North Dakota revels in record growth thanks to oil; no alleviation for natural gas price pain; Edison’s expensive nuclear decommissioning; a new record for global CO2 emissions; a hint about some interesting movement in the Mississippi Lime; and a sneak preview of what’s to come in this week’s premium newsletter…
Good news for the state of North Dakota, which tops the US charts for growth and daily oil production as figures are released for 2012, but bad news for natural gas prices, which analysts say look set for another downward climb.
Let’s start with the good news, if you’re from North Dakota. The US Commerce Department’s Bureau of Economic Analysis just came out with 2012 growth and oil production figures, and North Dakota is the clear leader with 13.4% growth last year, compared to only 1.7% overall growth for the US. According to the bureau, this is the highest growth rate in 25 years—thanks to booming oil production—and far beyond Texas’ growth rate of 4.8%. And there are no states in between these two. Check out this “charticle” from realclearenergy.org.
Now the painful news—natural gas prices. Late last week, natural gas futures started to take another beating with a gain in inventories that surpassed any weekly gains for four years as supplies rose by 111 billion cubic feet—a good 10-15 billion cubic feet more than expected and a good 40-50 billion cubic feet more than the previous week. Some analysts think this trend will continue for the immediate future.
But the big “upset” story this week—for those not lured away by the sexier news of the NSA’s digital surveillance reach—is the permanent closure of the San Onofre nuclear plant and the ensuing regulatory battle Edison International (EIX) will have to fight over who is going to foot the bill here. It will cost around $3.4 billion to retire the nuclear plant. The plant is owned by Southern California Edison, which has invested $2.1 billion in San Onofre’s two nuclear reactors, and now finds that it could end up paying $1.3 billion in refunds for customers who paid since the plant stopped producing power in January last year when the reactors were shut down after a radioactive leak was discovered.
The San Onofre story is the continuation of a story that began in earnest when the shale gas boom turned nuclear endeavors into economic nightmares. This year has seen the closure of four other commercial nuclear power units so far. Since then the idea of possibly restarting the reactors proved to come along with costs that wouldn’t be recouped and significant regulatory hurdles. Existing nuclear reactors are becoming increasingly too expensive to maintain, and questions of safety rise in tandem with costs that question commercial viability. But it’s not the beginning of the end for nuclear; it’s just the beginning of the beginning, and a future (still quite a long way off) where small modular reactors (SMRs) will take center stage.
In the meantime, we have apparently set a new record in global carbon dioxide emissions, according to the International Energy Agency (IEA). This week, the IEA released its figures for 2012, stating that global emissions of CO2 from energy use rose 1.4% to 31.6 gigatons last year—a record high. The energy sector accounts for more than two-thirds of greenhouse gas emissions, so “energy has a crucial role to play in tackling climate change,” the IEA said.
This week’s report comes from the Inside Investor section of our Premium publication and is written by our energy trader, Dan Dicker and takes a look at why oil has managed to stay so strong in the face of almost universally weakening markets? See below…
Also this week, expect to find the next installment of our popular US shale play series in our Premium Newsletter, plus another hot pick that you don’t want to miss in the Mississippi Lime, and much more.
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That’s it for this week. I hope you enjoy Dan’s report below and have a great weekend.