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!
WHAT’S HAPPENED SINCE LAST THANKSGIVING: A year ago this Wednesday, President Joe Biden announced his first in what was to become a series of drawdowns from the Strategic Petroleum Reserve designed to reduce high fuel prices.
Days later, on Black Friday, the Interior Department put live its review of the federal oil and gas leasing program, which Biden ordered days into office alongside his “pause” on new leasing.
Here’s a look back at how two storylines that have defined Biden’s presidency have developed in a year’s time.
SPR: Biden announced on Nov. 23, 2021, the release of up to 50 million barrels of SPR crude oil, a share of which was offered under congressionally-mandated sales and the rest of which was made available under Department of Energy’s exchange authority.
At the time, a war in Ukraine was a distinct possibility but there was no major disruption to oil supplies.
Where the Russia-Ukraine escalation was concerned, everybody was talking about what would happen to Nord Stream 2. The White House said the SPR move was an attempt to “lower prices and address lack of supply around the world.” It was about the demand rebound from the COVID-19 pandemic, and neither “Ukraine” nor “Russia” were mentioned.
With that announcement, Biden had embarked on a novel utilization of the nation’s reserve oil by making the United States government into a more active market participant in the oil market, a strategy some Democrats and outside experts say should continue in order to manage the growing pains associated with a transition to more alternative energy sources.
Fast forward: After Russia invaded Ukraine in February of this year, an event that caused oil prices to peak near $130 in the weeks after, Biden made multiple determinations of a supply “emergency” to authorize further drawdowns from the SPR.
By April, the administration had announced plans to release up to 260 million barrels of oil from the SPR through October, mostly through emergency drawdowns. Additional releases from the reserve could come later, White House officials have said in recent months.
Oil and gas leasing: Interior followed up Biden’s first SPR announcement two days later with a quiet release, on Black Friday, of its review of the federal oil and gas leasing program.
Biden, who came into office on promises of scaling back and ending parts of the program, ordered the review in his Jan. 27, 2021, executive order that paused new leasing at least until the report’s release.
Interior concluded that taxpayers weren’t getting a fair shake and recommended reforms like higher royalty and rental rates, but the review was a disappointment to environmental groups and some climate hawks in Congress, who said it had no teeth because it did not recommend a substantial reduction in new leasing or drilling.
It was a preview of more disappointments to come for many of the same folks. Interior went on months later to carry out new lease sales across multiple Western states after a federal judge ruled against Biden’s leasing pause, although the department shrunk the total acreage offered.
Even though Democrats would ultimately provide for higher rates on new leases with the Inflation Reduction Act, the same law brought back canceled offshore lease sales and tied continued development of renewable energy resources on federal lands to continued leasing of acreage for oil and gas.
Interior will hold an offshore lease sale next month for acreage offshore Alaska. Another offshore lease sale in the Gulf of Mexico is scheduled for March, and Interior is eying Q22023 for its next round of onshore lease sales.
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.
GOLDMAN CUTS OIL FORECAST, CITING G-7 PRICE CAP AND CHINA WOES: Goldman Sachs lowered its fourth-quarter oil price forecast by $10 to $100 per barrel this morning, citing a “lack of clarity” on the G-7 Russian oil price cap, which takes effect in two weeks, as well as new COVID-19 restrictions in China as it battles a resurgence of cases.
Prices for international benchmark Brent crude fell today to $86.83 per barrel, a 0.9% drop from the previous day of trading. Meanwhile, futures for U.S.-based West Texas Intermediate fell to $79.21 per barrel—down by 1.29%.
“The market is right to be anxious about forward fundamentals, due to significant Covid cases in China and a lack of clarity on the implementation of the G7′s price cap,” Goldman analysts said in their note.
Investors have also “been left disappointed by higher than expected production and export flows from Russia,” Goldman said. It noted that Russia is continuing to export significant volumes of crude in the final stretch before the G-7 price cap takes effect Dec. 5.
