Global oil demand is set to return to pre-pandemic levels by the end of 2022, but renewed COVID outbreaks and low vaccination levels in developing countries will make the recovery uneven, the International Energy Agency said on Friday.
The IEA issued its first forecast for 2022 in its monthly oil report, predicting that demand would build on 2021’s growth of 5.4 million barrels per day and increase by an additional 3.1 million barrels per day in 2022, reaching 100.6 million barrels per day by the end of next year.
Recovery will however be uneven as COVID-19 continues to affect non-OECD countries with slower vaccination rates and the pandemic caused shifts in consumer behaviour.
“Continued teleworking in OECD countries […], higher electric vehicle sales and increased car efficiencies for new models will weigh on growth.” the IEA believes, adding that ongoing border closures will also keep impacting fuel orders. They had slowed down significantly during the pandemic and associated lockdowns that prevented international and domestic travel.
Jet fuel and kerosene demand are therefore still expected to be 11% lower at the end of 2022 compared to before the pandemic. At the same time, LPG and ethane demand will rise around 5% above pre-pandemic levels and gasoline and diesel orders will rebound to their former standards.
The IEA left its outlook for 2021 demand mostly unchanged from last month. The more stable COVID-19 situation and continued recovery and economic reopening in OECD countries caused demand to rise in the first half of the year. However, slow vaccination rates in non-OECD countries led the IEA to reduce forecasts for the second half of the year.
Overall 2021 demand expectations were therefore lowered to 50,000 barrels per day, with annual growth now expected to be around 96.4 million barrels per day.
Global oil supply is set to grow more quickly in 2022, as the US is set to recover from two consecutive years of production declines and will account for much of the increase in supply from outside OPEC+. The IEA predicts non-OPEC countries will supply around 1.6 million barrels per day more next year, leaving OPEC+ to produce an additional 1.4 million barrels per day to meet growing demand.
“The boost in non-OPEC+ oil supply next year comes despite financial constraints and mounting pressure from climate activists and shareholders on major oil companies and independents,” the report said.
In the shorter term, the IEA said OPEC+ may have to revise its current supply policies in the second half of 2021, as disparities between demand and supply start developing and are set to affect markets in the last quarter especially.
Finally, sanctions on Iranian oil exports will also play a role in increased supply. If Tehran can strike a deal with global powers over its nuclear activities and sanctions are lifted, Iranian crude could flood markets and make the country the biggest driver of supply growth in 2022, the agency said.
Citing sources who work in security, the Journal says DarkSide told associates it no longer has access to its servers and pointed to disruptions caused by a law-enforcement agency and pressure from the United States. The website associated with DarkSide was no longer active as of Thursday.
The group said it lost access shortly after President Joe Biden said: “We have been in direct communications with Moscow about the imperative for responsible countries to take decisive action against these ransomware networks. We’re also going to pursue a measure to disrupt their ability to operate.”
Biden said there wasn’t any evidence the Russian government was behind the attack, but those involved “are living in Russia.” The Journal, alongside the website Oil Price says it’s possible the US successfully disrupted the hackers.
The announcement of its shutdown could also be a cover, however, in which the hackers shut themselves down and take all the money. In fact, the Journal reports, it’s not uncommon for ransomware groups to disband only to reappear later under different names.
DarkSide made headlines this week for attacking Colonial Pipeline, which operates the country’s largest refined products pipeline and supplies 45% of all fuel consumed on the East Coast. After news of the attack spread, people began panic-buying gasoline, which sent gas prices soaring to over $3 for the first time since 2014.
Ransomware made over $400 million last year and has been emerging as a profitable criminal business, according to blockchain research firm Chainalysis Inc. Security researchers told the Journal Darkside had become prominent within the world of ransomware. Within its first seven months of operation, the firm made at least $60 million – $46 million of which came in the first quarter of this year, Chainalysis Inc. found.
Colonial Pipeline on Saturday announced that it had returned to “normal operations” days after it restarted its pipeline following a cyberattack that resulted in disruptions across the East Coast.
The company made the announcement on Twitter Saturday at 7:30 a.m. It had restarted the pipeline at 5 p.m. on Wednesday.
“Since this incident began, we have been clear that our focus was on the safe and efficient restoration of service to our pipeline system,” Colonial Pipeline said in a tweet. “That is what we have achieved through the commitment and dedication of the many Colonial team members.”
