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!
WINNERS AND LOSERS: We brought back together a band of smart energy and geopolitical analysts to examine the winners and losers from the OPEC+ 2.0 agreement, this past weekend’s extension of the unprecedented Saudi Arabia- and Russia-led pact agreed to in April to cut nearly 10% of the world’s oil production to raise prices.
Revisit here if you missed our grades of the original deal for OPEC+ plus to cut 9.7 million barrels per day in May and June.
Without further ado, here’s what’s changed, and what hasn’t after OPEC+ extended those output cuts through July (the extension reduces output by 9.6 million barrels a day next month, as Mexico isn’t participating this time).
Winner – Saudi Arabia (and its new oil minister Abdulazziz bin Salman): Saudi’s oil minister, long a background figure in the kingdom’s oil strategy, has revealed himself as a clever strategist, says Jim Krane, energy geopolitics fellow at Rice University’s Baker Institute.
The key to the deal was his introduction of the concept of “compensation” for quota cheating, meaning that countries that produce beyond their quotas need to make up for the excess barrels through additional cuts, until the entire amount is accounted for.
Four countries promised as part of the extended deal to compensate for the barrels they failed to cut in May, and would fail to cut in June: Iraq, Nigeria, Angola, and Kazakhstan.
“If the concept of compensation for cheating holds in the future, Saudi Arabia will be all the more powerful and OPEC’s claims more credible,” Krane told Josh in an email.
Winner – The OPEC+ alliance: There were no signs of a return to the Saudi-Russian “price war” brinkmanship of March, which made the price crash worse, noted Gregory Brew, an oil historian who studies the Middle East at Southern Methodist University’s Center for Presidential History.
“The meeting confirmed the continued cooperation between OPEC and non-OPEC producers,” Brew told Josh in an email.
Loser – The compliance laggards: The aforementioned quota cheaters will “now face greater pressure to restrain production,” said Bob McNally, president of Rapidan Energy Group and a former top oil official in the George W. Bush administration.
The extra cuts taken on by those countries after failing to do so earlier will hurt more now that prices are higher.
“The four cheaters have learned that their malfeasance will cost their treasuries billions of dollars,” Krane said.
Winner – US shale and President Trump (kinda): Trump didn’t tweet about the extended deal, but he remains a beneficiary, “though he had to expend much less effort this time,” McNally told Josh in an email.
That’s because producers in U.S. oil states, who are already starting to come back, will benefit from the boost in prices without having to cut more production of their own.
“Not only does shale not take orders from OPEC, but shale producers tend to swoop in and steal OPEC market share when the cartel succeeds in choking back its own production,” Krane said.
Brew, however, warned the situation for U.S. producers remains “uncertain”, with inventories still running high, and gasoline demand only slowly recovering going into summer driving season, even as cities reopen.
“While there’s renewed optimism as prices recover, $40 is still well below the level needed for most companies to turn a profit,” Brew said.
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.
BP’S HUGE JOB CUTS PART OF ‘REINVENTION’ TO CLEANER ENERGY: British oil major BP announced plans to reduce its global workforce by 10,000 people, about 15% of its total staff, as a result of the pandemic and to help it shift away quicker from fossil fuels.
BP CEO Bernard Looney revealed the job cuts in an email to staff he made public, in which he said most of the layoffs would occur this year and involve people in “office-based” jobs, not frontline operational staff.
BP was unable to turn a profit as oil prices tanked during the pandemic, and the company is spending “much more” than it makes, Looney said, with its net debt rising $6 billion this quarter and capital spending falling 25% in 2020. But the BP chief also framed the job cuts as part of the company’s shift from oil and gas to renewable energy and its commitment to reaching net-zero emissions.
“It was always part of the plan to make BP a leaner, faster-moving and lower carbon company,” Looney said. “The broader economic picture and our own financial position just reaffirm the need to reinvent BP.”
CAN A GREEN STIMULUS CREATE JOBS QUICKLY? A working paper circulated Monday by the National Bureau of Economic Research finds Obama-era clean energy stimulus investments, though creating jobs in the long-run, had little effect on near-term U.S. employment.
According to the research, the Obama-era American Recovery and Reinvestment Act created nearly 15 jobs per $1 million spent on green stimulus, but most of those employment gains were accrued in the long-term. In total, the 2009 legislation spent more than $90 billion on clean energy.
