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The actual actual increase in marketable Treasury securities is far higher than the “actual” increase announced in the “Marketable Borrowing Estimates.”

By Wolf Richter for WOLF STREET.

The Treasury Department’s Quarterly Refunding announcements, normally cause of a global yawn, have turned into a market-moving circus: Longer-term Treasury yields surged from August through October 2023 after the Treasury Department said in its Quarterly Refunding announcement at the beginning of August that it would issue a tsunami of longer-term Treasury notes and bonds. Then three months later, at the beginning of November, the Treasury Department attempted to undo some of the damage and said that it would shift the huge borrowing needs more to short-term Treasury bills, which caused longer-term yields to fall sharply.

And today, the Treasury Department announced in its “Marketable Borrowing Estimates” that – despite the fiscal deficit that has ballooned in recent months – it would have to borrow less in Q1 than it had forecast in the October announcement, and that it would have to borrow relatively little in Q2. And yields fell again. Everyone likes a good market manipulation scheme to push up bond prices and push down longer-term yields?

Today, in its announcement, the Treasury department said that:

In Q1, it plans to add $760 billion in new debt to outstanding marketable Treasury securities, which is a huge amount, but that’s $55 billion lower that the estimate announced in October for Q1 ($816 billion), assuming a balance in its checking account – the Treasury General Account, or TGA – at the end of Q1 of $750 billion.

It said the $55 billion reduction in borrowing needs was due to higher tax receipts than previously expected and a higher Q1 beginning balance in its TGA – which started Q1 at $766 billion (instead of the projected $750 billion).

In Q2, it plans to add $202 billion to outstanding marketable Treasury securities, assuming an ending balance of the TGA of $750. On April 15, income taxes and estimated quarterly taxes are due, so there are usually huge inflows of tax receipts.

On Wednesday, the Treasury Department will release the Quarterly Refunding details, including projections of the amounts of Treasury bills, notes, and bonds to be issued.

However, the actual actual increase…

The Treasury Department’s “actual” amounts of marketable securities added to the pile in Q3 and Q4 — the data released today, see screenshot — don’t quite match the actual increase in marketable securities.

The total Treasury securities outstanding ($34.1 trillion currently) come in two portions: marketable securities ($27.0 trillion currently), which all kinds of investors buy and trade; and non-marketable securities ($7.1 trillion currently), which are held by US government pension funds, the Social Security Trust fund, etc.  The Treasury department is talking about issuance of marketable securities.

So the Treasury department said today that it added $1.01 trillion (“actual”) in Q3 to marketable securities and $776 billion (“actual”) in Q4, or $1.786 trillion combined. We marked these “actuals” in red on the “Sources and Uses Reconciliation Table” released today (excerpt; total table here):

But over the same two quarters, marketable Treasury securities actually actually increased respectively by $1.35 trillion and $894 billion, or by $2,248 trillion combined (according to data published by the Treasury Department daily here).

Increase in Marketable Securities outstanding, billion $
Treasury Dept: “actual” increase
Actual actual increase
Over
Q3 2023
$1,010
$1,354
$344
Q4 2023
$776
$894
$118
Total
$1,786
$2,248
$462

In three months, we’ll know how much the expected addition of $760 billion for Q1 actually added to marketable securities in Q1. And in six months, we’ll know how much the expected addition of $202 billion for Q2 will have actually added to marketable securities in Q2. We’ll surely take a look.

$3.0 trillion in nine months?

If the estimate of $760 billion for Q1 is on target, and the increase in total marketable securities is actually $760 billion in Q1, marketable securities will have increased in by $3.0 trillion over the nine months from July 1 2023 through March 31 2024.

As of today, marketable Treasury securities — the actual actual amounts, released by the Treasury Department daily here — are $27.0 trillion, up from $24.7 trillion at the beginning of Q3 2023. And if the “Marketable Borrowing Estimates” estimates today for Q1 are on target, marketable securities will be at $27.8 trillion by March 31.

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The post Treasury Department Trying Very Hard to Push Down Yields with its Quarterly Refunding Announcements. So We Take a Look appeared first on Energy News Beat.

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The Rooiwal and Pretoria West Power Stations, constructed almost 70 years ago when my grandfather moved to Pretoria, are now in need of attention. They were standing idle for almost 10 years and, finally, it appears that the mayor of Pretoria has recognized the urgency and is taking steps to revive these aging coal power stations.

