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A LITTLE DEMAND DESTRUCTION? As gas prices soared in June to a national average of $5.016 a gallon, gas sales saw a 5% drop compared to pre-pandemic levels, according to data from the U.S. Energy Information Administration (EIA), and 2.6% compared to the same point last year. And in April, Americans drove 6% fewer miles than they did before the pandemic in 2019, according to a transportation analysis from Sivak Applied Research.
But the 6% decline in driving only translates to a 1% drop in U.S. carbon emissions overall, transportation analyst Michael Sivak told the Associated Press—a small step toward delivering on President Joe Biden’s emissions reduction goals, but ironically, one that would also prolong Democrats’ political suffering as they continue to bear the brunt of responsibility for the high gas costs.
It “isn’t a surprise to see demand a touch lower than a year ago, given the record high gas prices we’ve faced this year,” Patrick De Haan, chief petroleum analyst at GasBuddy, told Breanne, though he noted that the EIA data is based on implied gasoline demand rather than retail, which is “notoriously volatile” and vulnerable to a multitude of factors.
Gas prices stood at a national average of $2.82 in July 2019—meaning that, in percentage terms, the 5% reduction in gas sales from pre-pandemic levels is far less than the corresponding increase in gas prices of roughly 80%.
Analysts had wondered how much the soaring gas prices would reduce demand, given that many people were eager, as the pandemic waned, to get out and visit friends and family and explore the country at the peak of the summer driving season.
The answer appears to be: A little, not a lot, and demand could pick right back up. “Domestic gasoline demand dipped recently, which took some of the pressure off of pump prices,” AAA spokesman Andrew Gross said in a blog post this week.
“But July is typically the heaviest month for demand as more Americans hit the road, so this trend of easing prices could be short-lived,” Gross wrote.
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MORE ON GAS DEMAND… According to EIA data, gas demand increased from 8.92 million b/d to 9.41 million b/d ahead of the July 4 holiday weekend, while total U.S. gas stocks decreased by roughly 2.5 million bbl. While this supply/demand imbalance would typically put upward pressure on gas prices, AAA noted in a blog post, falling oil prices have contributed to lower prices at the pump.
But U.S. gas prices have trended downward this month compared to the record-highs seen in June: Today, the national average dropped to $4.72 per gallon, according to AAA—roughly 30 cents below the average highs in June and a 10-cent drop compared to the same point last week.
Some states reported even bigger single-week decreases, including Illinois, where prices dropped 16 cents per gallon. Nine other U.S. states—Texas, Delaware, Ohio, Florida, Indiana, Virginia, Arizona, South Carolina, and Alabama saw weekly decreases of 12 cents or more per gallon.
Recession fears are to blame: “What we’re seeing in the last month has a lot to do with concerns about an economic slowdown, after the Federal Reserve raised interest rates,” De Haan said.
De Haan noted that investor worries about a downturn have crimped oil demand and lowered prices, which dipped below $100 this week. At the same time, gasoline supplies have improved.
“Now that we’re seeing gasoline supply rise, I think the market is getting a little bit less anxious,” he added. “Supplies were extremely tight there for a couple of weeks; it was looking fairly bleak. But now with the reversal, there’s kind of a sense of relief. And that’s probably pushing prices down as well.”
Still, analysts warned that consumers should not mistake this period as a lasting trend: “Enjoy the relief while it lasts, but don’t expect it to stick around,” De Haan told Breanne.
He added that consumers should “be prepared for when prices do jump back up,” a particular risk with the advent of peak hurricane season, from mid-August through mid-September.
“It’s lasted three weeks, it will probably make a fourth,” De Haan added. “But beyond that, it’s certainly not guaranteed to continue much beyond where we are now.”
TRANSPORTATION EMISSIONS TARGETS MANDATE FOR CITIES AND STATES: The Department of Transportation proposed a new rule yesterday that would require cities and states to set carbon emissions reduction targets for transportation, in an effort to deliver on Biden’s climate goals and reduce greenhouse emissions in the highest-generating sector.
According to the new draft rule, both state transportation agencies and metropolitan planning organizations (MPOs) would be required to measure their transportation emissions, and to set new two- and four-year targets for reducing tailpipe emissions on the national highway system. (DOT noted that 24 states and Washington, D.C. have already been working to set targets.)
It would also require MPOs and states to report on their progress in meeting the new targets twice a year.
DOT officials said Thursday that the effort would help deliver on Biden’s climate goals, including reaching net-zero carbon emissions by the year 2050.
“Our approach gives states the flexibility they need to set their own emission reduction targets, while providing them with resources from President Biden’s Bipartisan Infrastructure Law to meet those targets and protect their communities,” Transportation Secretary Pete Buttigieg said in a statement.
Transportation accounts for the largest share of greenhouse gas emissions in the U.S., according to EPA data, accounting for 27% of total U.S. emissions in 2020.
