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Video: The Story Behind Oil’s Plunge

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Video: The Story Behind Oil’s Plunge

In the financial markets, everything makes sense in hindsight. While the narrative had continued since the 2008 Financial Crisis that energy prices were rising and there was nothing to slow them down, it only took a small crack in the armour to send oil tumbling down by about 50% since the 2014 summer peak.

This infographic video from CNN Money helps put the sudden and inevitable oil plunge in perspective. In short, it is a combination of slowing demand (stemming from China’s growth slowdown, the EU’s stagnation, and America shaking off its addiction to oil) and oversupply caused by new shale technology and OPEC keeping production constant.

Lower oil prices create some relief for consumers at the pump, but also create their own array of problems. Losses of jobs, especially around more expensive shale and oil sand production, will partly counterbalance the gains from the additional $60 billion in consumer discretionary income in 2015. Energy companies also struggle at such prices.

Cost of different forms of oil production

Another big risk is geopolitical. Many political analysts have suggested that crashing oil prices put Putin between a rock and a hard place. Crushed oil prices give Putin a crude problem to deal with, as the Russian budget breakeven point is around $102/bbl. The ruble has already felt the pain, and Putin must now either allow the Russian economy to slowly crumble, or double up on his aggressive bets from a foreign policy perspective to continue to win the hearts of Russian sentiment.

Original Graphics by: CNN Money and BI

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Energy

Mapped: Every Power Plant in the United States

What sources of power are closest to you, and how has this mix changed over the last 10 years? See every power plant in the U.S. on this handy map.

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This Map Shows Every Power Plant in the United States

Every year, the United States generates 4,000 million MWh of electricity from utility-scale sources.

While the majority comes from fossil fuels like natural gas (32.1%) and coal (29.9%), there are also many other minor sources that feed into the grid, ranging from biomass to geothermal.

Do you know where your electricity comes from?

The Big Picture View

Today’s series of maps come from Weber State University, and they use information from the EPA’s eGRID databases to show every utility-scale power plant in the country.

Use the white slider in the middle below to see how things have changed between 2007 and 2016:

The biggest difference between the two maps is the reduced role of coal, which is no longer the most dominant energy source in the country. You can also see many smaller-scale wind and solar dots appear throughout the appropriate regions.

Here’s a similar look at how the energy mix has changed in the United States over the last 70 years:

Energy net generation over time

Up until the 21st century, power almost always came from fossil fuels, nuclear, or hydro sources. More recently, we can see different streams of renewables making a dent in the mix.

Maps by Source

Now let’s look at how these maps look by individual sources to see regional differences more clearly.

Here’s the map only showing fossil fuels.

Fossil fuel power plants in the U.S.

The two most prominent sources are coal (black) and natural gas (orange), and they combine to make up about 60% of total annual net generation.

Now here’s just nuclear on the map:

Nuclear power plants in the U.S.

Nuclear is pretty uncommon on the western half of the country, but on the Eastern Seaboard and in the Midwest, it is a major power source. All in all, it makes up about 20% of the annual net generation mix.

Finally, a look at renewable energy:

Renewables power plants in the U.S.

Hydro (dark blue), wind (light blue), solar (yellow), biomass (brown), and geothermal (green) all appear here.

Aside from a few massive hydro installations – such as the Grand Coulee Dam in Washington State (19 million MWh per year) – most renewable installations are on a smaller scale.

Generally speaking, renewable sources are also more dependent on geography. You can’t put geothermal in an area where there is no thermal energy in the ground, or wind where there is mostly calm weather. For this reason, the dispersion of green sources around the country is also quite interesting to look at.

See all of the above, as well as Hawaii and Alaska, in an interactive map here.

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Energy

The Periodic Table of Commodity Returns

This unique chart shows the performance of individual commodities over the last decade – see commodity returns in 2018, and how they compared to previous years.

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Periodic Table of Commodity Returns (2019 Edition)

Commodities are an interesting asset class to watch.

In certain years, all commodities will move in price together in an obvious and correlated fashion. This is a representation of the cyclical characteristics of commodity markets, in which macroeconomic factors align to create a tide that lifts or sinks all boats.

At the same time, however, each individual commodity is incredibly unique with its own specific set of supply and demand circumstances. In the years when these supply or demand crunches materialize, a certain commodity can surge or crash in price, separating itself from the rest of the pack.

A Decade of Commodity Returns

Today’s visualization comes to us from our friends at U.S. Global Investors, and it tracks commodity returns over the last decade.

More specifically, it takes a closer look at individual commodities (i.e. corn, gold, oil, zinc) to show how performance can vary over time. With a quick examination of the graphic, you can see years where commodities moved together – and some years where individual commodities stole the show unexpectedly.

Palladium: A Perennial Winner

The best performing commodity in 2018 was palladium, which found itself up 18.6% – just enough to edge out corn, which jumped up 17.9% in price last year.

Interestingly, palladium has also been the best performing commodity over the 10-year period as well:

Palladium is the best performing commodity

Palladium has finished in first place in four of the last 10 years, including in 2017 and 2018 – it’s also impressive to note that palladium has only had negative returns twice in the last decade (2011, 2015).

A Crude Awakening

The worst performing commodity in 2018 was crude oil, which fell -24.8% in price.

Like palladium, this wasn’t a unique occurrence: crude has actually been the worst performing commodity investment over the last decade:

Oil is the worst performing commodity

As you can see, crude oil has been the worst (or second worst) commodity in three of the last five years.

Further, as our chart on how all assets performed in 2018 shows, crude oil was outperformed by every other asset class, and the energy sector had the poorest performance out of all S&P 500 sectors last year.

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