🛢️Crude diplomacy's limits

Plus: Manchin's pivot | Friday, June 03, 2022

Open in app View in browser   Presented By ExxonMobil   Axios Generate By Ben Geman and Andrew Freedman · Jun 03, 2022 🍺 It's here. Today's Smart Brevity count is 1,110 words, 4.5 minutes.  🚨 Tesla CEO Elon Musk said he's prepared to cut staff by about 10%, citing a "super bad feeling" about the economy, per an internal email seen by Reuters. 🎶 This month in 1988 the great Joan Armatrading released "The Shouting Stage," which provides today's intro tune...     1 big thing: The U.S.-Saudi thaw won't chill the crude market Illustration: Annelise Capossela/Axios   The White House had rather nice things to say about Saudi Arabia's role in the OPEC+ decision to unexpectedly speed oil output increases, but don't look for the new barrels to greatly cool off the market, Ben writes. Catch up fast: OPEC, Russia and allied yesterday producers agreed to boost production by roughly 650,000 barrels per day in July and August, rather than 432,000 envisioned in the ongoing restoration of pandemic-related output cuts. What's new: President Biden is slated to visit Saudi Arabia later in June, per multiple reports yesterday. Biden had once vowed to treat the kingdom as a "pariah" over human rights abuses and journalist Jamal Khashoggi's murder, but the NYT notes the trip comes as Biden is "seeking to lower gas prices at home and isolate Russia abroad." Why it matters: Russia's attack on Ukraine has sent oil prices to their highest levels since 2008 — and U.S. gasoline prices are at nominal record highs ahead of the midterm elections. A few takeaways... The market kind of shrugged. The OPEC+ move did not cause a steep price drop. "The oil market will still remain tight given the production boost is modest at best," Oanda analyst Edward Moya said in a note. Rapidan Energy Group, in a note, projects that prices will continue rising into the third quarter before high levels will force a slowdown in consumption growth that bring them back down. "[T]he additional OPEC volumes are unlikely to fully compensate for Russian export losses, or fix the products problem caused by crippling refinery shortages," RBC Capital Markets said in a note. It's not clear how many new barrels will truly arrive. "While every producer has the freedom to increase production, only a few have the ability," oil analyst Ellen Wald tells me. How quickly and by how much Saudi Arabia — OPEC's dominant producer — uses its spare capacity is a key focus. Diplomacy has consequences. Rapidan noted the OPEC+ move follows "relentless pressure from the Biden administration for three months" and represents a "complete about-face in Saudi oil policy." "[T]he deal represents the successful culmination of an intense, multi-month diplomatic effort that has seen a lot of air traffic between Washington and Riyadh by high level government officials," RBC said. But there are a lot of moving parts too. Wald said market forces fueled the decision. "Prices are very high and some producers have the ability to produce more and want to take advantage of the opportunity for greater revenue and potentially moving into new markets in Europe that were purchasing Russian oil," she said via email. What's next: Traders will watch the effect of Europe's phased-in ban on Russian crude and how much new production truly stems from the OPEC+ move.     Bonus: Gas marches toward $5 average Data: FactSet; Axios Visuals Wholesale prices for gasoline keep surging, meaning the angst Americans are feeling at the pump will last, Axios' Matt Phillips writes. Why it matters: Gasoline prices are key inflation indicators to the American public and a headwind on household budgets. Driving the news: Benchmark futures prices for gasoline hit a new high of $4.19 per gallon yesterday, as the Department of Energy reported that gasoline supplies last week hit their lowest level this year. The current nationwide retail average has risen to $4.76 per gallon, per AAA. Read more in Axios Markets.     2. 🏃🏽‍♀️Catch up fast on policy: EPA, Arctic, EU, New York 📝 EPA released draft rules that return more power to states to review — and block — energy and infrastructure projects under the Clean Water Act. Read more. 🛑 Three companies have canceled drilling leases in the Arctic National Wildlife Refuge, further curbing chances of development in the region where Biden administration officials oppose oil exploration, the Anchorage Daily News reports. 