Archive for Energy

23 Apr

Is a Commodities Super Cycle on the Way?

Source: Streetwise Reports (4/19/24)

Are we at the start of a commodities supercycle? We sat down with McAlinden Research to see what they had to say about the current state of commodities.

McAlinden Research Partners is a global provider of original investment strategy insights. The company’s primary goal is to pinpoint profitable investment opportunities in their early stages and promptly inform their clients about these potential avenues for growth. Its founder, Joseph J. McAlinden, has over five decades of experience in the research and investment space.

With this in mind, we at Streetwise thought it would be good to sit down with some of the McAlinden team to get their take on what is currently going on in the commodities market.

First, we discussed current trends in the commodities space.

The McAlinden team told us, “In the stock market, we have a super bull market. That is not showing any signs of letting up.” However, when it comes to commodities, the market is a mixed bag. They pointed out that some commodities, such as cocoa, have soared while others, like lumber, have been struggling.

AI and Y2K

In terms of a parallel, the McAlinden team said, “Market cycles don’t repeat, but they do rhyme,” and this reminded them a bit of the late 90s and early 2000s. People thought the world was going to end with Y2K, which led to high revenue in technology companies. However, once the world realized the sky wasn’t falling, it led to a major correction.

The McAlinden team compared this to the current excitement surrounding AI. Eventually, the market will learn if AI has lived up to the hype.

Was it as scary as everyone predicted?

Maybe it won’t be as advanced as we had previously thought, and when that happens, corrections will be made like with technology during Y2K.

A Geopolitically Influenced Market

Now, the McAlinden team explained that commodities are influenced by similar fears and movements in the world. They said, “Throughout history, you see that commodities are very heavily impacted, more impacted by geopolitics than equities.”

For example, OPEC’s oil embargoes significantly impacted the prices of oil in the 1970s, and this alliance of oil producers continues to have a profound impact on the price of energy commodities today.

“Now, within OPEC, or this OPEC+Syndicate, you have countries like Russia and Saudi Arabia, which are both countries within or right on the edge of war zones,” the McAlinden team explained. “They depend . . .  the free movement of trade that is subject to a lot of risk. And that is definitely pushing up some of the commodity prices, particularly in energy.”

Still, the team made it a point to note that they don’t believe we are at the beginning of a commodities super cycle yet, though “we may get there in the next couple of years.”

Though the team pointed out that there has been a lot of chatter about “worst-case scenarios,” that is not what has happened yet.

“There’s been a lot of chances [where we thought] this could get really bad, this could  spiral out of control, but for the most part, the state actors have been pretty rational in trying to avoid these cataclysmic events that might create something like a supercycle.”

They continued, “I think that that has saved the world. [Still] there’s only so many times you can really go right up to the edge of that risk cliff and not end up falling into it. And that’s what you always have to be looking out for in commodities.”

Still, the team made it a point to note that they don’t believe we are at the beginning of a commodities super cycle yet, though “we may get there in the next couple of years.”

Once this happens, almost all commodities could appreciate in value simultaneously, but right now, they are still mixed and dependent on a myriad of factors, including geopolitics and weather.

Closer and Closer to a Recession

We then went on to discuss the current state of inflation, as commodities are also affected by this.

The McAlinden team said, “The Fed suggested they were going to cut [interest rates] three times, and traders basically ignored that, and we’re talking six or seven cuts . . . the data for the year started to show sticky inflation, and strong employment at the headline level; however, this was a bit misleading . . . there are reasons to expect inflation to improve, but [we] doubt it is going to happen in the next six months.”

When asked about the misleading nature of the employment readings, the McAlinden team turned to current headlines regarding increased job creation in the U.S. Though the most recent reports show that job growth is beating the highest estimates of economists, this does not take into account the impact of part-time / contract work accounting for the entire net increase in payrolls over the past several months. So, while job creation is accelerating, full-time work is not.

The Biden White House has succeeded in bringing down CO2 emissions to their target level, but that has come at the expense of higher oil prices because of a lack of investment.

A small part of this is the emphasis among the young workforce to enter the so-called “gig economy.” More and more working millennials and Gen Z are leaning toward freelance and contract work rather than full-time employment.

A larger aspect, according to McAlinden’s team, is “this wave of immigration that the United States is experiencing right now, which is starting to inflate the supply of labor.” People are coming to the United States to gain work visas. However, many of these workers tend to end up in part-time work. ” The number of part-time workers is exploding, but the number of full-time workers is falling, and it’s falling at a rate we haven’t seen in some time.”

This is leading us closer and closer to a recession.

The Impact of the 2024 Election

Commodities are often influenced by federal policies. With this in mind, we spoke about how commodities may be impacted based on the results of the 2024 election. The current candidates are incumbent Democrat Joseph Biden and Republican nominee Donald Trump.

“The outcome of the election will be important,” the McAlinden team told Streetwise.

Oil is one commodity in particular that may be affected. “Trump is essentially running on this drill, baby drill mantra,” they said. “One of his big campaign points is that [energy companies are]  going to drill more when he’s president . . . despite the fact that we have seen oil kind of go up to record highs, it’s only slightly higher than where we were going back to 2020. Back in 2020, production was at 13.1 million barrels, which was the record . . . Today, we’re [still] only at 13.1 million barrels. We were at 13.3 a couple of months ago.”

