Here’s the WaPo on the decision:

ON TUESDAY, President Obama’s Jobs Council reminded the nation that it is still hooked on fossil fuels, and will be for a long time. “Continuing to deliver inexpensive and reliable energy,” the council reported, “is going to require the United States to optimize all of its natural resources and construct pathways (pipelines, transmission and distribution) to deliver electricity and fuel.”

It added that regulatory “and permitting obstacles that could threaten the development of some energy projects, negatively impact jobs and weaken our energy infrastructure need to be addressed.”

According to a new Intelligence Report published today by SAFE, Iran is likely to intensify its threats toward oil supplies moving thorough the Persian Gulf over the course of 2012 as part of an unconventional method of conflict that uses oil as a strategic weapon to keep the West from continuing its trend of hard-hitting sanctions.

Unfortunately, there is no elegant way for the U.S. and its allies in the short-term to put a stop to Iran’s behavior. The United States has lacked good policy options against the Iranian regime for decades because the U.S. transportation sector is heavily dependent on oil. In the short and medium-term, additional sanctions and better strategic oil stockpile management may help alleviate some of the risk posed by a cut-off in oil shipments by Iran. In the long-term, however, the key to any effective strategy that will reduce U.S. dependence will likely only be found by shifting America’s transportation sector toward non-petroleum fuels like electricity and natural gas.

Click here to read the full Intelligence Report.

Does hydraulic fracturing to obtain natural gas cause earthquakes?  Yes.

This stark opening was quickly followed by a reasoned explanation of the relationship between fracking and seismic activity, and that technical discussion then succeeded by a recognition of the game-changing fact that is our natural gas bounty:

Yet fracking in America’s massive Marcellus Shale formation could provide a large, domestic source of energy with fewer harmful emissions and half of coal’s carbon output.

The WaPo goes on to recognize the jobs bonanza that is already flowing from the shale production, and makes the unobjectionable recommendation that more study and probably more regulation will be needed. 

The paper also cites the US Geological survey for the proposition that of the 144,000 storage wells of this type in America, only a tiny fraction have been linked to earthquakes.

Unfortunately, the thoughtful analysis that followed the attention-grabbing first line may be lost in future references to the Post.  This is an area where trying to be provocative is probably not a good idea.

Saturday’s WSJ reported on natural gas prices falling through the $3 per million Btu floor at the end of December — for the first time in two years.  More downward price pressure will come from the fact that inventories aren’t being drawn down sufficiently — the Journal reports they are at “their highest ever for this time of year and about 12% above year-ago levels.”

This is a case where ever lower prices may not be good for consumers.  A sustainable price will be needed to keep production levels up, though it is true that, as the WSJ further noted, producers “have shown little desire to curb output.”

At some point, pricing and irrational environmentalism (or simple NIMBYism) will begin to really rain on the gas parade.  Let’s hope that markets and policy-makers can adjust before it’s too late.

The candidates’ energy policy consensus breaks down over tax breaks for oil and gas producers and whether to just restructure, or flat out eliminate the EPA. The Iowa Caucuses on Jan. 3 saw Mitt Romney defeat surprise second-place finisher Rick Santorum by a mere eight votes and follow up primaries in New Hampshire on Jan. 10, South Carolina on Jan. 21, and Florida on Jan. 31 will have a disproportionate influence on the outcome of the Republican nomination.

Regardless of who is the Republican nominee may be, the contrast between the Republican energy platform coming out of its Tampa, Florida convention in August and the energy/environmental policies of President Barack Obama as he runs for re-election could not be starker, making the November 6^th general election one for the ages in terms of the future direction for U.S. energy policy.

Click here to read the full report.

The report bases its analysis on three risks that become quickly intertwined: general geopolitical instability, continued oil demand growth in developing economies, and the closing down of more than 1 million barrels of refining capacity in the Atlantic Basin in the past two years that could keep gasoline very high this summer in the U.S., even without the additional risks.

Citigroup sees the upside risk to oil prices as more numerous than in 2011 – which is saying something considering that the Arab Spring boosted global prices throughout the past spring and early summer.

