Federal Reserve Tells U.S. Banks To Assess Climate-Related Risks

By Irina Slav - Jan 19, 2023, 

The Federal Reserve has tasked the largest U.S. lenders to make an assessment of the risks they are vulnerable to in case of an extreme weather event caused by climate change.

The U.S. central bank recently released information about a “pilot climate scenario analysis” that aims to find out what disruptions climate change and the energy transition itself could cause the business world, E&E News reports.

As well as extreme weather events such as hurricanes, floods, and wildfires, scenarios that could affect top lenders’ performance also include protests against high-emission but highly profitable businesses in which banks have invested.

The purpose of the exercise, as the Fed calls it, is dual: first, to gauge the banks’ ability to tackle literal, physical damage from, say a hurricane, on its real estate portfolio, and, second, to assess their ability to deal with the financial fallout of such an event that causes financial stress for their customers, compromising their ability to repay their loans.

The lenders that need to submit an assessment of their climate change and transition risks include JP Morgan, Goldman Sachs, Morgan Stanley, Citi, Wells Fargo, and Bank of America. They have until the end of July to complete their assessments and develop a transition scenario for their operations.

Consumer rights advocacy Public Citizen has been quick to criticize the Fed’s plan. According to the organization, as quoted by Politico, the tests are too narrow and use models that rely too much on carbon offsets, which will lead to an underestimation of the risks that need to be assessed.

However, these tests could be seen as the starting pistol for a wave of climate-related disclosures. Last year, the SEC announced it would introduce rules mandating emission disclosures from all listed companies. The Treasury Department, meanwhile, is preparing a similar stress test for insurers.

By Irina Slav for Oilprice.com

British Columbia And Blueberry River First Nations Reach Oil And Gas Agreement

By Tsvetana Paraskova - Jan 19, 2023

The Canadian province of British Columbia and the Blueberry River First Nations have reached an agreement on land, water, and resource stewardship that will resume oil and gas development in the Montney shale formation in northeast B.C.

The agreement ensures Blueberry River members can meaningfully exercise their Treaty 8 rights, and provide stability and predictability for the industry in the region, the government of British Columbia said in a statement on Wednesday.   

The agreement is a response to a ruling of the B.C. Supreme Court from June 2021, which found the province had infringed upon Blueberry River’s Treaty 8 rights due to the cumulative impacts of decades of industrial development. The court prohibited the provincial government from authorizing further activities and directed the parties to negotiate a collaborative approach to land management and natural resource development that protects the Nations’ treaty rights.

Through the agreement, B.C. and Blueberry River will bring a more collaborative approach to oil and natural gas development planning and projects. They have agreed to focus disturbance from oil and gas activities wherever possible in areas already developed.

Executives from the oil industry with operations and interests in the Montney shale play welcomed the agreement, saying that it finally provides clarity on oil and gas development in northeast British Columbia.

“As a global energy leader, we look to B.C.’s world-class North Montney basin and LNG Canada as cornerstones of both our global portfolio and B.C.’s important economic and environmental opportunity to deliver the world’s lowest-emission LNG,” said Izwan Ismail, president and CEO at Petronas Energy Canada Ltd.

“The agreement between the British Columbia government and Indigenous communities in northeast B.C. provides much-needed clarity to move forward with natural gas development,” said Tristan Goodman, president and CEO at The Explorers and Producers Association of Canada.          

“British Columbia’s clean and responsibly produced natural gas can support Canada’s climate goals and supply the world with lower carbon, reliable and affordable energy.”  

By Tsvetana Paraskova for Oilprice.com

Japan’s Crude Oil Imports Increase For The First Time In A Decade

By Tsvetana Paraskova - Jan 19, 2023

Crude oil imports in Japan, the world’s fourth-largest crude buyer, jumped by 8.5% annually in 2022, the first yearly increase in a decade, while the value of crude imports nearly doubled to a record, data from the Japanese Finance Ministry showed on Thursday.

Last year, many large energy importers – including resource-poor Japan – focused on energy security after the Russian invasion of Ukraine and the spike in commodity prices as a result of the war.

So Japan imported last year a total of 156.62 million kiloliters of crude oil, or 2.7 million barrels per day (bpd), according to the data. The value of the imports surged by 91.5    % compared to 2021 and hit $103 billion (13.27 trillion yen), due to the jump in oil prices and a weakening of the Japanese yen.  

The average price of crude per kiloliter of imports hit the highest level on record in data going back to 1979, according to the finance ministry.

Meanwhile, Japan’s imports of LNG fell by 3.1% in volume but almost doubled in value as it surged by 97.5%.

Thermal coal imports for power generation rose by 2.5% but the value jumped by 196.7% after global thermal coal prices hit records last year following the Russian invasion of Ukraine and the EU ban on coal imports that came into effect in August.

