TIME energy

OPEC Says U.S. Oil Boom Will End This Year

oil-refinery-american-flag
Getty Images

Declines in rig counts are expected to result in lower growth in U.S. oil output

OPEC says the demand for oil – its oil – will rise during 2015 because the cartel is winning its price war against U.S. shale producers by driving them out of business.

“Higher global refinery runs, driven by increased [summer] seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” the cartel said in its Monthly Market Report, issued, April 16.

OPEC forecasts demand at an average of 29.27 million barrels per day in the first quarter 2015, a rise of 80,000 bpd from its previous prediction made in its March report. At the same time, it said, the cartel’s own total output will increase by only 680,000 barrels per day, less than the previous expectation of 850,000 barrels per day, due to lower U.S. and other non-OPEC production.

Read more: Latest EIA Predictions Should Be Taken With More Than A Pinch Of Salt

The United States appears to have been OPEC’s chief target when, at its November meeting in Vienna, its members, under Saudi leadership, agreed to maintain production at 30 million barrels per day despite falling prices caused by an oversupply of oil.

Average global oil prices began plunging in late June 2014 from more than $110 per barrel to a low of around $50 in January. They’ve now settled to around $60, and Laurence Fink, the CEO of Black Rock, the world’s largest asset manager, said in an interview April 16 on CNBC that the price of a barrel of oil probably would go no lower than $60 this year, but also rise no higher than $80.

The initial oversupply came mostly from a boom in U.S. shale production, which was turning Americans from OPEC’s biggest customer into a competitor. But shale oil extraction requires hydraulic fracturing, or fracking, which is more expensive than conventional drilling and isn’t profitable if the price of oil falls below a threshold of about $60 per barrel.

Read more: Could The World Cope With Almost Limitless Energy?

The U.S. producers are beginning to feel that price pinch, the OPEC report said, quoting data gathered by Baker Hughes, the large US oilfield services company, that the oil rig count in the United States fell by 238 in March, leaving a total of only 1,110 rigs operating in the country as of March 15. It also pointed to a declining number of drilling permits.

As a result, OPEC said, it expects that U.S. supplies of oil will increase to around 13.65 million barrels a day in this year’s second quarter, but then flatten and begin to turn down for the rest of the 2015. This applies to Canadian production as well. “U.S. tight oil and Canadian oil sands output are expected to see lower growth following the recent strong declines in rig counts,” the report said.

Read more: Why It Won’t Matter If Oil Prices Rebound

On other subjects, OPEC produced 30.79 million barrels of oil per day in March, 800,000 more barrels than in February, the report said, citing not its own members but independent sources including industry sources, oil analysts and shippers. It said this increase can be attributed to Saudi Arabia, which increased its output, as well as strong production in Iraq and increased production in war-torn Libya.

As for global demand for OPEC’s own crude oil, the report said it would rise only marginally to an average level of about 29.3 million barrels a day this year. “Almost two thirds of 2015 oil demand growth is seen coming from China, Other Asia [Indonesia, Malaysia, the Philippines and Thailand] and the Middle East,” the report said.

Meanwhile, it said, worldwide demand for non-OPEC oil is expected to drop by about 165,000 barrels per day to 680,000 barrels per day.

This article originally appeared on Oilprice.com.

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TIME energy

100 Billion Barrels of Oil Below Gatwick? Maybe Not

A sign at Gatwick airport in London, England.
Matt Dunham—AP A sign at Gatwick airport in London, England.

The figure is merely an estimate of the entire area and not the plots licensed to drill

Only last week UK Oil and Gas Investments (UKOG) announced that it had discovered an oilfield in the Weald Basin near London’s Gatwick Airport holding as much as 100 billion barrels of oil. Shares in UKOG immediately soared.

A week later, Stephen Sanderson, UKOG’s CEO, says he’s not certain how much oil is in the field. The value of his company’s stocks immediately plunged by 18 percent, but managed to rally and level off to record a modest loss.

But Sanderson appeared certain on April 9 when he announced the discovery, declaring. “Based on what we’ve found here, we’re looking at between 50 and 100 billion barrels of oil in place in the ground. We believe we can recover between 5 percent and 15 percent of the oil in the ground.”

