Category Archives: Fossil Fuel News

MIT sacrifices its reputation at the behest of Oil and Legacy Auto companies

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You get what you pay for

In a recent story in MIT Technology Review, we were surprised to read that we should not expect EVs to compete with gasoline cars on price any time before 2030.

The findings sharply contradict those of other research groups, which have concluded that electric vehicles could achieve price parity with gas-powered ones in the next five years. The lingering price difference predicted by the MIT report could stunt the transition to lower-emission vehicles, requiring governments to extend subsides or enact stricter mandates to achieve the same adoption of EVs and cuts in climate pollution.

The most quoted number for lithium-ion battery packs to reach price parity with ICE is $100/kWh, a price that has been predicted to happen by 2022 for the industry based on prices declines over the last decade (the price was about $1200/kWh in 2009).

MIT researchers contested the 2022 price was accurate, claiming they couldn’t be sustained.

The problem is that the steady decline in the cost of lithium-ion batteries, which power electric vehicles and account for about a third of their total cost, is likely to slow in the next few years as they approach limits set by the cost of raw materials.

“If you follow some of these other projections, you basically end up with the cost of batteries being less than the ingredients required to make it,” says Randall Field, executive director of the Mobility of the Future group at MIT. “We see that as a flaw.”

Well, that would be a flaw, but it flies in the face of decades of actual real world experience with high tech commodities. Computer memory for example, went through numerous boom/bust price cycles over the last 50 years, then has become so cheap that you can almost get a flash drive in your corn flakes. Hell, even oil prices have defied this thinking (in the U.S.), with gasoline currently costing about the same as it did in the 70s (adjusted for inflation).

The article then goes on to state that the adoption of EVs is going to be much slower than economists and advocates have predicted, so we are going to have gasoline cars around for at least another decade.

I started to go dig into the logic and research behind these conclusions, but decided to skip all that work, and instead go straight to the report, Insights Into Future Mobility, skipping to page 8 of the 220 page report where researchers thanked the groups who “sponsored” the “research”.

The MIT Energy Initiative gratefully acknowledges the 10 consortium members whose generous sponsorship made this research possible: Alfa, Aramco, BP, Chevron, Equinor, ExxonMobil, Ferrovial, General Motors, Shell, and the Toyota Mobility Foundation.

Representatives from all of these companies engaged with the MITEI team in extensive discussions, providing valuable critique and perspective that helped us sharpen our analysis and improve this report.

Yeah, I bet they did help “sharpen” your analysis. A study paper that basically says, “Never mind EVs, they won’t really be a thing for another 11 years, so keep burning that gasoline in the cars automakers are currently selling”, sponsored by the largest oil companies and the biggest car maker in the world.

No conflict of interest here.

Now adding MIT to my list of unreliable sources.

Insurance companies refusing to insure new coal plants

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Coal power becoming ‘uninsurable’ as firms refuse cover (sic)
The Guardian, 12/2/2020

The number of insurers withdrawing cover for coal projects more than doubled this year and for the first time US companies have taken action, leaving Lloyd’s of London and Asian insurers as the “last resort” for fossil fuels, according to a new report.

The report, which rates the world’s 35 biggest insurers on their actions on fossil fuels, declares that coal – the biggest single contributor to climate change – “is on the way to becoming uninsurable” as most coal projects cannot be financed, built or operated without insurance.

The first insurers to exit coal policies were all European, but since March, two US insurers – Chubb and Axis Capital – and the Australian firms QBE and Suncorp have pledged to stop or restrict insurance for coal projects.

At least 35 insurers with combined assets of $8.9tn, equivalent to 37% of the insurance industry’s global assets, have begun pulling out of coal investments. A year ago, 19 insurers holding more than $6tn in assets were divesting from fossil fuels.

This is definitely the end game for coal. Governments could step in to create insurance pools for coal companies, but 1) these pools would likely cost more and cover less, and 2) the public will not be happy with tax funds being used to prop up coal plants.

