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TRUMP TURNS TO PUTIN TO HELP AVOID SHALE ‘WIPEOUT’: President Trump said he was planning to speak Monday morning with a “gentleman named Vladimir Putin” to help resolve a price war between Russia and Saudi Arabia as U.S. crude toppled to a new low.
After years of touting the benefits of low oil prices for U.S. drivers, Trump is continuing to shift his rhetoric as senators and companies warn him of the carnage of the shale industry.
“I never thought I would be saying this: maybe we have to have an oil increase,” Trump said in a phone interview with Fox and Friends. “Because we do. The price is so low now. We don’t want to have an industry that’s wiped out.”
“I’m talking to him about that among other things, because you know, getting along with Russia is a good thing,” Trump added.
Trump said Russia and Saudi Arabia “both went crazy” by producing more oil while demand has been crushed by coronavirus, a double whammy which has produced historic low oil prices that are “bad for everybody.”
The U.S. WTI crude oil price dropped below $20 per barrel early Monday, the lowest price since 2002. Trump’s outreach to Putin to help stem the tide comes after his administration has made similar entreaties to Saudi Crown Prince Mohammed bin Salman.
Russia is mad at shale dominance — and sanctions: But analysts and industry advocates say Trump will have a hard time moving Russia to rejoin a pact with OPEC to cut production to raise prices.
“Russia’s concerns with the U.S. go beyond market share,” Dan Eberhart, CEO of the oil services firm Canary and a Trump donor, told Josh. “Putin is frustrated with sanctions and may be more interested in punishing the U.S. than Saudi Arabia.”
Anders Aslund, a senior fellow at the Atlantic Council’s Eurasia Center who studies Russia, told Josh that the big Russian oil companies are “comfortable” with oil prices as low as $15 per barrel because of the benefits from the devaluation of the ruble that comes with it.
Aslund said Igor Sechin, the head of Russia’s biggest oil company, Rosneft, was instrumental in convincing Putin to abandon OPEC.
Sechin is angry with U.S. sanctions on him and his company, along with additional sanctions passed by Congress as part of its defense bill last year on Russia’s Nord Stream 2 pipeline to Germany.
“If Trump wants an agreement with Putin, he may have to promise to ease up on sanctions,” Eberhart said.
But Aslund said Trump has little authority on his own to relieve sanctions as a carrot to Russia, given the most powerful sanctions are backed by Congress, including the Countering America’s Adversaries Through Sanctions Act (CATSA) passed and signed into law in 2017.
“The question is if Trump knows how little leeway he has with Russia because of CATSA and the defense bill,” Aslund said.
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PIPELINE COMPANIES JOIN PUSH FOR US PRODUCERS TO STOP PRODUCING: You know things are bad when U.S. pipeline operators are asking oil companies to voluntarily curb oil production because the glut has overwhelmed storage capacity.
Plains All American Pipeline, one of the biggest shippers of crude, sent a letter asking its suppliers to scale back production, Bloomberg reported Saturday.
The Houston-based company sent a separate letter requiring companies to prove they have a buyer or confirmed place to offload and store the crude they are shipping.
There will be a surplus of 1.8 billion barrels of oil in the first half of 2020, the consultancy IHS Markit projected last week, an amount that exceeds empty storage capacity in the world, which is 1.6 billion barrels.
The push for output cuts come as oil regulators in Texas have floated the idea of issuing “pro-rationing” schedules to force producers in the state to cut production to raise the price of oil. Ryan Sitton, a member of the Texas Railroad Commission, has said he’s discussed with OPEC leadership the concept of Texas, the top-producing state, cutting its oil output 10% in exchange for Saudi Arabia and Russia each doing the same.
Sitton tweeted Saturday he’d heard that “some Texas producers are starting to get letters from shippers (pipelines) asking for oil production cuts because they are out of storage.”
API ENCOURAGES COMPANIES TO ENHANCE REPORTING ON CLIMATE CHANGE MITIGATION: The American Petroleum Institute, along with international oil and gas trade groups, released guidance Monday on how companies should report environmental progress, including addressing climate change.
The fourth edition of the “Sustainability Reporting Guidance,” which involved the input of 28 oil and gas companies across six continents, includes an enhanced focus on performance indicators for addressing climate change, which API owes to the increasing expectations put on the industry by investors and bankers.
“What we are signaling here is our industry is interested in the long game and sustainability is part of the long game,” said Debra Phillips, API’s senior vice president of Global Industry Services, in a phone call with reporters. “We are not pausing our efforts to focus on the risks of climate change.”
Phillips was responding to a question regarding API’s decision to release the new guidance amid the coronavirus pandemic, which has prompted the lobbying group to encourage federal agencies to scale back regulatory requirements.
The guidance encourages oil and gas companies to report on several areas showing efforts to address climate change. These include communicating an overall strategy, revealing climate-related risks and opportunities, demonstrating research into low carbon technologies (including renewables), reporting carbon and methane emissions from combustion, venting, and flaring (including indirect emissions), and implementing energy efficiency measures.
COAL MINING ‘ESSENTIAL’ DURING PANDEMIC: The struggling coal industry is finding another way to sell itself as crucial to U.S. national security after the Department of Homeland Security this weekend listed coal miners as essential workers who should continue working during the coronavirus pandemic.
“During this period of uncertainty, we commend the Department of Homeland Security for recognizing that the coal supply chain—coal producers, railroads, barges, equipment suppliers, and others—is ‘essential critical infrastructure’ necessary to support public health and safety, as well as economic and national security,” said Michelle Bloodworth, president and CEO of America’s Power, a coal industry lobbying group.