These geopolitical risks include: low OPEC spare capacity, presidential elections in Egypt, Russia, Venezuela, France and the United States, and the natural climate for escalation that exists in the Persian Gulf. Iran and its increasingly numerous set of adversaries — Israel, the U.S., Saudi Arabia and the Arab Gulf states – could get into a military conflict in the next year that threatens shipping in the Strait of Hormuz, where 15.5 million barrels past each day on their way to world markets.

Add to the geopolitical risk the continued de-linking of emerging and developing economies around the world from rich economies in North America and Europe. By the second quarter of 2012, the report estimates emerging economies that include China and India will surpass the developed economies of the world in oil demand for the first time in history, with each averaging about 45 million barrels of demand a day.

This is a big deal; it means that regardless of the strength or weakness of major economies like the United States, the developed world is no longer the main driver of oil market prices. In the past, markets could count on the fact that if the U.S. entered an economic slowdown, oil demand would slump, followed quickly by a fall in oil prices. These lower prices would then allow the economy to recover, starting a new cycle of recovery. But these days are over, which explains why U.S. consumers spent more than $4,100 in 2011 on gasoline, a record, even as its economy remained in the dumps.

Finally, Citigroup’s global head of commodity research Ed Morse says it is almost certain the U.S. will suffer an incredibly tight gasoline market in the coming summer with gasoline prices much higher than currently anticipated. This is because between 2010 and 2012 more than 1 million barrels of refining capacity has been shut-in the Atlantic Basin as refineries that were operating at a loss were closed. Up to 700,000 barrels a day of refining capacity has been shut-in in the East Coast U.S. alone, and these refineries have been the disproportionate producers of summer-grade gasoline whose use in mandated in many parts of the country to lessen smog pollution during the hot summer months. The absence of this refining capacity has cut into summer-grade gasoline stocks, which will cause traders to bid-up gasoline prices as the summer driving season approaches.

None of these dynamics bode well for American consumers over the next year or two as the U.S. economy attempts to escape the Great Recession. With these structural changes in the global oil market, transportation options that involve the use of non-petroleum based fuels like electricity could be more and more attractive thanks to the dramatic fuel savings that will be available. It just so happens that more than 20 models of plug-in electric vehicles (PEVs) will be available in the U.S. during the next 12 months. It will be interesting to see their sales numbers if even a few of the risks highlighted in the report come to pass.

The so-called “Utility MACT” rule was signed Friday night — as Juliet Eilperin and Steven Mufson reported in Saturday’s WaPo:

The Obama administration finished crafting tough new rules Friday curbing mercury and other poisons emitted by coal-fired utilities . . . culminating more than two decades of work to clean up the nation’s dirtiest power plants.

The signing resulted from last-minute negotiations between the White House and the Environmental Protection Agency over flexibility that would be available to EPA to lengthen compliance periods.  That’s probably a good thing.  Given our abundant natural gas, many utilities can make the economics work to switch from coal to gas.  Where reliability may suffer as a result, deadlines should be extended.

WaPo then reported that the President had to make several environmental concessions to congressional Republicans late Friday night as part of a deal to extend the payroll tax cut.  Senate leaders agreed Friday night on a provision that would accelerate the Keystone XL pipeline permitting decision . . . .

And in return, a congressional rider on the Utility MACT was dropped.  Sounds like a good trade.  But let’s be clear about language here: the decision on Keystone has been ripe for some time.  The State Department EIS is done and has been for months.  What has now happened is that Republicans have countered the President’s move to delay a final decision until after the election.  To call it “accelerating” a permitting decision is just spin.  ”Accelerating” a political decision is more accurate. 

Now this deal is not yet done, as the Sunday shows and Monday papers reported.  Speaker Boehner is once again facing a revolt from his rank-and-file — not over either of the MACT for Keystone deal, but over once again increasing the debt by handing out a tax holiday.  So while the principals have all agreed on a Keystone deal, the vehicle in which is it riding is not yet over the finish line.

And even if the deal holds, it could backfire.  One potential outcome prior to this move was that the pipeline would be rerouted and ultimately approved by a new Republican presidential administration.  Now POTUS can argue that 60 days is too short to discuss a reroute and he can make the decision in February to deny the permit.

And then Congress can, one supposes, seek to overrule that decision — but that will be a steep hill to climb.  Republicans think they win on the politics by forcing cancellation and using it as a campaign issue.   Whether or not that’s a smart political calculation, the real question is where does the Canadian oil end up — in the US or in China?

But that’s history, and the annual two-week negotiations over addressing global climate change did end on Sunday with what the WaPo called “a last-minute deal.”  The deal?  An agreement to potentially reach an agreement that would apply something called “an agreed outcome with legal force” to developing nations.  This is arguably an advance on the Kyoto Protocol, which did not require developing nations to commit to reduce their greenhouse gas emissions.   And that’s important because some “developing nations” — namely China and India — are leading the globe in aggregate emissions.  To be fair, their per capita emissions are far lower than developed nations, but that shouldn’t give them a free pass.  The key negotiating issue since the US pointed out the fundamental unworkability of the Kyoto Protocol has been  how to account for developing nations’ exploding emissions without unfairly impeding their economic growth — after all, the developed nations built their economies on cheap fossil fuels and only subsequently has the world (well, most of it) realized that there will be highly negative consequences because of it.

It remains to be seen whether this year’s climate confab really moved the ball on this point.  Host South African foreign Minister Maite Nkoana-Mashabane certainly thinks so, as the WaPo quotes him saying, “We have indeed saved tomorrow today.“  Veteran climate watcher Alden Meyer, of the Union of Concerned Scientists, had a different view, noting failure to achieve agreement on reducing the gap between expected emissions and those most scientists believe are the maximum that the climate can endure without expensive and life-threatening damage:  “There’s nothing [in the agreement] that’s going to get the world to lift its game and close that gap.”

Maybe more important news this weekend came from the Nuclear Regulatory Commission, where dysfunction apparently reigns.  Both the WaPo and the WSJ reported Saturday on four NRC Commissioners, two Democrats and two Republicans, writing to the White House accusing Chairman Greg Jaczko of  ”actions and behaviors [that] are causing serious damage to this institution.”  That quote is from the WSJ, which runs an unfortunate lead sentence (“Four of the five members . . .”) — if you didn’t already know that there are only four commissioners and a chairman, you don’t find that out until the end of the piece, so casual readers may have thought there was a hold-out.  The fact is that all four of these highly respected professionals, Democrat and Republican alike, took the trouble of airing their concerns about the NRC’s leadership to the White House.  House Oversight and Government Reform Committee Chairman Darrell Issa, not the fuming four, released the letter to the media.

The bipartisan nature of the criticism made Senator Harry Reid’s (D-NV) otherwise laudable defense of his former staffer ring a bit hollow.  As reported in the WaPo on Sunday, he called the complaints “a politically motivated witch hunt.”  We’re guessing Senator Reid meant that Chairman Issa was hunting witches, not labelling the letter such.  But since loyalty in Washington is often in short supply, we’ll give him a pass either way.  Not so the NRC as a whole, an organization too critical to our energy future to have it’s oversight confined to the weekend papers.  Oversight hearings, anyone?

Source: ExxonMobil 2012

The largest oil major is, understandably, bullish on long term fossil fuel supplies, yet these projections underscore the urgency of the United States developing its own petroleum resources while emerging economies continue to squeeze the global oil market.  If anything, this graph may understate the demand growth, due to the vast increases in light-duty vehicles directly impacting demand for liquid fuels.  In 2010 there were just over 200 million vehicles in non-OECD countries, a number expected to more than quadruple to 900 million in 2030; it is unclear if ExxonMobil expects a similar surge, or if their report accounted for these vehicles.

Another transformative change anticipated by the report is a massive shift away from conventional internal combustion engines to hybrids and other plug in electrics, with these vehicles comprising almost 50 percent of the light-duty fleet.

ExxonMobil 2012

As Steve Levine noted in his must-read blog on oil geopolitics, Oil and Glory, most of this growth is expected to come from hybrid vehicles, with the important qualifier, “faster-than-expected drops in battery costs would likely make electric cars more of a factor through 2040 than we expect them to be.”  Levine notes:

“Doing much hanging around with battery scientists in recent months, I have to say that I am relieved to see this caveat. Common sense tells you it is highly improbable that scientists will make almost no technological advance in battery technology in a three-decade period. That some 20 nations including the U.S., Japan, South Korea, China, Israel and Germany are engaged in a race to make advanced battery breakthroughs suggests better progress.”

