On this week’s Energy Shots:
- Weekly Energy News Recap
- The Real Winners of The Renewables Push
Weekly Energy News Recap:
Russia to Lift Fuel Export Ban
According to reports from various media outlets, Russia plans to scrap its remaining restrictions on fuel exports. Russia introduced the ban on September 21st in response to elevated domestic fuel prices.
Russia eased restrictions on pipeline exports of diesel on October 6th but kept the gasoline export ban in place. According to an interview with Russian Energy Minister Nikolai Shulginov released Wednesday, the country would consider lifting export bans on certain grades of gasoline.
Saudi Arabia, Russia to Continue Voluntary Cuts
On November 5th, Saudi Arabia and Russia confirmed an extension on voluntary supply cuts through the end of the year. Saudi Arabia plans to continue with its 1 million bpd cut, maintaining production of 9 million bpd.
Russia will continue a 300,000 bpd crude and product export cut.
Both countries said they would consider extending or deepening the voluntary cut, pending data.
EIA: US Nat Gas Production, Demand to Reach Records in 2023
This week, the Energy Information Administration (EIA) projected US dry gas production to climb to 103.68 bcfd in 2023 and 105.12 bcfd in 2024, exceeding the prior record in 2022 of 99.60 bcfd.
The EIA expects domestic gas consumption to climb to 89.42 bcfd in 2023 from 88.38 bcfd in 2022. The EIA forecasts 2024 domestic gas consumption at 89.00 bcfd.
US Rig Count Falls
Combined US oil and gas rigs fell two to 616 in the week ending November 10th, putting the total rig count down 21% YOY.
US oil rigs fell two to 494 while US gas rigs held steady.
Oil’s Friday Finish
Brent futures climbed 1.8% on Friday to $81.43. WTI rose 1.9% to $77.17.
Brent and WTI notched their third consecutive weekly decline for the first time since May after finishing this week ~4% lower.
The Real Winners of The Renewables Push:
In the argument against new oil and gas production, environmentalists and policymakers typically focus on greenhouse gas (GHG) emissions.
What you rarely hear, however, is a comparison of mineral density between fossil fuels and renewables.
Mineral density measures the mass of minerals required to produce a unit of energy.
As you will see in the following graphs, renewables require vastly higher mineral inputs than energy-dense fossil fuels.
The International Energy Agency’s sustainable development protocols push for widespread adoption of renewables like wind and solar as well as increased market penetration of electric vehicles over combustion engines.
With the IEA’s narrative infiltrating wealthy nations’ policies, increased demand for renewables and EVs clears the path for a few countries with an iron grip on key mineral production and extraction.
Currently, China is the clear leader of global mineral production. The consolidated nature of mineral production increases the risk profile for Western renewable investments – China only needs to cut refined mineral exports to derail Western renewable development.
We will begin with an analysis of the mineral density of renewables versus fossil fuels. We will expand into the IEA’s mineral demand forecasts based on current policy and the IEA’s aggressive sustainable development standards. We will finish with an analysis of the supply-side picture.
Key Mineral Demand:
The rapid expansion of renewables with state-of-the-art technology drives massive demand growth for rare earth elements (REEs).
The IEA’s conservative stated policy scenario (STEPS) forecasts more than 3x demand in 2040 for rare earth elements like neodymium – a REE used in wind turbines, EVs, and electronics.
The IEA’s more aggressive Sustainable Development Scenario (SDS) more than doubles the demand forecast in 2040 from the conservative STEPS. The SDS predicts demand for rare earth elements to increase more than 7x the levels in 2020.
Key Mineral Supply:
Critical mineral production and extraction is dominated by a handful of players.
As you can see in the figures below, China leads global extraction of rare earth minerals and graphite. China similarly leads global processing of copper, nickel, cobalt, lithium, and rare earths.
China’s limited domestic supply of cobalt is negated by its foreign investment activity in Africa.
Chinese mining firms own the majority stake in the DRC’s Sicomines cobalt mining project in partnership with the DRC’s state-owned Gecamines.
Chinese firms Sinohydro Corp and China Railway Group Limited negotiated a 68% stake in Sicomines in exchange for infrastructure development in the region.
In May 2023, DRC officials argued the deal is lopsided and announced plans to renegotiate the DRC’s stake to 70% – 60% for Gecamines and a non-dilutable 10% for the state.
As you can see in the figure above, global average lead times from mineral deposit discovery to production exceeds 16 years.
According to the IEA’s conservative and aggressive demand forecasts, the adoption of renewables through 2040 will outstrip key mineral supplies.