Note: The DHS list also includes workers supporting renewable infrastructure, including wind, solar, biomass, and hydrogen.
ENERGY DEPARTMENT GIVES BOOST TO DIRECT AIR CAPTURE RESEARCH: The Energy Department announced Monday it is providing $22 million for research to achieve “breakthroughs” in technology to capture carbon dioxide directly from the air. The funding applies to research of materials and chemical sciences, along with field testing of prototypes. Eligible applicants for the funding include universities, nonprofits, and industry, with a 20% cost share.
“Accelerating success in direct air capture of carbon dioxide would strengthen America’s energy security and open new avenues for commercial applications,” said Chris Fall, director of DOE’s Office of Science. “While we’ve seen real progress in this field, both basic and applied research are needed to develop highly effective direct air capture technologies on a large scale.”
EPA DELAYS SWITCH TO SUMMER-GRADE GASOLINE: The agency is giving the oil industry another two and a half weeks before it must make the switch, saying Friday the move helps “ensure a steady supply of gasoline.”
The American Petroleum Institute, which requested the waiver in a letter to the EPA early last week, welcomed the move. “This flexibility is necessary to address the unprecedented disruption in fuel demand resulting from the measures implemented to slow the spread of COVID-19,” said Frank Macchiarola, API’s senior vice president of policy, economics, and regulatory affairs.
Paul Billings of the American Lung Association, though, cautioned waiving summer-grade gasoline requirements has public health consequences, including increased emissions of greenhouse gases and smog-forming pollutants.
TUCKED IN EPA’S NEWS RELEASE ABOUT SUMMER-GRADE GAS: The agency is buying itself some time, saying it’s not taking action on the 10th Circuit’s ruling restricting small refinery exemptions under the Renewable Fuels Standard until all appeals have been resolved.
The EPA also said it doesn’t intend to “unilaterally revisit or rescind” previously granted waivers, which exempt small refiners from RFS obligations to blend a certain amount of biofuels into the fuel supply. And citing the coronavirus pandemic, the agency said “investigating and initiating enforcement actions against small refineries that were previously subject to an exemption is a low priority.”
It’s a blow to ethanol producers: They’d just celebrated Trump’s decision not to appeal the 10th Circuit ruling, which restricts the EPA’s ability to grant new small refiner exemptions. Geoff Cooper, head of the Renewable Fuels Association, accused the EPA of slow-walking implementing the court decision in a move that “has nothing to do with COVID-19 and everything to do with politics.”
TRUMP REPEAL OF OBAMA FRACKING RULE STAYS INTACT: A federal district court judge in California said the Bureau of Land Management outlined a “reasoned explanation” for reversing the regulation, which limited venting and flaring of methane on public lands.
The ruling is a victory for oil and gas groups and several oil and gas-producing states, which have fought the Obama-era rule since it was finalized in 2015. Those challengers had successfully won a pause of the fracking rule in 2015, meaning it never actually went into effect, a factor that weighed in part on the judge’s decision in the Friday ruling.
Does the ruling signal anything about similar cases? Environmentalists had a pretty good track record overturning Trump administration attempts to delay or pause implementing environmental regulations while agencies rewrote them. But they’re now waging a legal war against the rollbacks themselves, court battles for which Trump officials have had more time to back up their actions and in which judges are inclined to give federal agencies deference.
Some of the Friday ruling suggests these upcoming battles could be tougher for environmentalists and other challengers. “Although BLM could have provided more detail, it did enough to clear the low bar of arbitrary and capricious review, and that is all the law requires,” California federal district court Judge Haywood Gilliam wrote.
A DEEP DIVE ON HYDROGEN’S POTENTIAL: Clean hydrogen, produced from zero-carbon energy, could slash emissions from fossil fuels and industry by up to 34% at a cost that is “manageable” — but only if governments put in place supportive policies that help drive down the technology’s cost, according to a new report from Bloomberg NEF.
Energy circles are often buzzing about the potential of hydrogen these days, in part because it can be used for so many different purposes and in hard-to-decarbonize sectors, from fueling trucks and ships to powering industrial facilities. But the new BNEF report stresses the hydrogen will have to be made cleanly — either from renewables or carbon capture and storage — in order to get the climate benefit.
The biggest challenge is the cost: Hydrogen storage infrastructure alone, for example, would cost $637 billion by 2050 to build out, according to the BNEF report. BNEF suggests $150 billion in global cumulative subsidies would be needed through 2030 to help scale up hydrogen. “That may sound daunting but it is not, in fact, such a huge task,” said Kobad Bhavnagri, BNEF’s head of industrial decarbonization and lead author on the report, noting governments currently spend more than twice that every year on fossil fuel subsidies.
A carbon price changes the economics: Using clean hydrogen in steel production becomes more cost-effective than coal at a carbon price of $50 per ton, according to BNEF. The study found similar scenarios for cement production at $60/ton, ammonia production at $78/ton, and clean fuel for ships at $145/ton.
BARCLAYS BANK TARGETS NET-ZERO: Not just in its own operations, but across the portfolio of projects it finances globally (or its scope 3 emissions), the bank said Monday.
So far, details about the bank’s plans to achieve that target are sparse, but Barclays said it will begin reporting on its progress next year and will be able to share more specifics later in 2020. Barclays also said it plans to release “the full detail of the methodology we are building as an open source contribution to the challenge of tackling climate change.”
The Rundown
Axios Civil rights leaders oppose swift move off natural gas
Bloomberg The global oil market is broken, drowning in crude nobody needs
New York Times Oil prices crash, virus hits, commerces stops: Iraq is in trouble.
Calendar
MONDAY | MARCH 30
House is out for an indefinite period. Senate is out until April 20.
