🛢️Biden's Saudi strategy

Plus: Twitter and Tesla | Monday, July 11, 2022

Open in app View in browser     Axios Generate By Ben Geman and Andrew Freedman · Jul 11, 2022 🍩 Good morning! Ben here, steering things solo this week while Andrew's on a well-deserved break. 🙏 Editor Mickey Meece is making sure I don't crash the ship. Today's edition has a Smart Brevity count of 1,090 words, 4.5 minutes.  ⛽ Gasoline prices are dropping quickly, with AAA estimating the nationwide average at $4.68 per gallon today. 🎶 Happy birthday to songwriter Suzanne Vega, who has today's intro tune...     1 big thing: Biden's careful embrace of Saudi Arabia Illustration: Brendan Lynch/Axios   Oil's on the agenda when President Biden visits Saudi Arabia this week, but analysts don't expect major new supply announcements, Ben writes. Driving the news: Biden's Washington Post op-ed defends the trip despite Saudi human rights abuses and offers a wide-ranging rationale for the visit. The op-ed about the visit to the Middle East spends little time on oil but talks up the energy security benefits of a less dangerous region. "Its energy resources are vital for mitigating the impact on global supplies of Russia's war in Ukraine," Biden states. Why it matters: Biden's in a tricky spot. Average pump prices have fallen from highs above $5 per gallon, but remain a political problem for Democrats ahead of the midterms. The White House wants more barrels on the global market, and Saudi Arabia is among the only producers with spare capacity. The big picture: Biden says he's looking to "reorient" the relationship with the Saudis and credits them for restoring unity among Gulf Cooperation Council members. The country is now "working with my experts to help stabilize oil markets with other OPEC producers." But officials have downplayed the oil dimension and managed expectations, calling it one of many topics on the trip agenda. "Given the effects of Putin's war on Ukraine, we would certainly expect...to spend some time with the GCC and with the Saudis talking about energy security," a senior administration official tells Axios. Between the lines: "I think there is recognition on the U.S. side that the Saudis can help on the energy front, but a potential compromise has to address Saudi interests on energy as oil revenues are important to Vision 2030 plans," the Eurasia Group's Ayham Kamel said in an email exchange, name-checking the Saudi's economic diversification initiative. What they're saying: Analysts don't expect the trip to be about immediate output. Saudi Arabia "has to manage spare capacity carefully," Center for Strategic and International Studies analyst Ben Cahill tells me. "We might have some cautious statements about Saudi Arabia and the Gulf States looking to add more supply this fall if possible," he said via email. Rapidan Energy Group president Bob McNally said there already appears to be a mutual near-term understanding, citing the OPEC+ decision last month to speed its modest output increases. Looking ahead, "If the oil market tightens up later this year, especially as the EU embargo on Russia takes hold, the White House expects that Saudi Arabia and UAE would increase production further," he said via email.     2. 🏃🏽‍♀️Catch up fast on oil: Arctic and markets The Interior Department is keeping everyone guessing with its plans for ConocoPhillip's proposed Willow oil production project in Alaska's North Slope, Ben writes. Driving the news: The agency released a highly detailed environmental analysis of the project Friday but didn't tip its hand on how much development it may approve — if any at all. Why it matters: If approved, the project could produce, at its peak, over 180,000 barrels per day over its three-decade life, per Interior. Climate and conservation groups call Willow a test of the Biden administration's appetite to thwart fossil fuel development on federal lands. What they're saying: The project will "supply much needed energy for the United States, while serving as a strong example of environmentally and socially responsible development that offers extensive public benefits," ConocoPhillips said, via the Washington Post. But Kristen Miller of the Alaska Wilderness League said in a statement: "If approved the Willow project would be bigger than any other proposed oil and gas project on our nation's public lands, and it poses an unparalleled climate and biodiversity threat that puts President Biden's climate legacy at risk." 👀 Speaking of oil, traders will get fresh doses of potentially market-moving information this week. The International Energy Agency will release the latest version of its closely watched monthly oil market report Wednesday. And separate monthly reports from OPEC and the U.S. Energy Information Administration drop tomorrow.     3. What Elon Musk's Twitter saga means for Tesla Photo illustration: Sarah Grillo/Axios. Photo: Dimitrios Kambouris/Getty Images for The Met Museum/Vogue   Tesla is playing a cameo role in CEO Elon Musk's abandoned (he hopes) play to buy Twitter, but the electric automaker's arc in the story isn't fully written yet, Ben writes. Driving the news: Tesla's stock climbed after Musk said Friday he's trying to back out of the deal, which could signal that shareholders are relieved by the decision. But overall Tesla's shares have fallen by over 25% since began the takeover bid began in mid-April. Axios' Kia Kokalitcheva reports that while Tesla didn't escape the broader market pullback, some of the fall arguably stemmed from Musk's sale of $8.5 billion in Tesla shares to finance the deal and questions about his ability to focus on making cars. A protracted legal battle over the attempted breakup, however, could be another distraction. The intrigue: The takeover bid put a political spotlight on Musk, winning friends on the right by vowing less content moderation and pledging to reverse Donald Trump's Twitter ban. But Trump over the weekend called Musk "another b------t artist." Meanwhile, Musk's rightward drift in cultural politics has further alienated him from progressives even though he's a climate tech pioneer. What we don't know: Whether any of this will affect Tesla's sales at all. The controversy has certainly Been A Thing online. But who knows whether that bleeds into real life to influence buyers on the right or left.     A message from Chevron It's only human to help power a brighter future     At Chevron, we believe the future of transportation is lower carbon, and hydrogen fuel can help us get there. We're partnering with vehicle makers and commercial truck fleet operators to scale the hydrogen fuel industry, because we believe innovation can help power a brighter future.     4. The big natural gas divide Data: Rystad Energy; Chart: Jacque Schrag/Axios The natural gas market is not as global as you might expect, Axios' Kate Marino writes. The big picture: As of the end of last week, European prices were a staggering ninefold higher than U.S. costs. They started skyrocketing last year, on the heels of an unusually cold winter, and as Russia had already begun curtailing supply. Why it matters: There's a limit to how much U.S. production can help European allies wean themselves off Russian gas. But U.S. LNG shipments have been increasing, with more projects planned too — but they take a while. Read the whole story. 🚨Speaking of natural gas, Reuters reports: "The French government is preparing for a total cutoff of Russian gas supplies, which it sees as the most likely scenario in its forward planning, French Finance Minister Bruno Le Maire said on Sunday."     5. Quote of the day "If our society descends into very, very strong conflict and strife because there is no energy, we're certainly not going to make our [climate] goals." — European Commission executive VP Frans Timmermans, speaking to The Guardian (h/t Carbon Brief) Why it matters: EU officials are struggling to navigate the energy crisis spurred by Russia's invasion of Ukraine — which is leading some countries to prolong or boost reliance on coal — while maintaining climate goals.     A message from Chevron It's only human to help power a brighter future     At Chevron, we believe the future of transportation is lower carbon, and hydrogen fuel can help us get there. We're partnering with vehicle makers and commercial truck fleet operators to scale the hydrogen fuel industry, because we believe innovation can help power a brighter future.   📬 Did a friend send you this newsletter? Welcome, please sign up. Thanks for reading and we'll see you back here tomorrow! Why stop here? Let's go Pro. Join the thousands of professionals reading Axios Pro: Climate Deals to better understand the forces shaping their industry.   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, 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: