2022 Energy Year Ahead
Welcome to the New Year 2022. On the energy front from local to global it has the potential of being an important and pivotal time. Here in Pennsylvania we are 10 months away from electing a new governor. For all intents and purposes Governor Wolf is “a lame duck” who continues to shepherd the effort by executive order and appointee committees to have Pennsylvania to join the Regional Greenhouse Gas Initiative. RGGI is a consortium of ten states with the goal to reduce carbon dioxide emissions by reducing electricity being generated from fossil fuel fired power plants. Upon joining power plants in PA would be subject to a carbon tax credit system. Proponents of RGGI project millions of dollars from the sale of carbon credits in the new green economy and argue it as an important reduction of emissions to thwart climate change. They see joining RGGI will be the foundation for creation of thousands of new jobs as the state makes investments in renewables. Opponents counter Pennsylvania is the only state of the group that is a net exporter of electric power and the state has already reduced emissions by some 30 percent as more natural gas power plants come on line. Again Pennsylvania would be the only state in the group that has abundant natural gas reserves that can continue to generate low cost electricity and be positioned to produce “blue hydrogen” for the future. Further their opinion is RGGI would devastate local economies with the loss of high paying jobs in the mining and gas extraction industries. Both the State House and Senate are advancing bills to prevent the Governors independent action on taxation and misappropriation of legislative authority. Governor Wolf has signaled he will veto both bills in spite of the fact all the other states joined only upon approval from their respective legislative bodies. It could be argued that this another example of the division of the state demographics with the southeastern part of the state dictating direction and policy disregarding the true natural resource assets of the state. This could be further indication how important the upcoming election cycle is and knowing the energy position of candidates for governor as well as other offices.
On other energy matters completion of pipeline projects Mariner 2 in Pennsylvania and Mountain Valley in West Virginia and Virginia should occur in 2022. These pipeline projects should continue the increase need and use of natural gas both in the regional market as well as providing additional gas to be exported as liquid natural gas LNG to Europe and Asian markets. As the world struggles to balance energy demands and needs as well as address the issues of global warming, LNG becomes increasing the realistic transition energy for most likely the next several decades.
Most analysts agree oil prices will continue to increase and may exceed $100 dollars a barrel by mid-summer. This will mean gasoline prices will hover above three dollars and higher for most of the year. Biden’s energy policy and restricting oil production has now contributed to higher oil prices and will see reinvestment flow to US oil producers. This could lead in 2022 to the US being the world’s largest oil producer and largest exporter of liquefied natural gas surpassing both Qatar and Australia.
According to Hart Energy, “Biden is likely to see a booming domestic oil and gas industry during his second year in office. America’s fossil fuel producers are set for a banner year of bumper earnings and growing output.” All this while they the producers struggle with addressing Environmental Social Governance ESG, controlling methane emissions, carbon credits, versus carbon taxes, net zero targets, and being good stewards of the earth.
Somewhere in all of this Biden and the Democrats will still attempt to revive and pass the $1.75 trillion spending bill that has a record $555 billion investment in climate initiatives and would provide huge tax incentives for renewables. It seems Senator Joe Manchin who at the end of last year said he could not back it, may be offering some hope by suggesting this week a compromise on the bill’s climate provisions was possible. He is quoted saying, “The climate thing is one that we probably can come to an agreement much easier than anything else.”
Speaking of climate winter so far has been mild and forgiving here. In Europe as they push to cut emissions through their Green Deal plan, they fret over their failure to secure adequate supplies of natural gas for the season. They along with other world leaders also fret over pledges of emissions reductions made at COP26 in Glasgow, Scotland. Countries are being encouraged to increase the magnitude of their emission reducing promises ahead of COP27 in Egypt this November.
Most likely too in 2022 Lithium commodity prices will remain at all-time highs as the world seeks a greener economy. Lithium is a key component for batteries powering electric vehicles, and manufacturers race to secure deposits. Lithium carbonate prices in China are 282,500 yuan/mt at the start of 2022, or approximately $21,000 a ton in US dollars. It may come as no surprise Lithium miners are facing opposition from environmental groups. A final Pennsylvania 2022 note the long awaited Shell Cracker plant will be fully operational in 2022. Shell Pennsylvania Chemicals owner operator of the massive facility in Beaver County made the announcement this past week. For 2022 stay safe, stay warm, and may all endeavor to work towards a better tomorrow.
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