Energy Policies

ESG Funds Buy Russian Over Canadian Oil

Posted on by Ron Clutz

More evidence that ESG investing is poppycock is revealed in Jeff Lagerquist’s Yahoo Finance article Why ESG funds ‘shockingly’ buy Russian oil instead of Canadian crude.  Excerpts in italics with my bolds.

Russia’s war on Ukraine continues to expose uncomfortable realities for environmental, social and governance-focused (ESG) investments, prompting calls for the asset management industry to rethink the loosely-defined term as analysts point to “shocking” holdings within some funds.

A new report from CIBC Capital Markets shows many of the 10 largest energy holdings across ESG funds have pared down or exited investments in Canada’s oil sands, while half stayed invested in Russia. At the end of 2021, the bank found ESG funds owned twice as much Russian oil and gas as Canadian oil and gas.

“Perhaps most shockingly, the ratio of dollars held in Gazprom (a Russian state-owned energy firm) was six times that of Suncor,” the CIBC analysts wrote in research published on Monday.

According to the report, the big four Russian energy companies, NK Lukoil, Novatek, Gazprom and NK Rosneft, accounted for about 0.2 per cent of the global ESG holdings. That’s double the size of investments in Canada’s TC Energy (TRP.TO)(TRP), Suncor Energy (SU.TO)(SU) and Canadian Natural Resources (CNQ.TO)(CNQ), the bank said.

“Russia and Saudi Arabia may well emit less CO2 per produced barrel of oil equivalent than some North American firms, but they also invariably have less robust social and governance oversight,” the CIBC analysts wrote.

“This says nothing of the reality many of their energy entities are de-facto state controlled and often aligned (read: weaponized) with foreign policy objectives – many of which will be an affront to mainstream ESG investors.”

Several of the world’s largest companies and institutional investors have moved to cut ties to Russia in recent weeks, amid increasingly violent attacks on Ukraine’s population. ESG funds held at least US$8.3 billion in Russian assets before Russia invaded Ukraine, according to data compiled by Bloomberg.

Those include the country’s financial firms. Bloomberg News recently reported that Vanguard Group and Northern Trust upped their stakes in Russia’s leading bank through their respective index-based ESG funds in January, as Vladimir Putin’s forces amassed on Ukraine’s borders.

Vlad Tasevski, chief operating officer and head of product at Purpose Investments, says these examples show the need to rebalance the trio of ESG priorities. He says the environmental “E” in ESG is being over-emphasized, likely due to the greater challenge of measuring the social and governance variables, compared to hard carbon emissions data.

Tasevski isn’t overly surprised by the lack of enthusiasm for Canadian fossil fuel producers across ESG funds. He says Canadian producers have been “overwhelmingly negatively impacted by the ESG movement,” even as the industry has worked to shrink its carbon footprint, and invested in technology like carbon capture and storage.

CIBC says global flows into ESG funds were down more than 50 per cent through the first two months of this year, after setting records in 2020 and 2021. The bank says flows out of ESG funds have outpaced net outflows from other asset classes.

 

Oil Is Hero or Zero, Which Is It?

Posted on by Ron Clutz

United Arab Emirates’ Minister of Energy and Infrastructure Suhail Mohamed Al Mazrouei attends a session of the Russian Energy Week International Forum in Moscow, Russia October 14, 2021. REUTERS/Maxim Shemetov

David Blackmon explains at Forbes UAE Energy Minister Urges The World To Make Up Its Mind About Oil.  Excerpts in italics with my bolds and added images.

Speaking at the Global Energy Forum by the Atlantic Council in Dubai on Monday, United Arab Emirates (UAE) Energy Minister Suhail al-Mazrouei urged the public and global policymakers to make up their collective mind about whether they want more oil production, as quoted by Reuters.

“I think in COP 26 all the producers felt they were uninvited and unwanted but now we are again superheroes, it’s not going to work like that,” he said in reference to last year’s UN-sponsored COP 26 global climate conference, at which representatives from the oil and gas industry were disinvited to attend. Obviously, a short-sighted decision by the organizers, given recent developments.

Al-Mazrouei emphasized the need for long-term planning related to energy needs, and pointed to the reality that the recent pattern of governments and investors alternatively forcing under-investment in finding new oil resources and then demanding more oil production whenever prices rise is not sustainable. He pointed out that the OPEC+ cartel as a group must invest the capital needed to replace 5 to 8 million barrels of oil per day of production each year just to maintain a steady level of global supply.

“We as a country are trying to do our best. We are investing and raising our capacity to 5 million barrels,” he said. “But that does not mean that we will leave OPEC+ or do something unilateral. We will work with this group to ensure that the market is stable.“

Oil company leaders who have seen their industry derided for years by the climate change lobby and globalist politicians in the U.S. and other Western democracies who have pumped the energy transition narrative can be excused for seeing more than a little irony in the suddenly urgent calls from the same policymakers for them to now rapidly raise their production levels. Indeed, expecting a major supply response from the U.S. industry in the current economic environment seems not just ironic, but unrealistic.

The point is that the days of the U.S. industry being able to increase production by an amazing 2 million barrels per day, as it did across one 12-month period during 2018-19, are no longer with us. The industry simply lacks the investor capital support and supply chain efficiency to run the 1,000+ active drilling rigs required to accomplish that in the current environment.

That doesn’t mean, however, that U.S. domestic production will not rise during 2022. In fact, the Dallas Federal Reserve Office recently reported results of a survey that indicate that the corporate U.S. producers plan to increase their year-over-year production by 6% in the current year, while privately held companies plan a more robust 15% increase. If those plans combine to produce, say, an 8% increase overall, it would mean an increase in U.S. daily production of almost 1 million barrels per day during the 2022 calendar year.

Given the successful efforts by both government and ESG investors to limit the domestic industry in recent years, that would be a pretty extraordinary achievement. So, Minister al-Mazrouei is right in saying that oil producers shouldn’t be treated as superheroes, but their companies are still capable of doing some big things despite the best efforts of their opposition.