“If Trump was to win [that would be] bearish for oil prices because, if production is up, we’re going to see prices come down,” they explained.

This is largely because “The Biden White House’s Interior Department is very hostile to oil companies, and oil companies don’t really feel very comfortable investing a whole lot in North America right now because of the administration. So one president is saying drill, baby drill, the other is very concerned about climate change.

The Biden White House has succeeded in bringing down CO2 emissions to their target level, but that has come at the expense of higher oil prices because of a lack of investment, a lack of . . . leasing federal land to  [energy] companies, and things like that. So, there definitely will be commodity implications from the election. And we think that really is going to be pronounced in energy commodities.”

All in all, the current policies in today’s White House and the policies Trump’s administration will put in place if he is elected may be significantly different.

“If Trump was to win [that would be] bearish for oil prices because, if production is up, we’re going to see prices come down,” they explained.

The Weakening of the US Dollar

Another factor in a possible commodities supercycle is the status of the U.S. dollar.

“We’ve seen the dollar remain very strong over the past couple of years. It’s weakened a little bit since 2022 when the dollar index broke 20-year highs, but when the dollar depreciates versus other currencies, commodities tend to benefit from that since . . . commodities are priced in dollars.”

 If the Federal Reserve stays tight and keeps the dollar strong, that’s probably not so good for commodities.

This will allow other countries to buy even more commodities as their local currencies will be able to purchase more product in dollar terms.

They continued, “The path of commodities will be heavily influenced by what the United States Federal Reserve does. If the Federal Reserve stays tight and keeps the dollar strong, that’s probably not so good for commodities.

However, if the Fed is as dovish as everyone else or more dovish (it doesn’t look like it’s gonna be the case right now), that would weaken the dollar and would probably be good for commodities, assuming that there’s not some major economic downturn that’s causing those rates to come down like that.”

ETFs

In summation, it looks like we are not yet at the starting line of the commodities super cycle, but we may get there in the next couple of years. With this in our back pocket, we asked the McAlinden team if they had any ETFs they thought might be impacted.

“Unfortunately, things have gotten harder for equity investors trying to acquire commodities exposure,” they said. “Last year, 21 commodity ETNs were actually closed out by Barclays.” These covered most commodities across the board, and some of the pure plays that just focused on one commodity, like cocoa, had been some of the highest returning ones.”

Still, the team had a handful of solid commodity-focused ETFs they were looking at.

 Invesco’s family of funds is one of these that covered a pretty broad allocation of commodities.

Another is  Invesco DB Commodity Index Tracking Fund (DBC:NYSEARCA), though McAlindnen shared more segmented ETFs such as Invesco DB Agriculture Fund (DBA:NYSEARCA) for ags as well.

“These are the kinds of the products that we’re looking at to represent the performance of some kind of ideas that we might highlight as themes at some point,” they said.

Continuing on with their list, they shared mining ETFs such as Global X Copper Miners ETF (COPX:NYSEARCA) and VanEck Gold Miners ETF (GDX:NYSEARCA:).

As for energy, they pointed out Invesco DB Oil Fund (DBO:NYSEARCA), Energy Select Sector SPDR Fund (XLE:NYSEARCA), and Sprott Uranium Miners ETF (URNM:NYSEARCA).

 

Important Disclosures:

  1. Katherine DeGilio wrote this article for Streetwise Reports LLC and provides services to Streetwise Reports as an employee.
  2.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

For additional disclosures, please click here.

McAlinden Research Partners Disclosures
This report has been prepared solely for informational purposes and is not an offer to buy/sell/endorse or a solicitation of an offer to buy/sell/endorse Interests or any other security or instrument or to participate in any trading or investment strategy. No representation or warranty (express or implied) is made or can be given with respect to the sequence, accuracy, completeness, or timeliness of the information in this Report. Unless otherwise noted, all information is sourced from public data.
McAlinden Research Partners is a division of Catalpa Capital Advisors, LLC (CCA), a Registered Investment Advisor. References to specific securities, asset classes and financial markets discussed herein are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. CCA, MRP, employees and direct affiliates of the firm may or may not own any of the securities mentioned in the report at the time of publication.

Energy Opinions
22 Apr

Brent crude dips to four-week low amid easing geopolitical tensions

By RoboForex Analytical Department

Brent crude oil prices fell to a four-week low of 86.50 USD on Monday, influenced by several contributing factors. The primary cause of the decline was a reduction in geopolitical tensions as Iran’s rhetoric toward Israel showed signs of de-escalation. This change is significant given that Iran is the third-largest OPEC oil producer, with substantial exports to China and other countries, making stability in the region crucial for global oil markets.

On the demand side, US crude oil inventories rose 2.7 million barrels for the week, nearly double what was anticipated. This unexpected increase has put additional pressure on oil prices.

Furthermore, global economic uncertainties and concerns that the Federal Reserve may maintain elevated interest rates for an extended period also impact the outlook for oil demand. Heightened interest rates tend to strengthen the US dollar, making oil, priced in dollars, more expensive for holders of other currencies. However, the current stability of the US dollar is providing some support, preventing even steeper declines in oil prices.

