Energy Week

U.S. Refineries Eye Week of Strong Gasoline Demand With Caution
https://financialpost.com/pmn/business-pmn/u-s-refineries-eye-week-of-strong-gasoline-demand-with-caution
- summer is in full swing and so is gasoline demand
- Was July 4 the height of gasoline demand? Is is downhill from here? Or will we see another surge when people go back to work/office in September?

https://twitter.com/GasBuddyGuy/status/1414286726281969671?s=20

Biden's quest for cheap gasoline tests his climate goals
https://www.eenews.net/stories/1063736567
- Did Biden really try to get OPEC+ to increase production?
- Is Biden really concerned about higher gasoline prices right now?

Higher Inflation Is Here to Stay for Years, Economists Forecast
https://www.wsj.com/articles/higher-inflation-is-here-to-stay-for-years-economists-forecast-11626008400
- 3.9% inflation in May excluding energy and food. 3.9% including food and energy.
- But energy impacts everything over the line
- Fed still thinks inflation is transitory due to bottlenecks and hiring difficulties.
- But lots of industries are having issues that aren’t related to Covid

OPEC+ yet to make progress in resolving impasse, sources say
https://financialpost.com/pmn/business-pmn/opec-yet-to-make-progress-in-resolving-impasse-sources-say
- Will OPEC get its act together?

Analysis: Big Oil keeps brakes on spending even with crude rally windfall
https://www.reuters.com/business/energy/big-oil-keeps-brakes-spending-even-with-crude-rally-windfall-2021-07-12/

BP Report Tries To Explain What Really Happened to Energy Markets in 2020
https://jpt.spe.org/bp-report-tries-to-explain-what-really-happened-to-energy-markets-in-2020
- China to the rescue when it comes to natural gas demand in 2020
- Will natural gas prices decline or increase as we get into winter?

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More from Ryan:
https://twitter.com/ryanraysr
https://shor.by/insidethewarroom

Connect with Ellen:

https://twitter.com/EnergzdEconomy

Paul Hickin with S&P Global Platts @GramscianPaul

Undersea gas pipeline rupture causes fire in Gulf of Mexico
https://apnews.com/article/mexico-fires-business-e6e053384af21242722f2f3fc1acb27d
- PEMEX fault, not “capitalism”
- Mexico actually the first country to nationalize its subsoil resources
- PEMEX doesn’t maintain infrastructure well and chronically underfunded

Explosion rocks Caspian Sea near Azerbaijan gas field
https://www.theguardian.com/world/2021/jul/05/explosion-rocks-caspian-sea-near-azerbaijan-gas-field

Saudi oil minister highlights need to extend Opec+ deal
https://www.argusmedia.com/en/news/2231047-saudi-oil-minister-highlights-need-to-extend-opec-deal

Saudi Arabia pushes back on UAE opposition to OPEC+ deal
https://www.reuters.com/business/energy/saudi-energy-minister-pushes-back-uae-request-over-baseline-oil-output-says-2021-07-04/

- Iraq committed to OPEC+ deal, doesn’t want a price war
- Favors extended

Paul Hickin with S&P Global Platts @GramscianPaul
- OPEC and OPEC+ — different situation from Saudi/Russia spat last year
- When UAE first raised baseline issue, prices were only in $40 range. Different scenario now
- UAE made more sacrifices than other members
- UAE looking to go up to 5 mbpd by 2030
- Is it realistic to change the baselines? Would be hard is only some baselines change.
- Prices have surged a bit - perhaps likelihood of no new deal? Or an OPEC fudge?

- China’s oil storage: little bit of a black box
- Has gone from 50 days cover in imports 5 years ago to 100 days of imports. Puts China on par with IEA countries, which have to cover 90 days
- Shows how important China views oil, still.
- 2 million bpd in refining/petrochemical capacity to come online
- If China wants to play a role as a swing consumer, it could do this using its oil stocks.
- China buys when crude is cheap, less keen when crude is higher, but still buy a lot because of domestic demand. Oil security means won’t draw down too far into reserves.

