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!
OPEC+ FALLOUT: OPEC+’s production cut plunges the Biden administration back into unwelcome waters of worrying about global oil supply and makes its SPR refill efforts all the more complicated.
What happened: Prices surged on the unexpected OPEC+ announcement that it will cut production by an additional 1.16 million barrels per day which followed its October cut and is sparking more fears about global supply and market tightness as China reopens its economy.
Saudi Arabia’s energy minister described the cuts as a “precautionary measure” aimed at supporting oil market stability amid slightly weaker-than-expected.
Some analysts said the cuts were an overreaction that could send oil prices soaring. Rystad Energy estimates the cuts could put oil prices above $100 per barrel this summer, potentially as high as $110 for Brent.
“From a supply side perspective, the cuts signal the group is willing to defend a price floor well above $80 per barrel and prioritize revenue versus market share,” Rystad senior vice president Jorge Leon said in a note this morning. “From a demand-side perspective, these cuts may be signaling that OPEC+ believes that there are enough recessionary indicators in the market.”
Oil politics: We know where the White House stands on this sort of thing. It has both leaned on the Saudis and OPEC+ to help solve what became one of its main political problems last year in high gas prices and pledged to help shape the world into one no longer subject to the cartel’s whims.
The Group of Seven, and President Joe Biden especially, fought the Saudis and OPEC much of last year and lobbied for more production to bring prices down from where they were in the high end of the post-invasion price range.
Additional production remains as much a priority now as then for Biden, who has since kept up the pressure and critical rhetoric toward U.S. producers to bring more oil to market, even with prices well down from last year’s highs.
Another wrinkle for the SPR: The Department of Energy had already all but written off the possibility of acquiring oil this year to replace emergency barrels sold in the last. The cut complicates its fixed-price repurchase plan more, with WTI straying even further now from the administration’s preferred price range, trading above $80 per barrel this morning.
Even at $80 per barrel, the department, if it were to move forward with another solicitation, could still make a significant profit under its fixed-price contract plan if it could find some sellers. The average barrel drawn down and sold on Biden’s emergency orders last year went for $96 a pop.
The department isn’t bound by its preferred price range or its fixed-price purchase plan, but the Biden administration has pledged to get a “good deal” for taxpayers.
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.
…RUSSIAN CRUDE EXPORTS SHOW NO SIGNS OF SLOWING: Meanwhile, OPEC+ member Russia has shown no signs that it has slashed oil production by 500,000 bpd as it vowed to do beginning in March. Last month, Russian oil shipments increased by 1 million bpd, according to ship-tracking data compiled by Bloomberg, bringing its shipments to a new record-high of 4.13 million bpd in the final seven days ending March 31. (Four-week averages stood at around 3.45 million bpd, the highest level since June.)
Russia had vowed to slash its output from March through June in retaliation for the G-7-backed oil price cap, which caps its crude exports at $60 per barrel in a bid to reduce Russia’s war funding and excess energy revenue while still keeping its barrels on the market.
The export numbers make it unclear if Russia, which has limited internal storage capacity, has actually implemented the oil production cut or whether it plans to do so in the months ahead.
CAPITO AND CARPER LEAD NEW BIPARTISAN NUCLEAR BILL: A bipartisan group of senators announced a new bill this morning that would facilitate more U.S. nuclear energy diplomacy around the world and seek to cut down on regulatory hurdles at the Nuclear Regulatory Commission that slow the licensing of new reactors.
The bill, led by Sens. Shelley Moore Capito, Tom Carper, and Sheldon Whitehouse, would establish a joint initiative involving the Commerce Department and Energy Department to work with nations seeking to develop advanced nuclear energy programs.
It would also require the NRC to “periodically review and assess performance metrics and milestone schedules to ensure licensing can be completed on an efficient schedule,” according to a summary.
Other cosponsors include Sens. Cory Booker, Martin Heinrich, and John Barrasso.
Pro-nuclear members of Congress, including Energy and Natural Resources Committee Chairman Joe Manchin, have sought to make the U.S. more competitive on nuclear around the world, and U.S. reactor developers are facing off against international competitors for their share of the growing nuclear pie.
Saudi Arabia is currently looking at bids from reactor developers, none of which is American, wanting to build the oil giant’s first nuclear power plant. Bidders include China National Nuclear Corp., EDF, Korea Electric Power Co., and Russia’s Rosatom.
TERRAPOWER UTILITY PARTNER WANTS TWO MORE REACTORS: PacifiCorp, the utility working with TerraPower to build the first demonstration plant for the Bill Gates-backed startup’s advanced reactor design, wants to acquire two more of the Natrium reactors and storage systems over the next decade.
PacifiCorp revealed its plans in a regulatory filing on Friday. The company, which operates in six western states, including California, Wyoming, and Oregon, published a resource plan proposing to acquire 1,500 megawatts of advanced nuclear energy from three total Natrium reactors by 2033.
