White House Humiliates Itself With OPEC+ // Drax Burns Canadian Forests for Fuel // ISO-New England Fined $500K

White House Humiliates Itself With OPEC+

Biden offered to buy 200 million barrels of OPEC+ oil at $80 a pop to refill the Strategic Petroleum Reserve in hopes of persuading the cartel to keep up its production.

In response, a panel of OPEC+'s ministers recommended cutting production by 2 million barrels per day. Such a cut, "shared pro rata, would require just eight countries to reduce actual production and would deliver a real cut of only 880,000 barrels a day, according to Bloomberg calculations based on September output figures," Bloomberg reports. "It would still be the biggest OPEC+ production cut since 2020, a move that risks adding another shock to a global economy that is already battling inflation driven by high energy costs. "

This is a humiliating blow to the Biden White House, as it has tried unsuccessfully to get the cartel to increase its output twice this year. It also reveals the administration's line on the fossil fuel industry as reckless and spasmodic.

"[I]n the spring of 2020, [Democrats] killed a proposal by President Donald Trump to replenish the SPR with oil from American producers, not OPEC+ ones, and at a price of $24 a barrel, not the $80 a barrel that the Biden White House promised to OPEC+. At the time, Trump was seeking to stabilize the American oil industry after the Covid-19 pandemic massively reduced oil demand," reports Michael Shellenberger. "Trump and Congressional Republicans proposed spending $3 billion to fill the SPR. Senate Democratic Leader Chuck Schumer successfully defeated the proposal, and later bragged that his party had blocked a 'bailout for big oil.'"

Rather than expanding American oil and gas production, the Biden administration has throttled lease auctions, talked a big game about "ending the fossil fuel industry," and threatened the industry with all sorts of attacks. And now it seems the administration will drain the SPR to keep prices low until the midterms.

Drax Burns Canadian Forests for Fuel

When I was in college, my alma mater installed a "biomass" facility on campus. I didn't know anything about energy then, but its construction and operation were met with great celebration. At a Sunday Coffee Hour, when our house got together to go over business and announcements, it was explained that the facility would burn wood chips. This was considered "green" despite the incredible carbon intensity of burning wood. So what does one of the largest power plants in the UK do? Well...

"Drax runs Britain's biggest power station, which burns millions of tonnes of imported wood pellets - which is classed as renewable energy," reports BBC. The company says that it only burns waste wood and sawdust. But that's not what the BBC uncovered.

"Panorama analysed satellite images, traced logging licences and used drone filming to prove its findings. Reporter Joe Crowley also followed a truck from a Drax mill to verify it was picking up whole logs from an area of precious forest," BBC reports.

Drax, a converted coal plant, bought a logging license in British Columbia to cut down old-growth forests for fuel. It generates 12% of Britain's renewable electricity and has received £6bn in green subsidies. How did burning wood get slated as "green"?

Like most of our energy Lysenkoism, you can derive the origins of biomass from the 1970s environmental movement. Back then, emissions were a concern of nuclear scientists, not the greens. What the environmentalists of the era, like Amory Lovins, worried about was the centralization of energy. Biomass was seen as a "small is beautiful" alternative to things like nuclear plants, which involved complex systems thick with managerial oversight. Greens have updated their concerns since the seventies, but their energy playbook hasn't adapted as quickly. Biomass is more controversial than it once was but many in the Brussels set still see it as an important tool in the environmental toolkit.

ISO-New England Fined $500K

ISO-New England, the region's grid operator, will have to pay half a million in fines for violating its own market rules. The Federal Energy Regulatory Commission has just okayed the fine.

The grid operator failed "to change the commercial operation date for a power plant being built near Boston that was facing delays, leading to more than $100 million in improper capacity market payments to Salem Harbor Power Development, according to an agreement approved Friday by the Federal Energy Regulatory Commission," Utility Dive reports.

ISO-NE has neither confirmed nor denied the allegations, but according to Utility Dive, it is committing more money to its compliance program in response to the fiasco. No system is perfect and corruption emerges in any institution given enough time. But whether or not consequences besides a fine are put into effect is important. If ISO-NE has committed a crime and no one responsible loses their job for it, how different is this from the frequently cited problems with regulated monopoly utilities?

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Conversation Starters

1. Could next winter in Europe be worse than this one? The IEA thinks so. "Europe's gas storages could have around 25-30% volume left at the end of the upcoming winter season but could face a difficult time refilling them ahead of the following winter, International Energy Agency chief Fatih Birol said on Wednesday," reports Reuters.

2. Germany's Economics Minister, Martin Habeck, seems to have accused the United States of wartime profiteering off of its LNG sales to Europe. "Federal Economics Minister Robert Habeck has accused several states of charging excessive prices for natural gas, including the USA. The Green politician told [said] that some countries achieved moon prices - including friends. This brings with it problems that need to be discussed," reports MDR (quote translated with Google Translate).

3. Coal prices in the Pacific region are rallying going into Q4. "The seaborne metallurgical coal market is entering the fourth quarter on firmer footing, as weather-related disruptions stoke supply worries while year-end restocking demand from India and China keep prices supported after a volatile Q3," reports S&P Global. "Benchmark Platts premium low-volatile hard coking coal prices, basis FOB Australia, declined $31.5/mt, or 10%, on the quarter to $270.50/mt while PLV CFR China was down $86/mt, or 22%, to $308/mt at the end of Q3."

Crom's Blessing