 

SEC Agency Aims to Legislate US Climate Policy

Posted on by Ron Clutz

Jay Clayton and Patrick McHenry explain in their Wall Street Journal article The SEC’s Climate-Change Overreach.  Excerpts in italics with my bolds and added images.

Congress shouldn’t palm off its responsibility for social and economic policy
on financial regulators.

The Securities and Exchange Commission will propose sweeping new rules this week requiring publicly traded, and perhaps even private, companies to disclose extensive climate-related data and additional “climate risks.”

Setting climate policy is the job of lawmakers, not the SEC, whose role is to facilitate the investment decision-making process.

Companies choose how best to comply and thrive under those polices, and investors decide which business strategies to back. That approach addresses many societal issues—think vaccines—and enhances global welfare. Taking a new, activist approach to climate policy—an area far outside the SEC’s authority, jurisdiction and expertise—will deservedly draw legal challenges.

What’s worse, it puts our time-tested approach to capital allocation, as well as the agency’s independence and credibility, at risk.

Understanding and addressing global climate change is one of the most complex and significant issues of our time. Some predict we face inevitable catastrophe, while others say the costs of the transition to a “net-zero world” outweigh the benefits  We know four things for sure.

♦  First, implementing an economywide emissions-reduction policy will have a profound impact on the domestic energy, labor, transportation and housing markets, among others. Many jobs will be destroyed while others are created. Some businesses will close while others will flourish. Even if the long-term benefits outweigh the costs, near-term stresses on working Americans are inevitable and will be distributed unequally.

♦  Second, leaving policy decisions this significant to a single regulator—or even a patchwork of regulators—has failed time and again. Tellingly, there is no indication that the SEC has meaningfully coordinated with any of the other relevant federal agencies and departments on the policy choices embedded in its proposed rules.

♦  Third, Russia’s war against Ukraine demonstrates again the clear and longstanding links between energy policy, global stability and competing national interests. America’s ability to lead on the global stage depends on our economic and military strength, and energy policy is a key to both. These issues are far outside a financial regulator’s depth and mandate.

♦  Fourth, the body that the Constitution prescribes for weighing the relevant trade-offs in this area is Congress. Congress, duly elected by and responsible to the people, is precisely where climate policy, in all its complexities and consequences, should be resolved. Yet over decades, elected leaders have pushed hard policy questions to federal agencies staffed by unelected bureaucrats, whose decisions are reviewed only by unelected judges.

This is at best bad for democracy and at worst unconstitutional.

Demanding that the SEC “act on climate change” allows politicians to say that they are working on their constituents’ behalf without accepting responsibility for the hard choices involved in crafting policy.

Executive branch and independent agencies, including the Environmental Protection Agency; the Transportation, Labor, State and Treasury departments; and other financial regulators, have a role to play. They should work to inform Congress during the policy-making process and then implement legislative mandates in their respective areas of expertise.

Unfortunately, because the SEC has decided to move forward unilaterally, the debate will shift not to Congress, where it belongs, but to the courts. The commission’s chosen path will allow the political buck-passing to continue and delay thoughtful, appropriate and democratically accountable policy.

If and until Congress acts on climate policy, the message to regulators must be clear: Stay in your lane.

Mr. Clayton served as SEC chairman, 2017-20. Mr. McHenry, a North Carolina Republican, is ranking member of the House Financial Services Committee.

See Background Post SEC Warned Off Climate Disclosures

Biden’s War on American Energy

Posted on by Ron Clutz

From  zerohedge America’s energy policies, specifically those centered around oil and gas, are “bat shit crazy” and the Biden administration is doing nothing but creating “turmoil” in the oil markets, according to geologist and fossil fuel expert Dr. Marc J. Defant. More on Dr. Defant’s credentials at the end.  Excerpts in italics with my bolds and added images.

How did Biden’s policies impact the lower production of oil and gas?

By 2019, due primarily to fracking, the US became the number one producer of oil and gas in the world. In fact, we became a net exporter of oil and gas.

Prior to Biden entering office, oil production of oil shales reached over 12 million B/D. but fell more than 1 million B/D during 2021. During this time, Russia became the world’s largest exporter of oil which helped fund their war effort in the Ukraine.

Social Cost of Carbon

Under Obama, the government came up with a dollar value called the social cost of carbon. It is supposedly an estimate by the government as to the environmental damage from everything from rising sea level to wildfires and floods from the release of one ton of carbon dioxide via fossil fuel burning. But scientists are still completely uncertain about the direct impact the burning of fossils fuels may have on the environment. I hope this causes you to suspect the number may be related to magic.

But that never stopped the Obama administration from coming up with a solid amount of $57. Trump reduced the number to $7, but Biden revised the number to $51. The number is important because it gave the Biden administration the leverage to restrict oil and gas production based on supposed environmental and economic threats from greenhouse gasses (i.e., reduce permitting on federal lands).

As might be expected, gas-producing states fought back by challenging the social cost of carbon in court, and a judge issued an injunction preventing the administration from using the metric. But rather than submit to the judge’s ruling, the Biden administration simply decided to stop new permits on federal lands blaming the judge for the action – sigh. But Biden has been slow-walking permitting since he became President. He is the only President in 20 years not to have an onshore lease sale in a given year (2021).

Intentional Destruction of American Energy Production

We should not be surprised by Biden’s actions. During his campaign he promised to end drilling on federal lands to fight climate change. As much as 25% of oil and gas production comes from federal lands.

Finally in November of last year, the Department of the Interior, which is required by law to have quarterly lease sales, opened its first Gulf of Mexico oil lease auction which generated $190 million from oil companies. But alas, a green Obama-appointed judge vacated the auction after [environmentalists] Earthjustice out of San Francisco sued.

The ruling effectively ended new drilling in the Gulf, where some of the world’s environmentally friendly oil resides.

There are some state representatives that claim the Biden administration went ahead with the auction knowing full well it would be vacated. As you might imagine, the Department of the Interior will need a great deal of time to review the environmental impact of drilling in the Gulf (wink wink).

Bloomberg reported that an oil executive mused:

“Biden is signaling that his environmental goals trump energy security and consumer prices… that’s not lost on public companies or banks they rely on.”

