June 10, 2015
In a presentation for SAFE — Securing America’s Future Energy — Dr. Robert F. Wescott presents an analytical framework for understanding OPEC’s oil pricing strategy. For more information on Keybridge’s latest economic insights, please contact us at info@keybridgedc.com.
Related Documents: “Dr. Wescott Explains Oil Price Dynamics”
June 9, 2015
Energy Outlook. The Financial Times reports that the collapse in oil prices and subsequent austerity measures taken by oil producers could lead to an “industry shakeout,” as small- and medium-sized companies sitting on lower-cost oil and gas output in the U.S. become targets for larger companies with lower leverage but relatively high-cost oil and gas output. As many as one-third of independent producers could combine their assets to maximize access to unconventional oil sources; while some predict the development of “supermajors” similar to those emerging in the late 1990’s, the FT notes there are very few plausible mega-merger combinations in today’s market. FT
Climate Change. The Wall Street Journal reports on several climate-policy actions planned to be announced by the Obama administration in coming weeks, including separate regulations to cut carbon emissions from big trucks, airlines, oil and natural gas operations, and power plants. The near-term timing of these rules will allow the Administration to oversee as much of the regulations’ implementation as possible before President Obama steps down from office, while also allowing for key progress on U.S. climate policy initiatives prior to the United Nations summit this December. WSJ
Energy Outlook. The crude oil price collapse is expected to reduce Canada’s long-term oil output growth by more than one million barrels per day, due mostly to major capital spending cuts among Canadian energy companies. This production downgrade illustrates key differences between the Canadian and U.S. oil industries; while U.S. shale drillers are able to relatively quickly halt and ramp up production as prices move, Canadian production stems from oil sands projects that require substantial upfront investment and then run at full capacity for decades. FT
Oil. Oil prices rose today following EIA forecasts that U.S. shale-oil production will decline this summer. Specifically, the EIA’s Drilling Productivity Report calls for oil production to fall by 91,000 barrels per day to 5.5 million barrels in July in the top seven shale regions, which accounted for 95% of domestic oil production growth and all domestic natural gas growth from 2011 – 2013. EIA, WSJ
June 8, 2015
Climate Change. Leaders from the Group of Seven (G7) industrial powers set a new and ambitious target to phase out fossil fuel emissions within the twenty-first century, beginning with a reduction in greenhouse gas emissions of 40 – 70 percent of 2010 levels by 2050. Although it remains unclear how the G7 leaders will meet these emission reduction goals, this target is the most precise and long-term pledge that has been made to date. FT
Oil. Heinz-Peter Bader of Reuters argues that OPEC’s decision not to cut production on Friday was “entirely predictable and the only practical option open to its members”. Bader asserts that because both the shale revolution and permanent loss of global demand act as lasting supply-side shocks to the market, OPEC’s only sustainable approach moving forward is to continue pumping oil and allow the market to adjust on its own. Reuters
Energy Policy. In a testimony before Congress on the regional implications of a nuclear deal with Iran, Brookings Executive Vice President Martin Indyk asserts that possible negative repercussions are not sufficient to justify opposing the deal altogether. Specifically, Indyk argues that the deal is not likely to trigger a nuclear arms race, but will rather remove a primary source of tension in the region and give the United States a ten-to-fifteen year window to develop a more robust strategy to promote regional security. Brookings
June 5, 2015
Climate Change. New research from the National Oceanic and Atmospheric Administration (NOAA) indicates that what appeared to be a slowdown in global warming in the early 2000’s was actually based on incorrect data. Specifically, NOAA found that when adjustments are made to the way global temperatures are measured, the slowdown largely disappears — and suggests that 2015 will likely be another record-setting temperature year. NY Times
Energy Policy. In an analysis of the EPA’s proposed Clean Power Plan, the Environmental Information Administration finds that the proposed regulation would accelerate additions of renewable electric capacity and speed up coal plant retirements. While additions to wind capacity would be greatest over the next decade, solar capacity is projected to take off through 2040 as it becomes more cost competitive. EIA
Oil Outlook. OPEC announced at its meeting in Vienna today that it will keep its collective output level unchanged at 30 million barrels per day — a level that is now viewed as more of an “indicator” than a “ceiling,” as members consistently produce above the official level. Looking ahead, it is unclear how the addition of Iranian oil will weigh on the market in the event that a nuclear deal comes to fruition with the U.S., Europe, Russia, and China. WSJ
Energy Policy. Harvard economics professor James Stock discusses the EPA’s recent Renewable Fuel Standard requirements, applauding the Administration’s move to partner ethanol expansion with a USDA program to help the industry install new “blender” pumps at service stations. Professor Stock asserts that while this program acts as a subsidy for the ethanol industry, it will support “the most promising short-term path toward reducing carbon emissions from the transportation sector and matches money from states and the private sector”. Reuters
June 4, 2015
Fracking. The Environmental Protection Agency issued a draft report today concluding that hydraulic fracturing has not caused any major harm to drinking water supplies. The report — which EPA claims to be the “most complete compilation of scientific data to date” — is a big win for the oil and gas industry, which has faced many allegations that fracking pollutes groundwater, drinking water, and air. Bloomberg, Report
Energy Outlook. Asian consumption of gasoline and other fuels has been unusually strong in recent months, largely stemming from structural changes in the economies of China and India. While many Asian counties are experiencing their slowest economic growth in years, growth in certain regions — such as the interior provinces of China — has continued to boom as many residents buy their first car or upgrade to larger models. Reuters
Solar. At a major OPEC conference in Vienna this week, oil ministers of Saudi Arabia and Kuwait spoke at length regarding their efforts to expand solar power. Both nations have recently undertaken large solar power projects to advance their goals of becoming “solar exporting powerhouses” while fueling their own rapidly growing domestic demand for energy; energy analysts speculate that this heightened attention to alternative energy sources will spur similar investments among other government ministries in the region. Reuters
Biofuel. Robert Bryce of Bloomberg View writes that corn ethanol should be viewed as “worse than Keystone” for environmentalists, particularly in light of recent findings that the product produces more carbon dioxide per year than the proposed pipeline would. In conclusion, Bryce notes that the “ethanol industry’s interests continue to trump other interests”, especially in light of Iowa’s economic dependence on corn ethanol production and the importance of Iowa for presidential contenders. Bloomberg View