Coal Cap on China?

As we all know, China is major producer and consumer of coal. According to the Wall Street Journal, the demand for coal in China has gone up 10% and it's share of the global coal consumption has already tripled. Zhang Guobao, head of China's National Energy Administration, doesn't approve of this, therefore calling for a cap somewhere between 3.6 million tons and 3.8 million tons. China is currently consume over 4 million tons. They predict that China will run out of coal in 28 years, but they aren't sure about it since it's really difficult to compute. For a country that depends on coal fro 70% of their energy, this could be a major problem,

This will have a big effect in their economy. Many small oil producing businesses are going to feel the pressure. China is also trying to lower inflation at the moment. I feel that if this policy does get approved, this will cause the price of coal to rise. The loss of job and prices to go up is the last thing China wants. 

Further Disgrace for BP

                It now appears that  BP had many advance warning signs in the days and weeks leading up to the fateful explosion on the oil rig that lead to the events that have so firmly shaped the future of the energy industry.  There were multiple events in time leading up to the distaster that hinted that things were not perfectly well at all. Among these oversights were the fact that BP ignored tests which said that the bottom of the well was not able to hold under current pressure.

                One can only wonder what impact this further disgrace for BP will have on the energy industry. Obviously even more blatant errors by BP will lead to further government regulations, as the article notes. What will the effects be on oil and stock prices? Only time will tell, yet it seems that this can not have a positive connotation for the industry.

http://online.wsj.com/article/SB10001424052748704648604575620511160070900.html?mod=WSJ_Energy_leftHeadlines

Oil Companies Increase Capital Investment

        The future value or expected value of crude oil is expected to remain high. The price of a barrel has been as high as $146 in July of 2008, but is expected to hold more of a conservative estimate at $70 to $80 per barrel for the next three years. Due to this expected retention or stability in price level major global oil companies are beginning to invest at increased rates to expand production. Essentially, there is a belief that the usually volatile oil market will remain relatively stabilized leading to increased investment in exploration and production.

        Several big name companies that are seen in this new trend of investment are Exxon Mobil Corp., XTO Energy Inc., and recently Chevron Corp. Each of these companies have begun to build up excess liquidity in an effort to expand into growing oil production. Even BHP Corp. is expected to increase its holdings in research and development. Basically, all the major players in the oil industry have shifted their investment outlook to increased expansion and production. This move was made in an attempt to keep the relative stability of the oil industry constant for the coming years.

        What does this mean for the energy industry you may be asking yourself. Simply, there has been a shift in the trend of investment. Regardless of recent economic turmoil there seems to be a new perspective on investment. The major oil companies believe that the recent stability in the financial system will give them the opportunity to secure their investment projects. Oil companies are the first major players to begin re-investing in expansion and exploratory projects. Now it is only a matter of time before other lagging parts of the energy industry begin to re-invest in expansion.

- By: Timothy D. Vallario
- Source: Wednesday, November 17, 2010 - VOL. CCLVI NO. 118, B9A - "Oil Companies to Spend More Money", By Isabel Ordonez

Gulf Spill Linked to BP's Lack of 'Discipline'

- Rianna Das

According to an article from the Wall Street Journal, a team of technical experts have found the BP oil spill was mainly due to BP's lack of consideration of risk and their lack of operating discipline. This panel of experts was assembled by the Interior Secretary, Ken Salazar, to examine the BP oil spill more closely. This same panel also criticized the regulators and the industry as a whole. The team also found a lot of bad decisions on BP's part that lead to spill, along with a few technical problems that likely contributed as well. It also identified problems, such as BP's lack of management discipline and their lack of onboard expertise and clearly defined responsibilities. The goal of this report was to provide the government with a better understanding of what caused the BP oil spill. It will work to provide better regulation in the future and strengthen standards of offshore drilling.

I think this was an important report for the government to order. It is important to understand what specifically caused the BP oil spill. This is because if the government understands what caused the spill, they can work to prevent it in the future. As stated in the article, the goal of the report was to just this. Also, it is important so that other companies can learn from the mistakes of BP and can understand how to prevent an oil spill.

It is important that oil spills are prevented because of the incredible damage they do to the environment. Oil spills can do irreversible damage to ecosystems and the animals a part of them. The BP oil demonstrated this when the media continuously portrayed images of innocent water fowl drenched in oil.

Sources:

http://online.wsj.com/article/SB10001424052748704312504575619261331344070.html?mod=WSJ_Energy_leftHeadlines

The Pros and Cons to Taxes on Oil

According to a recent WSJ article, Israel is recommending raising tax on oil companies. It's really interesting because this article actually portrays both side of the story.

