North Dakota and Texas get all the press when it comes to America’s domestic oil boom, but production is increasing dramatically in several other states in the American West. According to the Energy Information Administration since 2010 oil production has increased 64% in Colorado, 51% in Oklahoma, 46% in New Mexico, 45% in Utah and 23% in Wyoming.
Source: FULL ARTICLE at Fox US News
By Rich Smith
Is solar power “the fuel of the future”? Elon Musk thinks so.
The co-inventor of PayPal, now turned alternative energy rock star, has built two companies — solar power utility SolarCity (SCTY) and electric car company Tesla (TSLA) — around the idea that solar-generated electricity is the way to power our cars and save our environment. He’s also working on a third company — SpaceX — which aims to bring mankind a bit closer to that ultimate clean-energy source, the sun.
But is solar power truly the solution to our energy needs? Not necessarily.
“Free” Power Can Be Awfully Expensive
Last month, alternative energy analyst Gordon Johnson at Axiom Capital crunched the latest numbers out of the U.S. Energy Information Administration, and published a report on his findings.
The upshot: When it comes to “alternative” ways to generate electricity, solar energy is just about the most expensive form of energy you can get.
Calculating the cost of generating a kilowatt hour (kWh) of electricity by tallying the cost of building a facility, operating it, and paying for the fuel it consumes — then amortizing all this across all the electricity it’s expected to produce in its lifetime — Johnson points out that solar photovoltaic power costs about $0.22 per kWh. Solar thermal power, where sunbeams are reflected and concentrated on a heat-retaining medium such as salt or graphite to store heat for later use in generating electricity, costs even more — about $0.32 per kWh.
What forms of energy are cheaper than these? Pretty much any that you might think of.
Motley Fool contributor Rich Smith does not own shares of any solar or electric car company named above. (Go figure.) But The Motley Fool recommends and owns shares of Tesla Motors.
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Source: FULL ARTICLE at DailyFinance
The price of oil stayed near $106 a barrel Tuesday as energy markets waited for the next U.S. report on crude and fuel inventories for confirmation of recent signs of increased demand.
Benchmark crude for August delivery was down 35 cents at $105.97 a barrel at midafternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract gained 37 cents to settle at $106.32 on Monday.
Oil is up about 10 percent so far this month. It has been jolted higher by unexpectedly sharp drops in U.S. crude and gasoline inventories, which suggest stronger demand. The military ouster in early July of Egypt’s president has also added a premium to crude, reflecting the risk of supply disruption from political instability in a country that controls the Suez Canal.
Those factors were tempered Monday by a second straight quarter of slowing economic growth in China and slower growth in U.S. retail sales in June. China’s economy expanded 7.5 percent in the April-June quarter after 7.7 percent growth in the previous quarter.
Wednesday’s report from the Energy Information Administration on U.S. crude and fuel inventories might show a third consecutive weekly drop in supplies. That would bolster the case of those traders and analysts who believe the oil price will rise further because U.S. energy demand is rising in step with faster hiring.
Brent crude was down 25 cents to $107.85 a barrel on the ICE Futures exchange in London.
In other energy futures trading on Nymex:
— Wholesale gasoline rose 1 cent to $3.04 a gallon.
— Heating oil was steady at $3.03 a gallon.
— Natural gas fell 2.4 cents to $3.65 per 1,000 cubic feet.
Source: FULL ARTICLE at Fox World News
By Tyler Crowe, The Motley Fool
Filed under: Investing
Doesn’t $2.50 per gallon for gasoline sound just dandy? During the 2012 presidential race, a couple candidates used that number as a way of showing how increased American production would lead to lower prices and higher energy security. The problem is, though, that despite the increase in production in the U.S., cheap gas and cheap oil will more than likely remain a pipe dream.
Let’s look at why oil prices will remain high despite our best efforts.
Drilling costs just aren’t what they used to be
The boom in U.S. energy has been made possible by several factors: development of advanced drilling technology, a large distribution network already in place, and a favorable regulatory framework. One element that is commonly overlooked, though, is the price of oil production. Accessing shale deposits requires not only deeper wells, but also much more energy for extraction. Today, wells are drilled for miles underground and cracked open with high pressure pumps and lots of water. Chesapeake Energy estimates that each new well requires 5 million gallons of water. Despite the best efforts of exploration and production companies to reduce costs, these new drilling techniques have break-even wellhead prices for most U.S. shale plays at $55-$80 per barrel.
