Trump's energy policy (fallacy?) (1 Viewer)

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,577
Reaction score
90,184
Location
Mt. Pleasant, SC
Offline
Trump's energy policy seems to be a solid turn back to hydrocarbons with a promise of eased regulations and restrictions on drilling - including offshore drilling along the East Coast and drilling on federal land in the West and Alaska. Trump also promises to complete the Keystone pipeline and end the fight against coal as a dirty fuel.

Trump seems to base his policy upon the idea that America has enough domestic energy to be energy independent - so we should increase production of that energy. The problem, however, is that hydrocarbon energy is sold on a global commodities market. American energy production is performed by for-profit companies and if the sale price of the commodity is less than the cost of production, those companies aren't going to produce - and that is where we are right now. Rig counts in the Gulf of Mexico are way down, not because of regulation or limited access to drilling lands, but because the cost of producing a barrel is more than the proceeds of the sale of that barrel. The same dynamics are happening in some of the shale formations.

When shale oil from the US and Canada came online, along with increased deepwater production, the world oil market began to decline (supply > demand). With much of the emerging markets in flat or negative growth (mainly China and India), the demand curve flattened further and increased supply sent prices to 15-year lows. For its part, OPEC has continued to produce and it is widely believed that the Saudis have kept production strong to drive out the North American producers, and this strategy has worked for the most part. Rig counts are indeed down and shale production has slowed to only those formations that are less costly to produce. Quite simply, North American producers are waiting for prices to come back up to profitability before they ramp up production again. Though the Saudis have recently finally come around to OPEC production caps - largely because the Saudis are facing a cash-flow problem in funding their war in Yemen - most observers are skeptical that the cartel would really be able to come an agreement and then carry it out. They're all far too self-interested.

So right now, the world is glutted with produced oil. It is sitting in storage tanks and in tanker vessels simply waiting to be sold. And this oversupply isn't expected to recede for at least the next 12 months. Though demand is seen to have some upward bias with Chinese recovery appearing stronger, the reality is that the Chinese are transitioning to a service-driven economy and peak energy demand for Chinese manufacturing has passed.

While it is true that costs of regulatory compliance and less efficient distribution (without a pipeline) do elevate the break-even point where oil companies can/will produce, I think those costs are insignificant in the context of the commodity supply and demand dynamics that ultimately drive production. In other words, there's no reason to expect that reducing the regulatory burden or opening the pipeline will meaningfully change the economics that have idled American producers and kept oil and gas workers (in places like Louisiana) out of jobs.

More importantly, the other aspects of Trump's energy policy go directly to increasing supply. Even if the cost of production can be lowered to the extent that it brings US producers back to the game, opening new drilling lands only adds to the supply problem. Quite simply, the biggest problem right now for American oil and gas producers and the American workers they employ is supply. I don't see how Trump's energy policy helps in the least.

There is one play that Trump could make to change the supply problem, and that is to take Iran back off of the world oil market. The Iran deal indeed resulted in a significant new producer in the supply chain that has complicated the oversupply problem and its impact on oil prices. Certainly the US oil producer community will be pushing Trump to follow through on his campaign promise of undoing the "disastrous" Iran deal, but that's far easier said than done, now that Iran is participating in these world markets. Trying to yank the bottle back out of their mouth won't be well-received by the Iranians or the Russians (and Trump's man-crush Vlad Putin). The Iranians' return to world markets after the removal of sanctions has been a significant boon to Russian bankers and other interests.

So is Trump's energy policy a paradox? His promise to return energy jobs and profits to American energy companies is effectuated by a plan that could only add to the very problem that has been a drag on that industry for almost the last two years. Or is he going to play the big bad wolf and try to re-install sanctions on Iran that keep them out of the market? This would probably need some kind of pretext to set the stage for new sanctions - and it would certainly spoil any positivity with the Russians.

Maybe Trump will be smart enough to recognize that policies to increase US supply are counterproductive at this time. Or maybe he's even smarter to decide to implement these policies but leaving the economics to the producers - who might not be able to produce on newly opened lands anyway. Or maybe his energy policy falls in line with other campaign promises: only mere rhetoric to win votes.

But I have to suspect that if voters in places like Louisiana were expecting that Trump is going to get them back to work producing oil and gas, reality is going to be a big disappointment. Or maybe he does make the Iranian play . . . that would be tremendously destabilizing, but it would almost certainly spike oil prices.



Trump Energy Policy: What to Expect | National Review

Oil Tankers Piling Up in North Sea Show Glut Facing OPEC - Bloomberg

Forbes Welcome

Can Trump Send Oil Prices Soaring? | OilPrice.com
 

JimEverett

More than 15K posts served!
Joined
Mar 18, 2001
Messages
24,979
Reaction score
7,834
Offline
The alternative, at least as expressed by Obama and Clinton, does not look good either.

