Top energy stories

1. Oil.  It's cheap and will remain so.  A few years ago that wasn't what was predicted.

The US is now a big exporter.  OPEC is on decline.  But fracking-produced oil wells generate most of their production in the first two years, so for oil production to remain high, wells will need to be continually drilled.  But since firms aren't really making money, is this sustainable?

-- "The Petro States of America," Bloomberg Businessweek, 2014
-- "The Dark Side of America's Rise to Oil Superpower," Bloomberg Businessweek, 2018

2.  Coal.  Since it's cheaper to fuel electricity generation with natural gas, coal production continues to decline, despite calls for increased use by the Trump Administration.  Another impact of natural gas as fuel for electricity generation is reduced labor.  NG electricity production requires a lot less labor than coal.

3.  Electric cars.  Are a way to reduce demand for oil, which hurts Saudi Arabia and Russia.  And reduces the "need" for the US to be involved in Mideast affairs as a way to ensure a continuous supply of oil to support the US's sprawl economy.

It's had an effect on those countries, clearly.  But the Trump Administration isn't interested in leveraging that economic effect to change the way those countries act.

But cheap oil makes electric cars less cost effective on an economic basis, without tax credits, and the Trump Administration is making noise about electric car tax credits.

4. Electricity generation and transmission.  I went to a presentation sponsored by BASF and produced by Atlantic Magazine, the Summit on Infrastructure and Transportation, and one of the presenters was Bruce J. Walker, Assistant Secretary, Office of Electricity, U.S. Department of Energy.  He actually made me feel confident about the Trump Administration in this area. He has extensive experience in the utility industry.

He distinguished between reliability and resiliency, making the point that the grid is very reliable, but what concerns him is "resiliency" especially in the face of changes in the mix of energy sources.  Coal use for electricity generation is way down, natural gas is way up, and wind and solar power is becoming a larger source.

I learned a new term "second contingency."  That is how the electricity transmission system is designed, so that if two major transmission lines fail simultaneously the system can still function.

Later on a coffee break I spoke with him at length about the problems and redesign of the grid in Puerto Rico. I missed a session as a result but it was well worth it. He was awesome.  He has a design for the PR system that goes to the fourth contingency in reliability.  (He even drew on a napkin the system, the problems--most of the demand is in the San Juan area but the power plant there is sub-optimal and they were rely on electricity from power plants more than 60 miles away--a problem when the transmission system goes down in a hurricane.)

Electric cars will also increase the demand for electricity and increase demands on the electricity grid.

5. Sustainable energy.  Off shore wind is a real opportunity for coastal states, but not a whole lot is happening in the US compared to Europe.  The one benefit of being a laggard is advances in technology and engineering mean that larger more efficient turbines can be deployed (a la Gerschenkron's thesis of the economic advantages of "backwardness.")

Another of the presenters at the Atlantic Summit on Infrastructure and Transportation was Tom Fanning, CEO, Southern Company. Southern Company is the nation's most innovative "traditional utility" and heavily invested in renewable energy. Another impressive presenter--actually virtually every presentation and presenter was great (which is rare).

His point was that they could manage the decline of the company as the electricity business model changed, or they could be forward, and shape and ride the changes and maintain profitability and position.

-- Southern Company Bets Big," POWER Magazine

Recently, I read a long article about the company's efforts in renewable energy but I can't remember where it was published.

6. Car industry efficiency requirements.  The Trump Administration aims to reduce car gasoline efficiency requirements, rolling back a continuous raising of the standards.

One of the plants GM will close makes the Chevrolet Cruze, in Lordstown, Ohio.  GM photo.

Yet, President Trump is not happy about GM closing manufacturing plants, which happen to make gasoline powered cars.  Over the last few years, Chrysler first and then Ford announced that they are mostly cutting back on car production and instead focusing on trucks and SUVs.

More than 0% of the market for vehicles is SUVs.  They aren't making money producing cars.

And without stronger requirements for fleet "efficiency" of course car companies aren't going to be able to sell cars, based on their legacy business model and business conditions.  So that's one of the spillover costs.

There need to be increased efficiency requirements for light trucks and SUVs.

7.  Natural Gas.  Fracking produces a lot of it. Prices are down as demand increases.  More is being produced for export through liquification (LNG) and shipment.  There are a few export terminals in operation, including in Maryland and there is interest in building more.  Note that Australia is in the odd position of exporting LNG through long term contracts and they are having a problem meeting domestic demand.

8.  Carbon taxes.  The unrest in France over an increase in energy costs as an energy efficiency measure has a lot of causes beyond attempting to deal with the environment.  But it does demonstrate that getting people to willingly pay more money for energy is difficult.

Washington State did not vote in favor of a carbon tax in the recent election.  But states are doing more, for example, the Regional Greenhouse Gas Initiative, a group of nine Northeast and Mid-Atlantic states have created a “cap-and-invest” system for power plant emission reductions.