The U.S. is not the only country that needs expensive oil prices. Both Russia and Saudi Arabia, the two largest global oil producers, need high oil prices for economic sustainability. For Saudi Arabia, its $630 billion economic development program is funded on the back of its national oil company, Saudi Aramco. In order for the country to meet its budgetary obligations, it needs current production levels priced at about $90. The same can be said for Russia; its government‘s largest revenue source is oil royalties. For the country to balance its budget, oil export prices need to be north of $120. For both of these countries, it is imperative that oil prices remain high enough to prop up government spending.
Saudi Arabia, Russia, and the U.S. are the three largest oil producers in the world and are responsible for more than 35% of global production. If all three require higher oil prices to sustain production and financial stability, they will all produce oil accordingly to meet their needs.
Price is set by the most expensive markets
For many years, the U.S. has been the largest consumer of oil in the world. Despite our large import bills, we have had a modestly robust oil and gas industry that at its lowest point was still supplying 40% of demand. When compared to some of the other top oil consumers, our production looks pretty impressive.
| Country | Daily Consumption in Mbpd (World Rank) | % Produced Domestically |
| U.S.A | 18,949 (1) | 59.9% |
| China | 9,810 (2) | 44.3% |
| Japan | 4,464 (3) | 2.8% |
| India | 3,360 (4) | 29.4% |
| Germany | 2,400 (8) | 6.8% |
| S. Korea | 2,230 (10) | 2.6% |
| France | 1,792 (11) | 4.3% |
| Italy | 1,454 (15) | 10.4% |
Source: U.S. Energy Information Administration, authors calculations
The countries with little domestic production pay a much higher premium for oil, and companies located all over the world will flock to capture those markets,
From: http://www.dailyfinance.com/2013/04/17/we-will-never-see-cheap-oil-again/
By Tyler Crowe, The Motley Fool
Filed under: Investing
The U.S. energy renaissance has been one of the bright spots in American industry, and its success has also brought an unforeseen boom in manufacturing. Much of the recent boom has been from unconventional sources such as shale, a resource that wasn’t even mentioned in the Energy Information Administration‘s Energy Outlook Report 10 years ago. Today, it accounts for more than 30% of total natural gas production in the United States.
We aren’t the only ones with reserves, but we harnessed these unconventional sources effectively and economically, and we did it faster than any other country. According to a panel of experts at the 2013 Energy Forward Conference, only China will be able to effectively match the U.S. in terms of shale gas production for 10 to 15 years.
Let’s take a look at a few reasons we won the shale gas race.
Regulations and governmental structure
Unlike many other countries around the world, the U.S. has a robust system that protects individual property and patents. According to a Wells Fargo panelist at the 2013 Energy Forward Conference, the U.S. is one of the few countries in the world where an individual landowner has mineral rights for anything found on his or her property, and contract rights can be structured for extraction from that individual landowner.
This negotiation process with multiple stakeholders fosters a competitive environment for drilling companies to be as efficient as possible and create the highest rate of return. In the case of most other countries, a drilling company will need to negotiate with a regulatory body for a petroleum contract that will regulate the amount of costs it can recover from drilling operations, and all land negotiations will need to go through that regulatory body, according to Robert Beck of Anadarko Petroleum.
Another reason that shale gas development has not as quickly developed is a lack of clear patent protection laws, especially in China. While both Schlumberger and Haliburton have expressed an interest in developing Chinese shale gas, a lack of intellectual-property protection has them hesitant to going all in. Rather, both companies have taken minority interests in smaller, Chinese-based companies and plan to take orders of drilling fluids and equipment. These kinds of moves are not necessary in the U.S. and have allowed companies to protect and profit from their expertise.
Costs
Much of the technology that sparked gas boom got started years ago, but it wasn’t until around 2009 when it really took off as a viable source of production.
Source: U.S. Energy Information Administration.
At that time, natural gas prices were high, and the cost for using new drilling technology was still economically feasible. Even though natural gas prices fell for the next couple of years, gas companies got very good at finding high-probability sites for wells and reducing well completion costs. From 2006 to 2012, gas specialist Ultra Petroleum reduced drilling costs by 30%. Today, the average shale gas well costs somewhere in the range of $3 million to $4 million.
According
From: http://www.dailyfinance.com/2013/04/14/why-the-rest-of-the-world-cant-keep-up-with-americ/
By Matt DiLallo, The Motley Fool
Filed under: Investing
Regional geopolitical disputes are increasingly becoming international economic issues thanks to our global economy. At first glance, rising tensions in the South China Sea would appear to be no more than a fishing dispute. However, some see this situation as one surrounding supposed gas and oil reserves under the sea.