With energy prices so low its not exactly a good time for private producers of renewable energy to get on line.

With energy prices relatively depressed now would be a great time for Trump to make good on his promise to build, build, build. Build up the U.S. infratstructure with a trillion dollar+ infrastructure plan. more than likely you will see increased energy costs at some point after that.
 
OP
superchuck500

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,577
Reaction score
90,184
Location
Mt. Pleasant, SC
Offline
The alternative, at least as expressed by Obama and Clinton, does not look good either.

With energy prices so low its not exactly a good time for private producers of renewable energy to get on line.

With energy prices relatively depressed now would be a great time for Trump to make good on his promise to build, build, build. Build up the U.S. infratstructure with a trillion dollar+ infrastructure plan. more than likely you will see increased energy costs at some point after that.
Agreed - that makes sense. First push policies to increase energy demand, and then follow with the production policies.

My personal view on oil and gas is that something substantial has to happen to demand or we're going to be in this environment for a long time. If producers are simply waiting on price to come back online, whatever price rises that would eventually allow that would be temporary because that new production would move prices back down again.
 

JimEverett

More than 15K posts served!
Joined
Mar 18, 2001
Messages
24,979
Reaction score
7,834
Offline
Agreed - that makes sense. First push policies to increase energy demand, and then follow with the production policies.

My personal view on oil and gas is that something substantial has to happen to demand or we're going to be in this environment for a long time. If producers are simply waiting on price to come back online, whatever price rises that would eventually allow that would be temporary because that new production would move prices back down again.
It is an interesting topic.

i wonder what a country like Germany is going through. Countries that have beefed up renewable output (mostly with a great deal of subsidies). Are they going to be in a better position economy-wise (including the savings on environmental costs).

I think that they will, though I am not sure. The more they move to renewables the less profitable hydrocarbon production becomes.
I guess we could sit around and wait till most of Europe is on renewables and nuclear, while China increasingly moves that way and then we can enjoy all our "cheap" domestic oil and coal. But that is not exactly an ideal situation.
 

Maxp

High Plains Drifter
Joined
Jul 31, 2006
Messages
5,144
Reaction score
2,520
Age
38
Location
now in Orange Beach
Offline
Agreed - that makes sense. First push policies to increase energy demand, and then follow with the production policies.

My personal view on oil and gas is that something substantial has to happen to demand or we're going to be in this environment for a long time. If producers are simply waiting on price to come back online, whatever price rises that would eventually allow that would be temporary because that new production would move prices back down again.
The biggest competitor to offshore oil in the GOM is shale. Doesn't look like Trump will be tightening shale regulations anytime soon and neither would have Hillary. The oil majors are putting all their money towards future domestic projects in shale. Shale production can be brought online quickly to meet any spike in demand. Oil prices should stay low barring any major Iranian conflict for a long time.
 

J-Donk

Hall-of-Famer
VIP Subscribing Member
Joined
Sep 16, 2005
Messages
3,422
Reaction score
3,725
Offline
It is an interesting topic.

i wonder what a country like Germany is going through. Countries that have beefed up renewable output (mostly with a great deal of subsidies). Are they going to be in a better position economy-wise (including the savings on environmental costs).

I think that they will, though I am not sure. The more they move to renewables the less profitable hydrocarbon production becomes.
I guess we could sit around and wait till most of Europe is on renewables and nuclear, while China increasingly moves that way and then we can enjoy all our "cheap" domestic oil and coal. But that is not exactly an ideal situation.
Europe is dependent on Russia for a lot of it's natural gas, and oil. They see renewables as a strategic strategy.
 

Goatman Saint

Subscribing Member
Platinum VIP Contributor
Joined
Apr 18, 1999
Messages
22,567
Reaction score
20,740
Age
49
Location
Between here and there
Offline
Europe is dependent on the Russians. China is getting backlash from its environmental side and they also see the benefits in large scale solar and renewables as a large chunk of hydrocarbons are in hostile territories and areas of strategic issues. Therefore, China is rolling out and pushing hard on renewables. A lot of states have gone that way also, either through greater efficiency (save money long term) or through renewable (clean and dirt cheap long term with no price spikes).

I don't see Trump's wanting to drill baby drill and mine coal going anywhere. In a budget sense, it makes little as supply isn't a problem. The export market for coal isn't drying up because of Obama, its drying up because it is an air pollution nightmare and gigantic piles of coal ash is a major environmental issue. Stores, towns and businesses are turning to LED to save money. Upgrades to major appliances and such take energy hogs off the market. So what's the push to start consuming again? The auto market has found that efficiency is a selling point, and the side effect of high efficiency is greater horsepower, yet another selling point.