Ultimately, investment in the oil industry increases when roadblocks to making a return on investment are removed. Biden’s actions have scared off many potential investors further reducing oil production. Press Secretary Jen Psaki’s oft repeated statement that 9.000 leases have been permitted is at the very least disingenuous considering the impediments to drilling the Biden administration has created.

Intentional Constriction of American Energy Supply

Psaki frequently claims that the Keystone XL Pipeline has no impact on oil prices because it will take two years to complete (only one year now if they had not shut it down). But Psaki is undermining (purposely in my opinion) the importance of the supply chain.

For example, the oil that would come through the pipeline has to be shipped by train. Recent train crashes demonstrate the danger of transporting oil via this method. And it obviously costs a lot more to ship via rail. But in a real head scratcher, Biden waved sanctions on the Nord Stream 2 pipeline from Russia to Germany. Why is this acceptable, but the XL is not? Russian oil is notoriously dirty (high sulfur content).

One would think Biden would be doing everything he could to send American oil and gas to Europe rather than making them more dependent on Russian oil.

Ultimately, the Biden administration has intentionally raised significant barriers in permitting supply of oil to the US. Infrastructure is extremely important to the supply of cheap and clean oil to the American economy.

The production of oil and gas in America is highly regulated – it’s the cleanest in the world both in lack of contaminants like sulfur which pollute and the way the industry protects against leaks.

The invasion of Ukraine by Russia created fears about the future of oil supplies which, in turn, pushed oil prices to record highs. And although the US buys less than 10 percent of its oil from Russia, Biden’s decision to stop buying oil from Russia, created more turmoil in the markets.

But perhaps the most irrational decision ever made by a President is Biden’s pursuit of [the] Iranian (and Venezuelan) nuclear deal to get access to Iran’s oil. They are the foremost sponsor of terrorism in the world and yet we are willing to sign a very one-sided treaty with them to gain oil which is extremely dirty (high sulfur).

We will pay them just as Obama did, with the helicopter carrying billions of dollars. And those payments will make it easier to develop delivery systems once they finally develop a nuclear bomb. On top of this, we are helping them build an nuclear power plant that will give them clean energy but not us.

Finally, I ask you to remember, gasoline prices were rising quickly way before the war in Ukraine broke out not only due to Biden’s interference in our oil production but also the inflation caused by his huge spending bills. Now we are going to buy oil from Iran instead of enabling our own industry to supply America’s needs. It is the very definition of “bat-shit crazy.”

Dr. Marc J. Defant is a professor of geology/geochemistry at the University of South Florida. He worked for Schlumberger Well Services and Shell Oil for three years, with two years at Shell working as an exploration geologist.  He has also been Editor of Geology and an Associate Editor of the Journal of Geophysical Research. Dr. Defant was also invited by the Chinese Government to be a keynote speaker at a symposium on the continental crust and has given invited talks at Massachusetts Institute of Technology, Columbia University, Universitè de Bretagne (Brest, France), University of California at Los Angeles, University of Georgia and Tennessee, and Woods Hole Oceanographic Institution, as well as many others.

 

 

‘C’mon Man’ Stop Sabotaging American Energy

Posted on by Ron Clutz

Kevin Mooney writes at Real Clear Energy ‘C’mon Man’ Stop Sabotaging American Energy. Excerpts in italics with my bolds and added images.

Ask Joe Biden a question about rising energy costs and he’ll be quick to fix the blame on Russian dictator Vladimir Putin while sidestepping any responsibility for his own policy failures.

But Putin’s authoritarian regime has only accelerated a process that was already in motion prior to the Russian invasion of Ukraine. After mismanaging the U.S. economy for the past year, Biden’s incessant “C’mon Man” routine is not playing well with the public. A broad cross section of polls shows Biden’s job approval ratings remain underwater.

The soaring inflation and rising gas prices that have been evident to American consumers long before the Russian invasion are at least partly responsible for Biden’s negative numbers. As a career politician who has been in Washington D.C. for more than 50 years, Biden has always stood on the wrong side of history exercising poor judgment at every turn. America would be in a stronger position today to resist Putin’s aggression if the Biden administration has not advanced heavy handed regulatory policies that discourage oil and gas development. The same is true of European leaders who have made themselves overly dependent on Russian energy.

That was one of the central messages Tom Pyle, president of the Institute for Energy Research, delivered during his March 8 testimony before the House Committee on Energy and Commerce.

“Unfortunately, but not surprisingly, in the wake of the 2020 election, President Biden made it clear that he intended to be an energetic advocate against the oil, coal, and natural gas that makes modern life possible,” Pyle said in his testimony. “Oil markets, now faced with an existential threat, responded as one might expect. The price of oil went up. In response, Mr. Biden inexplicably asked Russia and OPEC for more oil. National Security Advisor Jake Sullivan issued a statement calling on OPEC Plus (the most important part of the “Plus” is Russia) to produce more oil.”

From here, Team Biden’s self-inflicted wounds only became worse, Pyle explained, as the administration took “numerous actions designed to reduce the enthusiasm of energy companies to find, produce, and transport, domestic oil and natural gas.”

Pyle also expressed concern about the “propaganda” attached to the utility of so called “renewable energy” such as wind and solar. Despite several decades of subsidies and mandates aimed at increasing their use, renewables produced just 12.4% of American energy consumed, Pyle told lawmakers.

“A significant part of our current problem is the endless repetition of the propaganda about the utility of alternative sources of energy, the possibility of net zero greenhouse gas emissions, and the inevitability of an energy transition,” Pyle said. “These foundational myths have led directly to higher energy prices for Americans.”

But the policy missteps are not limited to the Biden administration. The European Union has also failed to sufficiently invest in oil and natural gas while chasing after renewable energy, Pyle observed in his testimony. He cited figures showing that in the past 15 years, natural gas production in Europe has fallen by 30% while natural gas consumption has only declined by 13%.

“This was driven by government policy, not market forces,” Pyle said. “Consequently, Russian natural gas has become more critical to European energy security. At the moment, the EU consumes about 540 billion cubic meters of natural gas a year.Over 40% of that originates in Russia. It is no surprise, therefore, that the European and the American governments have hesitated to impose strong sanctions against Russian-sourced energy and Russian energy companies either before or after the invasion.”

