Indonesia will remove gasoline price subsidies this week as part of President Joko Widodo’s plan to free up more funding for transportation infrastructure spending. At the same time, the price of gasoline will be cut to about 61 US cents a liter to reflect falling global oil prices. State-owned oil and gas company PT Pertamina is the sole supplier of gasoline and diesel fuel in the South Asian country and will decide on a monthly basis whether to make any changes to the fuel prices. The government will continue to subsidize diesel prices.

The world price of crude oil dropped below $50 US a barrel for the first time in more than five years as evidence mounted that the world will be oversupplied with oil this year. In June of last year oil was trading above $100 US a barrel. The last time oil traded below $50 was April 29, 2009.

Falling crude oil prices are affecting US efforts to export liquified natural gas to Asia. Excelerate Energy’s liquefied natural gas terminal plant in the state of Texas has become the first victim of collapsing oil prices. Plans for LNG exports to Asia rely on oil prices staying high to make the business profitable. The floating 8 million ton per year export plant moored at Lavaca Bay, Texas has been put on hold. The project was initially due to begin exports in 2018.

Ethanol producers in the US are being hit in the pocket book from two sources: falling crude oil prices coupled with rising prices for their main input, corn. Cheap crude oil reduces the prices these producers get from oil refiners to blend the corn-based fuel additive into gasoline. Falling profit margins may cause some ethanol companies to cut back production this year.

Cheap fuel in the US is driving more SUV sales. Consumers bought more pickups, minivans and sport utility vehicles (SUVs)  than cars in the country in every month of 2014.

US automobile sales are now back at pre-Great Recession levels. 2014 vehicle sales will likely total 16.5 million and bring about a 58% increase since 2009. Light-vehicle sales in the U.S. averaged 16.8 million from 2000 to 2007. The record, set in 2000, was 17.4 million.

Shenzhen, one of China’s richest cities has issued restrictions on new car sales. The city, located in southern Guangdong province, is the last of China’s four “tier-one” cities — large urban clusters with high per capita gross domestic product figures — to limit the issuance of new license plates, following similar decisions by Beijing, Shanghai and Guangzhou. Effective immediately, only 100,000 new license plates will be issued annually in the city.

North American drivers are saving big from lower world crude oil prices.  US drivers could save as much as $75 billion on gasoline purchases in 2015, according to American Automobile Association. Americans saved $14 billion on gasoline last year compared with 2013. In Canada, it is estimated by Kent Marketing that drivers could save $12 billion on gasoline this year if crude oil prices stay low. Such numbers are equivalent to a large tax cut.

A nuclear power plant in the US state of Vermont has closed due to the low cost of natural gas from the country’s shale gas revolution and heavily subsidized wind and solar. The 604 MW Vermont Yankee Nuclear Power Station in Vernon, Vt., which had been generating electricity since 1972, shut down last week. The plant was licensed to run until 2032.

Data analysis company EnAppSys reported electricity generated by wind energy provided more than a quarter of UK homes with power in 2014. Wind energy generated 28.1 terrawatt hours (TWh) of electricity in 2014, up from 24.5 TWh in 2013, and supplied enough electricity to for the needs of 6.7 million UK households — a 15% increase on 2013. (1 TWh = 1 trillion hours)

In the UK £53.1 million was given to the wind industry in 2014 to keep turbines switched off to regulate electricity supplied to National Grid. The money is paid by consumers through a subsidy added on to electricity bills. The turbines have to be shut down at certain times because Britain’s electricity network is unable to cope with the power they produce. The wind farm owners then receive compensation payments for not producing electricity. On average a wind farm that is paid to switch off earns about one third more than if it produced electricity and sold it to the National Grid. Renewable energy sources, like wind and solar, are unable to store there excess electricity production given the current state of battery technology.

 

 

with h/t Tom Whipple

Tags: , , , , , , , , , , , , , , , , , ,