Technical analysis of Brent

On the H4 chart, Brent established a consolidation range at around 87.87. The downward breakout from this range initiated a correction wave to 84.48. After reaching this target, the market may see a rebound towards 92.00, potentially continuing towards 95.00. This bullish scenario is supported by the MACD indicator, currently below zero, suggesting that the lows may soon be updated.

The H1 chart shows that Brent is forming the fifth correction structure towards 84.48. Once this level is reached, there may be potential for a rebound to 87.87 (testing from below). A successful breakout from this range upward could lead to further growth towards 90.50, with a possible continuation to 92.00. The Stochastic oscillator, currently below 20, indicates readiness to initiate a new growth structure towards higher levels, supporting the possibility of an upward trend resuming after the correction.

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
18 Apr

Renewable energy innovation isn’t just good for the climate — it’s also good for the economy

By Deborah de Lange, Toronto Metropolitan University 

As the climate crisis escalates, there are urgent and difficult choices that need to be made to drastically reduce our carbon emissions before more irreparable damage is done.

Many have argued the energy industry needs to change to reduce carbon emissions, but one concern that remains is the consequence this will have on economic prosperity.

Discussions vary across interest groups. Do we need to outright replace the fossil fuel industry with the renewable energy industry as soon as possible? Should we slowly phase out fossil fuels while making clean renewable replacements? Or, should we continue with a powerful fossil fuel industry while separately growing a renewable industry in parallel?

How these different choices could impact our economies seems unclear, and it is this lack of clarity that opens up the field for frustrating discussions. At the recent COP28 climate summit in the United Arab Emirates, the conference president shockingly said that there is “no science” behind any decision to phase-out fossil fuels from our energy systems — a statement which he later claimed was “misinterpreted.”

My recent research examines energy industry restructuring options for a green transition to renewable energy from an economic perspective.

Although economic analysis is helpful, it is not sufficient on its own for making these important decisions. So, my research also draws on sustainability which involves considering the conditions faced by future generations, and a concept known as equifinality reminding us to keep our minds open to many possible approaches that may satisfy the same objectives.

Renewable energy innovation and GDP

My research indicates that renewable energy innovation contributes to higher GDP. Contrary to some commonly held beliefs, a clean transition is, and has been for at least a decade, good for the economy — even in earlier stages of its development.

My findings also suggest that government and industry support for the fossil fuel industry negatively affects a country’s renewable energy innovation. The two industries are not compatible.

When the fossil fuel industry invests in itself, it also appears to improve GDP, which creates confusion about the best way to ensure economic prosperity while transitioning to clean energy.

But this investment, often made through lobbying, only prolongs the existence of the fossil fuel industry by keeping renewable energy competition out. This creates a false dichotomy between reducing emissions and improving GDP when, in fact, clean innovation can achieve both simultaneously.

My research indicates that clean innovation makes a stronger economy and reduces emissions. If we want to reinforce that dual progress, rather than accepting trade-offs, then we have to stop supporting the fossil fuel industry which aims to slow it down.

Helping renewable energy thrive

Economically speaking, the fossil fuel industry is negatively impacting consumer welfare by maintaining higher-than-necessary prices due to limited competition. This, in turn, bumps up GDP through inflated profits, having subsidised an already dominant polluting industry, reducing clean innovation and delaying cleaner progress — obviously not the way to grow a healthy economy.

In fact, GDP is not a standard of living measure or a measure of innovative competitiveness. To address inflation and the cost of living crisis, we should be promoting more competition across industries. This is a more productive type of capitalism that brings wider benefits to all of us, including more innovation, lower prices, and better products for domestic and export markets.

Government subsidies that boost the fossil fuel industry hinder consumer welfare and the transition to clean energy. Some examples include subsidies to fund more carbon capture and storage technology and the use of fossil energy in hydrogen storage systems.

Instead of funding these backward subsidies, governments should implement pollution taxes while also supporting renewable energy innovation.

My research demonstrates that pollution taxes work well with clean innovation capabilities. Supporting research and innovation in renewable energy and using a carbon tax as a tool can boost the economic benefits of transitioning to clean energy.

The findings of my work suggest that a robust economy is related to industry restructuring so that renewable energy innovation can thrive. Fostering novel scientific discoveries in clean energy innovation should be prioritized while reducing non-competitive industry formations and organizations, such as fossil fuel oligopolies and industry associations.

Making decisions with the future in mind

Increasing public awareness and understanding of fossil fuel industry games is a way to accelerate change. It’s important to recognize that industries at different life cycle stages contribute to the economy in different ways.

A newer rising industry with determined entrepreneurs, like that of renewable energy, invests in innovation to create value. On the other hand, a declining industry plays end-game strategies, like engaging in self-promotional activities, to maintain their existing position and create barriers to new industry entries.

However, consumer welfare increases with competition, not collusion. Economic analysis is not sufficient on its own for decision-making in this area because positive economic outcomes can be generated by different kinds of strategies supporting an industry’s life cycle goals.

