running around $90/barrel. It's not like its not still highly profitable, just not wildly profitable.

OPEC and allied oil-producing countries, including Russia, made a small trim in their supplies to the global economy Monday, underlining their unhappiness as recession fears help drive down crude prices — along with the cost of gasoline, to drivers' delight.

The decision for October rolls back a mostly symbolic increase of 100,000 barrels per day in September. It follows a statement last month from Saudi Arabia’s energy minister that the OPEC+ coalition could reduce output at any time.

Oil producers such as Saudi Arabia have resisted calls from U.S. President Joe Biden to pump more oil to lower gasoline prices and the burden on consumers. OPEC+ has stuck with only cautious increases to make up for deep cuts made during the COVID-19 pandemic, which were finally restored in August.

Since then, growing worries about slumping future demand have helped send oil prices down from June peaks of over $120 per barrel, cutting into the windfall for OPEC+ countries' coffers but proving a blessing for drivers in the U.S. as pump prices have eased.

The supply cut for October is only a small fraction of the 43.8 million barrels per day under OPEC+ production goals, but wrong-footed several analysts' predictions of no change in output. Oil prices jumped after the announcement.

U.S. crude rose 3.3%, to $89.79 per barrel, while international benchmark Brent was up 3.7%, to $96.50, after the decision.

The amount of oil per day “may seem negligible, but the message from today's cut is clear: OPEC+ thinks they've fallen enough,” Columbia University energy policy expert Jason Bordoff tweeted.

[LFC]

Coal fired power has been expensive to run for a while now and is even more expensive to build new capacity. Oil fired power is way up right now. Natural gas is at its highest price since 2008. But what about renewables?

This week, the US Department of Energy's Berkeley Lab released its annual analysis of solar energy in the US. It found that nearly half the generating capacity was installed in the US during 2021 and is poised to dominate future installs. That's in part because costs have dropped by more than 75 percent since 2010; it's now often cheaper to build and operate a solar plant than it is to simply buy fuel for an existing natural gas plant.

The analysis was performed before the passage of the Inflation Reduction Act, which contains many incentives and tax breaks that should expand solar's advantages in the coming years.

Solar, by the numbers

In terms of large, utility-scale solar installs, the US added over 12.5 gigawatts of new capacity last year, bringing the total installed capacity to over 50 gigawatts. Texas led the way, with about a third of the total capacity added (3.9 GW) going online in the Lone Star State. Combined with residential and other distributed solar installations, solar alone accounted for 45 percent of the new generating capacity added to the grid last year.

That growth showed up in figures on how much energy solar supplies. Five states now receive more than 15 percent of their electricity from solar power, including Massachusetts and Vermont, with California receiving 25 percent of its electricity from the Sun.

Solar's expansion has largely been driven by falling costs. The DOE estimates that the price of building a solar plant has been dropping by an average of about 10 percent a year, leading to a fall of over 75 percent since 2010. That has left prices averaging about $1.35 for each watt of capacity in 2021. Large-scale plants benefit the most, with projects over 50 megawatts costing about 20 percent less than those under 20 MW.

The drop in prices is causing some somewhat odd trends, driven by the fact that it's becoming increasingly economical to install large facilities in states that don't get as much sun, like Maine, Michigan, and Wisconsin. As a result, the past several years have seen the average incoming energy at newly constructed facilities (measured as daily kilowatt-hours per square meter) drop by about 20 percent.

That has helped cause a large spread in what's called the capacity factor, which is calculated by dividing the amount of energy produced at a facility by the maximum energy it could have generated if it produced 24 hours a day. The median capacity factor of solar plants in the US was 24 percent, but outliers were as low as 9 percent and as high as 35 percent. As prices continue to fall, this spread may become more pronounced, with more plants at the low end of the range.

[goldenvalley]

Sept 22, 2022 21:30:13 GMT LFC said:

Coal fired power has been expensive to run for a while now and is even more expensive to build new capacity. Oil fired power is way up right now. Natural gas is at its highest price since 2008. But what about renewables?

This week, the US Department of Energy's Berkeley Lab released its annual analysis of solar energy in the US. It found that nearly half the generating capacity was installed in the US during 2021 and is poised to dominate future installs. That's in part because costs have dropped by more than 75 percent since 2010; it's now often cheaper to build and operate a solar plant than it is to simply buy fuel for an existing natural gas plant.

The analysis was performed before the passage of the Inflation Reduction Act, which contains many incentives and tax breaks that should expand solar's advantages in the coming years.

