Tag Archives: Oil

New Directions in Global Oil

New Directions in Global Oil, the April issue of TerraJoule.us, reviews the expanded supply capabilities created over the past five years by the global oil industry. Because North American oil supply growth, however, cannot be expected to continue during a low priced environment, we speculate OPEC will be successful in its quest to win back market share. More broadly, TerraJoule.us concludes that the forecast for global oil production over the next five years will essentially track global growth. If global GDP weakens, oil supply will guide downward. If global GDP strengthens, oil production will advance, and supply the global economy with oil at an affordable price. This new equation is made possible by the intersection of new production capacity with the phenomenon of energy transition, in which oil itself has lost market share every year since the start of the new millennium.

In the second essay of this month’s issue, “The Path We Are On“, we welcome back new writer and analyst Justin Ritchie, of the University of British Columbia. Mr. Ritchie’s essay focuses on the four main pathways of future GHG emissions, and asks questions–in light of slowing global economic growth–about the probabilities of future demand growth for fossil fuels. Again, given the energy transition already underway, Ritchie’s essay, along with this month’s issue, calls into question wildly high projections for future energy consumption. This is an important topic, that probes issues surrounding the tendency to extrapolate past growth into the future.

In the continuously updating TerraJoule.us Global Grid Decarb Monitor, projections for marginal growth from wind and solar are largely maintained for both 2016 and 2017. We maintain our view of better global growth next year. And one note of interest here: new generation from solar in 2016 is forecasted to exceed new generation from wind power.

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, stands at 97.54 having started the new year at a notional value of 100. The Index plays a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position. Industrial names in the index continue to perform well in 2016, while the basket of solar equities continues to underperform.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.

Car Talk

Car Talk, the February issue of TerraJoule.us, discusses the plausible deployment rates of electric vehicles (EV) and autonomous vehicles (AV) in the context of a changing transportation market where the current dream is to detach automobiles from personal ownership. To counter some of the current excitement over an imminent revolution in transportation,  we show that existing solutions, like public rail transport, have been successful already in competing away marginal demand for automobiles, and oil. Overall, when we look at comparable infrastructure buildout rates for wind and solar technology, and the exceedingly slow rate so far of EV adoption, TerraJoule.us concludes that transition in mobility will run into familiar resistance points before the scaling process truly begins.

In the second essay of this month’s issue, “Oil’s New Problem”, we note the global oil market now is entirely dependent on demand changes in Non-OECD economies. And we wonder, if after 15 straight years of market share losses, whether energy transition has finally caught up to oil.  Conversely, with a flood of exceptionally cheap energy from all sources fanning out into the world—oil, coal, LNG, wind, and solar—it seems probable that this massive cost reduction will convert to stimulus by next year.

Relatedly, in the continuously updating TerraJoule.us Global Grid Decarb Monitor, projections for marginal growth from wind and solar are raised for 2017. A better economic outlook drives one part of this revision, but the normalizing effects of recent tax policy changes from the US will smooth both markets as we cross through next year, into the end of the decade. We also raise substantially the total growth rate of new power generation, from all sources, in the 2017 forecast.

Finally, The TerraJoule.us Transition Index, composed of 70% ETFs and 30% individual equities, stands at 91.59 having started the new year at a notional value of 100. The Index plays a favored super-theme of TerraJoule.us: that the global economy is transitioning away from liquid fossil fuels, to the powergrid. And, that the costs of fossil fuel extraction and combustion increasingly place the energy-capture technologies of wind and solar power in a favorable position.

–Gregor Macdonald, Editor of TerraJoule.us – A Journal of Energy Transition.

Oil Control: April Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is free. Listen here at SoundCloud.

Model Portfolio: The TerraJoule.us model portfolio is down -7.23% since inception and is up +7.52% in 2015. There are no changes to the model portfolio this month.

