I'm just reading now about the creation of the new National Energy Council "which will consist of all Departments and Agencies involved in the permitting, production, generation, distribution, regulation, transportation, of all forms of American Energy to establish U.S. energy dominance” around the world", headed by North Dakota Governor Doug Burgum.
And a link to a talk with Chris Wright and Maynard Holt:
Thanks Arjun for the very insightful article. I believe that making sense of the energy transition requires to think in terms of incentives and to recognise that it is wishful thinking to expect people to accept to pay more for their energy when cheaper alternatives exist. As a new joiner to the blog, I was however puzzled as to why the US *should* maximise its oil production? First, isn’t there an obvious market failure in that the price of oil is implicitly subsidised (something that a carbon price addresses)? And second, wouldn’t there be a case to invest in developing new technologies that render oil obsolete? In which case oil production may have to be abandoned earlier than anticipated and by no means maximised? Very grateful if you can provide links to articles that tackle this question. Cheers, Brendan
Hi Brendan, thank you very much for your comment and questions. When I look at global oil markets which are about 100 million b/d, with the US only about 20% of that share, there is considerable scope from a US policy perspective to ensure we do not willfully (or otherwise) enact policies that seek to limit US oil and gas production. An example would be reducing lease sales in the Gulf of Mexico or making promises to limit drilling on federal acreage. The actual mechanism for spending capital and drilling wells, etc., is entirely done by private companies. Right now, we have a situation where policy makers that are concerned that we are in or will be in a "climate crisis" are proposing steps to keep US oil and gas production in the ground. It is that part that I am pushing back on. Hope that makes sense. And 100% agree that we should be motivating spending on new technologies, including those that can displace global oil demand. In my view, you would actually want to do both.
Thanks Arjun for your insights. I am writing for clarification regarding your “Super Vol” hypothesis Do you have an older article that I can link to that talks about this idea. Thanks again. I appreciate “everyone deserves to be energy rich”
Regarding forecasting institutions, do you think the IEA's climate-first (lately an almost 'renewable-advocacy'), approach will be impacted? Or is that more specific to Mr. Birol's administration?
To add to the discussion, most of us will know the newly nominated Secretary of Energy, Chris Wright current CEO of Liberty Energy. I listened to both his podcasts with Robert Bryce and he has excellent energy industry experience and I think the right approach.
Sharing the links here for anyone, well worth a listen:
Investor, I am not sure there will be a meaningful change in direction at the IEA. It is true that some have called for greater scrutiny, etc., but I think there direction of travel is pretty firmly entrenched. That said, we would be happy to be proven wrong on this point. I for one am not an IEA hater. They do a lot of great work. I just don't agree with the advocacy that we see.
What a great summary of the current state of energy and likely path forward. Thanks for your thoughtful work!
As a corollary to “everyone has a right to be energy rich”, I’d offer “it is immoral to deny energy to anyone”.
If we can start formulating policies with those two truths as foundational principles, I believe we’ll see this resilient planet has all the resources we need for all to flourish. Here’s to making that happen. Cheers!
Thank you NTX! and yes, I agree it is immoral to deny energy to anyone. I regularly hear from folks in the "climate crisis" crowd that Earth cannot handle everyone rising to our living standards (irrespective of whether you believe that is possible for non-environmental reasons). We are all entitled to our views as I stated in this post. However, the idea that any of us in the rich world can tell anyone in the developing world that we cannot have everyone getting rich is not a perspective I share.
I think the biggest impact of the second Trump administration will likely be a major rollback of
1) Green energy subsidies and mandates
2) Regulations holding back natural gas and nuclear.
My guess is that this will lead to a substantial increase in natural gas production and a major decline in new solar and wind projects. I think that it will be a long time before nuclear can be price competitive.
Trump will likely have much less impact on oil, which will boom regardless, and coal, which is in terminal decline in the US.
My father was pretty big in the petroleum geology field, so I have been following energy issues all my life. He worked for the USGS for 30 years and earned a lifetime achievement award from the AAPG for inventing a new theory on how to find petroleum that is now standard practice for the entire industry. He literally wrote the textbook for petroleum systems after :
Nice take, Arjun. A cautionary note is that the degree of "control" of the house and even the senate is not large by historical standards. It remains to be seen how much friction there really is on any of the administration's initiatives.
Good summary Arjun ... on the question of "drill baby drill" it should be remembered that the shale boom took off when the economy had near 0% interest rates for a prolonged period of time. As a short cycle resource, if you give an E&P company free money why wouldn't they produce as much as possible! It is a very different environment now, with cost of capital a very real input to the decision to expand oil production.
Thank you Pyrrho of Elis. 100% on 0% interest rates and the initial ramp also started with super-cycle mentality still top of mind. It was both free money and cycle optimism.
FYI all, what an interesting time in US energy.
I'm just reading now about the creation of the new National Energy Council "which will consist of all Departments and Agencies involved in the permitting, production, generation, distribution, regulation, transportation, of all forms of American Energy to establish U.S. energy dominance” around the world", headed by North Dakota Governor Doug Burgum.
