Bottom Left Feat
Last week the Renewable Fuels Association (RFA) reported that President Trump is preparing to direct the Environmental Protection Agency (EPA) to make a big change to the country’s Renewable Fuel Standard (RFS). The change is one that has been long sought by refiners, but it has been resisted by the country’s biofuel industry. Today I will attempt to explain what it all means.
Briefly, the U.S. has certain biofuel mandates in place. To track compliance, renewable identification numbers (“RINs”) are assigned to biofuels as they pass through the supply chain. Ultimately, those defined as “obligated parties” are required to submit their quota of RINs to the EPA to demonstrate compliance.
Compliance can be met by purchasing the fuel with the associated RIN, or simply purchasing the RINs (which can be separated from the associated biofuel). This means that there is a value for RINs that has the effect of offsetting some of the production cost for the biofuel producer. This system subsidizes biofuels at the expense of both the obligated parties and the final consumer. CONTINUE»
I am currently reading the book The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. The excess and greed of a few of those profiled is mind-boggling. Of particular note, the late Aubrey McClendon nearly ruined Chesapeake with his excessive spending. But after presiding over a huge decline in Chesapeake shares he got margin calls and his personal shares were sold out from under him. So he turned around and did some self-dealing with Chesapeake that benefited himself enormously financially, at the expense of shareholders.
The greed was excessive, but in his defense he and Chesapeake co-founder Tom Ward (whose self-dealing was also highlighted in the book) did create a multi-billion dollar company from scratch that became one of the leading energy producers in North America. It doesn’t excuse the fact that he did things out of self-interest that weren’t in the best interest of shareholders, but the company itself did provide a lot of energy to consumers.
The same can’t be said of advanced biofuel company Gevo, one of three advanced biofuel companies that went public in 2010-11 with the backing of billionaire venture capitalist Vinod Khosla. CONTINUE»
In last month’s Short Term Energy Outlook (STEO), the Energy Information Administration (EIA) projected that it now expects record U.S. gasoline consumption this year:
Motor gasoline consumption is forecast to increase by 130,000 b/d (1.5%) to 9.29 million b/d in 2016, which would make it the highest annual average gasoline consumption on record, beating the previous record set in 2007 by 0.1%. The increase in gasoline consumption reflects a forecast 2.5% increase in highway travel (because of employment growth and lower retail gasoline prices) that is partially offset by increases in vehicle fleet fuel economy.
This projected increase follows several years of lower gasoline demand that resulted from persistently rising gasoline prices over the past decade. From 2002 to 2012 the average retail price of gasoline rose nearly every year, from an annual average of $1.39/gal in 2002 to $3.68/gal in 2012. Consumers responded to these higher prices in multiple ways, which cumulatively led to falling gasoline demand. Some even suggested that U.S. gasoline demand had permanently peaked, as a result of more fuel efficient vehicles and increasing adoption of electric vehicles (EVs). We can now say those predictions were premature. CONTINUE»
Green Tech Media
by David Keith
Although quite upbeat about solar PV (and I’m also a big fan of solar PV), this article generated almost 300 comments because it was also frank about the limits of solar PV, and wind, and to make matters worse, he concluded the article with the following statement:
My view is that only two forms of energy — solar and nuclear power — can plausibly supply tens of terawatts without a huge environmental impact.
An article last week in Business Insider discussed Bill Nye’s conversion from anti-GMO to pro-GMO (genetically modified organisms). According to Nye, while attending a political rally in NYC:
“…one speaker insisted that the US president Barack Obama was part of a conspiracy sponsored by large agriculture companies to control minds — and received a great many cheers — somehow that passionate man at the microphone crossed a line for me.”
Was it a desire to distance himself from conspiracy theorist nut-balls or was it the result of his exposure to facts by real scientists at Monsanto that finally convinced him to change his mind? If it was the latter then his stance was largely based on a lack of knowledge. Some are hoping that because Nye was convinced to distance himself from anti-GMO ideologues that he may also one day distance himself from their anti-nuclear energy counterparts, as several highly visible environmentalists have managed to do over the last few years, but I’m skeptical. Nye was not nearly as invested in his GMO stance as he is in his anti-nuclear energy belief. CONTINUE»
A Williston Basin Primer
In my previous article Addressing the World’s Flare Gas Problem, I discussed my current project, which recently took me to the Williston Basin in North Dakota and Montana. Today, I will discuss the region’s shale oil boom in greater detail. In Part 3 of this series, I will conclude by delving into the economics of shale oil production.