It continued: “Our team members across the pipeline worked safely and tirelessly around the clock to get our lines up and running, and we are grateful for their dedicated service and professionalism during these extraordinary times.”
The Colonial Pipeline is the largest pipeline of refined oil products in the US. It transports more than 45% of all fuel used on the East Coast to more than 50 million people from New York to Texas.
The Wall Street Journal reported Friday that DarkSide, the hacker group that took responsibility for the ransomware attack, said it planned to disband following pressure from the US and investigations by law enforcement agencies.
Though meteorologists aren’t predicting the Atlantic hurricane season, which runs from June through November, will be as record-breaking as 2020, they’re saying the number of named storms and hurricanes will be higher than in a normal year.
DTN, a Minnesota-based analytics firm, is predicting 20 named storms, compared to the annual average of 12. Of those, nine will be hurricanes, and four will be major hurricanes of category 3 or stronger. AccuWeather had similar predictions of 16 to 20 named storms, seven to 10 becoming hurricanes, and three to five to becoming major hurricanes.
The economic impact from last year’s hurricane season, which had six category 3 or higher storms, was about $60 to $65 billion in damage and losses, according to AccuWeather.
“The combination of another enhanced hurricane season and the threat of landfall across a big section of the East Coast of the US this year will be disruptive to the supply chain,” said Renny Vandewege, a leading weather expert at DTN.
Vandewege said the storms are more likely to favor the East Coast this year, compared to 2020, when the Gulf Coast felt a heavier impact.
The storms could “disrupt really anything that’s being imported in,” Vandewege said.
“We’re already having a months-long backup at the Port of Los Angeles, and then if we had also the same thing on the East Coast for an extended period of time, it could phenomenally exacerbate product shortages,” said Chris Wolfe, chief executive officer of logistics company PowerFleet.
Storms affect a state’s big industries, too. Along the Texas gulf coast, hurricanes can have an impact on the chemical and the oil and gas industries. A storm there could echo issues that arose from the Texas freeze in February and the six-day Colonial Pipeline shutdown that caused gas prices to surge and prompted some East Coast residents to panic-buy gas.
The forestry industry could be “deeply impacted” as well, Vandewege said. “There’s been shortage on building materials, and that could be enhanced even more if we’re seeing key manufacturing areas shut down around Louisiana and Alabama” because of a hurricane.
Pork, which is heavily produced in North Carolina and other southern states, has faced shortages in the past year, as well, thanks to the pandemic.
When hurricanes, like Florence in 2018, have struck the state in the past, thousands of hogs died. Other livestock and agriculture are also at risk when hurricanes hit.
“There’s huge pork production, chicken production, all the way through the South,” Wolfe said, so storms “could dirsupt food supplies.”
Porter from AccuWeather also noted that the West Coast could see another damaging wild fire season, and he said companies have to prepare ahead of time. “It’s a significant risk that all businesses need to be thinking about right now,” he said. “What’s their vulnerabilities and plan to mitigate.”
Climate change and extreme weather events topped the World Economic Forum’s list of biggest global risks in 2020. That was no surprise to Porter, who said, “people are getting negatively impacted almost on a daily basis by weather events. He said for businesses, the supply chain is a “major component” of that.
Other corporations like Facebook are joining in by buying huge amounts of solar and wind power. Smaller startups have in the meantime made progress on breakthrough technologies like batteries that last for days – a key component to transitioning to cleaner energy.
The new administration has also signaled that clean energy is a key priority. President Joe Biden set forth an ambitious climate-change agenda, and investment in clean-tech is booming. Energy executives told Insider they’re watching closely and hope to see alignment of regulatory authorities and support to offshore wind industries among other moves from the new president.
Insider’s Benji Jones gathered four top executives in the energy industry for a live roundtable earlier this month to talk about how Big Oil can make good on its promises, how to generate returns for shareholders while pivoting into cleaner energy products, and which breakthrough technologies are needed to reach net-zero emissions by 2050.
Panelists also discussed how rising oil prices may actually benefit investments into clean energy, as contrary as that may sound. West Texas Intermediate crude trades for about $61 a barrel, around pre-pandemic levels. Crude tumbled last year as COVID-19 put a stop to travel and manufacturing, driving down demand for oil.