Both plants would require investment to restart at a time when South Africa’s largest banks are limiting lending to coal projects in line with improving their climate credentials.

Rooiwal potentially has 10 years of life left, and “coal is the immediate and rational solution,” Sipho Stuurman, a Tshwane spokesman, said by text message.

“Pretoria West requires a complete overhaul in any event, so there we will look at gas/biomass/waste to energy solutions.”

I find it deeply concerning that our banks are employing ‘climate finance’ to hinder the revival of these power plants. There’s no way around it – this agenda is both racist and colonial, particularly if one considers that roughly two-thirds of South Africa’s youth are currently unemployed, with a majority of them being black. Imposing a decarbonisation agenda on a poor country is beyond callous and insensitive. Richer countries can afford decarbonisation, most of Africa cannot at this stage, because we are still developing and have various other trade-offs to consider.

It begs the question of how South Africa’s banks and business elites genuinely believe that prioritizing ‘saving the planet’ is a more acceptable tradeoff, despite the evident negative impact on the economy of the world’s most coal-dependent country, leading to an increase in poverty.

I’ve expressed this sentiment previously: South Africa grapples with a number of abandoned coal stations, and a pragmatic solution to address load shedding would involve dispatching an engineering team to assess and rectify the issues plaguing them. Depending on the status, they can be brought back within a 10 to 36 month period, and if the original supplier no longer has components then they can be reversed engineered. It is possible.

Coal has been the cornerstone of our industrial economy. South Africa’s industrialization has been deeply intertwined with coal usage, and existing supply chains are well-established. Because of its historical role, coal is simply the least constraint of all 8 major energy sources. Revitalizing these coal stations presents the most expeditious way to mitigate the ongoing problem of rolling blackouts.

It’s important to acknowledge that coal plants, like nuclear, can be operated beyond their original design life. Rather than making excuses, the government and politicians should commit, through legislation, to the restoration of these broken coal stations with the aim to overhaul the entire coal fleet. Only once energy security is established than there should be a thoughtful debate about the broader topic of decarbonization

The Pretoria government, both the DA and ANC administrations, knew that these stations were standing idle. They kept financing the sites, in excess of 10 years, with employees sitting and doing nothing, whilst being paid, at a cost in excess of R100 million per year to the city.

Imagine if our municipalities or Eskom just fixed the broken units?

Had they not walked away from King Coal, then South Africa would not have had loadshedding today.

The post Pretoria is going back to king coal – Hugo Kruger appeared first on Energy News Beat.

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When Europe last year agreed that by 2035 all cars sold in the region would be zero-emissions (read: electric), the most obvious question in my mind was: Who would pay for that?

Because gasoline and diesel vehicles are a great business — not just for the obvious companies, say Volkswagen AG and Stellantis NV, which produce them, or, Shell Plc and TotalEnergies SE, which refine the fuels. But they’re also helpful for another sector that’s often overlooked: European governments, which over the last 50 years have turned internal combustion engines into tax machines.

Last year, the top five European economies1 earned more than €150 billion ($163 billion) from fuel levies, or about 2% of their total tax collection. That money funds a lot of hospitals, schools and the like. In the UK alone, gasoline and diesel duties are expected to raise £24.3 billion ($31 billion) in 2023-2024 — more than what the British government takes from alcohol and tobacco duties combined, or from capital gains tax.

If European governments succeed with their green plans, much of that income will disappear in 25 years. So planning for a replacement needs to start immediately, not only because of the large sums involved but also because of the complexity of any alternative.

Clearly, there are other costs for governments: For example, loss of revenue from registration taxes (which electric vehicles often don’t pay in Europe), plus the outright costs, in some countries, of direct EV subsidies and grants. There are, however, pluses too: less pollution from burning gasoline and diesel, which reduces health and climate-change adaptation costs.

But, to simplify the debate, allow me to focus exclusively on fuel taxes for the moment.

The history of fuel taxation goes back more than a century. In the UK, the first gasoline duty was introduced in 1908-1909. The aim was to finance the enormous expansion of paved roads and highways that new cars needed. Only after the twin oil crises of the 1970s did the priority shift to improving fuel efficiency, and only more recently has it morphed into the battle against climate change.

