Friday, December 31, 2021

Shale oil is unprofitable

It's expensive to produce so production can flourish only while producers of conventional oil keep crude oil prices up. Recent drops in crude prices have driven many shale producers out of business so a revival of crude prices may not lead to a revival of shale production any time soon. So its once again producers of conventional oil who are dictating prices at the pump

Donald Trump had to be the most fossil-fuel friendly U.S. president of recent times. When he became president, Trump quickly reversed Obama’s energy policies; the Keystone Pipeline was approved, imports from the Middle East were cut, and the price at the pump came down. It was claimed that America had become “energy independent” and was again a “net exporter” of oil. In 2018, the U.S. oil business even surpassed the record petroleum production peak set in 1970.

Inasmuch as American petroleum production had been sliding downward since 1970, how did this come about? It came about because of “unconventional oil,” e.g. shale oil. But even before the COVID-19 pandemic and the installation of a new president hostile to fossil fuel, shale oil had hit a snag: financiers were losing patience with shale’s profit performance.

In November of 2019, two months before the outbreak of the pandemic in America, NPR ran “As Oil Prices Drop And Money Dries Up, Is The U.S. Shale Boom Going Bust?

Today, shale accounts for about two-thirds of U.S. oil production and nearly all of the industry's growth, but many of the companies that made that growth possible are now struggling to stay afloat. […]

Without access to new cash, many producers are pulling back on exploration. The number of rigs drilling for new oil is at its lowest point in two years.

That's bad news for people like Ron Fountain, who works on a drilling rig in the Bakken shale of North Dakota. He thinks back to a few years ago, when the price of oil was more than $100 a barrel and companies were drilling with abandon.

In March of 2020, just after the coronavirus began feasting on elderly Americans, “Why This Oil Crash Is Different” ran at both the Center on Global Energy Policy and at Foreign Policy:

With the economic slowdown from the coronavirus outbreak projected to cause the first annual drop in oil demand since the global financial crisis in 2009, oil prices had already plunged 20 percent in the lead up to last week’s meeting of the so-called OPEC+ group, which includes both OPEC members and several other oil-producing countries, most notably Russia.

Russia had made clear its ambivalence about cutting supply, given concerns about whether cuts would be effective in supporting prices, and Russia’s reluctance to throw a lifeline to U.S. shale oil producers struggling under low prices and high debt. […]

Even before this weekend, shale oil production growth was already projected to slow sharply due to lower oil prices and much tighter capital constraints as investors grew skeptical of the sector due to its poor profitability.

In April of 2020, with bodies piling up in makeshift morgues, The Guardian ran “US shale industry expected to shrink sharply as oil price falls”:

US shale was expected to grow by 650,000 barrels a day this year before the coronavirus outbreak wiped out forecasts for global oil demand, triggering one of the steepest oil price declines on record. It is now forecast to shrink by 1.5m barrels a day compared to last year and that may accelerate even further.

Also in April of 2020, the Federal Reserve Bank of Dallas ran “How the Saudi Decision to Launch a Price War Is Reshaping the Global Oil Market”:

Saudi Arabia’s decision [to expand oil production] was a response to the dislocation in the global oil market caused by the outbreak of the coronavirus (COVID-19) against the backdrop of an already weak global economy. […]

The resulting drop in the oil price from about $35 to near $20 has further exacerbated the financial stress experienced by U.S. oil producers in Texas, Oklahoma and other oil-producing regions, which were already reeling from sharp reductions in fuel demand caused by the coronavirus.

In July of 2020, as the pandemic was raging throughout America, the Washington Post re-ran Bloomberg’s “Shale’s Bust Shows Basis of Boom: Debt, Debt and Debt”:

What was very visible this spring was the steep drop in the fall of oil, driven first by OPEC actions to increase supply and then by pandemic lockdowns that decimated demand. But a crackdown by creditors alarmed at the industry’s debt levels had begun last year. […]

The pandemic and OPEC’s moves, which were driven by Russia and Saudi Arabia’s market-share war, pushed prices down steeply in March, with some oil futures prices falling into negative territory for the first time. Even when oil is at $35 a barrel, almost a third of U.S. shale producers are technically insolvent, according to a recent study by Deloitte LLP.

In August of 2020, energy investor Kirk Coburn ran “The US Shale Industry: From Boom to Bust”:

For years, the US shale industry was on a boom fueled by junk bonds from Wall Street. The industry was waning in 2019. In 2020, shale oil giants faced the perfect storm -- COVID-19, failed OPEC+ talks, and relentless oil price wars came to a head. Then the US shale industry went from just barely hanging on […] to a definitive bust.