Read more: Top 12 Media Myths On Oil Prices

The upshot was that UKOG drilling in the Weald Basin could produce between 10 percent and 30 percent of Britain’s demand.

That was encouraging news to investors and Britons eager for their nation to become energy independent, but it also generated some skepticism. After all, 100 billion barrels of oil was about the same as the proven oil reserves of Kuwait, and would be more than twice as much oil as Britain has produced from the North Sea in the past 40 years.

The Weald Basin discovery seemed at first to be a savior for Britain’s oil industry as the nation’s North Sea operations are becoming less productive and more expensive. Costs for drilling there have risen by 8 percent while the global drop in oil prices has dramatically cut energy companies’ revenues to lows not seen in 17 years.

Read more: Is Private Equity Distorting E&P Asset Prices?

But now the Weald Basin appears not to be such a savior. UKOG’s statement of clarification said the figure of 100 billion barrels of oil is merely an estimate of the entire area and not the plots where the company has licenses to drill, called Horse Hill. These plots take up about 5 percent of the entire Weald Basin.

“The company has not undertaken work outside of its license areas sufficient to comment on the possible oil in place in either the approximate 1,100 square miles or the whole of the Weald Basin,” the company’s clarification said.

Read more: What The Iran Nuclear Deal Could Mean For Asia

This statement supported critical comments by Matthew Jurecky, director of oil and gas research at the consulting firm GlobalData. “Estimates for 100 billion barrels of oil are very misleading,” he said shortly after UKOG’s initial announcement. “Rarely are formations that homologous [similar in structure] where a single discovery can be extrapolated over a very wide area.”

The discovery, however big or small it may be, also has piqued the ire of British environmentalists. In its initial announcement, UKOG said the oil is held in shale, but that the underground rock is naturally fractured, meaning there would be no need for controversial hydraulic fracturing, or fracking, but only conventional methods to release the oil.

“UKOG has backtracked on the wild claims it made last week and admitted that it has no idea how much oil is under the Sussex Weald,” said Brenda Pollack, Friends of the Earth’s South East campaigner. “This is yet another example of the potential for shale oil and gas being overhyped by an industry desperate to starting pumping profits with little concern for residents or the climate.”

This article originally appeared on Oilprice.com.

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TIME energy

Top 5 Richest Tycoons in Renewable Energy

solar-panels
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The solar industry has been growing rapidly in the United States and the Asia-Pacific region

Not so many years ago the idea of a renewable energy CEO raking in billions, joining the ranks of oil barons, publishing tycoons, banking scions and other captains of industry would have seemed unlikely. The stereotype of the Birkenstock-clad hippy with dreams of a world powered by solar energy seemed to belong to the Age of Aquarius, not the dawn of the 21st century. This seemed especially so after the fall of communism ushered in a new era of capitalism and greed, all fueled to some extent by oil and gas, symbolized by the Bush years in the White House with their ties to American oil wealth, and the rise of the Russian energy oligarchs.

With the bull market in oil that followed the financial crisis in 2008, however, solar energy and to a lesser extent, wind, began to look more interesting to countries wanting to diversify away from expensive fossil fuels. The environmental movement and buy-in by governments that created incentives for utilities to use renewables, have also been factors in solar’s ascent.

Read more: How Much Water Does The Energy Sector Use?

The increased demand for solar particularly in the United States and the Asia-Pacific region created a boon for makers of solar panels. Within a short time, the stock prices of those companies rose, and with them, the compensation paid to their top executives.

The growth of the solar industry is truly astounding, particularly in China, the world’s solar leader. Between 2011 and 2012 the Chinese solar market grew by 500 percent. According to a 2014 report by Frost & Sullivan, a consulting firm, the global solar market earned revenues of nearly $60 billion in 2013. The firm estimates that by 2020 it will double to $137.2 billion.

With all this growth, somebody was obviously going to get rich, and it didn’t take long for Oilprice.com to identify some of the biggest beneficiaries of the push toward renewables. The following are 5 of the world’s most successful renewable energy business leaders and their net worth.