Government policy decisions should be made based on economic analyses alongside broader sustainability criteria. Ignoring the equifinality argument and reverting to discussions about replacing coal with gas as a bridge only ensures fossil fuels remain in use for at least another generation of infrastructure.

Communities should apply sustainability and equifinality lenses to decision-making, understanding that there are many possible means to an end. For example, if a community has specific concerns about one type of renewable energy system, they should explore other alternative clean energy options instead of defaulting to fossil fuels.

An educated public should reject simplistic and single-sided arguments and understand there are usually more nuanced solutions to problems supported by evidence-based analysis. By embracing a more holistic approach, we can develop more sustainable societies by opening up renewable energy possibilities.The Conversation

About the Author:

Deborah de Lange, Associate Professor, Global Management Studies, Toronto Metropolitan University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
17 Apr

Brent crude prices dip amid concerns over global demand

By RoboForex Analytical Department

Brent crude oil prices decreased slightly on Wednesday, falling to 89.50 USD per barrel. The decline is primarily attributed to concerns over global oil demand, particularly given the economic indicators coming out of China, the world’s largest energy importer. Although China’s GDP grew faster than expected in Q1 2024, other critical economic parameters such as property investment, retail sales, and industrial production remain subdued, dampening overall demand prospects.

According to the American Petroleum Institute (API), US crude oil inventories have risen more than expected, adding to the complexities. While such an increase in inventories typically might bolster oil prices, the prevailing anxiety over global demand continues to exert downward pressure.

Political developments in the Middle East also remain a focal point for the oil markets. A high-level meeting involving Western nations and Israel was postponed to Wednesday, with efforts expected to focus on averting a significant escalation in regional conflicts. Given the region’s important global oil supply, such disputes are crucial for the oil sector.

Later today, the US Department of Energy is scheduled to release updated statistics on crude oil and petroleum product inventories for the week, which could influence market volatility.

Technical analysis of Brent

On the H4 chart, Brent crude has formed a consolidation range around the 88.30 USD level, indicating a lack of a clear trend. If there is an upward breakout from this range, a rise to 92.00 USD could be anticipated. This could be followed by a potential correction to 84.50 USD and further growth to 94.00 USD, potentially extending to 97.00 USD. The MACD indicator supports this scenario, with the signal line nearing zero and expected to rebound upwards, suggesting continued growth.

On the H1 chart, a growth impulse to 90.20 USD has been completed, and a corrective movement to 88.80 USD is underway. Once this correction is completed, a new growth wave towards 92.00 USD is anticipated, likely followed by a new corrective phase. The Stochastic oscillator, positioned below 20, prepares for a rebound, supporting the likelihood of further upward movement.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
16 Apr

Stock markets signal a growing gap between Canadian and American clean tech firms

By Yrjo Koskinen, University of Calgary; J. Ari Pandes, University of Calgary, and Nga Nguyen, Université du Québec à Montréal (UQAM) 

Canada is one of the largest oil and gas producing nations in the world, and the oil and gas sector is its most important export industry.

With the rapid increase of green energy investments globally, stock markets have begun viewing oil and gas firms in Canada and the United States as mature with an uncertain future — despite recent record profits and increases in stock prices.

A prudent and economically viable energy transition to a low carbon economy is of the utmost importance for the future prosperity of the country. As part of the transition, Canada must become a lucrative destination for clean tech investments.

The International Energy Association reports clean energy investments (including nuclear) are continuing to grow over fossil fuel investments, with US$1.7 trillion invested in clean energy in 2023, compared to US$1.1 trillion in fossil fuels. This trend will only continue in the coming decades.

Our recent analysis of stock market data from 2018 through 2022 provides important information about how capital markets view the risk and return for oil and gas companies and clean tech firms in both countries.

U.S. clean tech firms are valued more

In our study, we examined how stock markets in Canada and the U.S. value traditional energy companies, clean tech companies, and the prospects for both.

Our study suggests there are large differences between the clean tech industries in Canada and the U.S. Clean tech has much better prospects in the U.S., while oil and gas firms in Canada may outlast their American counterparts.

Our report indicates that markets view clean tech firms as growth firms in both Canada and the U.S., despite disappointing stock returns for these companies since 2021. Growth firms are companies that reinvest their current earnings into operations to further expand rapidly and then aim to deliver profits later on.

The valuations are significantly higher in the U.S., suggesting the market sees better long-term prospects for the sector south of the border. Canadian clean tech firms could have problems scaling up and taking advantage of opportunities.

Clean tech firms in the U.S. are also attracting more equity capital, particularly since that country passed the Inflation Reduction Act (IRA) in 2022. The IRA has significantly accelerated investments in clean tech in the U.S.

While Canadian tax credits for clean tech are substantial, they don’t seem to have the same impact on investments as the IRA, perhaps because rules for Canadian tax credits and other incentives are deemed more complex.

The real issue is not Canadian policy for energy transition per se, but rather the complex implementation, uncertainty and lack of clarity of these policies.

Political uncertainty

Opportunities in clean tech exist in Canada, but there is no room for increased regulatory risks. Disagreements between the federal and some provincial governments create uncertainty that hurts investments.