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Upbeat US shale sector still not primed for growth
https://www.argusmedia.com/en/news/2228807-upbeat-us-shale-sector-still-not-primed-for-growth
- lack of new capital for oil and gas investments could hamstring production in coming years.
- 1/400 investors seems willing to provide funding

Ahead of talks, OPEC forecasts point to oil supply deficit in August
https://www.reuters.com/world/middle-east/ahead-talks-opec-forecasts-point-oil-supply-deficit-august-2021-06-28/
- Is there REALLY an oil supply deficit? How much is in storage?
- OPEC will have returned 5.8 million bpd to the market of the 9.7 million bpd they took off last year.

Saudi Aramco bets on blue hydrogen exports ramping up from 2030
https://www.arabianbusiness.com/energy/465332-saudi-aramco-bets-on-blue-hydrogen-exports-ramping-up-from-2030
- $1 billion just to capture the carbon for every million tons of blue ammonia produced

Trump’s Thwarted Oil Buy Would’ve Given Biden $6 Billion Bonanza
https://www.bloomberg.com/news/articles/2021-06-25/trump-s-thwarted-oil-buy-would-ve-given-biden-6-billion-bonanza

Supreme Court rules in favor of refiners on exemptions from renewable fuel obligations
https://www.ogj.com/general-interest/government/article/14205845/supreme-court-rules-in-favor-of-refiners-on-exemptions-from-renewable-fuel-obligations

Biden's ticking climate clock
https://www.axios.com/biden-climate-change-ticking-clock-4ea5d1c4-aa85-402b-ba9f-2ada754af43d.html

The Dark Side of Solar Power
https://hbr.org/2021/06/the-dark-side-of-solar-power

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Column - Global passenger aviation’s uneven recovery from the pandemic: Kemp
www.reuters.com/article/us-global-aviation-kemp-column/column-global-passenger-aviations-uneven-recovery-from-the-pandemic-kemp-idUKKCN2DX1M1
- domestic travel in the US is up - TSA screened 2.1 million travelers on Sunday
- business travel people will put up with the restrictions and possibly getting stuck. Leisure won't pick up until the covid protocols go away

Climate Policies Could Hand Power and Profits Back to OPEC
https://foreignpolicy.com/2021/06/16/climate-goals-opec-oil-prices-energy-crisis-shortages-fossil-fuels/#
- NOCs are in position to make a lot of money as oil prices trend higher and western companies divest from fossil fuels
- balance of power is shifting towards Saudi Arabia, Russia, UAE, etc.
- Are shale producers de facto cahooting with OPEC by not producing more
- will investors continue to keep out of oil companies as oil prices get higher?

Why oil prices may shoot at least 15% higher: Goldman Sachs
https://finance.yahoo.com/news/why-oil-prices-may-shoot-at-least-15-higher-goldman-sachs-130028408.html

The Natural-Gas Glut Has Evaporated, Driving Prices Higher
https://www.wsj.com/articles/the-natural-gas-glut-has-evaporated-driving-prices-higher-11624134728
- Less drilling, drought meaning the demand for natural gas is up and the supply isn't keeping up