Then there’s China, which dominates the market for the mining, production, and processing of critical minerals that help power electric cars. These include: copper, lithium, nickel, and cobalt.

That’s a problem since Biden’s EPA is hot to trot for implementing new rules crafted with an eye toward coercing Americans into buying electric cars. During his testimony, Pyle discussed the EPA’s new greenhouse gas emission standards for passenger cars and light trucks through model year 2026. “This rule essentially mandates that 17% of new vehicles in model year 2026 be fully electric or plug-in hybrids,” he said.

As electrification grows, so will reliance on China.

“It is challenging to believe that Americans would be in favor of trading energy independence – which we currently enjoy despite the best efforts of some in the Administration – for dependence on a genocidal regime (and identified as such by both the current and previous Administrations) marked by international hooliganism,” Pyle said.

Even if a future administration were to abruptly reverse course from the damage done under Biden’s watch, there’s an opportunity cost associated with current efforts to discourage domestic and oil and gas development.

Energy executives and their investors are understandably hesitant to begin exploratory efforts in an environment where federal officials from Biden on down have expressed hostility toward their products. Never mind Putin.

The problem is not just one of poor judgment at the Biden White House, but also a fundamental misunderstanding of what it takes to reinvigorate American energy. That’s why American Petroleum Institute President and CEO Mike Sommers recently took White House Press Secretary Jen Psaki to school when she said there are 9,000 approved oil leases that the oil companies are not currently tapping into. Psaki was responding to media questions about Biden’s ban on new oil and natural gas leases on public lands.

“Just because you have a lease doesn’t mean there’s actually oil and gas in that lease, and there has to be a lot of development that occurs between the leasing and then ultimately permitting for that acreage to be productive,” Sommers told Bloomberg News.

“I think that they’re purposefully misusing the facts here to advantage their position.”
C’mon Lady.

As IER points out in a blog post, the oil industry has to pay the government fees for renting leases whether or not oil and gas is ultimately found and produced. Moreover, it takes anywhere from 7 to 10 years for oil companies to know if a lease will become productive. It’s not hard to understand why they aren’t rushing in at a time when the clown act that is the Biden White House is pressuring banks to refrain from investing in the oil and gas industry

A paid agent of either China or Russia could not do a better job of sabotaging American energy at a time when it’s needed most.

Big Oil Embraces Its Demise for the Honor of Saving the Planet.

Posted on by Ron Clutz

Robert Romano asks and answers the pressing energy question in his Daily Torch article Why aren’t oil companies drilling more? Look no further than the ESG goals in their corporate annual reports. Excerpts in italics with my bolds and added images.  H/T John Ray

The largest oil producers in the U.S. do not appear to have major plans to increase production through 2025, a review of U.S. Energy Information Agency (EIA) data and corporate reports of U.S.-based oil companies reveals, despite oil prices being over $100 per barrel and inflation raging at 7.9 percent the last twelve months.

According to EIA, U.S. oil production will reach 12 million barrels per day in 2022 and 12.6 million barrels per day in 2023, a return to pre-Covid production levels that peaked at 12.9 million barrels per day in Nov. 2019.

But what about over the long term? A look at top U.S. oil producers reveals that these companies have been pivoting away from carbon-based energy for years. In short, they’re going green.

[ExxonMobil and Chevron are two examples where] explicit Environmental, Social and Governance (ESG) goals are being pursued by the largest oil companies in the U.S., particularly goals to support the Paris Climate Accords and to reduce carbon emissions to zero.

In both companies’ cases, the strategies short-term include deploying carbon capture technologies as well as reducing onsite carbon emissions on existing production facilities, and more investment in green energies.

Long term, however, they are sealing the fate of carbon-based energies, by embracing an investment model that calls for their extinction.

Ultimately, that will mean almost no oil production or consumption, a goal that would be contrary to an oil company’s continued existence and profitability.

ESG investing has increased dramatically the past decade via private retirement funds regulated under the Employment Retirement Income Security Act (ERISA) thanks to a regulation by the Obama Labor Department in 2015.

In addition, the $762 billion federal Thrift Savings Plan (TSP) for federal employee retirees will begin investing in ESG funds in 2022, following state government employee retirement funds in California, New York, Colorado, Connecticut, Maine, Maryland and Oregon.

The combination of these incentives and subsidies has led to an unprecedented rise of ESG investment: $38 trillion out more than $100 trillion global assets under management, will grow to $53 trillion by 2025, according to Bloomberg News. That’s about one-third of all assets under management, not necessarily seeking profitability, but to save the world.

BlackRock, a hedge fund with more than $9 trillion of assets under management, have placed green activists onto the board of Exxon to make it a “not-oil” company, thanks to ESG. Other hedge funds like Vanguard also make significant ESG investments.

But it has led to catastrophe. Besides making Europe and the West increasingly dependent on energy from adversaries like Russia, inflation is on fire. Thanks to the energy crisis, even major ESG beneficiaries like Tesla CEO Elon Musk are calling for an increase in oil and gas production in a bid to offset Russia, writing on Twitter on March 8: “Hate to say it, but we need to increase oil & gas output immediately. Extraordinary times demand extraordinary measures.”

Musk is right. It’s time to expand production dramatically. But ESG won’t let us. That’s a big problem.

The net result of these policies incentivizing and subsidizing ESG investments has been to restrict capitalization and financing to carbon-based oil, coal and natural gas energies in favor of green energies such as solar, wind and electric vehicles — and endangering the West.

As it turns out, energy security is national security, and with ESG, we do not have energy security.

See also Wake Up and Smell the Fossil Fuel Insanity

Wake Up and Smell the Fossil Fuel Insanity

Posted on by Ron Clutz

Terry Etam writes a BOE Report Column: The world faces both a hydrocarbon shortage and a divest fossil fuels movement. What next, oil patch? Excerpts in italics with my bolds and added images.

Today’s question is one only the hydrocarbon crowd can answer:  What’s your game plan from here forward?