That, however, is in conflict with some reports that state that there are negligible reserves to be found in the disputed areas. Even if the potential energy reserves are what’s behind the current squabble, it probably won’t be something that’s solved anytime soon. That could mean future flare-ups that affect the energy industry beyond the resources that may or may not be under the sea. So as China, Vietnam, and others debate the territorial rights of two certain islands in the region, let’s look at how future incidents might have the potential to affect the global energy trade.
According to the Energy Information Administration, 15 million barrels of oil per day, or a third of all seaborne oil, traveled through this region in 2011. That puts it nearly on par with the higher-profile Strait of Hormuz, which is responsible for more than 17 million barrels per day. If this situation here were to boil over, it could have a significant impact on the flow of oil through the sea, given China‘s military might.
As important as the region is for the oil trade, it’s also responsible for more than half of the global liquefied natural gas, or LNG, trade. With growing demand for natural gas in Asia, this dispute could become a big problem for LNG exports from places such as Africa and australia, while putting exports from North America at a competitive advantage. Take a look at the following map, and I’ll explain what I mean.
Source: Energy Information Administration.
In 2011, Africa shipped 0.3 trillion cubic feet, or Tcf, per day, while while australia shipped 0.9 Tcf. However, those numbers are probably headed much higher in the future. Energy companies are spending billions to develop new LNG export facilities designed to tap these highly profitable Asian markets.
For example, Anadarko Petroleum recently joined forces with Eni on a major LNG export facility in Mozambique. The project is designed to support Anadarko’s major natural gas find off the coast. The partners expect the project to begin exporting gas by 2018. While that’s a long way off, geopolitical disputes tend to be recurring themes.
Moving over to australia, ConocoPhillips is moving forward on a major LNG export facility. The company expects to begin exporting in mid-2015. Chevron is working to complete its own LNG projects with its Gorgon project, a joint venture with ExxonMobil and Royal Dutch Shell expected to come online in early 2015. Overall, a lot of gas will be flowing from Australia to Asia in the coming decades.
If China were to use its military might to shut down shipping lanes, it could conceivably crimp the
From: http://www.dailyfinance.com/2013/04/14/peace-in-the-south-china-sea-is-vital-for-the-oil/
By Tyler Crowe, The Motley Fool
Filed under: Investing
According to the Energy Information Administration, an alternative-fuel vehicle is any vehicle designed to run primarily on alternative fuels. So a vehicle that’s built to run on 85% ethanol but can also use gasoline is considered an alternative-fuel vehicle, but an electric-gasoline hybrid is not, because the primary fuel source is gasoline. Based on this definition, let’s take a look at the most alternative fuel-friendly states in the nation.
First, a few important notes. While the idea of owning an alternative-fuel vehicle can sound great, the simple truth is that we don’t have the infrastructure to support universal adoption. The gain from paying $1.50 less per gallon by using natural gas instead of diesel can be easily wiped out if you have to go several miles out of the way to get it. The use of certain types of alternative fuels has developed more quickly than in others, and certain fuels have found their niche in different parts of the United States.
Source: Department of Energy.
It’s easier to have an electric vehicle on the coasts …
Source: Department of Energy.
… and an 85% ethanol blend engine in the Midwest …
Source: Department of Energy.
… or, in some cases, none of the above.
The rankings are based on percentage of alternative fueled cars versus total cars, the percentage of alternative fueling stations versus total fueling stations, and growth of alternative-fueled cars on the road between 2010 and 2011.
5. California: Alternative vehicles, 0.62%; fueling stations, 18.36%; alternative-vehicle growth, 22.17%.
California has by far the most alternative-fueled vehicles by raw numbers, but the sheer size of the population means it will have to settle for fifth place. It should come as no surprise that California is near the top of the list. Its gas prices are some of the highest in the country, and some of the fastest-developing ideas in alternative fuel transportation are happening there. Aside from building one of the more successful electric cars to date, Tesla Motors and Solar City are collaborating on solar supercharger stations for Tesla vehicles. The facilities are expected to add a 150-mile charge to a car in 30 minutes, and the charge will be free. The first stations are being rolled out in — you guessed it — California, and the company plans to add stations nationwide in the next couple of years.
4. Hawaii: Alternative vehicles, 0.66%; fueling stations, 30.64%; alternative-vehicle growth, 23.4%.
Hawaiians have perpetually been saddled with high gas prices, and it doesn’t look like things are going to get any better. Tesoro intends to shut down its facility in the island state, leaving Chevron as the only game in town. That, combined with the high costs to ship crude there, has gas prices well north of $4.00 a gallon. As gasoline prices remain high in Hawaii, don’t be surprised if more and more drivers make the switch to alternative fuels
3. Maryland; Alternative vehicles, 0.74%; fueling stations,
From: http://www.dailyfinance.com/2013/04/13/which-states-are-the-most-alternative-fuel-friendl/
By Justin Loiseau, The Motley Fool
Filed under: Investing
From a solar-power project sale to new predictions for coal’s comeback, it’s been a busy week for utilities. Here’s what you need to know to stay current on your dividends’ profits.
