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A WARNING THAT OIL PRICES COULD CRASH RIGHT DURING THE 2020 ELECTION: A perfect storm is brewing in the oil market that could produce a major price collapse in the election year of 2020, potentially bringing massive lay-offs in the oil and natural gas industry.
The world is reaching a tipping point: The Energy Information Administration warned in its Week in Petroleum report Wednesday that 2020 could feature the right circumstances to drive up oil supplies and ratchet down prices — endangering Texas drilling.
EIA projected, in a major change, that OPEC will increase production alongside continued growth in U.S. crude oil production and exports. The forecasted supply rise will lead to record inventories — a doubling or more — as world liquid fuels production growth outpaces growth in consumption. Prices will fall as a result.
Learning from the past: The last time the U.S. experienced a major oil price crash was in the run-up to the 2016 presidential election. At the time, low prices had caused thousands of oil rigs to sit dormant, laying off hundreds of thousands of workers and driving up unemployment in the industry.
President Trump, with his promises of tearing down regulations on fossil fuels, won the election over his rival Hillary Clinton, who had promised to put fossil fuel companies out of business.
OPEC may be forced to ramp up production: Saudi energy minister Khalid Al-Falih said the shale oil boom in the United States is one of the uncertainties OPEC, along with Russia, will be weighing at their June 25 meeting in Vienna.
EIA is projecting that OPEC will end production cuts in 2020, forced to increase production to avoid ceding market share to American producers. But adding more oil into the market also creates the risk of a glut.
Many blamed Saudi Arabia for sinking the U.S. oil sector ahead of the last election through market manipulation practices that drove down the price.
Energy security analyst Robbie Diamond said that OPEC’s production decisions have created a boom-bust cycle in oil markets, and now once again pose a risk of creating a glut that would harm the U.S.
“OPEC’s clumsy intervention in the world’s most strategic commodities market has been a disaster for U.S. economic and national security,” said Diamond, who leads Securing America’s Future Energy, comprising industry CEOs and former military leaders.
Al-Falih and non-OPEC member Russia continue to lead production cuts among the largest oil producers in the world to bring balance to the oil market, and prevent prices from going too low, or bottoming out, like in the last major oil glut from 2014-2016.
He told members in Jeddah last month that global inventories have reached higher than expected levels, leading to some confusion over how they should proceed at the June meeting.
“There is a consensus that we need to maintain the course of drawing down inventories gently — we don’t want to shock the market,” he said at the Jeddah meeting. “We believe we need to drain that, and bring inventories to their normal level, which will take some time.”
U.S. remains the wildcard: The United States is moving toward breaking new records for production by 2020, and becoming a net energy exporter. This could offset OPEC’s plans by keeping inventories high going into the election.
The U.S. has now surpassed both Russia and OPEC nations as the leading source of new oil and natural gas reserves, raising the total global supply of fossil fuels to its highest level in a decade, EIA says.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers John Siciliano (@JohnDSiciliano) and Josh Siegel (@SiegelScribe). Email [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
UTILITIES ASK CONGRESS TO SET NATIONWIDE RULES FOR CLEAN ENERGY: Some of the nation’s largest electric utilities are calling on Congress to provide uniform rules for clean energy to help them meet self-established goals for reducing carbon emissions.
Utility leaders warn that a patchwork of differing policies across states would complicate their clean energy plans, and are asking the federal government to pass either a carbon tax or a clean electricity mandate to provide certainty.
“The most efficient thing long-term is for this country at the federal level to come to grips with the situation and allow for markets to be designed that will advance what our customers want,” Chris Crane, the CEO of Exelon, told Josh in an interview at the industry’s annual convention hosted by the Edison Electric Institute in Philadelphia.
Dominion joins the push too: Exelon, along with Virginia-based utility Dominion Energy, recently joined the CEO Climate Dialogue, a new coalition of businesses and environmental groups formed to asked Congress for legislation that would put a price on carbon across the U.S. economy to achieve at least an 80% reduction in emissions by 2050.