 There are a thousand occupations and situations, each with its own decision tree.  Despite the potential variance, it’s still a valid question, because we globally we are at a crossroads of some major significance. The well-being of much of the world’s population depends on what the hydrocarbon industry does over the next few years. At the same time, the pressure is building for the hydrocarbon industry to shrink and wither (as in the wildly successful divest fossil fuels campaign, or banks cutting back on oil/gas loans to curry favour with Those That Matter).

The question is not an easy one given the dramatic reframing of the hydrocarbon industry over the past few years. We used to be the good guys, the world’s fuel providers, a dynamic and entrepreneurial and fast-moving assembly of doers.

Then the narrative changed, and the industry went from relative obscurity to Public Enemy Number One. By 2019, public animosity towards it reached a peak, with orchestrated mass protests around the globe. 2020 brought a near-death experience as Russia and OPEC decided to decimate prices in a battle for market control, and all the anti-hydrocarbon protesters switched from protesting to cheering, famously claiming that “oil was dead”, that oil prices would never recover because EVs were causing rapid demand destruction, and that the humane thing to do now was to justly transition all hydrocarbon workers to other industries.

Even typing that stuff now sounds like an alien experience, like walking around in a crowd without a mask.

The reason those conversations feel so outdated is because, today, it is clear that oil is about as dead as the internet. Some will of course say that high oil prices will hasten a transition to renewables, and that is true that it will make renewables more cost competitive (though still no match on the reliability front).

But consider that a rapid transition to renewables is impossible from a mining perspective alone.

The IEA has said that a global Net Zero 2050 transition would require four times the number of critical mineral mines by 2040 (a virtual impossibility when governments are making mining harder everywhere).  And the Geological Society of Finland calculated that a full transition via renewables/EVs would require more critical metals and minerals than there are known global reserves.

If you are still on the fence as to whether hydrocarbons’ days are numbered, consider that Germany, the world’s most advanced energy-transition country, just days ago mused that drilling for new oil/gas deposits in the arctic sounds like a pretty good idea.

Consider also that this is the new-ish Green-led government saying this. Keep in mind also that any arctic development takes years at a minimum, so these developments have nothing to do with this immediate crisis. If Germany is plotting decade-length oil/gas developments, that tells you all you need to know about the demise of hydrocarbons. There isn’t one.

But that doesn’t answer the question at hand. What will people in the industry do? Will they bolt and get retrained in something else? There are a variety of situations of course, but one is far more ominous than the others. Here’s a bit of a dissection.

Process people will most likely keep processing; any occupations that are in perpetual flow states will likely not stop because of a lack of employees. If you are a gas marketer or pipeline scheduler or refinery manager, there isn’t a visible break point in the continuity of business.

But producers are different. Much different. Next year’s barrel of production won’t necessarily and automatically appear as part of a continuous flow. A lot of very capable brain power needs to be enacted, crews hired and managed, etc. Finding and developing new oil/gas flows is a choice.

If no one chooses to find and produce more petroleum, the flow slows, then stops. If geological talent dries up/retires/moves on, new production doesn’t just happen. Same with drilling crews or completions experts or – dare I say it – truckers.

Anti-hydrocarbon sentiment rums deep in academic institutions, yet it is those very institutions new employees will have to navigate if they are to land in the oil patch. It is no longer “just another option”. There is stigma attached to petroleum programs.

There is venom coming your way from complete strangers. It should then be no surprise that students are acting accordingly; they are going elsewhere. In one US study, from 2016-19, the US petroleum engineering student count fell by 60 percent, and no doubt has fallen further since. Even here in the heart of the Canadian oil patch, the University of Calgary has suspended the petroleum engineering program after the student count fell to an all time low of 10 – and that’s over a two year period.

What if no one chooses to look for oil anymore? Yes, ten thousand western elites will cheer wildly, but billions of trucker-grade people around the world that need that fuel for survival will say WTF, or some such local equivalent.

Those ten thousand western elites will tell all the global plebeians Hey, don’t worry! Solar panels are on the way. And the billions will say Yeah…but can I get a fridge that has power for more than six hours a day? And western elites will say Nope! But don’t worry batteries are on the way. And billions of those plebeians will say Great! When? And western elites will say Battery storage is cheaper than its ever been! And the plebes will say Great! When? And western elites will say Death to fossil fuels! And the plebes will ponder in awe the presumed mysticism and superiority of elite non-sequiturs, little conversational re-directs that the great unwashed masses simply aren’t worthy of comprehending, and then they will starve to death.

And the hydrocarbon producers will be sitting there wondering what to do next. They’ll answer the phone and second cousin Moonbeam from Toronto or San Francisco will be shrieking about how you’re killing the planet.  But you’ll turn on the news and hear that it is a moral imperative to produce more oil since all you oil guys are rolling in money which will be true.  But then the politicians will be saying ‘We’ll take that windfall money btw and then whatever is left better be going into green projects.  But yes you had better increase production right now and we mean right now but only for this year and then everyone should divest fossil fuels.  And we’ll see you in court for all the emissions you’ve unilaterally created over the past century, and maybe the fines will be deductible from the windfall tax and maybe not.  We’ll let you know when we’re good and ready.’.

If this sounds melodramatic it isn’t. In fact, the situation is far more critical than it sounds, in terms of global impact: there is a multi-trillion dollar behemoth of a fuel system that keeps humanity alive. It is 80 per cent hydrocarbon-based. There is at present no substitute. Most parts of that system function conditionally – they require a non-stop flow of hydrocarbons.

The various components of this huge system have “something to do” because, and only because, a relatively small group of people and entities at the origin of that system, the upstream, choose to keep it full. This small group looks at seismic, looks at well logs, drills wells, does production plans, builds small scale infrastructure to bring this energy life-blood on stream. Without those few people the system withers just as does a plant pulled from the ground.

A lack of expertise and/or interest in bringing new hydrocarbons to market will mean that the world’s supply dries up. Good, the ten thousand activists will say. Good, you might say, let’s see who needs who. But these other seven-plus billion won’t be too thrilled at all. No fuel, no fertilizer, no food. All because of choices we’ve made here in the west.