Leaders are expected to announce a price for the cap this week.
It is unclear if, or how, the cap will curtail production or if it will effectively cut into Moscow’s profits.
Goldman also lowered its demand expectations for China by 1.2 million barrels per day (bpd) for Q4 in anticipation of further lockdowns. China reported three deaths due to COVID-19 over the weekend, its first since May.
…Even so, China’s spending on Russian energy continues to climb: China continued to increase its imports of Russian energy products last month, Bloomberg reports, ramping up its spending on oil, LNG, and other products to take advantage of deeply discounted Russian commodities.
The imports contrast sharply with the rest of China’s economy, which saw purchases slump in October amid the increase in COVID-19 cases.
China’s imports of Russian oil rose by 16% in October, government data shows. And its Russian LNG purchases climbed to 756,000 tons, despite a 34% decline in China’s overall imports of the fuel.
Coal imports also increased to 6.4 million tons—three times the amount compared to last year.
In total, China has spent nearly $60 billion on Russian energy products since its invasion of Ukraine.
…And Indian refiners are racing to secure more Russian oil: At least four refining companies in India are seeking Russian cargoes that can load by Dec. 5 and discharge before Jan. 19—the last day of a so-called “grace period” being granted to buyers ahead of the oil price cap’s implementation.
The grace period seeks to take into account shipments loaded before or by Dec. 5, the day that the EU’s ban on Russian seaborne crude also takes effect.
Both the U.S. and UK said they will abide by the grace period, but the EU has not yet said whether it plans to do so.
Leaders have said the price cap will help governments negotiate better prices with Moscow, but some buyers remain wary. Just last month, two key Indian refiners halted shipments from Moscow, citing concerns over sanctions. Read more on India’s eleventh-hour scramble here.
DOMINO’S BUYING HUNDREDS OF CHEVY BOLTS: Domino’s Pizza said it has signed a deal with General Motors to procure hundreds of electric vehicles for its stores across the U.S., in an effort to attract drivers and overcome an industry-wide pizza delivery shortage.
Domino’s said it has purchased 800 branded Chevrolet Bolts from GM. It will begin deploying the new vehicles this month, and said it plans to purchase more after the initial round.
“We’ve got a long way to go, but we will have the biggest fleet of electric vehicles in the pizza industry, period,” Domino’s CEO Russell Weiner told the Wall Street Journal.
HOW UKRAINE’S ENERGY SECTOR IS DEFENDING ITSELF FROM RUSSIAN MISSILES: Russian fired an estimated $1 billion in missiles at Ukraine’s energy infrastructure last week, one of the heaviest waves of missile attacks since the start of the war.
It’s part of a strategy that the Pentagon’s top policy adviser, Colin Kahl, said was designed to exhaust and disable the country’s air defense systems. It has also crippled roughly half of Ukraine’s power system.
Volodymyr Kudrytskyi, the head of Ukraine’s energy utility Ukrenego, said in an interview with Politico EU, that they are working overtime to protect against further outages. “In my humble opinion, we are doing quite well,” he said.
“This kind of assault, the scale of it, on a power grid has never been seen before in the modern world and therefore we must invent solutions. We don’t have anyone else to consult because simply nobody has ever experienced anything even close to this before,” he added.
HOUSE ENVIRONMENTAL CAUCUS BACKS PERMITTING REFORM: The House Democrat-led Sustainable Energy and Environment Coalition is carefully endorsing permitting reform, so long as it allows more community engagement in the review and approval of energy projects and doesn’t favor fossil fuel ventures.
The SEEC, made up of several signatories to Natural Resources Chairman Raul Grijalva’s letter opposing the Manchin-Schumer permitting deal, is wading into the permitting debate today with a policy brief stressing the need to build more transmission lines while enabling locals to be more involved earlier on in the project’s process.
“Renewable energy is only as good as the electrical system upon which it relies,” says the brief, which promotes “clean energy-focused permitting reform” to more quickly approve transmission projects.