The panelists included: Urvi Parekh, Facebook’s head of renewable energy; Mateo Jaramillo, Form Energy’s cofounder and CEO; Shell’s EVP for renewables and energy solutions, Elisabeth Brinton; and Francois Austin partner at Oliver Wyman in the UK and head of the group’s energy practice.
Brinton told Jones that Shell – known for being a major oil and gas company – is investing in energy storage well as many other cleaner technologies.
“We’re involved in offshore wind, onshore wind, onshore solar, storage, hydrogen. So green hydrogen for industrial and transport uses,” Brinton said. “We have the largest LNG business in the world, and so we have a lot of experience moving ships and transport.”
Shell is “technology agnostic,” according to Brinton, who added that the company is really focused on use cases and how it can help various sectors reduce their carbon footprints.
Oliver Wyman’s Austin told Insider that the oil-price recovery isn’t putting the investment case for clean energy at risk. On the contrary, Austin said, the rising prices will actually “enable the Shells of this world to finance this transition” to clean energy.
“I think society has shifted. I think COVID has been a wake-up call,” he said. “Momentum is there.”
Austin said that oil and gas are going to continue to be part of the energy mix as far out as 2040 or 2050. The transition to clean energy is expected to take a long time as new technologies develop over time.
Brinton agreed, adding that she believes the near-term price of oil actually helps speed up the transition by funding it.
“That’s a really important point because a lot of people think, ‘Well, that’s bad. It’s going to slow things down,” she said. “Actually, it’s very helpful.”
Hello! Unfortunately, I have to share some bittersweet news: I’m leaving Insider, and so the newsletter is going on hiatus.
Of course, I’ll miss working with the talented team of writers and editors here including Zach Tracer, our energy editor. Thanks for subscribing to Insider Energy and for sharing feedback. It means a lot!
For better or worse, I’m staying in journalism, and I’d love to keep in touch. You can find me on Twitter and LinkedIn. Oh, and feel free to share your pet photos with me through my personal email. Jumi will miss the spotlight.
Ending on a high note, we hosted a lively panel with four top energy execs on Monday. See more on that below.
The highlights: Soaring oil prices won’t slow the clean-tech boom, according to Shell and Oliver Wyman. In fact, they could accelerate investments in transition technologies.
“This near-term price of oil actually accelerates us to be able to speed up the transition,” said Elisabeth Brinton, EVP for renewables and energy solutions at Shell.
Money is pouring into ESG funds, which has made the investment case for clean-energy projects comparable to oil and gas, said Francois Austin, partner and head of energy at Oliver Wyman.
Facebook is run on 100% renewable energy, as of last year. The key to getting there was partnering with utilities, which are also trying to reduce their emissions, said Urvi Parekh, Facebook’s head of renewable energy.
Electrochemical batteries are the cheapest and most feasible solution to the issue of intermittency, according to Form Energy (Form is developing that very technology).
A happy ending: We ended the panel by asking all four executives if they believed the world would realistically reach net-zero by 2050. Optimisim is in their job descriptions, but it was still nice to here the responses.
“Yes, if we get started right now. We really can’t afford to waste any more time. Not another five, not another 10 years. It’s got to get going right now,” said Mateo Jaramillo, the CEO and cofounder of Form Energy.
“Yes, because we are firmly focused on it and I believe people are good, have passion, and the capital is pouring in the right direction. But we have to put the pedal to the metal,” Brinton said.
“This is the decade for the corporates to really step up and really put the shovels in the ground and build the infrastructure,” Austin said.
“Yes. I’ve seen social and political will aligning around climate change in a way that’s unprecedented, and so I think that’s going to carry us a long way,” Parekh said.
I’m hosting a live energy roundtable on Monday with execs from Shell, Facebook, and other big firms, you know, in case CERAWeek wasn’t enough.
It should be great! We’ll discuss whether oil giants still deserve their bad reputations, how companies can generate returns as they pivot to renewables, and what tech breakthroughs we need to clean up the grid. And it’s just 30 minutes. You can sign up here.
Anyway, this week was another week.
We got a few more details on Exxon’s strategy during the company’s investor day Wednesday (though not much of what it announced is new). And the fallout from the Texas storm – now expected to be the most expensive weather event in the state’s history – continues to spread.