The Williston Basin underlies parts of North and South Dakota, Montana, southern Saskatchewan, and southwestern Manitoba. Within the Williston Basin is the Bakken Formation, which first produced oil over 60 years ago. It was on North Dakota farmer Henry Bakken’s farm in 1953 that Amerada Petroleum — later acquired by Hess (NYSE: HES) — discovered oil at a depth of about 10,000 feet. The Bakken Formation is to date the source of most of North Dakota’s rapid oil production growth, but underneath the Bakken Formation is the Three Forks Formation, which has also begun to produce oil:
Source: US Geological Survey CONTINUE»
I recently recieved two emails on the same day; one about more palm oil plantations usurping yet another tropical ecosystem, this time for highly endangered African Gorillas instead of Indonesian Orangutans, and the other from my local Sierra Club asking me to urge my elected representatives to reject a transportation funding bill that would not allow our Governor to mandate the consumption of biofuels. Instead, I wrote a letter to the editor of the Seattle Times expressing my opposition to a biofuel mandate (which, of course, wasn’t published). I put a copy of that rejected submission at the end of this post as an example of what not to send to the Seattle Times Op Ed department. CONTINUE»
In last month’s article Where are the Unicorns?, I discussed the fact that the commercial cellulosic ethanol plants that were announced with great fanfare over the past couple of years are obviously running at a small fraction of their nameplate capacity. In fact, April was a record month for cellulosic ethanol production according to the EPA’s database that tracks this information, but that meant that at least 8 months into the learning curves for these plants actual production for that month was only about 6% of nameplate capacity.
May’s numbers are now in, and the situation has gotten worse. After reporting 288,685 gallons of cellulosic ethanol in April, May’s numbers only amounted to 114,018 gallons. This is only about 2.4% of the nameplate capacity of the announced commercial cellulosic ethanol plants. If we use year-to-date numbers, the annualized capacity is still less than 3% of nameplate capacity for facilities that cost hundreds of millions of dollars to build. Let that soak in. POET alone spent $275 million, with U.S. taxpayers footing more than $100 million of that bill. Abengoa reportedly received $229 million from taxpayers for its project. For this (plus however much that was spent by INEOS), the combined plants are running at an annualized capacity of 1.7 million gallons of ethanol, which would sell on the spot market today for $2.6 million. CONTINUE»
I have been pretty adamant — some may say stubbornly so — about my expectations for crude prices this year. I have argued against the notion that oil prices were going to fall to $20 or $30/bbl for several reasons. In a nutshell, those reasons are:
- This is well below the marginal cost of shale oil production, and you can expect shale oil supplies to begin contracting in response to falling prices
- Growing crude oil inventories will peak soon for seasonal reasons
- Lower oil prices will spur demand
I have made this argument a number of places, including in a recent Wall Street Journal article. Noted oil analyst Philip Verleger made a comment following that article that those calling for collapsing prices are correct, and he patted himself on the back with the comment “A few of us who make a living in the field did (call the price collapse correct)” while arguing that those writing for the Wall Street Journal don’t “seem to understand what is going on” and are “in the dark ages.” Them’s fighting words! CONTINUE»
While U.S. crude oil inventories have been surging since last fall, I have argued that these inventories should peak off soon. There are several reasons for this, but the primary reason is that March is historically the month that refinery utilization is at its lowest, due to the popularity of performing refinery maintenance during the month. The difference in crude oil demand from refiners between March and July has historically been about 10 million barrels per week. This alone should be enough to halt the ~8 million weekly crude oil build that we have seen thus far in 2015.
Another factor is that the large capital spending cuts that have accompanied the oil price collapse will begin to negatively impact oil production. The Energy Information Administration reported 2 weeks ago that U.S. oil production had suffered a weekly decline for the first time since January. Last week, production was almost flat, up only 18,000 bpd over the previous week. Meanwhile, U.S. refinery inputs surged by 201,000 bpd, climbing back above 90% utilization for the first time in 2 months. This should have dropped crude oil inventories by more than a million barrels for the week, but the EIA reported a huge inventory build of nearly 11 million barrels for the week.
What is the explanation for this? CONTINUE»