Dr. Dean Foreman - API Monthly Statistical Report
- The economy is coming back! The data show. Demand in April and May is within a hair of where it was in 2019, the highest demand in 11 years.
- $20 trillion of economic stimulus is doing something, perhaps, in a broad sense. Causing price inflation and showing up in petroleum demand
- Urban commuting picking up
- Trend that contrast is when we look at capex, investment and drilling activity
- NEVER been lower, even during Great Financial crisis in 2008.
- Many companies say they are "people limited" have to find employees.
- Is it just a US issue?
- MENA region is also not showing growth. Sovereign level too.
- Record demand recovery and also need to replace natural decline in oil wells. Record low
- Policy really matters - in Colorado new setback rules have pushed drilling to the edges of the basin. This is why breakeven price has risen there.
- Bakken basin shift isn't related to regulatory activity
- Private companies vs. public companies drilling: less questioning for private companies so they can ramp up faster. Public companies more capital discipline.
- Will US drilling be as nimble as they have been?
- Drilling activity isn't keeping up with EIA model for US drilling. They expect over 1 million bpd more from US and it doesn't look like that's happening.
- Brent/WTI price differential is less than $1 per barrel. Tells us that there's a pull for US crude as opposed to Brent and that is pushing the price differential down.
- Consumers aren't planning for continued rise in prices. Federal leasing moratorium, tax proposals, state regulations are factoring into price expectations in futures markets and that factors into our prices today.
- we know that people are driving less and flying less, but shift towards freight shipping is picking up the slack in oil consumption
- naphtha and other products are WAY up. enduring need for medical plastics and packaging to support online retailing.
- Instead of 13 million bpd of production in 2019, US is only around 11 million bpd and the difference is coming from imports.
- Even though we have very high oil exports in May, we're still importing more oil.
- We need more investment and policies that enable that. We are seeing the result of less investment in oil and gas resources right now.

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ExxonMobil might change its tune on regulatory matters

WTI Oil Hits $70 for First Time Since 2018 as Market Tightens
https://financialpost.com/pmn/business-pmn/wti-oil-hits-70-for-first-time-since-2018-as-market-tightens
- China importing less oil now. 11.34 mbpd in May 2020, 9.86 mbpd in May 2021
- OPEC deciding not to increase production more than planned
- Anticipated Iranian oil didn’t come back on the market
- Demand rising, especially in US

Options Traders Bet on Return of $100 Oil
https://www.wsj.com/articles/options-traders-bet-on-return-of-100-oil-11623061227
- Goldman Sachs still says $80 by Q3

U.S. conservatives stake claim to climate activism with Miami rally
https://www.reuters.com/world/us/us-conservatives-stake-claim-climate-activism-with-miami-rally-2021-06-05/
- what actually IS conservative policy on climate?
- carbon tax is supported by old time Republicans but not by Liberals anymore

Square will invest $5 million to build solar-powered bitcoin mining facility
https://www.theverge.com/2021/6/5/22520436/square-invest-5-million-solar-powered-bitcoin-mining-facility-blockstream-cryptocurrency
- El Salvador will accept bitcoin as legal tender.
- New Cold War of bitcoin: economies that accept bitcoin and make it totally legal vs. economies that make bitcoin illegal or very difficult to use bitcoin. Bitcoin-bloc and the anti-bitcoin-bloc. Developing nations might be interesting.

ANALYSIS: Asia hopes it can revive love affair with Iranian crude sooner than later
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/060421-analysis-asia-hopes-it-can-revive-love-affair-with-iranian-crude-soon-than-later

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COVID 19 IMPACT ON EUROPEAN AVIATION
https://www.eurocontrol.int/sites/default/files/2021-05/covid19-eurocontrol-comprehensive-air-traffic-assessment-20052021.pdf
- travel within Europe is down 57% — because of lockdowns as opposed to fear?
- intra-Europe flow as increased 16% over 2 weeks but intra-Europe flight are still down 63% compared to 2019.

Are Vaccinated Americans Powering the Economy? Not Yet, Data Show
https://www.wsj.com/articles/are-vaccinated-americans-powering-the-economy-not-yet-data-show-11621848600
- The vaccine isn’t getting rid of fear and fear needs to be overcome before the economy can recover.

Oil to stay below $70/bbl if Iran sanctions lifted -Indian refiner HPCL
https://www.reuters.com/article/us-india-iran-hpcl-idUSKCN2D217A
- controlling the narrative about Iranian oil is a part of the deal. India wants sub-$70/oil and Iranian oil badly.

