Vice President Joe Biden is on a victory tour, swinging through the country exulting the $787 billion stimulus package as a green job creator. In Denver, he boasted about the $11 billion for improving the electricity grid as well as the estimated 450,000 new jobs the bill will create. Despite the difficulty in defining a green jobs and counting the number the bill will create, spending such sums will no doubt lead to some employment.

Many businesses and potential entrepreneurs are scurrying around the stimulus package and the pending climate change regulation to find opportunities. The activity in Washington will no doubt create openings for traders, biofuel plants, and wind and solar power companies (as well as opportunities for the IT and health care sector ).

However, there is also a downside of the stimulus bill and the pending climate and energy regulation. …..click here to read more

Nigerian militants from the Movement for the Emancipation of the Niger Delta (MEND) claimed to attack several pipelines of oil companies including Chevron yesterday, shitting in 100,000 barrels of crude a day. The attacks come in response as Nigerian forces over the past two weeks began a major operation against the rebel group. MEND claims to be fighting in part to ensure the impoverished delta region receives a greater portion of proceeds from oil and gas pumped from local lands. The attack comes a week after MEND announced a blockade of shipping channels, although it appears to have lacked the forces to enforce such an order.

The recent attack against Chevron has done little to rile the oil markets, unlike last year when an attack in the region prompted oil prices to jump over 2% in one day. Nigeria, the fifth largest supplier of oil to the US with reserves of 36 billion barrels of oil and 187 tcf of gas, now only produces about 1.6 million barrels a day, roughly half of its capacity according to Petroleum Minister of State Odein Ajumogobia. This drop in output reflects the recent up tick in violence, although the country has had difficulty in reaching its output potential due to regional instability. Over the past several years an estimated 20% of Nigeria’s oil production had been shut in.

The attacks highlight concern over future supplies …..click here to read more

In a move that went widely unreported last week, California Governor Arnold Schwarzenegger unveiled a plan that would allow additional drilling within state waters in an attempt to help ease California’s fiscal troubles. California had banned new exploration activity within state waters (an area that roughly extends nine miles from the coast) since the 1969 spill in Santa Barbara — although there has been ongoing production in existing sites within state boundaries.

This proposal, like the previous one in Florida, is all about money as the states grapple with budget shortfalls. California expects the legislation could bring in over $1.8 billion over time. The proposals also show how quickly two states which were adamant against lifting the drilling moratorium in federal waters less than a year ago could change their opinion.

California’s decision to allow offshore drilling would be a boon to the exploration industry, especially if the state supported opening up federal areas beyond state waters. Those regions have substantial proven reserves: roughly 2/3 of all proven supplies on the US’s outer continental shelf.

The International Energy Agency is now wondering what we had discussed earlier in the week: OPEC’s discipline is fraying.

The Agency believes that OPEC members are beginning to cheat because oil prices have risen from $32 earlier this year in part due to OPEC’s coordinated cuts. However, when prices are $60 a barrel, discipline is harder to manage as the incentives for overproduction is higher.

The IEA said:

Uneven compliance by a few members and Angola’s plea for an exemption [to its quota] threaten to chip away at Opec’s otherwise strong resolve to rein in oversupply.

China-based solar producer Suntech Power announced plans this week to build a manufacturing facility in the United States to serve the growing U.S. market for large-scale utility projects and to take advantage of government incentives.

“We believe in the outstanding long-term prospects of the solar energy market in the United States” Suntech Chairman and CEO Zhengrong Shi said.

The Suntech announcement reflects the value of federal and state incentives for renewable energy. It also counters a favorite argument of climate action opponents on Capitol Hill that shifting the United States to a clean energy future will send U.S. jobs overseas. Suntech, the world’s largest solar energy company in terms of photovoltaic module production, said it could cut transport costs and emissions by building closer to its market. The cost of shipping heavy renewable units, combined with the fact that the U.S. and EU currently constitute the majority of clean tech demand, makes local manufacturing facilities a sensible strategy for long-term growth.

Political considerations were also not lost on the company. Appealing to both green jobs enthusiasts and those who perceive China as taking manufacturing jobs from the U.S, Shi said he is hopeful that “initiating manufacturing in the U.S. will drive further growth of green jobs.”

Suntech America President Roger Efird said as many as 1,000 jobs could be created through Suntech’s U.S. operations over the next few years. The company plans to settle on a location in the next six months.

“We are currently in discussion with the governors of three different states who have been recruiting us to build factories,” Efird has said.

In making the announcement this week, the company specifically identified that its decision would be based on “local manufacturing incentives” and “long-term policy commitments.” …..click here to read more

OPEC reported a rise in output despite a pledge from the organization’s member to reduce production to meet quotas agreed to in December.

Five members (Saudi Arabia, Kuwait, Iran, Nigeria and Angola) increased production over the past month by a total of 180,000 bbls/day, although Saudi Arabia remains within its quota of roughly 8 mln bbls/day. The increase in output is the group’s first since last July. The cartel now produces just over 28 mln/bbls per day, almost 900,000 bbls over its quota.

OPEC members meet on May 28th and look set to maintain output as prices hit $60 a barrel - up over 80% from lows in February of $32/bbl - despite OPEC President Abdallah El-Badri’s stated goal that oil should reach $70/bbl and the expectations of weaker demand. OPEC announced it expects oil demand to drop to roughly 84 mln bbls/day as demand in industrialized countries shrinks due to economic conditions and as oil supplies increased.

Angolan Oil Minister Chakib Khelil hopes that OPEC members would reduce output to their quotas. Adherence to those levels would be an effective cut in production and have other benefits. The move would allow OPEC to control prices without resorting to an announced cut which would face political backlash for worsening the global recession by raising oil prices. Adhering to quotas also helps OPEC meet the goal of creating discipline within the organization as discussed here on March 16. Greater coordination when prices are low would “contribute to market stability” as the organization announced in March - or more directly, it increases the power of OPEC in determining price levels due to its ability to coordinate supply. If members cannot coordinate, prices will likely fall.

