My Top 10 Energy Stories of 2014

There was an energy story that stood head and shoulders above all the rest in 2014, but no clear runner-up. After the #1 entry on the list below, the rest of the Top 10 is highly debatable. I don’t think there is a consensus #2 story, and I don’t believe there is a well-defined Top 10.

But I do believe there is a clear #1. Here are my choices for the Top 10 energy stories of 2014, followed by about 15 more that could have easily been on the list. Feel free to chime in with any major stories I have missed.

1. Crude oil prices collapse

On July 30, West Texas Intermediate (WTI) closed at $104.29 per barrel (bbl). The next day it suffered a sharp decline below $100/bbl. As the year comes to an end, WTI has dropped below $55/bbl. The last time oil was this cheap was during the global financial crisis six years ago.

In fact, from the end of 2008 until mid-2014 energy stocks experienced a long bull market. Many oil producers saw their share price double and triple as oil found a home around $100/bbl. High oil prices put the brakes on the world’s oil-dependent economies. But as oil consumption fell in developed countries, the increase in demand from developing countries more than offset these declines, pushing global consumption higher. Eventually the U.S. shale oil revolution put enough oil on the market that supply growth started to outstrip the rate of increase in demand. Once the market recognized that Saudi Arabia would not cut its output to accommodate the shale producers, panic selling ensued. The nearly 50% decline in the price of WTI and Brent crudes is a sea change with far-reaching consequences. (For those who believe that demand declines are driving the price of oil down, note that global oil demand has increased 4 years in a row).

2. World sets new energy consumption records

I could have put any number of stories in the second spot, and the rest of the top five is pretty interchangeable. There were stories that were directly a result of the oil price crash (e.g., gasoline prices below $2/gallon in parts of the country; oil companies slashing capital budgets for next year) and stories that helped exacerbate the price decline (e.g., OPEC failing to cut production to prop up declining oil prices). I could have come up with a top five that was entirely related to the oil price crash.

But I thought the continued dominance of fossil fuels was worthy of the 2nd spot. The release of the 2014 BP Statistical Review showed new consumption records for oil, natural gas and coal. These three fossil fuels were responsible for nearly 87% of the world’s primary energy consumption. Fossil fuel consumption continued to decline in the European Union, while U.S. consumption rose for the first time in several years. Every developing region of the world continues to increase their fossil fuel consumption, which more than offset the declines in the developed regions.

3. Coldest U.S. winter in years drives energy prices higher

Last winter’s series of polar vortices caused U.S. natural gas inventories to be drawn down to their lowest levels in more than a decade. The overall winter draw on natural gas was also the largest in history, causing price spikes not only for natural gas but propane and heating oil as well. Natural gas inventories ended the winter withdrawal season about 50% below normal for that time of year, but a mild summer and record natural gas production allowed inventories to return nearly to normal for the 2014-2015 winter withdrawal season.

4. Continuing boom in U.S. crude oil and natural gas production

The fracking boom rolled on, with US oil production growing at the fastest pace in the country’s history and reaching the highest levels in nearly 30 years. North Dakota became the fifth state in the nation to see its oil production climb above the 1 million barrel per day mark. U.S. natural gas production continued to set new all-time highs thanks to the prolific Marcellus Shale, where output topped 15 billion cubic feet per day (Bcf/d).

5. EPA phasing out coal-fired power

This is a trend with big ramifications for U.S. electricity producers. In June the U.S. Environmental Protection Agency (EPA) released the Clean Power Plan proposal, which for the first time mandates carbon emission cuts from legacy power plants. The new regulations would require such plants to cut emissions by up to to 30% by 2030 from 2005 levels. Many coal plants will be unable to meet these new restrictions, and previous rules have imposed even more stringent limits on new coal-fired projects. The bottom line is that coal-fired power will continue to decline in the U.S. and could be phased out completely as a result of the new emission requirements.

