David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    Spiraling Offshore Wind Costs Show Limits of Biden Inflation Act

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    Orsted’s warnings are the most concrete example yet of the limits of the IRA, which was hailed as a key driver for America’s nascent offshore wind industry. While the law provides at least $370 billion in grants, tax credits and other incentives for climate and clean energy projects, that’s proving no match for rising inflation and borrowing costs. And by dangling higher incentives for companies sourcing US-made parts, it’s fueling demand before the domestic supply chain catches up, driving prices higher still.

    “The irony here is that the Inflation Reduction Act probably has had some part in stoking inflation for some of the green goods that it intends to encourage,” said Kevin Book, managing director at ClearView Energy Partners LLC. The IRA is already spurring construction of new US factories to manufacture critical clean-energy gear, but that’s lagging behind renewable project development, exacerbating the issue in the short term. “It takes a long time to stand up a factory. It takes a long time to replace a foreign-sourced supply chain.”

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    'There's No Plan B': Oil Chiefs Sound Alarm on Refining Woes

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    Low stockpiles are driving an “incredibly strong” diesel structure, signaling market tightness, said Ben Luckock, co-head of oil trading at Trafigura Group.

    It’s becoming more expensive to fund normal refining projects, Alex Grant, senior vice president for crude, products, and liquids at Equinor SA, said in an interview. Existing refineries will operate at the highest rates they can, with refining margins staying high, he said.

    The refining system is “crying out” for fresh investment with oil demand still growing, especially in Asia, said Sri Paravaikkarasu, director of market analysis at Phillips 66. Refiners need to cater to it, while also accounting for the green energy transition, she added.

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    China's #1 oil company says peak gasoline demand has already passed

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    So China's largest oil company Sinopec is already seeing a drop in demand, from which it doesn't expect to recover. Previous predictions placed peak demand somewhere in 2025, but at a conference in Zhengzhou in August, Bloomberg reported that one Zhou Yan, from Sinopec’s retail sales division, said EVs were already displacing some 15 million tons of Chinese oil product sales in 2023, and that the company is forecasting that 2024 and subsequent years will see declining demand.

    According to the International Energy Agency, Chinese demand accounted for more than 70% of global oil market growth in 2023, so while global oil product sales are at record highs of around 102.2 million barrels per day in 2023 (up around 2.2 million barrels per day over figures from 2022), and gasoline for passenger cars is only a percentage of total oil product demand, it'll be interesting to see how China's rapid EV uptake affects predictions for global peak oil demand.

    The IEA released its forecast in June, estimating that peak global oil use for transport will arrive around 2026, but strong demand from the petrochemical and aviation sectors would continue to support overall market growth, albeit at slower rates, at least as far out as 2028.

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    Money, Politics Imperil Indonesia's $21.5 Billion Climate Deal

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    The initial promise of peaking Indonesia’s power sector emissions by 2030 at no more than 290 million tons of carbon dioxide, about 20% below a baseline level for the year, looks out of the question. An alternate scenario laid out in the draft plan would raise the target maximum to 395 MT of CO2, to account for the construction of new captive plants to serve growing industrial power needs.

    Officials have said they are aiming to have a revised—perhaps final—investment plan before COP28 begins in Dubai at the end of November, taking on public feedback. But to do that, they will need to come to agreement on at least three major, interrelated issues: the money, the emissions target and the mechanics of the coal phaseout, including changes to Indonesian laws and policies that hold back wider green progress.


    But there may not yet be enough in either bucket. There is just $289 million in grants, with half earmarked for technical assistance—funding for experts, consultants and advisors to model and support the energy transition. Almost all of the rest is loans, at interest rates to be determined later.

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    Lithium Giant Albemarle Nears $4.3 Billion Liontown Takeover

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    A deal would cement the stunning rise of the Australian lithium sector, where the share prices of newly founded and previously little-known companies have soared more than 10-fold amid surging demand for the metal. The race for lithium has mining heavyweights, battery manufacturers and automakers from Rio Tinto Plc to Tesla Inc. chasing deals with firms with even early stage or pre-production projects.

