TIME energy

Why Oil Prices Just Jumped by 27 Percent in 3 Days

Oil prices have posted their strongest rally in years

Oil prices have posted their strongest rally in years, jumping an astounding 27 percent in the last three trading days of August.

While much of the recent price movement defies reason and is enormously magnified by speculative movements by traders to take and cover their bets on oil, still, there were a series of rumors, events, and fresh data that helped contribute to the spike.

For example, on August 31, the oil markets woke up to the news that Russian President Vladimir Putin will meet his counterpart from Venezuela to discuss “possible mutual steps” to stabilize oil prices. The meeting will take place in China on September 3. Venezuelan President Nicolas Maduro has already called for an emergency meeting of OPEC, a call that has fallen on deaf ears, at least in the most important country of Saudi Arabia.

It is still highly unlikely, but the one country that might be able to change the minds of Saudi oil officials is Russia. Again, even if Russia promised to cut back oil production to boost prices (which it has not shown a willingness to do), Saudi Arabia has little trust in Moscow to follow through on those promises. Similar understandings to cooperate in the past have fallen apart, making coordinated action unlikely.

Moreover, it is not at all clear that Russia’s best move is to cut back on production. Sure, it wants higher oil prices, but selling less oil will arguably offset price gains. And the depreciation of the ruble has cushioned the blow of low oil prices – Gazprom just reported a 29 percent gain in net profit for the second quarter compared to a year earlier, largely due to a weaker ruble. So, Russia is eager for oil prices to rebound, but the Kremlin is not as desperate as Venezuela.

Yet, bringing Russia to the table was enough to raise the prospect of OPEC production cuts, at least for oil traders, which bid up the price of oil on August 31.

Adding to the speculation was a new OPEC bulletin, which included a commentary about the state of the oil markets, entitled, “Cooperation holds the key to oil’s future.” Most of the article was unremarkable analysis about rising oil demand, but the article concludes with this:

“Cooperation is and will always remain the key to oil’s future and that is why dialogue among the main stakeholders is so important going forward. There is no quick fix, but if there is a willingness to face the oil industry’s challenges together, then the prospects for the future have to be a lot better than what everyone involved in the industry has been experiencing over the past nine months or so.”

In all likelihood, that is a throwaway line paying lip service to collective action, with no substance behind it. But the oil markets saw a glimmer of hope in a reevaluation of the group’s strategy, possibly portending a production cut. No doubt the Venezuela-Russia meeting added fuel to that speculation. Oil markets, as irrational as they are, don’t need confirmation to bid up prices. Oil prices jumped by more than 8 percent on the last day of August.

But another major reason that oil prices shot up at the end of August was due to very significant revisions by the EIA on U.S. oil production data, pointing to sharper contraction than was previously assumed. The EIA released new survey-based data, which is more accurate than their mere estimates based on extrapolation, and the new data showed that between January and May, the U.S. actually produced 40,000 to 130,000 fewer barrels per day than the agency previously reported. Then, in June, oil production dropped by 100,000 barrels per day from the month before, hitting just 9.3 million barrels per day (mb/d).

The largest downward revision came from Texas, which has been producing 100,000 to 150,000 fewer barrels than previously reported for the first half of this year.

To put that in perspective, consider the agency’s own weekly data, which comes out every Wednesday, and although it is less accurate than the retrospective looks, oil prices move up and down in response to the results. In its weekly data, the EIA shows U.S. oil production above 9.5 mb/d through the middle of July. For the week ending August 21, the EIA says the U.S. is producing 9.33 mb/d, above what the agency now says the U.S. produced in June.

In other words, for several months the oil markets had believed the U.S. was producing much more oil than it actually was. Instead of continuing to climb through much of the spring and leveling off into the summer, oil production actually peaked in April and has declined consistently since then. When the EIA released this latest revision on August 31, oil prices shot up.