The draft rule sparked backlash from some Republicans, however, who argued that it “goes against congressional intent” and should be rescinded.
“Unfortunately, this action follows a common theme by both DOT and the administration, which is implementing partisan policy priorities they wish had been included,” Sen. Shelley Moore Capito (R-W.Va.), the ranking member of the Senate Environment and Public Works Committee, said in a statement.
HABECK PLEADS WITH CANADA TO RELEASE KEY PIPELINE TURBINE: German Vice Chancellor Robert Habeck pleaded this week for Canada to release a Nord Stream 1 pipeline turbine that’s been stranded by sanctions against Russia, saying in an interview that releasing the component would remove Russian President Vladimir Putin’s excuse to keep the key gas pipeline closed “indefinitely” after it begins planned maintenance work next week.
“I’ll be the first one who will fight for a further strong EU sanction package, but strong sanctions means it must hurt and harm Russia and Putin more than it does our economy,” Habeck, Germany’s energy minister, told Bloomberg in a phone interview. “Therefore, I ask for understanding that we have to take this turbine excuse away from Putin.”
Habeck warned late last month that Russia could be using the planned maintenance work on Nord Stream 1 as a “pretext” for blocking gas delivery to Europe for the foreseeable future.
In June, Russian state-owned gas giant Gazprom announced a 60% reduction in natural gas delivery to Germany. At the time, Gazprom blamed the reductions on Western sanctions, saying they halted delivery from Canada of the part needed for repairs.
But that assertion has been dismissed by German leaders, including Habeck, who said last month: “We have established, in close consultation with the European Commission, that the maintenance problems are not related to the sanctions.”
EU officials and analysts have warned that a prolonged shutoff would likely have “seismic” ramifications for Europe, which relies heavily on Russian gas supplies, and could put the EU’s winter storage targets at risk.
DIMMING LIGHTS AND LESS BATHING IN GERMANY: Local authorities in Germany are imposing new rules to conserve energy now that the federal government has instituted emergency gas-saving measures nationally, the Financial Times reported.
Landlords and housing associations in particular have responded to Habeck’s requests to use less hot water and electricity.
The city of Cologne is dimming its street lighting after 11 p.m., while one housing association in the town of Dippoldiswalde in eastern Germany is restricting when tenants can take hot showers. The rules are quite specific – the permitted times are 4am-8am, 11am-1pm and 5pm-9pm.
The threat of shortages this winter is growing more dire now that flows of Russian gas are down, and at least one labor union leader in Germany warned that whole industries could be shut down by a dearth of gas.
BANKER SPLITS WITH HSBC AFTER SPAT OVER GREEN FINANCE: A senior executive at U.K.-based HSBC has parted with the multinational bank giant following a stir he caused by sharply disputing the premises underlying sustainable finance and ESG investing.
Stuart Kirk, who was head of global responsible investing at the bank’s asset management division, announced via his LinkedIn page yesterday that he is resigning after the bank opened up an investigation and suspended him for his comments in a speech at a finance forum in May. Kirk had accused policymakers and central banks of drastically overstating the risks that climate change poses to the financial sector and said that countries can adapt to the changing climate.
“Who cares if Miami is six meters underwater in 100 years?” was one of Kirk’s musings during the speech. “Amsterdam has been six meters underwater for ages, and that’s a really nice place. We will cope with it.”
In his resignation post, Kirk said the issues of climate change and finance need to be more open to debate and promised to “prod with a sharp stick” what he called hypocrisy and “sloppy logic…inside the mainstream bubble of sustainable finance.”
ESG under the microscope: Others in leadership at HSBC distanced themselves from Kirk’s view. At the same time, ESG and green financial regulations have reached a point of “reckoning,” as the Financial Times reported last month in a story charting out where they’ve become a liability in the face of the war in Ukraine and global energy crisis.
There’s evidence, too, that some of the world’s largest financial firms have stepped back from a more aggressive ESG approach taken in years past.
Republicans in Congress and those at the state level have been taking green finance and ESG head-on, while the Securities and Exchange Commission is seeking to enable them with its climate-related disclosure and anti-greenwashing proposals.
The Rundown
Washington Examiner Supreme Court EPA decision upends legislative priorities for Democrats
Bloomberg The world needs to spend $110 billion a year to curb methane
Washington Post Democrats race to clinch deal on climate, energy with Manchin
Associated Press Report: Europe’s banks need to raise game on climate risk
Calendar
WEDNESDAY | JULY 13
2:30 p.m. 366 Dirksen The Senate Energy and Natural Resources’ Energy Subcommittee will hold a hearing on pathways to lower energy prices.
THURSDAY | JULY 14
10:00 a.m. 1300 Longworth The House Agriculture Committee will hold a hearing on “A 2022 Review of the Farm Bill: The State of Credit for Young, Beginning, and Underserved Producers.”
