Commentators were falling all over themselves last week to announce that far from being impotent in the Ukraine crisis, the United States had a very important weapon: growing oil and natural gas production which could compete on the world market and challenge Russian dominance over Ukrainian and European energy supplies--if only the U.S. government would change the laws and allow this bounty to be exported.
But, there's one very big problem with this view. The United States is still a net importer of both oil and natural gas. The economics of natural gas exports beyond Mexico and Canada--which are both integrated into a North American pipeline system--suggest that such exports will be very limited if they ever come at all. And, there is no reasonable prospect that the United States will ever become a net exporter of oil.
U.S. net imports of crude oil and petroleum products are approximately 6.4 million barrels per day (mbpd). (This estimate sits between the official U.S. Energy Information Administration (EIA) numbers of 5.5 mbpd of net petroleum liquids imports and 7.5 mbpd of net crude oil imports. And so, to understand my calculations, please see two comments I made in a previous piece here and here. My number is for December 2013, the latest month for which the complete statistics needed to make my more accurate calculation are available.) ( Continue… )
At a summit in Brussels next week, European Union leaders are expected to call for measures that would cut Europe’s reliance on imported natural gas, according to draft documents for the meeting. EU leaders are scrambling to reduce their exposure to the political meddling of Russia, which has demonstrated its willingness to disrupt energy supplies for geopolitical leverage. The EU imports around one-third of its natural gas from Russia, much of it pumped through pipelines across Ukraine.
For individual countries, particularly in Eastern Europe, dependence on Russia is much greater. For example, Ukraine gets about 70% of its gas from Russia. Bulgaria is almost entirely dependent on Russia for natural gas.
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"The European Council is concerned about Europe's high energy dependency rates, especially on gas, and calls for intensifying efforts to reduce them, especially in the most dependent member states," said the draft document prepared for March 20-21 summit in Brussels. (Related Article: Russia Needs to Sell Gas More than EU Needs to Buy it) ( Continue… )
Lawmakers in Washington say expanded energy exports could strengthen the U.S. hand overseas while at the same time shielding the economy from overseas shocks. How that affects U.S. consumers, however, depends largely on forces at home, AAA said Monday.
With Russian holding the energy cards in Eastern Europe, House Speaker John Boehner, R-Ohio, said it was time for Washington to act. In a letter to Central European leaders, the speaker said President Barack Obama should sign off "immediately" on pending export requests for liquefied natural gas to help U.S. allies overseas.
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At the IHS CERA Week energy conference in Houston last week, U.S. Sen. Lisa Murkowski, ranking member of the Senate Energy Committee, struck the same chord for oil. She said reversing a ban on domestic crude oil exports could help establish the United States as the premier global superpower while creating more jobs at home. Adam Sieminski, director of the U.S. Energy Information Administration, said he was "quite prepared" to review the issue, though how that affects the domestic market remains to be seen. (Related Article: Coal’s Comeback Year Runs into Trouble) ( Continue… )
Exactly three years ago, a tsunami wiped out Japan’s Fukushima Dai-ichi plant and in doing so, washed away the nation's confidence in nuclear power. But after three years of going almost nuclear-free, Japan has turned a corner – and appears headed back along a similar path as before the March 11, 2011, nuclear disaster.
On Monday, Prime Minister Shinzo Abe said nuclear power plants deemed safe by regulators would be restarted. By summer, the first of Japan’s idled nuclear plants could be operational – ones that would be located farthest away from the fault lines that triggered the offending earthquake and tsunami.
“I would forecast that of the 49 remaining units that half could come back over the next five years,” says Tom Drolet, a nuclear expert and consultant in Englewood, Fla., in an interview. “But no new nuclear units will be committed in the next 10 years because the Nuclear Regulation Authority is busy reviewing the return of existing units and because the public has to see that those will be successful.”
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What's changed? Why is Japan returning to nuclear power three years after a terrible nuclear disaster while the fear generated by a much less dangerous nuclear accident – Three Mile Island – still hangs over the United States 35 years after it happened (also in March, coincidentally). Economics, Japan's long experience with the technology, even the threat of climate change play a role. Perhaps the biggest difference is Japan's lack of alternatives while the energy-rich US, far less reliant on nuclear power to begin with, had several options for creating power. America's embrace of nuclear power looks far less certain. ( Continue… )
Despite mounting concerns about safety, and developments in the midstream sector, John Gray, a senior vice president of the Association of American Railroads, said crude oil is now a key commodity group for the rail industry.
AAR said less than half of the 20 commodity groups carried on the U.S. rail network saw increases in delivery volumes last month when compared with February 2013. Outside of coal and grain, carloads for most commodity groups were lower by some 5,100 carloads.
The U.S. Energy Information Administration said last month the brutal winter season was affecting everything from refinery performance to pipeline deliveries. Gray said "it would be nice" to blame the decline in rail delivery on the weather, but that would be misplaced. (Related Article: Oil Train Derailments Reaching Crisis Point) ( Continue… )
Now that the world’s largest concentrated solar plant is operational in California’s Mojave Desert, the question is whether it will prove its mettle and whether more of those facilities will crop up.
