Why should you never iron a four-leaf clover? You don’t want to press your luck.
OIL
Oil’s post-pandemic global future
Ben Geman, Axios, March 17, 2021
Global oil demand is slated to rise above pre-pandemic levels over the next few years but nonetheless remain lower than it would have been absent COVID-19’s emergence, a new International Energy Agency analysis project.
Why it matters: The pandemic is certainly having a lasting effect — its mid-decade demand estimate is 2.5 million barrels per day lower than the growth level expected before the crisis.
- Global gasoline consumption will probably never reach pre-pandemic levels.
- Yet IEA’s estimate also shows that oil demand will still reach fresh records, a sign that nations have not yet responded to the pandemic with the kinds of clean energy policies that IEA and others had hoped.
What they’re saying: “For the world’s oil demand to peak anytime soon, significant action is needed immediately to improve fuel efficiency standards, boost electric vehicle sales and curb oil use in the power sector,” IEA head Fatih Birol said.
What we’re watching: The report lays out a basket of policies that could alter the underlying trajectory.
- That means the ones Birol name-checked above, alongside more telework and less business travel, and more recycling that lessens oil growth in the petrochemical sector.
- All that together could displace 5.6 million barrels per day by 2026, “which would mean that oil demand never gets back to pre-crisis levels.”
The big picture: The report compares the mid-decade forecasts to the global oil consumption path that would be consistent with the Paris climate agreement.
- The “base case” sees demand 3.5 million barrels per day higher in 2025 than 2019’s levels.
- But under IEA’s Paris-aligned “sustainable development scenario,” oil demand would need to decline by 3 million barrels per day over the stretch.
Of note: All the demand growth they project through the mid-2020s comes from non-OECD nations, with demand in Asia rising strongly.
- On the production side, IEA sees several forces combining to limit the U.S. bounce-back from last year’s declines, with only “modest growth” expected over the next half-decade.
- There’s less cheap capital available, industry investment is more conservative, climate pressures are greater and new Biden administration regulations are expected.
- “The slowdown in US production growth clears the way for OPEC+ to fill much of the supply gap as it taps into its spare capacity,” IEA notes.
What we’re reading: Speaking of oil, the Financial Times summarizes IEA’s separate monthly report out this morning: “The expectation of Wall Street banks that oil has entered a new and sustained period of dramatic price rises is misguided, said the [IEA] on Wednesday.”
State revenue outlook improves with oil price rebound
Elwood Brehmer, Alaska Journal of Commerce, March 16, 2021
Alaska’s ride on the oil price rollercoaster should again get a little smoother as markets have recovered quicker than expected from the pandemic but special provisions in the CARES Act will cause the state to forgo some corporate tax revenue as well, according to Department of Revenue officials.
“Revenues are moving in a much better direction, which is up,” Revenue Commissioner Lucinda Mahoney remarked during a March 16 Senate Finance Committee hearing.
The Revenue Department published the spring update to its official Fall 2020 Revenue Forecast March 15 with projections that the state will collect approximately $791 million more over the next year-plus than was thought last fall.
Higher oil prices and increased production — a rare combination of late — are the primary drivers behind the slightly improved fiscal outlook though the expected additional revenue would not nearly come close to fixing the state’s structural budget deficit.
GAS
A Tale of Two Pipelines
Senator John Barrasso, Newsweek, March 17, 2021
On his first day in office, President Joe Biden unleashed a devastating attack on American energy workers. One of his first acts revoked the permit for the Keystone XL pipeline. Yet when it comes to Russia’s Nord Stream 2 gas pipeline to Western Europe, the president is happy to give it his go-ahead.
The contrast between the two projects could not be clearer. Keystone would link the U.S. with a reliable ally and trading partner, Canada, and would be built by a Canadian company using American workers. The Nord Stream 2 gas pipeline being built by the Russian state-owned monopoly Gazprom would hand strongman Vladimir Putin a geopolitical weapon.
Guess which one President Biden punished?
MINING
Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition
Hund et al. For World Bank Group, March 2021
Summary of Study
Bottom Line: It too often goes overlooked that the energy transition to a low-carbon future will be highly mineral intensive. In fact, the more ambitious the climate policy to reduce greenhouse gas emissions, the more mining that will be needed. This centers on cross-cutting minerals used in a list of clean energy and storage technologies and concentrated minerals used in just a few of them. A shortage of these minerals could actually block progress on abating climate change. Recycling and reuse have a major role to play, but large-scale mining at the global level cannot be avoided. And while the emissions from these operations are significant, “smart mining” programs can help address the challenges and provide economic benefits.