6. While the U.S. saw uncommonly cool temperatures, The World Meteorological Organization projected that 2014 will go down as the hottest year on record for the planet.

7. Total (NYSE: TOT) CEO Christophe de Margerie was tragically killed when his private jet hit a snow plow as it was taking off from Moscow’s Vnukovo airport.

8. Over 300,000 people marched through the streets of New York City in what was billed as the “largest climate change demonstration in history.”

9. Mexican President Peña Nieto signed into law sweeping reforms designed to transform Mexico’s energy and electricity sectors by encouraging private investment.

10. Russia and China signed natural gas agreements that would send 68 billion cubic meters of Russian natural gas annually to China. This amounts to more than 10% of Russia’s current gas production.

I have seen the 60 Minutes story The Cleantech Crash — in which I appeared back in January 2014 — popping up on some energy lists as one of the top stories. I don’t think that would make my list, but the following are arguably worthy of Top 10 consideration:

  • The state of New York banned hydraulic fracturing (“fracking”).
  • Tesla Motors announced that Nevada will be the official site for the Tesla Gigafactory, the world’s largest and most advanced battery factory
  • The combination of a corruption scandal, the subsequent announcement that the company would delay earnings announcements by a month, the reelection of Dilma Rousseff as the country’s president, and plummeting oil prices sent the price of Brazilian oil giant Petrobras (NYSE: PBR) down nearly 50% for the year, to a level that hasn’t been seen in a decade.
  • The U.S. and China made a joint announcement that sets new carbon dioxide emission targets for the U.S., while China said it would try to reach its emissions peak by 2030.
  • The U.S. Environmental Protection Agency announced that it would not be able to issue a final renewable fuel standard for 2014 by the end of the year.
  • Halliburton (NYSE: HAL) agreed to buy Baker Hughes (NYSE: BHI) for about $35 billion in cash and stock, creating an oilfield services giant rivaling Schlumberger (NYSE: SLB) in size if not in margins.
  • Argentine lawmakers passed reforms designed to attract more investment in the country’s oil and gas industry.
  • Australian Prime Minister Tony Abbott fulfilled his campaign promise to repeal Australia’s two-year-old carbon tax.
  • Whiting Petroleum (NYSE: WLL) agreed to purchase Kodiak Oil & Gas (NYSE: KOG) to become the largest operator in the Bakken shale formation.
  • A two-year federal study concluded that fracking was not responsible for water contamination, but that the loss of well integrity had in some cases allowed contamination to occur.
  • The Obama Administration moved in the direction of loosening the ban on crude oil exports when it approved exports of minimally processed oil condensate for Pioneer Natural Resources (NYSE: PXD) and Enterprise Product Partners (NYSE: EPD).
  • The US Energy Information Administration (EIA) downgraded its estimate of recoverable oil in the Monterey Shale by 96%.
  • BP (NYSE: BP) suffered a number of legal blows, including an appeals court in New Orleans rejecting BP’s request to temporarily halt payments to businesses that can’t prove they were directly damaged by the 2010 Gulf of Mexico oil spill.
  • Two separate scientific teams concluded that the collapse of the Western Antarctic ice sheet is under way and inevitable, and could ultimately lead to a global sea rise of more than 10 feet.
  • A federal judge concluded that a multibillion-dollar judgment against Chevron (NYSE: CVX) over pollution in Ecuador was secured by lead plaintiffs’ attorney Steven Donziger through bribery, fraud, obstruction of justice, witness tampering and other crimes.
  • Several new LNG export license approvals were granted, including Sempra Energy’s (NYSE: SRE) Cameron liquefied natural gas (LNG) project in Louisiana.
  • Royal Dutch Shell (NYSE: RDS) issued a surprise earnings warning, blamed in part on Shell’s troubled Arctic drilling program.

This will be my last column for 2014. I hope the year was a good one for readers. Next week I will offer up my predictions for 2015.

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