It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Thursday, March 30, 2023
IRENA: $5 Trillion Per Year Needed To Meet Climate Goals
The global community needs to invest four times more in renewable energy to meet climate change targets.
IRENA report shows that $5 trillion should be invested in clean energy technology every year to mitigate the impact of climate change.
Governments and private investors need to accelerate the pace of investments in renewable energy to avoid the devastating consequences of climate change.
A new report from the International Renewable Energy Agency (IRENA) has found that we need to increase our annual investments in renewable energy by four times to meet climate goals.
According to IRENA, global investments in renewable energy technologies must exceed $5 trillion annually to align with the Paris climate accord's commitment to limiting temperature increases to 1.5 degrees Celsius above pre-industrial levels.
IRENA highlighted that a total of $35 trillion is required for transition technology by 2030, which includes improving efficiency, electrification, grid expansion, and flexibility.
Renewable energy deployment must increase from around 3,000 GW annually today to over 10,000 GW in 2030 to combat climate change. The agency also emphasized that there must be more equality in renewable expansion between industrialized and developing countries.
There are significant geographical differences in renewable investments. In developed economies, renewable energy investments must only increase by approximately 50% to reach climate mitigation targets. In contrast, developing economies need to increase investments by a factor of six.
Two-thirds of installed renewable capacity last year came from new renewable energy projects in China, the European Union, and the United States. Africa accounted for only 1% of renewable capacity installed.
"A fundamental shift in the support to developing nations must put more focus on energy access and climate adaptation," IRENA Director General Francesco La Camera said, calling on financial institutions to direct more funds towards energy transition projects with better conditions.
The report found that recent years have mainly seen significant investments in wind and solar power generation. Hydrogen, geothermal, and bioenergy investments must also increase to meet climate targets.
The report also emphasizes the urgent need for governments to provide suitable policies to encourage investment in renewable energy. This could include providing subsidies, tax breaks, or implementing a carbon price.
The IRENA report emphasizes that significant investments in renewable energy are necessary to meet these targets. Governments and private investors can make a difference by stepping up and accelerating these investments; otherwise, the world will face devastating consequences due to climate change.
Mexico Risks Trade War With U.S. Over Energy Reform Roll Back
AMLO’s roll back of reforms aimed at opening the country’s power and oil markets have angered the U.S. and Canada.
The Office of the United States Trade Representative will make a"final offer" to Mexico negotiators to open up its markets and agree to increased oversight.
Mexico’s move to reduce crude exports in order to refine its own crude may have a negative impact on the country’s economy.
The former U.S. administration was characterized by numerous trade wars involving multiple battles with various countries, including close American allies such as Canada. The battles frequently followed a particular U.S. legal rationale, with Trump labeling foreign imports a national security threat before imposing tariffs and/or quotas on imports.
The current administration has a slightly better track record, with Biden rolling back some Trump-era tariffs including removing tariffs on Canadian solar products, but electing to keep most of them in place. And now, Washington finds itself on the precipice of yet another trade war, with the Biden administration planning to send Mexico an "act now or else" message in the coming weeks as their energy dispute threatens to boil over.
The decision by Mexican President Andres Manuel Lopez Obrador toroll back reforms aimed at opening Mexico's power and oil markets to outside competition has angered the U.S., Canada and Europe and triggered bipartisan calls for the U.S. to get tougher on its southern neighbor. In recent years, U.S. Big Oil companies, such as Chevron Corp. (NYSE:CVX) and Marathon Petroleum Corp. (NYSE:MPC), alongside a host of solar and wind energy companies, have struggled to obtain permits to operate in Mexico.
The Office of the United States Trade Representative (USTR) will make a"final offer" to Mexico negotiators to open up its markets and agree to increased oversight. If they fail to accept the final offer, the U.S. will request an independent dispute settlement panel under the USMCA trade agreement. The U.S. and Canadademanded dispute settlement talks with Mexico nearly a year ago, far more time than the 75 days required under USMCA rules before aggrieved parties can request a dispute settlement panel if they fail to reach an agreement.
These developments increase the risk of another full-blown trade war between the U.S. and Mexico. The U.S. is Mexico’s largest oil export market, with the Latin American nation selling American refineries 710,000 barrels per day in 2021 while also importing 1.16 million b/d. Previously, Trump had imposed a25 percent levy on Mexican steel and 10 percent on aluminum, arguing that cheap imports were a national security threat and were decimating whole communities. However, he later lifted the tariffs, marking the first time the iconoclastic president backed down on protection once it had been imposed.
Energy Independence
Since becoming Mexico’s president in 2018, Obrador has undertaken various radical reforms in the country’s energy and power sectors as he endeavors to achieve elusive energy independence. Two years ago, he announced a rather controversial plan to phase down oil imports, reversing a major reform plan enshrined in the constitution in 2013.
