Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
IS THE OIL MARKET WRONG TO SHRUG OFF GULF ATTACKS? The oil market may be too easily shrugging off geopolitical risks in the Gulf.
Tensions escalated Friday with claims by Iran that one of its oil tankers, carrying 1 million barrels of crude oil, was struck by missiles while traveling off the coast of Saudi Arabia.
Oil prices rose 2% in reaction to the tanker attack. That’s much less than the initial spike of 15% to $71 per barrel for Brent crude that followed Iran’s attack last month on Saudi oil facilities, a move that took down 5% of the world’s oil supply.
But that price hike did not last long after the Saudis said they quickly restored the lost output, and President Trump and allies declined to take major retaliatory action. Prices eventually settled below pre-attack levels.
IEA issues warning: However, the International Energy Administration suggested Friday that the oil market may be underrating security risks, with these fears being “overtaken” by weaker demand growth.
“Intuitively, the precision attacks on Saudi Arabia and the possibility of a repeat should keep the market on edge,” IEA said in its monthly oil market report released before the attack on Iran’s tanker. “There should be talk of a geopolitical premium on top of oil prices.”
The IEA cut its 2020 demand growth forecast to 1.2 million barrels per day, down from 1.3 mbd in its previous estimate. The agency attributed this to “evidence of a slowdown” in the economies of several major consuming regions and countries, including Europe, India, Japan, Korea and the U.S.
The renewed focus on demand “does not mean that the attacks on Saudi Arabia can be shrugged off as being of little consequence,” IEA said, warning further incidents in the strategically important Gulf could happen and “cause even greater disruption.”
The US is still exposed to risk: Amy Myers Jaffe, director of the program on Energy Security and Climate Change at the Council on Foreign Relations, has been making a similar argument for weeks.
“Oil supply is highly exposed to disruption,” Jaffe told Josh in an email. “The risk is still there.”
In a blog post Tuesday, she argued that oil market watchers have wrongly assumed that rising U.S. oil production can replace disruptions from the Middle East.
While the U.S. is now the world’s largest producer of oil and natural gas, it remains a net importer of crude, relying on the same percentage of crude oil imports in 1973 as it does today.
Saudi Aramco expedited repairs on its facilities last month, but “a second attack would be harder to bounce back from,” Jaffe said.
She noted that spare oil production capacity across the world is constrained and inventories are being drawn down. Other oil facilities in Southern Iraq, the UAE, and in Kuwait could be vulnerable to similar attacks.
“All of this should mean that oil prices should be carrying a war premium,” Jaffe said. “Instead, prices are falling.”
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email [email protected] or [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.
Daily on Energy will not publish Monday, Oct. 14 in observance of Columbus Day. We will return on Tuesday.
RICK PERRY SUBPOENAED AS PART OF DEMOCRATS’ IMPEACHMENT PROBE: House Democrats subpoenaed Energy Secretary Rick Perry on Thursday to produce documents related to their impeachment inquiry of Trump’s discussions with Ukraine. Perry has until next Friday to comply.
The Democrats seek records to understand Perry’s knowledge of Trump’s July 25 phone call with Ukrainian President Volodymyr Zelensky, in which Trump pushed his counterpart to investigate Democratic rival Joe Biden.
Perry has acknowledged he asked Trump to hold a phone call with Zelensky, but said he sought the conversations as part of efforts to curb corruption in Ukraine’s energy sector and encourage energy investment opportunities.
He has denied discussing the Biden family with Ukranian officials.
Democrats also requested documents to learn whether Perry pressed the Ukranian government on changing the board of directors for Ukraine’s state-run gas company, Naftogaz.
Perry has said he recommended members to serve on the board of Naftogaz, but said he did so at the request of the country’s government.
SCHUMER TO FORCE VOTE ON TRUMP GUTTING OBAMA CLEAN POWER PLAN: Senate Democrats plan to force a vote next week on reversing, viar the Congressional Review Act, the Trump administration’s Affordable Clean Energy rule that would gut Barack Obama’s Clean Power Plan.
Democrats would still need four Republicans to cross over and vote with them on the CRA, assuming all Democrats vote against the Trump rule. That is unlikely in the Republican-controlled Senate, but the vote would force moderate vulnerable Republicans, such as Susan Collins of Maine, to go on the record regarding Trump’s deregulatory environmental agenda.