    Liontown, based in Perth, owns one of the most promising early-stage lithium projects in Australia, the world’s top exporter of the metal. It has supply agreements with major automakers including Tesla and Ford Motor Co.

    US-based Albemarle, which already owns stakes in lithium mines in Australia and has a processing plant there, offered to acquire all of Liontown’s equity at A$3 a share. That follows a bid of A$2.50 in March.

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    Summers Says Job Report Is a Step Down Road to US Soft Landing

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    Summers also reiterated his concern about the widening US fiscal deficit, and the need for Washington to wrestle with raising the government’s revenue over time. One reason why the economy has been so strong in the face of high interest rates has been a fiscal swing of “perhaps 3%” of gross domestic product this year compared with 2022, he said.

    Shutdown Warning

    “It would be helpful if we could get to more realistic views about the fact that we’re going to need more revenues,” he said. He also warned lawmakers against failing to enact annual appropriations bills that are needed to keep the federal government funded after the start of the new fiscal year on Oct. 1.

    A shutdown caused by an impasse over spending bills “doesn’t save any money, and further serves to disillusion people with Washington,” he said.

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    Russia Agrees on Further OPEC+ Oil-Export Cuts, Novak Says

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    Russia has agreed with its OPEC+ partners on further cuts to its crude exports, Deputy Prime Minister Alexander Novak told President Vladimir Putin.

    “We have agreed, but we’ll announce main parameters next week,” Novak said at a televised government meeting with Putin.  

    Russia has pledged to curb its crude exports by 500,000 barrels a day in August, then taper the curbs to 300,000 barrels a day next month. On Wednesday, Novak said that Russia was discussing extending the September export reduction into October, according to media reports.

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    Cybertruck employee deliveries 'imminent' with dual-motor or tri-motor options as Tesla films launch ad

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    The source mentions that the launch is "imminent" and only a few weeks away which jibes with Elon Musk's "end of Q3" Cybertruck release date promise back in April. There are a few other signs that point towards a Cybertruck launch in September, too.

    For one, Tesla has been filmed loading multiple units on trailers and shipping them out of Giga Texas just this past week alone, as the parking lot there seemingly gets new production batches every few days. They seem heading to the Fremont factory while some stop for crash tests on the way.

    Moreover, Tesla has reportedly been filming what could turn out to be the first Cybertruck launch ad up in the glaciers of Iceland. Locals have taped the Cybertruck surrounded by camera equipment there, or doing laps on the glacier fronted by a black Land Rover with its tailgate open as if for capturing footage.

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    LNG Strikes Could Begin Early September Amid Australia Disputes

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    Strike action in Australia’s LNG sector could begin as early as Sept. 2 if new talks between Woodside Energy Group Ltd. and union officials on pay and conditions fail to resolve disputes. Ballots are also taking place on potential walkouts by workers at Chevron Corp. facilities.

    Any outages would threaten about 10% of global supply and a local export sector that generated an estimated A$92 billion ($59 billion) in earnings in the year to June 30.

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    Email of the day on nuclear energy

    I am a pre-subscriber, but I was a little underwhelmed by the portion of today's first item, from David Brown, that I have access to.

    He doesn't say who the "real expert" that he quotes on the new energy system is.    A nuclear power station is a controlled version of a nuclear bomb, thus the enormous amount of energy available. I fully concede that today's power stations are completely safe in their operation. But of course, there is the question of safe disposal of the waste, which the extract doesn't address;  and also the security required for that waste, to prevent it getting into rogue hands.

    It is irritating to have statistics such as coal being 4000×, gas 100× and hydro 30× more dangerous than nuclear, without any detail as to how these figures are calculated (although that detail would require a lot more space).

    Just because someone writes in such a haughty fashion doesn't necessarily make him an expert.   Top scientists usually write with courtesy, and with a degree of humility, acknowledging that they could still be wrong, since the world of atoms and nuclei may still have some surprises up its sleeve for us.

    I do concede, however, that, since I do not have access to the full discussion, some of these points may have been raised there.

    Many thanks Eoin, for the commentary that I do have access to.   Your commentary on extracts often clarifies points which seemed obscure, and is always full of common sense!

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