Power prices are expected to soar under new tax cut and spending law
In states without policies to drive renewable energy, power prices could surge as federal tax incentives for clean energy disappear, according to Energy Innovation, a think tank.
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Testimonies & Speeches by Antoine Halff • January 19, 2016
Antoine Halff testified before the US Senate Committee on Energy and Natural Resources at a hearing to examine the near-term outlook for energy and commodity markets. His conclusion is below and the full written remarks can be found here (PDF).
Conclusion: A new era of heightened volatility?
In summary, the oil market is facing unprecedented headwinds, which have resulted in steep and, for the industry, highly challenging price declines. While supply growth is already slowing in the face of shale oil setbacks, oversupply and inventory builds continue amid relatively sluggish demand growth. Downward pressures on oil prices will persist until the market reaches an inflection point and inventories decline.
But the factors that today incentivize producers to boost output at the expense of longer-term investment will inevitably undermine future production. The very rise of the shale oil industry, with its unique cost structure and short business cycle, undermines longer-term investment in high-cost conventional supply. The ability of the shale industry to ramp back production in a rebound is untested, however, and the market might find out when prices finally recover that its capacity has been durably degraded. In a best-case scenario, the market ought to brace itself for a period of heightened volatility, albeit perhaps in a relatively narrow band, if the shale oil industry manages to function as an effective swing producer. Alternatively, low prices today may set the stage for significant supply shortfalls tomorrow.
China’s dependence on the energy supplies that move through the Strait of Hormuz makes it especially vulnerable to any possible closure of the waterway by Iran in retaliation for attacks by Israel and the United States.
The conflict between Iran, Israel, and now the United States has yet to disrupt energy supplies to global markets.
Calls to "Drill, baby drill" are back with Donald Trump's return to the White House, and for US natural gas production, the catchphrase might also be a necessity over the next three years if demand for the fuel grows as steeply as expected.
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Testimonies & Speeches by Antoine Halff • January 19, 2016