Whatever their final use, fuel taxes have today five distinctive advantages for governments: They establish a direct link between road usage and payment; they collect lots of money; they are simple and cheap to manage2; taxpayers largely accept them as fair; and finally, they are difficult to evade. The biggest pitfall is they’re regressive: Poor and rich pay the same (and because rich people typically drive newer, more efficient cars, that regressiveness is worse than at first sight).

So how to replace fuel taxes — and when exactly? The timing is crucial for two reasons. First, because tax incentives are still essential for the uptake of electric vehicles; and second, because as gasoline and diesel tax revenue starts to drop, any move to offset the shortfall by increasing fuel duty rates would be enormously regressive since wealthier households are adopting EV cars more quickly than poorer ones. Also, whatever replacement system is adopted should be revenue neutral: It shouldn’t raise more tax than the current system does today.

The transition period from the current fuel duty to whatever replacement is adopted is going to be complicated.

One option is to cast aside taxing driving completely and instead raise revenue for road maintenance and construction elsewhere, say via income taxes. An advantage is that income tax is more progressive. However, such a shift would have a pernicious effect: It would break the link between driving and taxes. Everyone, regardless of how much they use a car — if at all — would have to pay. Even a tax focused exclusively on the ownership of a car, rather than its use, wouldn’t work. Without putting a price on miles travelled, congestion would likely increase, and the incentive to use public transport or buy more efficient cars would disappear.

Thus, a replacement that taxes driving is needed. But that’s easier said than done. With the current fuel duty, taxing the amount of driving is a simple affair: Everyone fills up their car roughly the same way, at the gas station. The more one drives, the more fuel is consumed, the more tax is paid. With electric vehicles, the choices to refill — or charge — are larger, from the home driveway to ultra-fast chargers.

Taxing electricity is an option, but it would make the system more regressive: Typically, wealthier families have driveways in which to charge at home, and thus they can more readily take advantage of cheaper electricity rates or even install solar panels largely devoted to serve the EV. Perversely, those better off could end paying far less tax. Even putting that issue aside, houses would need electricity meters able to measure the consumption of their charging points.

The fairer option is to tax for the actual use of the road, a sort of pay-as-you-drive duty, not so different from the current highway tolls applied in some nations, but covering the whole of the road network. There are several ways to achieve this. One is a once-a-year measure of the total miles driven, with payment spread over the following year. That could be linked to the annual checkup most European countries mandate for cars. Garages would report the miles and the tax authority would issue the corresponding invoice.

Another option is to take advantage of ubiquitous GPS systems — basing taxation on how much, and where, one drives in real time. Of course, this would come with privacy issues. Both miles-driven tax systems could face much higher evasion than the current fuel duty, with tax dodgers manipulating their odometers or GPS systems. The cost for the government of the infrastructure needed to collect the taxes would be also much higher than the current one. Still, I think either system is doable with current technology.

Whatever the solution, one thing is clear: Governments need to start debating what will replace fuel duties. The longer the delay — and the longer electric vehicles remain largely untaxed — the more difficult it will be to introduce a new system.

The post You’ll Have to Pay to Use the Highway. Blame EVs. appeared first on Energy News Beat.

Energy News Beat

After years of misguided energy policies, Europe’s electricity has become so expensive that trade unions have started warning of the threat of deindustrialization. The warning will hopefully prove a salutary one for the U.S., which is now headed down the same road to energy serfdom.

Despite Germany shuttering its nuclear plants and sanctions disrupting the supply of Russian natural gas, the European Union has doubled down on renewable energy mandates, further constricting the supply of fossil fuel power. After soaring to 10 times their 2019 levels a year ago, Europe’s electricity prices have settled at triple their pre-pandemic levels. They are projected to remain at this level for some time.

According to the European Commission, industrial output in the Euro area plummeted 5.8 percent in the 12 months ending November 2023. Capital goods production was down nearly 8.7 percent. Investment in plants and equipment has plummeted. Europe’s current account surplus, which has averaged more than 3 percent of GDP for decades, was wiped out in a single year by soaring energy imports.

And there is worse to come. A survey by the European Investment Bank shows that energy cost in 2023 was the chief obstacle to firms’ long-term investment decisions. As recently as 2019, energy had barely been in the top five. For firms in manufacturing and services, the impact of energy on investment has been even more pronounced.

