Posted February 10, 2016
Yesterday, we took a look at the effects of the U.S. energy revolution on domestic oil production and the impact of that production on U.S. oil imports – and the resulting progress for America in terms of increased economic and consumer benefits and energy security. We argued that Obama administration policies risk retreating from progress that’s the result of the historic, game-changing shift in the U.S. energy outlook, thanks to America’s energy revolution.
Today, a look at natural gas, where the impacts of the energy revolution are no less significant.
Posted February 1, 2016
Iran’s plan to export liquefied natural gas (LNG) within two years is what you call a market signal, one that should cause U.S. policymakers to reconsider the ponderous pace with which proposed U.S. LNG export projects are gaining federal approval. The Wall Street Journal reported:
Iran is pushing to find new ways to extract and export its vast natural-gas reserves, including developing facilities to liquefy the commodity and ship it to Europe in two years now that western sanctions are no longer in place, according to a top Iranian official. Iran holds the world’s largest reserves of natural gas, but has long lacked the export infrastructure of competitors like Russia and Qatar. … Tehran is exploring several options to help the country “join the international LNG club,” said Alireza Kameli, Managing Director of National Iranian Gas Export Co., in an interview here.
Options for Iran include restarting its own advanced LNG export project that was halted in 2012 because of the western sanctions; building a pipeline under the Persian Gulf to Oman, which has LNG export facilities Iran might be able to use; and the construction of floating LNG facilities. Iranian officials say the country could export about 30 billion cubic meters (more than 1 trillion cubic feet) to the European Union long-term, the Journal reported.
While experts may disagree over how soon Iranian LNG exports could reach global markets, it makes sense for the United States – the world’s leading natural gas and oil producer – to capitalize on its natural gas abundance by speeding up federal approvals for domestic LNG exports to non-Free Trade Agreement countries. While a number of LNG export projects have received the go-ahead from Washington in the past couple of years, final non-FTA authorizations for more than 20 facilities remain under review at the Energy Department.
Posted January 11, 2016
A couple of data points from the U.S. Energy Information Administration (EIA) that help illustrate the impact of the natural gas portion of the American energy revolution.
First, EIA reports that wholesale electricity prices at major trading hubs, on a monthly average for on-peak hours, were down 27 percent to 37 percent across the U.S. in 2015 compared to 2014. The reason for the decrease, EIA says, is lower natural gas prices.
Now, let’s zero in on the increasing affordability of natural gas in electricity generation. Recently, EIA reported that 2015 natural gas spot prices at the national benchmark Henry Hub averaged $2.61 per million Btu (MMBtu), the lowest annual average since 1999. Interestingly, declining prices did not result in lower production, EIA says.
Posted January 4, 2016
As we write, the United States is once again an exporter of crude oil. Sure, in the past the federal government has allowed limited crude exports. The oil tanker that left the Port of Corpus Christi, Texas, late last week is the bearer of the first freely traded U.S. crude in about four decades – made possible by congressional legislation that President Obama signed to end a 1970s-era ban on exports. It’s a new day indeed.
But wait, there’s more. Cheniere Energy says it has begun liquefying natural gas at its new export terminal in Louisiana, setting the stage for its first LNG export cargo this month.
Both are big-time energy developments for the United States – opportunities created by a domestic energy revolution largely driven by safely harnessing vast shale reserves with advanced hydraulic fracturing and horizontal drilling.
Posted November 18, 2015
Interesting analysis on energy independence in the Wall Street Journal by Columbia University’s Jason Bordoff, a former energy adviser to President Obama. It’s a good thing the United States isn’t energy independent, Bordoff writes. That’ll get your attention, right?
As Bordoff explains, “energy independence” is a dusty concept from the 1970s and 80s, after policymakers made it a goal to end U.S. reliance on global crude suppliers after the 1973 oil embargo. It didn’t happen. To the contrary, U.S. imports steadily climbed in the 1990s and 2000s before the significant increases in domestic production, thanks to abundant American shale energy reserves and advanced hydraulic fracturing.
