The TxEnergyUpdate keeps you up to date on the energy sector's latest news and stories
INTERNATIONAL & NATIONAL ENERGY NEWS
Rising natural gas prices across Europe reveal what most have known: Russia, the largest exporter of gas, is willing to leverage its massive supply for political gain. While Moscow denies any foul play, natural gas prices miraculously dropped after President Putin promised to help calm the market.
“The European gas crisis has shown the extreme leverage that Russia has over Europe and beyond,” said Thierry Bros, an energy expert and professor at Sciences Po Paris. “Putin is the only one who could prevent blackouts in Europe because Russia has spare capacity. This is a position of power.”
Russia places the blame for the rising gas prices on Europe’s faith in the spot market. If Europe wants stable prices in the future, Russia encourages longer term contracts. Europe is in a jam because they’ve pivoted away from harvesting their own gas, and other options, like liquified natural gas (LNG) from the U.S., are more costly to attain than Russia’s direct pipelines. This has given Russia leverage to try and push things like the Nord Stream 2, a pipeline that will stretch from Russia to Germany, and cut out Ukraine and Poland, two countries with unfavorable opinions of Moscow.
Russia is embracing its gas and oil, and is set to produce up to one million barrels per day by next year. They are also expanding their reach to the east by providing China with coal, a large source of fuel for China’s economy.
“Russia’s role as an energy superpower is suddenly very clear,” said Daniel Yergin, vice chairman of consulting firm IHS Markit. If the U.S. has a panic button, someone should smash it now, because as a superpower, it’s clear Russia will leverage their power as they see fit.
Demand for energy is roaring back to near pre Covid levels, and as (mostly western) companies and governments taper back fossil fuels, renewables are unable to supply enough energy to fill the gap and meet the demand. For instance, “total global oil and gas investment this year will be down about 26% from pre-pandemic levels to $356 billion.” However, the International Energy Agency (IEA), said in a recent report that, “the world isn’t investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets.”
Few states have seen the repercussions of this volatile energy market like California. After announcing the retirement of many fossil fuel plants, and their sole remaining nuclear plant, the California Energy Commission has voiced concerns over their ability to meet growing energy demand in the upcoming summers. Hot summers, forest fires, and droughts have plagued California, leaving grid operators to take emergency action, from asking residents to conserve energy, to adding four “temporary” natural gas generators.
Meanwhile, the self-inflicted energy supply gap continues in Alaska. Large reserves of oil and gas remain in Alaska, but environmental groups have scared away investors. Bill Armstrong, who discovered the North Slope, one of the largest oil discoveries in U.S. history, says investors shirking away from oil and gas will not stop the demand. It will only put it in the hands of countries with fewer regulations.
The EIA says U.S. households that use natural gas to heat their homes could see a 30% jump in their heating bills compared to last year. Homes that use heating oil or propane could see their bills jump by 54% and 43% respectively. Homes that use electricity will see the lowest increase as their bill is expected to go up by no more than 6%. The rising prices run parallel with 5.3% inflation in the U.S. due to increased consumer demand, supply chain bottlenecks, and a weak labor force. If the upcoming winter brings colder than predicted temperatures, prices could go higher.
- "Energy CEO on gas ‘dysfunction’ and Dems’ clean electricity plan"
Last Friday, Vistra Corp CEO, Curt Morgan did an interview with E&E news. In the interview Mr. Morgan touches on the Clean Electricity Payment Program (CEPP) currently on the chopping block in the U.S. Senate, the rush to decarbonize and its consequences, and the status of state oversight from the Railroad Commission and the Public Utility Commission of Texas.
You can read the interview here.
- "Liz Peek: Biden team off to UN climate summit as their green energy policies fuel inflation at home"
In an opinion piece for Foxnews.com, Liz Peek points out that 13 members of President Biden’s cabinet will travel to Glasgow, Scotland for the upcoming United Nations Climate Change Conference, COP26. Ms. Peek rightfully points out the obvious hypocrisy that this conference falls during a major global energy crisis “brought on by the very policies the climate zealots will embrace in Glasgow.”
She continues to points out that while the Biden Administration struggles to curb rising inflation, they will essentially, take a vacation to Scotland to hear the choir preach, to include, Greta Thunberg, described by Ms. Peek as, “[the girl] who at 16 shamed the audience at COP25 by noting that promises of net zero emissions are "misleading" because they do not include air travel or shipping, or the production of goods in other countries.” She goes on to say about Ms. Thumberg, “Greta was right, of course, but she, like most climate alarmists, refuses to acknowledge that the entire world still relies on fossil fuels. Not everyone is content to travel by sailboat.”