Alberta’s sudden moratorium on renewable energy was not helpful, especially given the province has quickly become a Canadian renewables hotbed. While the province has since lifted the moratorium, its new regulations for the clean tech sector have been criticized as too strict.

Political uncertainty, coupled with more risk-averse business attitudes than in the U.S., is creating unnecessary hurdles for the commercialization of clean tech innovations in Canada.

This should be concerning to many, as Canadian clean tech firms might be tempted to locate their operations south of the border. Consequently, Canadian taxpayer-supported startups may end up creating more wealth in the U.S. than at home.

Meanwhile, Canadian oil and gas companies have recently experienced strong operating performance, and their valuations and stock return performance support this. Interestingly, Canadian energy firms are valued higher relative to profits than their U.S. counterparts, which is counter to popular opinion among Canadian energy sector pundits.

One reason for the more optimistic valuations is the impending completion of the Trans Mountain pipeline and the resulting increase in the capacity to export heavy oil from the oil sands. There is no doubt that the energy sector will continue to contribute to the Canadian economy, at least in the medium run. The key question is: for how long?

Reducing greenhouse gas emissions

The oil and gas sector must reinvest more of its profits into emissions-reducing technologies. However, if Canadian policies and incentives do not support enough investment return prospects, the sector will continue to under-invest in energy transition. In particular, the tax incentives should be made easier for small- and medium-sized companies to access.

Reducing greenhouse gas (GHG) emissions will be critical in continuing to attract financing and generating profits beyond 2030. The oil and gas sector has been criticized for slow progress in this regard, but the recent announcement of a regulatory application for a carbon capture project by oilsands producers with the Alberta Energy Regulator is certainly encouraging.

While competing with the U.S. for clean tech investments and reducing GHG emissions in the oil and gas sector are challenging, Canadian firms should continue to embrace opportunities. Both industries require predictable, stable and clear regulatory environments to provide the certainty investors and companies need to continue to invest in Canada.

Our success as a nation depends on it.The Conversation

About the Author:

Yrjo Koskinen, BMO Professor of Sustainable and Transition Finance, University of Calgary; J. Ari Pandes, Associate Professor of Finance, University of Calgary, and Nga Nguyen, Assistant Professor, Department of Finance, Université du Québec à Montréal (UQAM)

This article is republished from The Conversation under a Creative Commons license. Read the original article.

 

Energy Opinions
04 Apr

America’s green manufacturing boom, from EV batteries to solar panel production, isn’t powered by renewable energy − yet

By James Morton Turner, Wellesley College 

Panasonic’s new US$4 billion battery factory in De Soto, Kansas, is designed to be a model of sustainability – it’s an all-electric factory with no need for a smokestack. When finished, it will cover the size of 48 football fields, employ 4,000 people and produce enough advanced batteries to supply half a million electric cars per year.

But there’s a catch, and it’s a big one.

While the factory will run on wind and solar power much of the time, renewables supplied only 34% of the local utility Evergy’s electricity in 2023.

In much of the U.S., fossil fuels still play a key role in meeting power demand. In fact, Evergy has asked permission to extend the life of an old coal-fired power plant to meet growing demand, including from the battery factory.

With my students at Wellesley College, I’ve been tracking the boom in investments in clean energy manufacturing and how those projects – including battery, solar panel and wind turbine manufacturing and their supply chains – map onto the nation’s electricity grid.

The Kansas battery plant highlights the challenges ahead as the U.S. scales up production of clean energy technologies and weans itself off fossil fuels. It also illustrates the potential for this industry to accelerate the transition to renewable energy nationwide.

The clean tech manufacturing boom

Let’s start with some good news.

In the battery sector alone, companies have announced plans to build 44 major factories with the potential to produce enough battery cells to supply more than 10 million electric vehicles per year in 2030.

That is the scale of commitment needed if the U.S. is going to tackle climate change and meet its new auto emissions standards announced in March 2024.

The challenge: These battery factories, and the electric vehicles they equip, are going to require a lot of electricity.

Producing enough battery cells to store 1 kilowatt-hour (kWh) of electricity – enough for 2 to 4 miles of range in an EV – requires about 30 kWh of manufacturing energy, according to a recent study.

Combining that estimate and our tracking, we project that in 2030, battery manufacturing in the U.S. would require about 30 billion kWh of electricity per year, assuming the factories run on electricity, like the one in Kansas. That equates to about 2% of all U.S. industrial electricity used in 2022.

Battery belt’s huge solar potential

A large number of these plants are planned in a region of the U.S. South dubbed the “battery belt.” Solar energy potential is high in much of the region, but the power grid makes little use of it.

Our tracking found that three-fourths of the battery manufacturing capacity is locating in states with lower-than-average renewable electricity generation today. And in almost all of those places, more demand will drive higher marginal emissions, because that extra power almost always comes from fossil fuels.

However, we have also been tracking which battery companies are committing to powering their manufacturing operations with renewable electricity, and the data points to a cleaner future.

By our count, half of the batteries will be manufactured at factories that have committed to sourcing at least 50% of their electricity demand from renewables by 2030. Even better, these commitments are concentrated in regions of the U.S. where investments have lagged.

