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In 1956, Nikita Khrushchev, leader of the Soviet Union, told the Western countries: "We are going to bury you" because communism would survive capitalism. In 1979, Ezra Vogel's Japan as number one was published, followed by a wave of less thoughtful reflections on the Japanese economic miracle that culminated in Michael Crichton's economic crisis. Rising Sun. In the last two decades, badysts have suggested looking to "the Chinese century". It turns out that predicting long-term economic trends is a risky task. More recently, a series of books highlighting the weakness of the Chinese economic model have been published, including: Red Flags: Why Xi's China is Threatened, The Great Wall of Chinese Debt and The state counterattack: the end of economic reforms in China? As Martin Wolf of the FT said at the beginning of the year, "the future may not belong to China".
Recent events help sell these books. China's economic slowdown, whether as a result of policy changes, the trade dispute with the United States, or more serious structural problems, has drawn the attention of the international community to the country's prospects. A series of financial results released this week by US companies, including Caterpillar and Nvidia, stressed that China's size meant that its economic success or failure would inevitably have a huge impact on the global economy, for better or for worse. the worst.
For the global energy industry, it is difficult to overestimate the importance of China. The world's largest importer of oil, it is expected to be the largest importer of gas this year. It accounts for about half of global coal consumption and nearly a third of global investments in clean energy. If the Chinese economy were to slow down, producers of energy commodities and technologies from around the world would be affected. According to Opep, China accounted for just over a quarter of the increase in global oil demand last year and is expected to bring about the same contribution this year, the growth of its own consumption slowing along with the global total. A possible recession in China, with shockwaves spreading to other economies, seems to be the biggest threat to the stability of oil prices this year.
Not all products would be affected in the same way. Maarten Wetselaar, the company's integrated gas manager, said Thursday that Royal Dutch Shell's fourth-quarter profit indicated that even in a "mixed" year for the Chinese economy, its gas demand had risen even further. 16% in 2018 and its liquefied natural resources. gas imports increased by 40%. "So, if it's a disappointing year in China, it will last a long time," he said. The reduction of coal used to reduce local air pollution is a priority of the Chinese government and should continue to stimulate the growing demand for gas, regardless of the activity of the economy. S & P Global Platts, however, hinted that China's demand for LNG is likely to increase less quickly this year.
While millions of people in China were heading to their country to celebrate the lunar new year holidays, the Voice of America went to the streets of Beijing to expose its views on the economic outlook and found both hope and nervousness. These feelings will be felt far beyond China.
In the United States, the economy seems to be vibrating, as shown by the very good data on employment on Friday, and the demand for oil is rising. Between 2005 and 2012, oil consumption in the United States declined sharply, but since then it has steadily recovered and by 2018 was close to its previous record. Nikos Tsafos, of the Center for Strategic and International Studies, examined the rise in underlying demand and said that "in the absence of a policy reversal or a recession, the United States will resume the path of increasing oil consumption. "
Last week, the signals were mixed about the possibility that electric vehicles significantly reduce the demand for gasoline. Tesla, the spearhead of the electric vehicle industry, raised concern among investors when it revealed that its chief financial officer was leaving the company for the second time, just two years after his return. The announcement was made at the end of the call to discuss the fourth quarter results. The report seemed to signal a solid end to 2018, but investors and badysts are worried about the strength of Tesla's demand. "Make or break" model 3.
In the entire electric vehicle industry, many competitors are hoping to take advantage of it if Tesla stumbles. Patrick McGee, from the FT group, discussed Volkswagen's plans for a "Tesla Killer": a platform called MEB intended to serve as a base block for 50 different electric models promised by VW by 2025.
At the same time, the first commercial service using an electric plane aims to start its activities in Hawaii this year.
United States imposes sanctions on Venezuela's oil
While the future of Venezuela is at stake, the Trump administration has taken steps to increase pressure on President Nicolás Maduro, imposing heavy penalties on PDVSA, the national oil company. The initial badessment of FT writers on the impact of the sanctions was that they were more likely to result in a reorganization of global crude oil flows than to close large volumes to global markets. History shows that such sanctions can never be watertight and that countries with restrictions are strongly motivated to find ways to circumvent them. The sanctions, however, have had an immediate impact on PDVSA's operations, as its European customers put their purchases on hold, traders say. The Spanish energy company Repsol examined whether it could continue to import Venezuelan crude under an oil-for-debt agreement.
The details of the sanctions published by the US Treasury shows that they are "similar but slightly less extensive than those imposed on Iran last year," suggested Jessica Resnick-Ault of Reuters. Until now, their biggest effect on the oil markets has been to send refiners who prefer heavy crude to search for oil alternatives that they were buying at PDVSA. March, a moderately heavy oil extracted from platforms located in the Gulf of Mexico, climbed to more than $ 6 per barrel compared to WTI, the US benchmark, a significant change from last summer when prices were equal. Western Canada Select heavy crude closed its WTI rebate at only $ 9 per barrel, up from $ 50 a barrel in October, thanks to production restrictions imposed in Alberta and penalties imposed.
Javier Blas, of Bloomberg, explained that "America was producing the wrong kind of oil," with a growing glut of light crude oil "that was distorting the global oil industry." The sanctions imposed by the United States and the collapse of Venezuela's production as its industry sank into chaos exacerbated the situation, leaving refiners who have optimized their facilities for heavy and acidic crude "by paying unprecedented premiums for find [it]"Wrote Mr. Blas.
The heat wave in Australia continued, marking the hottest month of its history and fueling the debate over its electrical system. The United States, meanwhile, have been at the opposite extreme, with some regions of the country having suffered a record cold. John Kemp, of Reuters, pointed out that the gas and electricity systems in the United States have been remarkably resilient to extremely difficult conditions.
And finally: the freezing cold created an opportunity to make fun of the experts who suggested that solar energy would not work when it was cold. In fact, high temperatures reduce the efficiency of photovoltaic solar energy and cold temperatures are better, the other conditions being equal. On shorter days, low sun, cloudy weather, and snow-covered signs are legitimate reasons to expect a reduction in solar production in winter; low temperatures are not.
Actor James Woods has also sounded the alarm about wind energy and is in fact better founded. As the Canadian government explains, low temperatures can cause blade icing, which reduces energy production, and it may be necessary to close the turbines in very cold weather to avoid damage.
Other views
Nick Butler – The oil market will soon feel the heat of the turmoil in Venezuela
Colby Smith – Bondholders prepare for Venezuelan regime change
Colby Smith – The Second Son of the Global Economy
John Dizard – Glencore's smeared black flag clings to investors' ESG screens
Jonathan Ford – Nuclear is cheaper than we think
Quote of the week
We needed to focus more on performance, with more people really feeling deeply and personally connected to the bottom line than just producing technical results or KPIs. People needed to feel that it was a game that we had to earn financially, rather than just offering excellence.
– Ben Van Beurden, Managing Director of Royal Dutch Shell, highlights one of his priorities when he took office early in 2014. He explained that the company's profits were starting to show the benefits of this approach: the company reported increased free cash flow in the fourth quarter of last year.
Table of the week
This is from my story, published last weekend. Comparing the 2017 annual energy outlook of the US Energy Information Administration for 2017 and 2019, I found that the trajectory of projected coal production in the United States, baduming current policies would remain in place, was still inferior to the trajectory planned two years ago if Barack Obama's own power plant came into effect. In other words, market forces and other regulations should have as much impact on the US coal industry as Obama's flagship climate policy.
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