PacifiCorp will need the additional generation to fill the gap of its retiring coal-fired power plants. It has 22 coal units currently operating, and the “preferred portfolio” in its new resource plan includes retirement or gas conversion of 13 units by 2030 and 20 units by year-end 2032.
Where Natrium stands: TerraPower’s advanced reactor design, which is receiving funding under the Energy Department’s Advanced Reactor Demonstration Program, has some hurdles to overcome on the road to demonstration. The biggest one is perhaps the most fundamental: fuel acquisition.
The company announced in December that demonstration would be delayed by at least two years because it lost access to Russian high assay low-enriched uranium, a consequence of the war in Ukraine. Russia is the only source of commercial-scale HALEU in the world.
The U.S. has some domestic companies working on HALEU, including Centrus Energy, which is also a DOE fund recipient and recently completed construction of advanced uranium enrichment centrifuges and associated support systems at its Ohio demonstration facility.
DOE also just got additional funding to go toward HALEU in the Inflation Reduction Act.
GM GIVES A GLIMPSE OF ELECTRIC VEHICLE CREDIT EFFECTS TO AUTOS: General Motors released a list of models it expects to qualify for the consumer clean vehicle tax credit after Treasury published guidance on how it will implement the credit’s new battery and minerals sourcing requirements.
GM said it thinks its luxury Cadillac Lyriq will be eligible, as well as the Chevrolet Equinox EV SUV and Blazer EV SUV being launched this year.
Its Bolt models are expected to qualify for “some level of credit,” it said. Plus, thanks to the IRA’s credit for commercial purchases, which Manchin and others have said could become a “loophole” for manufacturers because it provides an incentive for cars and trucks but doesn’t include sourcing requirements, GM said customers purchasing the electric Chevrolet Silverado could get $7,500 off.
Models that don’t comply: GMC Hummers, which are among the more than three dozen models that meet the North America Assembly requirement but not those for batteries.
Other automakers are still working on certifying which of their models are eligible. Treasury has a working list of those that meet price and North American assembly conditions here.
The department’s new rules go into effect on April 18 and are expected to knock a still-undetermined number of models off the list of vehicles that could be otherwise eligible for the full credit.
GEORGIA’S PLANT VOGTLE CONNECTS TO THE GRID: Georgia Power announced over the weekend that the first of its two new reactors at Plant Vogtle was connected to the electric grid after it began generating electricity for the first time, making Unit 3 the first new NRC-licensed reactor design to begin generating electricity.
Operators are now focused on raising reactor power to increase generation and performing tests along the way, the company said.
It’s the moment a lot of people have been waiting for, and one that kept escaping the Georgia utility. The reactors’ in-service dates have been repeatedly delayed, and at a cost.
Georgia Power said it expects Unit 3 to be online within the next two months, with Unit 4 projected to enter service in late fourth quarter 2023 or first quarter 2024.
CANADA WARNS U.S. AGAINST WAGING ‘CARBON SUBSIDY WAR’ WITH ALLIES: Canadian Natural Resources Minister Jonathan Wilkinson warned the U.S. against waging a “carbon subsidy war” with its allies via the Inflation Reduction Act and the billions it provides in clean energy subsidies, saying in an interview that the law risks creating an unequal playing field in global trade.
Wilkinson told the Financial Times that the IRA’s $369 billion in clean energy subsidies have “created an unlevel playing field for the Europeans and for Canada,” which he noted were struggling to “match” the IRA’s handouts to developers.
“We don’t want to get into a subsidy war with the Americans and neither do the Europeans and Japanese,” he said, warning: “It needs to be friend-shoring, not just one country winning.”
“The Americans are the reserve currency of the world—they have the fiscal latitude to do things that I think almost no other country in the world can do,” Wilkinson added.
His remarks come as the Biden administration has sought to assuage allies’ concerns about the IRA, including by expanding access to subsidies for EV battery components last week in its long-awaited tax credit guidance.
Biden also traveled to Ottawa just days earlier, where he touted Canada’s abundant supply of critical minerals and described them as “essential for our clean energy future.”
NORTH SEA OIL AND GAS STRIKES EXPECTED TO BEGIN THIS WEEK: UK contract workers servicing oil and gas companies in the North Sea are expected to begin strike action this week, a union said today, affecting production at platforms owned by Shell, Harbour Energy, and others.
Some 150 workers are expected to take part in this week’s strike, according to the Unite union, which described the walkouts as the “opening round” in stoppages it said could ultimately impact or shut down dozens of platforms in the coming weeks.
The strikes are centered around better pay and working conditions, and are expected to continue through June 9.
The Rundown
Bloomberg Wind’s future is looking more turbulent than ever
Financial Times How China is winning the race for Africa’s lithium
Reuters Italy’s ski industry fires cannon against climate change
Calendar
MONDAY | APRIL 17
3:30 p.m. The Institute of World Politics will host a panel on the current energy supply crisis and Canada’s role in helping supply alternative energy sources. Panelists will include James Rajotte, Alberta’s senior representative to the U.S., SVB Energy founder and president Dr. Sara Vakhshouri, and others. Learn more and register to attend here.
