Blas: Second Oil Shock Inbound // India's 8-Hour Blackouts // Tariff Wreaks Havoc on Solar

Blas: Second Oil Shock Inbound

Javier Blas at Bloomberg has some bad news: Russian crude is down and is likely to stay that way, which means oil prices will stay high.

Here's the rundown:

• Russian crude production is down 10% since before the war.

• More production losses are likely as western refiners and traders walk away when contracts expire in the coming weeks.

• Unlike the first, quick shock, this second wave looks to be a slow boil. "Seasonal peak demand is still two-and-a-half months away, with the summer holiday period of the northern hemisphere, and retail gasoline prices are sure to climb," Blas writes.

• "The only potential relief is bad economic news: a recession in the U.S. and Europe is the clearest obstacle to $100-plus oil."

India's 8-Hour Blackouts

Hot weather and low coal supplies have sent blackouts ripping through India, namely the states of Punjab, Uttar Pradesh, and Andhra Pradesh. Experts warn that this is only the beginning as the country boils in hundred-year record heat.

It's doubtful India's coal supply can withstand the pressure. Coal makes up 70% of India's electricity generation. The country's ABP news outlet reports that several states are facing dwindling coal reserves due to intensifying heatwaves. "India’s Central Electricity Department has stated that a minimum of 100 out of 173 power plants are now facing a coal shortage, with stocks now 25% from their normal levels," reports Oilprice.com.

Nomura Holdings Inc., a Japanese financial holding company, warns that the country could be in for a "stagflationary shock."

And it could get even worse. Monsoon rains loom on the horizon, which means flooded mines and roads that will dampen coal production. Debasish Mishra, a Mumbai-based partner at Deloitte Touche Tohmatsu, told Bloomberg, “Plants should be accumulating coal ahead of the monsoon season. But that’s not happening. With demand surging, we may be heading for a coal crisis worse than last year’s.”

Tariff Wreaks Havoc on Solar

We covered the internal divide that's split the American solar industry since Biden introduced a tariff investigation on whether or not Southeast Asian countries were selling Chinese-made solar panels to America. A recent piece from the Solar Energy Industries Association reveals what that tariff has come to mean for solar companies reliant on foreign imports.

But before we get into that, here's a refresher on how this tariff came to be: earlier this year, The Commerce Department opened "a circumvention inquiry to determine if solar cells and modules brought in from Thailand, Vietnam, Cambodia, and Malaysia violate anti-dumping and countervailing duties against Chinese solar products," reported the Washington Examiner. "California-based Auxin Solar filed the petition last month, arguing the imports violate so-called "AD/CVD" tariffs and are injurious to domestic cell and module manufacturers."

Companies like Auxin see the tariff as a vehicle for establishing a domestic solar industry. Their buddies at SEIA see it much differently.

In response to the tariff, SEIA conducted a survey of 600 clean energy companies, most of them small businesses, and synthesized them into several categories of grievances. They're exactly what you expect: people worry for their livelihoods, they're freaking out about the already skyrocketing costs of solar from inflation and other supply chain constraints, investments in the industry are drying up, etc.

Here are some specifics:

• "In New Mexico alone, another company expects that 1 gigawatt of solar capacity will be cancelled, sacrificing 1,400 construction jobs."

• "SEIA estimates the solar industry will lose 70,000 jobs."

• Some respondents reported things like "a 35% increase in solar module prices and significant inflation on other materials."

• Others report margins so small as to threaten their entire business case.

SEIA expresses anger and confusion about how Biden could say he wants a clean energy future and then let something like this tariff happen. Everyone in O&G must be looking over their shoulder as SEIA and thinking:

Conversation Starters

• The US grid's queue of new generators is clogged with renewables struggling to find a place on the grid. More transmission needs to be built to accommodate them, which is a tacit admission that things like land rents and transmission costs are not (but should be) factored in when considering renewables buildouts.

• Some utilities are thinking about phasing out coal and replacing it with small modular nuclear reactors. Not everyone is pleased with this plan.

• ExxonMobil is considering complete withdrawal from its Russian operations in June.

Nuclear Barbarians: From Solar King to Nuclear Barbarian ft. Brian Gitt

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