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Noteworthy news, analysis, and viewpoints from around the web

How cheap oil is undermining Obama’s fuel-economy rules

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How cheap oil is undermining Obama's fuel-economy rules

(Vox) One of the central planks in President Obama’s climate plan is a rule to ratchet up fuel economy standards through 2025. New US cars and light trucks are supposed to get better and better mileage with each passing year. At least, that was the dream. But now cheap oil is messing that up.

Recent data from the Transportation Research Institute at the University of Michigan shows that overall fuel economy for new cars, SUVs, vans, and pickup trucks sold in the United States has been stagnating ever since oil prices crashed last year

Bernanke: the relationship between stocks and oil prices

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The relationship between stocks and oil prices

(Brookings) The past decade has been a roller coaster for oil prices, one that market participants have probably not much enjoyed riding (Figure 1). The period includes much volatility and two sharp crashes. One crash, in 2008, was associated with the financial crisis and the Great Recession. The second may still be going on: Oil prices have fallen from over $100 per barrel in mid-2014 to around $30 per barrel recently.

Stock prices have also been falling recently, and these moves have generally followed the course of oil prices, a development much commented on by the financial press (for example, see here and here ). On the surface, the tendency for stocks to fall along with oil prices is surprising. The usual presumption is that a decline in oil prices is good news for the economy, at least for net oil importers like the United States and China.

What’s Wrong With Bernanke’s ‘Relationship Between Stocks And Oil Prices’

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(Seeking Alpha) The financial press has been commenting on recent correlation of stock prices to oil prices. As a recent Wall Street Journal article put it, “Oil and stock markets have moved in lockstep this year, a rare coupling that highlights fears about global economic growth.”

Ben Bernanke published an article Friday on his blog at Brookings, “The relationship between stocks and oil prices.” He began by stating we should expect a negative relationship between stocks and oil prices because decreasing oil prices are a benefit to the U.S. economy and vice-versa.

But, in fact, there has been a positive empirical relationship between stocks and oil prices. He provides 5 ½ years of data that show the correlation is positive, on average, with a correlation of 39%.He concludes that there are two reasons for the positive relationship.

Is Oil Pushing Down The Economy, Or The Other Way Around?

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Is Oil Pushing Down The Economy, Or The Other Way Around?

(oilprice.com) Conventional wisdom has long held that when oil prices drop, consumers experience an increase in discretionary income while corporations experience a boost in profit margins. At the same time, companies in the consumer discretionary sector get a boost in sales volume as consumers spend more on discretionary items.

The logical conclusion of this scenario would be record gains in the stock market as investors anticipate strong corporate profits. However, those expectations were largely shaped by past supply shocks – mostly on the negative side – and recent stock market performance suggests that we are now dealing with an entirely different dynamic.

For Once, Low Oil Prices May Be a Problem for World’s Economy

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For Once, Low Oil Prices May Be a Problem for World's Economy

(Bloomberg) For the last 75 years, almost every economic crisis has been preceded by an oil price spike. The worry now is that low energy prices are pushing the global economy into a tailspin.

While the idea is counter-intuitive, it’s gaining traction because a growing share of the world’s consumers and investors are in the very places getting hammered by the rout in commodities prices. Apple Inc., for example, blamed weaker sales last quarter on lower economic growth in some oil-rich countries.

“I never thought I would wish, let alone pray, for higher oil prices, but I am,” said Han de Jong, chief economist at ABN Amro Bank NV in Amsterdam. “The world badly needs higher oil prices.”

How the world’s great oil powers became so powerless

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How the world’s great oil powers became so powerless

(Washington Post) To get a sense of how much more oil the world has than it needs, look to the world’s oceans. Every day, supertankers carrying 2 million barrels apiece sit idle, in hopes that the price of oil one day will rise again. Or look at the line of ships being turned away from ports at the Gulf of Mexico, the North Sea and everywhere in between. In some parts of the world, there is no more land left to store oil. Or, perhaps, look at the United States’ largest oil storage facility— a series of massive drums across the plains of Oklahoma — which is storing more crude than at any point in the past decade.

Have we reached the tipping point for investing in renewable energy?

