Going With the Flow

“You’re running to be prime minister — it’s hard to be the person who makes jokes.” – Ed Miliband Several months ago, we took to these pages to articulate an admittedly long-shot call. After foreseeing Mark Carney’s 180-degree flip on all things climate change, we postulated that perhaps Great Britain, Canada’s historical mothership, might also be ready to discard the geopolitical deadweight of carbon insanity. While searching for a British Carney—a politician with green bona fides so unquestioned as to put him above reproach in executing such a change—we settled on Ed Miliband. Thus followed our prediction that he might replace Sir Keir Starmer as prime minister. If you are going to be wrong, you might as well be spectacularly so. Not only was Miliband shuffled off to the post of foreign secretary, but his successor as energy security and net zero secretary, Miatta Fahnbulleh, seems no less a climate warrior than he. For our many beleaguered subscribers in the United Kingdom (UK), we sincerely wish your government had more to offer you in the face of the greatest energy crisis of the modern era than this : “ National Gas has moved into the advanced engineering design phase for a 350-mile hydrogen pipeline linking St Fergus in northeast Scotland to Teesside on England’s east coast, the gas transmission system operator said in a statement Sept. 17. The pipeline is the second phase of Project Union, and National Gas plans to develop a 1,500-mile national hydrogen network connecting major industrial clusters and hydrogen production centers, the company said. A first phase will connect Teesside, through Yorkshire and the Humber, and south into the East Midlands, through a 300-mile pipeline. ” Can’t win ‘em all | Getty While the rest of the world is busy reacting to a triple shortage of liquefied natural gas (LNG), crude oil, and refined products, His Majesty’s Royal Government is fixing to build a pipeline network for a molecule that nobody will produce because it is too expensive, in order to move it across vast distances despite nobody demanding that it be done, only for it to arrive at a location where nobody will have built the necessary-but-money-losing assets to make any use of it. And one wonders why the whiff of revolution is spreading across Britannia. Since the onset of the war in Iran, we have been flagging how the European Union (EU) was both particularly vulnerable to a winter energy shock and—inexplicably—doing precious little to avert it. The Miliband-for-Fahnbulleh trade inspired us to take a narrower look at the energy predicament of its only defector (to date). Amazingly, the UK approaches the coldest months of the year in measurably worse condition, particularly susceptible to the whims of the very global leaders its population claims to detest. The numbers are downright scary, so let’s take a cautious peek. Read more

Value Trap

“Thankfully, there’s no rehab for success.” – Lil Wayne In early July of 2025, the government of Angola made a fateful decision to raise diesel prices nationwide by one-third, part of a years-long campaign to phase out costly fuel subsidies. A three-day strike by minibus and taxi drivers spiraled into nationwide bouts of violent unrest. By the end of the month, some 30 people were confirmed dead, 277 injured, and over 1,500 arrested. Despite these severe civil disruptions, the government ultimately held firm. The riots came to an end, but the reduced subsidy levels held. Energy is life | Getty How local customers are treated in net energy-exporting regions is often an underappreciated political, economic, and strategic challenge. It seems only fair that resource wealth should, at a bare minimum, accrue life-nourishing benefits to surrounding residential and industrial consumers, but fairness is rarely value-optimizing for the risk capital needed to extract such wealth in the first place. Unfettered capitalism seldom solves for all three dimensions of the challenge, with thorny political issues regularly frustrating idealized theory. The degree of fettering by government authorities is thus the determinative variable, with countless fortunes made and lost based on such politicking. Disentangling such dilemmas is made especially difficult when native demand is significant. In such a situation, placating the locals through subsidies is an expensive option. If local consumption were tiny to the point of insignificance, the problem would solve itself—generous discounts could be given without much thought. When it is large, different prices for relatively equal demand pools are notoriously hard to enforce. Bootlegging, organized crime, and other forms of corruption quickly materialize. Subsidized fuel in Indonesia | VOI In today’s natural gas fields, two deeply interesting situations are emerging in which a wild abundance of cheap fuel is being produced, each one covering a different end of this local-consumption spectrum. In the Permian Basin, more than 23 billion cubic feet per day (bcf/d) of dry gas is flowing into the market, comfortably swamping local demand. There is hardly anyone living in the deserts of West Texas—fewer still that would protest the development of egress to serve more populous markets in distant places—and the fuel is often given away. On the other end sits Alberta, whose similarly trapped bounty of cheap natural gas regularly sells for rock-bottom prices. In round numbers , of the province’s 11 bcf/d of production, 7 bcf/d is consumed within its borders, and only 4 bcf/d is exported to points east over the Prairies, west over the Rockies, and south to Orangemanbadland. This presents Alberta Premier Danielle Smith—a politician on par with US Energy Secretary Chris Wright in her energy expertise and shrewdness—with a particularly vexing challenge: How can Alberta’s natural gas production reach its full potential without negatively impacting the voters who put her in office? Much to contemplate | Getty With a separatist referendum just weeks away, a growing trade war between her home country and the US to navigate, and a potential tsunami of demand for Alberta’s cheap fuel accumulating from aspiring data-center builders, now would seem an inopportune time for Smith to be confronted with an explosive leak detailing the inner contemplations of her cabinet as she tries to thread the natural gas needle. That’s exactly what went down last week, and the blowback has been swift. Let’s head to the northern stretches of the Great Continental Divide for a view into this emerging energy predicament. Read more

