You should challenge the US Department of Energy’s ‘declining gas demand’.

To me, there’s still a decent upside to oil demand.

Probably not so much here in the US, but globally, I’d say “more oil” is a pretty safe bet.

Planes, heavy trucks, and petrochemicals will keep oil “in the game” for much longer than they tell you.

Not to mention, when oil demand peaks, it will level off and slowly decline, not plummet as some claim.

The world oil market today is about 101 million b/d, and I could see it get to 110 or 115 million b/d in the next few years.

But, the much brighter energy future belongs to oil’s sister fuel: natural gas.

Today, gas accounts for approximately 33% of US energy and 40% of power generation.

The two “greenest” governments in the world, Germany and California, are using much more gasoline than people realize, despite literally decades of trying to get rid of what has become an irreplaceable fuel.

  • Bloomberg reports how Germany is deepening its drive to expand its capacity to import liquefied natural gas (LNG).
  • Reuters reports how during the worst of its heat wave last September, natural gas generated more than 60% of California’s electricity (for example, wildfires prevented sunlight from reaching solar panels).

As climate change worsens droughts, California’s ability to harness hydropower (in and out of state) to “use less gas” is shrinking, exactly what we saw in 2022 when gas power skyrocketed.

And for years now, the US Department of Energy has been pretty consistent when it comes to its annual energy outlook projecting how much more natural gas the US will use.

Our gas growth story has generally been a 2-to-1 ratio estimate: US gas production is up 2% each year, and US gas demand is up 1% per year.

That additional 1% we have domestically each year (new production exceeding new demand) is what would allow our prices to stay low and also meet a growing LNG export complex that started in 2016 (from the US). continental US) and could double by 2027 to ~28 Bcf per day (for reference, the current global LNG market is ~52 Bcf per day).

Looking at these consistent forecasts for over a decade, you’ll surely forgive me if I’m confused by the latest AEO which came out in March 2023.

So what changed?

Why is the latest reference case from the US Department of Energy now telling us that our gas-fired power generation and demand for gas will actually decline significantly starting this year?

However, be careful that even the 2021 prediction for 2022 gas demand came out significantly lower than the actual (Figure).

When you dig into the AEO 2023 numbers, it all boils down to one main thing: a herculean expectation that solar power, not just in capacity, will literally explode in actual generation. Per year, the US Department of Energy has: our solar generation up by more than 9%, wind power up by 3.5%, and now natural gas down by 1.6% (Figure).

I just don’t get it because solar and wind generation projections are obviously fickle as one never knows when the sun will shine or when the wind will blow, especially when looking into the future.

And climate change is clearly making our weather just that: much less predictable.

It is worth noting here that both the International Energy Agency (using the World Energy Model) and the US Department of Energy (using the National Energy Modeling System) have been criticized for not being optimistic enough when it comes to to forecast the growth of wind and solar power, both capacity and generation.

It turns out that power forecast models don’t have feelings.

Not to mention the all-too-often-forgotten problem of “high ranking” renewables: good places are finite, so every new solar plant and every new wind farm will naturally be in less sunny and less windy.

For wind and solar, capacity additions are the easy part, actual generation and power portfolio penetration is much more difficult because they are so dependent on weather, something that climate change is again making less reliable.

In fact, the problem of “huge amounts of more renewable energy” is not about a “lack of investment” (ask Germany and California) but about physics.

Requiring giant swaths of land, wind and solar constructions are not as popular with the American public as the media and many of our politicians like to claim.

And it’s not exactly Fox News reporting the problems here.

Even the Sierra Club expresses the really big concern: “The NIMBY threat to renewable energy.”

My Forbes My colleague Robert Bryce, probably the world’s foremost expert on this topic, has a growing list of nearly 525 solar and wind projects that have been rejected across our country since 2014 alone.

And as we keep hearing that solar power will inevitably evolve from a niche market to the mainstream, even the BBC reports on the environmental problems that solar panels are bound to create; CNN reports the same with the wind.

California is used as an example for solar power, but it’s too unique for that to be close to reality because California is one of our sunniest states, and the mild climate dramatically reduces the need for electricity.

The same is true of Texas and the other windy states on the Great Plains that have an advantage in installing more wind farms that actually generate electricity, not just adding wind capacity that hardly ever produces (which is common in other, less windy states).

Surely the goal of electrification to fight climate change (eg electric cars) should give all three (solar, wind and gas) especially a much brighter future.

But as easily our main source of energy, gas is the cornerstone.

US annual power demand has been stable at ~4050 terawatt hours for 15 years, but even California admits that climate goals could double its electricity need between 2020 and 2045, according to a study commissioned by San Diego Gas & Electric.

And according to the Institute for Energy Economics and Financial Analysis, the US coal fleet, a resource that generates 20% of our energy, could be cut in half by 2026.

I have never seen a single projection in the last 15 years of a rebound in nuclear generation. Has?

Take advantage of natural gas, particularly as the backup resource (“rotating reserve”) required for naturally intermittent solar and wind power.

The best batteries for storage are adding some capacity, but a big leap has always seemed “10 years from now.”

To demonstrate the explosion required, we have about 1,300,000 MW of total electricity generation capacity, but only 20,000 MW of battery storage capacity across the country.

Talk about a long way to go.

I think the Biden administration has reluctantly but steadily realized what central natural gas will continue to look like, which explains why Sen. Joe Manchin (D-WV) just pulled out his new pipeline (Mountain Valley) of the debt ceiling agreement.

So I have to ask you, is this all political wishful thinking or do you really believe what the US Department of Energy is suddenly saying?

I guess you already know my answer.

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