For the past several years, at year end I rank what I felt were the the major energy stories of the year. 2012 lacked a blockbuster energy story like the Deepwater Horizon oil spill in 2010 or the Fukushima Daiichi nuclear disaster of 2011, so there was no clear #1 in my mind. But, I thought I would change things up a bit and just let readers vote. So below I have summarized 15 of the major energy stories of the year in no particular order. Please vote for up to 5 stories, and I will report the Top 10 vote getters on December 31.
The revolution in US oil and gas production continues
The fracking revolution in the US continued, with oil production at its highest level since 1998 and dry natural gas production at an all-time high. President Obama became the first president since LBJ to serve in office during four consecutive years of increasing US oil production. The International Energy Agency (IEA) projected that by 2020 the US will become the world’s largest oil producer. They also projected that the US would become a net oil exporter again by 2030, which would be the first time that has happened since the 1940s.
India blackouts leaves 680 million people in the dark
India’s overburdened power grid failed, resulting in the largest power outage in history. Three regional grids collapsed, cutting power to an astounding 680 million people. The country’s rail system was paralyzed, and there were major traffic jams in cities affected by the blackouts.
President Obama rejects Keystone XL extension, endorses southern leg
When it looked like the Obama Administration was headed toward approving the Keystone XL Pipeline project in 2011, environmentalists organized protests at the White House against the “tyranny of oil.” The President bowed to the pressure, and announced that it would be impossible to make a decision on the project before the 2012 presidential election. In January Republicans passed a provision that forced the administration to make a decision, which resulted in the State Department rejecting the application for Keystone XL extension due to insufficient time to study the project. However, during a campaign appearance in Oklahoma, the president endorsed the southern portion of the pipeline that would connect Oklahoma to the Gulf Coast, announcing that he would “cut through the red tape, break through the bureaucratic hurdles, and make this project a priority.”
BP (NYSE: BP) settled criminal charges with the US government over the 2010 Deepwater Horizon oil spill for $4.5 billion, and a US District Judge in New Orleans approved a $7.8 billion settlement from BP to cover claims of economic and environmental loss. The US Environmental Protection Agency also suspended BP from bidding on new federal contracts as a result of the company’s actions leading to and following the oil spill.
Rigs shifting from natural gas to oil
Because oil production has been more profitable than natural gas in recent years, there has been a huge swing in rotary rigs from drilling for natural gas to drilling for oil. This trend continued in 2012 as natural gas rigs fell to their lowest numbers in over a decade. In 2009 nearly 80% of North American rotary rigs were drilling for natural gas. By 2012, nearly 80% of those rigs were drilling for oil.
California implements cap and trade
California implemented the first legally binding greenhouse gas (GHG) cap-and-trade program in the US. The program covers the state’s major sources of GHG emissions power plants, refineries, and industrial facilities. The program is intended to to reduce California’s greenhouse gas emissions to 1990 levels by 2020. NASA scientist and climate change activist James Hansen criticized the program for not going far enough, calling it “half-baked” and stating that “It’s certain that it won’t be effective.”
California gasoline shortage
An August refinery fire at Chevron’s (NYSE: CVX) 245,000 bbl/day Richmond, California refinery resulted in a shortage of gasoline in the state. The situation worsened due to an unplanned outage at an ExxonMobil (NYSE: XOM) refinery in Torrance. A gasoline shortage in the state ensued because refineries in most surrounding states do not meet California’s restrictive specifications. California’s gasoline prices spiked relative to the rest of the country, and some stations ran completely out of fuel. California Governor Jerry Brown attempted to alleviate the shortage by ordering an immediate transition to the less costly winter gasoline blends.
Sanctions on Iran
The US and EU targeted Iran’s oil income as a result of their continued nuclear program. The sanctions cut into Iran’s crude oil exports, which account for the majority of the Iranian government’s revenues. Iran’s oil revenues were cut in half as a result of the sanctions, but global crude oil prices were largely unaffected as increased oil production in other countries picked up the slack.
President Barack Obama was reelected for a second term, which means that the energy policies of his first term are likely to continue. This was generally viewed as good news for renewable energy, bad news for the coal industry, and mildly bad news for the oil industry — even though the oil industry didn’t do too badly during President Obama’s first term.
US carbon emissions plummet
Coal consumption in the US continued to fall because new supplies of natural gas are displacing coal in power plants. The change has been so dramatic that since 2006, the U.S. has been the world leader in reducing carbon dioxide emissions since natural gas emits less carbon dioxide per unit of power produced. US carbon dioxide emissions have fallen to a 20-year low as a result.
China in North America’s oil sands
China has long held ambitions with respect to North American resources. In 2005, China National Offshore Oil Corporation Limited (CNOOC) made a takeover bid for U.S.-based Unocal, which was the 9th largest U.S. energy company. The bid ran into serious political opposition, and was ultimately withdrawn. Having learned valuable lessons from their Unocal experience, in 2012 CNOOC made a successful $15 billion bid to take over the Canadian oil company Nexen. The deal is the largest-ever acquisition by a Chinese company, and gives China a more active presence in Canada’s oil sands. (China has already made investments totaling nearly $3 billion in Canada). Although approving the bid, the Canadian government also stated that future deals would only be approved under exceptional circumstances.
Hurricane Sandy and the aftermath
Hurricane Sandy struck the Eastern seaboard in October, leaving millions without power. In the aftermath of the hurricane, there were widespread gasoline shortages, leading to 1970s-era gasoline rationing in New York and New Jersey.
New CAFE standards doubled to 54.5 MPG by 2025
The Obama administration announced tough new regulations that call for a near doubling of fuel economy by 2025 to 54.5 miles per gallon. The National Automobile Dealers Association criticized the new standards, stating that they would raise the average price of a new vehicle by nearly $3,000 and would make new cars unaffordable for nearly 7 million people.
EPA rejects RFS waiver request
With the worst drought in the Midwest in many years threatening the US corn crop, many groups called on the US Environmental Protection Agency (EPA) to waive part of the mandated ethanol volumes under the Renewable Fuel Standard (RFS). The Washington Post even weighed in on the debate by calling on EPA Administrator Lisa P. Jackson to “ameliorate the situation by waiving all or part of the current-year ethanol mandate. In November, long after the worst effects of the drought had passed, the EPA finally rejected the proposed waiver.
Low natural gas prices stimulate US economy
For many years, industries that depend on natural gas as a major input have been leaving the US in search of cheaper gas supplies. These industries include chemical companies and fertilizer manufacturers. Low natural gas prices have led to a resurgence in interest in projects in the US. The New York Times reported that Dow Chemical has identified 91 new manufacturing projects representing potentially $70 billion in new investments and up to three million jobs that companies have started or proposed as a result of cheap natural gas. A report from the Yale Graduates Energy Study Group indicated that in 2010 cheap gas provided a net benefit to the US economy in excess of $100 billion.