Ken Jack/Getty Images
Exxon is chasing what it calls a $2 trillion carbon-capture opportunity
Once skeptical of betting big on carbon-capture technology, Exxon says it’s ready to go all-in.
During an investor presentation Wednesday, Darren Woods said advances in the technology and a “growing market need” have created a unique opportunity for Exxon.
The real change is that Exxon is now organizing all of its carbon capture projects – there are 20 in the pipeline, many of which were already under construction before the recent announcements – in a new business called Low Carbon Solutions.
Wall Street is happy: After freefalling in 2020, Exxon’s stock is up almost 50% from the start of the year, and many of the top Wall Street banks favor the company.
“XOM’s newly formed Low Carbon Solutions business helps mitigate energy transition uncertainty while also offering new attractive growth options for the company,” Morgan Stanley analysts wrote in a note this week.
Wall Street firms cite not just Exxon’s strategy to cut emissions but pared back capital spending and a low breakeven price for oil.
Yet challenges remain: Some investors say Exxon’s plan to cut emissions and change up its board doesn’t go far enough. Experts have also raised questions about the economics of carbon capture technology.
“The business as it stands today is underpinned by government support, and this can be shaky over the long term,” Peter McNally, an energy expert at Third Bridge Group, said in a comment this week.
Executives were not forthright with employees about the toll the downturn would take on its workforce and, at times, came across as insensitive when they did communicate about job cuts, current and former employees said.
In our story this week, we lay out the company’s business model, why it failed, and what happens next.
Michael Noble Jr./San Francisco Chronicle via Getty Images
Meanwhile, the Texas disaster is set to propel Sunrun to new heights
Following the widespread blackouts in California, back in 2019, the solar giant Sunrun – which sells rooftop panels and home batteries – began shifting its pitch to customers: Go solar not just to access clean energy but to power through blackouts.
The company even adopted the slogan “Power through.”
Join us: On March 8 we’re hosting a virtual roundtable on building a clean energy economy. You can register here.
Texas continued to dominate headlines this week, with lawmakers looking for where to hurl blame. They have plenty of options, including themselves.
Let’s start there.
Montinique Monroe/Getty Images
Blackouts and big bills: Who’s to blame for the Texas energy crisis?
That’s a question that lawmakers in the Lone Star State have been asking in state House and Senate hearings that began this week.
“Who’s at fault?” state Rep. Todd Hunter, a Republican from Corpus Christi, said Thursday during the House hearing. “I want to hear who’s at fault. I want the public to know who screwed up.”
A true cluster: Texas Governor Greg Abbot blamed ERCOT, the nonprofit that manages the grid, while other lawmakers blamed the Public Utility Commission, which oversees ERCOT – and is led by a commissioner appointed by Abbot, The Texas Tribune reported.
Legislation crafted by the very lawmakers questioning ERCOT and other entities also took heat for not mandating the kinds of safeguards that other deregulated states require.
Lawmakers scrutinizing the energy industry “reap millions of dollars in unlimited political contributions from energy interests, more than any other sector,” ABC News reported.
And then there were the energy producers themselves, which failed to provide enough power during the storm.
Sens. James Lankford of Oklahoma, Mike Lee of Utah, and John Marshall of Kansas – who sit on the Energy and Natural Resources Committee – reject the scientific consensus that human activity fuels global warming, according to statements they’ve made in recent years, Insider’s Eliza Relman reports.
“I’m not sure that there is even climate change,” Marshall said during an interview on a Kansas radio station in 2017. In a statement to Insider, Marshall claimed that the climate is “always changing.”
Read Eliza’s full story here. For more on the Senators who are tied to fossil fuel interests, check out this piece from The Guardian.
Bank of America came out with a big prediction for oil this week: demand for crude could, over the next three years, rise faster than at any point in the last half-century.
The growth in demand could push prices up to $100 a barrel – well beyond where they were before the pandemic caused demand to crash.
Today, a barrel of Brent is trading for about $65.
Behind the surge: Unprecedented government stimulus, which fuels economic activity, and rising demand in China, a major market. Voluntary production cuts, led by Saudi Arabia, have helped, too.