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Have we reached the tipping point for investing in renewable energy?

(The Guardian) Divestment – the decision to voluntarily reduce one’s fossil fuel investments – has been a hot button topic of discussion since 2011, when university students began calling on their institutions to remove fossil fuels from their portfolios. Divestment arguments have often focused on the morality of investments , but the economic value of divestment has recently become hard to ignore.

Suddenly, the Solar Boom Is Starting to Look like a Bubble

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(MIT Technology Review) By all accounts, 2016 should be a great year for solar power providers. In December, Congress extended the federal investment tax credit for solar installations through 2022, convincing analysts to project strong growth for the solar industry in coming years. Prices for solar panels continue to decline, even as emissions reduction targets reached under the Paris climate accord drive governments to seek more power from renewable energy sources. Several recent reports have shown that the cost of solar is often comparable or nearly comparable to the average price of power on the utility grid, a threshold known as grid parity.

17 Governors Agree to Pursue Clean Energy Goals

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17 Governors Agree to Pursue Clean Energy Goals

(Scientific American) The announcement by 17 governors yesterday to jointly pursue clean energy goals was perhaps most noteworthy in what it did not include—any mention of climate change.

That omission was necessary to bring a bipartisan swath of states together on energy efficiency and renewable energy, modernizing the electricity grid and promoting electric and alternatively fueled vehicles—all subjects often mentioned in the same breath as climate change.

Are We Doomed to Slow Growth?

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Are We Doomed to Slow Growth?

(NY Times) One day in 1980, when I was 10, I sat in my great-grandmother’s living room and poured out questions about what life was like for her as a girl in Belarus. At 90, she was still sharp and could answer my questions. But she didn’t betray any of the emotion I hoped for.

Born in 1890, in a tiny village powered by horses and the sun in a manner hardly changed from the time of ancient Rome, she grew up to witness the invention of the airplane and the adoption of electricity and the telephone. I wanted her to join me in marveling at this series of world-changing transformations, which I knew were beyond anything her girlhood self could have imagined.

Samuelson: The crash of 2016?

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(Washington Post) You cannot understand the vulnerable state of the U.S. and global economies — and nervous stock markets — without coming to grips with the crash of “emerging-market” countries. Led by China, these are middle-income countries that, along with the poorest countries, account for 85 percent of the world’s population and 60 percent of the global economy, according to Christine Lagarde, head of the International Monetary Fund.

Imagining a World Without Growth

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Imagining a World Without Growth

(NY Times) Could the world order survive without growing?

It’s hard to imagine now, but humanity made do with little or no economic growth for thousands of years. In Byzantium and Egypt, income per capita at the end of the first millennium was lower than at the dawn of the Christian Era. Much of Europe experienced no growth at all in the 500 years that preceded the Industrial Revolution.

EIA: U.S. energy spending down sharply

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EIA: U.S. energy spending down sharply

(UPI) Investment in the mining and other extractive industries, including oil, declined in the United States by more than 30 percent last year, federal data show.

When measured as a share of total private U.S. investments, federal data show spending in the mining and exploration sector dropped from a 5 percent share in 2014 to just more than 3 percent last year.

A daily briefing from the U.S. Energy Information Administration said low crude oil prices are the major factor in the reduction in capital spending .

Why the Dow Is Vulnerable to Weak Oil Prices

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Why the Dow Is Vulnerable to Weak Oil Prices

(The Fuse) The tight connection between the stock markets and oil prices has received a lot of attention this year, and for good reason. The correlation between the two reached the highest level in 26 years in January. In a time of financial and economic turbulence, all asset classes tend to move together—which is partly why the two are so closely aligned at this moment.

The World’s Economy Soared Last Year (or Plunged)

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The World’s Economy Soared Last Year (or Plunged)

(NY Times) Did global output rise or fall last year?

It all depends on what currency you use to keep track. Measured in dollars, global growth recorded the first drop since the end of the financial crisis late in the last decade, declining by nearly 5 percent, from $77.3 trillion to $73.5 trillion. That’s largely because of the dollar’s rise, which makes the output of countries with weaker currencies seem smaller when measured in dollars.