A low-carbon future will be very mineral intensive because clean energy technologies need more materials than fossil-fuel-based technologies.
Any lower-carbon pathway will increase the overall demand of minerals.
Greater ambition on climate change goals (1.50C–20C or below), as outlined by the Paris Agreement, requires installing more of these green technologies and will therefore lead to a larger material footprint.
For example, about 3,000 solar panels are needed for 1 megawatt (MW) of capacity of solar PV; this means that a 200 MW solar PV project could be as big as 550 American football fields.
Because of the material intensity of low-carbon technologies, any potential shortages in mineral supply could impact the speed and scale at which certain technologies may be deployed globally.
Cross-cutting minerals, such as copper, chromium, and molybdenum, are used across a wide variety of clean energy generation and storage technologies and have stable demand conditions. This is because these minerals do not depend on the deployment of any one specific technology within the clean energy transition.
On the other hand, concentrated minerals, such as lithium, graphite, and cobalt, are needed only for one or two technologies and therefore possess higher demand uncertainty as technological disruption and deployment could significantly impact their demand.
Beyond cross-cutting versus concentrated, some minerals face higher levels of changes in demand from the shift to a low-carbon future.
While the recycling and reuse of minerals can play a key role in reducing emissions, mining will still be required to supply the critical minerals needed to produce these low-carbon technologies, even with large future increases in recycling rates.
Despite the higher mineral intensity of renewable energy technologies, the scale of associated greenhouse gas emissions is a fraction of that of fossil fuel technologies. The carbon and material footprints, however, cannot be overlooked.
Limiting the carbon footprint of minerals needed for the clean energy transition may offer double wins, helping to boost economic growth and reduce environmental risks in resource-rich developing countries.
As one example, the World Bank’s Climate-Smart Mining Initiative addresses these challenges by working together with governments, development partners, industries, and civil society to minimize the new emissions from a low-carbon transition and work closely with resource-rich developing countries to responsibly supply these strategic minerals for clean energy technologies.
Read the full study here.
POLITICS
From the Washington Examiner, Daily on Energy:
INTERIOR TO RESUME PROCESSING DRILLING PERMITS AS NORMAL: We missed this in yesterday’s edition, but it’s worth mentioning that the Interior Department this week confirmed it won’t extend guidance preventing career staff in local offices of the Bureau of Land Management from processing oil and gas permits on federal land. The guidance, issued on Jan. 20, will expire as planned on Sunday, an Interior spokesperson confirmed to Josh.
On its first day in office, the Biden administration had moved decisions about drilling permits and other activities into the hands of top Interior political appointees, stripping authority from the local bureaus that usually handle the work.
The move was separate from Biden’s order pausing new oil and gas leasing, which does not affect the ability of companies to get permits to drill on existing leases.
What it means: The lesser-known guidance was intended to allow the administration to review Interior’s process of granting permits. The Biden team said the Trump administration had granted permits too liberally and argued the process had become politicized.
Now that the review is wrapping up, BLM said it will create a new online database showing pending and approved permits.
““This new resource begins a more transparent effort to show our work, including the significant time it can take to review complex or incomplete applications to ensure oil and gas development will be done in an environmentally sound and responsible manner,” Nada Culver, BLM’s deputy director of policy and program, told Bloomberg.
CLILMATE CHANGE
GOP group launches ad campaign for carbon tax
Josh Siegel, The Washington Examiner, March 17, 2021
A Republican-backed group is launching a six-figure ad campaign Wednesday to press Congress to pass a carbon tax, a policy to address climate change that has struggled to find bipartisan support.
Americans for Carbon Dividends, the advocacy arm of the Climate Leadership Council, is seeking to shore up support for its carbon tax and dividend proposal as policymakers have gravitated toward other ideas.
Steve Rice, managing director of Americans for Carbon Dividends, said the group aims to capitalize on the fact that big business trade groups, including the U.S. Chamber of Commerce and potentially the American Petroleum Institute, are coalescing around carbon pricing.
The ad, running digitally in Washington, D.C., over the coming months, sells a carbon tax and dividend as the “bipartisan climate solution.”
Rice said carbon pricing could be a compromise to sector-by-sector standards and regulations, which have become the preferred policies of Democrats and are expected to be the path pursued by President Biden.
“The ground is shifting because carbon dividends is the fastest and most efficient way to drive deep cuts among the entire economy from day one,” Rice said.
But the shift has not yet been embraced by Republicans in Congress, let alone Democrats.