This week, with a single stroke of a pen, President Trump rolled back eight years of Obama-era rules and directives designed to combat climate change. While Mr. Trump has yet to nix American participation in the 2015 Paris agreement, his administration’s reversal of Obama-era climate rules will make it difficult for the U.S. to meet its emission-reduction targets. The recent move will promote aggressive exploitation of America’s vast energy resources, bolstered by the shale revolution, without having to consider climate change and environmental impact. Flanked by coal miners, he promises that the rolling back of restrictions will ‘end the theft of American prosperity’ and bring back all the coal and energy jobs lost over the past four decades.
Except it won’t. American coal production has actually increased since the 1970s, and even though it has dipped recently since the promotion of clean energy, it remains above a billion tons a year, up from 600 million tons in 1970. All of this has come from the benefits of automation and a change in mining techniques, shedding labour intensive jobs in favour of tireless machines. The jobs Trump touts will come back to coal country don’t exist anymore, says Caterpillar, a heavy machinery producer developing fully automated coal mining trucks. Coal country voted heavily for Trump, swayed by snake oil sales techniques, and they will be disappointed. The good old days are never coming back, but Trump is coasting on the pretence that they will. Ironically, Trump seems to be ignoring the real job growth story that is happening in the renewables sector. Interestingly in the state of Texas, ground zero of the Oil industry in the US, jobs in renewables grew by 34 percent last year, giving the state the third largest number of solar jobs in the nation. California is the top solar employer, with more than 100,000 jobs, followed by Massachusetts, which has more than 14,500, according to data from the Solar Foundation. These numbers are hard to ignore, if Trump is actually looking for votes again in the next 4 years.
Trump knows this. He must. But though his overtures are publicly to blue collar, working class Americans, the measures are actually designed to benefit corporate players, millionaires and billionaires that Trump identifies with like Carl Icahn. Gutting the EPA’s power – in the first two weeks of Trump moving into the White House, the section on climate change on the EPA’s website disappeared – and now removing the regulations designed to minimise climate change impact frees what much of the energy industry sees as burdens. Essentially, it is to regress the energy industry back to the rapacious, free wheeling days of the Wild West, an unregulated era that helped create dynasties such as the Rockefellers and Vanderbilts.
Throughout a recent important industry conference known as CERAWeek by IHS Markit, energy ministers, CEOs and other top executives showed that the industry is running ahead of policymakers on climate change, no longer treating it as an inconvenient theory, but rather as a hard reality to which it must adapt and change. Khalid al-Falih, the Saudi Arabian energy minister, called on his colleagues to find ways to “minimize the carbon footprint of fossil fuels.” Exxon Mobil chief executive Darren Woods said energy development can only move forward by protecting the environment and climate. Ben van Beurden, CEO of Royal Dutch Shell, said the industry needed to produce more energy with fewer carbon emissions. Supermajors have begun to strategically invest in the direction of cleaner fuels such as natural gas and renewables, and even if Trump’s machete to climate change benefits them in the short term – opening up drilling in the Arctic, for example – they know this is a momentary dip. Even Trump’s Secretary of State, Rex Tillerson, knows that renewables are the future. While the US regresses, China and Russia are moving ahead, plotting to assume leadership of the clean energy movement.
General Electric Co. CEO Jeffrey Immelt recently defended efforts to reduce emissions and fight climate change, after President Donald Trump reversed rules that pushed U.S. utilities to use cleaner-burning fuels. Mr. Immelt said in a blog post that ‘climate change is real and the science is well accepted.’ Mr. Immelt mentioned the administration’s move and said climate change “should be addressed on a global basis through multinational agreements,” such as the 2015 Paris Agreement.
Rather oddly and in direct contradiction to the Trump administration, the Chinese government has come under a lot of pressure from its own population after years of ignoring climate protection. The government there is now actually supportive of the scientific consensus about climate change. Chinese state media has called President Trump "selfish" over his plan to abolish environmental regulations enacted by the Obama administration. The Global Times, a state-run tabloid argues that China is the largest emitter of greenhouse gasses in the world with the US in second but “China will remain the world’s biggest developing country for a long time. How can it be expected to sacrifice its own development space for those developed western powerhouses?” Interesting.
Trump’s myopia isn’t accidental or obtuse; his ability to cause regression is limited by his tenure, and meant to benefit and profit those closest to him during his short time in the White House. With scientists recently declaring the CO2 levels have reached the ‘point of no return’ globally, the world is at crossroads to deal with the looming climate crisis. From being a leader in climate protection, the US is now an administration of climate change deniers. And so it is now up to conscience of the American private sector to mitigate the worse excesses that Trump’s new policies will unleash or wait for another 4 years.