The U.S debates that it would limit the amount of investment in Israel. Many other governments believe that they aren't carrying out their "contracts that promised a generous tax and royalty regime", but Israel debates that they are not making money from this at all.

I think this is definitely a sticky situation. If the taxes do go up, I think this might also push some companies to invest in renewable energies. Usually they are talking about how theres a need in renewable energy, and now they are talking about how taxing might be expensive issue. In my infomational interview, the lady I had interviewed stated that the European Nation and China are more advanced in promoting energy efficency and renewable energy and that we need some sort of an incentive in the US to "catch up to them." Although this isn't really an incentive, but could this be it? Is it enough of a push?

Halliburton Explores Risky Energy Ventures

                   So far on the blog, I have looked at mostly the attempts of eco-friendly companies to explore energy that is both better for the environment and more sustainable than traditional energy practices. While this is certainly a significant proportion of the energy exploration that is happening among companies, not all businesses are interested in new sources of energy that are environmentally friendly. Indeed, one company Halliburton, which already has a reputation as one of the less environmentally conscience companies, has recently experienced some trouble with the Department of Energy as it explores ventures which may be detrimental to the environment.

                The EPA has subpoenaed Halliburton over its use of “hydraulic fracturing”. This is done by using large amounts of water to open up sources of gas to be extracted. While it may reveal previously inaccessible oil, detractors of this method claim that it may be harmful to drinking water.  The EPA claims that many companies have been unhelpful providing information on this practice.

                It seems as this practice is in contrast to the efforts of many companies to find more responsible methods of extracting energy from the earth. While studies have not been definitively completed to condemn the practice, the secretive nature of the companies in refusing to report to the EPA makes it seem as if there is at least something to hide about this new practice. Yet the companies can not be entirely held to blame, as the race to develop new methods for producing cheap energy have pushed many businesses into questionable practices. What is more important for the industry, pleasing the customer through cheap prices or preserving the world? Only time will tell.      

http://online.wsj.com/article/BT-CO-20101109-715152.html

Entergy Considers Sale of Vermont Nuclear Plant

-Rianna Das

This article is about a company, Entergy, in Vermont that is considering closing their nuclear power plant. This plant is 39 years old and has been recently been facing state resistance over the plant. This resistance is due to the plant having leakages of radioactive material. Through this resistance, the plant still supplies about one third of the state of Vermont's energy. Vermont is one of the few states that relies on nuclear power as a primary energy source. There about 65o employees who work at this nuclear power plant. If this plant were to be resold, the company assures that they would work with the new buyers to keep these employees at work at the same plant.

This article shows the importance in the industry for nuclear power. Nuclear power is a renewable energy option. Its use does not harm the environment, making it sustainable. However, it does have some problems in production. As the article demonstrated, nuclear power plants often have leakage of radioactive material, which can do great damage to the environments around the plants. This means that nuclear power plants face must face a lot of regulation from government. This regulation adds to the expense of the nuclear power, which is already expensive to produce.

Again, this article illustrates that although there is a need for renewable, sustainable, energy, it is not always easy for businesses to give this to their consumers. While it is hard for businesses to invest money in relatively new industry, it is important that they keep doing this. It is important for the environment that businesses keep searching for ways to deliver new types of energy to their consumers at a price they can afford.

Sources:

http://online.wsj.com/article/SB10001424052748703805704575594723506042644.html?mod=WSJ_Energy_leftHeadlines

ABC - American Biofuels Council

Today, I had my interview, by the luck of chance, with the President of the American Biofuels Council. The ABC is a independent national organization thats function is to educate, implement, and provide energy reform.  He was in the process of having lunch when I called to speak to a public relations representative or a human resources consultant. By chance Sean O'Hanlon, Founder and Executive Director of the ABC, answered the phone and spoke to me about current trends, job opportunities, and the current market situation.

Three major takeaways that I received from this interview were the extent of energy subsidies, the economics of the biofuel industry, and the current mentality American society now faces. Oil, natural gas, and coal are subsidized fivefold more than biofuel or biomass due to politicians levying for funds. The largest expenditure any government in the entire history of man is not either defense or austerity measures, but fuel. Fuel is the largest expenditure in the United States.

Simply, the technology, even the physical capital  is in place to some extent,  to create biofuel in mass quantities has been proven. the problem is with cash-flow. There is not enough liquidity to either lobby to increase 'push' in the market, nor is there enough currency to proceed with operations on a mass scale.

Regarding mentality, Americans generally are only interested in the short term. Not to stigmatize or generalize the population, but it must be understood that action is almost never taken unless society reaches a 'tipping point'. The American public does not realize the potential in the long term gain from investing in green technology today. Due to this the future outlook of the energy industry seems bleak.

