First I want to talk about some good news: China is accomplishing its wind power goals ahead of schedule. After doubling their wind capacity each of the last two years, many predict another doubling in 2008 that brings the country close to 10 GW or into the top four countries in cumulative capacity. Just a few years ago, China set a 5 GW by 2010 goal. Having achieved that early, they doubled it to 10 GW. Now they are aiming for 100 GW by 2020. Even those goal posts may change if fossil energy prices remain high as many believe they will. In the larger energy picture, wind growth is still a small fraction of the enormous coal annual capacity growth which has hovered around 100 GW the last couple of years. But it remains a hopeful sign of progress toward the sustainable energy transition ahead. Continue reading
The price of oil and gas went down a bit today after the EIA weekly report showed slight gains in petroleum stockpiles (almost 5 million barrels or .6%) due to decreased demand. Storage levels of most fuels remain low compared to last year (46 million barrels or 6.5% below) and the five-year average, leaving upside risk for prices if there is a drawdown in the months ahead. I’m proud that our country has lowered consumption this year — and hope we continue to make further progress through a shift toward more efficient vehicles and other travel options/telecommuting. Continue reading
This past semester, I studied the price of oil and its relationship to the cost of climate mitigation. It culminated in a paper for Professor Michael Oppenheimer that showed sustained record prices for oil will help make deep emission cuts much cheaper than before. The current price acts not only as a large tax on oil, to the tune of $200 per ton of carbon dioxide, but also pulls the price of other fossil energy sources up as well (as we have been reporting for natural gas and coal). Such a price level was unfathomable in previous mitigation cost models such as the Stern Review estimate of a high oil price being $80 per barrel (70% below today). If oil prices rise to $250 per barrel next year as Gazprom projected that would be equivalent to an almost $500 per ton of carbon dioxide without policymakers having to intervene. The current higher prices, as modeled in the Stern Review, would move optimal concentration of greenhouse gases down a great deal from the 550 parts per million (ppm) level originally estimated by the 2006 study. Continue reading
US coal prices remained at record highs, with the only significant change this past week being the 8.8% increase to $118 per ton of Northern Appalachian coal. The oil market generally agreed with my sentiment yesterday that Saudi Arabia’s production announcement was mostly underwhelming, especially with the news of disrupted production in Nigeria. Oil gained over 1%, approaching its record in the upper $130s per barrel. And natural gas rose more than 1% to $13.23 per MBtu on anticipation that the emerging summer heat will prevent sufficient storage buildup for winter. China recently bought LNG supplies ~$13.90 per MBtu so if we want to attract more LNG tankers, it looks as though natural gas prices will need to climb another 5% or so. Continue reading
Saudi Arabia announced at its meeting today that it plans to increase production by 200,000 barrels per day in July (as yesterday’s blog anticipated). This amount is only a .2% increase in global supply and is completely erased by recent events in Nigeria, a strike and a pipeline explosion, if they persist. Saudi Arabia also plans to increase capacity by over one million barrels per day by the end of 2009, but this amount would struggle to offset decreases in production in Mexico, Norway, and the UK or to provide for new demand in China and other emerging economies. In fact, Saudia Arabia will produce less oil in July than it did in 2005 Continue reading
Tomorrow, global leaders will meet at an unprecedented meeting of oil producers and consumers convened by Saudi hosts in Jeddah. The Kingdom is reported to offer 200,000 more barrels of oil per day beginning in July to help stem the current price rise. Will this stop the longest rise in prices in historical record? Continue reading
Last week, I wrote of the march upward in coal prices. And this week saw further huge gains as Richards Bay South African coal hit $144 (up 5.5%), Australian Newcastle coal hit $162.61 (up 1.5%), and ARA European coal hit $185.53 per ton (up 4.6%). As the Northern Hemisphere begins to turn the air conditioners on, it will be interesting to see if records reach $200 per ton in the months ahead, closer to the value of coal’s fossil fuel competitors. Continue reading
Today, the biggest source of growth in global oil demand cut subsidies that were exaggerating its appetite for the fuel. China, beginning Friday, is increasing the price of gasoline, diesel, and jet fuel by 17%, 18%, and 25%, respectfully. Their price is still below the global market equilibrium, but the increase should help to keep demand from growing as swiftly as their economy (which grew 10.6% in the first quarter of 2008). This should help the demand side of the equation a bit and helped oil prices slide a few dollars today. But the risk of continued increases in the price of oil and gasoline remains as supply struggles to suffice the demand of a growing world population and economy. In fact, large banks such as Credit Suisse and Barclays Capital predict non-OPEC oil production will plateau and even fall slightly in the coming years bringing $150+ oil prices.
In natural gas news, Continue reading
A new study released today by Clean Edge, Inc., and Co-Op America projects solar power achieving grid parity by the mid-2010s. It lays out a plan for solar to reach 10% of our nation’s electricity if utilities, investors and policymakers are proactive in the effort. They predict economies of scale and learning by doing can cut costs of solar electricity generation from the current ~22 cents per kilowatt hour (kWh) to less than 10 cents per kWh by 2020. And the reality is price parity may be achieved as early as 2010 if natural gas prices continue to rise at their current rate for another two years.
In other energy news, Continue reading
The US Energy Information Agency (EIA) reported yesterday that Appalachian and Uinta Basin (Colorado) coal reached record highs. Central Appalachian coal climbed 8.6% to $117.60 per short ton, Northern Appalachian rose 3.3% to $108.50, and Uinta Basin coal shot up 22.7% to $54. The higher price above $150 throughout Europe and parts of Asia leaves room for growth in our domestic prices as they have to compete with the opportunity cost of not exporting it.
The price of oil and gas will depend on the EIA inventory reports coming out tomorrow and Thursday and may fall a bit due to the talk of further Saudi increases in production. Meanwhile, more and more solar farms are sprouting up across Europe and the US — including here in New Jersey as Rutgers University has committed to a constructing a few MW at one of their campuses. With a likely Democratic sweep this November, federal climate policy may make wind and solar the clear choice over fossil fuels by late 2009.
Here’s to some great progress in the meantime!