In case you missed yesterday’s webinar on investing in the energy industry, you can now play the recorded program at your convenience. Continue reading “Your Complimentary Webinar”
President Trump’s recent executive order reversing some of his predecessor’s environmental policies has drawn cheers from affected industries and jeers from environmentalists. I take no position on the political debate Trump’s move has set off. But it is possible to map out some of the likely impacts his executive order will have on the energy industry.
Trump the candidate derided President Obama’s regulations that would clamp down on the coal industry and promised to bring back lost coal mining jobs by undoing those regs. In late March, Trump the president signed an executive order seeking to do just that. “My administration is putting an end to the war on coal,” he declared.
So what exactly does Trump’s executive order do? Continue reading “A Renaissance for Coal? Or Just a Reprieve?”
Gasoline prices are behaving themselves right now. But if you’re planning a spring or summer road trip, you should budget for higher prices at the pump. Continue reading “Gasoline Prices To Trend Higher This Spring”
For much of 2017, oil markets had seemed abnormally calm. Sure, prices gyrated up and down every trading day. But the moves were never very substantial. Between Jan. 18 and last Wednesday, benchmark West Texas Intermediate crude never closed lower than $51.08 per barrel, and never higher than $54.45 per barrel. Then, in a span of a few days last week, WTI dropped to about $48 per barrel.
What happened? And what happens next? Continue reading “What’s Next for Oil Prices After Last Week’s Tumble?”
In the waning days of President Obama’s second term, the Environmental Protection Agency issued a “notice of violation” to automaker Fiat Chrysler Automobiles that certain vehicles the company has sold don’t comply with the Clean Air Act. The specific charge: Pickup trucks and SUVs powered by the company’s diesel V-6 engine produce too much nitrous oxide, and the automaker used software to conceal the violation during emissions testing. The echoes of Volkswagen’s costly diesel emissions scandal were unmistakable. So, is it déjà vu all over again for diesel in America?
Some government regulators certainly seem to think so. Mary Nichols, the chair of the California Air Resources Board, said in a statement that “once again, a major automaker made the business decision to skirt the rules and got caught.” (CARB and EPA work together to test vehicles for emissions compliance and enforce air quality standards.) Considering that VW’s attempt to cheat on emissions rules by programming its diesel cars to run cleaner during lab testing has cost the automaker about $20 billion in various penalties, you can imagine why FCA’s stock price tanked after the news broke.
But is this the same situation exactly?
Let’s start with what we know. First, the EPA’s charges pertain to about 100,000 FCA vehicles: Ram pickup trucks and Jeep Grand Cherokees equipped with a 3-liter diesel V-6 engine. By contrast, almost 600,000 Volkswagen, Audi and Porsche vehicles were included in VW’s diesel cover-up. Two different diesel engines were fingered, spread across more than a dozen different models.
Second, VW eventually admitted wrongdoing. So far, FCA is disputing the charges. Chairman and CEO Sergio Marchionne has been typically outspoken in his denial that FCA attempted to circumvent the law. “There is nothing in common between the VW reality and what we are describing here,” he said in a media conference call shortly after the allegations were made, according to the Detroit News.
There’s no way to know right now exactly what FCA did or didn’t do. But some informed speculation is possible. I checked in with Bill Visnic, editorial director of mobility media at the Society of Automotive Engineers, to get his take.
The dispute between FCA and government regulators could come down to “semantics,” he says. Perhaps the automaker’s engineers tweaked their engine management software so that their diesel vehicles could just barely meet emissions limits while maximizing their fuel economy ratings. (The systems that diesel engines require to control emissions of nitrous oxide and other harmful pollutants tend to reduce mileage.) And perhaps FCA programmed their vehicles to throttle back those control systems during certain driving situations, on the grounds that the components need to be protected in order to last as long in real-world driving as federal regulations require. Maybe that resulted in vehicles that FCA engineers believed were fully in compliance, but which government regulators determined were cutting corners.
If so, that wouldn’t be quite the same as VW’s deliberate attempt to foil emissions tests with software that the company knowingly installed. Visnic’s scenario probably wouldn’t be such a black eye for FCA, especially if noncompliant vehicles could be brought up to snuff with a simple software upgrade. Of course, he adds, it could also turn out that FCA did in fact knowingly cheat and tried to cover it up, in which case the company’s legal and reputational woes could be substantial.
What about the bigger picture of diesel’s future in the U.S.? The technology has long been touted as a way to significantly improve fuel economy, especially in the trucks and other heavy vehicles that American drivers tend to favor. Diesels have long outperformed their gasoline cousins when it comes to mileage. And their low-rpm brawn makes them effective at hauling heavy loads. But Edmunds.com Senior Analyst Jessica Caldwell notes that diesel “has always been more of a niche” option for tech-savvy buyers. Only VW had systematically marketed diesels to American buyers, and now the company has pulled the plug in favor of advanced gasoline and hybrid engines.
