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ENFORCING THE OIL CAP: The G-7 backed Russian oil price cap is now expected to be set somewhere between $60-$65 per barrel following a final recommendation later today from the European Union. The figure is higher than many originally envisioned and higher than where Russia’s Urals grade currently trades, between $45-$48 per barrel.
One reason for settling on a relatively higher price: Enforcement.
Any massive differential between a capped price and global benchmarks for crude would create “so much temptation for people to cheat in the marketplace,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies specializing in energy security.
Though some level of cheating is expected—Russia has spent months procuring a “shadow fleet” of cargoes, which could allow it to transport as much as 80-90% of its crude outside the mechanism if it deems the cap to be unreasonable, many see the higher figure as a way to minimize that illegal trade activity.
Poland, Estonia, and Lithuania had pushed for a much more severe limit, to the tune of $20 to $30 per barrel, to limit Vladimir Putin’s funding for the war in Ukraine. It’s thought that Russia’s cost of production is below even those low levels.
But enforcing such a low cap might be difficult.
“By keeping a more reasonable price level in the price cap, as opposed to going for broke and trying to sell it at $40 [per barrel], I think that G-7 and Treasury officials are really trying to short-circuit that process, and minimize the cheating and obfuscation and falsification of documents,” Cahill said.
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TRADE TENSIONS FROM IRA SUBSIDIES A SUBPLOT IN BIDEN-MACRON DINNER: French grievances over the preferences for U.S.-made products implemented in the Inflation Reduction Act will feature as President Joe Biden hosts French President Emmanuel Macron tonight for a state dinner.
Of the $369 billion included in the legislation for energy security and climate change funding, European Union countries argue, $207 billion is tied to locally produced content provisions that discriminate against other countries and potentially violate the World Trade Organization rules.
Macron has advised the EU to adopt a “Buy European” program in response, and met with dozens of business executives in Paris before his trip to the U.S. to encourage them to invest domestically.
In talking with Biden, Macron will try to negotiate exemptions for European companies on the model of what Mexico and Canada have in place, a French presidential adviser told Reuters.
HOUSE APPROVES AVERT RAIL STRIKE BILL, BUT ITS SENATE PATH IS LESS CLEAR: House lawmakers resoundingly approved legislation yesterday to force agreement between rail companies and their workers, the first step in avoiding a looming rail strike that threatens to upend travel and supply chains across the country this holiday season.
The House voted to advance two rail deals: A wide bipartisan majority approved the bill brokered by the White House, which would force agreement between rail companies and unions, as well as a separate version of the legislation, which would give rail workers seven paid sick days, and which was passed largely on party lines, with all but 3 Republicans voting against it.
The legislation now heads to the Senate, where it faces a rockier future: Though leaders of both parties vowed to act quickly, some liberal Democrats, including Bernie Sanders and Elizabeth Warren, are threatening to withhold their votes unless their colleagues agree to back the version of the bill that includes paid leave. Sen. Joe Manchin said he was undecided as to whether he’d back the sick days. (In a show of just how odd the politics of this bill are, some of the chamber’s most outspoken conservatives, including Sen. Josh Hawley, have also thrown their weight behind the paid leave version backed by Sanders and Warren.)
Biden has insisted that the bill reach his desk by Saturday: White House press secretary Karine Jean-Pierre told reporters yesterday the Saturday deadline is critical. Asked about the two versions of the legislation, she says that Biden supports paid sick leave for “all Americans, including rail workers … [but] does not support any bill or amendment that will delay getting this bill to his desk by this Saturday.”
EPA PROPOSES MAJOR CHANGES TO RENEWABLE FUEL STANDARD: The Environmental Protection Agency proposed the next round of biofuel blending requirements covering years 2023-2025, and it is seeking to raise the amount of ethanol and other biofuels in the nation’s fuel supply to new highs.
The total proposed 2023 renewable volume obligation is 20.82 billion gallons, an increase from 2022’s finalized volume of 20.63 billion gallons. Those volumes would increase to 21.87 billion gallons in 2024 and 22.68 billion gallons in 2025.
The proposal represents a new stage in the life of the RFS, as 2022 was the last year covered by congressionally declared blending targets. From here forward, EPA will work with the Department of Energy to develop targets without guidance from Congress.
Some groups wanted more: The proposed record volumes are a win for the corn lobby and other biofuel groups.
“We are pleased with EPA’s forward-looking approach of annual increases in the proposal,” said Tom Haag, president of the National Corn Growers Association. “EPA clearly recognizes that renewable fuels like ethanol play a critical role in cutting greenhouse gas emissions, increasing U.S. energy independence and providing long-term relief to consumers at the pump.”
At least some groups wanted higher volumes, though.
Monte Shaw, executive director of the Iowa Renewable Fuels Ass
ociation, said the group “believes the final rule must better account for the rapid increase in advanced biofuels like biodiesel and renewable diesel.”
A new EV portion: The rulemaking also proposes new regulations covering the generation of renewable electricity made from renewable biomass that is used for transportation fuel in electric vehicles.
In particular, it proposes to create an “eRIN” program, deriving its name from the RFS’s existing regime of “Renewable Identification Numbers,” for compliance. The regulatory changes would allow participants to generate eRINs produced from qualifying renewable biomass and used as transportation fuel.
The agency said it expects the incentive to use qualifying renewable electricity in electric vehicles “would, in turn, incentivize increased vehicle electrification that would continue to allow for increased generation of qualifying renewable electricity,” and proposed implementing the program beginning in 2024.
SUMMER ETHANOL BLENDING REACHED NEW HIGHS: Fuel producers blended record amounts of ethanol into retail gasoline over the summer, according to the Energy Information Administration.
The summer 2022 fuel ethanol blend rate from June through August reached 10.5%, the highest blend rate since the Renewable Fuel Standard was created.
The discount of ethanol to gasoline, separated by high crude oil prices, drove the blend rate higher, EIA said in a timely blog post this morning.
The data is likely welcome news to the corn lobby and Midwestern lawmakers who, during the summer of high oil prices, aggressively promoted the expansion of renewable fuels as a cheaper alternative to petroleum-based fuels.
Sens. Amy Klobuchar and Deb Fischer just introduced legislation earlier this week that would allow for year-round availability of E15 and other blends with higher percentages of ethanol, saying it would lower prices for drivers.
INTERIM WATER MANAGER HEADED TO JACKSON: Edward “Ted” Henifin will assume the post of interim water manager for the city of Jackson, Mississippi, as that city faces a water crisis, as a federal judge has approved a proposal from the DOJ to appoint him.
Henifin is an engineer with over 40 years of public works experience, including 15 years as a general manager of the Hampton Roads Sanitation District in Virginia Beach, Virginia.
“It is excellent news for anyone who cares about the people of Jackson that the Mayor will no longer be overseeing the city’s water system,” Republican Gov. Tate Reeves tweeted, in a shot at Democratic mayor Chokwe Antar Lumumba.
The Rundown
Wall Street Journal Solar-panel shortage snarls U.S. green-energy plans
Financial Times EU looks to exclude banks and funds from sustainability rules
E&E News Biden wants to launch 16 offshore wind farms. Can he?
Calendar
FRIDAY | DECEMBER 2
3 p.m. The Environmental and Energy Study Institute (EESI) holds a virtual discussion to review what occurred at the COP27 summit and implications for U.S. policymakers. Learn more and register here.