To limit its dependence on fossil fuel resources it has to import, Japan is bringing back nuclear power as a key energy source, looking to protect its energy security in the crisis that has led to surging fossil fuel prices.

The Japanese government confirmed in December a new policy for nuclear energy, which the country had mostly abandoned since the Fukushima disaster in 2011. A panel of experts under the Japanese Ministry of Industry decided that Japan would allow the development of new nuclear reactors and allow available reactors to operate after the current limit of 60 years.   

By Tsvetana Paraskova for Oilprice.com

Strikes In France Halt Fuel Deliveries From Three Refineries

By Tsvetana Paraskova - Jan 19, 2023

On Thursday, a strike in France halted wholesale fuel deliveries from three refineries operated by TotalEnergies on the first day of a series of planned nationwide strikes in many sectors against President Emmanuel Macron’s plan to raise the retirement age.  

The Donges, Normandy, and Feyzin refineries of TotalEnergies stopped the wholesale supply of gasoline and diesel today, and the refinery at Feyzin had to reduce processing rates to a minimum, the CGT trade union told Bloomberg.

TotalEnergies and the French unit of ExxonMobil hold most of the refining capacity in France. The strikes against Macron’s unpopular pension reform are expected to continue with new industrial actions later in January and in early February, and they could further disrupt fuel supply in France, just as the EU embargo on imported Russian oil products by sea comes into force on February 5.

According to the CGT union, France will see a 48-hour strike on January 26, and a three-day strike in February. 

On Thursday, fuel supply was disrupted from TotalEnergies refineries, but there were fewer signs of disruption at the Exxon refineries.

The nationwide strike, which affected public transportation and schools, too, comes three months after refinery workers went on strike for weeks in September and October amid a pay row.

Strikes at refineries in France in the autumn of 2022 left more than 60% of the country’s refining capacity offline while gas stations in and around Paris and in the northern part of the country began to run out of fuel. France moved then to requisition essential workers to staff Exxon’s French oil depot and threatened to do the same for TotalEnergies’ French refineries if talks failed to progress. Strikes at Exxon’s refineries ended after some of the French trade unions reached an agreement with the company for a 7% pay rise.

By Tsvetana Paraskova for Oilprice.com

The Deadly Consequences Of Saving Energy

By Tsvetana Paraskova - Jan 19, 2023, 

Energy conservation in hot weather could raise mortality rates, a new study that has reviewed data from Japan showed this week.

The study, which will be published in the American Economic Journal: Applied Economics, argues that the Japanese government’s energy-saving campaigns since the country closed most of its nuclear power plants after the 2011 Fukushima disaster have led to higher death rates.

“Exploiting the electricity-saving targets across regions and over time, we show that the campaigns significantly increased mortality, particularly during extremely hot days,” study co-authors Guojun He and Takanao Tanaka wrote.

Guojun He, the director of research at EPIC-China, the Energy Policy Institute at the University of Chicago, and an associate professor at the University of Hong Kong, said, “Climate change is already upon us and encouraging less use of air conditioning or other means of adapting to extreme temperatures can kill people living right now.

“A better approach when designing climate policies is to speed up the transition to clean energy and encourage people to use more clean energy to protect themselves, rather than limiting individuals’ electricity or energy consumption,” He added.  

Japan has regularly called on its residents to conserve energy to avoid blackouts at times of extremely high power demand, such as on hot summer days or in the winter.

Ahead of the summer of 2022, Japan called on households and companies to conserve as much electricity as possible, seeking to prevent blackouts as spare reserve capacity was expected to drop to critically low levels. Ahead of this winter, Japan called on people and businesses to repeat the energy conservation drive from the summer, as energy scarcity and LNG price inflation continued to take a toll.

Japan is now bringing back nuclear power as a key energy source, looking to protect its energy security in the crisis that has led to surging fossil fuel prices.   

By Tsvetana Paraskova for Oilprice.com

Zelensky Questions Whether Putin Is Still Alive

By Charles Kennedy - Jan 19, 2023

Ukrainian media is citing President Volodymyr Zelensky as questioning whether Russian President Vladimir Putin is even alive and who is responsible for decision-making in Moscow these days. 

Cited by Ukrainian media during the World Economic Forum (WEF) in Davos, Switzerland, Zelensky is said to have told an audience: “I don’t quite understand who to talk to and about what. I’m not sure tha the Russian president who sometimes appears against a green screen … is actually the [right] one.”

"I don't quite understand if he is alive or whether he makes decisions, or whoever else makes decisions there. What group of people [could be making any decisions in Russia]? I don't have that kind of information,” the Ukrainian president continued. 

“I just don’t quite understand with whom we are dealing. When we say ‘peace talks’, I don’t quite understand with whom [we should be negotiating],” Zelensky was quoted as saying. 

