I hate the phrase “Innocent until proven guilty.” When serial killer Ted Bundy killed his first victim, he wasn’t innocent just because a court had yet to convict him. The correct phrasing — which practically nobody uses — is “Presumed innocent until proven guilty.” Yet nearly everyone says that a person is innocent until proven guilty. Most people know what is meant when someone says this, but there is the potential for confusion.
Language is important. The way we write and say things is important. I can’t count the number of times I have seen a news headline that would lead most people to conclude something entirely different than what the data actually suggested.
(RR edit: Some of you need to turn on your sarcasm detectors).
I just finished reading a story that made my blood boil. It was about how the oil industry is using dirty tricks to keep the ethanol industry in check. I need to sit down, take a deep breath, and make sure everyone knows of the atrocity that has happened in Kansas.
The problem started when the ethanol lobby requested — and subsequently received — a waiver from the Environmental Protection Agency (EPA) that would allow up to 15% ethanol in gasoline blends. The current limit is 10%, which is a problem for the ethanol industry because the mandate in the Renewable Fuel Standard already has the country at the 10% limit. It would be a huge boost to the ethanol industry if that limit was moved up to 15%, because that would increase the potential size of their US market by 50%. CONTINUE»
Over the past three weeks, there have been numerous headlines insinuating that a freefall in oil prices is underway. Last week I read that the various causes were a slowdown in China’s economy, OPEC’s decision not to cut production, and America’s growing oil production. Based on the headlines, one might suspect that we were right in the middle of a major bear market for oil.
Just how far had the price of West Texas Intermediate (WTI) fallen? All the way to $92 a barrel. Keep in mind that WTI opened 2013 at $93.14 a barrel. Since then it has traded between $98/bbl and $87/bbl. (In my Five Energy Predictions for 2013, I predicted that the price of WTI would average less this year than last year, and that the Brent-WTI differential would narrow. To date both predictions have proven to be accurate). CONTINUE»
Chemicals and Fertilizer Industries
In last week’s post Who Wins from Rising Natural Gas Prices?, I discussed the sectors that would benefit from rising natural gas prices. This week, let’s talk about the potential losers.
Natural gas is an important feedstock for the chemicals and fertilizer industries, so higher prices could pressure those sectors. Oil companies with significant chemical operations could also see this business segment take a hit, but based on ExxonMobil’s (NYSE: XOM) advocacy of liquified natural gas (LNG) exports, it clearly believes the net effect of rising natural gas prices on the company would be positive.
Dow Chemical (NYSE: DOW), on the other hand, has come out strongly against LNG exports because of the potential cost to its own business and that of other heavy users of natural gas. Ironically, last week the Department of Energy granted a permit to a facility called Freeport LNG — in which Dow owns a 15% stake. Dow’s answer to that is that they invested in the facility when it was supposed to be an LNG import facility.
But the risks to the chemicals and fertilizer industries are well-known. What isn’t as well-known is the risk from higher natural gas prices to the biofuels sector. This may be counterintuitive, since renewables like wind and solar power become more competitive as natural gas prices increase. CONTINUE»
Over the past two years the spot price of natural gas fell from nearly $5 per million British thermal units (MMBtu) in June 2011 to less than $2 per MMBtu in April 2012, before beginning a steady climb back to the current level of about $4 per MMBtu. Prices have been supported by resilient demand as well as diminishing supply from some of the more mature shale formations and the depleted wells offshore.
Stronger natural gas prices are good news for some and bad news for others. Natural gas producers like Chesapeake Energy Corporation (NYSE:CHK) were hit especially hard as gas prices fell. Between June 2011 and April 2012, CHK’s share price declined 25 percent. But over the past 12 months, CHK has rallied 36 percent as gas prices recovered. Since Chesapeake is the nation’s second-largest producer of natural gas, it’s not surprising that its shares track the price of the commodity. The company isn’t diversified, so it is nearly a pure play on natural gas.
Last week the U.S. Geological Survey (USGS) provided an update of oil and gas resources in the Bakken region. This was their first update since a 2008 report that estimated mean undiscovered volumes of 3.65 billion barrels of oil and 1.85 trillion cubic feet of natural gas in the region. The new estimate includes the Three Forks formation which largely lies underneath the Bakken in the Williston Basin that sprawls across North Dakota, South Dakota, Montana, and southern Saskatchewan.
The new USGS assessment stated that the Three Forks formation had not been previously assessed, but that an assessment was warranted based on a rise in drilling and production in the formation. Inclusion of the Three Forks formation added an estimated mean resource of 3.73 billion barrels of oil to the estimated 3.65 billion barrels of oil in the Bakken formation for a total estimated resource of 7.4 billion barrels of undiscovered, technically recoverable oil in the two formations. The two formations were also estimated to contain a mean of 6.7 trillion cubic feet (tcf) of undiscovered, technically recoverable natural gas and 0.53 billion barrels of undiscovered, technically recoverable natural gas liquids (NGLs). CONTINUE»
Perhaps the biggest shortcoming of solar and wind power is their intermittency. In locations like Hawaii, where I live, wind and solar power are already competitive on price. My fossil-fuel supplied electricity typically costs above 40 cents a kilowatt-hour, and wind and solar power can compete with that. But since they can’t supply power that is available on demand (firm power) they must be backed up by power sources that can provide power when the sun isn’t shining and the wind isn’t blowing.
This scenario could change dramatically if cost-effective energy storage solutions were developed. I consider this to be the most important unresolved problem in the energy business. A company that develops a way to efficiently and economically store intermittent energy for on-demand use will be a game-changer.
The ideal power storage solution would be able to store energy densely, at a reasonable capital cost, and would be able to return that power at high efficiency. For instance, if we put 1 unit of power into the storage system and we actually got 1 unit back out when we needed it, the system would be 100% efficient. Real-life efficiencies will be less than 100%, but the higher the efficiency, the more desirable the storage option.
In last week’s column, we examined some oil production trivia involving US states. This week, we look at some international oil trivia covering the 5-year period 2007-2011, as well as some individual trivia from 2012.
In this case, the data sources are the 2012 BP Statistical Review of World Energy and the Energy Information Administration. A table showing the Top 15 countries with the highest percentage increases in oil production over the past five years follows the quiz. Answers are at the end.
1. Which country had the largest percentage increase in oil production from 2007 to 2011?
b. United States
As a result of the hydraulic fracturing (fracking) revolution, US oil and natural gas production have been rising for several years. According to the Energy Information Administration (EIA), US oil production has risen by 27% over the past 5 years.
In reviewing the data for individual states, I came across some interesting trivia. So I decided to put together a little quiz. The data source is the EIA. A table showing the Top 15 states with the highest percentage increases in oil production follows the quiz. Answers are at the end.
1. Which state had the largest percentage increase in oil production over the past 5 years?
b. North Dakota