IMF SAYS $75 PER TON CARBON TAX COULD HELP MITIGATE CLIMATE CHANGE: The International Monetary Fund says the world needs a massive carbon tax within a decade to limit the consequences of climate change.
A study by the IMF released Thursday found that a global carbon tax of $75 per ton by 2030 could limit global warming to 2 degrees celsius, the main goal of the Paris climate agreement.
That would cause household electric bills to rise 43% cumulatively over the next decade on average, while gasoline would cost 14% more. That could be managed if governments used the carbon tax revenue to support “disproportionately affected” workers, like coal miners, or pay an equal dividend to the entire population.
IMF also proposes a back-up plan: The IMF acknowledges its preferred level of carbon taxes does not seem politically feasible. Currently, of the 50 countries that have carbon pricing in some form, the average price on global emissions is $2 a ton, a “tiny fraction” of what is needed for the 2 degrees celsius target. To compensate for this, IMF recommended countries with the largest emissions agree to a “international carbon price floor.” A floor below $75 per ton could produce big emissions cuts if the three biggest emitters — China, the U.S., and India — agreed to it.
If G20 countries participated, a carbon price floor of $50 for advanced nations and $25 for developing economies would reduce emissions 100% more than countries’ current commitments in the Paris agreement.
ENERGY DEPARTMENT CAN’T HOLD BACK OBAMA-ERA EFFICIENCY STANDARDS: The Trump administration must publish energy conservation limits for certain consumer and industrial products it’s been holding back since it took office, a federal appeals court ruled Thursday. The ruling is a victory for environmental groups and a coalition of states led by California, who have been fighting in court for years to get the standards published.
The efficiency limits in question were finished during the Obama administration, but hadn’t yet been published in the Federal Register when the Trump administration took office. The Energy Department now must publish and begin implementing the efficiency limits, the Ninth Circuit Court of Appeals judges wrote.
“Energy efficiency standards are a vital tool in our efforts to reduce energy consumption and alleviate the effects of climate change, the greatest existential threat of our time,” California Attorney General Xavier Becerra said in a statement lauding the ruling.
NEW LEAD RULE WILL DRIVE MORE SERVICE LINE REPLACEMENTS, WHEELER SAYS: Environmental Protection Agency Administrator Andrew Wheeler is touting the agency’s newly proposed updates to lead poisoning protections in drinking water, arguing it will drive greater replacement of lead service lines.
Wheeler unveiled the EPA’s proposal Thursday in Green Bay, Wisconsin, where he pushed back on criticism from environmentalists that the updates didn’t go far enough and would slow lead service line work. Replacing lead service lines is the most effective way to reduce and ultimately eliminate lead poisoning in drinking water.
Environmental groups slammed the EPA’s proposal for lowering the percentage requirement per year that water systems must replace — from 7% to 3%. But Wheeler said the EPA’s new rule eliminates “off-ramps” that allowed water utilities to bypass replacing lines if they made changes to monitoring and other treatment options.
MORE DETAILS EMERGE ABOUT NOAA’S DORIAN STATEMENT: Four top Commerce Department officials close to Secretary Wilbur Ross were involved in drafting a statement backing Trump’s incorrect claims about Hurricane Dorian’s path, Democratic Congresswoman Eddie Bernice Johnson of Texas says.
Johnson, the top Democrat on the House Science committee, is seeking more information about the officials’ involvement, including copies of any drafts of the statement Johnson said officials began discussing in the “predawn hours.” Johnson said in a letter Thursday that Dr. Neil Jacobs, acting administrator of the National Oceanic and Atmospheric Administration, provided details of the statement’s drafting during a recent briefing with Johnson’s staff. Jacobs also told Johnson’s staff White House Chief of Staff Mick Mulvaney participated in “high-level conversations” about the Sept. 6 statement.
The House Science committee is conducting one of three investigations into the NOAA statement. The Commerce Department’s inspector general and NOAA’s chief scientist are also conducting their own probes.
The Rundown
Wall Street Journal Looting, gas lines, and a packed comedy club: 24 hours in blacked-out rural California
San Francisco Chronicle: PG&E gas employees wined and dined just before mass power outages
New York Times Why Amazon fires keep raging 10 years after a deal to end them
Politico Tom Steyer thinks his ranch can save the planet
Wall Street Journal Bankers due to deliver crucial Aramco valuation as soon as Friday
Calendar
MONDAY | OCTOBER 14
House and Senate are out.
