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A MAJOR STORY OF THE ELECTION: President Joe Biden’s energy policies face a reckoning with today’s midterm elections, which have been defined by high fuel prices and inflation.
The outcome will at some level be a judgment of the climate change agenda on which Biden ran and has governed, as voters will decide whether they want another Democratic Congress to keep up the momentum created with the Inflation Reduction Act — or a counterweight in the form of Republican majorities that would favor more oil and gas production without the “short term” and “medium term” qualifiers that Biden administration officials have been appending to their calls for more production.
Energy front and center: Persistently high fuel prices have shaped Biden’s week-to-week politicking perhaps more than any other single issue (Readers need only consult the Twitter feed of Biden staff chief Ron Klain), causing the administration to acknowledge a need for more oil and gas to calm the crisis.
His approval numbers have been strongly and negatively correlated with rising gasoline prices, according to an analysis from ClearView Energy Partners.
Biden’s response to high prices has been multi-pronged: advocate first and foremost for green alternatives to traditional energy; sign legislation to subsidize more green energy; draw down oil stored in government reserves; and urge (most recently under threat of a new tax) the oil and gas industry to increase production more quickly.
How Biden’s agenda has played in key races: Democrats in close races, like incumbent Virginia Rep. Abigail Spanberger, have been campaigning on their support for Biden’s signature legislative victory in the IRA, making the case to voters that it will help lower prices.
At the same time, some vulnerable incumbents have also split with Biden on elements of his energy policy, including his administration’s slow-walking of new oil and gas leasing, and supported the expansion of leasing on federal lands and waters to help bring down prices.
Rep. Vicente Gonzalez, who’s facing off against Republican rising star Mayra Flores in the coastal 34th Congressional District in Texas, is among a group of four House Democrats who said earlier in the year that the administration wasn’t doing enough with its authorities over leasing to tame high prices.
Sen. Mark Kelly of purple Arizona also split with Biden on offshore leasing.
In Pennsylvania, Republicans have portrayed Democratic Senate candidate John Fetterman as a fossil fuel restrictionist of Biden’s bent, although the sitting lieutenant governor has argued in favor of more traditional energy alongside his support for a transition to greener sources.
The price picture: Prices for energy commodities, especially oil and natural gas, took off over the last year, driven in large part by increasing economic activity and the war in Ukraine’s effects on markets.
It’s been a dizzying year for oil markets, where prices rose to near $130 per barrel after the invasion of Ukraine. They’ve fallen considerably since that peak but the global benchmark closed roughly 17% higher yesterday compared to the same time last year.
Energy prices are up 40% since January 2021 in the Consumer Prices Index, although they have generally tamed from their summer highs.
The average consumer can expect to pay more to heat and power his home this winter, though. As of October, household expenditures on electricity and natural gas were forecast to be 4% and 21% higher than last year, according to the Energy Information Administration.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). 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.
INDIA COMMITS TO IMPORTING RUSSIAN CRUDE: Indian Foreign Minister Subrahmanyam Jaishankar said today that India will continue to purchase Russian oil after a G-7 oil price cap takes effect in December — playing up the benefits of a closer India-Russia relationship that has allowed it to import record volumes of discounted Russian crude.
“Russia has been a steady and time-tested partner,” Jaishankar said today at a press conference in Moscow. “Any objective evaluation of our relationship over many decades would confirm that it has actually served both our countries very, very well.”
Since the start of the war, India has become Russia’s second-largest oil buyer. In September, its imports surged to a whopping 23% of its overall purchases of the commodity-—up from just 2% prior to the start of the war.
He said that India also plans to expand its trade ties with Moscow in the months ahead.
Asked about the G-7 oil price cap plan, Jaishankar said that India must first look out for its own interests—which include buying cheap oil.
“And in that respect, quite honestly, we have seen that the India-Russia relationship has worked to our advantage,” he told reporters. “So, if it works to my advantage, I would like to keep that going.”
….MEANWHILE, YELLEN TRAVELS TO INDIA FOR ANOTHER PRICE CAP PITCH: Treasury Secretary Janet Yellen is traveling to India this week to meet with government officials and private sector leaders, in an eleventh-hour effort to secure India’s participation in the oil price cap and deepen ties between the two countries.
Yellen has no plans to dissuade India from purchasing Russian crude, officials said. Rather, she plans to play up the discounts that India and other buyers stand to gain by purchasing oil at the capped price.
“If [India wants] to use Western financial services like insurance, the price cap would apply to their purchases,” Yellen told local news outlet PTI. “But even if they use other financial services, we believe the price cap will give them leverage to negotiate good discounts from world markets.”
Treasury officials told the Wall Street Journal that they do not expect India to publicly support any price cap, but are hopeful that some refiners and private buyers could quietly opt to buy oil at the capped price.
MEANWHILE, RUSSIA’S CRUDE SHIPMENTS HIT FIVE-MONTH HIGH: Russian seaborne crude shipments jumped last week to a five-month high, as tankers raced to reach their destinations just weeks before Dec. 5, when EU and U.K. bans on Russian seaborne crude imports, as well as the G-7 oil price cap, all take effect.
