🗺️ Uncharted energy waters

Plus: The U.S. drilling battle | Monday, March 07, 2022

Open in app View in browser   Presented By Global X ETFs   Axios Generate By Ben Geman and Andrew Freedman ·Mar 07, 2022 🍳 Good morning. Today's Smart Brevity count is 1,188 words, 4.5 minutes.  🛢️ Situational awareness: U.S. gasoline prices are above $4-per-gallon for the first time since 2008 and poised to go higher thanks to surging crude costs. 🚨 Follow Axios' live updates on the war in Ukraine.     1 big thing: An energy world upended Illustration: Maura Losch/Axios   HOUSTON — A premier energy industry gathering is back in-person after a two-year COVID hiatus, but discussions that will dominate many sessions and closed-door meetings are different than anyone would have imagined before Russia invaded Ukraine, Ben writes. Driving the news: CERAWeek by S&P Global draws Big Oil CEOs, Cabinet officials, foreign energy ministers, tech and power giants and everything in between. The conference, now 40+ years old, blends speeches and wonky panels with private meetings and exclusive events. Catch up fast: Oil prices on Monday soared to 14-year highs amid potential U.S. and European bans on Russian imports. European natural gas prices have also surged. "We're going to need a degree of coordination between government and industry, in the United States and globally, that's just not there right now," said Pulitzer-winning energy historian and analyst Dan Yergin, CERAWeek's host. On gas, he said: "European officials are coming to CERAWeek to talk to every single LNG exporter that they can possibly meet with." The big picture: The official theme of this year's event is "Pace of change: energy, climate and innovation." But the European crisis and its effect on prices and companies will now be front-and-center, even though climate will get plenty of time. "A lot of the conference was focused on energy transition. Now it's certainly going to be about energy security and geopolitics," Yergin told Axios yesterday. "There's really no precedent for what's happening," he said. "You can look at previous crises going back to the 1970s, but this involves not only oil but also involves, very centrally, natural gas, and it involves the world's two nuclear superpowers." "This is the end of the post-Cold War era. And literally, Russia has been unplugged from the world economy. And when that happens, you find out that there are a lot more cords than people recognized," Yergin said, citing not only energy but global reliance on Russian wheat, metals and other goods. What we're watching: Oil execs are on fairly friendly turf here, but they're nonetheless under pressure over production levels and more. For instance, Shell is facing criticism for buying Russian crude at a steep discount, and later pledged the profits to Ukrainian relief. The world is also in a different place on climate. The last two years have brought sobering reports on the pace of warming and its effects — and stark evidence of harms already unfolding. The United Nation's COP26 summit in November married ambition and doubts about nations' and companies' follow-through. "Net-zero [emissions] is fundamental to the discussion that's going to unfold over CERAWeek, and I think that is a difference from the last time we had CERAWeek. This is post-COP26," Yergin said.     2. First look: Green counterpunch on drilling push Illustration: Rebecca Zisser/Axios   In a memo provided first to Axios, Evergreen Action is pushing back against the argument that boosting domestic oil and gas drilling is the best way to free the U.S. from Russian oil imports, Andrew writes. The environmental group is calling for a major boost in clean energy deployment instead. Why it matters: Industry groups have delivered asks to the Biden administration in the wake of the Russian invasion. These include providing more policy certainty regarding oil and gas leasing on federal lands. The intrigue: To Evergreen Action, the oil and gas industry is using the Ukraine crisis to pressure the administration into taking steps that would favor more drilling and worsen climate change. The American Petroleum Institute's Feb. 28 letter to Energy Secretary Jennifer Granholm, along with another on Feb. 25 from the U.S. LNG Association, also argues that more U.S. energy production helps European energy security via energy exports. Zoom in: Evergreen is trying to counterpunch this take, stating: "There is only one long-term solution to secure affordable energy for American families and undercut the Putin regime: a transition to a 100% clean energy economy." The memo notes that since oil and gas are global commodities, increased extraction in the U.S. would not diminish Russia's energy influence. "The fossil fuel industry is peddling false solutions that will do nothing to loosen Vladimir Putin's grip on the global energy market," said Jamal Raad, Evergreen Action co-founder and executive director, in a statement to Axios.     