1. Li Hejun, Chairman, Hanenergy Holdings. $31.5 billion. After graduating as a mechanical engineer in 1988, Li Hejun borrowed RMB50,000 ($8,264) from a professor to start his own business. After several attempts at new ventures, including bottled water, electronic parts, mining and real estate, in 1994 he began investing in clean energy projects, according to the 2014 book China’s Tycoons. Starting with a hydroelectric dam in his home province of Guandong, Li built six more dams in Yunnan, then expanded into wind farms and solar power. His company Hanenergy Holdings bought three Western, thin-film solar businesses in 2013 and a fourth, Alta Devices, in 2014. Li, who is China’s richest man, added $3 billion to his wealth in March after Hanenergy’s stock rose 36 percent in two days, according to Forbes.

Read more: Is The Paris Climate Conference Doomed To Fail?

2. Elon Musk, Founder/CEO, Space Exploration Technologies Corp., Tesla Motors. $12.2 billion. South African-born Elon Musk co-founded PayPal and was the company’s chair and CEO before moving on to Tesla, the American manufacturer of high-end electric cars. In 2008 Tesla released the Roadster, a two-seat sports car, and a year later, the Tesla Model S, a stylish four-door sedan. But since Musk didn’t yet have a factory, he sought one in Japan. As Wired tells it, Musk took a clandestine tour of the Toyota factory, “[donning] a hard hat, a blue jacket, and plastic safety goggles and acted as inconspicuous as possible in the hopes of not being recognized.” Impressed by the scale of the place, Musk offered $42 million and Tesla had its plant. A soaring stock price made Musk a wealthy man, and with $100 million, he founded SpaceX in 2002. The manufacturer of space launch vehicles in 2012 became the first commercial company to dock with the International Space Station and return cargo to earth via its Dragon spacecraft. In January SpaceX raised $1 billion from investors including Google and Fidelity, valuing the company at $10 billion, Forbes reported.

3. Wang Chuanfu, Founder, BYD Company. $5.3 billion. In 1995 Wang Chuanfu quit his job as a research chemist to set up BYD, which has been variously interpreted as “Build Your Dreams” or “Bring Your Dollars.” Its first product was rechargeable batteries for mobile phones. But Chuanfu had greater ambitions and, in the early 2000s, he set out to become the world’s largest electric car maker. BYD received a big boost in 2008 when Warren Buffett took a 10 percent share, but suffered later setbacks when car sales did not meet expectations and after a deadly accident involving one of its electric vehicles, according to China’s Tycoons. The company is now the world’s largest supplier of rechargeable batteries and also develops solar farms and battery energy storage stations.

Read more: Who Will Control The World’s Water: Governments Or Corporations?

4. Aloys Wobben, Founder/Owner, Enercon. $4.2 billion. Known as “Mr. Wind” in Germany, Aloys Wobben from a young age was fascinated with kites and had a large collection of wind toys. In 1984, the electrical engineer founded start-up Enercon, a manufacturer of turbines for windmills, and he turned the company into a global player in alternative energy. Opinionated and with a strong social conscience, Wobben has spoken out against the Iraq war and once said in an interview, “I wouldn’t enjoy supplying wind turbines to a nation so that it can supply water for huge golf courses,” referring to Enercon’s lack of presence in the U.S. market.

5. Zhu Gongshan, Chairman, GCL-Poly Energy Holdings. $1.9 billion. Jiangsu province native Zhi Gongshan started out building coal-powered and biomass generators, with help from the powerful Poly Group. As GCL Group’s largest shareholder, Poly Group had historical ties to the Chinese army and former Premier Deng Xiaoping. By the mid-2000s Zhu had a vision to produce polysilicon, the raw material for photovoltaics. He invested $1.15 billion in a unit to produce the material and signed long-term supply contracts with solar panel makers. In 2014 his company bought a 68 percent stake in Same Time Holdings, a manufacturer of printed circuit boards, which will invest in solar power plants.

Honorable mention: Rubens Ometto Silveira Mello, Chairman, Cosan, Raízen. $1.3 billion. The world’s first ethanol billionaire began his rise to financial stardom as head of Cosan, a Brazilian sugar company. Nicknamed “the tractor” for sugarcane harvesting, Mello turned Cosan into one of Brazil’s only privately-controlled energy companies. It is one of the world’s largest producers of sugarcane and ethanol.