From this month’s issue:

Last year, for the first time in history, over 50% of the world’s oil supply was consumed outside of the OECD. It’s ironic, and yet understandable, that 2014 was the year this structural change—in process for over a decade—finally completed itself. With global oil supply steady—and slightly increasing, even, in the second half of the year—a faltering of demand clearly hit oil prices, sending them on a 6 month tumble. But with OECD oil demand steady,  it’s not that Non-OECD demand fell but rather that demand growth in the Non-OECD was clearly not strong enough to handle the constant inching up of global supply. Data from the broader energy system in China, the top Non-OECD economy, bears out this theme. Demand growth for electricity in China has actually been slow enough the past 24 months that it’s allowed renewables—hydropower, wind, and solar—to storm into the gap, thus depressing coal consumption. Were the Chinese economy growing more strongly, renewables would not be taking such a large share of marginal growth. Meanwhile, the growth phase slated to come in India is just getting started. Thus, suppliers of global commodities continue to face the now familiar interregnum where China’s growth is slower, but no single or collection of economies is ready to take the baton. Early data suggests both Chinese and Indian oil demand last year rose by roughly 2-3%. That’s positive, but it’s not enough demand at the margin to kick the oil futures market into higher gear. Oil prices now are completely at the whim of demand changes in the Non-OECD. Is that good or bad news?  |  see: Share of Global Petroleum Consumption: OECD vs Non-OECD 2005-2014.

“TerraJoule.us eBook – Oil Control – April 2015” by Gregor Macdonald – Editor on Ganxy

Tyranny of Price and Energy Equity Outlook 2015: January (Double) Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is restricted to purchasers and subscribers.

From this month’s issue:

…And again, you can hear the call of the sirens: they are saying there is downside risk from here when natural gas is at $3.00 per million BTU and when WTI is near $52.00 a barrel. OK. Let’s consider that. US natural gas production just reached another all time high. But LNG exports are coming within 12 months. Meanwhile, drilling activity is dropping hard in the US, and in places like the North Sea there’s talk of a jobs and drilling massacre. Wellhead prices in Canada have also fallen way below spot. Let’s consider the chart below: the TerraJoule.us forecast is that supply will be at best flat year-over year in 2015, with about .7 mbpd (half the 2009 supply drop) at risk. Nota Bene: the risk of an actual supply drop will grow as the year goes on because, as previously discussed, the pipeline of project cancellations is still growing…

 

“TerraJoule.us eBook – New Year’s Double Issue – Tyranny of Price and Energy Equity Outlook 2015 – January 2015” by Gregor Macdonald – Editor on Ganxy

Uber and Oil: September Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for subscribers and purchasers only.

From this month’s issue:

The supertrend in which Uber is already taking part is the transition of vehicle use from one that concentrates on distance, to power. In the post-automobile growth era, the culture has become re-acquaninted with the fact that the highest and best use for vehicles is the short-distance hauling operation, in which concentrated energy (oil) is employed to ferry improbably large loads that would otherwise take many human hours of labor. In order to control uniformity of the ride-service to users, and to reduce exposure to upward volatility in oil prices, it seems inevitable that Uber is going to continue to concentrate on the short-distance market, and will eventually have to invest in capital equipment: namely, electric vehicles. Whether Uber builds a fleet of EVs (electric vehicles), or helps drivers purchase their own, is an open question. The important point here is that global transportation will become increasingly bifurcated between long and short-distance travel. Governments, as previously discussed, will increasingly take over the responsibility to provide interstate high speed rail, commuter rail, and light-rail. That leaves a fairly large and enduring market around the great urban sprawls: not only in the OECD, but in the Non-OECD. Given that the spread between a gallon of gasoline and an eGallon (see graphic below, from doe.gov) will continue to widen, it’s inevitable that Uber will have to eventually embrace EVs. The prospect that Uber will eventually own a lot of depreciating capital equipment may take the shine off its current business-model and attractiveness of its prospects as a growth company, but there would seem few ways Uber can control costs during the next repricing of oil—which is also likely to not be accompanied by an advance in wages. The good news is that the prospects for significantly higher electricity prices, at least in the US, are low. While Terrajoule.us remains firm that global oil supply has permanently entered a constrained era, the growth of inputs to global electricity has no constraint—just yet. North America has enormous reserves of natural gas; coal reserves globally are gargantuan; and best of all the growth of renewables will continue at its astonishing pace.

Also in this month’s issue:

The model portfolio as of 31 August 2014 is up +11.92% since inception, having recovered  nicely since the market declines of summer. This month will see the cash level taken down to zero, as we head into Autumn fully invested. Using the last bit of cash left in the model portfolio, we are going to become heavily weighted this month in oil…

“TerraJoule.us eBook – Uber, and Oil – September 2014” by Gregor Macdonald – Editor on Ganxy

The New Dependency on US Oil: August Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is opened up, and is freely available at SoundCloud.