Goldman sees oil hitting $80/bbl despite likely return of Iran supply
https://uk.investing.com/news/commodities-news/goldman-sees-oil-hitting-80bbl-despite-likely-return-of-iran-supply-2380027
- Goldman is clinging to its $80/barrel call at all cost
- Say that even if there’s robust Iranian exports, there will still be $80/barrel by Q4.

Lack of truck drivers could lead to fuel shortage this summer
https://abcnews.go.com/US/lack-truck-drivers-lead-fuel-shortage-summer/story?id=77374905
- between 20-25% of tank trucks in the fleet are parked. That is a lot of trucks that aren’t in use.
- Saying the drivers are retired or moved to other industries.

China's construction boom is sending CO2 emissions through the roof
https://www.cnn.com/2021/05/21/economy/china-co2-emissions-construction-intl-hnk/index.html
- China’s plan is to build its way out of pandemic economic issues is also pushing its carbon emissions to record highs.
- 9 % higher than their emissions in 2019
- 60% of the uptick in coal usage came from power structure
- 70% of the growth in emissions in Q1 came from increased coal use

China’s Latest Crackdown on Bitcoin, Other Cryptocurrencies Shakes Market
https://www.wsj.com/articles/chinas-latest-crackdown-on-bitcoin-other-cryptocurrencies-shakes-market-11621853002
- is cryptomining draining the power grid?
- or is China trying to push people into its “official” cryptocurrency?

Listen to pipelines and cyber security here:
https://soundcloud.com/user-609485369/energy-security-cubed-the-colonial-pipeline-and-cyber-energy-security

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Check out Ellen’s new column:
Green Energy Solutions Start at Factory Gates
https://www.bloomberg.com/opinion/articles/2021-05-17/green-energy-factories-can-solve-emissions-by-generating-own-power

Blackouts Threaten Entire U.S. West This Summer as Heat Awaits
https://finance.yahoo.com/news/u-west-facing-white-knuckle-111527363.html
- the issue is that coal and gas powered plants are closing and not being replaced, not the rapidly changing climate. Demand is outpacing supply and wildfires make it even more difficult.
- Sweden also had less spare capacity because they are closing nuclear plants. Curbing electricity exports.

Solar panels are key to Biden's energy plan. But the global supply chain may rely on forced labor from China
https://www.cnn.com/2021/05/14/energy/china-solar-panels-uyghur-forced-labor-dst-intl-hnk/index.html
- Report “In Broad Daylight: Uyghur Forced Labor and Global Solar Supply Chains
- components for solar energy “may be created with dirty coal and forced labor”

APIEnergy Monthly Statistical Report
- demand is almost back but not nearly
- 19.6 million bpd for April, up 2.5% from March
- crude oil production: wavered between 10.5 million bpd and 11 million bpd despite structural downturn in drilling.
- despite high prices, drilling is historically long
- ramifications for EIA’s outlook. This week’s EIA weekly petroleum status report has 1 million bpd downgrade in natural gas liquids. But this data has been there since February and they are just beginning to reflect on it. More supply pressures in the data than has been shown. Retroactive changes.
- If the expectation is for record oil demand growth for next 2 years, EIA expects US to supply 30% of the supply to meet that. But drilling activity isn’t picking up right now to match that.
- US economic growth plus lack of oil production growth means we are a net importer.
- Refinery throughput was 15.5 mbpd in April, increase of 6.6% from March. Inventories in good shape going into Colonial Pipeline issue last week. But its not back from where it was. EIA data showed 2.5 million bpd drop in exports before Colonial Pipeline. Refiners are gearing up but we have to watch May carefully to see where we are heading for the summer.
- Jet fuel: jet fuel delivery is up 7.7% from March, but 31.2% below April 2019. We are adding a lot of domestic flights back, but not so many international flights.
- Can the sudden pick up in jet fuel demand be met by supply chain?

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Colonial Pipeline
- if things get fixed by Tuesday shouldn’t have problems.
- If it goes on longer could really see problems
- some reports that Motiva shut crude oil units due to this, but could be it was duet o a power outage

US passes emergency waiver over fuel pipeline cyber-attack
https://www.bbc.com/news/business-57050690

U.S. Pipeline Shutdown Exposes Cyber Threat to Energy Sector
https://www.wsj.com/articles/u-s-pipeline-shutdown-exposes-cyber-threat-to-energy-sector-11620574464

Hacked Pipeline May Stay Shut for Days, Raising Concerns About Fuel Supply
https://www.nytimes.com/2021/05/09/business/energy-environment/colonial-pipeline-shutdown-gasoline.html

Mideast Gulf gasoline coursing to the US Atlantic coast
https://www.argusmedia.com/en/news/2213440-mideast-gulf-gasoline-coursing-to-the-us-atlantic-coast?

China’s greenhouse gas emissions exceed those of U.S. and developed countries combined, report says
https://www.cnbc.com/2021/05/06/chinas-greenhouse-gas-emissions-exceed-us-developed-world-report.html
- China is now responsible for more than 27% of global emissions
- US responsible for 11%
- India responsible for 6.6%
- EU responsible for 6.4%
Everyone else is responsible for at least half of the emissions.

Biden's Paris Agreement commitment will be tough on Americans — and ineffective
https://thehill.com/opinion/energy-environment/551809-bidens-paris-agreement-commitment-will-be-tough-on-americans-and?rl=1

OPEC+ crude oil production rises in April, on surges from Iran,Russia: Platts survey
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/051021-opec-crude-oil-production-rises-in-april-on-surges-from-iran-russia-platts-survey
- OPEC is 111% compliant but Iran’s oil production is up to 2.43 million bpd

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Eliminating natural gas in housing could cost $5.9B
https://www.sfexaminer.com/news/eliminating-natural-gas-in-housing-could-cost-5-9b/

Wyoming backs coal with $1.2M threat to sue other states
https://columbiabasinherald.com/news/2021/may/03/wyoming-backs-coal-with-12m-threat-to-sue-2/

- San Francisco gets 60% of its electricity from the Hetch Hetchy dam
- Even switching away from natural gas won’t eliminate enough emissions to actually make a difference.

Surging oil profits could actually be good for the clean energy race
https://qz.com/2003903/what-oil-companies-first-quarter-earnings-mean-for-clean-energy/
- BP tried to paint its Q1 earnings as a good showing by its green portfolio but really it was due to higher price of oil and also the oil and gas trading unit.

Oil rises to $67 as demand hopes counter India concern
https://www.reuters.com/world/middle-east/oil-climbs-demand-optimism-overshadows-india-worries-2021-05-03/
- Oil should be higher except India?
- We don’t really know what the situation in India is when it comes to oil demand — mobility data can be flawed.

Indian oil imports: Saudi claws back No.2 supplier status from U.S.
https://www.reuters.com/article/india-oil-imports/table-indian-oil-imports-saudi-claws-back-no-2-supplier-status-from-u-s-idUSL4N2MM2YF

U.S. Denies Any Deal With Iran to Ease Sanctions, Swap Prisoners
https://finance.yahoo.com/news/u-denies-deal-iran-talks-143713721.html#click=https://t.co/6aQ32QDpMe
- Is there anything new in this deal?
- Do we inflate Iran’s place in the world? Goes back to GWB? Goes back even further.

United Arab Emirates investment fund to acquire Israeli deep gas project as ties between the two countries strengthen
https://ihsmarkit.com/research-analysis/uae-investment-fund-to-acquire-israeli-deep-gas.html
- The more more cross-boarder investment that happens the less conflict there is
- First step, will see more energy collaboration between the two

View: Sorry, Aramco. Reliance just isn’t that into you
https://economictimes.indiatimes.com/industry/energy/oil-gas/view-sorry-aramco-reliance-just-isnt-that-into-you/articleshow/82307790.cms

Exxon, Chevron Put Permian in Cruise Control
https://www.energyintel.com/pages/eig_article.aspx?DocID=1104817
- Both Exxon and Chevron have plans to increase investment in the Permian and increase production by 2025.