-Timothy D. Vallario
-Informational Interview Wed. 10 - Sean O'Hanlon Founder and Executive Director American Biofuels Council

 

The Election and Energy

With the recent elections, the Wall Street Journal posted an article about how candidates are stating how they don't support renewable energy funding in their campaigns. Because they are doing that, it seems like its actually winning them votes. 

From the Wall Street Journal:

"At least a dozen ads portray stimulus spending on wind power or renewable energy as an example of waste. Another dozen or more allege the stimulus sent jobs overseas to China.  None explicitly calls for ending the tax breaks for the wind-power industry once they expire this year, but the wind association fears the criticism will make them harder to renew."

The wind energy industry companies are afraid of this year's congress. They are afraid that they are going to lose funding and tax credits. This has a big impact on the renewable energy industry. The first step to making wind energy popular is government funding and support. 

Government to possibly cut back alternative energy subsidies

 

                Recent issues in the government have lead some to question the administrations decision to provide financial backing to many alternative energy firms. They believe that the amount of money being subsidized to these companies does not come produce a benefit which is high enough to justify the cost. One measure in particular has come under fire recently. The government had planned to loan 1.3 billion dollars for a series of wind farms in the Northwest United states. However, many people are saying that this price is too high for the amount of clean energy that the farms would produce.

                This leads to another question which will have serious implications for renewable energy businesses and those wishing to invest in them. Is it worth it to spend money on a process which may not be the absolute most cost effective at the moment, but has the potential to shift the entire climate of the economy as a whole. Those lucky investors that find themselves to have backed the source which ends up taking control of the market will be in a unique position. So how can investors use this knowledge? Should they try and support a government which will give money to alternative energy ventures, or should this be determined by the market? Only time will tell which ends up getting us to the next big thing in the energy industry. 

http://online.wsj.com/article/SB10001424052748703506904575592843603174132.html?mod=WSJ_Energy_leftHeadlines

Californians Reject Proposal To Suspend Climate Law (an Update)

-Rianna Das

An article in the Wall Street Journal explained how proposition 23, which would suspend California's climate laws, was rejected in yesterday's election. This proposition would have suspended California's climate laws in order to create more jobs to help the state's economy. If proposition 23 had passed, it would have had a positive impact on many in the oil industry. Many oil refiners backed this proposition because it would leave the industry less regulated, making it easier for oil companies to make a larger profit since money won't have to be spent on complying with regulations.

This proposition also had enemies in the energy industry. Many green Californian businesses supported proposition 23 because it would bring them more business. For example, since the climate laws required California to cut its greenhouse gas emissions by 2020, many businesses probably want to go "green." If the proposition passed, it would have negatively impacted these businesses because the climate laws would have been suspended.

After blogging about this proposition last week or a couple weeks ago, personally, I am very glad that this proposition did not pass. Although it would have had a positive impact on the oil industry, it would have been taking a step backward in saving the environment. I think it is important for the development of the "green" energy business that this proposition did not pass. Now, this industry will be able to continue to impact the state of California and, can hopefully, illustrate to the rest of the country how to be "green" and how it positively impacts the environment.

Sources:

http://online.wsj.com/article/BT-CO-20101103-710843.html

-Rianna Das

Change in Big Oil Investments

With the recent BP oil debacle in the Gulf of Mexico, shares in BP have taken a decrease by as much as one third. New CEO Bob Dudley, to reinvigorate investors, has decided to halt dividend returns so that a larger supply of investment capital could be acquired. This is an attempt to open up cash flow so that BP could concentrate more on expanding. The idea is through a "ambitious program of growth"BP will be able to project better earnings in the future.

Investment-bank research has shown that major Western oil companies should consider shedding their mature assets,spend more on prospecting, and cut down on dividend returns to open up cash flow. To cut dividends is a dangerous task because shareholders feel that they are not sharing in the profits that they should rightfully be given. The other side of the table see that with cutting these returns there will be more money to invest in long-term profits.

This is a major shift in Big Oil investment. Specifically, Western oil companies have shifted their profit share to increase future exploring. Some regions that have been specified for this expansion are West Africa and the Gulf of Mexico. In these regions high-growth has been witnessed in the past three to four years. This change in investment by major oil corporations show, how even in a hostile unstable economic environment, there is a need to keep moving forward with ingenuity and innovation.

-Timothy D. Vallario
-Source: Wednesday, November 3, 2010 - VOL. CCLVI NO. 106, Marketplace B1"BP's Dividend Takes Back Seat"