Solar, by the numbers

In terms of large, utility-scale solar installs, the US added over 12.5 gigawatts of new capacity last year, bringing the total installed capacity to over 50 gigawatts. Texas led the way, with about a third of the total capacity added (3.9 GW) going online in the Lone Star State. Combined with residential and other distributed solar installations, solar alone accounted for 45 percent of the new generating capacity added to the grid last year.

That growth showed up in figures on how much energy solar supplies. Five states now receive more than 15 percent of their electricity from solar power, including Massachusetts and Vermont, with California receiving 25 percent of its electricity from the Sun.

Solar's expansion has largely been driven by falling costs. The DOE estimates that the price of building a solar plant has been dropping by an average of about 10 percent a year, leading to a fall of over 75 percent since 2010. That has left prices averaging about $1.35 for each watt of capacity in 2021. Large-scale plants benefit the most, with projects over 50 megawatts costing about 20 percent less than those under 20 MW.

The drop in prices is causing some somewhat odd trends, driven by the fact that it's becoming increasingly economical to install large facilities in states that don't get as much sun, like Maine, Michigan, and Wisconsin. As a result, the past several years have seen the average incoming energy at newly constructed facilities (measured as daily kilowatt-hours per square meter) drop by about 20 percent.

That has helped cause a large spread in what's called the capacity factor, which is calculated by dividing the amount of energy produced at a facility by the maximum energy it could have generated if it produced 24 hours a day. The median capacity factor of solar plants in the US was 24 percent, but outliers were as low as 9 percent and as high as 35 percent. As prices continue to fall, this spread may become more pronounced, with more plants at the low end of the range.

If we can get better battery storage we'll be in decent shape with renewables.  Cost of batteries will go down eventually too.

[LFC]

Cha-CHING! Hey, MAGAts. While y'all were whining about Biden and the price of gas the companies who help fund your Republican buddies were f***ing all of us ... hard.

If by some miracle you had a great 2022, you’re not alone. At least two of the world’s biggest oil corporations thoroughly rocked last year. In fact, for ExxonMobil and Chevron, 2022 wasn’t just a good year—it was the best one ever.

ExxonMobil posted record-eviscerating annual profits for 2022, with a $55.7 billion windfall revealed in the fossil fuel giant’s final quarterly report for the year on Tuesday. Previously, the company’s highest profit was $45 billion in 2008, making 2022's net earnings nearly a 25% increase on the past record.

Chevron, too, netted its largest profit ever, as reported to investors last week. The oil company raked in $35.5 billion, eclipsing its previous 2011 record of $29.6 billion.

[goldenvalley]

Jan 31, 2023 22:16:44 GMT LFC said:

Cha-CHING! Hey, MAGAts. While y'all were whining about Biden and the price of gas the companies who help fund your Republican buddies were f***ing all of us ... hard.

If by some miracle you had a great 2022, you’re not alone. At least two of the world’s biggest oil corporations thoroughly rocked last year. In fact, for ExxonMobil and Chevron, 2022 wasn’t just a good year—it was the best one ever.

ExxonMobil posted record-eviscerating annual profits for 2022, with a $55.7 billion windfall revealed in the fossil fuel giant’s final quarterly report for the year on Tuesday. Previously, the company’s highest profit was $45 billion in 2008, making 2022's net earnings nearly a 25% increase on the past record.

Chevron, too, netted its largest profit ever, as reported to investors last week. The oil company raked in $35.5 billion, eclipsing its previous 2011 record of $29.6 billion.

People are howling about high gasoline prices, blaming Biden and longing for the old days when Trump single handedly kept the gas prices in check. Does Faux News not mention the high profits of the oil industry?  Guess not.  

[LFC]

Exxon is bailing on trying to make fuel from algae.

It’s the end of an algal era: Exxon is backing out of a biofuel effort that the company has for years centered as part of its work in clean energy.

Bloomberg reported Friday that ExxonMobil has cut ties with Viridos Inc., a California-based company that has worked with the oil giant since 2009 on its exploration into the possibilities of using algae to create alternative energy. The company has also ended its partnership with an algal research project at the Colorado School of Mines.

“At this point we have other programs that are ready for deployment,” Vijay Swarup, Exxon’s senior director of technology who ran algae research, told Bloomberg. “We need to get on the deployment curve for carbon capture, for hydrogen, for biofuels. Algae still needs some more work.”