💶 "European Central Bank President Christine Lagarde said she's open to the idea of using the institution's lending facilities to encourage the transition to carbon neutrality." (Bloomberg) ☀️ New York State officials approved 22 solar and storage projects in what Gov. Kathy Hochul's office called the state's "largest land-based renewable energy procurement to date." Bloomberg has more.     A message from ExxonMobil Energy for today and solutions for tomorrow     At ExxonMobil, we're working to supply the energy the world needs while also developing lower-emission fuels. Innovations like renewable diesel made from plants could reduce emissions from trucks by about three million metric tons per year compared to conventional fuels.     3. Manchin pivots away from bipartisan talks Illustration: Rae Cook/Axios   Bipartisan Senate energy talks led by Sen. Joe Manchin (D-W.Va.) are essentially over, with Republican senators convinced that Manchin is close to a reconciliation deal with Majority Leader Chuck Schumer (D-N.Y.), Axios' Hans Nichols reports. Why it matters: The death of the bipartisan approach will allow Manchin and Schumer to focus on a potential deal that includes green energy tax credits and the tax increases to pay for them. But any deal will also need 49 other Senate Democrats, including the support of Sen. Kyrsten Sinema (D-Ariz.), who hasn't been directly involved in the Manchin and Schumer negotiations. Any Senate package will also need buy-in from House Speaker Nancy Pelosi and President Biden. What they are saying: "These talks had been a long shot to begin with," Sen. Kevin Cramer (R-N.D.) told Axios. "Manchin informed us in the last meeting that reconciliation is probably the route he's going down." Read the whole story.     4. Ford fills in more blanks on its EV plans Illustration: Sarah Grillo/Axios   Ford Motor Co. is offering new details about its electric vehicle production strategy, Ben writes. Driving the news: Ford yesterday announced $3.7 billion worth of investments across three states in both EV and gas-powered vehicle manufacturing. It included... $2 billion is for Michigan projects that include increased production of the new electric F-150 Lightning pickup. Another $1.5 billion is slated for Ohio to build an "all-new EV commercial vehicle" beginning in the middle of the decade. There's roughly $100 million to expand production in Missouri of the Transit commercial van, including the recently launched electric version. CNN has more.     5. Tropical storm warnings hoisted for Florida Map showing NWS predicted rainfall totals across Florida from likely Tropical Storm Alex. Image: Weatherbell.com   A tropical weather system forecast to become Tropical Storm Alex today is likely to bring flooding rainfall and strong winds to the Florida Keys and South Florida, including metro Miami, Fort Lauderdale and West Palm Beach, Andrew writes. What's happening: The storm is just the first in what is expected to be an unusually active Atlantic hurricane season, and comes just after the season's official start on June 1. Context: Due to climate change, tropical storms and hurricanes are producing heavier rains than just a few decades ago, thanks to warming sea and air temperatures. The air holds about 7% more water vapor for each 1°C increase in temperature. Threat level: The storm's rains will begin affecting the peninsula today, with the heaviest rains falling through Saturday. Some areas, including the Florida Keys and southern Florida, could see up to a foot of rain out of this storm, with rainfall rates of 2 to 3 inches per hour. This could cause "considerable flash and urban flooding," the Hurricane Center warns. The National Weather Service forecast office in Miami is warning of "major rainfall flooding [that] may prompt many evacuations and rescues."     A message from ExxonMobil We're working to ensure energy security and advance innovation     At ExxonMobil, we're working to produce the energy the world needs today, while developing new, engine-ready fuels for tomorrow. Solutions like renewable diesel, advanced biofuels, and eFuel made with captured CO2 could help reduce emissions by up to 85% compared to conventional fuels.   📬 Did a friend send you this newsletter? Welcome, please sign up. Thanks for reading and have a great weekend! 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. Sponsorship has no influence on editorial content. Axios, 3100 Clarendon B‌lvd, Suite 1300, Arlington VA 22201   You received this email because you signed up for newsletters from Axios. Change your preferences or unsubscribe here.   Was this email forwarded to you? Sign up now to get Axios in your inbox.   Follow Axios on social media: