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Gavin Newsom’s Unbridled Energy Hubris

Three big oil and gas-related stories this week were all interrelated with one another, though few really understand that to be the case. Those stories were:

 

 

For Governor Newsom, banning hydraulic fracturing – or “fracking” as it has come to be called – in his state is a relatively simple matter in what has become, for all intents and purposes, a one-party state. All he has to do is convince his overwhelming majorities in both houses of California’s state assembly to pass a bill mandating that all fracking operations cease within the state’s borders by a date certain.

Such a move would of course eliminate thousands of oil and gas-related jobs in the state, but most of those are concentrated in Republican Kern County and the surrounding parts of the Central Valley, over which the assembly’s Democrats would have little concern. Besides, they can all just respond to Republican and industry complaints with the Obama-era pretense that all those lost jobs and more will be made up by the heavily-subsidized wind and solar industries. It will be akin to former President Obama telling West Virginia coal miners and Ohio steel workers that their jobs are never coming back and they should all go learn to code.

Replacing the state’s millions of gas and diesel autos with electric vehicles will be far more complicated. Newsom’s order gets that ball rolling by requiring the California Air Resources Board to implement the phaseout of new gas-powered cars and light trucks in the coming years, and also require medium and heavy-duty trucks to be zero-emission by 2045 where possible. Sounds simple, right?

But here’s the thing about all of that: The generation and provision of energy is basically a zero-sum game. When you ban one energy source, you must figure out a way to generate the same amount of energy by another source. You either do that or you accept the reality that energy will become scarce, and thus far more expensive so that consumers demand less of it, and write off the negative economic consequences that will inevitably result.

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Did BP Really Say That Global Oil Demand Has Peaked? No, Not Really.

During a panel discussion in which I participated recently with three energy experts, the moderator asked us if we agreed with the recent projection by British oil giant BP that oil demand may have already peaked during 2019. Everyone on the panel answered with a firm “no.”

From my own perspective, I gave that answer in large part because all of the dozens of previous “peak oil” predictions – whether from the supply side or the more recent demand side reasoning – have turned out to be entirely wrong, often in hilarious fashion. From an historical perspective, it just seems like the safer position to take.

That’s not to downplay the position assumed by BP, whose internal expertise is undeniable. But it’s key to note that much of the media coverage the company’s findings have received portrays BP’s position as being far more absolute than it really is. The company’s position on “peak oil” is in fact highly-qualified.

As a part of its recently-released Global Energy Outlook study, the company ran three scenarios based on differing assumptions regarding how rapidly governments around the world would attempt to move to adopt emissions-reducing policies and subsidize renewables. The cases were labeled “Rapid” (the most aggressive assumptions), “Net-Zero” (assuming most governments would adopt ‘net-zero by 2050’ policies) and “Business as Usual”, in which progression would continue on the slower path seen to date.

In a COVID-19 hampered world in which governments across the globe are teetering on the brink of insolvency, the “Business as Usual” scenario certainly appears to be most likely to persist for the time being, given the multi-trillion dollar costs involved in the other two cases. Under that scenario, BP in fact projects that global demand will not only recover to pre-COVID levels seen late last year, but continue to grow through the year 2030.

Read the Rest Here

 

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Today’s news moves at a faster pace than ever. Whatfinger.com is the only real conservative alternative to Drudge, and deserves to become everyone’s go-to source for keeping up with all the latest events in real time.

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Biden Tries Again to Clarify His Fracking Stance, and Fails Again

The Biden/Harris ticket has been the source of a great deal of confusion during this campaign related to the candidates’ stances on the subject of hydraulic fracturing. Senator Kamala Harris firmly stated several times in the past that she is absolutely in favor of banning fracking, but has been attempting to walk all of that back in recent weeks as the polls have tightened in oil and gas states like Pennsylvania and Michigan.

Former Vice President Joe Biden, meanwhile, has been all over the place on this issue, promising repeatedly to ban fracking in whole or in part during the primary season, and more recently joining Harris’s efforts to modify that position in order to shore up his chances in those and other crucial swing states. Biden was asked the question again by an undecided voter during his CNN town hall appearance in Moosic, Pennsylvania this week, and again attempted to modify and clarify his position. Unfortunately, a reading of the transcript of that exchange doesn’t really clarify much at all.