The United States has been a commodity producing giant for over a century. And so, in one sense, there is nothing new in its latest emergence as a major energy exporter. The US contains the world’s largest coal reserves, with exports nearly tripling in the decade from 2002-2012. And even at the low points of US natural gas and oil production—approximately in the year 2005—the US was still the single largest producer of natural gas globally, and, produced more daily oil than Iran, or Iraq, or Canada. However, it’s been the remarkable change in the country’s oil balance sheet that has grabbed headlines the past several years. Growing oil supply by a million barrels per day each year, while reducing oil consumption at the same time, has greatly reduced the US call on global oil.

Accordingly, the world has become unwittingly dependent on this the strong rate of US supply growth, reflected mainly in the stable price of oil. Should US oil supply growth slow, however—and we think it will—the price sensitivity to such a change will be far higher than global oil markets currently anticipate.

“TerraJoule.us eBook – The New Dependency on US Oil – August 2014” by Gregor Macdonald – Editor on Ganxy

Big Trends in Global Energy: July Issue of TerraJoule.us

Each issue of TerraJoule.us contains: a Main Essay, the Model Portfolio, the Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

Podcast: This month’s podcast is for subscribers and readers, only.

TerraJoule.us is pleased to announce we are now working with Blue Terminal of Vancouver, BC to bring you the highest quality data, and data visualization. The core theme discussed in this month’s issue, Big Trends in Global Energy, is of course the transition from oil to power. In this regard, the growth in global electricity generation has strongly outpaced global oil production for the ninth straight year. |  see: Global Growth Rates: Electricity Generation vs. Crude Oil Production 2003-2013. (click on image to enlarge)

Global Growth Rates - Electricity Generation vs Oil Production

Also in this month’s issue:

The TerraJoule.us Model Portfolio, as of the close on Monday, 30 June 2014, is up +13.62% since the inception date, April 1, 2013. The portfolio is currently enjoying its best performance so far, even with cash levels above 20%. We remain, however, in the typical accumulation phase of Summer. More cash will be deployed, therefore. As of the close of trading on Tuesday, 1 July, we will make further changes to the model portfolio, increasing exposure to two (2) separate ETFs.

“TerraJoule.us eBook – Big Trends in Global Energy – July 2014” by Gregor Macdonald – Editor on Ganxy

BP Statistical Review of Global Energy Use

A copy of this post is sent directly to all readers and subscribers of TerraJoule.us

Dear Reader,

Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, India Unleashedit’s available now. Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com | And more detailed information at the TerraJoule.us website.

Model Portfolio: Up +10.98% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +10.98% since inception (April 1, 2013). Since raising cash in April, we have increased positions in GRID and TAN, and also started a new position in FCG. We will continue to deploy cash in July, August, and September.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first day of the calendar month. Subscribe today.

Free Issue

Because of sudden geo-political risk to the oil complex, due to the destabilization of Iraq, the May issue, Here Comes Oil, is being released at no charge. It’s very important that TerraJoule.us readers be informed as to the structural tightness that was already forming in the global oil market, before recent events transpired. Thankyou for your support and readership.

Mid-Month Data Update

The BP Statistical Review of World Energy has just been released overnight, June 16, 2014. As always, there’s a massive amount of new data to examine, and TerraJoule.us will select highlights over the next few issues.

The big picture of global energy use is a great place to start however, and below is a chart of Global Energy Use by Source, in 2013. The notable change is that coal has now reached over 30% share of total global energy use, and continues to challenge oil for the top position. The spread between use of the two fuels is slightly narrower than the chart suggests, however, because BP data combines oil use with other liquids. Against crude oil only, coal is now less than 2 percentage points from returning as the top energy source of the world.



Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Tuesday July 1, 2014.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

-Gregor Macdonald


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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Starting to Fight Declines, in the Bakken

A copy of this post is sent directly to all readers and subscribers of TerraJoule.us

Dear Reader,

Thankyou for your interest in TerraJoule.us. If you’ve not had a chance to read the latest issue, Here Comes Oilit’s available now. Single issue sales at Ganxy.com | Annual Subscription at Gumroad.com | And more detailed information at the TerraJoule.us website.

Model Portfolio: Up +8.59% Since Inception

The TerraJoule.us model portfolio, at mid month, is currently up +8.59% since inception (April 1, 2013). This is a decline of about 250 basis points since the March high. Cash heavy coming into May after greatly reducing exposure in April, we increased the core position in the solar ETF, TAN, on May 1. Currently, just as we did last summer, we will use the coming seasonal weakness to slowly build back positions, favoring oil and gas. As a reminder, the TerraJoule.us model portfolio is playing not for an all-renewable world by 2025, but rather, a re-weighting of the global energy mix from oil to the powergrid.