Ms. Peek finishes by saying the policies promoted at these conferences, hurt Americans. And that she hopes one of the 13 cabinet members attending, “has a realistic grasp of America’s greatest geopolitical advantage and understands the need to promote and protect our inexpensive and abundant energy resources. Judging from the White House’s actions so far, that seems unlikely.”
In our last update we covered President Biden’s request for the Organization of the Petroleum Exporting Countries (OPEC) to ramp up oil production to alleviate rising gas prices in the United States. It seems that request has fallen on deaf ears, as it now appears President Biden is reaching out to U.S. oil and gas companies to help tackle gas prices, which are at a seven-year high. While discussions are ongoing between the Administration and U.S. oil and gas executives, the relationship is strained.
"By pursuing policies that restrict supply and make it harder to produce oil and natural gas here in America, Americans will have to pay more for their energy," said Anne Bradbury, chief executive officer at the American Exploration and Production Council.
West Virginia Senator Joe Manchin could be the one to kill the Democrats Clean Energy Performance Program (CEPP). The $150 billion dollar program is tied to the Democrats Reconciliation bill, and, as the article states, “would pay electric utility companies that switch from fossil fuels to renewable or clean energy sources and fine those that don’t.”
Senator Manchin sees the CEPP as an overstep of federal authority that it is unnecessary because many producers are making the transition to producing cleaner energy on their own. While negotiations are ongoing, it is clear that progressive Democrats will be devastated if one of their own party kills the CEPP.
TEXAS ENERGY NEWS
Following Oracle and Hewlett Packard, the latest company to move from California to Texas is Elon Musk’s Tesla. He announced the move during a shareholder meeting at Tesla’s under-construction gigafactory in Austin. While Musk said he plans on increasing production at the California plants, he acknowledged the challenges of scaling, saying “it’s tough for people to afford houses, and people have to come in from far away…There’s a limit of how big you can scale in the Bay Area.”
Governor Greg Abbott appointed six new members to the Texas Energy Reliability Council (TERC):
Brad Jones, Interim CEO of ERCOT, Nate Murphy, Senior Counsel for Valero, George Presses, Vice President of Fuel & Energy for H-E-B, Edward Stones, Global Business Director for Energy & Climate Change for Dow, Inc., Jon Taylor, Corporate Vice President of Fab Engineering and Public Affairs at Samsung Austin Semiconductor, and Melissa Trevino, Vice President for Power at Occidental Energy Ventures. All new appointees live in Texas.
TERC was a birthed by Senate Bill 3 (87R) to “ensure that the energy and electric industries in this state meet high priority human needs and address critical infrastructure concerns” and to “enhance coordination and communication in the energy and electric industries in this state.” It is comprised of the Governors appointees above, as well as Railroad Commission Chairman Wayne Christian and his appointees, and the Public Utility Commission.
- "Shell sells off its oil and gas business in Texas’ Permian Basin, seeking to reduce its reliance on fossil fuels"
Royal Dutch Shell recently sold its Permian Basin oil and gas business to Texas based ConocoPhillips for $9.5 billion dollars. This acquisition places ConocoPhillips as one of the largest producers out of the Permian Basin, alongside Exxon Mobil and Chevron. Ryan Lance, the chair, and Chief Executive Officer for ConocoPhillips called the deal “a unique opportunity” in a press release. He also said, “we are very excited to enhance our position in one of the best basins in the world with the addition of Shell’s high-quality assets and talented workforce.”
MEANWHILE IN CALIFORNIA...
The California Public Utilities Commission is concerned that the state will not have enough energy to meet demand in the upcoming summers. Right now, California is attempting to stock up on energy produced by renewable sources and invest in battery storage. But because they are stocking up on renewables while simultaneously closing their last remaining nuclear plant, which provides 10% of the state’s energy, as well as other fossil-fuel based plants, there is a growing gap between supply and demand.
California is already on one knee with wildfires and droughts. Add the weight of trying to decarbonize their entire power grid by 2045, and it’s easy to see why the state added four temporary natural gas plants and is vocal on the strong possibility that residents will have to endure rolling blackouts and electricity shortages in the future.
Proponents of the fast transition to renewables like Fong Wan, senior vice president of energy policy and procurement for Pacific Gas & Electric say “We are literally on the cutting edge” of rapidly adding renewables … and along with that, there are some things we are learning by trial and error, and we are taking some risks in the process.”