As electrification continues and renewables become cheaper and cheaper, the window when replacing oil with biofuels might have been profitable may already be closed.

But there are some significant, long-term challenges that algae presents in bringing it to scale as an energy solution, and as renewable energy like wind and solar have gotten cheaper and cheaper, the prospect of algae as fuel has become less attractive to energy companies hoping for a quick return on investment. Both Shell and BP had abandoned their efforts by 2012, and Chevron admitted on its website in 2018 that its work “to produce second-generation biofuels that are economical at scale without subsidies has not been successful.”

Of course it may have been all about greenwashing for Exxon anyway.

By touting its work on algae while continuing to increase fossil fuel production, Exxon has “been trying to create the impression that [it is] part of the solution, when [it is] certainly not,” Robert Brulle, a visiting professor at Brown University and expert on fossil fuel industry messaging, told Bloomberg.

An Exxon spokesperson told Bloomberg that it had spent double on algae research than it had spent on advertising said research, and rejected the claim that its algae work was part of a greenwashing attempt.

Ironically, Exxon may be bowing out just when the algae is just getting good—and when the company has cash to spare to invest in longer-term technologies. Bloomberg reported that, according to Viridos, the Exxon partnership has recently seen a sevenfold increase in its algae production in certain ponds. And the company is choosing to abandon ship even as it posts record profits, thanks in large part to the global energy crisis. Maybe oil companies aren’t actually working as hard as they say they are on renewable energy while making all that money off fossil fuels.

[pnwguy]

The only green production ExxonMobil is concerned with is printing money from dinosaur juice.

[LFC]

Follow the money.

Money makes the world go round. And when it comes to energy, we’re seeing more investment than ever: companies, research institutions, and governments are all pouring money into technologies that could help power our world in the future.

The International Energy Agency just published its annual report on global investment in energy, where it tallies up all that cash. The world saw about $2.8 trillion of investments in energy in 2022, with about $1.7 trillion of that going into clean energy.

That’s the biggest single-year investment in clean energy ever, and where it’s all going is pretty interesting. I have some good news, some bad news, and a couple of surprising tidbits to share. So grab some popcorn and let’s dive into the data.

I've seen stories every now and then about how the fossil fuel companies are hedging their bets, but it turns out really not so much.

While we’re on oil and gas, I think it’s worth pointing out one really interesting point: while there’s a lot of money flowing to clean energy, it doesn’t make up a big share of spending by fossil-fuel companies.



See those tiny dark slivers in 2021 and 2022? That’s the share of oil and gas companies’ spending that went toward clean energy. Spending on oil infrastructure has fallen (which is what’s allowed solar to catch up), but companies are making up for it by paying out dividends, buying back stock, and paying back debt rather than putting more into low-emissions tech.

Any investment and attention going to renewables and innovations that could help cut emissions is great, and I do think oil and gas companies can play a role in boosting new technologies, especially those where they have expertise (I’m looking at you, geothermal!). But I think it’s important to keep that spending in context—oil and gas companies are putting less money into renewables than ad campaigns would have you think.

[goldenvalley]

Hard to find the right category for this one...international politics, inflation... From Bloomberg:

The main shifts in the oil price over the last decade have all been driven by geopolitics, and not by the forces of supply and demand in international financial markets. In 2014, the discipline of the OPEC cartel broke down in what was widely perceived as an attempt to punish shale operators by bringing crude to a level that they couldn’t operate profitably; in 2020, another breakdown reflected Saudi Arabia falling out with Russia; and the invasion of Ukraine evidently triggered the spike early last year.

The latest rally also owes much to geopolitics — this time, the alliance between Saudi Arabia and Russia that veteran oil analyst Jean Ergas of Tigress Financial Partners calls a “Pact of Steel.” The reference to the prewar alliance between Hitler and Stalin is provocative, but this new arrangement is having a galvanizing effect. The US responded to last year’s price spike by drawing on its strategic petroleum reserve, which had been built up for just such a moment. This stopped Russia from holding the western world to ransom over the oil price. But having done so once, the US cannot drain its reserve again. America’s oil inventories are far lower now, thanks to the depletion:

[andydp]

Here's a good link to use when they say we're not doing enough for the US oil supply:

Charted: The World’s Biggest Oil Producers


www.visualcapitalist.com/charted-worlds-biggest-oil-producers-in-2022/?fbclid=IwAR2t-yzEqxXLCQEdQriyhu05_jat_Ljex0QQKx4HaHOAOExyPx0CweJSsow