Finally, although probably not quite as important as the OPEC rumors and the EIA data revisions, Canada suffered some outages at its oil facilities that could lead to a disruption in supplies. Canadian Oil Sands had to shut down production of its synthetic crude oil facility after a fire damaged equipment. And Nexen Energy, an oil producer in Canada and subsidiary of China’s CNOOC, had to close 95 pipelines after inspectors found problems with them. Neither company offered specifics on what the disruptions mean for their production levels, but if the outages persist, they could cut down on supplies. Canada’s benchmark for synthetic crude rallied on the news.

Citigroup analysts think the recent rebound is overdone, calling it a “false start,” and the 27 percent gain in just three days was “driven by a misread of market data and financial headlines.” Indeed, the largest three-day price rally since 1990 was driven by headlines, but given the severe volatility and huge price swings, oil prices are not trading on the fundamentals right now. Nobody knows what will happen next.

This article originally appeared on OilPrice.com.

More from OilPrice:

TIME Iraq

Low Oil Prices Add to Iraq’s Stability Concerns

iraq-flag
Getty Images

If oil prices don’t rebound, Iraqi currency will come under increasing pressure

Iraq has managed to ratchet up oil production to record highs, against what would seem to be insurmountable obstacles.

Despite political gridlock, a fight against ISIS militants, and the ongoing need to invest in critical infrastructure, Iraq has succeeded in boosting oil production above 4 million barrels per day (mb/d), with significant month-on-month increases over the course of much of 2015. That is enough to make it the second largest OPEC producer behind only Saudi Arabia.

Yet, like most of the oil-producing world, Iraq is facing a significant financial crisis. Oil prices have fallen by more than 60 percent since the summer of 2014, with Brent crude trading below $45 per barrel as of August 27. The shrinking revenue that Baghdad is taking in has more than overwhelmed the impressive production gains.

Now, Iraq’s currency is getting squeezed. According to Bloomberg, Iraq’s dollar reserves have declined by 20 percent to just $59 billion as of July 23. And in order to maintain the dinar’s pegged currency rate – which stands at 1,166 dinars per dollar – the Iraqi central bank burned through $4.6 billion in foreign exchange so far in August.

Iraq is not alone. Emerging markets across the world are facing currency crises, particularly those that are commodity producers. Currencies in many Latin American countries have been battered by the downturn in commodity markets. But China’s devaluation has put an even larger strain on other emerging markets, precipitating a devaluation in Kazakhstan, and putting stronger downward pressure on countries like Nigeria, Russia, Turkey, among others. Even Saudi Arabia has come under heightened scrutiny over the integrity of its currency peg.

So it is no surprise that Iraq has been caught up in the worldwide sell off.

Iraq’s dwindling financial resources are a frightening problem. The fight against ISIS, which has put a greater strain on the Iraqi budget since they burst onto the scene last summer, could falter. Shrinking oil revenues affect not just Iraqi security forces, but also Kurdish forces in the northern part of the country. A deal fell apart between the central government and Kurdistan that essentially allowed Kurdistan to export oil under the purview of the government, and in exchange, Kurdistan would receive its promised share of the national budget.

That deal collapsed, in part because Kurdistan wasn’t producing enough oil, but also because Baghdad’s own funds were drying up. Kurdistan, in turn, has had trouble paying its own security forces. In other words, Iraq’s worsening financial and fiscal crisis could undermine the fight against ISIS on multiple fronts.

Iraq, just like Saudi Arabia, will turn to the bond markets for a fresh source of capital. But if oil prices don’t rebound, its currency will come under increasing pressure.

The financial troubles also undermine the country’s oil sector. The government in Baghdad (and consequently, the government in Erbil) has fallen behind on payments to private oil companies operating in the country. In an effort to square up, Iraq recently paid $9 billion in back payments owed to oil companies from 2014, according to Reuters. And to address arrears accumulated over the course of 2015, the government plans on paying companies back in stages.

Operating on the massive oil fields in Iraq’s south, near the city of Basra, companies including BP, Royal Dutch Shell, ExxonMobil, Eni, and Lukoil have seen their payments interrupted. In Kurdistan, companies like Genel Energy, Gulf Keystone Petroleum, and DNO, have been slammed by a cut off in payments from the Kurdish Regional Government (KRG). Running out of options, the KRG has moved to sell oil on its own, despite protests from Baghdad. With direct crude sales, the KRG announced that in September it will begin reimbursing private companies operating within its territory.

An outage of an indispensable pipeline route through Turkey, allowing for Kurdish oil to be exported, has not helped matters. PKK militants have attacked Turkish pipelines, causing the disruption of exports from Kurdistan. Since July, the KRG says pipeline outages have cost the government $501 million.

Ensuring payments to oil producers in Iraq, even if it means reworking the fees that companies are paid, is going to be a pivotal problem to resolve. If oil companies slash their budgets and ultimately produce well below their potential, that would lead to long-term funding problems for the Iraqi government.

But with the fall in oil prices and the global stock market sell off, Iraq faces a more immediate and urgent crisis. Amid searing heat, electricity blackouts, and sudden financial upheaval, the Iraqi public is starting to get restless.

This article originally appeared on Oilprice.com

More from Oilprice.com:

TIME energy

The ‘Fusion Engine’ Could Become a Reality Before 2020

"I would like nuclear fusion to become a practical power source"

Fusion has always been maligned by the old joke that it is a breakthrough technology that is just 20 years away…and always will be. Indeed, fusion energy has failed to materialize despite decades of hype. Although the idea has repeatedly disappointed, the concept of generating energy from fusion is still around as companies like Lockheed Martin, Lawrenceville Plasma, Tri Alpha and Helion Energy are developing their own fusion reactors.

Fusion is a basically a process through which the heated ions collide and fuse together by releasing an enormous amount of energy which is almost 4 times the intensity of a nuclear fission reaction. Another advantage of a fusion reaction is that it is much cleaner and safer when compared to a fission reaction.

There have been some promising developments in the field of nuclear fusion in last few years.

Lockheed Martin, the U.S. defense giant, has been one of the front runners in an effort to successfully develop and commercialize the nuclear fusion reaction as it has been working on a ‘compact fusion’ reactor that might be capable of powering commercial ships, power stations and air travel in the near future. Helion Energy is another company that has been in news thanks to the fresh round of funding for its own fusion reactor.

Helion Energy raised close to $10 million in a recent funding round that took place in July 2015. This was disclosed by Helion through a filing with Securities and Exchange Commission. This funding would enable the Redmond-based group to build its own fusion reactor for generating massive amounts of clean power.

What is interesting is the fact that the company further intends to raise more than $21 million by continuing the current raising. Helion is working on a ‘Magneto-Inertial’ fusion process which combines the heat of pulsed inertial fusion and the stable nature of steady magnetic fusion. Helion claims that this combination creates a ‘system’ which is cheaper and smaller than other fusion reactors such as the one being developed by Lockheed Martin.

As the company gears up to perform further tests and experiments, it’s CEO, David Kirtley, has indicated that Helion would be able to develop its fusion machine by 2016 at an expected cost of $35 million. He further claims that Helion could build commercial fusion systems by year 2020 at a cost of $200 million.

Detailed Plan or a ‘Pipe dream’?

Calling its creation “The Fusion Engine,” Helion Energy’s system would heat helium and deuterium from seawater as plasma and then compress it to achieve fusion temperature (greater than 100 million degrees) using magnetic fields. Although this seems to be a perfect technological innovation, there is still a lot to be done as far as getting the fusion engine to hold up under strict field tests. The size of these reactors, for example, is still a drawback as they are bulky and occupy a lot of space.

“I would like nuclear fusion to become a practical power source. It would provide an inexhaustible supply of energy, without pollution or global warming,” said the world renowned physicist Stephen Hawking. If there are timely innovations in field of superconductors, batteries and materials that facilitate a compact and a more efficient fusion reactor, that could be enough to make fusion energy viable. The technology that is available today can only produce a Helion ‘fusion engine’ which is capable of producing commercial energy of around 50 megawatts.

Still, there have been many promises before. We should await more permanent proof that the scientists can overcome the significant engineering obstacles in their way. But, unlike in the past, there are now a range of private companies and venture capital in the space, no doubt a development that bodes well for the technology’s eventual commercialization.

This article originally appeared on Oilprice.com

More from Oilprice.com:

TIME energy

How the American Oil Industry Got Its Start

Oil Well
AP This is the well near Titusville, Penn., that pumped the petroleum industry into existence 100 years ago. The picture was taken four years after Col. Edwin L. Drake struck oil on Aug. 27, 1859.

Aug. 27, 1859: Edwin Drake strikes oil in Pennsylvania with the first commercial well in the U.S.

America’s first successful wildcatter had a lot in common with fiction’s most famous whaler. Edwin Drake was as obsessively single-minded in his hunt for oil as Ahab had been in his quest for the white whale: He was called Crazy Drake, per PBS, after pouring the modern equivalent of more than $40,000 in investors’ money — and his own endless labor — into a search that spanned more than a year without results.

But on this day, Aug. 27, in 1859, Drake’s monomania paid off. He struck oil after drilling 69 ft. into the ground in Titusville, Pa., launching the petroleum age and making Titusville ground zero for the Pennsylvania oil rush.

Unlike Ahab (spoiler alert), Drake wasn’t destroyed by his discovery — at least not instantly. But although he was the first to engineer a successful oil-drilling system, lining his well with pipe to keep it from caving in, he never patented the method, and the money he’d made when he struck oil soon dried up.

A century later, TIME referred to him as “a sickly, bearded failure of a man in a stovepipe hat” in a story that nonetheless acknowledged that “[t]hough Discoverer Drake wound up virtually penniless and forgotten, his find opened the scramble for oil across the land,” inspiring a legion of oil prospectors to chase what had become, by 1959, “the greatest single source of wealth in America.”

His discovery also helped bring the whaling chapter of American history to a close. At the time, of course, petroleum didn’t power cars; it was used primarily to make kerosene for lamps. And it proved far cheaper than the prevailing source of lamp fuel: whale oil.

At its peak, around the time Melville published Moby Dick in 1851, whaling was the fifth-largest industry in the U.S., netting the equivalent of roughly $10 million, according to The Atlantic. But by the time Drake drilled for oil, over-hunting in the waters around North America had decimated local whale populations, forcing whalers to venture farther and stay at sea longer to catch their prey — and making the hunt both more costly and more dangerous, some historians say.

The parallels between the declining availability of whale oil at that time and the modern-day perils of the petroleum industry have not gone unobserved. As the New York Times has noted, whale oil once seemed to be an “impregnable” industry that the world could never do without. But petroleum, and the kerosene it produced, proved a fiercer rival to whalers than boat-bashing sea creatures.

Read more about Edwin Drake, here in the TIME archives: The Greatest Gamblers

TIME energy

How Low Oil Prices Have Affected Energy World So Far in 2015

oil-rig-ocean
Getty Images

Energy as a group and as individuals have collapsed in value

It has been a rough ride for energy stocks this year as almost all investors in the sector know. There are always extreme winners and losers among the thousands of publicly traded companies in the stock market, but broadly speaking stocks as a whole generally rise over time. This year has been an exception for energy stocks though.

Not only has energy as a group generally fallen, but the vast majority of individual energy stocks themselves have also collapsed in value. In fact, since the start of 2015, only 1 out of every 6 newly issued stocks or bonds in the energy space has appreciated in value. Most of the top performing energy stocks this year have still only managed to eke out modest gains on the order of 5-10 percent Year-to-date (YTD). Year to date returns are always a little odd though, since it’s hard to compare them to the typical mean annualized return of around 10 percent that has held for the broader market over the last 50 years. Because of that, it’s actually more useful to look at returns over the last year.

The list of the top performing U.S. energy companies with a market cap of at least $300 million is below.

chart1
Oilprice.com

* ALDW would also make the list, but is excluded here due to relationship with ALJ.

The notable point here is how low the returns are to make the Top 10 performers list. Most of the firms on the list are actually energy sector intermediaries involved in processing or transporting the product rather than drilling for it or servicing firms that do drill. Also, notably absent on the list are most of the well-known high growth names in the energy sector. That includes all the major frackers from Pioneer to Continental.

