In his podcast addressing the markets today, Louis Navellier offered the following commentary.
War Against Natural Gas
The G7 meeting in Japan will be interesting this week. Germany is in disagreement with Britain and France over support for natural gas. In fact, Germany has strived to label natural gas as “green.” In North America, we do not know what to do with all the natural gas that we have, which is why in North Dakota natural gas in their crude oil fields is “flared,” since there are no pipelines to transport natural gas.
So if California, New York, Britain and France succeed in curtailing natural gas usage, the excess natural gas will be increasingly flared and burned anyway. I remain perplexed by the seemingly growing war against natural gas, especially since natural gas will be needed to make the hydrogen that the green folks are calling for as the fuel of the future. Currently, green hydrogen is cost-prohibitive.
Speaking of carbon emissions, Alberta is burning as are boreal forests in Russia from thunderstorms. In Alberta alone, over 1 million acres have burned this year and caused 30,000 people to relocate. The annual wildfires in Alberta often disrupt crude oil and natural gas production and 320,000 barrels per day of oil equivalent representing 3.7% of Alberta’s production were offline last week.
The boreal forests in Alberta and Russia have ground characterized by peat, which is next to impossible to put out until snow falls on the forest floor. As a result of an early start to the boreal forest fire season this year, 2023 will likely set the record for carbon emissions. Naturally, the G7 has no plan to squelch these seasonal forest fires, so the green police literally cannot see the forest through the trees.
The Real Problems
ScienceAdvances published a study last year forecasting that the annual boreal forest fires in the Northern Hemisphere could release 12 gigatons of carbon dioxide per year into the atmosphere. Historically, forest fires have accounted for approximately 25% of global carbon emissions.
By comparison, the International Energy Agency said that carbon dioxide emissions from energy and industry globally hit a record of 36.8 gigatons in 2022 due to China, India and other emerging economies.
So for everybody worried about carbon dioxide emissions, which were not originally named in the Clean Air Act, the real problems are natural forest fires from thunderstorms as well as fossil fuels, especially coal, in emerging economies. As a result, I am not sure the G7 or COP28 cannot do much to impact global carbon emissions.
Naturally, I should add that a super volcano could also erupt and boost carbon emissions, so there is virtually nothing that mankind can do about it, other than to maybe tap into geothermal energy for electricity generation.
According to Clarksons Research, there are 625 LNG ships in the world and the fleet will be expanded to 907 by 2027. By comparison, there are 849 very large crude oil carriers (VLCC) operating around the world and the fleet will be expanded to 903 by 2027. In other words, by 2027, there will be more LNG carriers than VLCCs.
So despite a war on natural gas by California, New York, Britain and France, the rest of the world is following Germany’s advice and is increasingly turning to natural gas. Obviously, the chaos surrounding Russia is boosting the fleet of LNG carriers and since its natural gas pipelines to Europe were blown up, even Russia is now fueling LNG carriers.
Speaking of Russia, the International Energy Agency (IEA) reported that Russian crude oil exports rose 50,000 barrels per day in April to a post-invasion high. Almost 80% of Russia's crude oil exports go to China and India according to the IEA.
Specifically, Russia shipped 5.2 million barrels of crude oil in April, where China received 2.1 million barrels and India got 2 million barrels. In a report on Tuesday, the IEA said “Russia seems to have few problems finding willing buyers for its crude and oil products.” Due to lower crude oil prices, Russia’s crude oil revenue has declined 27% in the past year.
Expensive Carbon Capture
The Wall Street Journal had a great article about “carbon capture.” There is only one commercial power plant in North America, namely the Boundary Dam Power Station Unit 3 in Saskatchewan, Alberta, which is a coal-fired power plant that is fitted with a $1.1 billion carbon-capture system.
SaskPower said the benefits of operating a coal-fired power plant utilizing carbon capture are becoming less apparent, which is raising doubts about the Biden Administration’s goal of achieving carbon dioxide free electricity by 2035.
The oil industry has been experimenting with carbon capture technology to recover more oil from existing wells, which is where much of SaskPower’s carbon dioxide is piped 36 miles to extract more crude oil from geological formations. The only commercial scale carbon capture plant in the U.S. was the Petra Nova coal-fired plant in Texas that closed after operating for three years in 2020.
Even if carbon capture can be perfected, the next corundum is, will it be profitable where there are no producing oil fields? As a result, the Biden Administration's goal of shifting to hydrogen or carbon capture for electricity generation to eliminate carbon dioxide emissions looks futile.
I should add that Chevron’s flagship carbon capture experiment, the Gorgon CCS project in Australia is currently running at one-third capacity and needs billions more to expand. David Fallon, Chevron Australia’s general manager for energy transition, said, “We will not hide from the fact that it is not perfect.”
Gorgon was designed to capture and store 4 million tons of carbon dioxide per year and is currently running at 1.6 million tons. Carbon capture is currently very expensive. Under a deal with Western Australia, Chevron must buy 2.3 million tons of carbon offsets due to Gorgon’s shortfall.
California has historically become a boom/bust state for tax collections, since approximately 3,000 people pay the vast majority of the state’s taxes, especially from capital gains. As a result, California has gone from a surplus a couple of years ago to a big deficit nowadays.
Increasingly, the federal government has become more dependent on capital gains for tax revenue, but due to lackluster stock and real estate markets, it appears that the federal government’s deficit ceiling deadline may occur sooner than later.
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