Category Archives: Energy and Environment

An Oil-Price War´s Surprise Ending -My BPJ article on OPEC, Shale, Trump, Market & Geopolitics

bpj-oil-price-war-end-29nov16Here`s my latest at Berlin Policy Journal:  about  OPEC`s 30 Novermber meeting, US shale and the geopolitics from the  Trump Administration towards Iran and the Saudis. – Tom O`D.

An Oil-Price War’s Surprise Ending

No one expected shale producers to survive extended low oil prices.
, NOVEMBER 29, 2016 
The oil market’s oversupply – and the low prices that followed – was supposed to drive shale producers out of business. Instead, the economies of several large national producers have been upended, and the next act could prove even more destabilizing.

OPEC’s 171st meeting in Vienna on November 30 reflects the new paradigm of the global oil market. After two years, the Saudi-led price war to drive American shale and other “high cost” producers from the market has ended. However, to the surprise of many – not least the Saudis – shale has survived. What now?

The United States Energy Information Agency (EIA) expects persistent market oversupply to have been quenched by the second half of 2017. The Saudis view the diminishing oversupply as an opportunity to cut production by 600,000 or more barrels per day – although about twice this amount would be optimal – boosting prices from under $50 per barrel to $60 or more. The Saudis have worked intensely to reach an agreement at the OPEC summit to coordinate this production cut with Russia; any failure to achieve this highly anticipated deal would sink market confidence, pushing prices into the $30s.

The key obstacle to the Saudi plan is that Iran has refused to participate in any cut, insisting it should first be allowed to re-establish production it lost under years of sanctions. In response, the Saudis have threatened to boost their own production, punishing Iran by collapsing prices and by denying them market share. The Financial Times’ Nick Butler correctly characterizes this as “playing with fire,” and not only because of the severe pain this would impose on weaker OPEC states, but also for the geopolitical retaliation it might provoke from the new US administration as the Saudis would also bankrupt numerous shale producers in the US.

However, even if Russia, Iran, and the rest of OPEC agree to the Saudis’ cuts, US shale is widely expected to expand into the void, re-depressing prices by later next year. In all these scenarios, the future remains extremely difficult for OPEC, for Russia, and for other oil-dependent states.

A Price War Backfires

The prolonged high price of oil, starting to rise in 2002 and then dipping during the financial crisis before rising again till mid-2014, encouraged the emergence of new unconventional shale production. Driven by technical innovations in hydraulic fracturing plus abundant venture capital, by 2014 the US had added more new oil to the global market than what was lost in the Arab Spring and subsequent wars in Libya, Iraq, and Syria. By mid-2014, some two million excess barrels-per-day (bpd) were flowing into storage, and the price collapsed. Continue reading

“The Road to Paris: COP21 …” Berlin HEEN Conference

heen_logoCOP21 begins soon in Paris.  A very interesting discussion of the issues, with diplomats from EU states and China, takes place tomorrow, Friday evening, at Hertie School of Governance in Berlin to open the Hertie Energy & Environmental Network’s (HEEN) conference. I’ll be moderating the session. The session is open to those interested. Read on:

Opening remarks by German Undersecretary of State, ret. Rolf-Dieter Schnelle, fellows & friends of the Hertie Foundation

Panelists:
• Philippe Etienne, Ambassador of France to Germany
• Friis Arne Petersen, Ambassador of Denmark to Germany
• Wang Tianling, Counsellor, Embassy of the People’s Republic of China in Berlin
• Iwona Jakuszko-Dudka, First Secretary to the Embassy of Poland to Germany
• Dr. Jan Minx, Professor for Science Policy and Sustainable Development, Hertie School of Governance, Head of Working Group on Applied Sustainability Science, Mercator Research Institute on Global Commons and Climate Change

• Moderation by Dr. Thomas O’Donnell, Hertie School of Governance

Please register until 25 November 2015 via the following link https://docs.google.com/f

Background

In December 2015, the COP 21 climate conference in Paris will bring together world leaders, scientists, pressure groups and United Nations agencies, with the task to craft an agreement at the highest political level to tackle global warming. The representatives from 196 countries must reach an agreement to replace the Kyoto protocol. The COP 15 summit in Copenhagen (2009) is remembered more for the difficulty of reaching a global consensus than for tangible progress.

What will the legacy of COP 21 in Paris be?

  •  Is putting a price on carbon worldwide politically feasible?
  •  Is the gap between the cost of energy produced from fossil fuels and energy produced from renewable energy sources narrowing as much as to be a game-changer?
  •  How would policy proposals that raise the cost of energy go down with national leaders from the developing world, under pressure to deliver standard-of-living improvements?
  •  How will Intended Nationally Determined Contributions (INDC) impact the negotiations?
  •  How will China’s early pledge to peak emissions ahead of 2030, and the USA’s commitment to deep reductions by 2025 shape what is globally possible?
  •  Will the European Commission get a critical mass of support for the Paris Protocol?
  •  Will all parties arrive at an robust enough agreement?
  •  What is the future of the Green Climate Fund?
  •  How will the financing volume necessary to keep global warming below 2 degrees be secured?

Speakers will provide their take on the above, and engage in a lively and dynamic discussion with the audience about the major challenges which will be tackled at the COP 21 in Paris in December 2015.