The best performing firms over the last month show a similar trend.

chart2
Oilprice.com

Stocks like Flotek and TETRA are bouncing after substantial declines all year, largely on investors finding good news after dissecting earnings season reports. PDCE is one of the few pure-play E&P firms that has truly been holding its own for most of the year and at least tread water. The success stories of the year are in refiners like PBF, HFC, and ALJ. The point here is that a lack of stock picking ability is not what has hurt E&P investors this year – no amount of stock picking ability would have helped as virtually no E&P firms have managed to stay above the water!

The list of worst performing stocks emphasizes that point and reveals how deep the carnage has been for investors.

chart3
Oilprice.com

With declines of this magnitude, it is clear that the macro-environment has exposed a lot of energy companies. This makes it extraordinarily difficult for investors to find and select companies with great growth prospects.

This article originally appeared on Oilprice.com

More from Oilprice.com:

TIME energy

Oil Price Collapse Triggers Currency Crisis in Emerging Markets

oil-pumpjack
Getty Images

The more emerging market currencies lose value, the more concern there is about their health

Emerging market currencies are getting slammed by the collapse in commodity prices, a downturn that has accelerated in recent weeks.

The health of many middle-income and emerging market economies has been predicated on relatively strong commodity prices. A whole category of countries achieved strong growth by exporting their natural resources. For example, Brazil’s impressive economic expansion since the early 2000s, and the huge number of people that were able to jump into the middle class, was made possible by exporting oil, soy, iron ore, beef, and a variety of other resources. High prices for these goods led to more growth, a strengthening of the currency, and a real estate boom in cities like Rio de Janeiro.

The same story unfolded in many other commodity-driven economies, from Latin America, to Africa, to Central and Southeast Asia.

However, with commodity prices down dramatically from a year ago, growth in these countries has slowed, and their currencies are sharply weaker than they have been in the past.

In fact, the fall of Brent crude below $50 per barrel has sparked a sudden downturn in emerging market currencies across the globe.

But it isn’t just oil prices slamming currencies. The worries over the Chinese economy, including the plunge in its main stock market this summer, have raised concerns about the vigor of emerging market economies. Worse yet, China’s surprise devaluation has sent shock waves through currency markets around the world.

Other countries now feel pressure to let their currencies depreciate, and if they have adhered to a currency peg up until now, some are being pushed to float. Kazakhstan decided to scrap its currency peg last week, and the tenge promptly lost 23 percent of its value against the dollar. Vietnam also devalued the dong.

The devaluations tend to have a cascading effect, with other emerging markets coming under increasing pressure from their competitors.

Nigeria’s naira is under fire following Kazakhstan’s move, and Nigeria’s central bank vowed to fight off speculative attacks on its currency. “We haven’t seen any reason so far to institute a change in the foreign-exchange policies,” a spokesman for the Central Bank of Nigeria, told Bloomberg in an interview. “The preponderance of foreign currency in the country has led to speculative attacks on the naira. People who have done it in the hope we’ll devalue will be hurt.”

Russia’s ruble fared worse following the move by Kazakhstan to float its currency. It is now at its lowest level in six months, and could soon blow through the record low seen earlier this year when Russia suffered a brief currency crisis. Unfortunately for Moscow, the run on the currency comes on top of brewing fiscal problems, as the budget deficit has ballooned to its largest level since 2010, following the financial crisis.

However, Kazakhstan’s decision to float the tenge made sense given China’s devaluation and Russia’s own action to allow the ruble to lose value over the last year. Kazakhstan was seeking competitiveness for its economy. But one devaluation begets another.

The list of currency problems stretches long. South Africa’s rand is at its weakestin over a decade. Turkey’s lira has lost 19 percent so far in 2015. Mexico peso haslost about a quarter of its value since August 2014. The more emerging market currencies lose value, the more concern there is about their health.

A lot of uncertainty reigns for emerging market currencies. All eyes are on Washington for what comes next. The Federal Reserve is weighing an increase in interest rates for the first time in years, a milestone as the central bank seeks to (slightly) withdraw its heavy hand in the U.S. economy. However, an increase in interest rates would strengthen the dollar.