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Oil demand to buckle in India as COVID-19 surge wreaks havoc
https://financialpost.com/news/oil-demand-to-buckle-in-india-as-covid-19-surge-wreaks-havoc

Crude runs, oil demand feel pain as India's COVID-19 crisis hits like never before
https://www.spglobal.com/platts/en/market-insights/latest-news/oil/042621-crude-runs-oil-demand-feel-pain-as-indias-covid-19-crisis-hits-like-never-before

- Is Covid in India going to destroy oil demand?
- India consumes 4 million bpd
- Percapita oil use isn’t that much
- Run cuts might not be substantial because India can sell unused products to others in the region
- How will this impact OPEC+ later this week?

Newsom, State Attorney General among those challenging sale of oil and gas leases in Kern
https://bakersfieldnow.com/news/local/newsom-state-attorney-general-among-those-protesting-sale-of-oil-and-gas-leases-in-kern
- will this go through if Newsom is renewed

Prof. James Coleman
- fossil fuel subsidies mean different things to different people
- IMF study used in many news reports that give a value on how much oil companies should be taxed on carbon
- How much income in theory does the company have and how much should they pay based on corporate income tax rate? Are we letting them take deductions on this?
- How are they taxed compared to other industries?
- If goal of tax system is to be neutral, does it meet that neutrality standard?
- It is pretty neutral - there are some incentives but not larger than any other industry. But are they taxed at their full income level?
- President Biden says he wants agencies to “get rid of fossil fuel subsidies” (whatever that means)
- Federal agencies do things that impact profitability of oil companies, but don’t do the taxes. Real issue is Congress. Have tried to change it over past 70 years and have been changes to make it less favorable to fossil fuel companies.
- What is meant by oil and gas companies?
- There is a lot that could impact this on the margins —
- Severance taxes could be reduced. They have been reduced before on shale wells and that amounts to a subsidy. A severance tax goes over all other taxes. Wind and solar don’t have a severance tax, for example. Similar to royalties. Biden admin can have a lot of influence on how royalties are calculated on Federal Land. When come out of “leasing pause” they may have new policies. On older leases they can change how the royalty is calculated based on interpretations, etc.
- US royalty system is VERY antiquated. Leaves a lot of corners where its not very rational.
- Individual landowners have much more sophisticated process for extracting revenue from oil and gas companies than the federal government does.
- Hard to believe that Fed gov will get more money without a complete overall. But if the goal is to end fossil fuel production then just slap more severance taxes on it.
- For upstream oil and gas, they get to deduct intangible costs of building wells sooner. But there are so many tax incentives allowing companies to deduct expenditures sooner that this special provision for oil and gas isn’t really all that necessary. Reason for it was that when you used to drill a well you didn’t know if it would produce enough to cover costs. But now with technology we have a much better idea of whether it will produce.
- Is there any tax benefit to not completing a well (DUC)? As soon as get income, have to pay tax, but want income. Going to get the deduction when you have the income. No reason to worry about deductions if not paying tax. But if you want to carry forward deduction from an investment. Have to choose whether will capitalize expense or not, but must do it by end of year.
- Congress is constantly playing with these.
- You are allowed to deduct a percentage of your income because oil from well has been sold and its not longer there. But those are very limited fo big oil companies. Most of the provisions just benefit small companies and independent producers. Depletion deduction percentage has gone down from 27% to 15% recently. But very hard to get rid of depletion percentage overall because it applies to all manufacturers.
Follow him @EnergyLawProf on twitter and Clubhouse

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