Energy Investor Monthly – August 2024
INSIGHTS OF THE MONTH
U.S. Natural Gas Power Generation – More Than Just a Pipe Dream
Electricity: Meeting the Needs of Our Energy Future
Despite all the recent news about blackouts and other pressures on the U.S. power grid, over the past 15 years, electricity demand has remained roughly flat in the United States. At first, this may seem slightly counterintuitive. However, even though the number of devices that require electrical power has steadily increased, advancements in energy technology and power management have helped keep the growth of all these new power consumers at a moderate pace. A few examples include LED lightbulbs, energy efficient appliances, and even improvements in new home construction – the kind so well insulated that your ears pop when you close the front door.
However, this trend of moderate electric demand may finally be coming to an end. With the recent increase in re-shoring of U.S. manufacturing, the addition of new AI-enabled data centers, and even more E.V. s on the road, U.S. electric demand is expected to increase significantly. In fact, some energy experts estimate that electric demand could increase by as much as 20% by 2030. With this in mind, we believe it is important to understand where all this new power generation will come from and the balance between traditional and renewable fuels necessary to meet this rising demand.
How is Our Electricity Generated?

In the U.S., electricity is typically generated by spinning a turbine (or rotor) that converts mechanical (kinetic) energy into electricity via an electric generator. Several methods are used to spin these turbines, depending on regulations, economics, and the available energy source. In the case of natural gas, coal, nuclear, biomass, petroleum, geothermal, and solar thermal, the heat produced is used to create steam, which moves the blades of the turbine to generate electricity. In the case of wind power and hydropower, turbine blades are turned directly by the flow of wind or water. However, solar photovoltaic (P.V.) panels – like the ones on many homes – convert sunlight directly to electricity using semiconductors.
Electricity Generation – Today vs. Tomorrow
Reviewing the many ways the U.S. currently meets its electricity needs, a few are unlikely to help satisfy this expected growth in demand. These would include coal, nuclear, and traditional hydroelectric. Coal, once the largest source of power generation in the U.S., has been on a steady decline because of rising regulatory and environmental issues. While a source of carbon-free electricity, nuclear, like coal, has been hampered by countless regulatory issues, which, in addition to negative public sentiment, has significantly raised the cost and increased the time necessary to construct a new nuclear power plant to well over a decade.
What about “clean” hydroelectric power? Unfortunately, negative public sentiment and growing opposition by environmentalists and local communities to new dam construction would prevent or significantly delay the expansion of any new hydroelectric capacity here in the U.S.
Are “other” renewables the answer? Clearly, renewables will play an important role in helping the U.S. meet its growing demand needs; however, each has its limitations. Solar energy is limited by its high initial cost, international sourcing risks, and the number of daylight hours available. Wind power is frequently limited by local opposition and by wind duration and speed – too little or too much can lead to equipment failures and increased unreliability. Geothermal is limited geographically to areas where the underlying geology is favorable, and the availability of fuel volumes limits the size and scale to which biomass can be a consistent and reliable power source.
One way to overcome many of these limitations is battery storage – which, when connected to the power grid, can store the excess power generated during peak generation times. However, large-scale battery backup systems are very costly, and they also require materials that are unfriendly to the environment or are sourced from countries hostile to the U.S. and other Western democracies. Yet, despite these limitations, increasing federal and state mandates and support from private businesses ensure that renewables will play a more prominent role in meeting the U.S.’s future power needs.
Natural Gas: Essential to Meeting Our Future Needs
So, how will the U.S. meet its growing energy needs? Based on the latest data from the U.S. Energy Information Administration (EIA), hydrocarbons like natural gas and, to a lesser extent, coal will remain an essential part of the U.S. power grid – at least for the foreseeable future. Accounting for nearly 60% of total U.S. electricity production, fossil fuels are the most practical solution to help meet this rising demand. Making up over 43% of the total U.S. generation capacity, natural gas remains the easiest and most cost-effective solution for increasing electricity supply to the U.S. power grid. In addition, natural gas power plants can be operated around the clock and under any weather conditions, making them a very reliable source of base-load and on-demand (peak) power generation. Unlike most renewable generation facilities, natural gas power plants can be located practically anywhere and are limited only by their proximity to pipeline infrastructure.

Where fossil fuels fall short, however, is that many state and local governments, along with public and private businesses, have passed laws or specific mandates that increase the percentage of future electric power that comes from renewable sources. Some even specify the type of renewable power that must be used in their future power supply plans, such as solar, wind, biomass, etc. However, because of the intermittent nature of many of these renewable sources and the high cost of on-site storage, most are using natural gas or another hydrocarbon as a backup generation source. We support the irony embedded in many of these long-term energy goals.
Clearly, increasing generation capacity in order to meet the U.S. economy’s growing electricity needs will require an “all of the above” solution. However, with all the expected growth in electricity demand, particularly as we transition to a more sustainable energy future, hydrocarbons will still play an essential role in satisfying the nation’s future energy needs. The reason? Beyond all the media hype about the imminent demise of the oil and gas industry, following projections of the U.S. government’s own energy data, mandates restricting future power generation to 100% renewables is not only illogical, it is also economically and socially unfeasible. It is simply a pipe dream, although not the kind we would recommend.
Sources:
- https://www.eia.gov/energyexplained/electricity/electricity-in-the-us.php.
- https://www.eia.gov/tools/faqs/faq.php?id=427.
- https://www.eia.gov/outlooks/aeo/resources/.
- https://www.energy.gov/articles/doe-releases-new-report-outlining-solutions-meet-growing-electricity-demand.
- https://www.epa.gov/energy/about-us-electricity-system-and-its-impact-environment#impacts.
- https://en.wikipedia.org/wiki/North_American_power_transmission_grid.
ENERGY MARKETS BY THE NUMBERS
U.S. Total Crude Oil Production and U.S. Crude Rotary Rig Count (as of August 16, 2024):
- West Texas Intermediary (WTI) oil price was $75.54 per barrel (-2.5% m/m)
- U.S. oil production was 13.4mm bbl/d (+0.8% m/m)
- U.S. oil rig count was 483 (+1.26% m/m)

The U.S. Commercial Crude Oil Inventories (excluding those in the Strategic Petroleum Reserve) and Inventory Changes (As of August 16, 2024):
- Inventory decreased by 10.5 million barrels month over month to 426.0 million barrels (5.8% below the 5- year average).
- Total crude stockpiles, including the Strategic Petroleum Reserve (“SPR”), decreased by 7.7 million barrels month over month to 803.2 million barrels.

U.S. Imports and Exports (as of August 16, 2024):
- U.S. crude oil 4-week average imports were 6.5 mm bbl/d, down 4.1% month over month.
- U.S. crude oil 4-week average exports were 4.1 mm bbl/d, down 1.2% month over month.

U.S. Refinery Inputs and Utilization Rates (as of August 16, 2024):
- U.S. crude oil refinery inputs averaged 16.7 mm bbl/d for the week August 16, 2024. Four-week inputs averaged 16.4 million bbl/d, 1.4% lower than the same time a year ago.
- Refinery Utilization Rate was 92.3%, up from 91.6% for the previous month. This is lower than the same period last year, which was an 94.5% utilization rate.

This information is for illustrative purposes. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.
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