June 08, 2018

Happy Friday!

At this moment in 1977, Fleetwood Mac's "Rumours" was midway through a dominant, months-long run atop the Billboard album charts (interrupted for a week by Barry Manilow). So one of their tightly crafted tunes takes us into the weekend...

1 big thing: Uncertain future of electric cars

Data: Equinor; Chart: Chris Canipe
Data: Equinor; Chart: Chris Canipe

A new analysis by the oil-and-gas giant Equinor provides stark evidence of the diverging potential futures of electrified cars and trucks.

Why it matters: It's a technology likely needed to eventually decarbonize transportation in a manner consistent with avoiding high amounts of global warming.

The latest: The chart above is one small part of Equinor's annual Energy Perspectives report out Thursday, a wide-ranging look at what global energy systems — electricity, transport, industry and more — might look like in the future.

Equinor (formerly Statoil) breaks their outlook to 2050 into three umbrella categories, which are . . .

  • Reform: A world where continued market and tech trends drive changes the energy mix, with policy playing a role but not in the driver's seat.
  • Renewal: A scenario where aggressive policy creates a much faster transition that's consistent with holding the global temperature rise below 2°C.
  • Rivalry: A future where geopolitical tensions and conflict abound, climate policy takes a backseat and the energy mix remains very carbon-heavy.

What stands out about EVs: In the chart above, they dominate annual light-duty sales by mid-century in the wider "renewal" scenario, while growth is more constrained in the other two, especially "rivalry."

By the numbers: In the report's data appendix, Equinor forecasts that in 2050, oil needed for passenger cars and light trucks will be just 2.2 million barrels per day in the "renewal" scenario, compared with 24.2 mbd in "rivalry" and 16.2 mbd in "reform."

The intrigue: The report is the latest example of how analysts — from energy companies, the International Energy Agency, OPEC, consultancies and elsewhere — are all over the place when it comes to how much EVs will take hold in decades ahead.

  • Bloomberg New Energy Finance compares the conflicting analyses here.
  • BP's annual energy outlook in February also offered some comparisons, showing forecasts for EVs on the road worldwide in 2040 include: BP with 320 million, BNEF with over 500 million, OPEC with 235 million, and ExxonMobil with 180 million.

2. Revisiting peak oil demand via Equinor

The new Equinor energy outlook also offers more grist for the mill on the question of when global crude oil demand will peak.

Crude question: They don't exactly offer a central outlook, but the date is 2030 in their "reform" scenario, where demand peaks at 111 mbd and then falls to 105 mbd in 2050. For comparison, it's currently in the 98–99 mbd range.

Go deeper: S&P Global Platts delves into the crude oil analyses in the report here.

  • "Equinor's energy outlook painted a more pessimistic picture for oil than the International Energy Agency and BP, which estimate, respectively, that oil demand could peak after 2040 or in the late 2030s," they report.

3. Tensions over gas policy spill into the open

The Energy Department says it's not dissing the gas industry as the administration weighs plans to aid economically struggling coal-fired and nuclear plants.

Why it matters: New comments signal how the potential intervention in power markets is causing friction with an industry that has typically had a good rapport with Republicans.

  • Natural gas has taken substantial market share from coal, and bountiful cheap gas is a big reason why the coal and nuclear industries are struggling.

The latest: The Interstate Natural Gas Association of America, a trade group representing gas pipelines, issued a strongly worded statement yesterday attacking claims in a leaked administration memo about pipelines' vulnerability to cyber and physical attacks.

  • The memo lays out security justifications for preventing retirements of "fuel secure" facilities, i.e. coal and nuclear plants.

Quoted: INGAA said it's "deeply troubled by the Trump administration’s apparent move to scapegoat natural gas to prop up uneconomic coal and nuclear plants," and accused the administration of a plan to "punish" gas.

DOE response: Shaylyn Hynes, a DOE spokesperson, said yesterday evening saying that it's "absurd" to argue the administration is seeking to punish gas.

  • "DOE views natural gas as a vital part of our energy mix," she said, and touted administration efforts to bolster production and exports.
  • But Hynes noted, "DOE also recognizes that there are serious threats and vulnerabilities to critical infrastructure nationwide, including pipelines."

The context: The White House is eyeing a plan to ensure purchases of generation or generation capacity from coal and nuclear plants while it reviews electricity system vulnerabilities. But critics say the administration is grafting a security rationale onto a plan to nakedly prop up coal.