Here is that transcript:

QUESTIONER: Good evening Mr. Vice President, Mr. Cooper. With the abundance of natural gas in northeast Pennsylvania. Do you support the continuation of fracking safely and with proper guidelines, of course, and growing the industry (garbled) additional jobs to our region?

BIDEN: Yes, I do. I do. In addition to that, we can provide for right now, as you know, for thousands of uncapped wells because a lot of companies gone out of business. Whether they’re gas or oil facilities, we can put to work right away 250,000 people from iron workers and other disciplines, making union wages. Capping those wells that are leaking methane and their danger to the community. And so, not only do I continue to support it.

Read the Rest Here

 

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Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Rumblin’ Bumblin’ Stumblin’ Joe Biden Lies His Way Through Pittsburgh

Creepy Uncle Quid Pro Dementia China Joe Biden was allowed by his handlers to venture out of the basement Monday on an emergency mission to Pittsburgh, as his campaign’s polling tanks due to the big-city riots his Party has been sponsoring around the country. Biden, who couldn’t be bothered to even acknowledge the mayhem being created by his Party’s domestic terrorist support groups at his convention two weeks ago, took the stage in Pittsburgh to try to convince the public that it’s all Trump’s fault.

“Does anyone believe there will be less violence in America if Donald Trump is reelected?” Biden’s speech in Pittsburgh said. “We need justice in America. And we need safety in America. We are facing multiple crises – crises that, under Donald Trump, keep multiplying.”

Well, yes, the crises keep multiplying because the Democrat Party and its corrupt toadies in the Nazi-style news media keep inventing them out of whole cloth. And let’s notice that that first sentence is in fact a direct threat to the American voter – a threat that the Party and media will only ramp up the violence and mayhem should they re-elect the President. That threat is seditious, and it is evil.

But things only went downhill from there. At one point, the Democrats’ Unfrozen Caveman Nominee tried his hand at China Virus math, and hilarity ensued:

Please marvel at the fact that Joe Biden was in fact standing there reading a damn speech off of a TelePrompter. And that, friends, is why you will never see Joe Biden on the same stage with President Trump in a debate. He can’t even be trusted to properly read a script.

Biden also at one point during his speech had this to say about allegations that he would ban fracking if elected:

“I am not banning fracking,” he said. “Let me say that again: I am not banning fracking, no matter how much Donald Trump lies about me.”

In fact, during the Democrats’ debate last August, Joe Biden raised his hand with everyone else on the stage when asked by the moderator if he would ban fracking. Raising your hand means “yes”, Joe.

But more recently, he has gone even further than that, promising to ban fossil fuels altogether:

So, yes, all you good people in Pennsylvania and other oil, gas and coal-producing states, Joe Biden would indeed ban not only fracking, but your entire way of life if he is elected in November. Just as importantly, once he resigns and hands the office over to his running mate, Kamala Harris, know that she has also repeatedly promised to ban fracking and indeed, all fossil fuels.

These people are liars, and they’re not really very good at it.

*** UPDATE *** The Trump campaign has already released this:

 

That is all.

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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Chesapeake Energy Finally Succumbs With Chapter 11 Filing

One of the longest-running dramas in corporate oil and gas history finally came to a climax on Sunday when management for Chesapeake Energy announced it would seek Chapter 11 protection under the U.S. bankruptcy code. The company has traveled a long and winding road to reach this point.

Rumors about the company’s pending bankruptcy have run rampant over the past year as it teetered on the financial brink. But in reality, Chesapeake’s financial troubles go back much further, to the early years of this century, when founder and former CEO Aubrey McClendon famously made a bet on natural gas continuing to be a scarce resource in high demand whose price would remain strong for decades. Based on that market view, the company then went on a buying spree for the next several years, buying up natural gas assets and companies at very high prices. In one acquisition in which the company I worked for – Burlington Resources – was the second high bidder, Chesapeake’s winning bid was $3 per MMBTU equivalent higher. That’s a lot of excess capital deployment.

None of his assumptions about the future for natural gas turned out to be accurate, of course, but it must be pointed out that McClendon certainly was not alone in making them. For example, I personally played a leadership role in a 2003 National Petroleum Council study which attempted to project natural gas supply, demand and prices through the year 2025. The study was led by ExxonMobil and Anadarko Petroleum (acquired last year by Oxy), and included participants from many other industry companies, the Energy Department, the Department of Interior and environmental NGOs.