That would make the currency problems in emerging markets worse, both from the comparative devaluation against the dollar and from a potential further weakening in commodity prices. The global concerns could convince Janet Yellen to wait.

This article originally appeared on Oilprice.com

More from Oilprice.com:

MONEY Gas prices

$2 Gas Should Be Making a Comeback Soon

Arco gas station, Riverbank, Stanislaus County, California, January 21, 2015.
Don Bartell—Alamy

Gas prices are expected to plunge this fall.

The current disconnect between low oil prices and relatively expensive gas prices has understandably been frustrating for American drivers. Oil prices are at a six-year low, so on the surface it makes little sense that prices at the pump would be soaring.

For the most part, gas prices are out of whack in two areas of the country—the Midwest and West Coast—and high prices there have driven the national average upward, to $2.66 today from $2.58 a week ago. Thankfully, the reasons for disproportionally high prices in these regions are expected to be addressed in the near future, and experts say we should be back on track for $2 gas by this autumn or early winter.

Specifically, refinery problems in California and Indiana have been blamed for the broader gas price hikes. An explosion at an Exxon Mobil refinery in Torrance, Calif., earlier this year has led to stubbornly high gas prices in California, including a few dramatic price hikes this summer as demand seems to have exceeded supply. (High prices in California and the West Coast have also led drivers to complain of price gouging.) Similarly, the recent outage at the BP refinery in Whiting, Ind., has caused ripples throughout the Midwest, with overnight increases of 40¢ per gallon in cities like Cincinnati. In Chicago, the current average is $3.46 for a gallon of regular, up 70¢ in a single week.

Industry experts say that these price hikes are temporary, however, and that the refinery issues in both California and Indiana will be less of a problem starting in September. Consequently, gas prices are expected to plummet this fall—assuming no other refinery problems or other complications arise.

Tom Kloza of the Oil Price Information Service told USA Today that as the industry manages to better cope with the Indiana refinery shutdown, he expects the national average to drop 10¢ to 15¢ in early fall, followed by further decreases of perhaps 50¢ per gallon by year’s end. Seeing as the national average is currently $2.66, that could mean $2 gas for much of the country by Christmas.

The Exxon Mobil refinery in California, meanwhile, is hoping to use some older equipment and make other adjustments by next month that would allow it to significantly increase production, which has been operating at just 20% capacity for months. For a variety of reasons, though, California always has among the nation’s most expensive gas prices, and drivers there will have to be patient as prices will likely ease down slowly.

Speaking specifically about California, Gordon Schremp, senior fuels specialist at the California Energy Commission, told Reuters last week, “We are going to have very expensive gasoline at least through Thanksgiving.”

MONEY Gas prices

Drivers Outraged as Gas Prices Soar While Oil Prices Plummet

paying for gas
Predrag Vuckovic—Getty Images/iStockphoto

Prices at some gas stations spiked 50¢ overnight.

Earlier this week, analysts proclaimed that $2 gas would be common once again around the U.S. Global oil prices are cratering, nearing $40 per barrel, and shrinking wholesale rates can only result in lower prices at the pump.

Or so one would think.

Despite plunging oil prices, drivers throughout the Midwest have been subjected to dramatic price spikes at gas stations this week. In Cincinnati, for instance, the price for a gallon of regular increased more than 40¢ overnight at some stations. Less than two weeks after analysts predicted average prices in Michigan would drop below $2 by Christmas, average prices have soared to $2.98 according to AAA. The average price per gallon in Illinois has inched up to just under $3 as well.

The rise in prices throughout the Midwest has caused the national average to increase too, hitting $2.65 on Friday. That’s after a 27-consecutive-day decrease in prices had left the average at $2.58 on Tuesday.

Indiana has been one of the hardest-hit states, with gas stations in greater Indianapolis charging 67¢ more than they were earlier in the week. Speaking of Indiana, a problem with a refinery in the state is what’s being blamed for broad price hikes throughout the region. Specifically, an outage in part of the British Petroleum refinery in Indiana—”the most important unit in the biggest plant in the Midwest,” per Bloomberg—is what’s causing prices to spike during prime summer driving season.