This assessment is spot-on.  We’re thrilled to see that ExxonMobil is giving advanced technology vehicles their due, and even more excited to see a world in which every other car in the road is a hybrid/electric.

power plants are already ratcheting back purchases of thermal coal, which produces smog and soot-causing emissions as it is burned to produce electricity, in favor of cleaner fuels.

Globally, however, Day notes that there will be steady or higher coal prices in the form of demand from Asia; China and India are building coal-fired power plants at a furious pace.

This is an important point.   Many clean energy advocates repeatedly claim that China is investing multiples more in clean energy than is the US.  That’s true, but it’s also true that China is investing multiples more in all energy than is the US.   Why?  Because they have to.  The US and the rest of the West are nearly 100% electrified — China, India and the developing world have a ways to go before they hit that.  Indeed, lack of comprehensive electricity is a key determinant of a nation’s status as developed or developing.

So, while US generators are turning from coal, US miners have been exporting coal, including thermal coal, at a near-record pace this year.

And coal’s disadvantage against natural gas — investment in pollution-control technology doesn’t make sense in the face of cheap natural gas — will eventually go away, as natural gas prices eventually will climb.

Day quotes analyst Chris Kostas on the prospect of new emissions rules having an impact on natural gas prices:  “I don’t think that the natural gas market has priced (them) in.”  That may be a minority view, given the long lead time these rules have had, but it is a fact that natural gas settled Friday at $3.58 per million  Btus, and has been stuck down there for months.

 Devon Maylie had a piece in the WSJ reporting from South Africa, where the annual Kyoto Protocol climate change negotiations are making hardly any news.  Maylie notes that South Africa is poised to invest $12 billion in solar, wind and biomass projects to reduce their 90% reliance on coal.  Watch for China’s heavily subsidized renewable industry to soak up much of that new work.

And finally, Guy Chazan reported, also in the WSJ, that EU sanctions against Syria are causing Shell to pull out of the country.  We’ll end on that piece of good news.

 The bill is being pushed by Senator Richard Lugar (R-IN), the Ranking Republican on the Senate Foreign Relations Committee and a long-time energy security hawk.

Lugar believes that  we must break the dominance of those regimes around the world that use wealth for nefarious ends and move rapidly to stop putting American military and civilian personnel into harm’s way because of oil.   Senator Lugar’s first priority for energy policy is reducing our dangerous overdependence on foreign oil; but it also matters from where we import our oil.  Canada is a reliable and secure supplier and is allowng the investments necessary to meet demand.  We don’t worry about a war with Canada.  We do worry about wars elsewhere.

 The second reason Lugar is introducing this bill is the nation’s need for jobs.  Keystone XL is the largest infrastructure project available for construction right away.  Tens of thousands of people will be employed by this pipeline directly and many more will have brighter job prospects at the thousands of businesses across the United States that supply materials and services for the pipelines.  Allowing seven billion dollars of private economic activity should be a no-brainer. The bottom line is that Lugar’s Keystone bill will bring jobs quickly, avoiding the “after the election” wait that the Administration has embraced.

 This legislation will make Keystone XL happen, but it is no free pass.  TransCanada needs to fully respect landowner’s rights, and it is in everyone’s interest to continuously boost environmentally-sound practices and technologies in the oil sands.  Lugar’s bill codifies that the permit will require Keystone XL to meet the stringent environmental standards enumerated in the State Department’s environmental review – standards that will make it the most heavily regulated pipeline in the United States.  The bill also ensures that the Nebraska route will be changed to take care of the specific concerns in the Sand Hills.

 Within the Senate Foreign Relations Committee, Senator Lugar has advocated in favor of Keystone XL for some time.  He also felt that State Department should be allowed to conduct a thorough review.  It did so (even though it was frustratingly slow), and the Lugar bill will allow for the next logical step:  building the pipeline and creating jobs.