Europe’s trade unions are sounding the alarm. “We are facing a very worrying situation,” a senior European trade union official told Euractiv recently. “The lack of investment we are seeing today is already having dramatic implications for working communities,” he added, citing plummeting investment in buildings and equipment. “Factories are closing and jobs are being cut in the very sectors that lifted Europe to where it is today.”

Deepening Europe’s crisis, the Biden administration has announced a pause in liquefied natural gas export license approvals. Energy Secretary Jennifer Granholm claims the pause won’t affect the country’s “ability to supply our allies in Europe, Asia or recipients of already authorized exports.” But the market for LNG exports is global. With global demand increasing, and Europe particularly desperate for more LNG since Russia’s invasion of Ukraine, a restriction in U.S. exports anywhere will raise LNG prices for all importers. U.S. allies in Europe and Asia may soon be accusing President Biden of waging economic warfare against them.

Desperate to cushion the blow of soaring electricity prices, Germany is now plowing more than 4 percent of GDP into energy price mitigation for households and businesses. That’s almost the entire U.S. budget deficit in an average year. Decades of German fiscal discipline have vanished in a single energy shock, along with the ability of its industries to compete globally.

America has thus far been spared similar pain, but alas, it is headed down the same road. Buffeted by the anti-fossil fuel policies of the Biden administration and states such as California and New York, average electricity prices in the U.S. have risen 30 percent since the start of 2021. That has contributed to cumulative inflation of 25 percent since President Biden’s inauguration, wiping out a generation of wage gains for American workers.

Making matters worse, Biden’s proposed electric vehicle mandates would significantly add to electricity demand, and his new power plant rules would force many coal and natural gas plants to shutter. If implemented, the new rules would wreck America’s electricity grid and make American electricity prices even more expensive than Europe’s.

Rising electricity prices bode ill for the competition with China. While U.S. electricity prices have soared since Biden’s inauguration, China’s prices have kept steady at a level about 31 percent below ours, and will likely decrease as the country continues building coal-fired power plants at a frenetic pace. China’s tech industry is quickly catching up to America’s and could meet Chinese premier Xi Jinping’s stated goal of surpassing the U.S. by 2030.

America has been at the forefront of every major technological innovation since the Industrial Revolution began, a major reason the U.S. became the world’s superpower. Part of the reason has been abundant energy supply. But that era could be coming to an end.

Mario Loyola teaches environmental law at Florida International University and is a Senior Research Fellow at The Heritage Foundation.

The post High electricity prices have Europe facing deindustrialization; don’t let it happen here appeared first on Energy News Beat.

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Walkers enjoying a quiet stroll in the Welsh countryside captured a shocking sight on Sunday, after a wind turbine burst into flames before exploding.

Nick Blasdale, 61, and his wife Alison, 59, were left stunned when they saw burning parts of a turbine fall more than 100ft to the ground.

Firefighters were called to the blaze at Blaen Bowi Wind Farm near Newcastle Emlyn, Pembrokeshire at 11.46am, but could only watch and make sure passersby didn’t get too close.

Alison said: ‘We watched the top section burst into flames then drop off whilst still burning then explode when it hit the ground.’

The post Wind turbine explodes after bursting into flames at quiet Welsh farm, showering broken parts to the ground appeared first on Energy News Beat.

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The Danish company European Energy has decided to cease the development of the Omø Syd (Omø South) offshore wind project in Denmark.

European Energy has been developing the Omø South offshore wind project for over ten years and had its environmental impact assessment (EIA) approved in 2020, together with its other project in Denmark, the Jammerland Bay offshore wind farm.

However, on the same day, the company learned from the Danish Government that they plan to designate the same area as a Natura 2000 bird sanctuary, according to an update posted by Andreas Karhula Lauridsen, Vice President and Head of Offshore Wind at European Energy.

“We have tried to get the project to fly, among other things, in coexistence with nature, but we have to note that authorities and politicians have not had much interest in this,” said Lauridsen.

“Since our feasibility study permit has a height limit of 200 meters and today’s offshore wind turbines have become 256 meters tall, it goes without saying that the project has no future.”

In February 2023, the Danish Energy Agency suspended the processing of 33 open-door offshore wind projects, including Omø South, until further clarification of EU law issues.

