Daily on Energy: Fears over $100-a-barrel oil

Crude oil prices on the Brent and West Texas Intermediate benchmarks have on multiple trading days surpassed price levels not seen since the summer and fall of 2014. Brent is now flirting with $97 per barrel, and WTI opened today just short of $94, levels it hasn’t seen since September 2014.

Elevated global demand, as well as the volatile situation involving Ukraine and no. 2 global crude exporter Russia, are leading market watchers like Javier Blas of Bloomberg to assess the world to be “one big production outage away from a price super-spike.”

The inflationary pressure: The high and rising cost of oil is leading to concerns that economic recoveries coming out of the extended pandemic period will be stunted.

“The oil shock feeds into what is now a broader inflation problem,” Peter Hooper, global head of economic research for Deutsche Bank, told Bloomberg. “There’s a decent chance of a significant slowing of global growth.”

Moreover, the high prices for gasoline are the leading worry for respondents to a recent survey by eMoney Advisor — more than paying bills, inflation, and taxes.

Higher gas prices are a problem for Biden: Biden’s approval has sunk as gasoline prices have risen, and the Biden administration has made overtures to oil producers foreign and domestic to drill more crude during this period as prices frustrate economic growth and voters, too.

The administration faces immense pressures both to move more aggressively to mitigate climate change and to help ease the price spikes.

The next few weeks will tell a great deal about how far it will go in terms of embracing steps that would lead to greater domestic production, or whether it will sign on to proposals like the legislation from Democratic Sens. Mark Kelly of Arizona and Maggie Hassan of New Hampshire to suspend the gas tax.

Alternatively, the White House could try to ride out the pressure by focusing instead on initiating a more rapid transition to replace gasoline-powered vehicles with electric ones.

Pressure elsewhere on the transition to green energy: For others, like Spanish ecology minister Teresa Ribera, the high prices are driving worry that public buy-in for European economies’ attempts to limit the use of fossil fuels in favor of clean energy is taking a hit.

“A transformation like we are living through always needs social support,” Ribera told the Financial Times, warning that high prices could alienate the public. “Citizens have to think there is something positive in it for them.”

In the U.K., some lawmakers in Prime Minister Boris Johnson’s Conservative Party are demanding the government pump the brakes on its green policies and authorize more oil and gas drilling.

“Millions are now being hit desperately hard by the cost of living crisis with heating and fuel bills soaring,” said Robert Halfon, a Tory MP. “We cannot sacrifice any further their ability to cope on the altar of climate change.”

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NUSCALE-POLAND NUCLEAR AGREEMENT INCOMING: NuScale Power and Polish mining corporation KGHM Polska Miedź S.A. have agreed to terms for the deployment of the Oregon-based firm’s small modular reactor technology, the first SMR to receive design approval from the Nuclear Regulatory Commission.

The Biden administration and Polish officials will formally announce the agreement today, which intends to bring a NuScale-designed VOYGR power plant in Poland as early as 2029. NuScale said the plant would enable avoidance of up to 8 million tons of CO2 emissions per year.

NuScale on the move: During the Trump administration, NuScale announced negotiations with several European governments, including Romania and Czech Republic, to deploy the company’s reactor technology there.

Further in December, news broke that NuScale signed a memorandum of understanding with Kazakhstan Nuclear Power Plants LLP, saying it will assist KNPP with engineering, construction, design, and maintenance components associated with its VOYGR SMR plant technology.

As for the SMR-curious European nations, such interest puts them resolutely on the pro-nuclear side of a debate that has been embroiling EU member states in recent months over the place of atomic power in the bloc.

But nuclear has won the day and received the EU Commission’s blessing as a sustainable power source, despite fierce opposition from the Germans and Austrians.

NUCLEAR CREDIT PROGRAM ON THE ROLL: The Energy Department announced Friday it is requesting public input on how it should carry out the $6 billion Civil Nuclear Credit Program funded by the new infrastructure law and designed to prop up ailing nuclear power plants.

Industry and some green activists see such support for the existing nuclear fleet as essential to avoid closures of the carbon emissions-free power source and resultant backsliding on emissions goals.

The Biden administration is of that view as well, with the department calling the nation’s 93 reactors “a vital resource to achieve net-zero emissions economy-wide by 2050” in its announcement.

But some other environmentalists oppose the administration’s pro-nuclear approach. Environmental Working Group President Ken Cook pressed Biden ahead of his meeting with utilities heads last week to shirk any request by the executives for additional support for economically compromised reactors, calling the technology a “relic.”

“It is time to systematically replace nuclear power with modern clean energy technology and to stop burdening ratepayers and taxpayers with this financial albatross,” Cook said.