But there are signs that other companies want to step into the void left by VW. Mazda has announced plans for a diesel-powered version of its popular CX-5 crossover SUV. GM is readying a small diesel for use in its Chevy Cruze compact and GMC Terrain crossover. Perhaps most tellingly, Ford just unveiled plans to offer a diesel in its F-150 pickup, the best-selling vehicle in the country. Given all of these product plans, “somebody doesn’t think diesel is dead yet,” says Visnic. Those companies know just how badly VW was hurt by its diesel scandal, and they are proceeding anyway.
Chalk it up to fuel economy rules. The federal government’s Corporate Average Fuel Economy (CAFE) standards get more stringent every year, and automakers are running out of low-cost ways to boost gas mileage. Lightening a vehicle or making it more aerodynamic can yield small efficiency gains. Installing a diesel engine in that same vehicle could be a game changer, with mileage improving by 10% or more.
Of course, automakers will keep working on other fuel-saving strategies, too: Everything from making cars lighter to offering more of them as electric or hybrid models. And the industry is already hinting that it would like to see President Donald Trump relax the CAFE fuel economy rules to reflect the fact that Americans are buying pickups and SUVs, not fuel-sipping compacts. But some version of CAFE is here to stay, and carmakers can’t afford not to invest in anything that might help them hit their efficiency targets. At least for now, that appears to include diesels.
One little-noticed consequence of the heavy rain and snow falling on California and other Western states this winter: A potential boom in hydroelectric power generation this spring.
Hydropower doesn’t get much attention in the U.S. these days. Unlike wind and solar power, which are growing rapidly, there hasn’t been a flurry of new-dam construction in recent years. Unlike natural gas, the supply of which has soared thanks to hydraulic fracturing and horizontal drilling, no technology revolution has transformed the hydropower industry lately. And unlike coal, which has been at the center of heated political and environmental disputes, fights involving hydropower rarely make national headlines because they tend to involve individual dams. Continue reading “A Wet Winter Out West Points To A Big Spring for Hydroelectric Power”
With much of the U.S. feeling the effects of cold and snowy weather, now seems like an appropriate time to check in on heating fuel supplies and hazard some guesses about where fuel prices go from here. Many residential and business customers caught a break on heating costs last winter, with historically mild temperatures in many places. But the situation looks a bit different now that the calendar reads 2017.
Sizing Up Heating Fuel Stockpiles
Any analysis of winter heating costs has to start with how much natural gas, propane and heating oil is on hand to meet the season’s heating needs. And for the most part, those stocks of stored fuel look ample. Continue reading “Where Heating Fuel Prices Go From Here”
It’s safe to say that under President Donald Trump’s administration, a lot is going to change for energy and environmental policies after eight years of President Barack Obama. Trump’s early choices for Cabinet heads – an oil company executive at the State Department, a pro-drilling former Texas governor for the Department of Energy, an outspoken critic of Obama-era climate regulations to head the Environmental Protection Agency – strongly hint at a shift toward more development of natural resources and less-restrictive environmental rules. But what exactly will be changing, especially at the beginning of the Trump administration?
Walking Back Obama Priorities
Admittedly, I don’t have a direct line to Trump Tower, so I can’t ask the Donald himself what sorts of new policies we should expect when he takes office next month. But I have been speaking with folks who know his advisers, or represent influential business groups, or understand the industries most likely to be affected. Here are the highlights of their comments.
Christopher Guith, a senior vice president for energy policy at the U.S. Chamber of Commerce, believes the Trump administration will be busy undoing or modifying many of Obama’s policies and decisions. But some figure to change faster than others. Guith predicts that Trump will first go after certain executive orders Obama issued because they can be reversed right away by a new president.
That could include nixing the “social cost” of carbon dioxide and other greenhouse gases that Obama instructed federal agencies to weigh when considering the costs and benefits of regulations that limit emissions of such gases. In essence, assuming that emitting greenhouse gases imposes hefty future costs on society in the form of climate change makes the benefit of limiting such emissions higher, thus making the economic impacts of various regulations easier to justify. Guith believes that Trump will “take a knife” to this policy.
Also look for action on Obama’s recent order to halt the issuance of new coal mining leases on federal lands. That move cheered environmentalists who want to see the U.S. produce and burn less coal, but infuriated the coal industry and states with big coal mining operations. Guith expects the moratorium to be “eviscerated” within weeks or months of Trump taking office.