Duke forecasts sunshine
On Wednesday, Duke Energy announced its purchase of two California solar farms from Germany-based SolarWorld. The new acquisitions will add 21 megawatts of solar electricity to its current 61 MW of capacity. Collectively, the two farms will become Duke’s largest commercial solar farm in the nation, and the company has already arranged a 20-year power purchase agreement with Edison International .
FirstEnergy plays management musical chairs
Following the retirement of two long-term leaders, FirstEnergy announced this week that it’s switching up high-level management in all four of its states’ regulated utilities operations. Although the moves reflect positive promotions throughout, a management makeover of this scale could influence FirstEnergy’s short-term efficiency or long-term strategic direction.
Southern silence
After an explosion at Southern‘s coal-fired Plant Bowen forced the facility offline last Thursday, the utility has remained silent on any findings. Southern noted in its initial press release that there were no serious injuries and that the explosion doesn’t present a threat to the local community. In an email correspondence this Thursday, an investor-relations representative noted that Southern will “release more details after our investigation is complete and thoroughly vetted.” Plant Bowen‘s 3,160 MW generating capacity represents approximately 7.3% of Southern’s total capacity.
Dog days for natural gas
A new report from the Energy Information Administration predicts a relative drop in natural gas use for electricity generation over the next year. As natural gas prices push higher, the EIA expects natural gas’ share of the generation pie to drop 2.4 percentage points to 28% for 2013. To fill the gap, the EIA expects coal to make a 7.8% comeback this year. Although many utilities with older energy portfolios are celebrating the news, coal-centric TECO Energy arguably has the most to gain from natural gas’ price increase. Not only does the company’s regulated division rely heavily on coal for 61% of its generation, but the utility also owns and operates Appalachian coal mines.
As the nation moves increasingly toward clean energy, utility company Exelon is perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance-sheet health and its recent merger with Constellation, places Exelon and its resized dividend on a short list of the top utilities. To determine whether Exelon is a good long-term fit for your portfolio, you’re invited to check out The Motley Fool’s premium research report on the company. Simply click here now for instant access.
From: http://www.dailyfinance.com/2013/04/13/this-week-in-utilities-solar-sales-coals-comeback/
By Justin Loiseau, The Motley Fool
Filed under: Investing
New electricity data and projections are in, thanks to a new Short-Term Energy Outlook report from the Energy Information Administration, or EIA.
On the residential consumption front, electricity prices are expected to rise a below-average 2.8% in 2013. Although projected prices represent the largest percentage increase since 2008, they fall well below the 10-year average.
Source: EIA.gov
Despite relatively cheap electricity, the Administration expects consumption to drop a seasonally adjusted 5% for the upcoming summer. For 2013 overall, residential sales are expected to bump up 0.5%, while commercial sales rise 0.8%. Industry is projected to consume the most, upping electricity use by 1.2% in 2013.
On the generation front, the EIA expects utilities to push out 1% more power in 2013. As natural gas prices continue to rise, the Administration projects a slight coal comeback in 2013. Although coal generation is expected to increase 7.8% this year, its 39.9% share of total generation still falls shy of 2011’s 42.3%. Concurrent to coal, natural gas’ 2013 generation share is expected to fall 2.4 percentage points, to 28%.
The article Utilities Expected to Reduce Natural Gas Use in 2013 originally appeared on Fool.com.
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ou can follow Justin Loiseau on Twitter @TMFJLo and on Motley Fool CAPS @TMFJLo.
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From: http://www.dailyfinance.com/2013/04/11/utilities-expected-to-reduce-natural-gas-use-in/
The good news for motorists is that gasoline prices are expected to be more affordable in the coming months than they were during the two preceding summers. According to the U.S. Energy Information Administration’s (EIA) just released Short Term Energy Outlook, retail gas prices are expected to average $3.63 a gallon during this summer’s driving season. This figure is slightly below the $3.69 figure recorded last year and $3.71 in summer of 2011, and is only slightly higher than the national average of $3.61 a gallon as of April 8.
