Hydraulic Fracturing is the process of stimulating rock to capture gas from shale formations in the Earth, and is also one of the main reasons the United States is on its way to be a world leader in energy production. In this technological age, advancements are happening daily and rapidly. One nuance to the oil and gas industry is making the hydraulic fracturing process more seamless, efficient, safer, and less pollutant and that is coming to fruition with the innovation of Electrical Hydraulic Fracturing. So what is Electric Hydraulic Fracturing? The technology is based upon electricity powering pressure pumps and fracking equipment fueled 100% by natural gas fueled by field gas or alternative natural gas sources.
News was released this week announcing that the U.S. would be reinstating sanctions against Iran, specifically the Iranian government’s purchase of United States Currency (Dollar), Tehran’s trade in gold, other precious metals, and its automotive industry. President Trump stated as well that if Iran didn’t comply with the reinstatement of the first wave of sanctions that his administration would look into targeting Iran’s port industry as well as its energy shipping and ship building industries. These second wave of sanctions could ultimately have an impact on global supply as well as the worlds spare capacity cushion of oil. Sanctions against Iranian Oil will impact another player in the trade war against the U.S., China. China is the biggest buyer of Iranian crude oil and with Trump and his administration exchanging tariff blows back and forth it will be a test of time to see how long China will resist communicating with President Trump and the United States.
This Friday marks the day of trade sanctions between the United States and China. The tariffs include $34 billion worth of exports from each nation. The US tariffs imposed on China will include more than 800 products while Beijing will be targeting 545 American products. Later in the summer the United States is planning to impose $16 billion more in tariffs which China will respond to accordingly with another equal set of tariffs against US exports. With the looming tariffs on the horizon China may experience a few setbacks as they ambitiously try to increase bio-fuel usage in the country by 2020. Chinese government is planning to roll out E-10, gasoline containing 10 percent of ethanol coming from corn. However with tariffs near, the Chinese government wants to build new ethanol plants to aid in the production of E-10. COFCO (China's State Development and Investment Corporation) an agribusiness that has been awaiting approval of permits from the government on when they can begin, but will probably wait till the full force of these sanctions takes place. The amount of corn needed to start this roll out would be a quarter of the current annual demand, about 45 million tons. As Chinese corn stockpiles have dwindled in recent years, the corn used for the roll out would push up against demand for food supplies, which would leave little cushion for demand to increase. As the United States is one of China's top suppliers of corn imports, they will apply stiff tariffs on them starting Friday as well. These sanctions may drive Chinese corn prices higher in the short term as their stockpiles will continue to grow as domestic demand rises. One lingering question would be if corn becomes difficult/costly to acquire when does the conversation begin about potentially importing ethanol from the United States and what impact will these tariffs have on prices domestically in the U.S. as well as China?