The bust has been a long time coming; COVID-19 just pushed the industry over the edge.

In October of 2020, Forbes ran “As Oil Bankruptcies Surge, Vulture Investors Start Their Long Feast”:

More Chapter 11s are coming, […] it will mean that management teams are finally accepting of the new reality of oil prices stuck at $40/bbl amid a continuing supply glut and pandemic-weakened demand. The world has changed, the debt-fueled fracking binge has come to an end. Many zombie oil companies cannot survive in their current form.

Alarming stuff, I’d say. But pandemic or no, shale oil is a more costly proposition than regular old conventional oil. Because of the complexity of its extraction (fracking), shale oil has a higher break-even price than does conventional oil. It’s been alleged that the Saudis and others have recently been able to pump (conventional) oil out of the ground for $10 a barrel.

In April of 2021, at, we read that “Oil at $60 is undoubtedly a comfortable price level for U.S. shale.” And since oil has been trading above that price recently, maybe the U.S. oil business can round up new investors and creditors willing to take a chance that shale oil can turn a profit.

But for U.S. oil to be profitable, the federal government needs to get a whole helluva lot smarter. Biden should start by replacing his Energy Secretary with someone who knows something about energy. Jennifer Granholm is unfit for that job. America needs an Energy Secretary with a deep understanding of both fossil fuel and its alternatives. Biden should consider someone like chemical engineer Robert Rapier (a recent article of his).


Killing Keystone XL: How Biden Destroyed American Energy Independence

On his first day in office, President Joe Biden revoked the Keystone XL pipeline permit via Executive Order 13990.

With the stroke of a pen, Biden canceled a project that would have boosted U.S. gross domestic product by more than $3 billion, carried 830,000 barrels of oil daily from Canada to the United States, and directly and indirectly provided up to 26,000 jobs—11,000 of which were instantly lost.

Climate czar John Kerry lent a sympathetic voice to the plight of the newly laid-off workers: “Go to work to make the solar panels.”

Then-President Donald Trump had greenlit the project in 2017, after years of delay from the Obama administration.

Though the Keystone XL pipeline project received a favorable environmental review from the U.S. State Department, and construction had already started (crossing the Canadian-U.S border), the Biden administration bowed to radical environmentalists and the “religion” of climate change, leaving hardworking Americans in the cold.

Oil is the lifeblood of our economy and critical to our energy security, but the personal toll may be the highest cost of all: livelihoods, hopes, and dreams dashed in an instant.

Philip, South Dakota, is one of the many towns that the Keystone XL pipeline construction passed through. With the construction came construction crews, and entrepreneurs who provided both the workers and the pipeline project the services they needed—from pipe storage to places to live, eat, and work out. All of it is now extinguished.

“When they came in with a stroke of the pen, everybody was upset. That’s an understatement,” says Jeff Birkeland, chief executive of West Central Electric, which would have served pump stations across the Keystone XL route. He added:

I think the true characteristic of how people felt—they were p—ed off. Everybody had spent money, the project was underway, people were here. They were building. We could see progress, and just like that, it’s gone.

Tricia Burns, co-owner of Ignite Wellness Studio, which lost half its memberships in one day, added:

Every job matters; not just one, not just 11,000. A family has been impacted negatively, and we don’t know why.

There was no breach of contract. There were no broken rules. It was just that President Biden signed an executive order that said, ‘No more.’

We recently traveled to hard-hit towns in South Dakota and Montana to interview residents and business owners like Birkeland and Burns to learn firsthand how Biden’s callous decision to shut down the pipeline has negatively impacted these communities.

The corrupt corporate media will not report the devastating effects on local communities of the Keystone XL pipeline cancellation, so we’re taking the reins to bring the truth to the American people with our documentary “Killing Keystone XL: How Biden and the Far Left Destroyed American Energy Independence.”


‘Sustainable aviation fuel’ is here, but still has miles to go

United Airlines deployed what it called a “game-changing flight” last week. In a global first, a United Boeing 737 carrying more than 100 passengers flew from Chicago to Washington, D.C. on a tank of pure “sustainable aviation fuel,” or SAF. But while the stunt demonstrated that flying on pure SAF can be done, it’s unlikely to change the carbon footprint of your next airplane trip.