Source: FULL ARTICLE at Forbes Latest
By Matt DiLallo, The Motley Fool
Filed under: Investing
If you haven’t noticed yet, natural gas prices have started to head higher. A combination of factors, including a surprisingly cold March, have led to resilient demand. As prices have inched up, two top Wall Street banks have seen enough momentum to raise their 2013 price target for natural gas. Morgan Stanley‘s price forecast was bumped up by 7% to $3.93 per million British thermal units, or MMBtu, while Goldman Sachs raised its forecast from $3.75 per MMBtu all the way to $4.40 per MMBtu.
That’s good news for those companies in regions where natural gas production is actually growing. Overall since the end of 2011, North American dry shale gas production has risen by 9.95% to 27.2 billion cubic feet of production per day as of the beginning of this past February. This rise has been driven primarily by production growth at three big plays. Let’s take a look.
Eagle Ford
While not known for natural gas, the Eagle Ford Shale has actually seen a 43.12% pop in natural gas production according to data from the Energy Information Administration, or EIA, over the past year. Most of this gas is associated with oil and liquids, as fewer companies are drilling in the dry gas window at the moment.
For example, Chesapeake Energy‘s core acreage is in the sweet spot of the oil window. Despite that, 19% of the company’s fourth-quarter production was natural gas. As Chesapeake increases its overall production, natural gas production increases as a byproduct of its liquids-focused drilling. Further, as the nation’s No. 2 gas producer, Chesapeake is one of the biggest beneficiaries of higher gas prices.
Marcellus
According to the EIA, natural gas production out of the Marcellus jumped 55.28% over the past year. Top producer, Range Resources , produced a total of 146 Bcf of natural gas last year. That production easily exceeded that of number two producer EQT‘s 103 Bcf of natural gas production last year.
These two companies hold one thing in common: Both are among the lowest-cost producers of natural gas in the country, which gives them a competitive advantage to make money when most of their competitors cannot. Investors in these low-cost producers have been served well as both have returned around 40% over the past year.
Bakken
While the Bakken is known for its oil, natural gas production skyrocketed by 94.38% according to data from the EIA. Part of the reason more gas is being produced is because less of it is being flared — instead, it’s being put into pipelines. Most of this infrastructure simply didn’t exist until recently and now that companies have a way to get gas to market, they’re able to sell instead of flare.
The impact of this reduced flaring is clearly evident at Kodiak Oil & Gas . In 2011 the company produced 1,329 MMcf of gas, but flared 807 MMcf. That’s 61% of the gas! Last year the
Source: FULL ARTICLE at DailyFinance
By Joel South and Taylor Muckerman, The Motley Fool
Filed under: Investing
Unconventional natural gas production has created a large surplus of the commodity in North America, dropping prices from $12 per MMBtu in the summer of 2008 to under $2 per MMBtu last summer.
With international natural gas prices up to four times more expensive than domestic prices, significant profits can be had if the United States exports its surplus natural gas to these high-priced markets. However, opponents of exporting liquefied natural gas, or LNG, are quick to point out that cheap natural gas could be used to make the United States‘ manufacturing sector more competitive.
In the following video, Motley Fool energy analyst Joel South discusses a recent Energy Information Administration survey showing that U.S. manufacturing is increasing energy efficiency. With energy intensity dropping, is the country better off exporting the excess natural gas? A recent Deloitte study estimates the price increase due to exporting LNG would be insignificant, and since natural gas is a regionally priced commodity, the areas that would experience slight pricing pressure would be around shipping terminals, where gas is traditionally more inexpensive.
There are many different ways to play the energy sector, and The Motley Fool‘s analysts have uncovered an under-the-radar company that’s dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: “The Only Energy Stock You’ll Ever Need.” Don’t miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report — it’s totally free.
The article Another Reason the U.S. Should Export Natural Gas originally appeared on Fool.com.
Joel South has no position in any stocks mentioned. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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Source: FULL ARTICLE at DailyFinance
By The Huffington Post News Editors
SAN FRANCISCO -– A federal judge struck a major blow against fracking in California this week, ruling that the government was wrong to allow energy companies to drill for oil on 2,700 acres of public land without first considering environmental impacts.
The Bureau of Land Management‘s assessment of the land “did not adequately consider the development impact of hydraulic fracturing techniques,” wrote U.S. Magistrate Judge Paul Grewal in a decision made public on Monday that sided with environmental groups that sued the BLM.
The land in question sits atop the Monterey Shale, a formation of sedimentary rock stretching beneath much of Central California, which the U.S. Energy Information Administration estimates contains more than 15 billion barrels of oil. But the oil can only be reached through hydraulic fracturing, or fracking, an invasive process that injects vast amounts of water, sand and chemicals to create cracks in the rock and force the oil to the surface.
