A report from German news magazine Der Spiegel states that Iran's latest effort to disrupt key shipping lanes through the Strait of Hormuz may be to cause a massive oil spill. Code-named Murky Water, the operation may serve to force a temporary respite from sanctions targeting the country's energy sector. Iraqi leader Saddam Hussein tried a similar tactic during the first Gulf War to deter invading U.S. forces. If the German report is true, the Iranian operation could be a sign of Tehran's dwindling options.
Der Spiegel, citing unnamed "Western intelligence officials" privy to "top secret" information, reports that Iranian Revolutionary Guards Gen. Mohammed Ali Jafari could order an oil spill by possibly wrecking an oil tanker in the key strait. Such an act would force the temporary closure of the conduit for much of the world's maritime oil shipments. When Iran threatened to choke off the strait early this year, oil markets went into overdrive despite a lack of physical disruptions. But apart from closing the strait, the German report notes, any international response to the spill would require lifting the embargo on Iranian oil shipments and potentially result in kickbacks for Iranian companies responding to the disaster. ( Continue… )
Oil supply growth in the United States is expected to be the highest for non-OPEC countries this year, the Vienna-based cartel said. With less than a month before U.S. voters head to the polls in what's expected to be a close race, both sides of the political debate are making aggressive claims on energy, a contributing factor to the national economy. OPEC said it anticipated "robust" growth in the U.S. economy when compared to other developed countries, though "U.S. expansion remains below potential." The economic climate in the United States, OPEC said, could have regional implications, suggesting the U.S. election could have broad-based effects.
U.S. vice presidential contender Paul Ryan, a congressman from Wisconsin, stuck to his platform's five-point plan for the country during a Thursday debate with Vice President Joe Biden. Both sides of the political debate have focused on energy independence, though candidates differ on the best way forward. Republican challenger Mitt Romney has expressed his support for the Keystone XL oil pipeline, while President Barack Obama touts an "all-of-the-above" policy that includes renewable energy initiatives. The vice presidential candidates, however, barely mentioned the issue. ( Continue… )
With gasoline scaling $4 a gallon recently, plans announced last week by international oil giant BP to export U.S.-produced crude oil ought to have Americans howling. For such a plan to be good energy policy--rather than merely profitable for the oil industry--the United States would have to be producing more than enough oil to meet its own needs. But the country produces nowhere near that amount. Nevertheless, the industry's deceptive campaign to make the public and policymakers believe that the United States is on the verge of energy independence seems to be succeeding--a push that is really just a smokescreen for selling the country's oil and natural gas to the highest bidder.
So far this year the United States has produced 6.2 million barrels per day (mbpd) of crude oil plus lease condensate (which is the definition of oil) versus daily net consumption of 13.6 mbpd of finished petroleum products. The country is a long way from being free of oil imports, and as I'll discuss below, there is no realistic prospect that we'll ever produce enough oil domestically to satisfy our needs at the current level of consumption. ( Continue… )
Japan is dragging its feet on making a decision on whether it will hold on to any of its nuclear fleet. Elections have to be held within less than a year, and no one is willing to risk a controversial decision before then.
Will low prices last? Most analysts seem to think we’re still months away from a uranium price spike that would bring it back to levels it enjoyed before the nuclear meltdown at Fukushima a year and a half ago. The month before the Fukushima meltdown, spot prices for uranium were close to $70.
Yesterday, spot prices for Uranium One were down over 60%, while spot prices for Paladin are down over 70%.
Meanwhile, Japan has been sending mixed signals about its future nuclear plans. Since the disaster, only out of 50 nuclear reactor units have been operational. Last week, Japan’s ministry of economy indicated that the oil reactors could be put back on line if deemed safe. At the same time, there are reports to the contrary, highlighting the uncertainty and the lack of will to address this issue ahead of elections. (Related Article: Nuclear Waste: A Valuable Source of Energy)
Also, in September, the Japanese Cabinet unveiled a new energy policy that sets 2030 as a target date for ending the country’s dependence on nuclear power. This, too, is plagued by uncertainty and its fate may already have been sealed and the policy shelved.
While analysts had predicted the uranium slump, they also thought it would be eased by rising demand in Russia, China and India, three countries who have plans for 95 new reactors in the next two decades.
But while about half of these reactors are being built, it’s still too soon to be a boost for the uranium slump. At the first sign of real long-term contracting potential for uranium for these future reactors prices will rally. We are not quite there yet, though.
For the time being, uranium mining is not profitable and mining companies are either slowing or shelving big projects.
Earlier predictions that demand for uranium would again rise and drive prices upwards in 2015 now seem overly optimistic. (Related Article: Confidence in Nuclear Power is on the Rise Again)
Some of this will depend on Japan’s decision, and so far what that decision will be is anyone’s guess. Signals have been mixed, at best.
On 14 September, the government said it planned to phase out nuclear power entirely within the next two and a half decades. But what will happen in the meantime is unclear, and how many of the country’s 50 reactors will eventually be deemed safe and put back online will not be made clear until after elections.