This article originally appeared on Oilprice.com.

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TIME Innovation

Five Best Ideas of the Day: April 10

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

1. China is literally building islands from almost nothing to tighten control over the South China Sea.

By Sui-Lee Wee and Ben Blanchard at Reuters

2. With drones and a recycled fishing trawler, one group is rescuing migrants making the world’s deadliest border crossing.

By Brad Wieners in Bloomberg Business

3. How can India can fix its trade imbalance? Convince Hindu temples to deposit their billion-dollar gold hoards in banks.

By Meenakshi Sharma and Krishna N. Das in Voice of America

4. Bangkok’s insane malls consume as much power as entire Thai provinces.

By Adam Pasick in Quartz

5. Biometrics — fingerprints and retina scans — have changed spycraft, and now even the bad guys are using it.

By Kate Brannen in Foreign Policy

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

MONEY Gas

Can You Say Road Trip? Gas Prices Will Stay Cheap Through Summer

women on roadtrip, leaning out car windows
Alamy

Forecasts indicate that gas prices this summer will average $2.45—more than 30% cheaper than they were the year before.

It’s more or less tradition that gas prices spike in summer, hand in hand with vacation season and rising demand. Based on the new forecast from the U.S. Energy Information Administration (EIA), however, prices at the pump are expected to remain flat for months to come.

Since prices right now are dirt cheap compared to previous years—the national average of $2.39 per gallon as of Wednesday is $1.20 lower than the same day in 2014—that means big savings for drivers. What with cheap gas prices and increased fuel efficiency in today’s vehicles, average household spending on gas in the U.S. this year is projected to hit its lowest level since 2004. The typical household should expect to save $700 on filling up this year compared to 2014.

The EIA is forecasting a national average of $2.45 per gallon from April through September, and an average of $2.40 for 2015 as a whole. The last year that saw a cheaper average than this was 2009, when prices dipped dramatically to $2.35 after inching up consistently, from $2.25 in 2005, to $2.58 in 2006, and $2.81 in 2007, then spiking to $3.26 in 2008.

What’s truly remarkable is that the EIA estimates could be on the high side. The analysts at GasBuddy call for a national average of between $2.15 and $2.35 in June, for instance, compared to an EIA projection of $2.45 for the month. No matter what, as long as these estimates are in the ballpark, prices will be far cheaper than June 2014, when the average was around $3.60.

And yes, prices could even get cheaper as summer draws near, which is the opposite of what drivers have grown accustomed to. “We know that our assessment challenges the conventional thinking that believes retail fuel prices always run highest during the summer driving season,” GasBuddy senior petroleum analyst Patrick DeHaan said in a press release. “Barring any unforeseen events—like refinery breakdowns or hurricanes—current supply and demand fundamentals could put more downward pressure on retail prices even during the summer driving season.”

The experts at AAA agree, explaining, “Unless there are new regional refinery issues or global crude prices turn markedly higher, drivers can expect to see pump prices continue to slide leading up to the start of the summer driving season.”

MONEY energy

These Americans Are Being Hurt By Low Oil Prices

Low-cost oil is making more and more drilling operations unprofitable, leading to heavy U.S. job losses.

TIME energy

Mayor: Why My Texas Town Ditched Fossil Fuel

Wind Turbines at Sunrise
Getty Images Wind Turbines at Sunrise

Dale Ross is the mayor of Georgetown, Texas.

100% renewable energy made good business sense

Georgetown is a city of 54,000 just north of Austin known for beautiful Victorian-era architecture around our historic courthouse square. Founded in 1848, we are home to Southwestern University, a small liberal arts college.

The City of Georgetown recently announced that our municipal electric utility will move to 100 percent renewable energy sources by 2017. That probably caught some folks by surprise. A town in the middle of a state that recently sported oil derricks on its license plates may not be where you’d expect to see leaders move to clean solar and wind generation.

No, environmental zealots have not taken over our city council, and we’re not trying to make a statement about fracking or climate change. Our move to wind and solar is chiefly a business decision based on cost and price stability.

