Why US utility bills could be set to surge #NewsMarket

Good morning, and welcome back to Energy Source, coming to you from New York.

Oil prices slid to multiyear lows earlier this week, as investors grow increasingly nervous about weaker growth in China and the US. Brent crude, the international benchmark, has fallen 13 per cent since late August and tumbled below $70 for the first time in three years on Tuesday.

Fatih Birol, head of the International Energy Agency, warned that crude prices are likely to keep falling as demand weakens.

“Given the current weak demand and lots of oil coming from the non-Opec countries . . . we may well see downward pressure on the price,” Birol said in an interview with the Financial Times this morning on the release of its monthly oil report.

Oil demand forecasts have never been so controversial. The IEA’s warning of a “staggering” oil glut by the end of the decade enraged many in the oil industry, who accuse the agency of playing politics. ExxonMobil’s global outlook, which was published last month and warned of a future energy price shock if investment in fossil fuels were curtailed, provoked a similarly angry response from climate advocates.

Today we look at a report from consultancy ICF on what expectations for growing power demand in the US will mean for prices.

We also have an opinion article on Exxon’s forecasts by climate scientist Michael Mann. We invited Exxon to comment on the topic but the company declined.

Thanks for reading,

Amanda

US electricity prices could be set to rise

The expected surge in electricity demand from electrification and data centres for artificial intelligence risks driving up US power prices, warns ICF.

The consultancy released a report today forecasting a 19 per cent increase in wholesale prices for electricity from 2025 to 2028 from rising power demand. While households don’t typically buy power off the wholesale market, the wholesale price of electricity influences the rate they ultimately see in their utility bills.

“The whole notion of clean, affordable, and reliable [power] got incredibly, monumentally complicated in a very quick period of time,” said Patty Cook, ICF’s senior vice-president of market development. “All of that has huge implications for how much utilities will pay for power, how much customers will pay for power and how all those cost allocation decisions are balanced and made transparent to all the stakeholders.”

The consultancy expects a “sea change” in US power demand, with expectations that electricity consumption will increase by 9 per cent by 2028, up from less than 1 per cent annual growth for most years since 2010.

Michael Mann: Exxon’s forecast is a ‘recipe for climate disaster’

The writer is a professor in the department of earth and environmental science at University of Pennsylvania and author of ‘Our Fragile Moment’.

ExxonMobil’s annual outlook, published late last month, projects a world in which global CO₂ emissions decline by just 25 per cent between now and 2050, and oil and gas make up 54 per cent of the energy mix by the middle of the century. In no uncertain terms, this would be disastrous for humankind.

Exxon’s projection for 2050 would likely see global average temperatures increase by more than 2.4°C above pre-industrial levels. At around 1.2°C of warming, we have begun to witness what that future may look like. In 2022, severe flooding in Pakistan killed more than 1,000 people, displaced almost 8mn and resulted in economic damages in excess of $30bn. This year, India endured a weeks-long heatwave, in which temperatures frequently exceeded 50°C, resulting in hundreds of deaths.

The cost of extreme weather and climate disasters was nearly $100bn in the US alone in 2023. The global cost of climate damage is expected to reach into the tens of trillions by 2050. These events and their related costs are directly attributable to the burning of fossil fuels which generates greenhouse gas emissions.

Exxon is not simply projecting a future in which millions of people are put at risk, but is actively working — as it has for decades — to deliver that outcome. The company is not in the business of allowing the external environment to shape its future — it lies, lobbies and obstructs to ensure that government policies do not erode oil and gas demand. Its opposition to electric vehicles and bans on single-use plastics are the most recent examples of this. The “big lie” by Exxon was its denial of the reality of human-caused warming when its own scientists had secretly established this.

Exxon stands to make an enormous amount of money if it can successfully disrupt the clean energy transition. It has booked more than $120bn in profits over the past five years, including $59bn in profits in 2022 after a surge in energy prices following Russia’s full-scale invasion of Ukraine. A rapid transition away from fossil fuels — which is absolutely necessary if we are to limit global warming to safe levels — is not in ExxonMobil’s interests.

Exxon puts a lot of emphasis on energy equity, claiming that continued fossil fuel extraction is the only way to meet UN development goals. Its outlook conveniently omits any reference to the UN climate goals established by the Paris Agreement, or the COP28 agreement to transition away from fossil fuels. Exxon would like us to believe that if it stops drilling, energy prices will jump, leading to economic downturn and widespread unemployment. Yet the cost of climate action already greatly exceeds the investment costs of taking action.

Even the traditionally conservative International Energy Agency has stated that if we are to limit global warming below a catastrophic 1.5°C, there can be no new fossil fuel projects. There is a viable pathway to a safe climate future, it’s just not one that is in Exxon’s interests.

Exxon imagines a world in which 4bn people with inadequate access to energy become hooked on oil and gas, as is the case in the developed world. This would be a recipe for climate disaster and ironically, those in the developing world would be the hardest hit by the projected impacts of business-as-usual warming.

Exxon’s false appeal to charity is one of the industry’s preferred delay tactics. Millions of people suffer from energy poverty, not fossil fuel poverty, and that means there are far safer and more resilient pathways for development than the dirty pathway Exxon wants to force them into.

Exxon’s outlook is nothing more than an exercise in signalling. The company is signalling to governments that it does not care about their net zero policies and that it will be business as usual for as long as possible.

Its outlook should be called out for what it is: a window to a dangerous version of our planet, where Exxon places profit over people.

Job moves

• Renewables developer Avantus has appointed Cliff Graham as chief executive. Graham joins from 174 Power Globalwhere he served as chief development officer.

• James Fitzgerald has joined Marathon Capitala clean energy investment bank, as head of institutional sales. Fitzgerald joins from Tudor, Pickering, Holt & Co.

• The board of directors at ConocoPhillips has elected Nelda Connors as a board member. Connors is the founder of Pine Grove Holdingsan investment firm.

• True Green Capital Managementa renewable energy investment firm, appointed Gareth Miller to the board of Clean Energy Capital. Miller recently led Cornwall Insighta research firm.

Power Points

• Vladimir Putin has called on Russian officials to consider restrictions on uranium, a move in retaliation over sanctions that could affect western nuclear reactors.

• Abu Dhabi state oil company Adnoc is expected to make a formal offer of about €14.4bn to acquire chemicals firm Covestro in what would mark the biggest European deal this year.

Energy Source is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at [email protected] and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.