Energy, Politics & Money - 08 February 2023
Independent, objective, and politically neutral analysis of interconnected global developments in the world of energy, geopolitics, and money curated to help you thrive or survive these chaotic times.
There is much to analyze today. In this roundup, we look at:
The increase in Oil & Gas investment and changes to where the money will be spent
The Fed’s response to the US job market data of last week
AP Møller-Maersk earnings forecasts mentions that it sees a potential for contraction in global trade
Vestas says it has developed a chemical solution allowing windmill blades to be broken down and recycled
Martin Green’s forecast – the inventor of “Passivated Emitter and Rear Cell” technology used in 90 per cent of all solar panels – that the efficiency of photovoltaic cells will eventually be greater than 40% from the 25% achieved today
The EU’s deliberations on submitting a fossil fuel phase down proposal at COP28
The Global South’s criticisms of – what it believes is – the Global North’s hypocritical stance regarding the energy transition
General Energy News
After several years of repressed investment in oil and gas, pandemic-induced demand destruction, and climate-related policy hostility Big Oil is once again spending to find oil and pump it out of the ground says The Economist. Quoting S&P Global analysis, it says that worldwide upstream capital expenditure for the industry as a whole, including private-sector majors and national oil companies, was around $450bn last year, up from a 15-year low of $350bn or so in 2020, and that this year it is likely to be higher. Importantly, all this new money is not flowing to the same old places. American companies are beating a retreat from faraway “frontier” areas and instead are focused on North and South America. Their European rivals are shunning some of their own American projects in favour of Africa.
Macroeconomics
Last Friday’s US jobs report showed why the battle against inflation will “take quite a bit of time” says Jerome Powell, Chair of the Federal Reserve, reports Reuters. Interest rates may need to move higher than expected if US economic strength threatens the Fed’s progress in lowering inflation he added. Powell said, “We didn’t expect it to be this strong” but it “shows why we think this will be a process that takes quite a bit of time”. To the team at EPM, this seems to indicate the Fed does not necessarily want to raise rates much higher, but that it might leave them at their currently elevated levels longer instead.
AP Møller-Maersk forecasts a plunge in profits this year due to a strong decline in global trade, in part because the pandemic-driven boom in container shipping has ended writes the Financial Times.
Energy Transition & Technology News
Vestas, the world’s largest producer of wind turbines, says it has developed a chemical solution that allows the blades — made with durable epoxy resin — to be broken down and recycled rather than landfilled. It’s a potential solution for what could be a massive sustainability problem for the wind industry writes Bloomberg. Industry body Wind Europe estimated that about 25,000 metric tons of blades a year will be decommissioned by 2025, rising to 52,000 tons a year by 2030.
The inventor of the silicon technology that dominates solar power predicts that combining other materials with the silicon may boost the efficiency of photovoltaic cells from around 25 per cent today to more than 40 per cent writes the Financial Times. Martin Green, an engineer and professor of the University of New South Wales, invented the technology used in about 90 per cent of the world’s solar panels. The PERC, or Passivated Emitter and Rear Cell, reflects escaping light and electrons back into a photovoltaic cell — and boosts its efficiency from 16.5 per cent to the current 26 per cent enabling solar power to compete effectively with fossil fuels. He says that “Stacked cells”, which layer other materials on top of silicon to maximise the conversion of all wavelengths in sunlight into electricity, are likely future developments.
Indonesia is pushing to build battery and EV industries on the back of its rich mineral resources. It already produces about half of the world’s nickel and its share of global cobalt output will rise from about 1% in 2021 to almost 20% by 2030 according to Benchmark Mineral Intelligence reported by Bloomberg. The cobalt expansion is largely thanks to billions of dollars of investment by Chinese firms on refineries that dish out a chemical cocktail containing cobalt as well as nickel.
Climate Politics
Reuters writes that EU country diplomats are negotiating a plan to promote a shift away from so-called unabated fossil fuels – those burned without using technology to capture their planet-warming emissions – at COP28. The bloc has yet to reach an agreement, however, as some EU countries are seeking weaker wording while others want a stronger, more explicit call to phase out fossil fuels.
Bloomberg has collected the main points of relevance for energy in US president Biden’s most recent State of the Union address: 1. Rebuilding America’s infrastructure includes EV charging; 2. Climate change “an existential threat”; and 3. Oil and gas still needed “for a while” but profits are “outrageous”.
Lastly, during COP27, EPM mentioned that in our view, when it comes to climate politics, a gap is growing between “the Global North” and “the Global South”, in other words, between the developed world and the developing world. There are various reasons for this (the relative decline in Global North power and influence primary among them), but the key question is: How did this develop? If the India Energy Conference held this week is anything to go by, the gap will continue to widen, says Reuters, because there, officials from the South were quite vocal that in their view rich countries should stop throwing up roadblocks to poorer ones trying to secure energy supplies and do more to help them make the green transition.