Source: FULL ARTICLE at Huffington Post
By Justin Loiseau, The Motley Fool
Filed under: Investing
Alternative and replacement fuels are making moves, according to the most recent data released by the Energy Information Administration on Monday. From 2007 to 2011, traditional fuel use dropped 7.8% to 171 billion gasoline equivalent gallons, while alternative fuels bumped up 124%.
Pushed ahead by a 240% spike in biodiesels, replacement fuels took the consumption cake, with a 187% jump to 9.5 billion gasoline equivalent gallons in 2011. According to the EIA, biodiesel’s boost is primarily due to the reinstatement of the biodiesel tax credit under the Renewable Fuel Standard.
Source: eia.gov.
Alternative transportation fuel use jumped up nearly 13% to 516 million gallons in 2011. Although natural gas continues to comprise nearly 50% of total alternative fuel consumption, a new wave of E85-capable vehicles helped push ethanol use up 52% from 2010 to 2011.
Source: eia.gov.
The article Biodiesel Use Up 240% in 2011 originally appeared on Fool.com.
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ou can follow Justin Loiseau on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.
Try any of our Foolish newsletter services free for 30 days. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
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Read | Permalink | Email this | Linking Blogs | <a target=_blank href="http://www.dailyfinance.com/2013/04/08/alternative-fuel-vehicle-data/#comments" …read more
Source: FULL ARTICLE at DailyFinance
By Rich Duprey, The Motley Fool
Filed under: Investing
Just days after announcing cuts of up to 300 employees at its South Milwaukee facility that it acquired from Bucyrus, heavy-equipment manufacturer Caterpillar laid off 460 workers at its Decatur, Ill., plant, again citing mining industry weakness. The Decatur plant is a manufacturing facility that runs a foundry, overhaul, and remanufacturing, and where the South Milwaukee layoffs have been deemed temporary, these are said to be permanent. All told, the company wants to eliminate about 2,000 jobs.
A deep hole
Caterpillar identifies coal, iron ore, gold, copper, and oil and natural gas as primary users of its equipment, so it’s easy to see why the equipment maker is taking it on the chin. Mining companies are abandoning the coal industry in droves.
Rio Tinto recently announced its intention to sell off its Australian coal assets while also seeking “strategic alternatives” for its copper and gold mines. Despite global financial turmoil, gold is incongruously slipping as a safe haven, as billionaire investor George Soros recently pointed out.
While I see that as a temporary response to the currency destruction being engineered by central bankers — people only have their gold to sell to get cash, so it’s depressing the price — BHP Billiton is also looking to strip away things it now considers unessential to its main operations, and it has idled a number of coal mines and is looking to shed oil and gas assets because they’re deemed the easiest to get rid of. Cliffs Natural Resources is idling iron pellet facilities because of weakness in the steel industry.
Demand an answer
As I noted over the weekend, fourth-quarter coal consumption in the U.S. tumbled 11%, according to the Energy Information Administration, and production was down 12%. It’s not looking much better in steel.
The World Steel Association says that while China‘s crude steel production jumped nearly 10% in February, it was down almost everywhere else in the world, with the U.S. experiencing an 11.8% falloff, amounting to a 1.2% global increase in production. But with demand falling, we’re going to see weak pricing rule the day.
While natural gas prices have rebounded in recent weeks to above $4 per million Btus, they fell again last week, settling right at $4 at Henry Hub but down to $3.90 on the NYMEX. And as mild weather spreads across the country, it’s likely they’ll fall below that threshold again, even as the number of natural gas rigs in operation has dropped below 400 for the first time since 1999.
Strength in numbers
Joy Global is the world’s second largest mining-equipment manufacturer, and it relies even more so on the coal industry’s health than Caterpillar does, with two-thirds of its sales coming from coal miners. It cut several hundred jobs late last year, and in its first-quarter conference call in February, the equipment manufacturer pointed to a 27% decrease in books, as original equipment orders dropped 30% and it saw aftermarket orders cut …read more
Source: FULL ARTICLE at DailyFinance
By Arjun Sreekumar, The Motley Fool
Filed under: Investing
If you haven’t noticed, natural gas prices have soared over the past month and a half, helping reverse a lengthy decline that began in the summer of 2011. Gas futures in New York settled at a 20-month high on Friday, led by colder-than-expected weather that helped reduce stockpiles below the five-year average for the first time since 2011.
Cold weather erases stockpile surplus
March saw uncharacteristically strong demand for home heating because of unusually chilly temperatures. The trend is expected to continue, with MDA Weather Services, a provider of meteorological forecasts, predicting colder-than-usual temperatures in the north-central states and hotter-than-usual weather for Texas and the Southeast for next week.