Industry says more is needed: Nuclear advocates have generally maintained that subsidies for renewables and ultra-cheap gas have made nuclear plants, especially in wholesale power markets, unable to compete.

To make up for some of those market dynamics, the industry needs a stable 10-year production tax credit as proposed in Democrats’ “Build Back Better” proposal, said Matt Crozat, the Nuclear Energy Institute’s senior director of policy development.

“The transparent nature of the PTC provides greater certainty to nuclear plant owners and will be a more effective mechanism to accomplish the goal of incentivizing continuing operation,” Crozat said in a statement after DOE’s announcement Friday.

EUROPEAN BANKS SPEND BIG ON FOSSILS: Major European investment banks provided $55 billion in financing to oil and gas companies last year, according to ShareAction, a number that angers the London-based green investment lobbying group and others who want to see a faster turn away from fossil fuels.

ShareAction released its estimate in a report today detailing 2021 loan totals for 25 European banks. The report brings forward the International Energy Agency’s exhortation last year that new oil and gas development must cease to keep the Paris Agreement’s warming targets in reach and questions whether the firms are adhering to their own stated net-zero goals.

“Most banks … are not demanding transition plans from clients, raising doubts about their commitment to this transition,” ShareActon’s announcement said.

The other side: Oil and gas industry leaders, as well as some market analysts, are insisting that underinvestment is the real problem facing consumers and energy commodity markets.

Spending too little on oil and gas development “could create recurrent energy crises” like Europe is currently seeing, IHS Markit Vice Chairman Daniel Yergin said late last year.

JUDGE TEMPORARILY BLOCKS KEY BIDEN CLIMATE ACCOUNTING METRIC: A federal judge in Louisiana on Friday temporarily struck down the Biden administration’s effort to put greater emphasis on greenhouse gas emissions when creating rules for the polluting industry. The decision comes as a major blow to the administration, and one that is expected to have significant effects on climate regulations if not reversed.

The judge, Donald Trump appointee James Cain, issued a temporary injunction barring the administration––at least for now––from the higher cost estimate, which seeks to assign a dollar value on future damages caused by every additional ton of greenhouse gasses emitted.

NORD STREAM 2 LATEST: With the threat of war looming large along the Russia-Ukraine border, all eyes are on German Chancellor Olaf Scholz, who is meeting today and tomorrow with Ukrainian President Volodymyr Zelensky and Russian President Vladimir Putin, respectively, as part of a last-ditch bid for diplomacy.

Will Scholz directly address Nord Stream 2? Speaking to reporters after his sit-down with Zelensky today, Scholz called on Moscow to “take clear steps to de-escalate current tensions” along the Russia-Ukraine border. He also warned that any Russian military aggression would be met with “serious political, economic and geostrategic consequences …”

But Scholz, whose country has been reluctant to threaten Moscow with wide-ranging sanctions, at least compared to its Western counterparts, continued to dodge questions as to whether his government would support blocking the Nord Stream 2 gas pipeline as a possible retaliatory measure.

Following today’s meeting with Zelensky, Scholz said only that Berlin would help impose “very far-reaching and effective sanctions” on Russia in the event of a feared invasion.

Scholz also acknowledged the differences between his country and Ukraine over Nord Stream 2 — the completed but not-yet-operational gas pipeline that runs from Russia to Germany, and which Kyiv has long considered to be another Russian geopolitical weapon.

In a tweet this morning, Scholz said he planned to express Germany’s “continued solidarity and support” for Ukraine, adding: “We urgently expect signs of de-escalation from Moscow.”

“Another military aggression would have very serious consequences for Russia. I am in absolute agreement with our allies on this,” he added. “We are experiencing a very, very serious threat to peace in Europe.”

The Rundown

Financial Times What next after COP26? Gas crisis shadows the road from Glasgow to Sharm el-Sheikh

The Washington Post Underground carbon-dioxide storage idea is cracked. And that’s actually good.

Calendar

TUESDAY | FEB. 15

11:30 a.m. The House Energy & Commerce Environment and Climate Change Subcommittee will hold a remote hearing on ways to revitalize brownfield sites in the U.S. The hearing is entitled “Back from the Brink: Restoring Brownfield sites to Economic Engines.”

2:30 p.m. The House Select Committee on the Climate Crisis will hold a remote hearing entitled “Keeping the Lights On: Strategies for Grid Resilience and Reliability.”

WEDNESDAY | FEB. 16

10:00 a.m. The Senate Committee on Environment and Public Works will meet to discuss the EPA’s renewable fuel standards program. Members are also slated to vote on two EPA nominations: David Uhlmann to be Assistant Administrator of Enforcement and Compliance Assurance, and Carlton Waterhouse to be Assistant Administrator for the Office of Solid Waste.