The statements, cited by Ukrainska Pravda and the Kyiv Independent, prompted a rebuttal from Kremlin spokesman Dmitry Peskov, saying that Zelensky “would prefer that neither Russia nor Putin exist”. 

Peskov insisted that the war will end when the Ukrainian regime “shows readiness to take into account the demands of Russia – which will be achieved one way or another …”

Still, Zelensky’s statement, considered to have been delivered in the heat of the moment, will have media impact and raise additional challenges for Putin at home, where speculation abounds over high-level reshuffles as Moscow’s becomes bogged down in a protracted war in which any real notion of victory remains elusive. 

Fox News surmises that Zelensky’s comments questioning whether Putin is still alive may have been rooted in the Russian president’s recent withdrawals from public events, including a traditional annual press conference that was cancelled in December. 

Earlier this week, Putin was quoted as saying that victory in Ukraine is guaranteed, while Zelenksy this week vowed to retake Crimea, the first territory that Russia occupied in 2014 to a muted Western response. 

By Charles Kennedy for Oilprice.com

Is Artificial Intelligence A Net-Positive For Carbon Emissions?

By Haley Zaremba - Jan 18, 2023

• Artificial Intelligence is already playing a major role in the energy industry with smart grids, efficiency improvements, and helping to locate new energy resources and sites.
• 
  
• Artificial Intelligence requires vast amounts of energy to fuel the training and machine learning processes that make the model useful, meaning it could add to the carbon problem.
• 
  
• Ultimately, AI can be a net positive if used responsibly and efficiently, but it needs to be implemented in a manner that is not wasteful and that considers its energy sources.

Artificial Intelligence is increasingly becoming an essential component of the energy industry. As world leaders get more serious about meeting climate goals, the energy industry is facing the mandate to completely transform the way it operates at an unprecedented scale which will require massive, complex and nuanced computing power. AI is already playing a major role in renewable energy forecasting, smart grids, coordination of energy demand and distribution, maximizing efficiency of power production, and research and development of new materials. 

A 2021 explainer from the World Economic Forum laid out three key driving factors which are “huge strategic and operational challenges to the energy system and to energy-intensive industries,” thereby making AI an essential component of the energy transition: 

1. Scale. The almost unfathomable scale of the energy transition required for rapid decarbonization: in the energy sector alone, reaching net-zero greenhouse gas emissions will require infrastructure investments costing between $92 trillion and $173 trillion of by 2050, according to estimates by BloombergNEF. AI has a massive role to play here, as “even small gains in flexibility, efficiency or capacity in clean energy and low-carbon industry can therefore lead to trillions in value and savings.”
2. A changing power sector. Electricity is overtaking fossil fuel-powered energy, creating new demand for highly complex computations for “forecasting, coordination, and flexible consumption” which are far beyond the capabilities of traditional grids. This is made all the more complex by the variability of renewable energies like wind and solar, as well as the changing producer-consumer relationship created by decentralized power production through solar panels. 
3. Distribution and decentralization. New demands on the grid are made all the more complex by the variability of renewable energies like wind and solar, as well as the changing producer-consumer relationship created by decentralized power production through solar panels. Decarbonization is increasingly driving “rapid growth of distributed power generation, distributed storage and advanced demand-response capabilities, which need to be orchestrated and integrated through more networked, transactional power grids.”

AI is therefore essential for the unprecedented demands of decarbonization, which will depend on an intelligent, responsive, and flexible computing system able to recognize and predict complex patterns of production and consumption. But there’s a problem. While AI is necessary to curb emissions, AI itself requires vast amounts of energy to fuel the training and machine learning processes that make the model useful. Certain single AI training models have been shown to use the equivalent of 125 New York-Beijing round-trip flights, or the lifetime carbon footprint of five cars. 

So, is AI a net positive for energy efficiency and greenhouse gas emissions? Not always, according to a recent report from Semiconductor Engineering. Using AI responsibly and efficiently requires a number of considerations and calculations. Starting with the simple question: does this system actually need AI? While artificial intelligence undeniably has much to offer to the energy industry, it can also be more seductive than strictly necessary in certain contexts. In the words of Semiconductor Engineering, “we can no longer afford to be profligate with our resources; we need to ensure that the benefit outweighs the cost.”

If the system in question would indeed have net benefits from AI, engineers will next have to consider where the energy for the training is sourced, whether workloads are designed efficiently and effectively, calculate and consider embedded emissions, and maximize performance per watt. 

If AI is optimized for maximum energy efficiency and trained using clean energy sources, it’s a no-brainer for the energy transition. But making responsible, effective, and climate-conscious AI capable of catalyzing the clean energy revolution will require ‘clear policy incentives,’ but these have not been forthcoming, as AI is still relatively poorly understood and somewhat mistrusted in public spheres. Employing AI to its fullest potential will require a deep understanding of the enormously positive potential benefits it offers, in addition to its potential pitfalls.

By Haley Zaremba for Oilprice.com