The city’s contracts for solar and wind power will provide wholesale electricity at a lower price than our previous contracts. These long-term agreements also provide a fixed cost that will enable the city to avoid the price volatility and regulatory costs we were likely to have seen had we continued to use electricity generated by burning fossil fuels. With energy costs locked in for the long-term, we can maintain competitive, predictable electric rates through 2041.

The city’s shift to renewables also was the result of factors related to our previous wholesale power contracts, the Texas electric grid, and timing.

Our municipally-owned electric utility, started in 1911, has used power supply contracts to provide electricity to our customers since we shuttered our city power plant in 1945. Ending a long-term wholesale power contract in 2012 left us free to seek new power suppliers.

Meanwhile, Texas has become a leader in wind generation. When wind turbines began to sprout in West Texas and the Panhandle in the 1990s, the state faced bottlenecks in transmitting that energy where it was needed, to the growing metro areas of Austin, Houston, Dallas, and San Antonio.

The Texas legislature and Public Utility Commission eased the bottlenecks with the construction of 3,600 miles of transmission lines at a cost of nearly $7 billion. Now wind farms in West Texas and the Panhandle can move energy to the state’s population centers.

That new transmission capacity and new renewable projects were in place when Georgetown sought bids for power suppliers in 2013. We signed a contract last year for energy from the Spinning Spur 3 wind farm 50 miles west of Amarillo. That project is currently under construction and will begin sending us power in January of 2016. Spinning Spur 3 will meet most of our current demand throughout the day, with the exception of the peak demand periods, especially in the summer.

Because Georgetown is in the fastest-growing large metro area in the U.S., we needed more capacity to meet projected growth. Due in part to a drop in price on photovoltaic solar panels, last year we received a low-cost bid on solar power, and this February we signed a contract to purchase power from a solar farm in west Texas that is currently under construction. That power will be online by 2017.

Using solar power in the daytime peak and wind power throughout the day matches our power supplies with local demand patterns. The solar power produced in West Texas will provide a daily afternoon supply peak that mirrors our demand peak in Georgetown, especially during the hot summer months. Wind power production in the Panhandle exists throughout the day and is highest in the evening or early-morning hours. This means that wind power can most often fill power demand when the sun isn’t shining.

We have been asked what happens if the wind doesn’t blow or the sun doesn’t shine out west. Will the lights go out? Given the wind profile of the Panhandle, the radiance rating for West Texas, and the amount of energy we have under contract, we know that our wind and solar farms will be able to provide our power throughout the day. If both resources were not producing simultaneously — an unlikely event — the lights would stay on because the Texas grid operator, the Electric Reliability Council of Texas, will ensure generation is available to meet demand. In the short term, our solar and wind farms will provide more overall energy than we need. This means we will be able to sell extra solar and wind power we don’t use, providing an overall benefit to power users in the state.

Another reason solar and wind energy makes sense relates to water. Drought conditions and half-empty reservoirs have been common in Texas in recent years. Traditional power plants making steam from burning fossil fuels can use large amounts of water each day. Our move to renewable power is a significant reduction in our total water use in Georgetown.

One of the most important benefits of being 100 percent renewable is the potential for economic development. Many companies, especially those in the high-tech sector, are looking to increase green sources of power for both office and manufacturing facilities. Our 100 percent renewable energy can help those companies to achieve sustainability goals at a competitive price without the burden of managing power supply contracts.

Georgetown may not be run by environmental activists, but our residents do want us help them raise their families and run their businesses in a manner that is cost-effective and sustainable. We hope other cities follow our lead. So don’t be surprised if at some point down the road you see Texas license plates emblazoned with solar panels and wind turbines.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME energy

Who Benefits Most From Cheap Oil?

Chinese President Xi Jinping (L) makes a statement before the media as Indian Prime Minister Narendra Modi (R) watches after signing agreements in New Delhi, India on Sept. 18, 2014.
Manish Swarup—AP Chinese President Xi Jinping (L) makes a statement before the media as Indian Prime Minister Narendra Modi (R) watches after signing agreements in New Delhi, India on Sept. 18, 2014.

