IN Hong Kong, locals have a phrase, “chicken rib,” which means that while it has no taste, it is also a waste to throw away. It captures my feeling and ennui economically, where we are not in a good place, but not at the denouement. Even more so with the impeachment. Yet, we have to carry on and not be limited to paralysis over these grave issues and crises. Many more qualified than me are commenting and opining on the impeachment and politics. I see no need to add if I have nothing novel to contribute, but I am very worried and concerned at how much more stress our system can take, politically and economically.
Let’s get to an issue we are forced to face and where we must put in place a long-term solution that will take time, flexibility, comprehensiveness and sustained effort to implement: reducing our dependence on hydrocarbons for power generation and doing that in a lasting manner. As opposed to the lamentable knee-jerk, simplistic thinking we have seen from some commentators. I recommend they think harder before publishing knee-jerk and first-impression thoughts in their columns, then reverse or be shown up. In my view, they show bias, resistance to change, shallowness and muddled thinking. In other words, low-batt thinking.
I am reading Bloomberg’s Energy Daily of May 19, which is titled “Battery boom,” and other Bloomberg articles like “Why 2026 is the Year Batteries Go Mainstream” (April 20) and a corollary article from May 9, “Iran War Is Draining the World’s Oil Buffer at an Unprecedented Pace.” I could quote other sources like The New York Times and others in a similar vein, but will limit the direct quotes to those three.
I previously discussed why Spain and Portugal’s transmission grid had a major outage due to the volatility from renewable energy and contrasting that with China, which is handling even more renewable energy, which did not have an outage. Battery storage and adapting the grid to handle multiple and varied types of energy were key. Let me get to a further point. Change and progress are not linear and seamless. New and better solutions bring different and often more complex situations and problems that will also require new and sometimes more complex solutions. Often at the cost of some initial failures which one learns and improves on. Not an “oh no” change is bad, and let’s be a Luddite and fight progress and change as these balik-coal types advocated in knee-jerk fashion with their simpleton thinking or as an adjunct to their consultancies. I agree with my colleague Ben Kritz that in our case, it will at best be a transition on how the mix changes and not an immediate abandonment of coal and natural gas as we are busy adding capacity and can’t afford to limit ourselves by removing them. Western Europe has the luxury of doing that latter given their slower growth in power. We are like a tiny version of China which is adding more renewable energy without removing fossil fuel plants given the huge base and continued growth in demand.
So where are we? At the crossroads of technology change and proof that global political and supply assumptions we took as a given are no longer that. From the Bloomberg article on the oil buffer:
“The world has burned through oil inventories at a record speed as the Iran war throttles flows from the Persian Gulf, eating into the very buffer that protects against supply shocks.
“The rapidly shrinking stockpiles mean that the risk of even more extreme price spikes and shortages is getting ever closer, leaving governments and industries with fewer options to cushion the impact of the loss of more than a ‘billion barrels’ of supply, two months into the near-closure of the Strait of Hormuz. The sharp depletion will also mean the market stays vulnerable for longer to future disruptions even after the conflict ends.
“Morgan Stanley estimates global oil stockpiles dropped by about 4.8 million barrels a day between March 1 and April 25 — far exceeding the previous peak for a quarterly drawdown in data compiled by the International Energy Agency. Crude accounts for almost 60 percent of the decline and refined fuels the rest.
“Crucially, the system also requires a minimum level of oil, which means that the ‘operational minimum’ is reached long before the inventories actually hit zero,” said Natasha Kaneva, JP Morgan Chase & Co.’s head of global commodities research.
That Bloomberg article has a chart quoting various sources, including JP Morgan Commodities Research, that show the usual stockpile of reserves are about 9 billion barrels that is usually replenished subject to seasonal demand. Operational stress level is reached when it is reduced to 7.6 billion barrels which should be reached in June. The operational floor level needed to keep pipelines functioning and refineries operating is 6.8 billion barrels and without resolution that should be reached in September. Hence, my alarm that the worst is coming and soon.
Read the article on battery storage if you can. It is the next boom as it is needed to keep grids running like China has and unlike that of Spain and Portugal. Speaking of that, unlike the recommendation of alarmist columns on this last year, they did not return to coal. They learned from the outage, and are strengthening and adapting their grid to the vagaries of increased but more variable and less constant renewable energy. That is the basis for progress and increased economic prosperity. Not nostalgia and resistance, and fear of change and the challenges progress brings. Full-batt rather than low-batt thinking.
The author is an independent director of the state-run Maharlika Investment Corp.
