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GAS PRICES: Gas prices are at their highest point since April and analysts expect them to increase in the weeks and months ahead, due to a confluence of extreme heat, lower OPEC+ oil production, and high Atlantic Ocean temperatures that could portend a dangerous U.S. hurricane season.
“I think in the next couple weeks, we will probably see a new 2023 high watermark” for gas prices, Patrick De Haan, the head of petroleum analytics at GasBuddy, told Breanne in an interview.
Oil prices have rallied to their highest point since April amid OPEC supply cuts and an expected uptick in Chinese demand.
AAA pointed to higher oil prices as the “primary culprit” causing gas prices to rise in its most recent blog post, and Energy Secretary Jennifer Granholm used a CNBC interview this weekend to call for more oil production.
DeHaan said fundamentals could push WTI to $80 per barrel in the coming weeks, and potentially into the fall. “I definitely think we're probably going to start seeing gas prices rally more to the upside,” he said:
How heat factors in: The heat is also curtailing output at Gulf Coast oil refineries—including in Texas, which is on track to experience one of its hottest summers on record.
“The heat is slowing down refining operations and it's leading to some outages,” De Haan explained. “Gasoline supplies are actually at their lowest July level since 2015. They’re actually lower than last year, when [oil] prices were much higher.”
When temperatures are as high as they’ve been in recent weeks—well into the triple-digits in most of Texas—equipment risks breaking down and malfunctioning, forcing refineries offline and crippling their ability to refine oil into gasoline.
ExxonMobil’s refinery in Baytown, Texas, has had issues this month with the heat tripping its units off. Add to that the record demand placed on Texas’s power grid this summer, which poses a threat to other refining operations in the state. (Texas is home to roughly one-third of total U.S. refining capacity, according to the EIA.)
Restarting a refining plant after an outage is a careful and extremely deliberate process. “It's less of a light switch and more like navigating the restart of a nuclear power plant—there's a lot of things that have to go exactly right,” DeHaan said.
The height of hurricane season is quickly approaching: In previous years, DOE has relied on the SPR for supplies in the event of a natural disaster and resulting supply disruption, including after Hurricane Ike and Hurricane Katrina.
But with the SPR depleted to its lowest point in 40 years—with enough supply to last roughly 18 days—any hurricane that threatens U.S. Gulf Coast refiners could put the U.S. in a dangerous position. “We may actually see gas prices inching up this fall, especially considering the unknown surrounding hurricane season,” De Haan said.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writer Breanne Deppisch (@breanne_dep). Email [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
GRANHOLM SAYS OIL MARKETS ‘VOLATILE,’ CALLS FOR MORE PRODUCTION: Granholm called for more oil production, telling CNBC’s Sri Jegarajah in an interview this weekend that the administration is concerned about where prices are heading.
There’s “no doubt that there is a volatile environment,” she said of oil markets, adding that the White House is monitoring the situation.
“There is a lot of emotion in these markets and so we have deep concern about trajectories of where things are headed,” Granholm said.
“We want to see more [oil] supply … It gets dangerous when the prices are so high,” she added. “I think the prudent course is to ensure that transportation is affordable for people, and that of course means making sure that supply is stable.”
CHEVRON Q2 EARNINGS: U.S. oil major Chevron disclosed profits of $6 billion for the second quarter of 2023, offering a rare preview ahead of its official profit disclosures on Friday. While the second quarter earnings were roughly half of its profits compared to the previous year, when energy prices soared to an all-time high following Russia’s invasion of Ukraine, the $3.08-per-share profit still beat out Wall Street expectations, which had estimated somewhere closer to $2.97.
"The macro price environment has softened a little bit versus the first quarter," CEO Mike Wirth told Reuters in an interview. "It is still a strong quarter."
Chevron’s and gas production in the Permian Basin also hit 772,000 barrels per day, in what Wirth said was “the highest quarter we've ever had in the Permian and 10% over the same quarter last year.”