In the week ended March 29, the U.S. Energy Information Administration reported that 94 billion cubic feet, or bcf, of natural gas were withdrawn from underground storage, exceeding Wall Street‘s consensus for a draw of 92 bcf. That pushed the amount of working gas in storage down to 1.687 trillion cubic feet, or tcf, a decrease of 779 bcf from a year earlier and 37 bcf below the five-year average.
In addition to bullish storage data, gas price gains accelerated following the release of Baker Hughes‘ rig count data, which indicated that the number of rigs drilling for natural gas fell by 14 to end the week at 375 — the lowest level since May 1999.
According to Johan Spetz, an analyst at Goldman Sachs, gas prices will have to rise further in the second half of the year to spur production growth. According to his calculations, prices will need to average about $4.50 per thousand cubic feet in the latter half of the year to balance the market.
Winners and losers
If prices do end up moving higher still, some low-cost natural gas producers stand to see further gains. One company worth keeping an eye on is Ultra Petroleum , a pure-play gas producer whose stock price closely tracks the price of natural gas; since mid-February, shares are up almost 30%.
Ultra was one of the lowest-cost producers last year, with all-in costs of roughly $3 per thousand cubic feet equivalent, less than half the industry average of $6.31. If gas prices rise further, its Pinedale Field and Marcellus assets will become even more profitable — a catalyst that’s sure to send the company’s stock higher.
Some companies are already reacting to the surge in gas prices by resuming or ramping up gas drilling. For instance, Encana announced in February that it plans to increase the number of rigs it has running in the Haynesville shale by three this year, because of the play’s improved profitability.
Others, however, are opting to wait till prices rise much higher before they divert their resources away from liquids-rich plays.
For instance, Chesapeake Energy recently announced that it has no plans to resume drilling in gassier plays and is instead opting to ramp up operations in the oil-rich Eagle Ford play. Similarly, …read more
Source: FULL ARTICLE at DailyFinance
By Rich Duprey, The Motley Fool
Filed under: Investing
Having a finger in many pies is no longer the way Rio Tinto wants to operate anymore. It may have had diversified mining interests in the past, but new management has it focused on just one task now, and it is quickly putting up the “for sale” sign on anything that doesn’t align with that vision.
Down the mine shaft
After posting its first-ever full year loss in February — and a $3 billion one at that — newly hired CEO Sam Walsh is set on doing what’s necessary to turn the miner around, and that apparently means jettisoning everything that doesn’t make it money.
While iron ore has always been Rio’s biggest operation, accounting for nearly half of its $51 billion in annual revenues, it’s also been its sole money maker generating 80% of its pre-tax profits. It’s natural that iron ore will be what’s left after it sells off a lot of its other assets. It recently announced its intention to put a shingle out for its Australian coal assets and its hired advisors to find a buyer for its copper and gold mines down under. Its aluminum mining business has been up for sale for two years now.
BHP Billiton finds itself in an extremely similar situation: a new CEO and plans to divest itself of non-core assets. Analysts think the miner could realize as much as $25 billion from a sale while Rio Tinto may be able to book $10 billion or more. BHP has already sold off some $4.5 billion worth in four sales since last August and has idled a handful coal operations in recent months.
A dirty word
Coal is just not a healthy business. Consumption in the U.S. fell by 11% in the fourth quarter of 2012, according to the Energy Information Administration, while production was down 12%. Some 90% of coal gets burned to produce power, yet electricity use is down 2% over the past five years. Even so, the shale natural gas boom has made natural gas more competitive just as coal was looking cheap. Without the same stigma associated with it as coal, natural gas has led more utilities to switch from coal-fired plants to gas-fired ones, with tthe pace of divestiture is quickening.
Dominion Resources agreed just last month to sell interests in three power plants to private equity, while Ameren is unloading five coal-fired plants to Dynegy.
Yet Rio Tinto‘s bet on iron ore isn’t a slam dunk, either. Goldman Sachs recently forecast falling prices as demand and steel production drop in China, the largest market for iron ore and Rio’s biggest geographic segment. Ore imports fell to 56 million tons in February, down from 65 million in January. Cliffs Natural Resources is idling an iron ore pellet plant in Canada because of falling prices.
The admonition to do one thing and do it well just might not be the salve that Rio Tinto needs to …read more
Source: FULL ARTICLE at DailyFinance
Filed under: Energy, Market News
China could soon overtake the U.S. as the biggest importer of oil in the world. The oil cartel OPEC says the shift could happen as early as next year.