The next, more catastrophic insurance industry move will be when these companies and their re-insurers (like SwissRe) refuse to write polices for coastal areas because of escalating flood and hurricane threats. When that happens, governments will either have to underwrite the risk at tax payer expense, or see the entire housing market for those areas collapse.

Another Coal Plant Turned Off

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A Massive Coal Plant That Asked for Trump’s Help Has Gone Dark
Bloomberg News, 11/19/2019

At 12:09 p.m. local time on Monday — after churning out electricity for almost five decades — the largest coal-fired power plant in the western U.S. permanently closed, becoming the latest testament to the fossil fuel’s decline. Once a flash point in President Donald Trump’s campaign to save America’s coal industry, the Navajo complex in the Arizona desert will now spend the next three years being dismantled and decommissioned.

Tribal leaders spent years appealing to the Trump administration for help saving the plant, characterizing it as the president’s chance to fulfill his campaign promise to revive America’s Coal Country. The fact that the Interior Department owns a 24% stake in the complex gave him all the more reason to make an example out of it. Then-Interior Secretary Ryan Zinke vowed to explore all options for rescuing the site.

For all its political ties, the Navajo complex proved no match against market forces. The shale boom unleashed record volumes of low-cost natural gas, undermining the economics of coal generators across the U.S. Cheaper and cleaner wind and solar farms also began squeezing the plant’s profits.

Coal simply cannot compete with low methane prices and the continued fall or renewable costs. Hydro/solar/wind power generation are the only power generation methods where the fuel comes to you. No exploring, drilling, pumping, refining, transporting by pipe or rail required.

Big Oil in Big Trouble

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Economics of Electric Vehicles Mean Oil’s Days As A Transport Fuel Are Numbered
Forbes 9/2/2019

The future is not looking bright for oil, according to a new report that claims the commodity would have to be priced at $10-$20 a barrel to remain competitive as a transport fuel.

The new research, from BNP Paribas, says that the economics of renewable energy make it impossible for oil to compete at current prices. The author of the report, global head of sustainability Mark Lewis, says that “renewable electricity has a short-run marginal cost of zero, is cleaner environmentally, much easier to transport and could readily replace up to 40% of global oil demand”.

As a result, the report says, the long-term break-even oil price for gasoline to remain competitive as a source of mobility is $9-$10 per barrel, and for diesel $17-$19 a barrel

More and more analysts, industry insiders, and business/economics journalists are beginning to see the looming iceberg the oil industry is sailing toward with no awareness of their peril.

The current “oil boom” brought about by fracking was the result of new technology, and huge sums of borrowed money. The oil industry has always had a “boom/bust” cycle where the rising price of oil causes more rigs to be built, resulting in a glut of oil, which then drives down the price, bankrupting the late arrivals and the early players who didn’t have enough sense to get out before the prices collapsed. This then resulted in a contraction of the oil supply, causing the prices to rise again.

Rinse and repeat every decade since Titusville.

The new variable in this economic see-saw, is the rise of EVs and global warming. At some point, society is going to impose restrictions on oil extraction, which would limit supply and drive up the price. This would normally be welcomed by the oil industry, as consumers and industry must have oil for transport. But, unlike times past, there is an alternative to internal combustion engines powered by oil byproducts, electrically powered vehicles. Cheaper, cleaner, and with less impact of the environment.

So, as the price of oil rises, consumers are driven to EVs, which are cheaper to fuel, operate and maintain. The more people who switch, the lower the demand for oil, which drives the most expensive producers to bankruptcy, which reduces the supply of oil, keeping the price high.

“For the oil majors, the challenge is on a scale that they have never faced before, and business-as-usual is simply not an option,” the bank says, with any projects with break-even costs of $20 a barrel or higher facing the possibility that up to 40% of their output at below the cost of production.”

Automakers Badger China for Extra Year of Non-Compliance

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China Gives Automakers More Time in World’s Biggest EV Plan
Bloomberg News

Signage for a parking space for an electric automobile is displayed at a charging station operated by Tellus Power Inc. at an underground parking lot in Beijing. Photographer: Qilai Shen/Bloomberg

China unveiled a comprehensive set of emission rules and delayed a credit-score program tied to the production of electric cars, giving automakers more time to prepare for the phasing out of fossil-fuel powered vehicles in the world’s largest auto market.

Under the so-called cap-and-trade policy, automakers must obtain a new-energy vehicle score — which is linked to the production of various types of zero- and low-emission vehicles — of at least 10 percent starting in 2019, rising to 12 percent in 2020, the Ministry of Industry and Information Technology said on its website. The rule applies to car makers that manufacture or import more than 30,000 traditional vehicles annually, and those who fail to comply must buy credits or face fines.

Originally, China required 8% of cars sold in 2018 to be Zero Emission Vehicles (ZEVs), but US automakers whined and whined until China relented. Hey, what’s a few thousand more air pollution deaths in the free market?

Harsh you say? Sure, unless you are one of those people slowly suffocating.

California next to ban new gasoline cars sales?

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California Considers Following China With Combustion-Engine Car Ban
Bloomberg News

The internal combustion engine’s days may be numbered in California, where officials are mulling whether a ban on sales of polluting autos is needed to achieve long-term targets for cleaner air.

Governor Jerry Brown has expressed an interest in barring the sale of vehicles powered by internal-combustion engines, Mary Nichols, chairman of the California Air Resources Board, said in an interview Friday at Bloomberg headquarters in New York. Brown, one of the most outspoken elected official in the U.S. about the need for policies to combat climate change, would be replicating similar moves by China, France and the U.K.

“I’ve gotten messages from the governor asking, ‘Why haven’t we done something already?’” Nichols said, referring to China’s planned phase-out of fossil-fuel vehicle sales. “The governor has certainly indicated an interest in why China can do this and not California.”

Embracing such a policy would send shockwaves through the global car industry due to the heft of California’s auto market. More than 2 million new passenger vehicles were registered in the state last year, topping France, Italy or Spain. If a ban were implemented, automakers from General Motors Co. to Toyota Motor Corp. would be under new pressure to make electric vehicles the standard for personal transportation in the most populous U.S. state, casting fresh doubts on the future of gasoline- and diesel-powered autos elsewhere.

“Shockwaves” is an understatement. Certain pumpkin-hued individual’s head will explode all over the golf course when they read this. If California follows through, expect a major counter-offensive from the oil and auto industry.

Shell UK adding charging to gas stations

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Shell Retail Looks to the Future With Car Charging
Bloomberg News

Shell set up its first hydrogen refueling station in the U.K. earlier this year and will install its first electric car charging point later this month, said John Abbott, the top executive of its downstream business, which includes refining, marketing, retail, trading and chemicals. By 2025, he expects these new operations supplying cleaner fuels, including natural gas, to make up a fifth of margins from selling fuel.

Shell, still doesn’t quite get it. They are trying to preserve legacy methods of fueling involving tanks, tanker trucks, and all the plumbing that goes with fossil fuels (I include hydrogen since it is generally made from natural gas). It may seem like a way to preserve their capital investment, but really they are just making their stations WAY more expensive, since they will have to install more storage tanks and fueling hardware, which just mean spending LOTS of money and creating a very complex, expensive to maintain site, that will also complicate the logistics of scheduling deliveries of natural gas and hydrogen on top of the diesel/gasoline products already carried.

Oh, and you are adding the dangers of H2 and NG “spills” to the risk of gasoline/diesel spills. So, each time you resupply a station, you triple the number of chances something can wrong.