…Chevron announced two big leadership changes: The company’s CFO, Pierre Breber, will retire next year and will be replaced by current CTO and vice president Eimear Bonner, Chevron said. It also said it is waiving its mandatory CEO retirement age of 65, allowing Wirth to stay in his current role for longer than expected.
CALIFORNIA WATER CANAL TO BE COVERED IN SOLAR PANELS: California is planning to cover roughly 1.6 miles of water canal in solar panels, a first-of-its-kind project meant both to provide renewable energy and conserve water amid intense, years-long drought.
The panels are believed to help reduce water evaporation in sunny, water-scarce areas and bolster electricity production—a key goal in California, where leaders are targeting a goal of 50% renewable energy production by 2030—but where allocating land for renewable projects such as wind and solar can be extremely costly.
A University of California, Merced, analysis found that installing solar panels over California’s irrigation canals could save up 62 billion gallons of water in the state, and generate 13 gigawatts of solar power—enough to power the entire city of Los Angeles from January through early October—securing the support of state leaders, who agreed to allocate $20 million in public funds to help get it off the ground.
Now, all eyes will be on Project Nexus to see if it can deliver.
The project will cover 1.6 miles of canals in California’s Central Valley, between 20 and 110 feet wide, with solar panels between five and 15 feet off the ground. UC Merced researchers will be tasked with watching the project and measuring evaporation, water quality, and other environmental impacts.
“We need to get to the heart of those questions before we make any recommendations about how to do this more widely,” the lead researcher, Brandi McKuin, told EuroNews. Read more on California’s pilot project here.
ICYMI – BIDEN WATER HEATER RULES: The Biden administration proposed a new rule aimed at making residential water heaters more efficient, a measure that, if approved, would be the administration’s biggest crackdown on household appliances to date.
The draft rule would require most common-sized electric water heaters to use heat pump technology, while gas-powered heaters would be required to use condensing technology, the Energy Department said in a statement. The efficiency standards, which would take effect beginning in 2029, would save consumers an estimated $198 billion and reduce more than 500 million metric tons of harmful CO2 emissions over a 30-year period.
The water heater proposed rule marks the 18th new product efficiency standard introduced by DOE this year alone. In a statement, the agency said these changes will save consumers an estimated $570 billion and reduce greenhouse gas emissions by more than 2.4 billion metric tons cumulatively over 30 years, in line with the administration’s broader goals. Read more on the rules here.
BIDEN TO MAINE TO BOOST OFFSHORE WIND: President Joe Biden will travel to Maine this week in hopes of ginning up support for his administration’s offshore wind projects, including projects in the Gulf Coast off of Texas and Louisiana, which the administration announced last week.
The trip comes as the Biden administration looks to deliver on its goal of reaching 30 GW offshore wind capacity by 2030. It also follows the resolution of a dispute between Gov. Janet Mills, a Democrat, and unions over labor standards on offshore wind ports.
A FEW OTHER THINGS TO WATCH THIS WEEK: The House Rules committee will meet tomorrow to discuss voting on Senate-passed resolutions to cancel Biden administration protections for endangered species, including for the Northern Long-Eared Bat and the Lesser Prairie-Chicken.
Sen. Joe Manchin will chair an Energy Committee hearing Wednesday on permitting for electric transmission lines, pipelines, and energy production on federal land, as he seeks to advance permitting reform.
Louisiana Gov. John Bel Edwards, a Democrat, will be among the witnesses Wednesday at a Senate Budget Committee hearing on climate change and infrastructure.
The Senate Appropriations Committee on Thursday will mark up the Labor, Health and Human Services, Education, and Related Agencies Appropriations Act for fiscal year 2024.
Also on Thursday, a panel for the Fourth Circuit will hear oral arguments in the case over the Mountain Valley Pipeline.
The Rundown
Wall Street Journal From Moby Dick to wind farms: East Coast tries to pivot centuries-old ports
Washington Post Small-town GOP officials are torn over Biden’s clean energy cash
E&E; News 3 things to know about Biden’s oil regs