A month later, the agency resumed the assessment of four open-door schemes, including the 320 MW Omø South offshore wind project. The wind farm was planned to be developed in Småland water between Zealand and Lolland.

Apart from Omø South, European Energy is developing three other offshore wind projects in Denmark: the 160 MW Little Belt (located approx. 4km northeast of Als and 6km from Helnæs), up to 240 MW Jammerland Bay (located northwest of Reersø with over 6km to the nearest coast), and up to 72 MW Fredrikshavn (located 4km off Frederikshavn, and 1.8km off the coast of Hirsholmene).

Recently, the company entered into a partnership with TotalEnergies to develop offshore wind projects in Denmark, Finland, and Sweden.

Source: Offshorewind.biz

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The post European Energy Cancels Wind Project Offshore Denmark appeared first on Energy News Beat.

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Crude oil prices today inched higher after the Energy Information Administration reported an inventory draw of 9.2 million barrels for the week to January 19.

This compared with a draw of 2.5 million barrels for the previous week, whose effect on prices was muted, however, because of another round of substantial inventory builds in gasoline and middle distillates.

For the week to January 19, the EIA reported mixed changes in fuel inventories.

Gasoline stocks added 4.9 million barrels, according to the authority, with production averaging 8.3 million barrels daily.

This compared with an inventory increase of 3.1 million barrels and average daily production of 9.4 million barrels for the previous week.

In middle distillates, the EIA estimated an inventory decline of 1.4 million barrels for the week to January 19, with production averaging 4.5 million barrels daily.

This compared with a stock build of 2.4 million barrels for the week before last, with average daily production at 4.9 million barrels.

The EIA also said refineries last week had processed 15.3 million barrels of crude daily, which compared with 16.7 million barrels daily for the previous week.

Oil prices, in the meantime, remain stuck between expectations of weaker demand and geopolitical risk in the Middle East. That latter factor pushed prices higher earlier this week but the benchmarks still ended the Tuesday session with a dip.

On Wednesday, prices began trade with a dip as the demand outlook received some bearish support from the latest American Petroleum Institute estimate, which showed another massive build in fuel stocks. Per the API report, gasoline stocks had added 7.2 million barrels in the week to January 19, suggesting sluggish fuel demand in the world’s biggest oil consumer.

At the time of writing, Brent crude was trading at $79.88 and West Texas Intermediate was changing hands for $74.81. Both were up/down from opening.

Source: Oilprice.com

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The post Oil Ticks Higher on Significant Inventory Draw appeared first on Energy News Beat.

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New Delhi, Jan 29 GAIL (India) Limited, India’s largest Natural Gas company, has successfully concluded a long-term LNG purchase agreement for purchase of around 0.5 MMTPA LNG from ADNOC Gas. This is pursuant to an MoU dated 30.10.2022 between GAIL and Abu Dhabi National Oil Company (ADNOC) P.J.S.C wherein Parties agreed that, in potential areas of collaboration both parties shall explore opportunities including purchase of LNG by GAIL from ADNOC for a tenure ranging from short term to medium and long-term. This significant development between GAIL and ADNOC will reinforce the robust cultural and economic bonds between India and the United Arab Emirates (UAE).

Under this agreement, the deliveries will commence from 2026 onwards for a duration of 10 years, across India. This arrangement is believed to further aid in India’s rising energy security requirements and, simultaneously, also fuel GAIL’s strategic growth objectives to cater to its downstream customers in the rapidly evolving Natural Gas landscape of the country.

Sandeep Kumar Gupta, Chairman & Managing Director, GAIL (India) Limited said on this long-term LNG deal that this long-term LNG deal with ADNOC by GAIL will contribute to bridging gap in India’s demand and supply of natural gas and will open more avenues of strategic partnership between GAIL and ADNOC in other areas of energy domain.

Underlining the broader impact of the agreement, Sanjay Kumar, Director (Marketing), GAIL stated that this long-term LNG transaction by GAIL will help India in moving towards Government of India’s objective of enhancing share of natural gas in India’s energy basket to 15%. Further, this deal will also help GAIL to augment its significantly large LNG portfolio to serve its diverse consumer profile.

The long-term LNG purchase agreement with ADNOC Gas is anticipated to fortify India’s energy security, foster economic collaboration, and propel both GAIL and ADNOC into new realms of strategic partnership.

Source: Sarkaritel.com

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