Obama Proposes $10/bbl Oil Tax, Dead on Arrival

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Obama Proposes $10/bbl Oil Tax, Dead on Arrival

(The Fuse) The Obama administration’s plan to tax oil companies to pay for investments in transportation offers a strategy to create long-term reductions in oil demand. However, given the gridlock in Congress, the state of the economy, and the challenges faced by the domestic oil industry, the proposal fails to meaningfully advance solutions to move the country away from oil.

If There Is a Recession in 2016, This Is How It Will Happen

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If There Is a Recession in 2016, This Is How It Will Happen

(NY Times) More and more news headlines and stock market analysts’ reports have started predicting , or at least insinuating , that a recession could be near in the United States.

I’ve been skeptical; the economy may not be great, but I’ve had a hard time envisioning how economic turmoil in countries like China and Brazil and supercheap oil could somehow combine to drag down the mighty United States economy. That’s why my October article on the economic outlook ended not with any bold conclusion, but with the “shruggie” emoticon.

University of Michigan study weighs efficiencies of hydrogen and pure electric vehicles

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University of Michigan study weighs efficiencies of hydrogen and pure electric vehicles

(CNET) Green represents the best figure, red represents the worst, and yellow sits between the two, in case you were curious. It doesn’t take much research to realize the efficiency benefits of electric vehicles over their gasoline counterparts. However, if you want to quantify those benefits, it helps to do a little digging. The University of Michigan’s Transportation Research Institute did exactly that in its latest study.

Everybody Hurts: Oil Majors, Independents Drastically Cut Capex

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Everybody Hurts: Oil Majors, Independents Drastically Cut Capex

(The Fuse) It seems fitting that oil prices fell back under $30 on the day that two major oil companies reported disastrous earnings results showing the damage of the past year and a half. The decline in prices that began in mid-2014 has wreaked havoc across all different types of companies—NOCs, IOCs, independents, oil majors, oilfield services—and there seems to be no respite in the short run. Companies are continuing to lay off staff, cut back on projects, and report eye-opening losses.

Ethanol pioneer ADM’s struggle reflects deepening industry woes

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Ethanol pioneer ADM's struggle reflects deepening industry woes

(Reuters) The world’s largest corn mill of global grain company Archer Daniels Midland is pictured in Decatur, Illinois March 16, 2020. When Archer Daniels Midland opened two of the country’s largest ethanol plants in Nebraska and Iowa six years ago, the biofuels market was on the cusp of a boom with prices and profits on the rise.

Now, the plants are more of a headache for the Chicago-based company, considered an industry pioneer, amid crushed margins and weak prices as the financial success of its almost 40-year- old business fades.

U.S. economy slows sharply as oil and gas slump deepens

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U.S. economy slows sharply as oil and gas slump deepens: Kemp

(Reuters) The U.S. economy eked out anemic growth in the final three months of 2015, and the struggling performance of the oil and gas sector was a major contributor to the slowdown.

Real gross domestic product rose at an annualized rate of 0.7 percent in the fourth quarter, down from 2.0 percent in the third and 3.9 percent in the second, the Bureau of Economic Analysis (BEA) reported on Friday.

Monthly coal use for U.S. power fell to 35-year low in November: EIA

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Monthly coal use for U.S. power fell to 35-year low in November: EIA

(Reuters) U.S power generation from coal fell to the lowest monthly level in 35 years in November 2015 as generators switched to cleaner and cheaper natural gas, according to federal data.

Gas overtook coal as the leading source of U.S. power for a fifth month in a row in November, according to the latest data available from the U.S. Energy Information Administration. The first month in history that gas overtook coal was April 2015.

Report: Energy Storage Has Solid Future

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(CleanTecnica) Renewable energy storage endeavors appear to be highly attractive business models worldwide for the year 2016.

A report from the World Energy Council states worldwide solar energy storage platforms will become more competitive as new battery technologies drive prices down. On the wind storage front, technical advances in areas such as composite materials appears to enable the power generated by wind turbines to increase. With the cost of capturing and storing wind and solar energy coming down, energy storage deployment across the world will increase, finds the report.