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Covering energy, utilities and mining: An introduction

deep sea drillingSo you want to write about energy and mining. Good choice – this beat covers one of the critical business sectors underpinning modern life.

Every day 90 million barrels of oil are pumped out of the ground, in Arabia’s scorching deserts, Canada’s boreal forests, or a mile beneath the ocean’s surface. Millions of tons of coal, iron ore and copper are dug out of vast open-pit mines in South Africa, Arizona, West Virginia and Chile. The resulting materials are then shipped, via rail, ship or pipeline, to where they’re transformed in useful products— be it gasoline or diesel, steel bars or tin foil, and electricity. So we can drive, build skyscrapers, wrap our sandwiches and keep the lights on.

To understand the beat, the reporter must wrap his or her head around the dynamics of supply and demand. It’s a game of scarcity and abundance—either situation can dramatically alter local economies. Right now it seems to be a time of scarcity, as rapidly industrializing Asia seeks to catch up with the West. Asia’s appetite is such that the resulting commodities bubble has shrugged off even the worst financial crisis in seven decades.

It’s also a story about infrastructure— the job of producing energy and moving and processing metals requires a tentacular network of machinery that can alter our roads, our coasts and our skylines. When this infrastructure  network fails, it can result in disasters like blackouts, mine implosions or giant oil spills. And of course it’s a story about the environment and regulation— especially as energy production and consumption accounts for a large share of the gasses many scientists blame for global warming.

In short, we’re talking about a vast field, which for convenience sake we’ll split into three categories.

THE OIL AND GAS COMPLEX

Oil is the backbone of our car- and plane-based transportation system. Its cousin, natural gas, can also be used for transportation, but it’s mainly employed in generating electricity and heat.

The last decade’s surge in demand for oil and gas has meant that the companies that produce these commodities have become some of the largest in history. The biggest, especially in the oil sector, are owned and run by national governments— for example, Saudi Aramco, the Saudi Kingdom’s national oil company, the world’s largest oil producer. Some of these national governments, heavily reliant on revenue from oil, form groups, such as the Organization of Petroleum Exporting Countries, to try to maintain prices at a level that will bring them plenty of profit, but that is not so high that it will depress the economies of consuming countries.

When OPEC decides to raise oil output, prices at the pump in the U.S. are likely to fall, unless shortages elsewhere or a jump in demand offset the new amount of crude that comes into the market.

Western energy companies once dominated the global oil industry, but that is no longer the case. Nevertheless they’re big and powerful—and are ramping up their activity in places like Australia, Canada and the U.S. For example, Exxon Mobil Corp., the Texas-based heir to John Rockefeller’s oil empire, is the largest publicly traded company in the planet (although in recent times Apple has been able to catch up). It needs lots of new reserves to replenish the millions of barrels of oil and gas it produces every year, but now that foreign governments limit its presence overseas, the company is looking for more of it back home, where engineers have recently discovered how to extract natural gas and oil from shale rock through hydraulic fracturing. This technique –also called “fracking” – is controversial, and local reporters are bound to write about it often— but more on that later.

times squareUTILITIES

Electric utilities convert energy into electricity, by harnessing the movement of wind and water, the power of the atom, or by burning fossil fuels such as coal and natural gas. Sometimes operating under heavy regulation, utilities provide power to residences, industries and cellphones, but are also likely to become a major player in the transportation sector if electric cars become popular.

Some utilities, like Seattle City Light, are owned by municipalities. Others, like Dynegy Inc., are publicly traded; and others, such as TXU or Puget Sound Energy, belong to private equity firms. The main challenge these companies face is coping with an increasing demand for power. 

MINING

Like oil and gas companies, the mining industry is riding high on China and India’s growing appetites. After accumulating billions in profits, behemoths like Australia’s BHP Billiton and Rio Tinto are scouring the globe, looking to acquire assets and other companies. The growth in demand for metals, however, is creating supply bottlenecks due to scarcity of some materials—such as rare earths – or lack of infrastructure. Also traders have been stockpiling metals, still seen as a safe investment amid sluggish economic recovery, creating a bottleneck in warehousing capacity.

In 2014, Energy | Utilities | Mining.

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