The answer is not one but the two Asian Giants

We are living in a world obsessed with oil and its price movements. Some time back, when all the trade pundits were predicting a stable 100$ benchmark, the prices fell… and how! The current fall in the oil price has been particularly harsh and excruciating for some of the prominent players such as Russia and Venezuela. To add fuel to the fire, on March 16, 2015, the oil price plummeted to a 6-year low level of 42.98 dollar per barrel. With the possible addition of Iranian oil to the global oil supply, the refusal of OPEC to cut down its production levels, rising US crude inventory and weak global demand, one can easily predict that cheap oil is here to stay. These are testing times for global economy where a simple question arises: Who benefits the most from cheap oil?

The answer is not one but the two Asian Giants: India and China, who are among the biggest global importers of oil.

India

With a projected growth rate of more than 7.8% in 2015, India is all set to grow more than China according to the IMF and World Bank. With a consumption of more than 3 million barrels of oil per day, India is the fourth largest global consumer of oil in the world. Since the country imports around 80% of its total crude oil requirement, cheap oil has drastically reduced India’s import bill and current account deficit from the previous years. As per India’s current finance minister, the country might even achieve a current account surplus in the fourth quarter of 2015. Moreover, India has recently de-regulated the price of diesel and petrol and brought it in line with the international rates. The deregulation of fuel has reduced its retail cost which has resulted in reduction of the overall inflation rate.

Read more: Lifting The U.S. Oil Export Ban Is No Solution To Low Oil Prices

Most the major refiners in India are taking advantage of cheap oil and have been ramping up their production levels. Several public and private sector refiners have postponed or rescheduled their annual maintenance shutdowns and have decided to buy and refine more oil than before. India has a total refining capacity of around 220 million metric tons per annum. As the public sector refineries (government owned) in India are not allowed to hedge their crude prices, they have to buy the crude oil at the current international price, which falls in their favor at the moment. It is interesting to note that although India is a net importer of crude oil, it is a net exporter of refined products.

Improving and building new storage facilities

As per the Indian Strategic Petroleum Reserves Limited (ISPRL), India is building 5 million metric tons of crude storage facility in Vishakhapatnam, Mangalore and Padur (all located in southern India) to be commissioned by 2015. Building new storage facilities would ensure that the nation can buy and store sufficient cheap oil that can last for at least three months and safeguard itself from any unforeseen global events.

On one hand, where most of the global oil and gas companies have decided to drastically reduce their capex spending in 2015, Oil and Natural Gas Corporation Limited , India’s biggest public sector undertaking, has decided to increase its capex by 5 billion USD for 2015 ( Source : Press Trust of India, March 2015). Even oil marketing companies such as Indian Oil Corporation Limited, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited have decided to increase their capex investment for 2015. Reliance Industries Limited, India’s largest company, is currently expanding its Jamnagar petrochemical refinery which is also the world’s biggest refinery. Its expansion project, known as ‘J3’, is currently underway and it would enable the refinery to produce ethylene and other petrochemicals. India mostly imports ‘Oman- Dubai’ sour crude followed by Brent and Bonny Light.

Read more: Oil Markets Blow Yemen Crisis Out Of Proportion

China

Being the world’s largest importer of oil, China is poised to grow at a rate of 7.2 percent in 2015 and 7 % in 2016 according to the Asian Development Bank. A huge domestic demand and a robust growth rate have made the Chinese Dragon thirstier. China buys oil mostly from Middle East, especially Saudi Arabia, Oman, Iraq, UAE as well as other countries like Russia and Venezuela.

China’s Insatiable Appetite For Oil

As per the EIA, China is currently the biggest consumer of crude oil after the US and its consumption rate is about one third of the world’s consumption growth rate. In 2014, its crude imports averaged at around 6.2 million barrels per day .This means that cheap oil would hugely benefit the Asian giant as it would drastically reduce its overall import bill.