“Our preference is for a straightforward policy coming from Congress that will be long-lasting that we can react to, plan for, deal with, and educate our customers on,” Dominion CEO Thomas Farrell told Josh in an interview.
Read more of Josh’s report here.
NEVADA OFFICIAL: YUCCA MT. WILL NEVER SURVIVE COMING LEGAL ATTACK: The Nevada governor’s office warned House lawmakers Thursday that the federal government faces a barrage of legal attacks if it tries to go against the state in building a nuclear waste dump at Yucca Mountain.
“Yucca Mountain would have to survive Nevada’s 218 admitted contentions, and 30 new contentions, if licensing restarts,” Robert Halstead, the top Nevada official leading the charge against Yucca Mt., told House lawmakers on a climate subcommittee on Thursday.
The contentions are legal, safety and environmental arguments that the federal government will have to hear before the Nuclear Regulatory Commission can permit Yucca Mountain to be opened to receive waste. But that could take decades of legal wrangling to get through.
Halstead said it would likely take 20 years, or more, before the site could be opened.
Halstead said it would be a better use of the government’s time and the taxpayers’ money to look for alternatives to Yucca Mountain, like deep salt repositories, which would cost billions of dollars less.
Nevada’s bottomline: Continuing to support the nuclear repository at Yucca Mountain is a “bad bet” for meeting Congress’ policy objectives, said Halstead. Legislation that backs the site should be immediately scrapped, he added.
The Democratic-led House Energy and Commerce Committee’s climate subcommittee is gathering feedback on a piece of legislation making its way through the House and Senate that renews efforts to open Yucca Mountain. Nevada opposes the legislation.
Two other bills considered at Thursday’s hearing would seek other options, including interim waste storage facilities, which would be used to hold radioactive waste until a permanent solution is found.
Nevada supports legislation that does not force a state to accept nuclear waste without prior consent, he said.
BIPARTISAN EMBRACE OF RENEWABLES AT CLIMATE COMMITTEE HEARING, BUT CHALLENGES REMAIN: Democrats and Republicans of the House Select Climate Crisis Committee celebrated the growth of renewable energy Thursday, but cited challenges in making the electricity grid entirely carbon-free.
“There is no question renewable sources are going to continue to play a very important role in our energy future,” said Rep. Garrett Graves of Louisiana, the committee’s top Republican.
Another Republican, Rep. Buddy Carter of Georgia, took credit for “phenomenal” solar growth in his state, saying he pushed utility Southern Company to embrace solar when he was in the state Senate.
Graves, however, cited the need to modernize the grid to accommodate more renewables, easing the building of transmission lines to deliver wind and solar from producing areas to consuming regions, and expanding energy storage.
Later in the hearing, some Republican skepticism of renewables and the threat of climate change persisted. “You need natural gas,” said Rep. Gary Palmer, R-Ala. “When you talk about going to zero-carbon, it wouldn’t stop climate change.”
Policies that could help: The leaders of wind and solar trade groups testifying at the hearing called on Congress to enable more renewable growth with policies such as extending tax credits that are phasing down, support R&D for energy storage and providing it tax credits, and directing the Federal Energy Regulatory Commission to require regional planning for building transmission.
DEMOCRATIC FERC COMMISSIONERS WANT MANDATORY CYBER STANDARDS FOR PIPELINES: FERC Democratic Commissioners pushed Wednesday for Congress to force pipelines to be subject to mandatory cybersecurity standards to keep them secure from attacks.
“The cybersecurity of pipelines is so important it would be worthwhile for Congress to require some sort of mandatory authority,” Democratic Commissioner Cheryl LaFleur said in testimony before the House Energy and Commerce Committee.
LaFleur said the standards do not have to be enforced by FERC, noting it could be handled by the Department of Homeland Security, the Energy Department, or another agency.