Exports to European countries rose to a six-week high of 762,000 bpd, a 7% increase, while shipments to Asia hit 1.94 million bpd. (The largest increase in tankers were those with an unknown point of discharge— a tactic often used by Venezuela and others to skirt sanctions. As Bloomberg notes, most of these unidentified ships are likely to end up in India, as well as China, the UAE, and Sri Lanka.)
The flurry of activity drove a massive increase in profits: Last week, Russian crude export revenue reached $149 million — up by $16 million from the week prior.
They don’t have much time, however: Tankers being loaded now at two Russian ports in the Gulf of Finland are unlikely to reach terminals in China or India before the EU ban takes effect, Bloomberg reports.
UAE AND EGYPT AGREE TO BUILD ONE OF THE WORLD’S LARGEST WIND FARMS: Top renewable energy companies in the UAE and Egypt signed a memo of understanding today to develop one of the world’s largest onshore wind farms in Egypt, advancing the country’s Green Corridor initiative that seeks to ensure a 42% renewable energy mix by 2035.
UAE’s energy firm, Masdar, said in a statement that the wind farm will bring a total capacity of more than 15 GW. The wind farm is also expected to help Egypt offset more than 23 million tons of carbon dioxide emissions, and save an estimated $5 billion in natural gas costs per year.
“The project will enable the country to save vast amounts of natural gas; thereby attaining economic growth, reduce carbon emissions and provide greater access to sustainable energy sources,” Mohamed Mansour, the chairman of Egypt’s largest renewable energy provider, Infinity, said in a statement.
The first phase of the project — a green hydrogen manufacturing facility — will be operational by 2026. Read more about the effort here.
U.K. TO ANNOUNCE MAJOR DEAL FOR U.S. LNG: British Prime Minister Rishi Sunak is poised to announce a new energy partnership with the U.S. in an effort to secure more LNG from American sellers to help Britons avoid staggering high costs and a feared supply crisis this winter.
The U.S. will sell roughly 10 billion cubic meters of LNG to the U.K. in the coming year, the Telegraph reports. (Earlier this year, the U.S. separately agreed to supply 15 bcm of natural gas to the European Union to help it transition off Russian supplies.)
Though exact details of the final U.S. agreement are not known, leaders have described it as a new “energy security partnership” that’s critical to Britain in its first winter without Russian fossil fuels.
In addition to the new U.S. LNG, both the U.S. and U.K. are expected to sign a pledge to work together on developing nuclear power projects, such as small modular nuclear reactors.
Sunak and his government are also looking to import more gas supplies from export powerhouses Norway and Qatar to further alleviate the crunch.
JOHNSON SAYS BRITAIN CAN’T PAY CLIMATE CHANGE REPARATIONS: Boris Johnson, a conservative champion of the United Kingdom’s net-zero agenda, said British taxpayers cannot be expected to pay “reparations” to poor nations or those otherwise determined to be most vulnerable to climate change.
“Per capita, people in the UK put a lot of carbon in the atmosphere. But what we cannot do I’m afraid is make up for that with some sort of reparations, we simply do not have the financial resources,” Johnson said, challenging a central initiative of COP27 in Egypt, which is to facilitate funding for green energy and adaptation measures by wealthy nations for poorer ones.
The private sector would have to be the funding source instead, Johnson said yesterday in remarks at an event on the sidelines of the climate conference.
The U.K. faces immense inflationary and energy price pressures currently, along with the rest of Europe, and the conservative government is already utilizing alternative funding sources such as a windfall profits tax on energy companies to help consumers with high energy prices.
Developing nations, many of which have not had protracted usage of fossil fuels compared to OECD countries, expect wealthier ones to fund the “green transition” to enable them to meet the Paris Agreement’s 1.5 degree warming target, in large part because wealthier nations tend to be higher emitters of greenhouse gasses.
Indian Prime Minister Narendra Modi, during last year’s conference in Glasgow, said India expects the world to make $1 trillion available “as soon as possible” to fund its energy transition.
FORMER SENATOR PREDICTS ‘HEALTHY’ REPUBLICAN MAJORITY POST-ELECTION DAY: What are the biggest policy drivers in this year’s midterm elections—and to what extent are energy issues, such as high gas prices or renewable energy projects, driving voters to the ballot box?
Former FERC chairman Neil Chatterjee was joined on this week’s “Plugged In” podcast by former Minnesota Sen. Norman Coleman to discuss issues at the heart of the energy and climate debate in the U.S., and explore ways for the U.S. to increase production. You can listen to the full episode here.
The Rundown
Politico EU What election? EU sleepwalks into US midterms
Euractiv Finnish energy companies prepare for sabotage
Calendar
WEDNESDAY | NOVEMBER 9
11:15 a.m. The Energy Department holds a virtual meeting of the President’s Council of Advisors on Science and Technology (PCAST) to discuss cyber resilience and the economic impacts of extreme weather.
