Guest “Don’t blame green schist for the energy crisis it is causing” by David Middleton
Alessandro Blasi is a geophysicist and Special Advisor to the IEA Executive Director, International Energy Agency. His LinkedIn posts are always informative and well-founded… Well… Almost always…
This bit is priceless…
The 1st is to make diagnosis properly and not take the shortcut of just pointing the finger towards the clean transition as the main cause of current energy crisis.
Mr. Blasi urges people not to blame the “transition” to clean energy sources for the current “energy crisis.” Larry the Cable Guy would say, “I don’t care who you are, that’s funny right there!”
The reason why we are in this energy crisis is a lack of investment in fossil fuel resources due to the fake “transition” to clean energy sources. The totally fake transition from fossil fuels to Unicorn dust has caused the greatest misallocation of capital since alchemy was considered a science.
Mr. Blassi’s LinkedIn post included a link to this Economist article:
Natural-gas shortages threaten governments’ green goals
Why do we suddenly have looming natural gas shortages?
The world was warned about this last year…
COAL | NATURAL GAS | OIL 10 Dec 2020
Looming supply gap requires trillions of dollars in investment by ailing oil and gas industry, IEF warns
Author Herman Wang
Editor Alisdair Bowles
Commodity Coal , Natural Gas, OilLondon — The oil and gas industry will have to overcome its pandemic-induced retrenchment and boost investment by at least 25% annually over the next three years to prevent a severe supply crunch that could send prices skyrocketing and tip the global economy back into crisis, according to an intergovernmental agency.
Even with the possibility of peak demand nearing, the world will lack enough production capacity to meet its projected needs if oil companies do not urgently replace depleted reserves and develop new fields, the International Energy Forum said in a Dec. 10 report.
“Without sufficient investment, a reduced supply of oil and gas could lead to greater market volatility and higher prices, slowing the global economic recovery and jeopardizing energy security and international goals,” said the IEF, which collaborated with Boston Consulting Group on the study.
Warnings of a looming supply gap are not new, and indeed, both producing and consuming countries are largely united on the issue. Dating back to the oil price slump that began in 2014, the International Energy Agency and OPEC have both sounded the alarm that upstream capex in the industry was insufficient to meet future demand.
There has never been an energy transition. We just add more sources of energy to the mix, to feed an ever-growing demand for energy.
[…]
S&P Global Platts
Why aren’t oil & gas companies ratcheting up CapEx as quickly as the world allegedly needs us to?
- Wall Street is demanding that we exercise capital discipline and focus on shareholder return instead of growth… And most of us are fine with that because we remember 2014.
- The Climatariat/energy transition/fossil fuel divestment “axis of doofuses” is working 24/7/365 to limit our access to capital.
Unless we pledge allegiance to the ESG (Environmental, Social, Governance) Agenda…
Feb, 2020
S&P sees tight access to capital for energy companies not addressing ESG
Author Jodi Shafto
Theme EnergyAccess to capital may become increasingly more difficult for oil and gas companies failing to meet environmental goals, S&P Global Ratings said.
Even as the world moves toward cleaner energy options, the demand for fossil fuels will continue to grow. Still, investors are growing reluctant to fund companies that fail to address the environmental impacts of fossil fuel exploration and production, Ratings said during a Feb. 5 webinar.
S&P Global Ratings manager Luke Shane said this issue has already moved to the forefront and will continue to grow in importance. Some smaller banks, mostly in Europe, are dropping out of some of the revolver and credit syndications — loans offered by a group of lenders who work together to provide credit to a large borrower — looking to reduce exposure to companies that are heavy polluters, he said.
Further, hundreds of international investors have joined an initiative backed by the United Nations that aims to integrate environmental, social and governance standards into investment practice.
Principles for Responsible Investment asks signatories to publicly commit to consider ESG issues in investment analysis and decision-making processes, be active owners, and incorporate ESG issues into their ownership policies and practices. Signatories also agree to seek appropriate disclosure on ESG issues by the entities in which they invest, promote acceptance and implementation of the principles within the investment industry, work together to enhance effectiveness in implementing the principles and report on their activities and progress toward implementing the principles, according to the group’s website.
Shane said the initiative requires that signatories have ESG criteria integrated for 50% of the assets under their management. “This is clearly going to have an impact on capital access going forward,” he said. Noncompliance or failure to sign the agreement could result in the delisting of asset managers — “clearly something they don’t want,” Shane said.