As part of the plan, Mexico’s NOC Petroleos Mexicanos aka Pemex, was to cut crude oil exports from over a million barrels per day to just 435,000 barrels a day in 2023. The move is part of President Andrés Manuel López Obrador’s (AMLO’s) drive to lower imports of costly refined products, such as gasoline and diesel, and instead rely more on domestic production. “Practically 100% of Mexican crude will be refined in our country,” Pemex head Octavio Romero Oropeza said at the much-heralded opening of a new refinery in the southeastern state of Tabasco. Related: How Herd Mentality Sparked Chaos In Oil Markets
But high oil prices and an uncertain economic outlook including high inflation might see those plans shelved by the Mexican government.
Like most oil companies, high oil and gas prices helped Pemex to post its first annual profit in a decade, prompting the president to declare that Pemex, “was in bankruptcy and it is now being reborn”. Although oil revenues are no longer as important to Mexico’s economy as they once were, economist Victor Gomez has told Efe it is “improbable the Mexican government can stop relying on the export of petroleum as a source of funds”. Gomez is a former Finance Secretariat official who now works in the private sector.
According to Gomez, the financial windfall from oil sales “is a positive note” for public accounts. However, much of the oil profits have gone to cover the nearly $21 billion in uncollected taxes after the Mexican government suspended retail fuel taxes. Last year, people living in the United States have been driving across the border into Mexico in search of lower gas prices.
But oil is just one of the energy commodities that Obrador has sought to secure. In another act of protectionism, he sought to reform the electricity sector such that it would guarantee state electricity group CFE 54% of the market. The proposal aimed to transform the regulatory landscape for the electricity sector, including canceling power generation permits and prioritizing CFE power over private renewables on the national grid. However, the bill was defeated in Mexico’s Congress.
Obrador is also pushing ahead with plans to nationalize the country’s lithium sector after nationalizing lithium deposits last April, saying “There will be a company to explore for it, extract it, commercialize it.” Last month, he signed a decree handing over responsibility for lithium reserves to the energy ministry.
Bad Idea
The energy independence that Obrador dreams of might not be a very good idea. Indeed, a cross-section of analysts has pointed out that self-sufficiency would not be good for Mexico, and are even skeptical whether such a goal is economically viable.
“The supposed benefit of self-sufficiency doesn’t exist. So ending all petroleum exports doesn’t look like a real possibility.” Gabriela Siller Pagaza, head of economic analysis at the financial firm Banco Base, has said. According to Siller, energy security, defined by theInternational Energy Agency as “the uninterrupted availability of energy sources at an affordable price,” is more important to Mexico than self-sufficiency.
She has also pointed out that for Mexico to achieve its goal, it would have to incentivize other export products and/or boost the country’s tourism industry, noting that no such plans are currently on the table. “If Mexico were to stop exporting oil without a backup plan to compensate for the loss of capital, the Mexican economy would be at grave risk.”
Eric Smith, associate director of the Tulane Energy Institute, has concurred and says ending oil exports is not a feasible option for Mexico and the announcement by the president is little more than political posturing.
“I think what’s going on is that the president is trying to convince Mexico to essentially add more value to the crude oil it produces, and in order to do that, it needs more refining capacity and petrochemical processing capacity, and things like that, all of which take capital,”he has said.
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Source: Trading Economics
Mexico’s economy is a fairly energy intensive one requiring large amounts of petroleum, liquids and natural gas. In turn, rising natural gas consumption has led to the need for more infrastructure, including new pipelines to import U.S. natural gas.
However, Mexico is a classic example of a Jekyll and Hyde economy. On one hand, the country boasts a trillion-dollars in gross domestic product (GDP), making it one of the highest for a developing nation. However, the relatively big economy is overshadowed by the fact that ~44% of its population lives below the poverty line, with the country also having the third-highest degree of income inequality amongst the 39 member nations of the Organisation for Economic Co-operation and Development (OECD).
Meanwhile, the nation’s energy industry is riddled with rampant oil theft and a thriving black market.
Criminal syndicates associated with powerful drug trafficking cartels have frequently targeted Pemex’s pipelines to steal crude oil and derivative products. The problem has become so entrenched that by the time Obrador took office, the country was losing a whopping 80,000 barrels or more of petroleum and derivative products per day to oil thieves.
By Alex Kimani for Oilprice.com
Oil Prices Climb As Iraq's Dispute With Kurdistan Escalates
Oil prices continued their recent rally on Wednesday morning, with Brent inching closer to $80 and WTI nearing $74.
The dispute between Kurdistan and the Iraqi government that sparked the most recent price rise is yet to be resolved, keeping roughly 400,000 bpd out of the oil market.
Iraq claims it is in favor of restarting oil flows but will insist that the state oil company of Iraq is in charge of oil exports from Kurdistan.
An oil dispute between the Iraqi government and the semi-autonomous Kurdistan region that also involves Turkey has escalated this week, pushing oil prices higher.
Brent crude is inching closer to $80 and WTI was above $73 per barrel at the time of writing as Kurdish oil flows remain shut in for the fourth day in a row.
The dispute flared up last week, leading to the Iraqi government shutting down oil exports from Kurdistan to Turkey. The shutdown followed an International Chamber of Commerce court ruling in favor of Baghdad in a case against Turkey that claimed that the latter should not have allowed for the flow of oil from Kurdistan to Ceyhan without the express approval of the government in Baghdad.