There are some who disagree with this assessment, however, citing optimistic demand outlooks that could bring prices back to their heyday in the next couple of years. This is not likely, given the current pace of reactor construction in Russia, China and India, and the more realistic outlook for a spike in uranium prices in probably 4-6 years, during which time the dynamics of nuclear power could undergo numerous changes in relation to global renewable energy efforts.
Germany's clean energy principles are beginning to hit where it hurts: the pocketbook.
Starting in January 2013, German homeowners should see a tax they pay to support renewable energy increase by nearly half, according to a Monday press release from the country's four main grid operators.
Germans' electrical bills have long included a surcharge that is specifically used to subsidize the production of clean energy. The tax is credited with establishing Germany as a leader in green technologies, according to the Associated Press.
But the surcharge is designed to increase in proportion with an increase in clean energy production. So when wind and solar production rises, so too do homeowners' electricity bills.
And rise it has: the surcharge has more than quadrupled since 2009, according to Philipp Roesler, Germany's Economy Minister.
The price jump comes as the country transitions away from nuclear power – a result of anti-nuclear sentiment stretching back to Ukraine's Chernobyl disaster. After last year's Fukushima meltdown in Japan, mounting protests prompted Chancellor Angela Merkel to expedite the replacement of Germany's nuclear reactors with wind and solar energy.
As the transition's financial reality sets in, some are worried that Germans will abandon their clean energy ideals.
"Electricity should not become a luxury item," Michael Fuchs, a leading lawmaker from Merkel's center-right coalition, told the Associated Press. "The energy switchover will at the end only be successful when met with broad public support."
It's a reminder that, at least in the short term, clean energy comes with a substantial price tag — up-front costs that many find hard to stomach, particularly amid an economic crisis. The process of dismantling a nuclear plant alone can take as long as 40 years and cost up to 1.1 billion euros, according to Reuters.
There's a structural, environemental component too. Nuclear plants require a complex process of decontamination and entombment in concrete blocks to ensure proper disposal of radioactive material.
The cost-benefit tension may serve as a bellwether for countries following in Germany's nuclear-to-green footsteps. Japan, Switzerland and France have all announced a shift away from nuclear energy in favor of green technologies.
It remains to be seen if citizens will bear the brunt of immediate costs in exchange for the long-term benefits.
Oil prices started the week on a down note Monday as traders focused on tepid economic signals in China.
The daily ups and downs of the oil market hint at a much bigger picture. The world of energy, as we know it, is beginning to look a little topsy-turvy. And the effect on oil prices could be beneficial for consumers.
Start with demand. Ever since the Arab oil embargo of the early 1970s, oil has flowed from OPEC and other developing nations to the developed world, whose energy demands kept rising.
Granted, that's an oversimplified view. Nevertheless, the West's growing thirst for Middle East oil pushed prices up. Now, that dynamic is changing. The developed nations' demand for oil is slackening. Europe's in recession. The US is growing but only sluggishly. China is slowing.
Indeed, oil markets are keenly attuned to China's growth. Over the weekend, Beijing released trade data that suggested that the world's second-largest economy may be stabilizing but is not yet growing, which caused oil prices to fall Monday.
More broadly, oil demand from developing nations is catching up. As early as 2014, it should outstrip demand from the developed nations, according to a report released Friday from the International Energy Agency (IEA), an autonomous body based in Paris within the Organization for Economic Co-operation and Development.
Just as demand for oil is moving from the West to the East (and the southern hemisphere), supply is moving the other direction. Most of the growth in oil supplies is coming from North America, thanks to Canadian oil sands and US success with fracking, according to the IEA report.
Add in Iraq's production capacity, which is expected to enter a new growth phase, and the oil supply begins to look less dire. "These new supply sources are expected to more than offset decline rates and outages elsewhere as well as the continued impact of international sanctions of Iran," the IEA report forecasts.
It's easy to overstate this. North America's increase in production is quite small compared with what OPEC pumps out on a daily basis. That won't change. But on the margins, it's extremely useful. The combination of weak demand and growing supplies will mean OPEC's spare capacity for oil production will grow to 'more comfortable levels" in the next five years, the IEA forecasts.
That's a comforting thought. And it suggests a dynamic one doesn't hear very often: Barring a new crisis in the Middle East or a sudden economic upturn, there could be too much oil chasing too little demand.
The effect: A downward trend in oil prices over the next few years?
For the past two weeks train industry executives from around the US have been holding private meetings to discuss the potential of using natural gas to power the trains, rather than diesel. The idea is popular amongst train operators, with some describing it as a huge transition in locomotive technology, similar to the move from coal engines to diesel.
Doug Longman, a researcher at the Argonne National Laboratory, said that “the railroads would really like to be able to use natural gas in their locomotives. It’s a cost issue.” Last year, the rising diesel prices led to the annual fuel bill for Union Pacific Railroad to reach $3.6 billion, accounting for 26 percent of overall expenses; up from 13 percent of total costs back in 2001. (Related Article: Drowning in Natural Gas: Is the Answer Exports?)