As access to capital tightens, companies may need to explore mergers and acquisitions, shrinking the number of exploration and production companies working to meet the demand for oil and natural gas that is still expected to grow despite the push toward cleaner energy.
Most forecasts for oil demand project continued growth underpinned by energy demand, S&P Global Ratings senior director Simon Redmond said during the webinar. The world has a choice between using less energy or finding a better way of dealing with the pollution that arises from using fossil fuels, he said.
Fossil fuels, however, are used to meet 75% of global energy demand, and it will take a long time for non-fossil fuels to make up any significant proportion of that energy demand, Redmond said. If only for that reason, the demand for fossil fuels will grow for at least 10 years for oil and longer for natural gas.
[…]
S&P Global Market Intelligence
We can find and produce the oil & gas that the global economy depends upon… We can even do this while building out carbon capture utilization and storage (CCUS) operations… However, the more effort we have to expend on appeasing activists like Blackrock’s Larry Fink, the less effort we can devote to finding at producing the oil & natural gas quickly enough to avoid near-term supply shortages.
Until Wall Street, governments and idealistic fools comprehend the fact that there has never been an energy transition… Nor will there ever be an energy transition, the grotesque misallocation of capital will continue to worsen this self-inflicted “energy crisis.”
This is from the Energy Information Administration’s 2020 International Energy Outlook, published in October 2020:
It’s important to note that the EIA lumps hydroelectric in with renewables. If I was putting the chart together, I would have segregated them. I would have also not included biofuels with petroleum liquids… But you couldn’t see their contribution to the chart even if you segregated them.
While the original title highlights the projected increase in renewable energy, note that no other energy sources significantly decline over the full projection period, not even coal, which was then projected to top its 2014 peak by 2048.
If I plot the exact same data as a stacked area chart (like I would plot production data from an oil field), I get a totally different headline.
We’ve never transitioned from one form of energy to another; we just pile new sources on top of the old sources and use them more efficiently, with less impact on the environment. We burn almost as much biomass now as we did when we started burning coal; we just no longer rely on whale oil as a major component of that biomass.
About the Author
For those possibly unfamiliar with me, I have been a geologist/geophysicist in the US oil & gas industry since May 1981… Working for companies most of you have never heard of.
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It has never been a “transition”.
Shutting down reliable inexpensive high quality electricity generation, then installing unreliable highly variable extremely expensive poor quality electricity generation is never a “transition”!
At best it is a leap of faith. At worst, it is lemmings leaping off of cliffs. Like climate science, every cliff is high to lemmings.
(No matter what modern science says about lemmings, the current political alleged renewable madness is more lemming like than the original lemmings.
news for this person. Australia actually is an energy island. We are starting to see emerging problems here to but our useless politicians are too busy pretending they can stop Covid to actually focusing on something they can do something about.
I’ve come to the conclusion it is only going to be when angry consumers armed with pitchforks start heading for their local members of Parliament that something will be done about this. Alternatively it could happen faster if the greenies are detached from their phones because there is insufficient energy to charge them after mum and dad of cooked dinner. I’m a bit older so I know that if I had to choose between hitting my house and cooking dinner to keeping the kids iPads and iPhones charged, heat and food will win every time.
For most Australians they can install solar and have the system pay for itself within 2 – 5 years. Alternatively through a finance agreement or drawing down on the mortgage, solar can be funded cash flow positively by the savings it makes on energy bills.
So that’s your power problem over dinner solved, eh?
Is home solar power in Australia still worth it in 2021? | Solar Choice
Get real griff. Apart from FITs dropping like a stone the Regulator increasingly wants to shut down rooftop solar with the midday duck curve messing with grid stability-
AEMO installs early warning system for surplus solar and rooftop PV shutdowns | RenewEconomy
Those putting on rooftop solar now have to install smart meters so their solar can be cut off from the grid as there’s too much of it at the wrong time and home batteries to use it are uneconomic. Why the unreliables have to rely on gas backup all the time and as the globe does the same up goes the gas price.
$80.00+ Brent crude and $6.00+ NYMEX natural gas this morning— and not a word about it from the idiots at NPR.
Those $35-50/bbl hedges, that looked so good a year ago, really suck today!
Nobody can consistently and accurately predict interest rates, earnings, inflation or petroleum prices.