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In its latest Short-Term Energy Outlook, the U.S. Energy Information Administration (EIA) forecasts that natural gas-fired electricity generation in the United States will increase by 6% in 2019 and by 2% in 2020. EIA also forecasts that generation from wind power will increase by 6% in 2019 and by 14% in 2020. These trends vary widely among the regions of the country; growth in natural gas generation is highest in the mid-Atlantic region and growth in wind generation is highest in Texas. EIA expects coal-fired electricity generation to decline nationwide, falling by 15% in 2019 and by 9% in 2020.
The trends in projected generation reflect changes in the mix of generating capacity. In the mid-Atlantic region, which is mostly in the PJM Interconnection transmission area, the electricity industry has added more than 12 gigawatts (GW) of new natural gas-fired generating capacity since the beginning of 2018, an increase of 17%.
This new natural gas capacity in PJM has replaced some coal-fired generating capacity—6 GW of coal-fired generation capacity has been retired in that region since the beginning of 2018. The Oyster Creek nuclear power plant in New Jersey was also retired in 2018, and the Three Mile Island plant in Pennsylvania plans to shut down its last remaining reactor this month.
These changes in capacity contribute to EIA’s forecast that natural gas will fuel 39% of electricity generation in the PJM region in 2020, up from a share of 31% in 2018. In contrast, coal is expected to generate 20% of PJM electricity next year, down from 28% in 2018. In 2010, coal fueled 54% of the region’s electricity generation, and natural gas generated 11%.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
Wind power has been the fastest-growing source of electricity in recent years in the Electric Reliability Council of Texas (ERCOT) region that serves most of Texas. Since the beginning of 2018, the industry has added 3 GW of wind generating capacity and plans to add another 7 GW before the end of 2020. These additions would result in an increase of nearly 50% from the 2017 wind capacity level in ERCOT. EIA expects wind to supply 20% of ERCOT total generation in 2019 and 24% in 2020. If realized, wind would match coal’s share of ERCOT's electricity generation this year and exceed it in 2020.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
Natural gas-fired generation in ERCOT has fluctuated in recent years in response to changes in the cost of the fuel. EIA forecasts the Henry Hub natural gas price will fall by 21% in 2019, which contributes to EIA’s expectation that ERCOT’s natural gas generation share will rise from 45% in 2018 to 47% this year. Although EIA forecasts next year’s natural gas prices to remain relatively flat in 2020, the large increase in renewable generating capacity is expected to reduce the region’s 2020 natural gas generation share to 41%.
Headline crude prices for the week beginning 9 September 2019 – Brent: US$61/b; WTI: US$56/b
Headlines of the week
Detailed market research and continuous tracking of market developments—as well as deep, on-the-ground expertise across the globe—informs our outlook on global gas and liquefied natural gas (LNG). We forecast gas demand and then use our infrastructure and contract models to forecast supply-and-demand balances, corresponding gas flows, and pricing implications to 2035.Executive summary
The past year saw the natural-gas market grow at its fastest rate in almost a decade, supported by booming domestic markets in China and the United States and an expanding global gas trade to serve Asian markets. While the pace of growth is set to slow, gas remains the fastest-growing fossil fuel and the only fossil fuel expected to grow beyond 2035.Global gas: Demand expected to grow 0.9 percent per annum to 2035
While we expect coal demand to peak before 2025 and oil demand to peak around 2033, gas demand will continue to grow until 2035, albeit at a slower rate than seen previously. The power-generation and industrial sectors in Asia and North America and the residential and commercial sectors in Southeast Asia, including China, will drive the expected gas-demand growth. Strong growth from these regions will more than offset the demand declines from the mature gas markets of Europe and Northeast Asia.
Gas supply to meet this demand will come mainly from Africa, China, Russia, and the shale-gas-rich United States. China will double its conventional gas production from 2018 to 2035. Gas production in Europe will decline rapidly.LNG: Demand expected to grow 3.6 percent per annum to 2035, with market rebalancing expected in 2027–28
We expect LNG demand to outpace overall gas demand as Asian markets rely on more distant supplies, Europe increases its gas-import dependence, and US producers seek overseas markets for their gas (both pipe and LNG). China will be a major driver of LNG-demand growth, as its domestic supply and pipeline flows will be insufficient to meet rising demand. Similarly, Bangladesh, Pakistan, and South Asia will rely on LNG to meet the growing demand to replace declining domestic supplies. We also expect Europe to increase LNG imports to help offset declining domestic supply.
Demand growth by the middle of next decade should balance the excess LNG capacity in the current market and planned capacity additions. We expect that further capacity growth of around 250 billion cubic meters will be necessary to meet demand to 2035.
With growing shale-gas production in the United States, the country is in a position to join Australia and Qatar as a top global LNG exporter. A number of competing US projects represent the long-run marginal LNG-supply capacity.Key themes uncovered
Over the course of our analysis, we uncovered five key themes to watch for in the global gas market: