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GAS PRICE DIVERGENCE BETWEEN US AND EUROPE: The weeks since the explosion at Freeport LNG’s Gulf Coast terminal have seen a further divergence between U.S. and European gas prices, illustrating that what has been good for prices at home is making things tougher for EU customers.
Next-month natural gas futures have fallen more than 40% since their most recent peak to close yesterday at $5.51 per MMBtu, territory that’s much more familiar to traders and consumers than the $9.32 level where NYMEX futures closed on June 6.
Market analysts have drawn a link between the outage at Freeport, whose LNG shipments met some 2.5% of European demand in May, and both the lower prices at home and higher prices in Europe.
In Europe, benchmark gas futures have nearly doubled over the last month.
The fundamentals: To be certain, the main driver of volatility in European prices over the last month has been Gazprom’s throttling of natural gas flows, which has countries instituting emergency measures to conserve gas.
But the explosion has added tightness to markets, according to analysts with Rystad Energy and other industry players.
The Freeport explosion has reduced the demand of gas for liquefaction by 2 billion cubic feet per day. Freeport accounts for some 17% of U.S. LNG capacity.
For the Europeans, who have been increasingly reliant on U.S. LNG shipments to fill storage and want to secure more long-term contracts, that drop in shipments is significant.
“That obviously has an impact on European prices, because that’s supply that’s now taken out of their market in a scenario where supply is already [strained] and their storage is low,” Charlie Reidl, executive director of the Center for Liquefied Natural Gas, told Jeremy.
Stephen Nalley, then-acting administrator of the Energy Information Administration, told the Senate Energy and Natural Resources Committee in November that fewer exports would have this effect on prices.
An export ban in particular would send U.S. prices falling but cause them to “skyrocket” internationally, Nalley said.
Other factors at play: U.S. prices dropped considerably in the days after the explosion on June 8 and fell even further after Freeport announced on June 14 an extended timeline for a return of partial operations. It has since extended the timeline again, now expecting to be partially back online in October.
Reidl said the Freeport’s outage is affecting prices, but he said it doesn’t compute that the reduction in demand for feedgas at Freeport is what’s mostly responsible for such a massive swing at home. Freeport’s capacity only accounts for about 2% of the total 95 bcf of natural gas currently being produced per day.
“Obviously, having a 2 bcf-a-day surplus that was tagged for export now being able to feed back in the local market is helpful [for lowering prices]. But it’s not enough to start talking about these dramatic swings that we’ve seen,” Reidl said.
Monthly natural gas production levels have been at or near records in recent months, and Reidl said $9 gas was not a result of a shortage of supply.
“We’re meeting what the demand is here domestically,” he said, contending that the dramatic swing to lower prices has been “predicated on sentiment rather than actual fundamentals” — sentiment such as fear of a recession.
Export ban chatter: Some environmental groups are clinging to the fall in prices since the explosion to promote an export ban.
“Stopping exports through that one facility actually had a dramatic impact on lowering natural gas prices around the country,” Jim Walsh, policy director for Food & Water Watch, told Jeremy recently. He said the administration should take action to reduce and eliminate all fossil fuel exports.
There’s already some appetite among Democrats in Congress for an export ban for both petroleum and gas exports, although an LNG export ban would compete directly with the administration’s initiative to get Europe more shipments.
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CLIMATE ACTIVISTS PLAN TO DISRUPT CONGRESSIONAL BASEBALL GAME: Several climate activist groups are planning to “disrupt” this year’s Congressional Baseball Game, taking aim at one of Washington’s longtime traditions — and rare displays of bipartisanship— as they pressure lawmakers to pass a climate bill through budget reconciliation.
Details of the planned disruption remain largely under wraps, though organizers told the Washington Post there “will be a component of direct action for activists who are willing to risk arrest” at the game, currently scheduled for July 28.
“We refuse to watch a member of Congress play baseball while the world burns,” Jamie DeMarco, a federal policy director for Chesapeake Climate Action Network, told the Post.
DeMarco added that two of the game’s sponsors are BP and Chevron. “Either you deliver on your promise on climate or voters will hold you accountable,” he said.
RIVIAN REPORTS SHARP RISE IN GROWTH, NEARLY DOUBLES Q1 PRODUCTION: California-based EV startup Rivian said it produced more than 4,400 vehicles in the second quarter of 2022—a sharp increase from the previous quarter, and one that the company says puts it on track to hit its annual target of 25,000 vehicles.
The second-quarter production numbers nearly doubled output from the first three months of 2022, when Rivian produced just 2,553 vehicles, the Wall Street Journal notes. Rivian also said it delivered 4,467 vehicles to customers in Q2, compared to just 1,227 deliveries in the first quarter.
Rivian, which faces stiff competition from other, more established rivals, is trying to overcome parts shortages and other production hurdles. Rivian CEO RJ Scaringe has pointed specifically to the global shortage of semiconductors as a major driving factor behind the delays, which prompted the company in March to slash its yearly production forecast by half.
Rivian has maintained that increasing production levels is “essential” to stemming its losses, which soared to $1.6 billion in the first quarter of 2022, compared to $414 million at the same point last year.
Yesterday’s production numbers outpaced analysts’ expectations, and Rivian’s stock was up 10% at yesterday’s close.
CONSERVATIVE GROUP POLL FINDS GOP SUPPORT FOR CLIMATE MEASURES: A new survey found strong Republican and bipartisan support for fiscally responsible climate measures in three battleground states.
The poll was conducted by conservative climate group C3 Action, and surveyed voters in Arizona, Georgia, and Michigan. Among their findings:
Just 14% of Republican voters believe climate change is not happening, and most Republicans said they prefer candidates who propose climate solutions.
The poll also found majority-Democrat support for center-right climate preferences: Roughly 71% of Democrats said they support the “all of the above” strategy to adopting clean energy alternatives, while 68% said they support nuclear energy.
Two-thirds of all voters said they support streamlining regulations to speed up deployment of new clean energy technology. Meanwhile, votes from both parties prefer to finance clean energy research through spending offsets—49%— over borrowing—13%— or tax increases (9%).
Another biggie: Republican voters also said it is more important for a candidate “to have plans to reduce gas prices, promote energy independence and defend America from foreign threats” than to have Trump’s endorsement.
“Our poll indicates a strong bipartisan consensus exists around an ‘all of the above’ fiscally responsible energy diversification agenda,” said C3 Action executive director John Hart.
“The party that embraces and implements this agenda will set itself up for success for a generation.”
GREAT SALT LAKE IN UTAH DROPS TO LOWEST POINT ON RECORD: The Great Salt Lake in Utah dropped Sunday to its lowest level on record for the second time in less than a year, as climate change and extreme drought conditions continue to wreak havoc across the West.
Water elevation at the Great Salt Lake lake fell to 4,190 feet on Sunday, according to the U.S. Geological Survey data, marking the lowest-ever recorded point since scientists first began taking measurements in the mid-1800s. (Before last year, the lowest recorded elevation was 4,191.4 feet in October 1963, according to the Salt Lake Tribune.)
“It’s clear the lake is in trouble,” Joel Ferry, the executive director of the Utah Department of Natural Resources, said in a statement. “We recognize more action and resources are needed, and we are actively working with the many stakeholders who value the lake.”
Scientists and state officials said they expect lake levels will continue to drop until late fall or winter, prompting officials in the state to call for “urgent action” to preserve the body of water. Read more about that effort here.
FRENCH GOVERNMENT TO NATIONALIZE POWER COMPANY EDF: The French government is planning to nationalize electricity giant EDF, French Prime Minister Elisabeth Borne announced yesterday, as the country seeks to combat the energy crisis exacerbated by the war in Ukraine.
Borne, speaking before the French parliament for the first time since being appointed to the role, said the government plans to hold 100% of EDF’s shares—up from the 84% it owns currently.
“We must have full control of our energy system and its performance,” Bone said, describing the decision as part of a strategy to gain “energy sovereignty” and build “a stronger France in a more independent Europe.”
Borne’s remarks come as EU nations scramble to find alternative sources of Russian energy and prepare for a potential shutoff in Russian gas supplies.
EDF, which manages France’s large fleet of nuclear reactors, is one of Europe’s most important energy companies—serving tens of millions of consumers both in France and in neighboring countries, and using nuclear power to help stabilize the region’s electric grid.
Nuclear has also been embraced by French President Emmanuel Macron as a means of fighting climate change—and in February, he announced plans to build 14 full-size nuclear reactors in the country.
EDF shares closed up roughly 15% yesterday following Borne’s announcement.
The Rundown
Bloomberg US college students are shunning oil-Industry degrees for ESG future
New York Times How one restaurateur transformed America’s energy industry
Reuters Texas power use to keep breaking records as heatwave lingers
Bloomberg UK’s Drax to extend life of coal units to secure winter supplies
Washington Post The battle that will determine the future of American passenger rail
Calendar
WEDNESDAY | JULY 13
2:30 p.m. 366 Dirksen The Senate Energy and Natural Resources’ Energy Subcommittee will hold a hearing on pathways to lower energy prices.
THURSDAY | JULY 14
10:00 a.m. 1300 Longworth The House Agriculture Committee will hold a hearing on “A 2022 Review of the Farm Bill: The State of Credit for Young, Beginning, and Underserved Producers.”