The 392-megawatt Ivanpah solar plant doesn’t just have competition from natural gas and nuclear facilities. It is also up against photovoltaic (PV), or rooftop solar panels, which have fallen in price by 70 percent since 2010. Odds are that concentrated solar power (CSP) technology, which focuses the sun’s rays to produce heat, will have a tough time competing, unless it can reduce costs and perfect the technology.
“CSP has fallen by the wayside of the solar industry after attracting huge amounts of government and investor money in 2010 and 2011,” says Ed Cahill, a research associate with Boston-based Lux Research and lead author of its recent report on CSP. “ But the industry can still bring the technology back to the forefront for utility-scale, stand-alone power applications.”
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The plunge in solar PV prices has led to 4,400 megawatts of solar-panel installations in the United States. PV’s gain will be CSP’s loss. Because several large plants are in the pipeline, the 520 megawatts of CSP capacity in operation now could become 1,300 megawatts by year end. But after that, while PV takes off, CSP's growth will slow and eke its way to 2,000 megawatts by 2018. ( Continue… )
The Russian occupation of Crimea has raised concerns about the European Union’s dependence on its eastern neighbor for natural gas. The EU gets about 34% of its natural gas imports from Russia, a large portion of which transits Ukraine through a web of pipelines. For Eastern Europe, that dependence is much greater. In the brutally cold winter of 2009 Russia cut off gas supplies to Europe allegedly over a pricing dispute with Ukraine. However, it was also a lesson to Western Europe on its dependence on Russia for energy.
Russia has a track record of using its natural gas supplies as a political weapon. The latest incursion into Ukraine has no doubt revived worries among European policymakers that saw what happened back in 2009. Thankfully, Vladimir Putin eased tensions on March 4, indicating that he wasn’t seeking a military conflict. This allowed natural gas prices to fall back a bit after spiking by 10% the day before. (Related Article: Ukraine Refinery Halts Amid Tensions with Russia)
But how vulnerable is Europe to the political machinations of the Kremlin? It appears that this time around the EU is in better shape. A mild winter and stagnant demand have left Europe with higher levels of inventory than in past years. According to a spokeswoman at the European Commission, the EU has 40 billion cubic meters of natural gas on hand in storage, which accounts for 10% of annual demand for the entire European Union. Those figures vary by country (Czech Republic and Slovakia have 90 days of supplies; Hungary two months; Austria six months), but as a bloc, the EU has 20% greater supplies at its disposal than it did last year. ( Continue… )
It's a question many in Washington and the energy industry are asking as Russia leverages its own energy largesse to keep Ukraine in its orbit. But the US has long banned oil exports to maintain its own energy security, and has only recently begun to approve large, expensive terminals that would export liquefied natural gas (LNG).
Even with all the permitting in place, boosting energy exports is not an overnight solution – at least not in the case of LNG. Those terminals can take years to build and ramp up exports, and producers may be more interested in shipping to the higher-price markets in Asia and Latin America. Exporting oil could technically happen much more quickly, but it is a delicate political debate that has only begun to evolve after decades as a nonstarter. ( Continue… )
The brewing war in Ukraine has quickly reverberated through the markets, sending stocks down and commodities up. Tension heightened over the weekend with Russia’s move to send troops to Crimea in an effort to secure its strategically critical naval base in Sevastopol. The new Ukrainian government responded by putting its armed forces on “combat readiness.” What began as domestic unrest in Ukraine over former President Yanukovych’s coziness with Moscow is now rapidly escalating into not only a potential civil-war, but also a Russian invasion of Ukraine and a clash with the West.
With events quickly unfolding in real-time, global markets are reacting negatively. Russia itself is already paying the price – on March 3rd the Ruble dropped by 2.5% against the Dollar and 1.5% against the Euro, both all-time lows. Russian stocks also dived to their lowest level since the global financial crisis, with the Micex Index down 9.8%. Gazprom, which the Kremlin uses as its piggy bank, was down 10.7%. The Russian central bank was forced into action, raising interest rates from 5.5% to 7%. Yields for Russian government bonds increased to 8.84%, within 25 points of an all-time record. (Related Article: Can U.S. LNG Break Russia’s Gas Grip on Europe?)
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The Obama administration has promised that there will be significant costs for Russia’s actions. But, the markets are already acting. Russia has inflicted an immediate economic cost upon itself – one that appears to be stronger and swifter than anything the Obama administration has thus far considered. ( Continue… )
As it has done in the past, Russia is using its role as Europe's dominant natural gas supplier to hold sway over Ukraine and the West. Over the weekend, Russia's gas-export monopoly Gazprom warned it may boost prices to Ukraine if the former Soviet republic doesn't pay the $1.55 billion it reportedly owes for the heating fuel.
Russian President Vladimir Putin has a history of shutting off the gas to Ukraine when it falls behind on its bills, and there's some concern Mr. Putin might make such a move again. But a lot has changed since the Russia-Ukraine gas disputes of 2006 and 2009. Europe has diversified its natural gas sources to some extent, and Ukraine has long-term options for boosting its own production.
"Russia is in a much weaker situation now than in 2006 and 2009 because they have overplayed their hand," says Anders Åslund, a senior fellow at the Peterson Institute for International Economics who has advised Russia and Ukraine. "Given that they’ve managed this so badly before, I would not exclude that they would be foolish once again, but the cost would be for Russia, not Europe or Ukraine." ( Continue… )