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4 Aug 1 2014 @ 7:27am by Matt Smith in Crude Oil, Global Energy, Natural Gas

Preposterous!

If this tortoise could talk, I’m pretty sure he would say ‘preposterous’ in response to what you are about to read. For the wild and wacky world of energy has revealed some preposterous notions in the last week or so. Here are but a few of them.

–First up we are talking trash, for only 1% of Sweden’s trash ends up in a landfill. This is not only because of an aggressive recycling program, but because it burns as much of its garbage as it recycles to create electricity. So while the country gets approximately 44% of its electricity from hydro, 40.5% from nuclear, it gets 8.5% of its electricity…from burning trash (classified by the IEA as biofuels and waste). To put this in context, the US sends 54% of its 251 million tons of waste to landfills each year

–Next up is old Blighty, as the Department of Energy and Climate Change’s statistics show it has imported its largest share of energy since 1974. It imported a preposterous 47% of its total energy use in 2013, up from 43% in 2012, and 37% in 2011. On the bright side, renewable energy accounted for 15% of total power generation in 2013, jumping 30% year-on-year. This chart reminds me very much of the US….except that the US chart shows energy self-sufficiency:

–Next in the line of preposterity comes record US refinery inputs this month, which have reached 16.8 mbpd. As an oil export ban remains (mostly) in place, refiners continue to refine as much cheap oil as possible from key shale plays in Texas and North Dakota, sending it out onto the global market…to receive a global price for it:

–The penultimate preposterous point of this post is the energy efficiency scorecard, which has just been released. It shows Germany leading the way in energy efficiency (although its rampant pursuit of green energy is losing favor among the locals amid high utility bills). This isn’t the preposterous piece of this scorecard, however, this is: the US is lagging by a long shot, coming in a mere 13th... 

–And finally, I leave you with the ‘Widowmaker’ in natural gas. The widowmaker is the spread between the April and March contracts, and is known as such because bets on it can go exceedingly awry. There is generally a winter premium priced into the March contract, with the magnitude of it depending upon how tight the market is, or is expected to be, exiting winter.

For example, the widowmaker for 2015 spiked to over $0.75 earlier in 2014 amid the polar vortex, as the market priced in the expectation of much lower storage levels for the end of winter in 2015. However, as storage is being replenished at a record rate amid a mild summer and strong production, the expectation of adequate storage levels exiting next winter has narrowed the winter premium on the March contract versus April’s contract to a preposterously paltry $0.20:

Well that’s it for this week, as always – thanks for playing, and keep it preposterous! 

4 Comments on this post:

  1. Peter Cielecki says:

    Yet another – very interesting read from you. Cheers mate !

  2. Matt Smith says:

    Thanks Peter – very kind of you. I hope all is well!

  3. Germany?? says:

    Interesting to see Germany at number 1. Does the impact of higher coal consumption not factor highly into these calculations?

  4. Matt Smith says:

    Apparently not! The report’s ranking system is based on 31 measures, including energy use, energy savings targets, fuel economy standards for vehicles and energy efficiency standards for appliances to come up with the ranking. The scorecard was was produced by a Washington-based non-profit organization.

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