Annual Subscription

All annual subscribers to TerraJoule.us, using the Gumroad platform, receive their latest issue automatically on the first of the calendar month. Subscribe today.

Mid-Month Data Update

The Drilling Productivity Report from EIA in Washington is a relatively new product, and despite some discrepancies between how the EIA defines “The Bakken” and the State of North Dakota defines The Bakken, there are some useful metrics contained therein.

As detailed in the current issue of TerraJoule.us, Here Comes Oil, we have begun to undertake a running tally of the age of wells in The Bakken. The reason: wells age quickly in this shale region; and they age predictably, losing (on average) over 50% of their initial production rate by the third year. In the current issue of TerraJoule.us, we laid out the age progression already underway, and estimated that sometime later this year, or early next year, more than 50% of Bakken wells will turn three or more years old.

The IEA helpfully keeps an account of the effects of this aging well population, and as of April of this year, the decline from legacy wells was averaging 67,596 barrels per day. | see: Monthly Decline from Existing Bakken Wells in bpd 2008-2014

Monthly Decline from Existing Bakken Wells bpd 2008-2014

Let’s make a simple observation here: in a resource that is presently producing roughly 1 million barrels a day, a decline rate from existing wells is pushing towards 70 thousand barrels a day, and will absolutely reach 100 thousand barrels a day. It’s inevitable therefore that in order to fight these declines, the industry is going to have to significantly step up their game. Adding 1800 new wells per year in the Bakken is not going to be sufficient, as it was the past two years. And given that the industry only added 403 new wells in the first three months of 2014 further adds support to this theme.

Next Issue of TerraJoule.us

The next issue of TerraJoule.us will be published Sunday June 1, 2014 and will address the emerging issue of carbon risk as the global resource extraction industry runs into serious profitability challenges.

Thanks so much for reading TerraJoule.us, and we hope to see you again next month.

Gregor


____________________
Gregor Macdonald
Editor, of TerraJoule.us Monthly ebook
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When Cities Drive Energy Transition: February Issue of TerraJoule.us

Front Title Page IMAGEEach issue of TerraJoule.us contains: a Main Essay, a Model Portfolio, a Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Ganxy.com: Purchase.

Or, readers may also take a 12 month subscription through Gumroad.com: TerraJoule.us Monthly eBook  Annual Subscription.

The theme of this month’s publication, When Cities Drive Energy Transition, is that we’ve reached the point in energy transition when cities are about to take over, as the world economy shifts its weight from liquid fossil fuels to electrical power. This is not the end of oil as a key input to many industrial processes by any means. Indeed, you are encouraged to read the September 2013 issue, Road Map to the Next Repricing of Oil, to understand better why oil will reprice higher. That said, we are indeed passing beyond the oil age, which turns out to have been a brief, 70 year period when oil was the primary energy source for the world:

There were a number of promised changes to developed world oil demand, touted just five years ago, that frankly seemed wishful and unimportant at the time. They included increased MPG in existing cars and trucks, the onset of electric vehicles, the transition to NG powered engines, the resurrection of public transport, growth in renewables, and migration of workers back to the urban core. These factors have banded together now, however, and collectively have shown up five years later as a serious, serious impediment to oil demand growth, especially in the United States. No, sales of Teslas alone have not shifted the trajectory of US oil demand growth. But as the marquis EV, Tesla is a proxy for the amazing set of new conditions now blunting the US economy’s return to oil-based consumerism. As the economy stabilizes, the US populace finds it can take a train on a restored commuter line in Boston; Bus Rapid Transit in Los Angeles; a streetcar in Charlotte; or new bikeways in Indianapolis. Meanwhile, a surge of solar power capacity along with already cheap electricity rates is restoring economic competitiveness to many American cities, as the US economy tilts from consumer-importer to producer exporter. Is it any wonder that California gasoline sales, therefore, have never recovered from the crash?

There are also changes to the TerraJoule.us Model Portfolio, which began April 1, 2013:

Renewable exposure now moves to 15% of the portfolio, as fossil fuel exposure remains stable at 45% and powergrid exposure at 25%. We make further investment in renewable exposure this month.

To purchase a single issue through Ganxy.com, please follow the link below:

“TerraJoule.us eBook – When Cities Drive Energy Transition – February 2014” by Gregor Macdonald – Editor on Ganxy