Energy market volatility creates winners and losers

CompositesWorld's editor-in-chief Jeff Sloan examines the effects, both negative and positive, of the currently volatile and dynamic energy market on the composites industry.

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There is, right now, no end market served by the composites industry that is as volatile and dynamic as the energy market. And because it encapsulates everything from oil and gas exploration to wind energy, its volatility and dynamism has been either extraordinarily beneficial or extraordinarily harmful to composites fabricators, depending on which end of the spectrum you find yourself. As has been widely reported, and as is obvious to anyone who pays for gas to fuel their vehicle, the oil market is in the midst of massive oversupply that has depressed prices in ways that, just a few years ago, might have been unimaginable. As I write this, in mid-April, a barrel of crude oil is hovering around US$40, and this is up from January 2016, when it dropped to US$30.83. And both of these numbers are mere fractions of the US$92.74 that a barrel of oil was fetching as recently as July 2014. Since then it has been — literally — all downhill.

Although this dramatic price drop has been a boon to consumers, pushing gasoline prices to near historic lows (adjusting for inflation), it’s had negative consequences as well, particularly in the oil patch: Many smaller oil exploration and production firms have succumbed to bankruptcy, throwing thousands of people out of work. And for composites fabricators who serve the oil market with the manufacture of highly engineered downhole consumables like the plugs used in hydraulic fracturing (fracking), the news has been just as bad.

The irony here is that the United States has been, in many ways, an unwitting culprit in the oil price depression. After years of dependence on foreign suppliers to feed our demand for oil, the “energy independence” mantra was finally answered with a full-blown commitment to fracking, beginning in about 2006 and peaking in 2014-2015, making the US, today, the world’s single largest producer of oil. If you throw in the fact that Iran can now sell its oil into the global market, there seems to be very little light at the end of this price tunnel. 

At the other end of the volatility spectrum is the wind energy industry, which is in the midst of substantial and rapid expansion that shows no signs of abating — almost in inverse proportion to oil’s decline. Indeed, the American Wind Energy Assn. (Washington, DC, US) issued in April its report on 2015 wind activity in the US, and the results are impressive. In 2015, the US wind energy industry installed 8.6 GW of electricity generating capacity in 20 states, the third most ever in a single year and a 77% increase over 2014. Wind led new plant installations, representing 41% of all new capacity, beating out solar (28.5%) and natural gas (28.1%). Further, 9.4 GW of wind capacity is under construction in 2016, and another 4.9 GW is in advanced development. The US state of Iowa currently derives 31.3% of its electricity from wind, making it the first state to top the 30% mark. Altogether, 10 states derive at least 10% of their electricity from wind.

Globally, the data are even more impressive. According to the Global Wind Energy Council (Brussels, Belgium), the world installed 63 GW of wind energy in 2015, with 30.5 GW of that in China alone. Europe added 13.8 GW, led by Germany at 6.0 GW. All told, the world is running on 432.4 GW of wind energy, and by 2019 that number is expected to exceed 665 GW. The top 10 wind energy producers are China (145 GW, by far the largest), US, Germany, India, Spain, UK, Canada, France, Italy and Brazil. In short, that’s a lot of composite wind blades.

As difficult as the oil industry’s downturn has been, we know that it won’t last forever. In the meantime, it is gratifying to see a sustained commitment to wind energy development around the world, and the attendant carbon emissions benefits it offers. In any case, this volatility and dynamism is likely here to stay, which helps make the composites industry as interesting as it is. 

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