4. Wanted: A new metric to guide climate policy

Episode 4 These Arent The Droids Youre Looking For GIF by Star Wars - Find & Share on GIPHY

Out today: A new analysis says policymakers should consider alternatives to a common tool for estimating damages from carbon emissions — the "social cost of carbon" (SC-CO2) — when setting CO2 taxes and clean energy subsidies.

Noah Kaufman, an economist with Columbia University's Center on Global Energy Policy, instead suggests crafting CO2 prices based on what cost-effectively puts countries on a pathway toward long-term "net-zero" emissions.

Between the lines: While carbon taxes are a non-starter in Washington right now, the paper is part of the think tank's wider effort to generate analyses that can guide policy decisions if a political window opens in the future.

The details: Kaufman compares the benefits and drawbacks of the SC-CO2 versus setting prices based on a "net zero" target in the latter half of the century. Better still, he writes, is a near-term — perhaps 10-year — emissions target that creates an initial pathway to the "net-zero" goal.

  • The paper lays out reasons why the all-encompassing SC-CO2 can be ill-suited to creating tangible policy, noting there's less uncertainty involved with creating carbon prices to achieve a specific emissions outcome.
  • "[M]odeling the economy of one jurisdiction over a handful of decades is inherently easier than modeling the climate and economy of the world over centuries," he writes.

One level deeper: "The presumption that today’s CO2 prices should reflect a start-to-finish solution to the climate problem may give disproportionate influence to the most uncertain aspects of the climate problem," Kaufman writes.

  • "Instead, like the doctor who tells her patient to take two pills and call her in the morning, a humbler approach to developing CO2 prices could enable a focus on the aspects of the problem that we understand well and a willingness to adjust our strategies as we learn more," he adds.

5. CO2 hits all-time monthly high

Speaking of carbon dioxide, Axios' Andrew Freedman reports that the amount of CO2 in the air exceeded 411 parts per million during the month of May, which was the highest monthly level ever recorded, according to the National Oceanic and Atmospheric Administration as well as Scripps Institution of Oceanography.

Why it matters: Based on studies of historical levels of greenhouse gases in the air, this is also the highest level in human history.

The big picture: CO2, is the most important long-lived greenhouse gas and human activities, primarily via burning fossil fuels for energy, are adding more of it with each passing day.

  • Scripps and NOAA monitor CO2 levels at the Mauna Loa Observatory in Hawaii as well as other locations.
  • This year, the May average peaked at 411.31 ppm, according to Scripps researchers, the organization reported in a press release. NOAA’s reading was 411.25 for the month, according to a press release.

In addition, the growth rate of CO2 in the atmosphere is increasing, NOAA data shows.

  • The rate of growth averaged about 1.6 ppm per year in the 1980s, and 1.5 ppm per year in the 1990s, but it has climbed to 2.3 ppm between 2016 and 2017.
  • This was the sixth straight year-to-year increase above 2 ppm, scientists said.

Go deeper: Read the full piece in the Axios stream.

6. Petro news and notes

Offshore: Per The Wall Street Journal, "The world’s largest energy companies lined up Thursday for a major auction of coveted Brazilian oil fields, even as Brazil’s government rolled back some market-friendly policies that would have made its oil industry more competitive."

  • Their piece and other reports note that companies together paid over $800 million for access to the huge resources off the country's coast in the so-called pre-salt formations.

U.S. shale: Bloomberg has the latest on the effect of pipeline constraints in the prolific Permian basin.

  • "Eight of the Permian’s so-called pure-play drillers lost $15.6 billion in combined market value in the 15 days through Tuesday, as shipping constraints devour the profit they can fetch for a barrel of crude," they report.

Aramco IPO: The BBC writes about efforts by financial regulators to land the planned (though uncertain and delayed) IPO of Saudi Aramco and offerings from other state-owned companies.

  • "A new category has been approved for companies traded on the London Stock Exchange, which will allow oil giant Saudi Aramco to list shares in London. London has been accused of watering down corporate governance rules in order to accommodate the huge listing," they report.

7. Latest in the Scott Pruitt saga

A few new revelations on Thursday in case you're not following every twist and turn in the controversy over EPA Administrator Scott Pruitt...

Errands, part 1: Per The Washington Post, Pruitt "asked members of his 24/7 security detail to run errands for him on occasion, including picking up his dry cleaning and taking him in search of a favorite moisturizing lotion, according to two individuals familiar with those trips who spoke on the condition of anonymity to talk frankly."

Errands, part 2: Via The Daily Beast, "According to four sources familiar with the work environment at the Environmental Protection Agency, its scandal-plagued EPA administrator has regularly sent his subordinates out during the workday to pick up his favorite snacks and treats."