But, she said, “A structure with some teeth to it would be very helpful.”
Struggles under current system: The pipeline industry prefers FERC stick to a process being run by the Transportation Security Administration on a voluntary cyber program.
Democratic Commissioner Richard Glick, however, referenced a Government Accountability Office released this year that found TSA does not have a process to update its pipeline security guidelines, accusing the TSA of “weaknesses” in pipeline security. GAO found TSA’s inspections of pipeline facilities fell from almost 180 in 2010 to about 80 last year.
TRUMP STILL CONSIDERING SANCTIONS ON NORD STREAM 2 PIPELINE: Trump reiterated Wednesday his administration’s consideration of sanctioning Russia’s Nord Stream 2 natural gas pipeline to Germany
Germany continues to support the pipeline despite opposition from the U.S. and other European allies who worry a dependency on Russian gas would embolden President Vladimir Putin.
“Well, we’re looking at it. People have a right to do what they want to do. I think it’s something that I’ve been looking at and I’ve been thinking about and I’m the one that brought up the pipeline problem,” Trump said during a press conference with Polish President Andrzej Duda.
U.S. opposition to Nord Stream 2 is bipartisan. Sens. Ted Cruz, R-Texas, and Jeanne Shaheen, D-N.H., introduced legislation last month to sanction vessels used to build Nord Stream 2.
THREAT TO HIGHWAY FUNDING UNITES ENVIRONMENT COMMITTEE STALWARTS: Senate Environment and Public Works Committee leaders from both parties stand united when it comes to highway spending.
Republican committee chairman Sen. John Barrasso of Wyoming, known for his stalwart support of fossil fuels, and Sen. Tom Carper of Delaware, the panel’s top Democrat, known for his climate advocacy, joined together Wednesday to try to sway Senate leadership not to roll back highway trust fund dollars to states.
“We are writing to you to request that you address a significant issue facing our nation’s infrastructure and economic security,” they said in a letter sent to Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-NY.
Carper and Barrasso urged the leaders to block a section of a previously-passed highway spending bill that would slash spending in highway infrastructure.
The environment committee leaders aim to pass a new highway spending bill this summer. Yet, without the countervailing provision in the previous law rescinded, the highway bill will not have the spending power to do much for infrastructure beginning in 2020.
Section 1438 of the Fixing America’s Surface Transportation Act, signed into law by Barack Obama in 2015, rescinds $7.6 billion in Federal-aid Highway Program contract authority on July 1, 2020.
“If it stands, this rescission will impact every state’s ability to plan, build and repair needed roads and bridges that are vital to American communities,” Carper and Barrasso said.
The Rundown
The Atlantic The think tank struggling to write the Green New Deal
Reuters As Iran nuclear deal flounders, France turns to Saudi for oil
Washington Post Adrift in the Arctic: A frozen journey on a vanishing frontier
Wall Street Journal Norway’s sovereign-wealth fund boosts renewable energy, divests fossil fuels
Calendar
FRIDAY | June 14
The Business Council for International Understanding holds a briefing with Brenda Van Horn, deputy senior commercial officer at the U.S. Embassy Riyadh, Saudi Arabia. The closed press briefing is open to the business community at a time when the Trump administration is trying to open U.S. investments in nuclear energy in the oil-rich kingdom.
TUESDAY | June 18
9:30 a.m., 366 Dirksen. Senate Energy and Natural Resources Committee holds a hearing to examine deferred maintenance needs and potential solutions on federal lands administered by the Department of the Interior and the USDA Forest Service.
WEDNESDAY | June 19
10:00 a.m., 366 Dirksen. The Senate Energy and Natural Resources Committee holds a hearing on a number of National Parks bills.
10:30 a.m., 2322 Rayburn. The Energy Subcommittee of the Committee on Energy and Commerce will hold a legislative hearing on pipeline safety proposals. The hearing is entitled, “Legislative Solutions to Make Our Nation’s Pipelines Safer.”