Sent from my iPhone using Tapatalk
 

Galbreath34

Very Banned
Gold VIP Contributor
Joined
May 8, 2008
Messages
32,273
Reaction score
30,812
Offline
The spending on the infrastructure and the investment in the science also pay off along the way, developing new parts of the economy.

Climate change: Denmark's 'fairy tale' energy island - CNN.com was an interesting article that came out during all the talk about COP21. It's a small example and a small community, but there's a bit more to going green than the immediate bottom line.
 

MGC

ALL-MADDEN TEAM
Joined
Sep 27, 2011
Messages
1,607
Reaction score
1,342
Offline
Energy independence is of strategic importance to the American economy. I guess many of you were not around during the OPEC embargo. Those of us that did don't ever want to have to wait for hours for a few gallons of fuel. My goal would be to completely eliminate the importation of fuel of all types. Sure, you can still put a solar array on your house if you like, just don't expect me to help you pay for it. There is plenty of oil and natural gas in America to last a long long time.
 

coldseat

Super Forum Fanatic
VIP Contributor
Joined
Jan 10, 2007
Messages
9,117
Reaction score
15,247
Age
45
Offline
Energy independence is of strategic importance to the American economy. I guess many of you were not around during the OPEC embargo. Those of us that did don't ever want to have to wait for hours for a few gallons of fuel. My goal would be to completely eliminate the importation of fuel of all types. Sure, you can still put a solar array on your house if you like, just don't expect me to help you pay for it. There is plenty of oil and natural gas in America to last a long long time.
What does energy independence mean to you? How do you achieve it? Is this really feasible when we live in a global energy market?

Energy independence, unless you're talking about removing the reliance on hydro-carbons, is largely a myth. At least the way it's traditionally understood/expected to work. But I thought I'd ask you some questions first to understand what you mean.
 

JimEverett

More than 15K posts served!
Joined
Mar 18, 2001
Messages
24,979
Reaction score
7,834
Offline
Perhaps a dumb question:

When oil is produced in Texas is it refined in Texas/Louisiana, or does it go somewhere else? Same with oil in Alaska, North Dakota, etc.?

Once the oil is refined into gasoline, what happens? Does it depend on who owns it, etc. Or is it almost always used domestically, or is it almost always shipped off somewhere else?
I understand oil and probably refined products are fungible - but I just wondered about the actual supply of domestic product.
 

Goatman Saint

Subscribing Member
Platinum VIP Contributor
Joined
Apr 18, 1999
Messages
22,567
Reaction score
20,740
Age
49
Location
Between here and there
Offline
It's refined in Texas/Louisiana because until recently it was illegal to export American crude although perfectly legal to export its distillates. A huge chunk of American diesel is sent to china for their industry as a matter of fact. Distilled oil products are a sizable export of the US.




Sent from my iPhone using Tapatalk
 

saintmdterps

If we give ya the boogie, can ya handle it?
VIP Subscribing Member
Gold VIP Contributor
Joined
Jan 15, 2007
Messages
16,702
Reaction score
18,867
Age
60
Location
Salisbury, Maryland
Offline
Remembering all the while that the US is the only country discussing whether or not climate change is real. Every other country accepts climate change and is deciding what to do about it.so does Trump turn the US into an energy pariah???
 
OP
superchuck500

superchuck500

guarding the potatoes
VIP Subscribing Member
VIP Contributor
Diamond VIP Contributor
Joined
Aug 9, 2004
Messages
58,577
Reaction score
90,184
Location
Mt. Pleasant, SC
Offline
Energy independence is of strategic importance to the American economy. I guess many of you were not around during the OPEC embargo. Those of us that did don't ever want to have to wait for hours for a few gallons of fuel. My goal would be to completely eliminate the importation of fuel of all types. Sure, you can still put a solar array on your house if you like, just don't expect me to help you pay for it. There is plenty of oil and natural gas in America to last a long long time.
We all agree that energy independence is in our strategic interest - but I think you're missing the point about the economics.

Oil and gas are global commodities on a market wherein US companies are participants, so to Jim's questions, it really isn't about whether a gallon of gas refined in Texas could end up exported to another country. That does happen because of the nature of these markets - it's not a "domestic need first and then export if any is left over. Rather, you have to look at the net totals to see how US needs are being met.

The US is a net exporter of natural gas - that means we produce more than we consume. The US is also a net exporter of refined gasoline - that means we refine more gasoline than we consume. We still are a net importer of crude oil (which serves, in part, as the raw material for that gas production), but I bet many would be surprised to know it is at 24% right now. That means three out of every four barrels of crude oil we require is produced domestically.