“Green stimulus investments appear more effective for reshaping an economy than for restarting an economy,” the researchers write, adding such investments might need to be paired with other short-term relief to have a near-term effect.
The research comes as Democrats are ramping up calls to include support for clean energy in any next coronavirus relief legislation.
DNC COUNCIL SHOWS HOW BIDEN COULD MOVE LEFT ON CLIMATE: New policy recommendations from the DNC’s Environment and Climate Crisis Council offer a road map of what progressive activists are seeking from Joe Biden as he looks to strengthen his climate plan.
The recommendations, issued Thursday, go far beyond Biden’s initial climate plan. And while it isn’t clear how much sway the DNC climate council will have or how it dovetails with other efforts like Biden’s joint climate task force with Bernie Sanders, it does offer a glimpse at the bolder actions left-wing climate activists are hoping the former vice president will endorse.
For example, the council calls for slashing emissions by 70% by 2030 and to “near-zero” by 2040, whereas Biden’s plan targets net-zero emissions by 2050. The council also takes a much stronger stance on fossil fuels than Biden has been willing to stake out so far. The recommendations call for banning fracking, reinstating the crude oil export ban, blocking natural gas exports, and ending the sale of internal combustion engine cars by 2030.
More in Abby’s story posted this weekend.
TRUMP GONE FISHIN’ WITH MARINE MONUMENT ROLLBACK: Trump on Friday lifted restrictions on commercial fishing at an underwater national monument off the coast of New England designated by former President Barack Obama.
The Obama administration used the Antiquities Act in 2016 to create the Northeast Canyons and Seamounts Marine National Monument, which protects 5,000 square miles of deep sea corals and marine life in the North Atlantic.
A coalition of fishing groups had unsuccessfully sought to overturn the designation in federal court, arguing the monument cut off too much access to commercial fishing.
“As we work to fully reopen and revitalize our nation’s economy, I’m doing everything in my power to support American workers, including those in Maine’s amazing seafood industry,” Trump said during a roundtable discussion at Bangor International Airport with the state’s former Republican governor Paul LePage and commercial fishermen.
Power over monuments in question: Rep. Raul Grijalva, chairman of the House Natural Resources Committee, blasted the move as an “illegal rollback” that threatens marine life and shows Trump is behaving in “pure recreational destruction mode” as he “clings to power.”
Trump has weakened other Obama administration national monuments, including Bears Ears and Grand Staircase-Escalante national monuments in Utah. Environmental groups have challenged those actions in federal court.
The Antiquities Act gives the president unilateral power to declare national monuments on federal land, but it does not explicitly say whether a president can overturn or change a monument designation, and the concept has not been tested in court.
CLEAN ENERGY TRANSITION IS FALLING BEHIND, IEA SAYS: Only six of the 46 energy sectors and technologies the International Energy Agency is following were on pace by the end of 2019 with what’s needed to meet global climate goals — and those that are on track represent just a small share of the emissions reductions needed, the IEA said in a June 5 report.
A third of the technologies IEA follows were “off track” with the Paris Agreement goals, including nuclear power, carbon capture and storage, methane emissions from oil and gas, and emissions from building heating. Nuclear power was downgraded in this year’s report, after the amount of new nuclear capacity in 2019 was just half of what was added in 2018, according to the IEA.
Many of the world’s largest emitting sectors remain behind the Paris goals, too, the IEA said, including the power, building, and transportation sectors.
The Rundown
Axios Civil rights leaders call for more diverse oil and gas industry
Bloomberg Energy industry jilts Trump with curb on campaign donations
New York Times A new weapon against climate change may float
Politico Borrowed time: climate change threatens US mortgage market
Miami Herald Feds have $4.6 billion plan to protect Miami-Dade from hurricanes: walls and elevation
Financial Times US states weigh exit from power market in clean-energy dispute
Calendar
TUESDAY | JUNE 9
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee holds a business meeting to consider the nomination of Mark Menezes to be the Deputy Secretary of Energy.
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee holds a hearing to examine wildfire management in the midst of the COVID-19 pandemic.
12 p.m. The House Energy and Commerce Committee’s Subcommittee on Environment and Climate Change holds a virtual hearing entitled, “Pollution and Pandemics: COVID-19’s Disproportionate Impact on Environmental Justice Communities.”
2:30 p.m. The House Natural Resources Committee hosts a virtual forum entitled, “After Coronavirus: Building a Prosperous, Environmentally Friendly Economy.”