Read more: Driverless Cars Poised To Transform Automotive Industry

Strategic Planning

China has ensured that it protects itself from any potential oil shocks in the near future by creating an elaborate Strategic Petroleum Reserve (SPR) Plan. The country has more than 12 SPR sites with a capacity of more than 250 million barrels and has plans to expand it to 500 million barrels by 2020. It is interesting to note that China National Petroleum Corporation (CNPC) had bought close to 20 million barrels of crude oil towards the end of 2014 mostly from Middle East through its trading company. This shows that the Chinese are smart enough to cash in on cheap oil and build their strategic reserves to store it. Their internal consumption requirements would ensure that their strategy does not backfire.

Cash and Burn!

Much like India, even China exports much of its refined products to the global market. These exports are based on ‘quotas’ that are set by the Chinese government. The export quotas have increased in the last few years, which have ensured that refiners buy more cheap Oil and increase their outputs. It is therefore quite evident that both China and India are cashing in on cheap oil and burning it at a faster rate than anyone else in the world. Now, the million dollar question is: When does the party end?

This article originally appeared on Oilprice.com.

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TIME energy

Can China Promise Blue Skies for 2022 Winter Olympics?

chinese-flag-roof
F. Lukasseck—Corbis

Shutting down four coal-fired power plants by next year may not be enough

With the 2022 Winter Olympics looming, there are only two significant impediments to China’s efforts to host the Games in Beijing: Almaty, Kazakhstan, and the notorious smog that chokes the Chinese capital.

This isn’t the first time China has had to struggle against itself to make sure that an international event isn’t overshadowed – literally and figuratively – by nearly impenetrable air pollution. Smog was a significant factor in whether the International Olympic Committee would award the Summer Games to Beijing in 2008, a prize that China eventually won.

And last November Beijing hosted the 26th annual summit of the Asia-Pacific Economic Community (APEC), providing the group’s leaders with what became known as “APEC blue” – clear skies instead of the usual gray pall that congests the air around the Chinese capital. The term, coined in earnest, is now used sarcastically to describe any brief experience of something unusually pleasant.

Read more: Oil Markets Blow Yemen Crisis Out Of Proportion

Clearing the air was relatively easy for the 2008 Summer Games – banning auto traffic on roads in the area and shutting down factories – and similar remedies were applied for the APEC summit. But the Winter Games will be held in bitter February, when generators are working overtime to keep homes and office buildings warm. You can’t just turn off these generators during a Beijing February.

Nevertheless, the odds look good for Beijing to hold its second Olympic Games in 14 years. Already four candidates have dropped out of the running – Krakow, Poland; Lviv, Ukraine; Oslo, Norway; and Stockholm, Sweden. It’s not clear how strong Almaty’s bid is, but China recognizes that its biggest hurdle is smog.

Read more: Forget Rig Counts And OPEC, Media Bias Is Driving Oil Down

“I think this is a fact – Beijing’s air at the moment has a problem. We all know it. This is a problem that we have great determination to resolve,” Wang Hui, spokeswoman for the Beijing 2022 Olympic Winter Games Bid Committee, told a news a news conference on March 21. “The measures we have taken are the toughest.”

Wang said the government is spending $7.6 billion to fight smog but didn’t associate that effort directly with China’s bid to host the 2022 Winter Olympics.

Evidently one element of that effort is China’s decision to shut down by next year four coal-fired power plants in Beijing that now provide electric power and heat to the capital and its environs. These generators will be replaced with cleaner-burning gas-fired plants with a goal of reducing sulfur dioxide emissions by 10,000 tons, nitric oxide by 19,000 tons and eliminating 3,000 tons of dust each year.

Read more: The Most Challenging Oil And Gas Projects In The World

But closing these power plants alone won’t make skies blue over Beijing. The former director of the China Meteorological Administration, Qin Dahe, says the effort will require China to transform its energy and industrial infrastructure, and the public must contribute with personal conservation efforts.

The question, though, is whether even those efforts will be enough to clear the air by 2022.

Liu Xinhua, a spokesman for the Chinese Political Consultative Conference, said the Games offer a strong incentive not only for reducing smog by 2022, but also in helping the country reach its longer-term goal of blue skies over its major cities by 2030.

According to Li Ting of the Institute of Atmospheric Physics at the Chinese Academy of Sciences, blue skies are in China’s future. “If the region takes the opportunity of the games and steps up their industrial restructuring process … then Winter Olympics Blue is still possible.” he said.

This article originally appeared on Oilprice.com.

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Read next: China Is Using Drones to Fight Pollution

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TIME energy

Oil Council: Shale Won’t Last, Arctic Drilling Needed Now

Arctic Oil Drilling
Al Grillo—AP In this 2007 file photo, an oil transit pipeline runs across the tundra to flow station at the Prudhoe Bay oil field on Alaska's North Slope.

A new study from the Energy Department advisory council says the U.S. should begin Arctic drilling

(WASHINGTON) — The U.S. should immediately begin a push to exploit its enormous trove of oil in the Arctic waters off of Alaska, or risk a renewed reliance on imported oil in the future, an Energy Department advisory council says in a study to be released Friday.

The U.S. has drastically cut imports and transformed itself into the world’s biggest producer of oil and natural gas by tapping huge reserves in shale rock formations. But the government predicts that the shale boom won’t last much beyond the next decade.

In order for the U.S. to keep domestic production high and imports low, oil companies should start probing the Artic now because it takes 10 to 30 years of preparation and drilling to bring oil to market, according to a draft of the study’s executive summary obtained by the Associated Press.

“To remain globally competitive and to be positioned to provide global leadership and influence in the Arctic, the U.S. should facilitate exploration in the offshore Alaskan Arctic now,” the study’s authors wrote.

The study, produced by the National Petroleum Council at the request of Energy Secretary Ernest Moniz, comes at a time when many argue the world needs less oil, not more. U.S. oil storage facilities are filling up, the price of oil has collapsed from over $100 a barrel to around $50, and prices are expected to stay relatively low for years to come. At the same time, scientists say the world needs to drastically reduce the amount of fossil fuels it is burning in order to avoid catastrophic changes to the earth’s climate.

The push to make the Arctic waters off of Alaska more accessible to drillers comes just as Royal Dutch Shell is poised to restart its troubled drilling program there. The company has little to show after spending years and more than $5 billion preparing for work, waiting for regulatory approval, and early-stage drilling. After assuring regulators it was prepared for the harsh conditions, one of its drill ships ran aground in heavy seas near Kodiak Island in 2012. Its drilling contractor, Noble Drilling, was convicted of violating environmental and safety rules.

Environmental advocates say the Arctic ecosystem is too fragile to risk a spill, and cleanup would be difficult or perhaps even impossible because of weather and ice.

“If there’s a worse place to look for oil, I don’t know what it is,” says Niel Lawrence, Alaska director for the Natural Resources Defense Council. “There aren’t any proven effective ways of cleaning up an oil spill in the Arctic.”

But global demand for oil, which affects prices of gasoline, diesel and other fuels everywhere, is expected to rise steadily in the coming decades — even as alternative energy use blossoms — because hundreds of millions of people are rising from poverty in developing regions and buying more cars, shipping more goods, and flying in airplanes more often.

In order to meet that demand and keep prices from soaring, new sources of oil must be developed, the council argues. The Arctic is among the biggest such sources in the world and in the U.S.

The Arctic holds about a quarter of the world’s undiscovered conventional oil and gas deposits, geologists estimate. While the Russian Arctic has the biggest share of oil and gas together, the U.S. and Russia are thought to have about the same amount of crude oil — 35 billion barrels. That’s about 5 years’ worth of U.S. consumption and 15 years of U.S. imports.

The council’s study acknowledges a host of special challenges to drilling in the Arctic, including the sensitive environment, the need to respect the customs and traditions of indigenous peoples living there, harsh weather and sea ice.

But the council, which is made up of energy company executives, government officials, analysis firms and nonprofit organizations, says the technology and techniques needed to operate in the region are available now, and the industry can safely operate there. The report contends the industry has developed improved equipment and procedures to prevent a spill and clean up quickly if one occurs.

The council makes a number of suggestions designed to make U.S. Arctic development more feasible. They include holding regular sales of drilling rights, extending the amount of time drillers are allowed to work each year, and doing more scientific studies of the wildlife in the region to ensure it is disturbed as little as possible.

“It’s important to have good information to make these decisions,” says Jason Bordoff, director of Columbia University’s Global Energy Policy. “We need to make sure we’re doing this in the right way.”

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