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READING THE SIGNS ON THE OIL PRICE CAP: A few new signs suggest that the G7-led Russian oil price cap may not be delivering on its intended goals of cutting into Moscow’s war revenue while also keeping its barrels on the market.
Among the things we’re watching that call into question the efficacy of the first-of-its-kind effort less than nine months after it came into force:
– Russia’s temporary diesel and natural gas export ban. Russia announced last week it is temporarily banning nearly all exports of its diesel and gasoline products, further squeezing global markets.
Russia did not announce an end date to the export bans. A protracted ban on diesel exports could leave markets deeply undersupplied.
Russia is the largest seaborne exporter of diesel, just ahead of the U.S., and the ban could force buyers to find alternative sellers for the foreseeable future.
– Russia’s finances. Draft Russian budget documents show that the country expects its sovereign wealth fund to increase by 40% over the next three years, exceeding pre-war levels by 2026 on the backs of higher oil and gas revenues.
The documents, obtained by Bloomberg, also show Russia expects its average prices for its Urals-grade crude to reach $71.60 per barrel in 2024, well above the $60 cap set by the G7-led coalition.
Russian oligarch Oleg Deripaska also praised the “resilience” of the country’s economy in an interview with the Financial Times, and dismissed sanctions as an inefficient tool to cut into Moscow’s revenue. Sanctions, he said, are a “kind of instrument of the 19th century.”
“We can’t see that it would be efficient in the 21st century,” Deripaska added, especially given Russia’s abundance of natural resources.
To that end: Russia’s trade with China has jumped in 2023 by 32%, year-on-year, while trade with India has tripled in the same period on the backs of energy exports—which Deripaska said offers evidence that the West’s sanctions packages have not achieved their intended effect.
“It was a grave mistake of people who thought that they could use this excellent mechanism to put pressure on autocratic regimes,” he said.
– EU LNG imports. The European Union is slated to import record amounts of Russian liquefied natural gas this year, conflicting with its aim of reducing its reliance on Russian fossil fuels following the start of the war in Ukraine.
Spain and Belgium were ranked as the second- and third-largest buyers of Russian LNG, behind only China, according to a report from the nonprofit group Global Witness. And as a whole, EU imports of the chilled Russian gas were up 40% in the first half of this year.
…Meanwhile, oil prices continue to climb, underpinned by fears of supply tightness in the final months of 2023. Futures for international benchmark Brent crude rose near $97 a barrel this morning, while futures for U.S.-based West Texas Intermediate approached $94.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Breanne Deppisch (@breanne_dep) and Nancy Vu (@NancyVu99). 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.
BIDEN ECHOES UAW CALL FOR 40% WAGE HIKE IN DETROIT: President Joe Biden joined striking UAW workers on the picket lines in Detroit yesterday, where he echoed their calls for a 40% pay raise and urged them to “stick with it.”
“Companies were in trouble, now they’re doing incredibly well,” Biden told union workers during the strike, referencing the 2009 government bailout of U.S. automakers. “And guess what? You should be doing incredibly well, too,” he told them. “Stick with it.”
Asked if he supported the UAW’s demands for a 40% wage increase—commensurate with CEO pay raises over the past four years—Biden responded, “Yes. I think they should be able to bargain for that.”
It is unclear what impact Biden’s remarks will have on the negotiations, or if they threaten to prolong the strikes further.
…Meanwhile, former President Donald Trump is slated to travel to Detroit today, where he will address dozens of employees at a local auto supplier. He has sought to win over union voters by criticizing Biden’s EV push, which he said yesterday will “annihilate” the U.S. auto industry and cost “thousands” of employees their jobs. More on his remarks later…
SENATE CR COULD SAVE FEMA … IF IT PASSES: Senate appropriators introduced last night legislative text of a continuing resolution to keep the government funded through Nov. 17, in hopes of staving off a government shutdown. And there’s money to keep the Federal Emergency Management Agency’s coffers from drying up – but not as much as the White House initially hoped for.
The proposed bill allocates about $6 billion in disaster aid for the agency – $10 billion short of what the White House had asked for back in August and September. FEMA is facing a shortfall of funds in a record-breaking year for natural disasters – and as a result, the agency has started to ration its monies, delaying the delivery of about $2.8 billion in grants, as reported by the Washington Post this morning.
It’s important to note: This continuing resolution aims to keep the government funded for six weeks – and if this bill were to pass both chambers, there’s a chance for Congress to pass more funding for FEMA. Democratic Sen. Brian Schatz of Hawaii, a member of the Appropriations Committee and whose state is still recuperating from the Maui wildfires, said that there is a plan to provide more FEMA funding if the resolution passes. “But let’s go through this first,” he told the Washington Examiner.