Companies to benefit: “We’ve got buy ratings on pretty much all the oil names,” Doug Leggate, Bank of America’s head of oil and gas research told us earlier this year. “We think we are at the bottom of another significant cycle recovery in energy.”
We’re hosting a panel with executives from Shell, Facebook, Oliver Wyman, and Form Energy on March 8. You can sign up here.
What we’ll discuss: My plan is to go beyond a fluffy conversation about the energy transition and break into some of the challenges companies face as they try to meet demands from investors, climate activists, and their employees. I also want to delve into the specific hurdles that remain on the technology front.
Save the date! We’re hosting a virtual roundtable about building a clean energy economy on the morning of March 8. More on that below.
It snowed a lot this week. My dog lost his mind. Now, like all good things, the snow has turned to brown slush.
Also this week, several top oil companies reported earnings, giving us a more complete picture of the financial fallout from the pandemic. There were no major surprises, but the negative numbers are big.
We’ll get to that, but first: A look at an early winner of the hydrogen boom.
When hydrogen gas inside the Hindenburg exploded in 1937, the era of airship travel came to an end. Now the very same gas is reentering the aviation industry. And this time it’s kicking off a new era – one of zero-carbon travel.
This week:I profiled ZeroAvia, an ambitious startup working on hydrogen-powered aircraft. It recently raised money from huge names including Amazon, Shell Ventures, and Bill Gates’ climate tech venture fund, Breakthrough Energy Ventures.
Hydrogen’s moment: Is right now. The gas is quickly building a reputation as a linchpin in the transition to cleaner energy, and investors are now looking for where to place their bets. Some aren’t having much luck.
“We look aggressively,” Vinod Khosla, founder of Khosla Ventures, told me last fall. “We haven’t found somebody with breakthrough technology. There’s a lot of incremental technologies there, but nobody has a real breakthrough. If you find one, have them call me.”
Investors we spoke to say hydrogen used for aviation, heavy-duty vehicles, and industrial processes, such as steelmaking, is most promising.
Justin Sullivan/Getty Images
Big losses for Big Oil
The results are in: Major oil companies, surprising no one, suffered steep financial losses in 2020.
One big number: $56 billion
That’s the combined full-year loss of five of the top companies including Exxon, Chevron, BP, Shell, and ConocoPhillips. Exxon and Shell topped the list.
Last year, these firms earned about that same amount, combined.
Only up to go? Probably, at least until demand for oil and gas begins a more permanent decline.
The price of oil is rising fast as demand notches up. Brent is trading at close to $60 a barrel, erasing year-over-year losses.
Companies spent 2020 lowering the cost of production, so they’re positioned to succeed even if oil prices don’t go much higher.
What to know: The unit, which Exxon launched after investors pressed the company to move faster to address climate change, will initially focus on carbon capture and storage.
No surprises here: Exxon has been developing carbon capture projects for a while now.
The technology is attractive to oil companies in part because it doesn’t require that they rewrite their business models and pump less crude from the ground.
How investors responded: They were nonplussed.
A coalition of investors with over $2.2 trillion in assets said Exxon’s plan to build out carbon capture capabilities isn’t credible, pointing to a carbon-capture project that the company delayed.
Activist investor Engine No. 1 had a similar reaction: It’s “poor long-term planning to rely almost exclusively on the idea that carbon capture will become scalable and affordable soon enough to allow for continued oil and gas production growth for decades to come under a Paris-compliant trajectory,” the group said.
But investors aren’t jumping ship: The company’s stock is up 10% this week and 20% since the start of the year.
What’s more: Exxon also announced a new board member this week – Tan Sri Wan Zulkiflee Wan Ariffin, former CEO of the Malaysian state energy company Petronas.
A board shake-up is another demand from activist investors.
Hedge fund DE Shaw had been in talks with Exxon about making changes to its board, Bloomberg reported ahead of the announcement. Engine No. 1 has also launched a campaign to elect four new directors.
On Thursday Bloomberg reported that the company is considering also appointing Jeff Ubben, who runs Inclusive Capital Partners, to the board.
Michael Brochstein/SOPA Images/LightRocket via Getty Images
5 things in energy politics
Jennifer Granholm’s nomination as Energy Secretary cleared a key Senate committee and now advances to the full Senate, where she is expected to be confirmed.
