Trump Ignorance has even his Allies “Agassed”
May 28, 2016
Above, chart shows how leading traditional importers of LNG (which most of my readers know means Liquified Natural Gas) have cut usage so much as to become net exporters.(more details below)
The current oil glut has turned thinking upside down on the idea of how the Oil age comes to an end. Classically, we’ve always supposed that at some future time we run out of oil and gas, and they become so expensive so as to be prohibitive. (archetypical Mad Max scenario)
But as I’ve discussed here before, instead, the abundance of oil being produced, leading to a glut and collapse of prices, and flameout of plans to expand drilling to ever more exotic resources, may actually be what ushers rock oil the way of whale oil.
Could something like that happen to LNG?
And if it did, would Donald Trump ever know?
Robert Murray is the founder and CEO of Murray Energy Corp., an Ohio-based coal mining company. He blames the troubles facing the coal industry entirely on Democrats and has led lawsuits against Obama administration energy policies.
Speaking at a conference on Monday, Murray recounted that about a week ago, Donald Trump summoned him in for a one-on-one meeting, to reassure him that Trump is a friend of coal.
During the meeting, as Trump asked about various aspects of energy, Murray suggested lifting the ban on liquefied natural gas (LNG) exports. The hope is if more natural gas can be exported, it might reduce the glut in the US, which has driven prices so low that it’s killing coal.
Which brings us to this immortal exchange, recounted in SNL:
[Murray] said that Trump was agreeable with the idea, but then had a question.
“What’s LNG?” Murray said Trump asked.
And just to be clear, that’s not Saturday Night Live but the excellent energy trade journal SNL. It is, in other words, real life.
Japan’s Jera Co., one of the world’s largest buyers of liquefied natural gas, agreed to sell the fuel to a unit of France’s Electricite de France SA.
Jera, a joint venture between Tokyo Electric Power Co. and Chubu Electric Power Co., will sell as much as 1.5 million metric tons of LNG between June 2018 and December 2020, it said in a statement Thursday. The price of the LNG will be linked to European gas market prices, according to the statement.
Jera’s debut as a seller to Europe underscores how the oversupplied market has challenged traditional exporters, who have relied on steady, one-way demand from buyers in countries like Japan, the world’s largest consumer of the fuel. Japan’s new role as a middleman adds further pressure on LNG producers, who are losing bargaining power because of the glut.
“This deal represents an entry point for Jera into the European market, at a time when the company’s LNG contracts from the U.S. will be ramping up significantly,” Michael Jones, a Singapore-based gas and power analyst at Wood Mackenzie Ltd., said by e-mail. “The demand outlook in Jera’s home market remains uncertain, so EDF gives Jera the ability to offload some flexible U.S. volumes into Europe.”
Japan’s LNG consumption is expected to fall to 72 million tons in 2020 and 62 million tons in 2030, compared to 85 million tons in 2015, according to data compiled by the government and the International Energy Agency. Global demand is expected to grow by 45 percent between 2014 and 2020, according to a government presentation from earlier this month.
“Japanese utilities are faced with uncertainty in their future LNG needs due to nuclear restarts, weak domestic demand, strong renewable growth and market liberalization,” said James Taverner, an analyst at IHS Inc. in Tokyo.
Bloomberg video here explains in very simple terms the current oil conundrum, which might be a cautionary tale for the rest of the industry.