“It’s 45-day money, so it’s an acceptable amount if it’s prorated over the 45 days,” Schatz said. “That obviously won’t last us much more than a month or two, but it’s a good important first step.”
Reality check: Attached to the bill is about $6 billion in Ukraine aid. A number of conservatives in both chambers have signaled they would vote down any bill that would fund the Russia-Ukraine war.
Plus, Congress is teetering on the edge of a shutdown – there are four days left until government funding runs out. FEMA has stated that its grant payments should resume once Congress approves a deal – but currently, there isn’t one in sight.
ADDITIONAL $$$ FOR EV BATTERY PLANT: More money is being allocated in Michigan for a $3.5 billion electric vehicle battery plant after Ford Motor Co. said it would halt construction until it can run the factory competitively, the Associated Press reports.
Ford announced the delay Monday, while the company is in the midst of national contract talks with the United Auto Workers Union. And yesterday, a Michigan economic development board voted to send $65 million to the site that will be used for “assistance for site readiness activities,” according to a board memo.
“We fully expect that Ford will continue to develop the BlueOval Battery Park Michigan site and we need to allow the Ford Motor Company and UAW to continue their negotiations,” Quentin Messier, president of Michigan Economic Development Corp., said during yesterday’s meeting.
UAW strikes started on Sept. 15, with workers protesting Ford and two other Detroit automakers, General Motors and Stellantis. The union at first targeted one plant from each automaker, and last week expanded it to parts warehouses. But Ford was spared from the expansion because the union said it was making progress in negotiations.
The factory was to start making batteries in 2026, cranking out enough battery cells to supply 400,000 vehicles per year.
Related – how do IRA tax credits factor into all this? Ford executives have signaled that its plans for the factory could hinge on whether the Biden administration rules that the batteries produced there (through a licensing agreement with the Chinese battery giant CATL) qualify under the sourcing rules for the $7,500 full tax credit for electric vehicles under the IRA, the Wall Street Journal reported.
“It would be absurd to classify Ford or its fully owned subsidiary as a foreign entity, much less one of concern,” Chris Smith, Ford’s chief government affairs officer, told the publication.
But rival General Motors is lobbying the administration not to make the batteries eligible, the Journal reports, arguing that such a ruling would benefit China, against the spirit of the IRA.
YOUTH CLIMATE CASE IN STRASBOURG: Six young people from Portugal made their case in court that 32 European governments violated human rights by failing to act fast enough on climate change, Reuters reports.
The case – filed in September 2020 against the 27 EU member states as well as Britain, Switzerland, Norway, Russia and Turkey – is the largest climate case ever to be heard by the European Court of Human Rights in Strasbourg.
Backed by the British-based Global Legal Action Network, the Portuguese applicants – aged between 11 and 24 – are seeking a legally-binding decision that would force governments to act. If the complaint is upheld, it could result in orders from national courts for states to cut carbon emissions blamed for climate change faster than currently planned.
A ruling in the case is expected in the first half of 2024. Read more on that here.
CONTROVERSIAL ROSEBANK OIL FIELD APPROVED FOR DEVELOPMENT: British regulators are allowing Norwegian Energy Giant Equinor to develop the controversial U.K. offshore Rosebank oil field in the North Sea, despite Britain’s stated target to decarbonize all of its economic sectors by 2050, CNBC reports.
The U.K. government said it had given operator Equinor and British energy company Ithaca Energy – which both own stakes in the field – permission to proceed after “extensive scrutiny by the regulators,” which include examining the environmental impact of the development.
Equinor says the project will be pursued in two phases, and estimates it will create £8.1 billion ($9.8 billion) of direct investment.
“We are investing on our world-leading renewable energy but, as the independent Climate Change Committee recognise, we will need oil and gas as part of that mix on the path to net zero and so it makes sense to use our own supplies from North Sea fields such as Rosebank,” U.K. Energy Security and Net Zero Secretary Claire Coutinho said in a statement.
The Rosebank development has faced repeated delays and intense public backlash amid questions over its environmental impact. The approval also comes after Britain in July confirmed plans to issue hundreds of new oil and gas leaves in the North Sea, despite asserting its stated target to decarbonize all national sectors of the economy by 2050.
The Rundown
Los Angeles Times Tearing down dams could save Western rivers — and also make climate change worse
Associated Press As climate change and high costs plague Alaska’s fisheries, fewer young people take up the trade
