Narrative Violation!
If you only got your news from the mainstream media or the environmental activists, you would think the U.S. is on the brink of a Co2 emissions crisis and the only way to combat the rise in emissions is through investments in “green energy”.
Taking a step back and looking at the emissions data tells a different story.
Currently the per capita emissions for U.S. citizens is at the lowest level since the 1940s, while emissions on an absolute basis are at levels we saw in the 1980s. If we are rapidly lowering our total and per capita emissions why is there not more media attention to this positive development? I suspect the reason is because the primary driver of the emissions reductions was caused by the increase in natural gas usage, not “green energy”. Plus fear and alarmism sells, good news stories don’t get many clicks.
To be fair, renewable energy, nuclear, efficiency gains and carbon offshoring have played a part, but natty gas is the star of the show. Major narrative violation!
Since the shale revolution kicked off in the mid-2000s natural gas production has exploded higher, providing an affordable and abundant replacement for coal fired power generation. This should be celebrated by all. A free-market solution creating positive environmental outcomes.
Solutions like using increased natural gas production to displace more carbon intensive energy sources are “bottom up” drivers of innovation. Put another way, natural gas displaced coal because it made our energy cheaper and provided an alternative for consumers that made their quality of life better.
If we want to have a real energy transition, we need to continue to foster and develop solutions that don’t require “top-down” mandates to force consumer choices. Energy transitions need to be deflationary and cause meaningful positive changes to society and the economy.
So next time you hear talk of the impending emissions crisis, point to the data, and paint a more positive picture. Also be sure to give credit where credit is due!
This Week in Energy News:
The Inflation Reduction Act made it through the Senate after Joe Manchin changed course and struck a deal with Senate Democrats. Proponents of the bill claim that its provisions will fight climate change, back clean energy initiatives, raise tax revenue, and help lower inflation.
Most of the energy provisions deal with extending tax credits for rooftop solar panels and credits for purchasing electric vehicles. Although one provision is aimed at expediting the completion of the Mountain Valley natural gas pipeline, which has been hung up in the courts under activist lawsuits.
The pipeline developer Equitrans Midstream has had positive stock movement on the news, rising to a three month high after the deal was announced.
Equitrans spokesperson Natalie Cox released a statement saying:
“MVP is being recognized ass a critical infrastructure project that is essential for our nation’s energy security, energy reliability, and ability to effectively transition to a lower-carbon future.”
The reforms proposed in the bill would set timelines for permitting reviews and statute of limitations guidelines for court challenges. It is not yet clear how much the bill will in fact “lower inflation” but greenlighting new infrastructure projects to grow natural gas supplies will likely reduce some of the upward pressures on natural gas prices that we have seen in 2022.
Pricing and Markets Update
Crude Oil
At the time of the newsletter, WTI was trading at $88.59/bbl. Crude prices have steadily declined in August with concerns of global oil demand.
Last week, President Biden announced plans to release the next round of Strategic Petroleum Reserve release of 20 mm bbls. The White House said the previous SPR release decreased gas price by $0.40/ gal. They also announced plans for crude buy back to refill the SPR, which will provide additional price support for out months.
Many of the majors are expected to report very strong Q1 earnings. Many companies have also stated that they expect crude prices to continue to increase due to the current market conditions.
The EIA Petroleum Status Report for the week ending July 29th, 2022 reflected a crude inventory increase of 4.5 mm bbls. Domestic crude production remained the same as the prior week at 12.1 mm bbls. Refinery run rates continue to run at max rates at 98.2% utilization. Jet fuel supplied decreased from the prior week to 1.4 mm bbls.
www.eia.gov/petroleum/supply/weekly
Natural Gas
Nat Gas futures are seeing an upward tick today, opening at $8.281 and bouncing around the mid-$8, after spending much of the week on a downward trend. As the summer heat wave eased earlier in the week, demand cooled off while the Natural Gas rig count continued to climb. Tensions continue to mount over Nord Stream’s turbine maintenance issues. With the pipeline operating at 20% of capacity, Russia claims the giant turbine is stuck in transport due to Western sanctions, while Germany believes the delay is deliberate. This looks to be a bullish force for prices, but the vulnerability may continue as seasonally cooler weather should start to trend in the coming weeks.
In the Midcon, total demand is projected to see a 700 MMcf decline through the weekend, while outflows have dropped to a near two-week low, according to Platts Analytics. With producers looking to capitalize on high prices, supply has surged as flows from the Midcon to East Canada have hit record highs this summer. While the Dawn hub has absorbed much of the supply, uncertainty remains around the longevity of the surge. The projected demand decline and excess supply have pushed prices down as ANR-OK comes in $0.46 off Henry Hub this morning at $7.37 while NGPL-Midcon follows closely behind at $7.27.
The EIA released storage numbers this morning, coming in at 2,457 Bcf, representing a net +41 Bcf increase from the previous week. This increase was slightly above marketplace expectations +37 Bcf. Stocks were 268 Bcf higher this time last year, however, this week’s levels are still within the 5 yr. historical range of 2,794 Bcf.
Natural Gas Liquids (NGLs)
Majority of Mont Belvieu and Conway products are down from same period last week. Only MB Isobutane (+2%) and Conway Propane (+1%) are higher, with both Ethane prices down double digits, 10% and 14%, respectively. Conway N. Gasoline is also down 12% from Thursday of last week. MB Propane was relatively flat.
Rig Count Update:
The U.S. oil and natural gas rig count picked up a rig on the week to 856, with oil rigs adding five to 659 and gas rigs sliding four to 197, per Enverus late last week. The combined count is now at its highest level since Dec 2019. Rigs counts were flat across the major basins, with the Bakken being the lone basin adding a single oil rig. Although crude prices have been off roughly 20% from early June, the drilling outlook is still relatively strong for the balance of 2022. “Demand for rigs is going strong, leading to high day rates and tight rig supplies”, said Patterson-UTI CEO William Hendricks during the company’s Q2 earnings call last week.
Talk Energy Podcast
Check out the latest episodes of the Talk Energy Podcast below:
#135: Saudi Inc.
This episode’s guest is Ellen R. Wald PHD, a professor in middle east history and President of Transversal Consulting. Ellen studied history and focused on Saudi Arabia, its rich history in oil & gas development and the role the Kingdom plays in global geopolitics.
Ellen’s book "Saudi Inc." is a deep dive into Saudi Arabia’s role in the world oil markets and the history of Aramco. This episode we discuss Biden’s recent trip to visit the Saudis. We talk about the Russia Ukraine conflict, the impact it has had on oil markets, and the unintended consequences of Western Sanctions on Russia. Lastly, we discuss the cultural shifts in the public’s view of oil & gas with the backdrop of climate alarmism.
Video:
#137: Oil & Gas Market Update with Abhi Rajendran
This episode we cover the domestic and global oil & gas markets and get Abhi's views on how the year is going so far.
Video:
#136: Energy Misinformation
This episode had returning guest Brian Gitt talking about the common types of energy misinformation seen in the media and spouted by politicians.
Video:
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