Initially, Turkey said it would abide by the court’s decision but this week, the Turkish Ministry of Energy and Natural Resources said in a statement that the court had in fact ruled that Iraq should compensate Turkey for violating an oil export deal the two countries had.
In the statement, the Turkish ministry said that the ICC had dismissed four of Iraq’s five claims against it while accepting most of Turkey’s claims.
Kurdistan exports about 400,000 bpd via the pipeline that connects Iraq with Turkey. Currently, the government of the semi-autonomous region is discussing next steps with Baghdad but an agreement has yet to be reached.
Iraq has stated it is very much in favor of restarting oil exports from Kurdistan but it has suggested it would only agree to that on its own terms. These terms involve the state oil company of Iraq, SOMO, being in charge of the exports, rather than the Kurdish government.
“The best way for oil to get exported through SOMO and for the Kurdistan Region to get its share,” a spokesman for the Iraqi oil ministry told Rudaw on Tuesday.
These are just the most recent events in a long battle for control over the oil resource of Kurdistan between the region’s government and the government in Baghdad.
By Charles Kennedy for Oilprice.com
European Gas Prices Extend Gains As French Strikes Block LNG Imports
The front-month future at the TTF hub climbed to $47 on Wednesday morning, rising for the third consecutive day.
Nationwide strikes in France and expectations of a colder start to April are the driving factors behind the price spike.
Despite the rise, European natural gas prices are still near a 20-month low and European gas storage is at its highest level for this time of year in a decade.
Europe’s benchmark natural gas prices rose on Wednesday morning for a third consecutive day of gains amid lower LNG supply due to the nationwide strikes in France and expectations of a colder start to April than usual.
The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, traded up by 1.3% at $47 (43.30 euros) per megawatt-hour (MWh) at noon in Amsterdam, while the equivalent UK benchmark contract was up by nearly 1% at the same time in London.
Wednesday’s trade marked the longest streak of gains for European natural gas prices in about a month, according to Bloomberg’s estimates.
Three of France’s four terminals remain shut and will stay shut until at least Thursday as strikes are crippling LNG and crude oil imports, as well as refinery operations. The French strikes against President Emmanuel Macron’s pension reform have entered their fourth week.
France has four LNG receiving terminals, Dunkirk, Montoir, Fos Cavaou, and Fos Tonkin. The terminals at Montoir, Fos Cavaou, and Fos Tonkin, operated by French company Elengy, are currently shut due to the strikes.
Adding to the gas price rise were weather forecasts suggesting that most of Europe will see a colder-than-normal start to April, which could prolong the winter heating season and increase gas demand.
Nevertheless, milder than usual winter overall helped Europe avoid a gas shortage this winter. As of March 27, the EU’s gas storage sites were nearly 56% full, per data from Gas Infrastructure Europe. That’s the highest gas stocks for the end of a winter heating season in a decade, also thanks to demand cuts from industry and households, and a steady inflow of LNG in recent months.
Despite the rise in Europe’s benchmark gas prices, they are now at around a 20-month low. Signs have emerged that industries are switching back to using gas in a tentative sign that European industrial gas demand is rising.
By Charles Kennedy for Oilprice.com
Russian Oil Giant Signs New Deal To Boost Crude Supply To India
Russia’s largest oil firm has signed a new deal with Indian Oil Corporation to significantly increase the supply of Russian oil to India.
Since Russia’s invasion of Ukraine, India has become a significant buyer of Russian oil and Russia is now the top supplier of oil to India.
India has made it clear that it is not participating in the oil price cap and will source oil from wherever it gets beneficial terms.
Russia's largest oil firm, state-controlled Rosneft, signed on Wednesday a term agreement with Indian Oil Corporation to raise the supply of Russian crude to India significantly.
The deal was signed by Rosneft's chief executive Igor Sechin during a visit to India, in which he met with officials from the Indian government, as well as with the heads of some of the country's largest oil and gas companies, Rosneft said in a statement on Wednesday.
"The parties also discussed ways of expanding cooperation between Rosneft Oil Company and Indian companies in the entire value chain of the energy sector, including possibilities of making payments in national currencies," the Russian company said.
From a negligible buyer of Russia's oil before the Russian invasion of Ukraine, India has become a key export market for Moscow and is importing record volumes of Russian crude. In February, Russia remained India's top oil supplier for a fifth consecutive month.
Russia has been redirecting most of its crude oil exports to China and India since the EU and the G7 announced plans to embargo seaborne oil imports from Russia and set a price cap on the crude if it is to be shipped to third countries using Western tankers and insurers.
India is not abiding by the G7 price cap as it seeks opportunistic purchases of cheap crude, and it doesn't intend to.
India has not committed to and is not obligated to buy Russian crude oil only below the $60 price cap of the Western nations, a source at the Indian oil ministry told Reuters earlier this month.
India will buy the oil it consumes from "wherever we have to" if the economics are beneficial for the country, Indian Oil Minister Hardeep Singh Puri told CNBC last month.
"Today we feel confident that we'll be able to use our market to source from wherever we have to, from wherever we get beneficial terms," the minister said.