The Hertie Energy and Environment Network (HEEN) is an established platform bringing together fellows of the Gemeinnützige Hertie-Stiftung with professional experience in the field of Energy and Environment (E&E) in the public, private, academic or civil society sector. HEEN’s purpose is to facilitate dialogue, knowledge-sharing and learning, to provide a trust-based environment for career path reflection, and to facilitate the development of lasting professional connections among outstanding individuals of diverse backgrounds who share a common interest and motivation for further professional development in the E&E field.

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MY REPORT | Washington Viewpoints: Assessing Berlin’s Leadership on EU Energy Security

merkel_obama_dinner-denver_post_06jun2014

Merkel and Obama answer questions. 6 June 2014 [Denver Post]

During April and May, I interviewed over a dozen Washington-based experts in European energy and geopolitics.  My report on these interviews–along with some policy proposals in light of Brussels’ “institutional incapacities” and the “fundamental contradictions” of German leadership–is here: [PDF with a Table of Contents for navigation] or at the AICGS website [HTML].

This work was conducted as a resident fellow of the AICGS (American Institute of Contemporary German Studies) in Washington, DC and supported by a generous grant from the German Academic Exchange Office (DAAD) with additional support from the Foreign Office.  My thanks to the AICGS for their collegial support and warm hospitality.

Next, the plan is to interview in Berlin and perhaps Brussels energy experts and officials for their viewpoints on European energy vulnerabilities and on their work with the U.S. side.

US Experts on German & EU Energy Vulnerabilities (My D.C. seminar)

Merkel and Obama at G7 - the main topic was Russia and Ukraine

Merkel and Obama at G7. Main topic was Russian threats to EU and Ukraine

An AICGS workshop with Dr. Thomas O’Donnell was held on May 27 in Washington, DC with a lively full-room attendance.

O’Donnell presented preliminary results of interviews he conducted in Washington during April and May to hear candid views of US energy-and-geopolitical experts on German and the EU energy policies.  The main topics were (1) European natural-gas vulnerabilities in light of the Ukraine crisis and dependence on Russian supplies and (2) implications of Germany’s commitment to a transition to renewable energy called the Energiewende.   Continue for Workshop PowerPoint & written Summary –>  Continue reading

“US Expert Perspectives on German Energy Vulnerabilities” – My AICGS/Washington Project

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German Chancellor Merkel listens to Russian President Putin [Photo: dw.de 29.4.14]

Throughout April and May I’m researching US Expert Perspectives on German [and EU] Energy Vulnerabilities – as a visiting fellow of the American Institute for Contemporary German Studies (AICGS) in Washington, DC, funded by the German DAAD.  You can read the proposal below.  But, first, I’d like to ask Global Barrel readers for two things:

(1) Is there anyone you feel I should interview here in Washington–the idea is to interview US energy experts, government officials and business people?

(2) What is your opinion of German and EU energy policies and their geopolitical implications. This includes issues ranging from German/EU dependence on Russian gas, the Ukraine and Turkey as gas-transit states, the new European “Energy Union,”  the German Energiewende, and moreno matter on which side of the Atlantic you live. 

[I’ve deleted the names of people I propose to interview, as not all will agree to have their remarks made public. I’m happy to keep opinions private and use them in general summaries of my findings.]

USA Oil 3.0 | US energy experts on Europe, Russia & Ukraine

Note: I’m teaching a post-graduate course “The Global Oil System & US Policy” at JFK Institute of Freie U. in Berlin. In order to give students a feel for how US energy policy is developed–and to see the views of important US actors–I’m sending them frequent e-mails with supplemental readings and videos  from US think tanks, US government offices and from the US media on energy topics.

These are not my own in-depth analysis like I usually post on GlobalBarrel.com.  However I think they are worthwhile sharing with especially non-USA followers of my blog.  I’ll title these posts “USA OIL” plus a number to label them).  I hope these are useful.  Here’s today’s ‘optional material’ I sent to my students:

How is US energy policy developed? You might find this video of interest.

Some background: The CSIS (Center for Study of International Security) is a non-partisan (i.e., not Democratic or Republican) think tank in Washington, DC. It performs an important role in US foreign policy. Continue reading

My DGAP article | Energiewende vs. USA Shale Gas: Can German industry compete?

ImageIn Germany, the impact of the country’s renewable energy transition on the economy is a very hot topic.  Tuesday, Mrs. Merkel’s  new Minister of Economy & Environment (and chair of the Social Democratic Party), Mr. Sigmar Gabriel, declared: “We need to keep in mind that the whole economic future of our country is riding on this,” (NYT, 21Jan14).

Here’ is my article in the DGAP’s (German Council on Foreign Affairs’) IP Journal of 30Dec13  (submitted 24Nov13):

Germany’s Energiewende (renewable-energy transition) is under intense pressure both from consumers facing soaring electric bills and from German manufacturers fretting about their falling energy competitiveness vís-a-vís the US, where manufacturers are benefiting from the boom in cheap natural gas production. What should be done to address these concerns has become a major topic of the CDU-SPD negotiations forming Chancellor Merkel’s new coalition government.  

From the viewpoint of German manufacturers, there are two ways the US shale gas revolution implies a worrisome competitive challenge. First, cheaper natural gas in the US is lowering electricity and other energy costs for American manufacturers, while Germany’s continue to rise. This is especially of concern to energy-intensive industries, where the EU now has 36 percent of world capacity and the US only 10 percent. Secondly, as the US begins to build facilities for export of liquefied gas (LNG), this capacity could have a significant effect on the price of electricity and gas in Asia. … Continue reading at DGAP’s (Deutsche Gesellschaft für Auswärtige Politik e.V.) IP Journal.