(Incidentally, reopening federal lands to coal mining might not make an immediate difference for the coal industry’s bottom line. As I recently wrote, the industry is poised for a rebound in 2017. But its upside is probably limited in the long run.)
A recently issued Obama regulation that would make coal mining permits harder to get in the name of protecting streams from mining-related waste could also be on the chopping block. The Republican Congress could employ the seldom-used Congressional Review Act to kill the regulation, since there will soon be a pro-coal Republican in the White House who would probably approve such a measure. (The CRA doesn’t have much teeth when one party controls Congress and the other has the presidency, since the president who issued the regulation in question can veto any bill from Congress seeking to overturn it.)
Finally, look for a change in the EPA’s approach to dealing with lawsuits from environmentalists. Guith says that the Obama EPA often declined to defend itself from such suits because it agreed with the gist of the complaints and was content to go along with the resulting court orders. That “sue and settle” mentality will be a thing of the past under Trump, he thinks. Instead, the EPA will vigorously defend its policies in court.
One thing that probably won’t change right away is the Environmental Protection Agency’s Clean Power Plan, which was designed to reduce carbon dioxide emissions from power plants. A legal challenge to the regs prompted the Supreme Court to order a halt to their implementation and give the Court a chance to hear the case. The outlook had been murky because of the death of Justice Antonin Scalia. But with Trump likely to appoint a conservative replacement, there is a good chance that the Supreme Court will eventually strike down at least part of the CPP, forcing the EPA to go back to the drawing board on regulating carbon. That’s a process that could take quite a while to play out.
Drill, Baby, Drill?
So much for what Trump might undo. What will he do?
To answer that, I checked in with David Holt, president of the Consumer Energy Alliance, a trade association composed primarily of big energy users, as opposed to producers. When I spoke with him in the immediate wake of Trump’s victory on Nov. 8, he said to look for the new president to expedite and support more energy infrastructure such as pipelines, and authorize more oil and gas drilling in areas such as the waters of the Gulf of Mexico. As Holt sees it, the widespread growth of hydraulic fracturing and horizontal drilling is nothing short of an “energy revolution” for the U.S. And he believes Trump fully intends to encourage that revolution to foster job creation.
White House support for expanded drilling and pipeline construction could set off a backlash among foes of such development. Holt’s primary concern is that, with the federal government less likely to limit or block energy-related development, activists in the environmental movement will resort to sabotage or civil disobedience to thwart new projects. The months-long protest of the nearly completed Dakota Access Pipeline System in North Dakota could be a sign of more-aggressive activism to come.
(Trump looks likely to grant the final easement needed to complete the DAPS project. And even the stillborn Keystone XL pipeline to connect Canada’s oil sands region with U.S. refiners could gain new life in the Trump administration. If so, buckle up for a major showdown between green groups and the White House.)
Speaking of environmentalists, I’ve been calling some of them to get their take on the incoming administration. So far, no one has been willing to talk, giving the impression that a lot of these folks are still sizing up Trump themselves and don’t yet know what to expect from him. Odds are they’ll become more talkative when Trump takes office and begins implementing policies that they disagree with. But here’s one early prediction: The confrontations will be frequent and acrimonious.
One of Donald Trump’s clearest campaign promises was to revive the beleaguered U.S. coal industry and bring back the thousands of mining jobs that have been lost in recent years. Trump pinned the blame for coal’s woes on the Obama administration’s pending climate change regulations, which would discourage burning coal to generate electricity. Trump isn’t in office yet, and his environmental policies are still taking shape. But the coal industry is already enjoying a bit of a comeback.
Natural Gas: Fueling a Coal Comeback
“Coal hit bottom in the spring of this year,” says Andrew Moore, managing editor of Platts Coal Trader at S&P Global Platts. Back then, coal consumption had plummeted and coal’s share of U.S. electricity generation had fallen to its lowest point on record. (It was around that time that we first spoke with Moore, who predicted that 2016 could mark the low point for the coal business.) Continue reading “Will Trump Bring Better Days for Coal?”
All eyes in the oil market are on OPEC’s upcoming meeting. But whether the cartel finally makes good on its long-awaited promise to cut production or not, we counsel taking a longer view on prices.
Production Cuts: Are We There Yet?
The Organization of the Petroleum Exporting Countries has been disappointing oil bulls for two years now. In fact, it was just about two years ago, when the group shocked markets by publicly opting not to cut production despite weak crude prices, that oil’s rout began in earnest. Traders seemed flummoxed that OPEC was abandoning its long-standing role as the unofficial regulator of global oil supply at a time when U.S. crude output was soaring and the world was awash in excess oil. Continue reading “Previewing OPEC’s Latest Confab”