The problem right now, though, isn't that we don't have enough oil to produce and need to drill in new areas. Our "proven reserves" (crude identified and sitting in the ground waiting to be produced) is as high as it has been in the last 50 years:

<img src="http://www.eia.gov/naturalgas/crudeoilreserves/images/fig_1.png", width="800 or less">


In fact, the world is awash with oil ready to be produced - the supply problem is long-gone:

<img src="http://peakoilbarrel.com/wp-content/uploads/2014/12/EIA-World-Proved-Reserves.png", width="800 or less">


Yet, American producers aren't producing and American oil industry workers are unemployed. Here's a chart that demonstrates this by looking at the active rig count for offshore US production. There are now far many more rigs idled than working and the same is true in some of the onshore production zones (like the Bakken formation):

<img src="http://static3.businessinsider.com/image/56e30b7391058436008b5d59-1200-900/3-11-16-oil-rigs.png", width="600 or less">


With the world awash in oil, the supply and demand dynamics are heavy on the supply side right now and oil prices are low. They are lower than the break-even price for many US producers and so they aren't producing. Other production zones and other business models (e.g. state-controlled) have different economics and they can continue to produce.

But the answer to US energy independence isn't policy to increase supply. Even if you did get some US production online because producing federal recreation lands in the West, for instance, was cheaper than offshore, you will have just replaced one unit of capacity with another. Those rigs and workers in the Gulf of Mexico, and in the Bakken formation will remain idle.

If energy independence truly is the strategic goal (and not some other interest of American oil and gas profits or meeting the demands of lobbyists), it seems to me the best course remains continuing to transition to natural gas (our strongest and most economical production) and alternative energy. Reducing the raw demand of the nation will reduce that need for the one in four barrels to be imported far more efficiently than trying to force production by driving supply in an already over-supplied market.


America

How much oil consumed by the United States comes from foreign countries? - FAQ - U.S. Energy Information Administration (EIA)

https://www.eia.gov/dnav/pet/pet_move_wkly_dc_nus-z00_mbblpd_w.htm

http://www.wtrg.com/rigs_graphs/short/rigus.gif

U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Proved Reserves

http://peakoilbarrel.com/wp-content/uploads/2014/12/EIA-World-Proved-Reserves.png

Forbes Welcome
 

Goatman Saint

Subscribing Member
Platinum VIP Contributor
Joined
Apr 18, 1999
Messages
22,567
Reaction score
20,740
Age
49
Location
Between here and there
Offline
Energy independence is of strategic importance to the American economy. I guess many of you were not around during the OPEC embargo. Those of us that did don't ever want to have to wait for hours for a few gallons of fuel. My goal would be to completely eliminate the importation of fuel of all types. Sure, you can still put a solar array on your house if you like, just don't expect me to help you pay for it. There is plenty of oil and natural gas in America to last a long long time.


Ok so your solution is drill baby drill. Great

How about this. There has been so much solar out into California and is being put in that both Diablo Canyon and San Onofre, our two big Nike plants into decommission. And solar is free once installed. Efficiency standards have improved power usage so much that even though there are ten million more people in California, the water usage and power usage has stayed even or gone down depending on whose members you look at. No coal or oil is burned for power in this state anymore. But yeah I understand that whole for the common good is lost on you


Sent from my iPhone using Tapatalk
 

Bishop

shuffle-by Poster
Joined
Mar 27, 2003
Messages
5,311
Reaction score
1,221
Offline
The alternative, at least as expressed by Obama and Clinton, does not look good either.

With energy prices so low its not exactly a good time for private producers of renewable energy to get on line.

With energy prices relatively depressed now would be a great time for Trump to make good on his promise to build, build, build. Build up the U.S. infratstructure with a trillion dollar+ infrastructure plan. more than likely you will see increased energy costs at some point after.
We have to forget about enjoying the low price of oil and consider its effects on the environment. I really don't blame those along the Gulf Coast for being pro-oil as far as employment goes, but what has this industry done for the marshes, hurricane protection, and air quality across the globe? Same goes for the coal miners. They'll simply have to find other means of employment, if they truly care about a legacy left to their grand kids. Green jobs have to be better than working in coal mines.

BTW: What happened with those Natives recently getting thumped for attempting to block a pipeline on their land? I don't recall that saga mentioned, though I havent been on as often.

I'm all on board with building up our infrastructure.
 

Create an account or login to comment

You must be a member in order to leave a comment

Create account

Create an account on our community. It's easy!

Log in

Already have an account? Log in here.

Users Who Are Viewing This Thread (Users: 0, Guests: 1)

 

New Orleans Saints Twitter Feed

 

Headlines

Top Bottom