It’s simple guys. You have electrical wires right there above your station. Installing chargers is a matter of tapping the existing electrical infrastructure and setting aside some spaces for charging EVs. Simple installation, nothing to resupply multiple times a week, fewer tanker trucks on the road burning diesel.

China Pulls Out Death Certificate and Pen for ICVs

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China’s Fossil Fuel Deadline Shifts Focus to Electric Car Race
Bloomberg News

China will set a deadline for automakers to end sales of fossil-fuel-powered vehicles, becoming the biggest market to do so in a move that will accelerate the push into the electric car market led by companies including BYD Co. and BAIC Motor Corp.

Xin Guobin, the vice minister of industry and information technology, said the government is working with other regulators on a timetable to end production and sales. The move will have a profound impact on the environment and growth of China’s auto industry, Xin said at an auto forum in Tianjin on Saturday.

The world’s second-biggest economy, which has vowed to cap its carbon emissions by 2030 and curb worsening air pollution, is the latest to join countries such as the U.K. and France seeking to phase out vehicles using gasoline and diesel. The looming ban on combustion-engine automobiles will goad both local and global automakers to focus on introducing more zero-emission electric cars to help clean up smog-choked major cities.

China does not set a date, just says one is coming. Chinese automakers are putting a smiley face on the announcement.

“The implementation of the ban for such a big market like China can be later than 2040,” said Liu Zhijia, an assistant general manager at Chery Automobile Co., the country’s biggest passenger car exporter that unveiled a new line for upscale battery-powered and plug-in hybrid models at the Frankfurt motor show last week. “That will leave plenty of time for everyone to prepare.”

Yeah, about that.

If China is looking to cap carbon emissions by 2030 and improve air quality, I am guessing they have a date in mind much closer than “later than 2040”. Also, this announcement is a big slap in the face to all the automakers (except Tesla) who have been pressing China to relax its EV requirements and let them sell more ICVs and fewer EVs.

EVs in the U.S. have now arrived at 1% of sales, up from 0.01% in 2010. That might not seem like much, but it is a two order of magnitude improvement in seven years. If we cut that growth rate in half, that would mean that EVs would make up 10% of car sales in 2024, and 100% of sales by 2031.

Seems to me we are at the bottom of the “S-curve” right before it spikes upward.

Harvey may hurt oil prices short term, but the glut continues

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Hurricane Harvey has severely damaged the Texas Oil Cost, shutting down refineries which will probably disrupt gasoline supplies, resulting in price hikes. Despite this, the long term forecast is still that we are in an oil glut, and barring major hostilities in the Middle East, prices are going to remain soft. The word to learn today is “contango”:

Contango occurs when the current futures price of an asset (as quoted in the futures market) is higher than the current spot price of the underlying asset. (meaning today’s prices are much less due to excess supply)

“Floating storage off Singapore reached an all-time high in February,” Smith told CNBC’s “The Rundown.”

“We started to see Singapore floating storage dropping off last month from that record high of 60-million barrels, but we saw it rebound last week.”

Ahead of the OPEC production cut, producers ramped up production and exports to maximize revenues, with OPEC sending over three- fifths of its production to markets in the Asian region.

February arrivals hit 16.1 million barrels per day. That’s 1.1 million barrels more than last year’s average and nearly 300,000 barrels higher than the previous record set in February 2016, according to ClipperData.

The region’s refineries cannot process that much crude, so the influx lifted Singapore floating storage to 64-million barrels in early February, the highest level on available records. It has fluctuated since then, but remains well above recent averages.

“As long as we see 60-million barrels floating offshore in Singapore, it is just indicating that the market is still oversupplied and is not absorbing all this oil,” Smith said.

Of course, any excuse, valid or not, to raise prices and start gouging drivers will be taken. The cost getting the oil to the refineries has not changed, there are just suddenly fewer refineries to make fuel, and pipelines to transport what fuel is in the area are shut down. This situation could see fuel prices rise up to $1 gallon.