Some companies are already taking action. Tesla is building the world’s largest solar array on the roof of its Texas factory. LG has committed to sourcing 100% renewable solar and hydroelectricity for its new cathode factory in Tennessee. And Panasonic is taking steps to reach net-zero emissions for all of its factories, including the new one in Kansas, by 2030.

More corporate commitments can help strengthen demand for the deployment of wind and solar across the emerging battery belt.

What that means for US electricity demand

Manufacturing all of these batteries and charging all of these electric vehicles is going to put a lot more demand on the power grid. But that isn’t an argument against EVs. Anything that plugs into the grid, whether it is an EV or the factory that manufacturers its batteries, gets cleaner as more renewable energy sources come online.

This transition is already happening. Although natural gas dominates electricity generation, in 2023 renewables supplied more electricity than coal for the first time in U.S. history. The government forecasts that in 2024, 96% of new electricity generating capacity added to the grid would be fossil fuel-free, including batteries. These trends are accelerating, thanks to the incentives for clean energy deployment included in the 2022 Inflation Reduction Act.

Looking ahead

The big lesson here is that the challenge in Kansas is not the battery factory – it is the increasingly antiquated electricity grid.

As investments in a clean energy future accelerate, America will need to reengineer much of its power grid to run on more and more renewables and, simultaneously, electrify everything from cars to factories to homes.

That means investing in modernizing, expanding and decarbonizing the electric grid is as important as building new factories or shifting to electric cars.

Investments in clean energy manufacturing will play a key role in enabling that transition: Some of the new advanced batteries will be used on the grid, providing backup energy storage for times when renewable energy generation slows or electricity demand is especially high.

In January, Hawaii replaced its last coal-fired power plant with an advanced battery system. It won’t be long before that starts to happen in Tennessee, Texas and Kansas, too.The Conversation

About the Author:

James Morton Turner, Professor of Environmental Studies, Wellesley College

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
29 Mar

Week Ahead: Oil primed for more upside?

By ForexTime 

  • Crude ↑ over 15% in Q1
  • Oil could kick off Q2 with bang
  • OPEC+ JMMC meeting, EIA data & NFP in focus
  • Prices bullish on D1 & W1 timeframe
  • Key level of interest at $83

Despite the holiday shortened week ahead for UK and European markets, the second quarter of 2024 could kick off with a bang.

All eyes will be on top-tier economic reports including the US March nonfarm payrolls and speeches by a handful of Fed officials:

Sunday 31st May

  • Easter Sunday
  • CN50: China non-manufacturing PMI, manufacturing PMI

Monday, 1st April

  • Easter Monday –UK and Europe markets closed
  • CN50: China Caixin manufacturing PMI
  • JP225: Japan Tankan business sentiment, manufacturing PMI
  • SGD: Singapore home sales
  • TWN: Taiwan manufacturing PMI
  • USD: US construction spending, ISM manufacturing

Tuesday, 2nd April

  • AUD: Australia Melbourne Institute inflation, RBA meeting minutes
  • EUR: Eurozone S&P Global Manufacturing PMI, Germany PMI
  • UK100: UK S&P Global/CIPS Manufacturing PMI
  • US500: US factory orders, JOLTS job openings, Fed speeches

Wednesday, 3rd April

  • CN50: China Caixin services PMI
  • JPY: Japan services PMI
  • EUR: Eurozone CPI, unemployment
  • OIL: OPEC+ JMMC meeting, EIA weekly report
  • US30: US ISM Services, Fed Chair Jerome speech, Chicago Fed President Austan Goolsbee speech

Thursday, 4th April

  • AUD: Australia building approvals
  • EUR: Eurozone S&P Global Services PMI, PPI
  • SEK: Swedish Riksbank meeting minutes
  • NZD: New Zealand building permits
  • USD: US initial jobless claims, Fed speeches

Friday, 5th April  

  • AUD: Australia trade balance
  • CAD: Canada unemployment
  • SGD: Singapore retail sales
  • JPY: Japan household spending
  • EUR: Eurozone retail sales, Germany factory orders
  • RUS2000: US March nonfarm payrolls (NFP)

Our attention lands on oil benchmarks which have appreciated in Q1 amid geopolitical risks and expectations around OPEC+ supply cuts tightening global markets.

Crude gained over 15% in Q1 with prices hovering near it’s 2024 high.

Note: Oil markets are closed for Good Friday, but trading will resume on Monday 1st April.

With the path of least resistance pointing north, further gains could be on the horizon.

Here are 4 factors that may impact oil prices in the week ahead:

    1) OPEC+ JMMC meeting (virtual)

No changes are expected to oil supply policy when OPEC+ alliance’s Joint Ministerial Monitoring Committee meets on Wednesday.

Note: At the start of the month, OPEC+ announced they will extend voluntary supply cuts that total 2.2 million barrels a day through the end of June.

So, the next major decision may be in June when OPEC+ meets to decide output for the second half of 2024. Nevertheless, any fresh insight or clues on what to expect from the cartel ahead of the big meeting could influence oil markets. 

