Daily Archives: May 22, 2009

Fiona Harvey

So the cap-and-trade bill trundles on through the US legislative process with the House of Representatives Energy and Commerce Committee last night voting through the much-mauled bill.

The bill itself is about 1,000 pages long, which gives an insight into the complexities of getting enough support together to ensure its passage through the committee stage.

It swelled in size under the influence of scores of amendments, many of which have been criticised as attempts by state representatives to win benefits for their states, such as free carbon permits for coal-fired power generators.

Fiona Harvey

Henry Waxman, chairman of the committee and co-sponsor with Ed Markey, said the bill enjoyed “substantial support from industry, labour and environmental groups from across the country”.

This is true, but does not tell the whole story. While many companies have embraced cap-and-trade – Duke Energy, Cisco, DuPont, Caterpillar, among others – the compromises that have been made to get the bill to this stage have also made enemies.

Kate Mackenzie

The IEA’s report for G8 energy ministers, to be presented this Sunday in Rome, has generated a few stories. Some picked up on the oil supply squeeze that awaits the world due to massive cuts in production investment. I wrote yesterday that the IEA forecasts that, for the first time since World War II, world electricity consumption will decline in 2009.

IEA chief economist Fatih Birol said he personally thought the electricity forecast was the most striking finding of the report.

However he was also keen to highlight concern about green spending in the G20 stimulus packages:

The agency will also tell ministers that its calculation of the stimulus spending required from G20 nations on renewable energy was inadequate and should rise by a factor of six if greenhouse gas emissions targets set by the United Nations were to be met.

Some more comments from Birol that didn’t make it into the story:

Ed Crooks

The world’s electricity use will fall this year for the first time since 1945, according to the IEA. That is an extraordinary event, revealing just how sharp the downturn in the world economy is. Electricity use is closely linked to economic activity, and when economies shrink, so does power consumption.

The downturn was already taking effect last year, helping carbon dioxide emissions in the US and Europe to fall, in the US case by the largest amount for more than 20 years.

An analysis to be published next week by Capgemini, the consultancy, explains why those short-term successes point towards long-term failures.

Kate Mackenzie

Gregor highlights the pointless polarisation of many debates on clean coal. The coal lobby makes too much of emissions improvements dating back to 1970; opponents minimise the simplicity of reducing coal use. The problem, he writes, is that as oil holds steadily above $60, cheap coal becomes even more attractive:

But as I have written previously coal is a nemesis precisely because it’s a cheap source of BTU that continually prices just below other fossil fuels. And sometimes, it prices well below other fossil fuels. Such a pricing is forming now, as oil climbs back above 60.00, while Central Appalachian Coal (CAPP) still lingers in the mid 40’s per ton. The 5.8 million BTU in a barrel of oil will set you back 60 bucks. Yes it’s liquid. And yes, it’s a very useful form of energy. But the fact remains that the world’s poor, a full quarter of humanity, is still in the process of migration to liquid fuels. And coal, with its versatility in both heating and industry, is still the fossil fuel of choice for the developing world. For 45 bucks, you can get yourself as much as 25 million BTU in a ton of coal. That’s a 25% price discount to oil, for more than 4 times the BTU.

Kate Mackenzie

On Energy Source:

China’s oil reserves: Another explanation for strong oil prices

Markets: Puzzlement continues

US natural gas unlikely to recover until 2012

Exelon moves a step closer to buying NRG Energy

Big oil’s lobbying spending up

Twittering in the eye of the storm

Elsewhere:

Nuclear is still not renewable, but not for lack of trying (Powerlines/Platts)

Prospects for oil and gas cooperation in the Middle East (Transcript/PDF) (Brookings Institution)

Fuel cell cars hit the road Development of hydrogen cars continues (CNet)

The economics of CAFE Does it really hurt jobs? (Baselinescenario)

Is it time for Congress to act on foreign oil? This week’s National Journal discussion, led by T. Boone Pickens (National Journal)

Deep roots to violence in oil-rich Nigeria Ken Saro-Wiwa’s legacy is very much alive (NY Times)

Sheila McNulty

Exelon has moved a step closer to acquiring NRG Energy in a hostile takeover to become the largest US power producer.

The Federal Regularly Energy Commission (FERC) unanimously approved Exelon’s application to acquire NRG. And Exelon’s Elizabeth Moler, executive vice president for government and environmental affairs and public policy, took the approval as proof that its bid would be successful:

The combination with NRG remains on track for closing in the fourth quarter of 2009.

Kate Mackenzie

The persistence of front month and near month crude oil prices above $60 has many commentators puzzled.

Demand remains low and inventories, despite a recent ease, remain high – especially when tankers are considered. Opec’s compliance level has also eased off in April. Investment in future production capacity is certainly falling, but this is a problem for the medium term. For many observers the price resilience is difficult to explain without pointing to macro factors such as equity markets, the weaker dollar and risk appetite.

Neil McMahon at Bernstein has another theory: that China building its Strategic Petroleum Reserve may be affecting price levels.

Crude oil was higher this morning amid a strong market for most commodities, trading above $61 a barrel.

Nymex July West Texas Intermediate rose 54 cents to $61.59 a barrel while ICE July Brent moved 59 cents higher to $60.52 a barrel.

Oil traders in the physical market remain puzzled about the recent strength in oil prices in spite of almost record high inventories and weak demand in the US and Europe. The focus will soon move towards Opec, the oil cartel, which meets next week in Vienna to discuss its production policy.

Gold also consolidated a two-month peak above $950 and and several agricultural and soft commodities hit fresh peaks. Read the full commodities report on FT.com.

Sheila McNulty

Even though US natural gas drilling has fallen from about 1600 rigs in operation at last year’s peak to about 700 now, the oversupply situation is continuing to build.

Indeed, Wood Mackenzie, the energy consultancy, says prices of natural gas, which have fallen to below $4 per million British thermal units from a high of more than $13 per million British thermal units, will remain low until demand returns to the global economy, to soak up some of the supplies.

Despite the credit squeeze, economic downturn, and low natural gas prices, which are combining to push some companies into bankruptcy, drilling is continuing in some parts of the US because the equipment is under contract and companies figure it makes more sense to use it than not. On top of that, there is the possiblity of losing acreage if companies do not drill on the land before leases expire. And liquefied natural gas (LNG) is flooding in from global markets because the US has the storage to hold the unwanted fuel amid the global downturn. All the while, new coal-fired plants are coming on line in the US to provide still more power  to US markets.

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