Publications

Energy and Environment

August 31, 2015

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Climate Change.  Today the White House Office of Management and Budget (OMB) received the EPA’s new rule aimed at reducing the allowable concentration of ozone pollution in the air, thus beginning the final review process for one of the most controversial regulations of President Obama’s tenure.   The Administration has already agreed in court to release the rule by October 1 — a timeline many criticize as insufficient for OMB, given the regulation’s high predicted costs and impact on fossil fuels and the industries that use them.  The Hill

Oil Outlook.   Newly released federal data from the U.S. Energy Information Administration suggest that U.S. oil output has been more significantly affected by lower oil prices than previous estimates indicated. EIA’s expanded survey-based methodology — which represents more than 90% of oil production in the United States — now indicates that U.S. crude oil production stood at 9.3 million barrels a day (b/d) in June 2015, a decrease of approximately 100,000 b/d from May’s revised production estimate. EIA

Climate Change.  President Obama travels to Alaska today to call for urgent and aggressive action to tackle climate change.  While the President intends to capitalize on the melting glaciers, crumbling permafrost, and rising sea levels in the region to illustrate the immediacy of the issue, activists criticize Mr. Obama for failing to address the oil and gas drilling offshore that he permitted there earlier this month. NY Times

Oil.  Russian President Vladimir Putin will meet with Venezuelan President Nicolás Maduro to discuss “possible mutual steps” to stabilize the global price of oil, as both countries face plunging prices for their main exports.  Both leaders have been pushing for an emergency meeting with OPEC, although agreement on any strategy may prove difficult given that Russia vies with Saudi Arabia for the position of top global oil producer and is unlikely to cut output for the sake of higher prices.  WSJ

Energy and Environment

August 28, 2015

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Oil Outlook.  Analysts and executives expect lower refining profits for the world’s biggest energy companies in the second half of 2015, as summer gasoline consumption eases, which will reduce demand.  Although refinery profits are expected to remain elevated relative to oil prices, the International Energy Agency notes that “fissures are appearing” in the strong refining environment that prevailed earlier this year.  WSJ

Oil.  Oil exploration companies are renegotiating drilling commitments, selling off stakes in licenses, and cancelling plans to drill exploration wells in attempts to pare back budgets once dependent on expensive drilling programs.  Firms are finding it increasingly difficult to make investment decisions within the low and unstable price environment — a trend the Wall Street Journal notes is reflective of a “much broader scramble” by the industry as a whole.  WSJ

Energy Outlook. Christopher Helman of Forbes argues that as the Internet of Things (IoT) brings electricity to every corner of the world, the utilities industry will face significant and fast-moving changes to its traditional business models.  He asserts that as consumers become increasingly interested in saving electricity and becoming power self-sufficient, utility companies are uniquely positioned to serve as trusted custodians of private data and information about energy usage — and should take advantage of this before new competitors move in on them.  Forbes

Energy Policy.  John Kemp of Reuters argues that energy efficiency mandates are “capping the recovery” of oil demand, as policies that encourage energy conservation and investments in energy efficiency technologies limit the degree to which increased oil consumption can rebalance the excess supply within the market.  Kemp notes that while these fuel efficiency mandates were enacted after past oil market disruptions in response to concerns about energy prices and energy security, they are unlikely to be reversed in the current price environment due to legislators’ increasing concerns about climate change.  Reuters

Energy and Environment News

August 27, 2015

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Oil.  Oil companies worldwide need to find nearly half a trillion dollars in total to repay existing debts, while also experiencing credit-rating downgrades that strain their ability to raise money at a low cost.   Bloomberg predicts that sustained oil prices at or below $40 per barrel will likely result in an increase in bankruptcies and distress mergers — which will change the shape of the oil industry over the next decade.  Bloomberg

Energy Outlook.  Mexican regulators have improved the conditions of the upcoming September oil auction in an effort to boost interest among international companies pressured by low oil prices.  The improvements were made to both auction procedures and contract terms, and are expected to reduce a number of risks faced by firms participating in the auctions. WSJ