It is only possible to discern that (in the famous words of Herbert Stein), “If something can’t go on forever, it won’t.” After that, all that’s required is patience— it really is impossible for anybody to accurately and consistently get the timing right.
…and, of course, hindsight is always “20-20.”
It is very easy to get whipsawed and that is something that must be guarded against.
If you’re going to instate a policy of hedging, it is very important to be consistent and follow that policy continuously. I’ve seen far too many people (and companies) start second-guessing themselves when hedges go the wrong way. Don’t get all “smart” and compound the error by ceasing hedging after you’ve instituted hedging policy.
I’ll admit (as a “true, long term investor”) that I’m not a big fan of the practice. I want to own hydrocarbons; I do NOT want to own a Wall Street trading operation.
Mr. Middleton,
I must add that I both enjoy and benefit from your knowledge of science, economics, geology and energy.
Your nummeracy is not coincidental.
Thanks.
Oil and gas hedges are a cry for help by subpar managers/owners. They are trying to compensate for their failure to operate competitively by zero sum bargaining with folks who do that for a living. The best run companies go bare.
In fact, I can think of a company that lost ~$20/bbl last quarter on a realized price of over $64/bbl. We’ll never know for sure, but since that was “inclusive of hedges”, it was certainly from a combo of bad operating decisions and bad hedging….
It looks like a perfect storm of transitioning is shaping up….
European Energy Prices Surge to Records as Supply Crisis Spreads (yahoo.com)
Don’t blame the U.S. either.
Gas-Starved Europe Can’t Look West as U.S. Faces Its Own Crunch (yahoo.com)
One consolation for Alessandro Blasi is that his boss apparently listens to him. Fatih Birol, head of IEA today says dont blame the energy transition for the gas price crisis. Ha Ha. If the head of the IEA doesn’t understand this he should resign.
In which universe does shutting down Groningen (Europe’s biggest gas field), or shutting Germany’s nuclear plants after Fukushima (could earthquake risk in Germany be further from that in Japan?), or shutting UK coal plants not affect gas prices? Or the fact that wind supplied only 2% of electricity in the UK over the last month when the installed capacity is 29%. In his defence, Zero Hedge points out that gas supply down the Yamal to Mallnow (Russia to Germany) pipeline is down 57%. Even then, if we blame the Russians for withholding gas supply, which numbskulls allowed them that leverage?
The upside is that crazy energy prices may be the ultimate red pill in waking the public up to this nonsense energy policy.
Off Topic
“I wish sarcasm was a font”
Here’s an idea.
I’m sure someone out there has the skills to make a font where the “lines” used to make the letters consist of small and repeating “WTF!”.
(If someone does that and makes a million dollars, I settle for 10% … maybe even 5%.) 😎
So, a warning to all!
“Don’t step in the Green Goo! When it sticks to your feet, don’t blame your shoes!”
Interesting report on 2nd quarter financial results for worldwide hydrocarbon producers:
https://www.eia.gov/finance/review/pdf/2021Q2%20Financial%20Review.pdf
Hedging losses of $11 billion in the 2nd quarter were the highest in the 2016-2021 period (see page 11).
Return on equity continues to be substantially lower (1/3rd) than U.S. manufacturers (see page 16).
European gas prices hit all-time highs
Fri, October 1, 2021
By Vladimir Soldatkin and Katya Golubkova
MOSCOW, Oct 1 (Reuters) – European gas prices surged to all-time highs on Friday as Russia kept a tight lid on supply, signalling further price pressures on European consumers heading into the winter heating season.
The November gas price at the Dutch TTF hub, a European benchmark, hit an all-time high of 97.73 euros per megawatt hour (MWh) earlier on Friday, up around 400% this year, before easing slightly.
Demand for gas has soared as the post-pandemic recovery meets low inventories with stiff competition for supplies from Asian buyers – China, for example, is seeking more liquefied natural gas (LNG) cargoes despite record prices as its own winter season starts.
The Kremlin reiterated on Friday that Gazprom, whose gas exports outside the former Soviet Union rose 15.3% year on year in the first nine months of 2021, was meeting all its contract obligations in full.
“Gazprom is supplying gas in accordance with customers’ requests under contract obligations,” the company said in separate emailed comments on Friday.
German utility Uniper, one of Gazprom’s biggest clients, confirmed Russia was fulfilling all its contract obligations to it.