The rail companies are confident that natural gas prices will remain low, giving them an advantage over diesel. Currently natural gas tends to sell for $1 - $2 less per gallon than diesel, and with industry leaders consuming one billion gallons of fuel a year, that sort of price difference can lead to hundreds of millions of dollars savings.
Although switching to natural gas isn’t all about savings.
The diesel engines used presently by locomotives would have to be modified to run on natural gas, which according to Normand Pellerin, the assistant vice president for environment and sustainability for Canadian National Railways, would cost an estimated $600,000 to $1,000,000 each. (Related Article: Iran's People Suffer as Oil Income Protects the Government from Hyperinflation)
Another obstacle blocking the success of the idea is the storage of the natural gas in order to power the train as it travels around the country. This dilemma was at the heart of most of the discussions that took place over the last two weeks, and the favourite solution which they hope the government will approve, was to reintroduce a relic. A relic is one of the carts that used to carry coal for coal engines. That extra ‘fuel cart’ could be used to contain a large tank of LNG.
The United States finally has a road map for developing solar energy on federal land in the West.
The big idea: Seventeen solar-energy zones – about 285,000 acres of public lands in six western states – have been set aside as priority areas for commercial-scale solar development. That way, instead of approving such large renewable energy projects on a case-by-case basis where developers want to build them, the energy zones will guide development to areas that are high in solar energy, close to transmission lines, and have, in the Interior Department's words, "relatively low conflict with biological, cultural, and historic resources."
The road map also excludes 79 million acres of federal land as being inappropriate for development and another 19 million acres as "variance" areas where the government would continue to decide solar projects case by case. Secretary of the Interior Ken Salazar finalized the roadmap at a signing Friday. The six states are Arizona, California, Colorado, Nevada, New Mexico, and Utah.
Will the new zones work? Since 2009, the Interior Department has authorized 18 utility-scale solar projects on federal lands (as well as seven wind farms and eight geothermal plants). When built, these renewable energy projects are expected to generate 10,000 megawatts of renewable power – President Obama's goal – enough electricity to power 3.5 million homes.
The new zones are supposed to simplify and speed up the approval process for renewable energy projects. Conservation groups have applauded the effort.
Still, some developers are skeptical that the process will eliminate the delays that have hampered previous projects.
"The Bureau of Land Management must ensure pending projects do not get bogged down in more bureaucratic processes," Rhone Resch, president of the Solar Energy Industries Association, told the Associated Press.
It has not been a good year for super tankers, what with sanctions on Iran and the US shale boom that has resulted in reduced demand for cargo transport and a glut of vessels. But Europe’s sanctions against Iran are providing a bit of relief for one specific type of tanker: the Suezmax, for which demand has been rising since the EU slapped sanctions on Iran in July.
Tanker earnings have been hard hit by the US shale gas boom, which has considerably lowered demand for US gas imports. According to Reuters, estimated earnings for large crude carriers will see a 24% drop from earlier predictions for 2013, while Suezmax tankers are expected to bring in 25% less than originally expected for next year. ( Continue… )
The Obama administration can’t seem to catch a break with the clean energy industry these days.
Republicans have used the high-profile bankruptcy of Solyndra, the solar panel manufacturer that received $528 million in federal loan guarantees, to pummel the president on energy policy. Last month, slow sales forced bailout-backed GM to offer hefty discounts for the Chevy Volt. The tepid growth of the electric car industry has led some to question the president's use of taxpayer money to promote alternative fuel sources.
Now, energy rifts with China are exacerbating tensions between the two countries, while further complicating the Obama administration's relationship with clean energy.
Late last month, Obama blocked Ralls Corp., a small Chinese company, from investing in a wind farm project near the site of a military training site in Oregon. The president invoked a rare power granted by the Defense Production Act of 1950, concerned that the companies backing the project "might take action that threatens to impair the national security of the United States," as the order reads.
Ralls Corp. responded in kind, suing the president.
A decision Wednesday from the US Department of Commerce threatened to further strain relations between the two countries. The department ruled that Chinese companies, backed by foreign subsidies, were "dumping" solar panels into the US market—selling their products at prices ranging from 18.32 to 249.96 percent below fair value.
The final ruling would impose tariffs of 24 percent to 36 percent on solar panels imported from China, the New York Times reported.
"The impact on the domestic industry has just been devastating. I think we're unfortunately up to 13 companies where there has been either a shutdown or a bankruptcy or significant work layoffs due to the Chinese imports," Tim Brightbill, lead attorney for SolarWorld Americas and other US producers told Reuters in the days leading up to the ruling.
It's not the first time the Commerce Department has imposed tariffs on China for dumping activities. In June, the department found that Chinese companies were illegally selling wind turbine towers below their market price and would have to pay duties of 20.85 to 72.69 percent on imports.
The recent jabs are the latest in an ongoing back-and-forth between an administration protective of American manufacturers and an economic juggernaut flooding the global clean energy market with inexpensive products.
"The United States is provoking trade friction in the new energy sector," Shen Danyang, China's Commerce Ministry spokesman, told Reuters, "and sending a negative signal to the world that stirs global trade protectionism and obstructs the sector's development."