April 12, 2010

Drill Baby Drill (For Shale Gas)
The political rallying cry seems to have been taken to heart by US natural gas exploration companies who continue to expand exploration and production in US shale fields. In fact, their continued success may preclude any need for offshore natural gas exploration for decades to come. The eagerness of the shale producers to monetize their assets and repay their working interest partners quickly should help keep natural gas and electricity prices stable. Since the first of this year, over 182 natural rigs have been put to work in the field according to Baker-Hughes. Of the 941 natural gas rigs in operation, 567 of them are classified as horizontal, typical of shale gas exploration.

This morning at 10:55, natural gas is trading up $0.107 to $4.177 per mmbtu. The brief rallies that we have seen over the past two months seem to be in response to the improving economic conditions in the US. Excellent gas inventory, balmy spring weather and our excellent production capacity will modulate any trader-driven news. It seem reasonable to expect the premium on the futures curve to flatten as inventory injections increase over the summer.

GE Brings Long Life To Lighting

http://www.foxnews.com/scitech/2010/04/09/new-ge-lightbulb-lasts-years/

Are Productivity and Energy Efficiency Driving the Economy?
In this week's BusinessWeek (4/19/10), in an article on the US economy by Mike Dorning, the author comments that worker output per hour, grew at a 6.9% annual pace in the fourth quarter, capping the biggest one-year gain since 2002. The GDP growth for the quarter was also revised up to 5.6%. "Over the long run, productivity growth is what raises living standards. Corporate profits also have been rising, up 8% in the fourth quarter, putting businesses on a sounder financial foundation to invest and hire as customers return." (Businessweek, 4/08/10)

Another under-covered economic driver that may also be helping the rebound of US corporate profits is the effect of the energy efficiency programs implemented since 2004. While I have not been able to find quantitative measurement for these efforts, there are qualitative improvements in terms of reduced urban pollution and flattening of CO2 levels in the US. Since 2004, many companies introduced energy efficiency programs in anticipation of Green House Gas initiatives by states and the Federal government. A typical industrial energy efficiency program performed by a Superesco will deliver an ROI in three years. (Power Management Company's LightSavers programs have ROI's that are typically faster.)

Many of the programs initiated by Fortune 500 companies in 2004-05 will be reaching their payback dates. According to the American Council on Energy Efficiency, "an estimated $300 billion was invested in 2004 in energy efficiency technologies and infrastructure in the United States... moreover, these investments in energy efficiency technologies are estimated to have generated approximately 1.7 quads of energy savings in 2004 alone."

Our experience is that energy efficiency programs are generally so successful that companies maintain and expand on their successes. It is difficult to turn your back on bottom line energy savings in excess of 20%. The combination of improved operating efficiency and low energy prices drives savings and enhance margins thus boosting corporate profits. (Source: American Council on Energy Efficiency: http://www.aceee.org/pubs/e083.htm)

Art Rosenfeld- America's Trillion Dollar Man
"The cheapest energy is what you don't use. " Art Rosenfeld

In honor of Earth Day, we are shining a bright but energy efficient light on one of America's most unrecognized heroes. The most valuable man in the United States is not the venerable Warren Buffet, our wealthiest citizen. America's most "valuable" man is an 83-Year Old, nuclear physicist, named Art Rosenfeld, who was one of Enrico Fermi's last students. His innovative ideas have saved value-conscious US energy users over a trillion dollars.

In 1973, the gifted nuclear physicist had a moment of illumination, (no pun intended) when OPEC's oil embargo drove Americans to gas lines. On the day it was announced, Professor Rosenfeld was the last person to leave his office at the Lawrence Berkley National Laboratory building at UC Berkley. As he was walking down the empty hallway, he noticed that almost every light in the building was left on. He proceeded to turn out every light in every office in the building. In the process, he found a life-long mission to teach Americans how to change their energy-wasting habits. His said at that time, "It would be more profitable to attack our own wasteful energy use than to attack OPEC."

That is exactly what he did. He and his lab team convinced school administrators and government officials that energy efficiency and economic growth can work hand in hand. He created the first energy efficiency standards for residences and industry. His UC Team developed the first standards for appliances which evolved into the EnergyStar standards now administered by the US EPA. He helped create the California Energy Commission and served on its board for many years. California is still benefiting from the Rosenfeld Effect, which is the empirical fact that electricity use per capita in California (CA) has been almost flat from 1973 to 2006 whereas use in the US has gone up 50%. Professor Rosenfeld retired from the California Energy Commission in 2009.

Perhaps his greatest achievement is the development of the fluorescent bulb. This amazing application of esoteric plasma physics to something as mundane as a light bulb has generated over a trillion dollars in energy saving to the US since it was first introduced. His UC Berkley team recently promoted the concept of converting all dark roofs to heat-shedding white roofs, which could save American consumers another trillion in energy expenses. Thank you Professor Rosenfeld.

Natural Gas Storage Report
Working gas in storage was 1,669 Bcf as of Friday, April 2, 2010, according to EIA estimates. This represents a net increase of 31 Bcf from the previous week. Stocks were 2 Bcf less than last year at this time and 180 Bcf above the 5-year average of 1,489 Bcf.

Natural Gas Market Watch- Intraday Prices Snapshot
Here are the intraday prices on the CMEG/NYMEX electronic market today (Monday) at 10:50 AM for the next six months($ per mmbtu, intraday prices):

May. $4.177 +0.107
Jun. $4.277 +0.108
Jul. $4.415 +0.107
Aug. $4.508 +0.100
Sep. $4.551 +0.097
Oct. $4.660 +0.096

Natural Gas Futures:
PMC 30-Day Natural Gas Futures Chart

Crude Oil Watch
NYMEX Crude front month future is up $0.16 to $85.08 at 10:43 AM.
West Texas Cushing traded down $0.18 to $84.44 per bbl at 9:06 AM.
 OPEC Basket Data
 
Electricity Watch-
Electricity for all Northeast markets is trending up but it is still trading at seasonally low levels.

For more information view the Day Ahead Electric pricing data charts from the PMC database, updated every Monday.

Weather Trends-
09-2010.
NOAA Forecast for Next Week
8-14 Day forecast
NOAA Forecast- 30-Days
El Nino-La Nina (Pacific Ocean Temperature Levels)
Arctic Oscillation (Arctic Pressure Patterns)

Written and Researched by Martin Linskey; Energy Charts developed by Charles Myers.

Disclaimer: This information is provided for the use of our customers and potential customers. Power Management Company assumes no responsibility or liability for the accuracy or completeness of pricing or information in this document. Historical data was obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. It is not intended to provide advice or recommendation. Views are subject to change without notice.