A new report by left-leaning groups Evergreen Action and Data for Progress reveals how Senate Democrats can clean up the electric grid by 2035, even with a razor-thin majority.
Senate Democrats reintroduced legislation for a $100 billion national “green bank.” It would make loans and investments in technologies aligned with Biden’s climate agenda, Greentech Media reported.
Agriculture Secretary nominee Tom Vilsack said that he plans to prioritize efforts to address climate change and food insecurity, during his confirmation hearing on Tuesday, Insider’s Ayelet Sheffey reports.
Senator Gary Peters, a Michigan Democrat who advocates for strong climate change policy, recently invested up to $15,000 in a power company that primarily burns fossil fuels, according to a stock purchase disclosure, Insider’s Dave Levinthal reports.
Save the date: Building a clean-energy economy
We’re hosting a virtual roundtable, as part of our Transformers series, on how to build a clean energy economy. Save the date!
When: March 8, at 10:00 am (NYC time)
Where: Online, of course. We’ll send out more information next week.
Who: The roundtable will feature Shell’s head of new energies, the founder of Form Energy, Facebook’s renewable energy lead, and Oliver Wyman’s head of energy.
That’s it! Have a great weekend.
Ps. This was a serious storm. Here’s what it looked like in Park Slope.
Exxon Mobil, the largest US oil company, announced on Monday that it was forming a new business focused on low-emissions technologies including carbon capture. The announcement follows reports that investors with more than $2 trillion in assets are pressing the company to move more quickly to address climate change.
The Irving, Texas-based company said it plans to spend $3 billion through 2025 on what it calls “lower-emission technologies.” That’s $600 million a year, or 3% to 4% of the firm’s project budget for 2021.
Part of that will go toward 20 new carbon-capture projects that Exxon also announced Monday.
“With our demonstrated leadership in carbon capture and emissions reduction technologies, ExxonMobil is committed to meeting the demand for affordable energy while reducing emissions and managing the risks of climate change,” Exxon CEO Darren Woods said in a statement.
Carbon capture involves sucking greenhouse gas emissions out of ambient air or from point sources, such as steelmaking factories. It’s among a suite of technologies researchers say we’ll need to achieve the goals of the Paris Agreement, an international accord aimed at keeping global warming in check.
The technology is attractive to oil companies in part because it doesn’t require that they rewrite their business models and pump less crude from the ground. As Exxon advances its carbon capture projects it will be able to lower the carbon emissions associated with each barrel of oil – something known as “carbon intensity.”
In December, the company committed to reducing the carbon intensity of emissions stemming from oil exploration and production by as much as 20% by 2025.
Other major oil companies including BP and Shell have taken more aggressive approaches to lower their emissions over the last year, such as by investing in clean energy sources like wind and solar. BP, for one, said it will spend $4 billion to $5 billion a year by 2025 on low-carbon energy.
Exxon is scheduled to report financial results on Tuesday morning.
Investors call on Exxon to address its climate impact
The pressure on Exxon to do more to address climate change has been building over the past few months.
Last year, the activist firm Engine No. 1, with the support of CalSTRS, began a campaign to elect four new board members, push the company to invest in cleaner sources of energy, and preserve its dividend. Other investors including BNP Paribas, through its asset management division, are pressing Exxon to be more transparent about its lobbying efforts as they pertain to climate change.
These efforts are snowballing: Reuters reported last month that more than 135 investors who manage more than $2 trillion altogether are forming a coalition to force the company to make similar changes.
It’s not clear whether those investors will be satisfied by Monday’s announcement.
Exxon’s new business will focus on carbon capture
Exxon has been developing and using carbon-capture technologies for years.
The new business, dubbed Low Carbon Solutions, marks a major expansion of that effort and it includes new carbon capture projects located in the US, Europe, the Middle East, and Asia. Exxon also suggested it may expand its work with hydrogen.
“ExxonMobil Low Carbon Solutions will also leverage ExxonMobil’s significant experience in the production of hydrogen which, when coupled with CCS, is likely to play a critical role in a lower-carbon energy system,” Exxon said in the press release.
The Low Carbon Solutions business will be spearheaded by Joe Blommaert, who was formerly the SVP for global operations in Exxon’s chemical business. The company also elected him as VP, a coveted title shared by just 12 other executives.