So? Will you continue to power the world or not? A lot of hungry mouths are desperate to hear a yes. Those in power here in the west, the ones that control your economic destiny, have a crazed and volatile look in their eyes as they try to figure it all out, but are publicly unable to support you because they’ve been kicking you in the ribs for a long time and it’s kind of hard at that point to stop and call all the other kickers bullies.

Don’t look at me, I have no idea what happens next. All I can say is that at the point it becomes optional, I will choose not to put my head in the vise any longer. I suspect I am not alone.

Postscript on Petroleum Companies \Outlook and Viability

Outlook 2022: Oil Industry from Proshare

Chart 22: Global oil demand (mb/d) 2019 -2022

Source: OPEC, Proshare Research * OPEC’s Predictions

In the OECD countries, there were larger-than-expected oil demands in H1 2021. However, oil demand struggled to recover to the pre-pandemic level due to lower demand for industrial and transportation fuels for the rest of the year. Oil demand within the OECD for 2021 mirrored the slow phase of economic growth due to supply chain disruptions and the uptick in COVID-19 cases.

Meanwhile, non-OECD’s oil demand in 2021 fluctuated for the better part of the year on demand swings from China and India. China’s crude imports started the year relatively high but fell to an average of 8.9 mb/d in October, the lowest since February, as refiners lacked import quotas and mobility remained limited on the back of the Zero-Covid-19 policy implemented in the country. India’s crude imports also fell to an average of 4.0 mb/d in October, following 2 months of successive gains. Thus, the Covid-19 and supply chain induced soft patches in H2 2021 across Asia impacted considerably on the global oil demand in 2021.

Illustration 30: Determinants of Crude Demand in 2021

Oil Supply

The global oil supply for the year 2021 was driven mainly by the decision of OPEC+, which strived to achieve balance in the oil market.

The share of OPEC in global oil production stood at about 27.7% in 2021, with an average production of about 26.32 mb/d (see chart 24 below).

Chart 24: Global Oil Supply (mb/d) 2019 – 2022

Source: OPEC, Proshare Research * OPEC’s Predictions

Oil Prices

The tightness in the market kept oil prices elevated in 2021. Despite the lingering Covid-19 pandemic, demand had more robust fundamentals while supply was constrained by underinvestment, low spare capacity, and outages. The global oil market began the new year 2021 with a price rally above the 2020 average, and both benchmark contracts reached their 2021 highest in October, with Brent at US$86.70 and WTI at US$85.41 per barrel. Brent price averaged US$71.2 per barrel in 2021, up by 63.3% Y-o-Y above the US$43.6 per barrel average in 2020. Brent increased from about US$51 per barrel in January 2021 to about US$79 per barrel in December 2021, representing a gain of about +55% YTD (see chart 25 below).

Chart 25: Brent Crude Price in 2021 (US$/barrel)

Source: Oilprice, Proshare Research

 

 

 

 

 

Green Energy Puts US Electric Grid in Peril

Posted on by Ron Clutz

Matthew Kandrach writes at Real Clear Energy America’s Emerging Energy Crisis. Excerpts in italics with my bolds and added images.

The warning signs are everywhere. We are stumbling toward an energy crisis that is likely to be far more severe and long-lasting than the upheavals of the 1970s. And no, this isn’t about Russia or Ukraine. This is about the perilous state of the U.S. electricity grid.

If action isn’t taken soon to address the unraveling reliability of the grid, the United States will face the specter of rolling blackouts, factory shutdowns, loss of jobs and soaring electricity bills. Our organization CASE recently released a policy brief highlighting just how dire the situation is.

Events In recent years show how serious the situation is. According To the Wall Street Journal, outages have gone from fewer than two dozen major disruptions in 2000 to more than 180 in 2020. The catastrophic blackouts that gripped Texas for a week in February of last year should have been eye-opening. Now, warnings from regulators, grid operators and utilities suggest far worse is coming.

There’s no getting around it. The nation’s electricity transmission system is growing increasingly undependable. Aging infrastructure, severe weather, and the rapid pivot away from baseload power to intermittent solar and wind are all contributing. Supply chain problems and local opposition to building new power lines and siting renewable projects are also turning into increasingly tall hurdles. Expectations of increased demand driven by electric vehicles are only compounding the challenge.

The energy transition is happening but the question we must ask is how do we responsibly manage it? It’s becoming apparent that the transition to renewables is vastly more difficult and complicated than some believed. Those who want to shut down every coal and natural gas plant ignore that fossil fuels supply 60% of America’s electricity. There’s growing alarm the America’s haphazard approach to the energy transition is taking apart the existing grid and the reliable generating capacity that long underpinned it far faster than we’re adding reliable alternatives.

Coal plants, in particular, are being pushed aside when it’s becoming painfully clear the optionality, fuel security and reliability they offer the grid is still very much needed. If we continue as we are – ditching the well-operating power plants that hold the grid together during severe heat and biting winter cold –we’re only going to exacerbate this crisis of our own making.

The affordability of our power supply also hangs in the balance. Last year, a 17% surge in coal-fired electricity helped shield consumers from rising natural gas prices. As we continue to disassemble the coal fleet, with another 100 gigawatts of coal capacity expected to close by 2030, we’re robbing the grid of an important price shock absorber for when natural gas prices rise. With global demand for gas rising, U.S. exports soaring and the Russian invasion of Ukraine throwing volatility into global energy markets, dismantling fuel optionality is short-sighted and reckless.

Europe’s decision to race away from coal and close much of its nuclear power capacity before having reliable alternatives in place, has left it at the mercy of Russian natural gas imports and soaring global gas prices. Energy security – now more so than since the energy crises of the 1970s – requires careful attention.

The singular, haphazard focus of climate-driven energy policy requires an abrupt rethink.

There remains an opportunity for an energy policy reset – both at the state and federal levels – to tackle this reliability and affordability crisis head on. First, we must recognize the need for dispatchable fuel diversity and fuel security. That must also include a commitment to increasing capacity reserve margins in electricity markets instead of letting them continue to shrink. As we grapple with the complexities of the energy transition and the challenges posed by integrating renewable power and building transmission infrastructure, we need a reliability and affordability insurance policy. The insurance we can provide is recognizing the value of the generating capacity we already have and the importance of dispatchable fuel diversity.