3. Talk of Russian import ban further shakes markets Data: FactSet; Chart: Axios Visuals Oil prices shot to 14-year highs as the U.S. and other nations weigh direct bans or limits on crude oil imports from Russia, Ben writes. Why it matters: The latest price surge shows how Russia's invasion of Ukraine and the response is rattling what are already tight energy markets. Soaring energy prices are the most direct channel through which the world economy stands to be battered by the conflict. But rising prices for other commodities will also fuel inflation and could disrupt supply lines, Axios' Neil Irwin reports. Catch up fast: Brent crude oil surged to nearly $140-per-barrel after markets opened last night before easing off to near $123 as we hit send this morning. WTI, the U.S. benchmark, was trading near $120. Russian oil supplies have already been crimped, even as sanctions have avoided direct aim at the Kremlin-backed energy sector, due to "self-sanctioning" and Russian isolation from commercial transactions. Before the invasion, Russia exported around 5 million barrels per day of crude oil and condensates to world markets and additional volumes of petroleum products. Europe is the largest buyer. What we're watching: Fresh signs of U.S. and other nations' intentions. U.S. Secretary of State Antony Blinken said yesterday the U.S. is working with its European allies to look into the possibility of banning Russian oil imports. But what's next is anyone's guess. "With the surge in geopolitical tensions, uncertainty and anxiety, it would be quite difficult to accurately gauge the top of this rally," John Driscoll, founder of JTD Energy Services, tells Bloomberg. The intrigue: Axios' Hans Nichols reports President Biden's advisers are discussing a possible visit to Saudi Arabia this spring to help repair relations and convince the Kingdom to pump more oil. Saudi Arabia has significant spare production capacity, but OPEC+ has thus far been unwilling to deviate from modest monthly output increases.     A message from Global X ETFs Ready to invest in the green economy?     Supportive government policies and private sector innovation are helping renewables become more affordable, paving the way for wider adoption. The Global X Renewable Energy Producers ETF (RNRG) invests in companies involved in wind, solar, biofuels and more – all in a single trade. Explore RNRG.     4. Gasoline smashes through the $4 barrier Data: U.S. Energy Information Administration/AAA; Chart: Will Chase/Axios The average regular U.S. gasoline price climbed to $4.07-per-gallon Monday, per AAA. That's a roughly 45-cent increase over the last week alone, it reports.     5. The cold truth about electric cars in winter Data: Recurrent; Chart: Baidi Wang/Axios More Americans are opting to purchase an electric vehicle, but some EV owners are surprised to find out how much their car's driving range is compromised by winter weather, Axios' Joann Muller and Margaret Harding McGill report. Why it matters: Getting over the hurdles of buying an EV — the higher sticker price, knowing where to charge it or the fear of getting stranded — is hard enough. If your car doesn't live up to the promised range, it could undermine confidence in EVs and even deter potential buyers. Zoom in: Most EVs experience some loss of driving range in cold weather. In Norway — where half of all new cars are plug-ins — tests show that EVs lose about 20%, according to the Norwegian Automobile Federation. AAA found the loss in driving range could be as high as 41% with the heater on full blast. But some EVs do better than others in the cold, as the chart above shows. Read the whole story.     A message from Global X ETFs Ready to invest in the green economy?     Supportive government policies and private sector innovation are helping renewables become more affordable, paving the way for wider adoption. The Global X Renewable Energy Producers ETF (RNRG) invests in companies involved in wind, solar, biofuels and more – all in a single trade. Explore RNRG.   Like this email style and format? It's called Smart Brevity®. Over 200 orgs use it — in a tool called Axios HQ — to drive productivity with clearer workplace communications.   Axios thanks our partners for supporting our newsletters. If you're interested in advertising, learn more here. 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