 

    2) US Energy Information Agency (EIA) report

It is worth noting that Crude oil inventories unexpectedly jumped by 3.2 million barrels in the week ended March 22nd, after falling by 2 million barrels in the previous week.

The next EIA report published on Wednesday 3rd April may influence oil’s short to medium-term outlook.

  • Another build in US crude oil inventories may hit the demand outlook, pulling crude oil prices lower as a result. 
  • A decline in US inventories could boost optimism around demand which may push the global commodity higher.

 

   3) US March nonfarm payrolls (NFP)

The US economy is expected to have created 203k jobs in March, a noticeable drop from the 275k jobs in February, while the unemployment rate is expected to remain steady at 3.9%.

Note: Lower interest rates could stimulate economic growth, which fuels oil demand.

Traders are currently pricing in a 68% probability of a 25-basis point Fed rate but by June, with a cut fully priced in by July.

Note: Lower interest rates may also lead to a weaker dollar, which boosts oil which is priced in dollars.

  • Oil prices may push higher if a disappointing US jobs report reinforces bets around the Fed cutting rates three times this year.
  • A strong report that supports the case around the Fed keeping rates higher for longer could drag the global commodity lower. 

 

    4) Technical forces 

Crude seems to be gaining positive momentum on the daily charts with prices trading above the 50,100 and 200-day SMA. However, the Relative Strength Index is approaching the 70 level, indicating that prices may be overbought.

  • A solid breakout and daily close above $83 may pave a path towards $86.40 and potentially $90 in the medium to longer term.
  • Should $83 prove to be a tough resistance, prices may slip back towards $80 and the 200-day SMA at $79.00. 

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Energy Opinions
20 Mar

Crude: Capped below weekly resistance?

By ForexTime 

  • Crude up almost 2% this week
  • Watch out for EIA report & Fed decision
  • Weekly resistance at $83.64
  • Possible bearish scenario on H4
  • Key levels of interest at $81.25

Our focus falls on US crude oil which is currently hovering around levels not seen in over four months!

The global commodity is up almost 2% this week thanks to geopolitical tensions, Iraq’s pledge to cut crude exports, and the American Petroleum Institute (API) reporting a fall in US crude stockpiles.

Watch this space because more volatility could be on the cards due to the incoming Energy Information Administration (EIA) report and highly anticipated Fed rate decision. 

While the central bank is widely expected to leave rates unchanged, all eyes will be on the dot projection and Powell’s press conference for clues on rate cut timings.

  • Oil prices could extend gains if the central bank strikes a dovish tone and signals that three rate cuts are still on the cards in 2024.
  • However, if the Fed sounds more hawkish than expected, signaling that US rates will remain higher for longer – oil bears may enter the scene as the dollar appreciates.

Looking at the technical picture, crude oil is currently busy with a strong impulse wave that exploded out of a previous slow and steady uptrend.

The price almost reached a weekly resistance level. This might create a short opportunity on the lower time frames.

On the 4-hour chart, an extended uptrend can be seen with a correction wave in progress. The price is close to the weekly resistance level and the manual trendline has been broken. The longer price cycle Moving Average Convergence Divergence (MACD) Oscillators is still bullish, but the signal line has been broken and this might hint at a possible overbought scenario. A market that is in an overbought state may well slow down and then a possible reversal can be on the books.

This will need to be confirmed by a lower top and then a lower bottom.

If this does happen, a possible scenario can be seen in the chart below.

When the price reaches the $81.25 level, a possible short scenario will become feasible.

Attaching a modified Fibonacci tool to the trigger level at $81.25 and dragging it above the weekly resistance level at $83.80, four conservative targets can be established:

  • First target at $80.22

  • Second target at $79.71

  • Third price target at $78.69

  • Fourth and last price target at $77.41

If the price breaks past $83.80, this opportunity is no longer valid.

Forex-Time-LogoArticle by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

Energy Financial News
19 Mar

Brent Oil Prices Continue to Surge, Reaching New Peaks

By RoboForex Analytical Department

Brent crude oil continues its rally, reaching peak values since early November 2023, with prices around USD 87.00 per barrel. Investor concerns over commodity supply, particularly due to tensions in several oil-producing countries, significantly influence quotes by incorporating potential supply disruptions.

Iraq has announced a reduction in crude oil exports to 3.300 million barrels per day soon to compensate for OPEC+ quota implementations. This reduction marks the second consecutive month of export decreases, including in Saudi Arabia, where exports dropped to 6.297 million barrels per day from the previous 6.308 million.

Despite these cuts, global demand for energy remains high. Recent statistics from China have shown a confident retail sales and industrial production sector and a stable outlook for oil demand this year.

It is important to note that a five-session rally of the US dollar could act as a headwind for the oil market. The American currency is at a two-week high against its major counterparts, making commodity purchases more expensive for investors holding other currencies.

Market projections concerning demand for aviation fuel during the summer season are not very confident at this time. There is a risk this could affect the global upward trend in oil. Due to increased summer travel activity, world prices for aviation fuel in Q3 2024 are expected to be 5-6% higher than previous forecasts, reaching around USD 111.00 per barrel. However, the number of flights remains low due to the global economic situation, which could pressure the market and the cost of aviation fuel.