Forging a new partnership between the United States and China can help address climate change, but only if regulatory and market shortcomings can be overcome.

A new alignment on energy and the environment between China and the United States sounds like a formula capable of delivering real solutions on climate-change issues. China’s abundant scientific research-and-development resources and manufacturing capacity not only help carbon sink testing and the scaling up of renewable energies become more feasible, but also less costly.

However, the potential cost effectiveness of reducing emissions in China could prove more of a liability than a benefit where the environment is concerned. Systemic regulatory and market shortcomings demonstrate the difficulty of managing and preventing environmental degradation and guaranteeing public health in a developing country context. One example is in the power sector, where in some cases emissions performance has not matched infrastructure upgrades as expected because the use of low-grade coal has gone unmonitored. Does the new US administration have the will to face the prospect that a low-cost approach might be inimical to a low-carbon strategy? Will they ensure careful planning and responsible oversight?

The recent release of a joint Asia Society and Pew Center on Global Climate Change report (see “Road to rapprochement” by Banning Garrett and Jonathan Adams), followed by secretary of state Hillary Clinton’s trip to China, generated considerable US interest in enhancing US-China coordination on energy and the environment.

Grand bilateral collaboration undoubtedly can help reduce the rate of growth of emissions in both countries, and bring much needed efficiency improvements to China’s outdated power production and transmission infrastructure. And a powerful US-China nexus may help break post-Kyoto gridlock at Copenhagen in December. However, a partnership between the world’s largest carbon dioxide emitters is not the “holy grail” for preventing further environmental degradation. Though full of promise, the “China advantage” comes with its own pitfalls. …..click here to read more

The Chinese government is considering imposing a pro rata carbon tax on coal and fossil fuels such as gasoline, jet fuel, and natural gas, Finance Ministry official Su Ming has told the country’s state-run media.

For the past year, 20 experts from seven different government agencies have been investigating the development and implementation of a carbon tax, which has emerged as a preferred mechanism for curbing emissions in China’s energy intensive sectors.

Though the research findings are due out this summer, no details on the size of a tax or date for when it would take effect have been released.

Earlier this year, the government organizations responsible for the study – the China Environmental Culture Promotion Association and the China Institute of Development Strategy Studies – proposed rolling out the carbon tax in select provinces first as a “barometer” for monitoring the carbon intensity of economic activity.

Proponents of the plan favor an incentive structure that would reward producers for investing in cleaner technologies. Under the current market conditions, coal-fired power plant owners reap more profits by using cheaper, lower quality coal, which contributes greater emissions because it’s a less efficient fuel source.

Critics, however, point out that unless the tax rate is set appropriately high, firms would choose to pollute and pay the fee, instead of take steps to curb emissions.

…..click here to read more

Chevron CEO David O’Reilly spoke out last week against the Administration’s plan to use a cap and trade system to limit carbon emissions. His stance against US policy is nothing new.

from a policy standpoint, America has been moving in the wrong direction for a very long time.

He further outlines his list of grudges against US policy: taxes, restrictions on oil and gas development, and the belief that we can drill our way to energy independence (although the latter is not policy).

With such a grudge list, his apprehension against a cap and trade system is no surprise. His call for a carbon tax after he berated US policy is.

One of the main reasons why people support a carbon tax to limit carbon emissions is because it is simple and easy to employ quickly. (For other reasons check out the Carbon Center’s rationale.) In addition, it can also reduce emissions as well as a cap and trade system because it increases the cost of CO2. (The debate has become more intense recently as cap and trade legislation is being discussed.) O’Reilly’s decision to support the tax, however, is part business calculation, part negotiating tactic.

O’Reilly wants a stable and predictable business environment. A cap and trade system, which puts a variable cost to a unit of emissions, is intended to create incentives when demand to pollute is high. But the oil and gas industry with its long-term investment does not like short-term instability. Rex Tillerson, CEO of ExxonMobil, derided Europe’s cap and trade system last year, saying it is “all about moving the money around” as people buy and sell emission credits. Although a tax may increase the cost of their products, it would reduce uncertainty in their cost structures, which may be a greater management obstacle.

Cynics argue that he is trying to forestall the debate on climate action by bringing forth unpalatable idea: a call for a tax during a recession, which the American public is loathe to support. After all, it’s highly improbable you will see him lobbying for a $.50 gas tax just as you would not see a CEO of a steel company ask to increase taxes of iron ore.

O’Reilly knows that future climate legislation is near certainty. The more supportive he appears of some type of legislation, the more likely his views will be accepted in the debate.

On Friday, T Boone Pickens entitled an article “Swimming in Natural Gas” playing off a similar quote from the Wall Street Journal. (It is also sounds similar to, er, my coulumn I wrote last month that the world is swimming in oil as stocks had increased driving down the price of oil.)

In his piece, he lays out part of the case for investing more heavily in natural gas. He believes the US now has the capability to tap trillions of cubic feet of natural gas, which could help reduce US reliance on imported energy and, therefore, bolster national security.

Natural gas is an important part of the United State’s future energy portfolio and could help offset our need for imported oil. But energy self-sufficiency by itself does not make us invulnerable to the demand of the international energy market. It is hard to imagine how the US would be secure in a world where we could meet our energy needs when many other nations could not — especially with the large role US companies play in the global energy market. Nations starved of energy would engage in a race for global resources that would likely lead to regional, if not global conflict. Security is more than ensuring the US can meet its needs; it’s also enabling a robust global energy market.