SAF resembles conventional jet fuel and emits carbon dioxide when it’s burned in a plane’s engine. It’s considered sustainable because it’s refined from material that already exists in the environment, like used cooking fats and plant oils, rather than from fossil fuels that have stored carbon in the earth’s crust for millions of years. That means SAF can potentially have a smaller carbon footprint than crude oil–based fuel when the entire life-cycle emissions of producing it are taken into account.

Neither United nor World Energy, the company that produced the SAF for the flight, has revealed any details about the life-cycle emissions of the fuel used for Wednesday’s flight, but the companies advertise that SAF has the potential to reduce emissions by up to 80 percent compared to conventional jet fuel. The flight also wasn’t fueled entirely by SAF. One of the two engines on the plane ran on conventional jet fuel “to further prove there are no operational differences between the two,” according to United.

The point was less to demonstrate a flight with a lower carbon footprint than to show that SAF technology is now just as good as the fossil-based stuff. Some airlines are already blending SAF into the fuel they use, but the American Society for Testing and Materials, which develops standards for jet fuel, limits blending to 50 percent. Lauren Riley, United’s managing director of global environmental affairs, told Politico that was because of technical problems with earlier generations of SAF. “It’s matured since then, and we are proving that those concerns are no longer relevant,” she said.

SAF isn’t the only early-stage proposal for cutting emissions from flying. Major manufacturers like Airbus are also looking at fueling planes with clean hydrogen, which doesn’t produce any greenhouse gases when it’s burned. Battery technology has not advanced enough to power big planes over long distances yet, but using battery-powered planes for short distances is starting to take off. The shipping company DHL recently announced it was ordering a fleet of 12 battery-powered planes that are expected to be able to carry about 2,600 pounds of cargo over roughly 500 miles on one charge.

In the near term, SAF is one of the few available tools to lower emissions from commercial aviation — but it’s got some serious hurdles to overcome. There are doubts the world could sustainably produce enough SAF to power the entire industry, due to limited supply of the raw materials needed to make it. At the moment, it’s three to four times more expensive than conventional fuel, and there’s hardly any of it on the market. According to the International Air Transport Association, a trade association, about 26 million gallons of SAF will be produced this year. Riley of United said SAF accounts for “far less than 0.1 percent of our total fuel supply in any given year.” United chief executive officer Scott Kirby told Bloomberg Green that converting just 10 percent of the global aviation fuel supply to SAF will require $250 billion in capital. Kirby said the industry couldn’t afford it, and that a “government foundation” was needed.

Experts say another way to cut aviation emissions in the near term, without spending hundreds of billions of dollars, is to issue stronger regulations that require airlines to buy the most efficient planes on the market. The Biden administration recently opted not to develop more effective emissions regulations for aircraft.

But Biden is taking steps to help scale up SAF. In September, the White House announced loan guarantees, research and development funding, and an interagency “Grand Challenge” to increase production of SAF to 3 billion gallons per year by 2030.

The Build Back Better Act, the social spending and climate bill that passed the House last month, also includes $300 million for SAF research, as well as a new tax credit of at least $1.25 per gallon for aviation fuels that achieve at least a 50 percent emission reduction.

The aviation industry supports the measure. Carter Yang, a spokesperson for the lobbying organization Airlines for America, told E&E News, “A tax credit would help build the nascent market for SAF, providing a financial incentive for companies to integrate more SAF into the fuel supply and enabling them to offer it at a price that would allow airlines to use more of it.”


Australia: Greenie hate on display

Old Parliament House has suffered 'incalculable damage' after a fire ripped through the entrance to the historic landmark, with Scott Morrison branding the destruction 'disgusting' and 'appalling'.

Within hours of the building going up in flames on Thursday, Greens senator Lidia Thorpe posted a tweet - which was hastily deleted - remarking 'the colonial system is burning down'.

image from

She was quickly slammed for the post, in which she appeared to celebrate the destruction and told followers 'Happy New Year everyone'.

The entrance to the building was engulfed in flames after a smoking ceremony demanding Aboriginal Sovereignty in Canberra grew out of control - with some claiming it was spread intentionally.

Emergency crews arrived to douse the flames, but not before the fire had caused extensive damage to its heritage doors, the portico and the building's exterior.

Demonstrators were heard shouting 'let it burn', amid a tense stand-off with police who used pepper spray to disperse the crowd.

The smoking ceremony, which was approved by authorities as part of a protest, was to blame for the blaze while police begin to investigate how the chaos escalated.




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