As 2017 comes to a close, it’s time to review the top energy stories of the year. There are several stories that could compete for the year’s top spot, but this year I have decided to list the stories roughly in the order they occurred during the year. Thus, the recent tax reform bill, which would be the top energy story on some lists, is near the end.
Here are the stories that shaped the year in energy.
Executive Orders on Pipelines
Just after he was sworn in last January, President Trump signed executive orders on two stalled pipeline projects. One was the Keystone XL Pipeline rejected by his predecessor. Trump asked TransCanada, the pipeline’s backer, to reapply for the permit. Shortly after, the company did just that, and the permit was approved.
The other project backed by Trump was the Dakota Access Pipeline (DAPL). The $3.8 billion project had been halted by President Barack Obama following months of protests. Trump instructed the Secretary of the Army to cut through the red tape that had stalled the project. That directive was followed, the project was restarted, and oil began to flow through the pipeline in May.
Repeal of the Clean Power Plan
In March, Donald Trump signed an executive order that instructed EPA Administrator Scott Pruitt to begin the process of dismantling the Clean Power Plan (CPP). The CPP was first proposed by the Obama administration in 2014 and would have required states to cut carbon dioxide emissions from existing coal- and gas-fired power plants, targeting an emissions reduction of 30 percent below 2005 levels by 2030.
An Exodus from the Oil Sands
Citing high costs and better opportunities in U.S. shale oil, oil majors like Statoil, Shell, and ConocoPhillips sold off $24 billion in assets in Canada’s oil sands sector. Other majors, like Total, have indicated they will follow suit.
U.S. Exit from Paris Climate Agreement
In June, President Trump continued to undo Obama’s environmental legacy with the announcement that the U.S. will pull out of the Paris Accord on climate change. Opponents of the agreement cited the costs to the U.S. economy. Trump stated that the agreement is unfair to the U.S. and that he hoped to negotiate a better agreement. The agreement was deemed as harmful to the coal industry in particular, which President Trump had promised to revive.
New Records Abound
In June, the Renewables 2017 Global Status Report and the 2017 BP Statistical Review of World Energy were both released. The reports showed new record consumption numbers for major renewables like wind and solar power, but also new records for oil and natural gas production. Global carbon dioxide emissions also reached a new record. The EIA also reported that despite record sales for electric vehicles, U.S. gasoline consumption reached a new all-time high.
Hurricane Harvey Causes Havoc
Late August brought Hurricane Harvey to the Texas Gulf Coast. The storm shut down oil production offshore and in the Eagle Ford formation. The storm also idled an estimated 30 percent of the country’s refining capacity. The result was a surge in gasoline prices that rippled across much of the U.S., and gasoline shortages. The situation was exacerbated by the outage of the Colonial Pipeline, which originates in Houston and is the nation’s largest finished products pipeline.
U.S. Shale Production Rebounds
Falling oil prices negatively impacted U.S. oil production in 2015 and 2016. Between the spring of 2015 and fall of 2016, U.S. oil production dropped by about a million barrels per day (BPD). But production came roaring back in 2017. By December production had reached nearly 9.8 million BPD, topping the 9.6 million BPD mark set in April 2015. December’s oil production marked the highest monthly oil production since 1971.
Oil Prices Begin to Recover
Oil prices bounced back as well. After spending most of 2017 below $50/bbl, in August West Texas Intermediate (WTI) finally moved from the mid-$40s into the upper $50s. In November, the price of WTI tested the $60 mark. A rally in the energy sector accompanied the price increase, with many major oil and gas companies reaching 52-week highs in December.
Warnings about Future Oil Supplies
During the year, multiple agencies warned about the lack of investment in the energy sector. The International Energy Agency (IEA) warned that energy companies had approved the lowest number of new drilling projects in more than 70 years.
Neil Atkinson, head of the IEA’s Oil Markets and Industry Division warned: “There are still not enough signs of investment beginning to return, and that raises the risk of tightening of the market in the next five years and a risk to the stability of oil prices. There is at least a possibility of going back to the situation we had ten years ago where oil prices were very, very high at a time when demand was growing.”
Meanwhile, the IEA also reported in April that global oil discoveries in 2016 fell to a record low.
Tax Reform Boosts the Energy Sector
Perhaps the most significant energy story of the year happened in December. Congress passed a massive tax overhaul, which the President has now signed. The new law will drop the corporate tax rate to 21 percent from the current 35 percent.
Energy companies stand to benefit the most. In addition to the drop in the tax rate, the law was changed to allow deduction of capital expenditures in the year they are incurred. This change will further lower the tax burden for the energy sector while encouraging more capital spending. Higher earnings across the energy sector should ensue.