Responsibly navigating the road ahead means building on the shoulders of our existing baseload capacity, not taking it apart.

 

 

Oil Is Progress. Warming Alarmism Is Regression.

Posted on by Ron Clutz

Rob Smith writes at Real Clear Markets Oil Consumption Is About Progress. Global Warming Is About Alarmism.  Excerpts in italics with my bolds and added images.

Why is it that we are ruled by the dumbest on the planet? As I have previously stated, there is NO threat that “systematic climate change” is going to change our lives one iota, much less ruin the planet. It is a sham, and Dear Reader, if you don’t understand “what’s up” after witnessing the government’s Covid 19 fear campaign, you get a free membership into the “Docile Non-Thinking Sheep Society.” Baa.

Virtually everything government officials and their foot soldiers told us about Covid turned out to be a lie.

Notice, I did not use, the more diplomatic term “untrue.” They knew they were spreading misinformation and doing everything in their power to cancel anyone exposing their deception. Masks don’t work, but they do deprive one of needed oxygen and cause children to develop speech issues. Prophylactics that could have saved over 500,000 lives were banned and disparaged as “dangerous.” The “Know It Alls” put Covid patients in nursing homes, tens of thousands of non-sick then died. They said you won’t get the virus if you have the vaccine, and that the vaccine would prevent the virus from spreading. “The vaccines are perfectly safe,” evidence is mounting that the CDC and our government elites knew this to be untrue. Millions were prevented from seeing their doctors, visits that would have detected serious illnesses like cancer and heart problems. Thousands died needlessly. Our so called “experts” response to every issue was 180 degrees from what it should have been. “Awake, dear heart, awake. Thou hast slept well. Awake.” As Americans awake from their hypnotic slumber and the Covid “tempest” passes, we should never forget what our government did to us.

Had officials in the federal government done absolutely nothing to combat Covid, many less people would have died.

Instead they purposefully spread fear, and in doing so, it gave them the power to transfer trillions of dollars of wealth to favored constituencies depriving the private sector and market forces to determine the most efficacious uses of these resources. These people shut down millions of businesses and forbid people from going to work or in some areas leaving their homes just to walk down the street. It was likely the stupidest decision in mankind’s history.

These are the same “authorities” lecturing you on “climate change.” Why would you believe anything they say?

Before the advent of fossil fuels, man existed in a Hobbesian world where life was “solitary, brutish, nasty and short.” Slavery and servitude was the norm. The amount of time that has elapsed since Col. Drake drilled the first oil well in 1859 is only 163 years. This represents less than .000543 % of modern man’s existence on earth. In other words, for 99.999467 % of man’s history, man did not harness petroleum products and life absolutely sucked.

In just .000543% of modern man’s existence, life on earth has improved 1,000 fold. An absolute miracle and an impossibly without the oil and gas industry. Americans should erect giant statues of oil rigs in every town square with inscriptions of adulation venerating the industry’s accomplishments and the benefits it has provided humanity. Yet, the absolute stupidest people in the world want to eliminate this fuel source. Unfortunately, moronic people are pretty good at getting elected to office. Dementia Joe and the witless AOC, both stupid on steroids, are now in control of our energy policy. Joe whose family got rich whoring themselves to foreign oil and gas companies, set out to destroy the American oil and gas business on his first day in office. The chickens are coming home to roost as the global consequences of nitwits interfering in these market forces are now apparent. America was energy independent and a net exporter of oil and gas immediately before Brandon’s inauguration. The less energy America produces, the less supply on the world market and the greater the costs. In 2020, the average price of oil was $39.68/barrel. It peaked over the weekend at $130/barrel. In Slow Joe’s State of the Union address, he mentioned that the way to beat inflation is to “Buy American.” That is a ridiculous understanding of economics, as the exact opposite is true, robust worldwide trade reduces prices. But if Joe wants America to buy American, why destroy the American energy sector? It is all being done at the altar of the false god of “Climate Change.” That is how the high priests and apostles of Climate Change think.

Industrial policy where government directs resources to decide winners and losers is always a disaster. It is a “grim” fairy tale. Look at the accomplishments and incredible efficiencies of the oil and gas industry and the combustible engine. Before Sleepy was inaugurated, I could buy a gallon of gas for less than a bottle of water. This gallon of energy was pulled out of the ground as crude oil thousands of miles away, then shipped to a refinery where it was turned into gas, then shipped to the Texaco station 5 blocks from my house. This one unit of energy could power my 5,000 lb. German car, with a carload of occupants and luggage to the next town 25 miles away for less than $2. There are over 150,000 easily accessible and well-located fueling stations around the country and likely an equal amount of repair shops. If my car needs a new fuel pump, I can purchase it online and have it delivered to me the next day. I used to own several gas stations. If a dropped my prices $.05/gallon, every other gas station within 20 miles would follow my lead. There is no industry more competitive and efficient than the oil and gas industry, nor one that provides so much convenience to the consumer, not to mention benefits enjoyed by the entire world. Yet, the “Apostles of Doom” want to destroy it. This entire energy infrastructure was built solely by market forces. There were no pointy-head Harvard grads in the Commerce Department deciding how to extract oil from the ground or where to place gas stations. No government industrial policy made this happen. Zilch, Nada, Zero. It is an amazing testimony to the wonders of capitalism.

Yet, despite the wonderous efficiency of the oil and gas industry, we have stupid people (many are Harvard grads), who ignore the miraculous phenomenon that is right smack in front of their eyes. Why we want to worship the Golden Calf, not the God that delivered us from bondage! The simple-minded charlatans of Climate Change want to wave their magic wand and eliminate this entire industry. Untethered to reality, they think if they click their ruby slippers three times and utter “Renewable Energy” then this new industry magically appears. These are the same dolts who force taxpayers to pay subsidies to Iowa farmers to grow corn for ethanol, a fuel source that reduces gas mileage and damages engines. Brilliant. Only pompous, soft handed, sneering government elitists and their sycophants would think growing food for cars instead of people is a good idea. The “Dolts” know better than the trillions upon trillions of decisions of people voting with their own money who like the current system. It is stupid beyond words, so to achieve their objectives, they must do the Covid 19 Tango and spread lies, fear and deception and then mandate acceptance of their remedy against your will. If one calls them out on their fear tactics that person becomes an enemy of the state. How stupid was it to shut down practically every business in the country during Covid? Astoundingly stupid. How stupid is it to promote electric vehicles stating they reduce our reliance on fossil fuels when all the energy to charge the batteries comes from fossil fuels?