Brent Technical Analysis

The H4 Brent chart has formed a consolidation range around 84.33, with the market breaking upward to 86.60. A decrease to 85.70 could occur today, followed by a new growth structure towards 87.87, a local target. A correction back to 84.33 might follow, then an increase to 88.48 as the first target. The MACD indicator supports this scenario, with its signal line above zero and poised to reach new highs.

On the H1 Brent chart, a growth wave structure towards 88.00 is forming. This is a local target, following which a correction to 84.40 (testing from above) is considered, with expectations for the continuation of the growth wave to 88.50. This scenario is technically supported by the Stochastic oscillator, whose signal line is below 20, indicating the start of a rise towards 50 with the potential to continue to 80.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
06 Mar

Lithium-ion batteries don’t work well in the cold – a battery researcher explains the chemistry at low temperatures

By Wesley Chang, Drexel University 

Rechargeable batteries are great for storing energy and powering electronics from smartphones to electric vehicles. In cold environments, however, they can be more difficult to charge and may even catch on fire.

I’m a mechanical engineering professor who’s been interested in batteries since college. I now lead a battery research group at Drexel University.

In just this past decade, I have watched the price of lithium-ion batteries drop as the production market has grown much larger. Future projections predict the market could reach thousands of GWh per year by 2030, a significant increase.

But, lithium-ion batteries aren’t perfect – this rise comes with risks, such as their tendency to slow down during cold weather and even catch on fire.

Behind the Li-ion battery

The electrochemical energy storage within batteries works by storing electricity in the form of ions. Ions are atoms that have a nonzero charge because they have either too many or not enough electrons.

When you plug in your electric car or phone, the electricity provided by the outlet drives these ions from the battery’s positive electrode into its negative electrode. The electrodes are solid materials in a battery that can store ions, and all batteries have both a positive and a negative electrode.

Electrons pass through the battery as electricity. With each electron that passes to one electrode, a lithium ion also passes into the same electrode. This ensures the balance of charges in the battery. As you drive your car, the stored ions in the negative electrode move back to the positive electrode, and the resulting flow of electricity powers the motor.

A diagram showing three boxes, one labeled cathode, one labeled electrolyte, and one labeled anode. Small circles representing lithium ions move to the anode to charge and the cathode to discharge.
When a lithium-ion battery delivers energy to a device, lithium ions – atoms that carry an electrical charge – move from the negative electrode, the anode, to the positive electrode, the cathode. The ions move in reverse when recharging.
Argonne National Laboratory, CC BY-NC-SA

While AA or AAA batteries can power small electronics, they can be used only once and cannot be charged. Rechargeable Li-ion batteries can operate for thousands of cycles of full charge and discharge. For each cycle, they can also store a much higher amount of charge than an AA or AAA battery.

Since lithium is the lightest metal, it has a high specific capacity, meaning it can store a huge amount of charge per weight. This is why lithium-ion batteries are useful not just for portable electronics but for powering modes of transportation with limited weight or volume, such as electric cars.

Battery fires

However, lithium-ion batteries have risks that AA or AAA batteries don’t. For one, they’re more likely to catch on fire. For example, the number of electric bike battery fires reported in New York City has increased from 30 to nearly 300 in the past five years.

Lots of different issues can cause a battery fire. Poorly manufactured cells could contain defects, such as trace impurities or particles left behind from the manufacturing process, that increase the risk of an internal failure.

Climate can also affect battery operation. Electric vehicle sales have increased across the U.S., particularly in cold regions such as the Northeast and Midwest, where the frigid temperatures can hinder battery performance.

Batteries contain fluids called electrolytes, and cold temperatures cause fluids to flow more slowly. So, the electrolytes in batteries slow and thicken in the cold, causing the lithium ions inside to move slower. This slowdown can prevent the lithium ions from properly inserting into the electrodes. Instead, they may deposit on the electrode surface and form lithium metal.

The molecules in fluids move slower at colder temperatures – the same thing happens inside batteries.

If too much lithium deposits on the electrode’s surface during charging, it may cause an internal short circuit. This process can start a battery fire.

Making safer batteries

My research group, along with many others, is studying how to make batteries that operate more efficiently in the cold.

For example, researchers are exploring swapping out the usual battery electrolyte and replacing it with an alternative electrolyte that doesn’t thicken at cold temperatures. Another potential option is heating up the battery pack before charging so that the charging process occurs at a warmer temperature.

My group is also investigating new types of batteries beyond lithium ion. These could be battery types that are more stable at wider temperature ranges, types that don’t even use liquid electrolytes at all, or batteries that use sodium instead of lithium. Sodium-ion batteries could work well and cost less, as sodium is a very abundant resource.

Solid-state batteries use solid electrolytes that aren’t flammable, which reduces the risk of fire. But these batteries don’t work quite as well as Li-ion batteries, so it’ll take more research to tell whether these are a good option.

Lithium-ion batteries power technologies that people across the country use every day, and research in these areas aims to find solutions that will make this technology even safer for the consumer.The Conversation

About the Author:

Wesley Chang, Assistant Professor of Mechanical Engineering and Mechanics, Drexel University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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