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The fundamental conclusions and projections of that study basically supported McClendon’s view of natural gas remaining a scarce resource with pretty high commodity prices as far as the statistical models we used could project. It was in fact the prevailing common wisdom in the industry at that time.

The NPC study projected that imports of Liquefied Natural Gas (LNG) would in fact have to make up an increasingly high percentage of U.S. natural gas supply. That incredibly wrong projection led to the building of a series of LNG import facilities in the U.S. and helped compel ExxonMobil to invest billions in its own fleet of new LNG tankers to help supply America’s coming needs.

While other operators held similar views about the future for U.S. natural gas, Chesapeake was without doubt the most aggressive in terms of pursuing new reserves. In addition to arguably over-paying for acquisitions of other companies or their assets, Chesapeake became infamous for radically driving up lease bonus prices in every new shale play, in the process running up a prodigious level of corporate debt. At one point, Chesapeake’s corporate debt exceeded that held by ExxonMobil, a company many times its size.

As natural gas prices collapsed in the late ‘00s, McClendon next turned to sales of his own company’s assets or portions of working interests in big play areas as a means of continuing to finance and pay down that debt. He sold shares of the company’s working interests in the Barnett, the Eagle Ford, the Marcellus and the Haynesville to various other players, like BP and CNOOC, but every sale also meant less and less cash flow coming into the company itself. Many in the business during that time joked about it being a sort of a pyramid scheme in which the debts would ultimately end up outstripping the company’s income and ability to pay.

 

 

 

 

Read the Rest Here

 

That is all.

Today’s news moves at a faster pace than ever. Whatfinger.com is my go-to source for keeping up with all the latest events in real time.

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$70 Oil by the end of the Year? It Could Happen.

What a difference three months makes. Three months ago today, Russia and Saudi Arabia had just embarked on a completely irrational effort to flood the global oil markets after Russia had basically blown up the OPEC+ supply limitation agreement when it balked at making an additional few hundred thousand barrels of oil per day (bopd) in cuts.

But on Saturday, those same two big producers cajoled the rest of the countries participating in OPEC+ to extend the deep, 9.7 million bopd May/June supply limits through the end of July. The cuts had been scheduled to scale back to a combined 7.7 million bopd on July 1. Reuters reports that Saudi Arabia has now reduced its daily production by 2.24 million bopd from its market-flooding level in April, while Russia – which could not stomach a reduction of about 200,000 bopd back on March 4, has cut its own daily production by more than 900,000 barrels.

It’s pretty amazing how single digit – and even momentary negative – crude prices will change an oil minister’s perspective on what constitutes an appropriate level of output.

The OPEC+ members also pledged to monitor and reassess appropriate supply levels on a monthly basis, beginning with their next meeting, which is scheduled for June 18.

Combined with dramatic reductions in crude output in the U.S. and Canada and a more-rapid-than-expected recovery in demand, the extension of the OPEC+ May/June quotas sets the stage for a more rapid re-balancing of the global markets. Bjornar Tonhaugen, Rystad Energy’s head of oil markets, said that “Today’s deal is a positive development and, unless a second Covid-19 wave hits the world, it will be the backbone of a quick recovery for the energy industry. That is due to the oil stocks decrease that we will see as a result of the production deficit. Stocks are now what keep prices at relatively low levels and the quicker they fall, the faster we will see prices rise.”

Read the Full Piece Here

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Texas Oil Regulator Poses The Fundamental Question: “How Do We Start?”

After taking more than 10 hours of verbal testimony from more than 50 witnesses at Tuesday’s hearing, the three members of the Texas Railroad Commission tabled any decision on whether to move to limit oil production from Texas wells through its power of prorationing. During the course of the hearing, Commissioner Christi Craddick hit on the fundamental impediment that will likely prevent the RRC from any quick implementation of limits: There is no institutional memory on how to do it.

“We don’t know how to do it at the agency anymore,” Craddick said to one witness who was around during the last time the RRC enforced prorationing back in 1972. “Do we start on Jan. 1? Where do we start? How do we start?”

Exactly. As much as many struggling independent producers would like to think the Commissioners possess some magic bullet power that would boost prices and help them survive the most severe oil industry downturn in modern times, reality tells a different story. No one working at the RRC today was there in 1972, and even if they were, the industry the Commission regulates has fundamentally reinvented itself at least half a dozen times since then. The Commissioners and their current staff can read all the history books on the market about the golden age of prorationing, but that wouldn’t be much help to them in implementing new production limits soon.

