A year ago the emergence and subsequent consequences of the Covid-19 pandemic had a tremendous impact on the year’s energy stories. That remained true in 2021, as supply chain issues combined with an economic recovery caused prices to soar.
1. Energy prices soar
For the average person, the sharp rise in gasoline prices was probably the story that impacted them the most. The root cause traces back to the Covid-19 pandemic, which negatively impacted oil production. Demand has returned, but supply hasn’t caught up. That’s a recipe for higher oil prices, and subsequently higher gasoline and natural gas prices. Consumers saw that, as gasoline prices rose to their highest levels since 2014. President Biden eventually announced a release of oil from the Strategic Petroleum Reserve in an attempt to stem the gasoline price rise.
2. Europe’s natural gas crisis
If you live in Europe, this was probably your top energy story of the year. For some of the same reasons experienced by the U.S., Europe suffered from a natural gas shortage this year. That was exacerbated near the end of the year by nuclear plant outages and cold weather. Russia could help ease the crisis, but Germany suspended the process of certifying the Nord Stream 2 Russian gas pipeline. These factors have helped push Europe’s natural gas prices into record territory, which has caused some factories to close. It has also caused some utilities to opportunistically switch back to coal as the crisis unfolded.
3. President Biden executive orders
On his second day in office, President Biden signed Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis. The biggest takeaway from the Executive Order was the cancellation of the Keystone XL pipeline permit. The project had been rejected by President Obama in late 2015, fast-tracked by President Trump in 2017, and now once more rejected by President Biden in 2021.
Next the administration issued Secretarial Order No. 3395, which implemented a 60-day suspension of new oil and gas leasing and drilling permits for federal land and water. President Biden followed that action up with Executive Order on Tackling the Climate Crisis at Home and Abroad. The biggest takeaway from this order was an indefinite “pause on new oil and natural gas leases on public lands” until a comprehensive review on the climate change impacts can be completed.
Although it will take years for some of these actions to impact oil supplies, the political impact was felt immediately. As gasoline prices continued to rise, many pointed at Biden’s executive orders as the reason. And for its part, TC EnergyTRP, the Canadian company that was building the pipeline, filed a formal request for arbitration under the North American Free Trade Agreement. The company is seeking $15 billion in damages from the U.S. government for the cancellation.
4. Energy stocks soar
The surge in energy prices hit consumers hard, but energy companies have had a tremendous year. The energy sector is on track to have its best year in two decades. Year-to-date (YTD) the sector has been the top performer in the S&P 500, nearly doubling the return of the index. As an example, ConocoPhillipsCOP — the largest publicly-traded pure oil and gas produce — is up 80% YTD versus an S&P 500 return of 26%.
5. The 2021 Infrastructure Bill
The $1.2 trillion Infrastructure Investment and Jobs Act was signed into law by President Biden in November. Although the bill covers many areas, it promises to have an enormous impact on our energy production and consumption in coming years. The bill provides new federal spending for electric vehicle (EV) charging stations and upgrades to the electrical transmission grid. Both are aimed at speeding up the transition to EVs. There are also provisions for encouraging energy efficiency, as well as the domestic sourcing and manufacturing of numerous clean energy technologies (e.g., batteries, solar panels, wind turbines)
There are a number of other stories that could arguably be Top 5, and certainly Top 10 energy stories of the year.
Winter Storm Uri in Texas caused a major power crisis there that left more than 200 people dead. The COP 26 agreement on emissions reductions was a top story, but only time will tell if the agreements had the intended impact. Functioning nuclear power plants continue to be shut down (e.g., Indian Point in New York), and that risks significant implications on future power supplies (similar to what Europe is currently experiencing).
Those are the top energy stories as I saw them in 2021. I thank you for reading, and I hope you are enjoying a wonderful holiday season.