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from Counterparties:

Awash in fuel

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The average price of a gallon of gas in the US this week is $3.19, and it’s been been falling since Labor Day, when it hit $3.60. The falling price caused one research firm to up its third-quarter GDP forecast by 0.3 percentage points to 2.7%.

While part of the fall in gas prices is likely a typical seasonal fluctuation coupled with the falling price of oil (WTI crude is now about $93 a barrel, compared to about $110 over the summer), Brad Plumer writes that there are other factors at work. For one, no hurricanes have hit the Gulf Coast, which means the refineries in the area have been more productive than usual this year. Today, Jason Furman, the head of the White House Council of Economic Advisors, tweeted that “monthly domestic crude oil production exceeded crude oil imports for the first time since Feb 95”.

Perhaps an even bigger factor is the increase in the production of natural gas in the US, which has led to American refiners producing a lot of diesel that gets exported. “The U.S. became a net exporter of petroleum products just two years ago and is now the largest exporter in the world”, according to CNBC. Domestic gas is just a byproduct. “Gasoline is produced in the same process but it isn't as widely used abroad, leaving the U.S. market awash in the fuel”, writes the WSJ.

from Breakingviews:

Review: Frackers needed long view to make history

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The revolution in U.S. energy came from an unlikely source, as Gregory Zuckerman recounts in “The Frackers: the Outrageous Inside Story of the New Billionaire Wildcatters.” Tiny drillers like George Mitchell and Harold Hamm persisted with shale while deep-pocketed giants such as Chevron gave up. It was a triumph of leadership over short-term shareholder value.

from Breakingviews:

Suntech casts shadow over China capital raisings

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Suntech has gone from solar panel maker to financial black hole. The stricken company is fighting with creditors who want to see it liquidated after it defaulted on interest payments in March. Proposals to sell assets and take Chinese government cash seem unlikely to help investors avoid huge losses. For investors it’s a lesson in what happens when things really go wrong with Chinese companies.

from Global Investing:

Value or growth? The dichotomy of emerging market shares

Investors in emerging markets are facing a tough choice. Should one buy cheap shares in the hope that poor corporate governance and profitability will improve some day? Or is it better to close one's eyes and buy into expensively valued companies that sell mobile telephones, holidays and handbags -- all the things high-spending emerging market consumers hanker after?

At the moment, investors are plumping for the latter, growth-at-any price investment strategy. Result: a lopsided emerging equity index in which consumer discretionary shares are up more than 5 percent this year, energy shares have lost 7 percent while MSCI's benchmark emerging equity index is down 3 percent.

from Data Dive:

The problem with moving away from coal power

On Tuesday, the US government announced it would stop investing coal power plants around the world in an effort to combat climate change. Here are the details from Reuters:

The U.S. Treasury said it would only support funding for coal plants in the world's poorest countries if they have no other efficient or economical alternative for their energy needs.

from Breakingviews:

UK’s nuclear rebirth comes at a fair price

By Pierre Briançon

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

David Cameron really is rolling out the red carpet for French investors - and no matter that they are state-backed. The first power plant of the UK’s nuclear reset will be built in the county of Somerset by a consortium led by EDF, the French government-controlled utility. UK taxpayers will guarantee the price paid for energy it produces from 2023. And EDF says it will meet its target of a 10 percent return on investment, in spite of making concessions during negotiations. The investor consortium - which includes two Chinese nuclear power groups, CGN and CNNC - will take on any extra cost and fund the plant’s decommissioning programme. This deal strikes the right balance, assuming energy markets do not suffer major turmoil.

from Counterparties:

The 40-year energy myth

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to Counterparties.Reuters@gmail.com.

This week marks the 40th anniversary of the 1973 oil embargo, when Middle Eastern producers, the members of OPEC, temporarily banned imports to the US to protest its support of Israel in the 1973 Yom Kippur war. “Crude-oil prices spiked, fuel lines snaked behind gas stations and years of stagflation followed”, writes the WSJ. Every president since has made a push to reduce the country’s dependence on foreign oil -- despite the fact that US consumers cannot divorce themselves from global oil prices.

from Photographers' Blog:

Uncovering Nuclear Britain

By Suzanne Plunkett

It sounds like the road trip from hell: a journey around all Britain’s functioning nuclear power stations.

After all, when the UK has so much to offer the traveller – from the bright lights of London to the ancient ruins of Stonehenge – why would anyone go out of their way to visit the far-flung places where the country has stowed its grim industrial reactor halls?

from Breakingviews:

Solvay pays up to tap into fracking market

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Solvay is paying up to tap into fracking. The $13 billion Belgian chemicals group is staking $1.3 billion on Chemlogics, a U.S. specialist in compounds for extracting oil and gas. The price looks high. But there should be tax savings, a sales boost, and a chance to ride the shale revolution.

from Breakingviews:

Apollo’s energy IPO gives new life to quick flips

By Christopher Swann
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Apollo’s latest sale gives new life to the quick flip. Leon Black’s shop is taking EP Energy public less than 18 months after leading a $7.2 billion takeover of the oil and gas company. That contrasts starkly with the trend of longer buyout holding times. The prospect of a twofold return shows that private equity can still dig into its old bag of tricks.

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