Oil Outlook.  John Kemp of Reuters contrasts the current oil price slump to that of 1985 and 1986, noting that there is less spare capacity to work off in the current market, much of the growth in supply is now from unconventional shale production, and global consumption growth appears to be weakening. Despite these differences with the prior price collapse, Kemp predicts that the current oil market situation may take a similar amount of time —a decade or longer — to rebalance.  Reuters

Energy Policy.  Hillary Clinton became the latest presidential hopeful to promise support for the Renewable Fuels Standards (RFS) — which Michael Lynch of Forbes characterizes as poor farm policy, environmental policy, and energy policy. He argues that the RFS is a “true triple threat” in its poor concept, design, and implementation; unlike a direct expenditure or subsidy that has clear costs to the public, the RFS forces producers to accept the additional costs imposed by the mandate and pass them on to consumers.  Forbes

Energy and Environment News

August 26, 2015

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Oil.  The Financial Times reports that the world’s oil services industry continues to move towards consolidation as a measure to save costs and improve competitive advantages in the low oil price environment.  The trend is exemplified by this week’s announcement that Schlumberger, the world’s largest oil services group, will purchase Cameron International, a large energy equipment manufacturer, in order to increase the range of technologies it can offer.  FT

Natural Gas.  Industry analysts warn of record-breaking inventories of natural gas and a downturn in natural gas prices later this year as the U.S. natural gas glut continues.  While power plants continue to consume more gas than years prior amid warmer summers and a transition away from coal,  strong output from shale formations has significantly exceeded the levels demanded.  FT

Oil.  Despite remarkably robust demand, Chinese oil prices continue to fall amid tumbling commodity prices and uncertainty about China’s economy.  Oil-market participants are accusing China for the latest nosedive in global oil prices, attributing the recent dip under $40 per barrel to the plunge in China’s stock market this week and its decision to devalue the renminbi earlier this month.  WSJ

Oil.  R. T. Dukes asserts in Forbes that the U.S. oil boom of 2014 and 2015 might “simply be busting,” as U.S. consumers reap the benefits of mounting U.S. supply levels while the economies of energy-producing states contract. He also notes that energy companies in North America are now grappling with the fundamental decision regarding whether to maximize revenue or reduce production from wells, which will help determine the length of the U.S. supply glut.   Forbes

Energy and Environment News

August 25, 2015

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Oil.  Moody’s Investors Service downgraded the credit rating of the largest Canadian oil-sands producer yesterday, largely due to the steep downturn of prices in the global market.  The company’s creditworthiness rating is now just one notch above “speculative,” but could be further reduced to a junk rating if the firm’s debt-to-earnings ratio does not improve.  WSJ

Energy Outlook.  While oil companies of all sizes are cutting costs and delaying new projects in the low oil price environment, sustained $40 oil will most likely require companies to cut dividends as well.  Nick Butler  of the Financial Times writes that shareholders will have little choice but to “take the pain” of reduced dividends, as company valuations have fallen significantly over the past two years and the long-run outlook for commodity prices is undeniably positive.   FT

Oil.  The Wall Street Journal notes that unsteady demand growth primarily attributable to economic turbulence in China has prompted many OPEC members to question whether the cartel should again move to restrain production in an effort to stabilize prices.  Iran and Algeria have indicated that they would support such a move, but Saudi Arabia remains adamant against a change of strategy.  WSJ

Energy Policy.  Speaking at the International Atomic Energy Agency’s (IAEA) Board of Governors in Vienna, Iranian officials warned the United Nations not to probe into Tehran’s past nuclear work, reiterating that U.S. charges that the country had worked on nuclear weapons were “baseless allegations” simply used to justify sanctions.  IAEA investigation into Iran’s past actions has become a focal point for skeptics of the nuclear agreement reached in July, which may or may not be approved by the U.S. Congress next month.  WSJ