Apricity or Bust

“If the world seems cold to you, kindle fires to warm it.” – Lucy Larcom Watching the parade of negative-charisma European elites cascade toward their inevitable political demise would be entertaining, were it not certain that their equally incompetent replacements would spawn into place from a seemingly endless line of empty suits, like so many Pez popping out of identical plastic dispensers. Consider soon-to-be-ousted German Chancellor Friedrich Merz. Anybody who labored through his bizarre speech to the Bundestag on Wednesday would hurriedly bet the under on his longevity in the post. Already the least popular German chancellor of the modern era—his roughly 15% approval rating bests his predecessor, the hapless Olaf Scholz, for that dubious title—Merz’s response to an electoral rout suffered by his party in last Sunday’s regional election in Saxony-Anhalt was a classic five-stages-of-grief display stuck on “anger.” The unruly session barely avoided devolving into fisticuffs. Keir Merz | Getty Our longstanding view is that the European Union’s (EU) bungled energy policies sit upstream of all other hot-button issues befalling its member states. Lo and behold, losing heavy industry, paying more for basic needs, and being lectured to that these real-life problems rank lower than various foreign policy adventures, is deeply unpopular. Even more so when said adventures make energy realities worse. Among the adventures for which Europe’s leaders cannot be directly blamed is US President Donald Trump’s disastrous foray into war with Iran. Merz didn’t cause the Strait of Hormuz to be closed or Qatar’s entire liquefied natural gas (LNG) export volumes to suffer indefinite loss; however, his response to those developments—a stunning display of inaction, as it turns out—is surely his to own. As it became apparent that EU leaders would not implement emergency measures to prepare for the upcoming winter—seemingly choosing, yet again, to roll the dice on the weather—prices have drifted steadily higher for front-month LNG at the Dutch TTF benchmark. At the time of this writing, Europeans are paying more than 10 times the price of US natural gas at the Henry Hub, yet still regularly losing auctions for incremental LNG cargoes to even more aggressive bidders from Asia. Although we have chronicled the current gas-storage situation at the aggregate EU level on multiple occasions, an analysis of Germany, the most important nation within the Union (for now, at least), raises even more cause for alarm. None of the lessons from the natural gas crisis of 2021–2022 have been learned. If anything, Merz has steered Germany into such a precarious position that a full-blown energy emergency this winter is not only possible, but perhaps even probable. The way things are headed, getting booted from power might be a welcome reprieve for the embattled chancellor. Let’s look at why the German people are left hoping for a little well-timed global warming this winter. Read more

Necessary Inventions

“Here is the test to find whether your mission on Earth is finished: if you’re alive, it isn’t.” – Richard Bach Among the most ironclad, stone-cold, lead-pipe-lock bets of history is that aggregate primary energy consumption is a curve that goes up and to the right. Longtime readers will be familiar with the physical foundations for why this is so: The human endeavor is a constant, unrelenting struggle against the forces of entropy; one must harness primary energy to temporarily prevail in that struggle; one’s standard of living is thus measured by how much primary energy is on offer for the task; and all humans everywhere want a higher standard of living. Wars, famines, political crises, and pandemics come and go. Degrowth nutters and carbon-counters ebb and flow in their political influence. Social shaming to make do with less—an impulse that invariably emanates from do-gooders already flush with abundance—occasionally bends localized policy for short periods of time. And yet, all small wiggles down in aggregate energy consumption rapidly mean regress. Despite such sound theoretical substance and a mountain of confirmatory empirical evidence, legions of otherwise lucid energy-market participants serially bet against this trend. Shale gas in Appalachia will never be economic. Global crude-oil production has peaked (again). Natural gas liquids don’t count. The price on the screen is wrong. Have you seen the decline rates in the Haynesville? It’s cold in the Arctic. There’s corruption in Mexico. Justin Trudeau was once a thing. The easy stuff has already been lifted. Russia can’t keep oil flowing without Western help. China’s shale resources are prohibitively uneconomic. Cushing’s tanks are bottoming out. Good-natured fun-poking aside, energy pessimism is a useful signal in one important regard: One can predict, with uncanny accuracy, that whatever the attention of the we-are-about-to-run-out crowd is focused on will be the genesis of an imminent innovation breakthrough. Consider the all-important Permian Basin, simultaneously responsible for a huge slice of global crude oil production growth over the past decade and subject to endless claims that production must soon peak and then fall precipitously. The latest ghost going bump in the night is the burgeoning problem of produced water. For the uninitiated, there are roughly 3 to 4 barrels of highly contaminated and hypersaline water brought to the surface for every barrel of crude lifted across the Permian. With crude production approaching an incredible 7 million barrels per day (bpd), what to do with the undesired gusher of hydration has many concerned that growth there is finally on the cusp of drowning. Naturally, we hold a different view. The very scale of the problem is the accelerant for finding workable solutions, and strong signs indicate that scientists and entrepreneurs will soon crack it. When they invariably do, robust riches will certainly accrue. Let’s head to West Texas and check in on some of the latest progress. Read more