The brief’s recommendations reflect Sen. Joe Manchin’s reform legislation in a few key ways, particularly by providing for the government to deem certain projects to be in the “national interest” and expanding FERC’s authority over interstate transmission.
Manchin’s bill does something similar, although it would extend beyond transmission and provide for other projects, including fossil fuel projects, to be deemed in the national interest and prioritized.
Other differences between Manchin’s bill and the SEEC’s recommendations center on community engagement. The SEEC brief disputes the notion that more chime-in from locals is what’s responsible for project delays, arguing that community engagement instead doesn’t happen early enough during the process. Manchin’s bill would put strictures on litigation against projects.
COP27 RESULTS – CLIMATE FUND, BUT LITTLE ELSE: Wealthy nations agreed yesterday to create a “loss and damage” fund to assist vulnerable countries affected by global warming—an agreement that came after two weeks of tense negotiations at this year’s COP27 summit.
The deal was clinched in the early hours of morning Sunday, though the triumph was, for some, short-lived. Many criticized the lack of progress since last year’s COP26 summit in Glasgow, and noted that the new framework released at the end of the summit did not include efforts to phase out, or phase down, all fossil fuels.
“We had to fight relentlessly to hold the line of Glasgow,” the UK’s Alok Sharma, the COP26 president and architect of the Glasgow deal, told Reuters.
Sharma, visibly frustrated, then listed a number of ambition-boosting measures that leaders were forced to leave out of this year’s framework. “Emissions peaking before 2025 as the science tells us is necessary? Not in this text,” he said. “Clear follow-through on the phase down of coal? Not in this text. A clear commitment to phase out all fossil fuels? Not in this text.”
…Still, the agreement marked a notable shift from the U.S. and EU: Government officials of both those countries have long feared that the creation of such a fund could make them liable for massive payouts.
U.S. climate envoy John Kerry said in a statement that he welcomed the agreement to “establish arrangements to respond to the devastating impact of climate change on vulnerable communities around the world.”
Kerry also vowed to keep the pressure up on major emitters such as China to “significantly enhance their ambition” and keep alive the goal of limiting global warming to 1.5 degrees Celsius.
QATARIS CEMENT 27-YEAR LNG DEAL WITH CHINA’S SINOPEC: State-owned QatarEnergy announced today it signed a a nearly three-decade liquefied natural gas supply agreement with China Petroleum & Chemical Corporation, earmarking another nearly 195 billion cubic feet per year of Qatari LNG for Chinese consumption.
The agreement is just the sort that major LNG suppliers, wanting the financial certainty provided by long-term contracts, are seeking out as the global energy crisis generates new business opportunities.
It’s also the sort agreement that European customers, although anxious to secure more gas now, are holding out on because of the demands of their climate goals. Europe’s LNG imports have ballooned this year but the increases have come largely via the spot market.
DOE ‘CONDITIONALLY’ SELECTS DIABLO CANYON FOR BAILOUT PROGRAM: The Department of Energy announced the “conditional selection” of California’s Diablo Canyon Power Plant for federal funding provided to save troubled nuclear stations.
The short announcement said DOE would provide up to $1.1 billion worth of credits to extend operation of the financially-challenged plant, whose full retirement had been scheduled for 2025.
Congress created and funded the $6 billion Civil Nuclear Credit Program via the bipartisan infrastructure law last year to save nuclear plants that struggle to compete in wholesale power markets where generation from gas and renewables is substantially cheaper.
The Rundown
Wall Street Journal Race to secure gas for Europe’s future winters has already begun
Financial Times ‘More smoke than fire’: China’s Pacific aid falls short of pledges
Bloomberg Inside the billion-dollar market for junk carbon offsets
Calendar
WEDNESDAY | NOVEMBER 30
10:00 a.m., 406 Dirksen. The Senate Environment and Public Works Committee will hold a hearing on the bipartisan infrastructure law and the view from the private sector.