Drivers are understandably more than a little upset at the unexpected rise in gas station prices, and some aren’t accepting the refinery problem as a legitimate reason for the swift increase. In Michigan, Rep. Michael Webber even called on the state attorney general to launch an investigation into the matter, which he suggested smells of opportunistic price gouging. “This dramatic increase in price deserves a full investigation by a trusted Michigan official,” Webber said in a statement. “In Michigan’s improving economic climate, the necessity of this price spike must be questioned.”

Meanwhile, Reuters is reporting that the refinery outage being blamed for extraordinarily high prices in the Midwest “may take months to resolve.”

TIME Environment

Could Obama’s Clean Power Plan Lower Your Electric Bill?

Dave Scarantino, senior installer for SolarCity Corp, installs solar panels on the rooftop of a home in Kendall Park, N.J., U.S., on Tuesday, July 28, 2014.
Michael Nagle—© 2015 Bloomberg Finance LP Dave Scarantino, senior installer for SolarCity Corp, installs solar panels on the rooftop of a home in Kendall Park, N.J., U.S., on Tuesday, July 28, 2014.

Critics of President Obama’s plan to reduce greenhouse gas emissions in the U.S. energy sector have asserted for more than a year that the plan will do more harm than good, costing homeowners and businesses by slashing jobs and driving up prices.

But researchers at the Georgia Institute of Technology have concluded that the Clean Power Plan will actually lower electricity bills.

In a report released last week, public policy professor Marilyn Brown found that boosting renewable energy sources such as wind and solar power would reduce energy costs in the long run as they become more readily available.

Even if energy costs did go up in the short run, she argued that would cause consumers to invest more in things like energy-efficient appliances, which would again lead to lower electricity bills over time.

“The idea that customer electricity bills may actually go down may seem counterintuitive to some, but it’s a natural outcome of making smart investments in energy efficiency — better heating and cooling equipment, programmable thermostats, appliances, replacing incandescent bulbs, using cogeneration, as well as insulation and windows,” said Brown in an email to TIME. “These investments can all produce lower electricity bills.”

Not everyone buys that analysis, however.

Nicolas Loris, a senior policy analyst at the Heritage Foundation, said that there’s nothing stopping consumers from buying energy-efficient appliances now, so that can’t be a reason for arguing the plan would reduce costs.

“Families and businesses already have the option to buy more energy efficient goods,” he said. “This logic is like a business telling an employee they’re getting a pay cut but to save money they can shop at Target. The option to shop at Target exists without the pay cut.”

But Brown says that people need to take the long view of the energy market.

“As energy is used more efficiently, non-competitive power plants can be retired, construction of new coal plants can be deferred and transmission and distribution line upgrades can be delayed,” says Brown. “All of which would lower rates and further lower the energy bills of Americans.”

TIME BMW

Why BMW Is Paying Some Car Owners $1,000

BMW Launch Their First All- Electric Car
Dan Kitwood—Getty Images

It's trying to get people to change their behavior

Last year, Los Angeles carved out a plan to become a national electric vehicle leader by 2017. The city has since hit a roadblock. The environment would benefit radically if everyone had an electric car, but as the electric cars become more popular, utility companies have to figure out ways to support them.

BMW and PG&E, a California utility company, have joined forces in a trial that they’re calling the “BMW iCharge Forward” program, which they hope will solve the issue. They announced the 18-month trial in January and are finally starting it this month.

PG&E will alert BMW during peak hours when it wants to limit energy consumption. The car company will then alert drivers not to charge their cars for the next hour. The drivers can select their preferred driving hours, which BMW will keep in mind when choosing which customers they’ll request to refrain from charging. The drivers can also opt out if they can’t commit to a delay.

100 BMW i3 drivers have agreed to participate. Each participant receives a $1,000 gift card at the beginning of the program, and at the end of the 18 months they’ll get a second one worth up to $540, depending on how many times they’ve complied with the delay.

Your browser is out of date. Please update your browser at http://update.microsoft.com