Let me tell you what our national energy policy should be in two words: Do Nothing.

I assume one day; the oil and gas industry might fade away. It might be 50 years or 1,000 years from now. When it does fade away, it will be because market forces allocate resources to new technologies that have not yet been invented or perfected. Maybe it is electric, fusion or nuclear, but it could just as easily be that some West Virginia hillbilly (no offense to hillbillies) invents the new technology by tinkering around in his basement. Having the government misallocate resources through mandated industrial policies just keeps capital out of the hands of the most talented and productive and retards growth and innovation.

So if you are a member of the Docile Non-Thinking Sheep Society, take a deep breath. Now exhale. You just exhaled carbon. It is a natural substance. Without it all life on earth ceases to exist. The planet is not going to implode. Take a chill pill. Get a life. Trade in your girly-man Prius and buy a Hummer.

.

Energy Puritans Enable Enemies of Democracies

Posted on by Ron Clutz

Russian President Vladimir Putin and Swedish climate activist Greta Thunberg (Reuters)

Western media has stirred up a puritanical revulsion against carbon-based energy, resulting in calls for prohibition of fossil fuels.  Leaders in western democracies responded with regulations and constraints punishing companies either producing energy or operating supply infrastructure.  This empowers market dominance by sovereign energy nations, some of whom are autocratic, and one of whom just invaded Ukraine.

Author blasts ‘green delusions’ of Western countries that empowered Putin’s energy advantage in Europe.  Excerpts in italics with my bolds and added images.

‘As the West fell into a hypnotic trance … worshiping a teenager named Greta, Vladimir Putin made his moves,’ Michael Shellenberger wrote

In a Tuesday Substack post headlined, “The West’s Green Delusions Empowered Putin,” Shellenberger argued Putin understood economics better than his western counterparts, citing the latter’s incapability of understanding the realities of energy production, and questioned how countries like Germany allowed themselves to become so dependent on an authoritarian country.

“How has Vladimir Putin … managed to launch an unprovoked full-scale assault on Ukraine?” Shellenberger wrote. “There is a deep psychological, political and almost civilizational answer to that question: He wants Ukraine to be part of Russia more than the West wants it to be free.”

“Missing from that explanation, though, is a story about material reality and basic economics—two things that Putin seems to understand far better than his counterparts in the free world and especially in Europe,” he added.

Shellenberger pointed to the differences in energy production and consumption between other European countries and Russia, noting that Europe consumed more energy than it produced, while Russia produced more than it consumed.

“The reason Europe didn’t have a muscular deterrent threat to prevent Russian aggression—and in fact prevented the U.S. from getting allies to do more—is that it needs Putin’s oil and gas,” he wrote.

Shellenberger argued that the focus on “Green ideology” made European countries “incapable of understanding the hard realities of energy production,” and that their moves away from natural gas and nuclear energy gave Putin command over Europe’s energy supply.

“As the West fell into a hypnotic trance about healing its relationship with nature, averting climate apocalypse and worshiping a teenager named Greta, Vladimir Putin made his moves,” he wrote, referencing teen climate change activist Greta Thunberg and noting that Putin expanded nuclear energy and oil production in Russia while western countries obsessed over “carbon footprints.”

Shellenberger specifically used Germany shutting down its nuclear energy production as an example and cited figures showing 47% of the natural gas consumed by the European Union in 2021 being exported from Russia.

“The result has been the worst global energy crisis since 1973, driving prices for electricity and gasoline higher around the world. It is a crisis, fundamentally, of inadequate supply. But the scarcity is entirely manufactured,” he wrote.

“Europeans—led by figures like Greta Thunberg and European Green Party leaders, and supported by Americans like John Kerry—believed that a healthy relationship with the Earth requires making energy scarce,” he added. “In service to green ideology, they made the perfect the enemy of the good—and of Ukraine.”

The controversial Nord Stream 2 pipeline from Russia to Germany was halted following Russia’s invasion of Ukraine last week, something the Biden administration avoided pressing at the request of Germany despite shutting down construction of the planned Keystone XL pipeline from Canada to the U.S. immediately after taking office.

In order to counter Russia’s continued dominance over energy markets, Shellenberger implored Biden to have Germany halt any future shutdowns of nuclear reactors and to have the ones previously shut down turned back on, called on Canada and the U.S. to expand their energy production for increased export to Europe, and argued the U.S. needed to expand the construction of nuclear plants rather than shutting them down.

“Putin’s relentless focus on energy reality has left him in a stronger position than he should ever have been allowed to find himself. It’s not too late for the rest of the West to save the world from tyrannical regimes that have been empowered by our own energy superstitions,” he wrote.

See also The Greta/Davos Collusion

And also, about the miniscule contribution of wind and solar to energize the world today:

Many observations are possible by studying these exhibits. For example, some activists insist that passenger air travel is dangerously warming the planet, and ordinary people should stay home, with flights restricted to essential trips by global elites. A glance at the transportation statistics on slide #2 shows Aviation is only 4% of fossil fuel consumption (12% of 34% FF used for transportation). And aviation includes cargo transport, so passenger travel is a fraction of that.

The bulk of FF transport consumption is Road, meaning cars and trucks, which is why some are demanding electric vehicles be the only means of mobility. Yet a look at slide #6 shows that presently only 10% of electricity comes from Wind, Solar and waste fuels. Furthermore, for all of the investment in wind and solar power, slide #7 shows that so called “green energy”` supplies only 2% of the world’s energy needs.

See World of Energy Infographics

Background  Activists Attack Energy Companies, State-owned Producers Benefit