Commissioner Craddick’s mention of a possible January 1 date for trying to implement the change is very telling. If professional industry analytical firms like Rystad EnergyIHSMarkit and Wood MacKenzie are accurate, the immediate crisis in global oil over-supply will have been resolved well before then, and oil prices should be well on their way back up to higher levels. It is equally likely that dozens of Texas oil producers will have been forced into bankruptcy in the meantime.

Another potential logical date of implementation would be September 1, which is the start of Fiscal Year 2021 for the Texas government. Even if the RRC currently possessed the budget and staff to meet that quick goal (it possesses neither) it is quite likely that the Texas industry will have already lost upwards of 2 million barrels of daily oil production by that time due to dramatically-lowered drilling activity and voluntary shutting-in of production.

Then there is the other practical limiter that the commissioners must consider: The budget. The Texas government famously operates on a two year budget cycle, with the legislature meeting for 140 days in odd-numbered years to make biennial adjustments. The RRC is currently operating under a budget that does not expire until August 31, 2021. Any upward adjustments to that budget designed to enable the Commissioners to hire in additional staff and build new computer systems to implement and police prorationing would have to be authorized by a special session of the Texas Legislature, subject to a call by Governor Greg Abbott.

Think of how unlikely that is to take place at a time when Texas is currently functioning under an executive order to avoid gatherings of more than 10 people due to the COVID-19 pandemic. Also consider how unlikely Gov. Abbott and the legislature would be to agree to increase any agency’s budget during this time of massive economic destruction.

Read the Rest at Forbes.com

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OPEC+, G20 Produce A Very Dim Light At The End Of A Long, Dark Oil Price Tunnel

After the OPEC+ countries produced an oil supply reduction agreement on Thursday that amounted to a half-measure at best, industry observers had pinned some hope on a firm commitment to further cuts coming from G20 call that took place on Friday. Those hopes were not fulfilled, as the G20 communique included only vague language indicating those nations would work towards “market stability.”

The language in the comminique reads as follows: “We commit to ensure that the energy sector continues to make a full, effective contribution to overcoming COVID-19 and powering the subsequent global recovery. We commit to work together in the spirit of solidarity on immediate, concrete actions to address these issues in a time of unprecedented international emergency. We commit to take all the necessary and immediate measures to ensure energy market stability.”

In this political season in the U.S., that reads like issue-specific talking points from a candidate trying to say something to placate the public and media without really taking either side of the issue.

Leaving matters even more up in the air, Mexico refused to commit to its full share of the OPEC+ cuts, saying it could only reduce its own production by 100,000 barrels of oil per day (bopd). U.S. President Donald Trump intervened to commit to his country to supporting Mexico’s part of the deal by supplying 250,000 bopd in cuts of its own, but left the process of how he would achieve that level of firm supply reduction unclear. This is a key question since the national U.S. government has very limited power to force firm reductions in production by the private companies that operate all wells in the country.

Canada, which has not been a participant in any previous efforts to control supply, also remained non-committal in terms of committing to any firm reductions of its own.

Read the Rest at Forbes.com

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The OPEC++ Deal: Calling it a Half-Measure is an Exaggeration

Let’s be honest: The so-called OPEC++ agreement to cut 10 million barrels of oil per day from global crude oil supply is a half-measure. Really, with Rystad Energy reporting that demand for oil will drop by 27 million bopd from January 1 levels during April, calling it a half-measure is an exaggeration.

Even this half-measure has still not been finalized, as Mexico’s government still has not committed to holding up its end of the bargain as of this writing on Friday morning. So, anything could still happen. All of which explains why the oil markets reacted negatively to the OPEC++ announcement, with oil prices dropping by more than 15% in just a few hours.

But here at least are the parameters of the agreement that are being reported Friday morning:

– OPEC++ (the OPEC nations plus Russia, Mexico, Canada, Brazil and several others) agree to cut 10 million barrels per day of exports from April through July;

– The cuts drop to 8 million bopd from August 1 through December 31;

– The cuts further fall to 6 million bopd beginning January 1, to continue for the next 16 months;

– The cuts include no formal contribution from the U.S. oil and gas industry.

President Donald Trump will discuss his views of America’s contribution to a reduction in global supply in a call involving the Group of 20 – or G20 – on Friday.

 

Read the Rest at Shalemag.com

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