CERAweek Oil Day:<\/p>\n
I have to agree with Iain Conn, group managing director and chief executive of BP’s worldwide refining and marketing group.\u00a0 Mr. Conn said refinery investments will continue happen in the Atlantic Basin, but it will be strategically done.\u00a0\u00a0 He also specified he expected to see investments in facilities to take the condensates from the shale development and make products.\u00a0\u00a0 Those who have been reading\u00a0my blog will note I made that call early February<\/a>.<\/p>\n A group made of a good aquiantance Marianne Kuh, Chief Economist ConocoPhillips, and my friend Frank Verrastro, senior vice president and program director at CSIS Energy and National Security Program; noted the high crude oil price is more of a function of actual demand growth, not only political uncertainty of Iran.\u00a0\u00a0 I do agree with these points, but I still think monetary policy has influenced the price of oil as significantly as demand, if not more.<\/p>\n To prove my point, I have pulled annual oil prices, M2 money supply, and oil demand since 1981.\u00a0 I have graphed the information below.\u00a0\u00a0 I also ran regressions on each of the variables to oil price.\u00a0\u00a0 M2 money supply has a better R^2 with 0.61 vs. 0.48.\u00a0 Together they produce a rather strong correlation for an R^2 of 0.70.\u00a0\u00a0 Another interesting outcome of this analysis is it shows for\u00a0the first time the\u00a0amount of M2 is now greater than 10% of the world demand expressed in millions of barrels\/day.\u00a0 This started in 2009 as the FED aggressively moved to \u201csave\u201d the system.<\/p>\n CERAweek Gas Day:<\/p>\n There were several discussions of natural gas vehicles.\u00a0\u00a0 I think it\u2019s a clear choice for fleets to convert to natural gas.\u00a0 Mass transit vehicles should move towards CNG.\u00a0\u00a0 There was discussion on a\u00a0recent article in the Wall Street Journal<\/a>\u00a0by Robert McFarlane, served as President Reagan’s national security adviser from 1983-85.\u00a0 In the article Mr. McFarlane talks about methanol vehicles.\u00a0\u00a0 Speakers at CERAweek disagreed with him largely on the premise of structural issues.\u00a0\u00a0 I think the more valid concern would be the history and fate of MTBE.\u00a0\u00a0 From what I have gathered methanol would be more toxic than MTBE.\u00a0 I do disagree in how we handle the MTBE issue \u2013 requiring MTBE then banning it.\u00a0\u00a0 MTBE was a messenger to a problem that is still happening.\u00a0 MTBE gave you a mechanism to trace and track leaking gasoline.\u00a0\u00a0 By eliminating MTBE you did not solve the real problem.<\/p>\n Apache CEO, Steven Farris, made remarks in regards to supplying utilities with long-term contracts, but with a floating gas price.\u00a0 Once again I have\u00a0blogged about this before<\/a>.\u00a0\u00a0 It would be worthwhile to continue to watch this evolution.\u00a0 Many are trying to emulate coal contracts, but the reason and the value of contracting gas is not the same as it was with coal.<\/p>\n Of course it wouldn\u2019t be gas day without a deluge of shale discussion and fracking concerns.\u00a0 Many speakers talked about transparency and the efficacy of fracking.\u00a0 I will have to agree here that it can be done in a responsible and safe way.\u00a0\u00a0 It is a\u00a0matter of regulators to effectively regulate, because there will always be bad actors.<\/p>\n My former consulting company, Purvin & Gertz, who got acquired by IHS had their own session at CERAweek.\u00a0\u00a0 They spoke about the NGL markets.\u00a0\u00a0 Once again I did note about the dynamics of what is going on in this market in my\u00a0previous blogs<\/a>.\u00a0\u00a0 This is an exciting area, full of opportunities.<\/p>\n CERAweek Power Day:<\/p>\n For some reason, the day opened with a discussion of nuclear renaissance.\u00a0\u00a0 I will have to agree with GE CEO Immelt \u2013 there has never been or will be a nuclear renaissance in the US.\u00a0 I will add the caveat – unless significant structural changes are made to our electric industry design.\u00a0\u00a0 This country has cost-effective options whereas other countries do not (e.g. France, Japan, etc\u2026).<\/p>\n I will have to differ with many of Alstoms thoughts.\u00a0 Alstom has been a very vocal and huge supporter of CERAweek for the past few years.\u00a0\u00a0 They spoke many times during the conferences.\u00a0\u00a0 I have read that they still are investing heavily in CCS.\u00a0\u00a0 They believe the focus for clean energy should be on the technology side.\u00a0 Once again in\u00a0my blogs<\/a>, I elude to the point it is not the technology that is limiting \u201cclean\u201d energy; it is the business strategy and incentives.\u00a0 They also point out that\u00a0gas generation should focus on bigger turbines with lower cost.\u00a0 Of course, that sounds ideal, but I think over the next 3 years the value proposition will be for more dynamic turbines versus bigger and efficient.\u00a0 I say this because of the need to serve the intermittent nature of wind.<\/p>\n FERC commission, Philip D. Moeller, discussed the point that the consumer needed to see the real price.\u00a0\u00a0 I believe he is trying to point out the desire of real-time metering.\u00a0\u00a0 However I will disagree with this since there are several ways to make pricing more transparent to the consumer.\u00a0\u00a0 Rate design in itself does not hide the cost of power, since regulation comes with cost recovery.\u00a0\u00a0 It is the actors behind the rate design that hide the true cost of power \u2013 as noted in my\u00a0previous blog<\/a>.\u00a0 Real-time pricing will change consumption, but the bulk of the impact could be done by having block metering \u2013 on and off-peak hours with no dynamic pricing, but a statement to the consumer. The hours between 7am-10pm will be more expensive than 10pm-7am.\u00a0 This method would come at a fraction of the cost and involve much less complexity.\u00a0\u00a0 I do understand the value of the \u201csmart\u201d grid that it comes from other forms, such as reliability; but this is not how it is being sold to the consumer.<\/p>\n I couldn\u2019t agree more with CEO and President Bruce Grewcock of Kiewet \u2013 \u201cIn a lot of jurisdictions, people are going to see rate shock when they see the true costs.\u201d\u00a0 Once again this is not coming from a smart grid realtime perspective, but the fact that there has been an underinvestment by the utilities.\u00a0 Instead of focusing on true needs over the past years, we have focused on projects and mechanism of style (e.g. CCS, IGCC,\u00a0fuel deferral<\/a>, smart grid, etc\u2026).\u00a0\u00a0 Inefficiency in markets will always come back to haunt you.<\/p>\n <\/p>\n We positively and evocatively challenge the current thinking involving any aspect of energy use. We look for projects that offer meaningful, transformative, with impactful outcome to the marketplace or society.<\/p>\n Independent analysis and opinions without a bias right is what we offer to our clients. Please consider and contact All Energy Consulting for your consulting needs.<\/p>\n Your Energy Consultant,<\/p>\n <\/p>\n![\"Oil](\"https:\/\/allenergyconsulting.com\/blog\/wp-content\/uploads\/2012\/03\/mi-oilpricem2demand.jpg\" "\\"Oil")
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