Energy, Politics & Money (EPM) - 01 Mar. 2023
Independent, objective, and politically neutral analysis of global developments curated from sources covering the world of energy, geopolitics, and money.
In this roundup, EPM looks at:
The possibility of another round of consolidation between the five top Western oil producers
China’s post-COVID recovery in manufacturing
The latest round in the semiconductor economic warfare from the US (it has decided companies applying for subsidies to establish semiconductor manufacturing capacity in the US under CHIPS Act may not grow capacity in China for the next 10 years and are prohibited from collaborating with Chinese partners)
The US Secretary of State Antony Blinken’s visit to Central Asia which, since the fall of the Soviet Union, is part of Russia’s sphere of influence
The explosive growth in solar capacity which has overtaken hydro’s position in global energy supply and is set to overtake coal by 2027
Italy’s plan to team up with the other “major car company countries” in Europe, France and Germany to influence and slow the pace of European Union laws designed to reduce car and truck emissions
China’s steady progress in autonomous driving technology in which, according to Continental, it has taken a clear lead over Western countries
The US Postal Service’s $10 billion investment in Ford electric delivery vans
BMW’s misguided efforts in hydrogen as a fuel source
General Energy News
According to Michael Wirth, Chevron’s CEO, their is a possibility for another round of consolidation between the five top Western oil producers, though he admitted, consolidation efforts would face stiff regulatory hurdles writes Reuters. The reason is current record-level cash flows and – as we discussed at EPM yesterday – the difference in valuation of oil companies in the US and Europe. The significantly higher valuations in the US make the European oil majors a potential acquisition target for the US majors.
Macroeconomics
China’s economic recovery is on with manufacturing activity expanding at the fastest pace in more than a decade in February writes Nikkei Asia. The official manufacturing purchasing managers' index (PMI) stood at 52.6 against 50.1 in January, according to data from the National Bureau of Statistics, above the 50-point mark that separates expansion and contraction in activity on a monthly basis. The PMI far exceeded an analyst forecast of 50.5 and was the highest reading since April 2012.
Geopolitics
More economic warfare from the US. The Nikkei Asia reports semiconductor manufacturers must agree not to expand capacity in China for a decade if they want to receive money from the CHIPS Act, a $39 billion federal fund designed to build a leading-edge semiconductor manufacturing industry in the US. Gina Raimondo, US Commerce Secretary, said companies that receive funding must also not ‘knowingly engage in any joint research or technology licensing effort with a foreign entity of concern that involves sensitive technologies or products”, i.e. collaborate with Chinese partners.
At the same time on Tuesday, US Secretary of State Antony Blinken met the leaders of Kazakhstan and Uzbekistan a diplomatic move in Central Asia which since the fall of the Soviet Union has been part of the Russian sphere of influence. Reuters writes leaders in the region have been emboldened to stand up to Russia following its invasion of Ukraine, and have also been buffeted by the fallout from the war, including rising food and fuel prices, while coming under suspicion as potential routes for sanctioned goods reaching Russia.
Energy Transition & Technology News
A little more than a decade ago, solar power was an also-ran in the global energy race. At less than 1 per cent, it had the smallest share of generation capacity of any major power source. But all that has changed, writes the Financial Times. Next year, solar photovoltaic capacity will leapfrog that of hydropower, according to the International Energy Agency. In three years, it will overtake gas-fired generation. And, in four years, it will push past coal — to boast the largest share of generation capacity of any power source. Fast falling costs have been the primary driver of the solar buildout in recent years. The average unsubsidised lifetime cost to build and operate utility-scale solar was just $36 per megawatt hour in 2021, according to financial advisers Lazard — down about 90 per cent since 2009. That compares with $108/MWh for coal, $60/MWh for combined cycle gas, and $38/MWh for wind.
Climate Politics
Yesterday EPM reported on Germany’s request to the EU to change its proposed ban on the sale of ICEVs, by allowing the continued sale of ICEVs that run on renewable liquid fuels, biofuels, and e-fuels. Today, Reuters reports Italy intends to vote against the EU plan outright, quoting Energy Minister Gilberto Pichetto Fratin. Italy wants to team up with the other “major car company countries” in Europe, France and Germany, to influence and slow the pace of European Union laws on cutting car and truck emissions.
The Electrification of Transport
In an interview with Nikkei Asia, Gilles Mabire, chief technology officer of Germany-based Continental’s automotive group, said China’s efforts toward autonomous driving are “significantly faster” than the rest of the world. Continental is increasing investment in autonomous driving technology, supplying sensors, radar and lidar - core technologies for advanced driver assistance systems - to auto companies worldwide. The company is also investing heavily in developing AI, the brain of self-driving cars. As to Level 3 autonomous capability, Mabire said that from a “pure technology standpoint, we are there. We are able to bring that on the road.”
The US Postal Service will be buying more than 9,000 battery-powered delivery vans made by Ford, Bloomberg reports, as part of a $10 billion push to electrify its aging fleet. The Ford E-Transit Battery EVs, which the Postal Service expects to take delivery of this December, are part of plan to electrify 75% of the its service trucks over the next five years.
BMW continues its – in the view of EPM – misguided efforts in hydrogen. As per CNBC, the new BMW iX5 Hydrogen uses fuel cells sourced from Toyota, has a top speed of more than 112 miles per hour, and has a range of 313 miles. It will enter service in 2023, although the scale of the rollout is small, with a fleet of “under 100 vehicles” set to be “employed internationally for demonstration and trial purposes for various target groups.” In EPM’s view, BMW’s initiative is all nice and well, but we do not expect the hydrogen recharging infrastructure needed for hydrogen-based cars to be built out, ever, because it is just too expensive.