The reason is that the shale oil boom here at home has dramatically increased domestic production, reducing the need to import as much oil as we have been for the past several decades.
The U.S. based Energy Information Administration says Chinese imports could top 6 million barrels a day this year, while U.S. imports fall below that level next year.
Will this mean lower prices at the pump for American drivers? Probably not, say the experts.
Shale oil – produced from the controversial process known as fracking – is expensive, so prices are not likely to move dramatically.
However, the U.S. will be less reliant on other nations, especially OPEC countries. And that should make the U.S. less susceptible to big price swings when there is geopolitical unrest elsewhere around the world, or when OPEC tries to manipulate prices.
The U.S. has been the top oil importer for the past four decades, ever since domestic onshore production started to decline. But oil imports fell by 21 percent last year, as the U.S. produced 84 percent of its energy needs.
Domestic production is ramping up so quickly that the IEA now forecasts the U.S. will produce more oil than Saudi Arabia by 2020.
And while the U.S. reduces it dependence on OPEC, China is moving in the opposite direction. It’s requiring more and more imported energy to power its factories and cars, and economists say demand will continue to increase for the foreseeable future.
As for prices, crude oil has tumbled this week, as worldwide demand has weakened. And the price we pay at the gas station has stabilized. AAA says the national average for a gallon of regular now stands at $3.63. That’s down 10 cents from a month ago, and down 31 cents from last year at this time.
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Source: FULL ARTICLE at DailyFinance
By Business Wirevia The Motley Fool
Filed under: Investing
Tampa Electric Files for Rate Increase; Bills to Remain among State’s Lowest
If Adjustment is Approved, Residential Customers Would Be Paying Lower Bills Than Six Years Ago
TAMPA, Fla.–(BUSINESS WIRE)– Tampa Electric Co. today filed its formal request with the Public Service Commission (PSC) to raise residential rates by about 10 percent in January 2014. If the adjustment is approved, Tampa Electric’s residential bills would remain among the lowest in the state.
As announced in February, Tampa Electric is seeking about $135 million in higher rates, or an increase of $10.41 a month – or 35 cents a day – for the average residential customer who uses 1,000 kilowatt-hours (kwh) a month. Typical commercial and industrial customers would see increases of about 6 percent.
If approved as filed, the average residential bill would be about $113 a month – a lower bill than six years ago. That bill would remain 5 percent below the national average, which was $118.90 in January 2013, according to the Energy Information Administration.
In the past four years, Tampa Electric’s residential customer bills have dropped by more than $12. A residential customer who uses 1,000 kWh a month currently pays $102.58 a month.
“It is important to remember that while the cost of nearly everything has gone up in recent years, Tampa Electric bills have gone down,” said Gordon Gillette, president of Tampa Electric. “We empathize with our customers who also are feeling the effects of a difficult economy. There is never a good time to raise rates, but even with this increase, Tampa Electric bills would remain among the lowest in Florida.”
The PSC is expected to hold hearings about Tampa Electric’s request later this year, and the PSC is expected to vote on the issue by the end of the year. The new rates would take effect in 2014.
Tampa Electric last requested a rate increase in 2008. Since then, the company has increased reliability: Over the past five years, Tampa Electric’s customers have had the fewest – and among the shortest – interruptions among Florida’s investor-owned utilities. In that time, Tampa Electric also has invested in projects such as a reclaimed water pipeline to …read more
Source: FULL ARTICLE at DailyFinance
By Rich Smith, The Motley Fool
Filed under: Investing
General Electric‘s (NYS: GE) new “Durathon” energy storage system is off and running.
On Thursday, the industrial behemoth announced it notched its first European sale of Durathon, with the U.K.’s Western Power Distribution as its inaugural customer. Western Power is seeking a means of improving electricity delivery to its customers with minimal carbon footprint. To this end, it will buy and, in Q3 2013, test five Durathon 100 kilowatt-hour energy storage systems to see how they might help with this effort.
A sodium-nickel battery, Durathon is described as being a ” no self-discharge” battery system useful in such spheres as telecommunications, power generation, grid operation, and energy management. GE says it has invested $100 million already in building a Durathon Battery manufacturing facility in Schenectady, N.Y. This facility opened for business in July of last year.
According to statistics from the U.S. Energy Information Administration, the 100 kWh storage capacity on these battery systems should be roughly sufficient to power one average American home for three days.
Financial terms of the deal between GE and Western Power were not disclosed.
The article General Electric Announces Inaugural Storage System Sale originally appeared on Fool.com.
Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of General Electric. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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