And a link to a talk with Chris Wright and Maynard Holt:
https://youtu.be/kbUHzVUCBiI?si=l_YurnXD4rZ4rN0S
Thanks Arjun for the very insightful article. I believe that making sense of the energy transition requires to think in terms of incentives and to recognise that it is wishful thinking to expect people to accept to pay more for their energy when cheaper alternatives exist. As a new joiner to the blog, I was however puzzled as to why the US *should* maximise its oil production? First, isn’t there an obvious market failure in that the price of oil is implicitly subsidised (something that a carbon price addresses)? And second, wouldn’t there be a case to invest in developing new technologies that render oil obsolete? In which case oil production may have to be abandoned earlier than anticipated and by no means maximised? Very grateful if you can provide links to articles that tackle this question. Cheers, Brendan
Hi Brendan, thank you very much for your comment and questions. When I look at global oil markets which are about 100 million b/d, with the US only about 20% of that share, there is considerable scope from a US policy perspective to ensure we do not willfully (or otherwise) enact policies that seek to limit US oil and gas production. An example would be reducing lease sales in the Gulf of Mexico or making promises to limit drilling on federal acreage. The actual mechanism for spending capital and drilling wells, etc., is entirely done by private companies. Right now, we have a situation where policy makers that are concerned that we are in or will be in a "climate crisis" are proposing steps to keep US oil and gas production in the ground. It is that part that I am pushing back on. Hope that makes sense. And 100% agree that we should be motivating spending on new technologies, including those that can displace global oil demand. In my view, you would actually want to do both.
Thanks Arjun for your insights. I am writing for clarification regarding your “Super Vol” hypothesis Do you have an older article that I can link to that talks about this idea. Thanks again. I appreciate “everyone deserves to be energy rich”
Hi Deborah, here are 3 reports that go through the idea:
https://arjunmurti.substack.com/p/super-vol-vs-super-cycle-a-subtle
https://arjunmurti.substack.com/p/the-pursuit-of-vikings-embracing
https://arjunmurti.substack.com/p/crude-oil-commodity-markets-101
Hello Arjun,
Regarding forecasting institutions, do you think the IEA's climate-first (lately an almost 'renewable-advocacy'), approach will be impacted? Or is that more specific to Mr. Birol's administration?
To add to the discussion, most of us will know the newly nominated Secretary of Energy, Chris Wright current CEO of Liberty Energy. I listened to both his podcasts with Robert Bryce and he has excellent energy industry experience and I think the right approach.
Sharing the links here for anyone, well worth a listen:
https://youtu.be/BSPBjDH9mrY?si=O7iRgoBvUoV9CRdX
https://youtu.be/NOAYH3p9f0s?si=-87hOXvBqXvnYxgb
Investor, I am not sure there will be a meaningful change in direction at the IEA. It is true that some have called for greater scrutiny, etc., but I think there direction of travel is pretty firmly entrenched. That said, we would be happy to be proven wrong on this point. I for one am not an IEA hater. They do a lot of great work. I just don't agree with the advocacy that we see.
What a great summary of the current state of energy and likely path forward. Thanks for your thoughtful work!
As a corollary to “everyone has a right to be energy rich”, I’d offer “it is immoral to deny energy to anyone”.
If we can start formulating policies with those two truths as foundational principles, I believe we’ll see this resilient planet has all the resources we need for all to flourish. Here’s to making that happen. Cheers!
Thank you NTX! and yes, I agree it is immoral to deny energy to anyone. I regularly hear from folks in the "climate crisis" crowd that Earth cannot handle everyone rising to our living standards (irrespective of whether you believe that is possible for non-environmental reasons). We are all entitled to our views as I stated in this post. However, the idea that any of us in the rich world can tell anyone in the developing world that we cannot have everyone getting rich is not a perspective I share.
Interesting analysis.
I think the biggest impact of the second Trump administration will likely be a major rollback of
1) Green energy subsidies and mandates
2) Regulations holding back natural gas and nuclear.
My guess is that this will lead to a substantial increase in natural gas production and a major decline in new solar and wind projects. I think that it will be a long time before nuclear can be price competitive.
Trump will likely have much less impact on oil, which will boom regardless, and coal, which is in terminal decline in the US.
Thank you Michael and thank you for sharing your views.
No problem. I enjoy reading your content.
My father was pretty big in the petroleum geology field, so I have been following energy issues all my life. He worked for the USGS for 30 years and earned a lifetime achievement award from the AAPG for inventing a new theory on how to find petroleum that is now standard practice for the entire industry. He literally wrote the textbook for petroleum systems after :
https://www.amazon.com/Petroleum-System-Source-Leslie-1994-10-02/dp/B01K17DTKO/
Now he is a professor of Petroleum Engineering at Stanford University.
By the way, I have also written a number of articles on energy which you and your readers might be interested in:
https://frompovertytoprogress.substack.com/t/energy
Nice take, Arjun. A cautionary note is that the degree of "control" of the house and even the senate is not large by historical standards. It remains to be seen how much friction there really is on any of the administration's initiatives.
thank you Paul and yes, agree.
Good summary Arjun ... on the question of "drill baby drill" it should be remembered that the shale boom took off when the economy had near 0% interest rates for a prolonged period of time. As a short cycle resource, if you give an E&P company free money why wouldn't they produce as much as possible! It is a very different environment now, with cost of capital a very real input to the decision to expand oil production.
Thank you Pyrrho of Elis. 100% on 0% interest rates and the initial ramp also started with super-cycle mentality still top of mind. It was both free money and cycle optimism.