Now, with U.S. energy output surging, the inclination among some is to keep that energy here at home by maintaining the 1970s-era ban on crude oil exports, believing that it lessens others’ ability to disrupt our oil supplies. But Bordoff writes that an “isolationist” approach on energy misunderstands the reality that today’s global energy market is highly integrated and that the interconnectedness of the market has helped the U.S. compensate for supply disruptions here at home and overseas. “Free trade in a highly integrated global energy market made us more secure,” he writes.
Posted October 15, 2015
Reuters reports that Lithuania is in talks with U.S. liquefied natural gas company Cheniere Energy, seeking to reduce its dependence on Russia for LNG supplies. Lithuania opened an LNG import terminal last year, and its gas supply contract with Russian state-owned supplier Gazprom is scheduled to expire at the end of the year. Rokas Masiulis, Lithuania’s energy minister:
“We would love to have U.S. cargo in our region to have competition with Gazprom. … I believe negotiations with Gazprom now will be on competitive, reasonable terms and that will be just business and nothing else. … After we have built an LNG terminal, there is no possibility of blackmail. Since we think there is no possibility of blackmail, discussion will be rational and economical rather than political. This is a big step.”
The minister speaks diplomatically, so let’s read between the lines a bit. We suspect that Lithuania is trying to secure the diversification of its energy supply. The country wants options, additional sources of LNG so that it is beyond leveraging by Russia on natural gas. Russia did this with oil in 2006, Reuters reports.
At the same time, Masiulis told Reuters that Lithuania also would be open to buying U.S. crude oil if the United States repeals its current ban on the export of domestic crude.
Posted July 31, 2015
Our series highlighting the economic and jobs impact of energy in each of the 50 states continues today with Washington. Yesterday we looked at Alaska. All information covered in this series can be found online here, arranged on an interactive map of the United States. State-specific information across the country will be populated on this map as the series continues.
As we can see with Washington, the energy impacts of the states individually combine to form energy’s national economic and jobs picture: 9.8 million jobs supported and $1.2 trillion in value added.
Posted July 29, 2015
Our series highlighting the economic and jobs impact of energy in each of the 50 states continues today with Minnesota. We started this week with North Dakota and Illinois. All information covered in this series can be found online here, arranged on an interactive map of the United States. State-specific information across the country will be populated on this map as the series continues.
As we can see with Minnesota, the energy impacts of the states individually combine to form energy’s national economic and jobs picture: 9.8 million jobs supported and $1.2 trillion in value added.
Posted June 22, 2015
Wall Street Journal (Hamm) -- Amid news of a pending nuclear deal with Iran, some OPEC countries have struck agreements with refineries in Asia to avoid losing market share when Iranian oil comes back on the market. If U.S. policy will allow Iran to export oil, shouldn’t it allow America to do the same? Clearly, our allies would rather get their oil from America than Iran if given the choice. But without the ability to export, the U.S. is not even in the game.
Congress must lift the ban on U.S. crude oil exports. The ban is a terrible relic of the Nixon era that harms the American economy. As Sen. Lisa Murkowski (R., Alaska) has pointed out, restrictions on oil trade effectively amount to domestic sanctions. Combined with a mismatch in refining capacity, the ban on oil exports is creating a significant discount for U.S. light oil at no benefit to anyone except refiners and their foreign ownership. It has cost U.S. states, producers and royalty owners $125 billion in lost revenue in four years, according to industry estimates.
Foreign producers are using their heavy oil—and the U.S. ban on exports—as a weapon against America. Over the past three decades countries such as Venezuela, Mexico, Saudi Arabia and Canada have overtaken U.S. refining capacity to run their heavy crude in American refineries and capture a large portion of the U.S. market. Without firing a shot, they have disadvantaged American oil and interests.
Posted June 17, 2015
The Hill – A new Republican bill introduced Tuesday would completely repeal the federal mandate to blend ethanol into the nation’s gasoline supply.
Sen. Bill Cassidy’s (R-La.) legislation would completely do away with the renewable fuel standard, which first took effect in 2005 and now requires increasing levels of ethanol and biodiesel to be put into traditional fossil fuels.
The mandate invites frequent criticism from Republicans, the oil industry and sectors that complain the demand it creates for corn ethanol increases agricultural prices.
“Workers, refiners, producers, farmers and ranchers across the country are affected by the renewable fuel standard,” Cassidy said in a statement. “More mandates mean less jobs. It means families are paying more for gas and groceries.”