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LATEST ON AN EXPORT BAN: A petroleum export ban is apparently back on the “table” of options the Biden administration is entertaining to reduce fuel prices after the Secretary Jennifer Granholm affirmatively took it off said table late last year.
Granholm declined yesterday to say the administration opposes an export ban ahead of her meeting today with oil executives, which will focus on finding solutions to energy prices and the dearth of refining capacity.
Granholm said she doesn’t think “anyone is taking anything off the table” but left it an open question as to whether President Joe Biden supports it.
“He’s not proposing that at this moment,” she said from the White House podium. “But he’s not willing to take tools off the table.”
War changes things: Congressional Democrats asked for an oil products export ban last year, when gasoline was closer to $3.5 per gallon. They were rebuffed.
Granholm told the National Petroleum Council in December that the White House heard industry players “loud and clear” and that it wasn’t considering reinstating the ban, which was lifted in 2015 and released a flood of exports. She also urged producers to “get your rig count up.”
Circumstances have changed considerably since Granholm offered the industry that quid pro quo.
Rigs counts are up, but so are gas prices, and the rate of increase in oil production hasn’t pleased the administration (although Biden is proud that production just reached 12 million barrels per day).
Exports volumes are also up and rose from 3.1 million barrels of crude oil per day in November to 3.3 million bpd in March, according to the Energy Information Administration. The US also exports large quantities of gasoline and diesel fuel.
The case for: Democratic lawmakers who asked the administration to consider an export ban last year, argued that shipping crude, refined products, and natural gas overseas makes those products more scarce and hurts US consumers, while enriching energy companies.
Jim Walshthe policy director for Food & Water Watch, said the administration should take a hard line against oil and gas companies for the billions of dollars they are making and prevent them from sending energy to more lucrative markets while Americans pay high prices.
“Their profit margins are through the roof because of exports and this is something that has been going on, a plan that’s been in the works, for decades,” he told Jeremy.
The administration’s support for more oil production and liquefied natural gas exports reflect a “cozying up” to the industry rather than a sustained rebuke, Walsh said.
“In rhetoric, we’ve seen the administration slamming the oil and gas companies, but in practice, we’ve seen them doing very little to actually rein in the runaway profits of oil and gas companies,” he said.
The case against: Granholm acknowledged yesterday “there may be consequences that have to be considered on doing something like [an export ban]that would have adverse impacts on everyday citizens.”
The industry certainly thinks so, having argued exports help prop up the global commodities markets and help allies displace Russian energy sources.
Raoul LeBlancthe vice president for energy at S&P Global Commodity Insights, made note of the disruptions to global supply chains which COVID-19 wrought and said disrupting energy supply chains with an export ban would make things even tighter.
“It’s a bit of a simplistic solution… in a market which has developed a very efficient and sophisticated way of moving products around to people who need them,” LeBlanc said.
During the latest export ban campaign last year, then-acting administrator of the EIA, Stephen Nally, said an export ban would give domestic energy markets a surplus of energy, but he said prices internationally “would skyrocket [and] lower prices in the US would probably discourage more production.”
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INDUSTRY POINTS TO EUROPE IN STRESSING THE VALUE OF COAL: Coal interests see Europe’s crisis-driven reversion to coal as a “wakeup call” to the US, arguing that it should better value the fuel in order to avoid the high energy prices afflicting allies in the region.
“It’s certainly a message to the United States as well that we need to prioritize all of our domestic fuels, including coal, to get through this and to preserve national security,” Rich Nolanpresident and CEO of the National Mining Association, told Jeremy.
Overall market conditions do not favor coal over the long term, to say the least. Power generators have retired 48 gigawatts of coal-fired capacity over the last five years, and the Energy Information Administration estimated that coal retirements will make up 85% of capacity retirements this year.
Those retirements have been partially blamed for the shortage of reserve generating capacity among midwestern power generators, which put the region at a higher risk for blackouts this summer.
At the same time, coal-fired power as a share of generation rose last year to 23%. EIA primarily attributes this to higher natural gas prices — prices that have been significantly higher this year than last, making conditions even more favorable to coal for now.
US coal to Europe: Europe’s embargo on Russia coal, scheduled to be fully effective in August, is sending it looking for alternative sources, and US exports have increased.
Germany, Italy, and the Netherlands saw some of the largest year-over-year increases in US coal imports. More than half of the US thermal coal sent to Europe in April was bound for the Netherlands and Germany, according to data collected by Argus.
A look at prices: Spot prices for thermal coal have ballooned over the last eight months. Central Appalachia coal was worth $71.05 per short ton during the week ending Sep. 17. It’s now at $138.80.
Illinois Basin coal has more than tripled in value, going from $36.25 per short ton to $126.00.
US SALES OF LNG TO CHINA DOWN 95%: Chinese imports of US LNG dwindled by 95% this spring versus last spring, the Wall Street Journal reports.
Soaring demand from Europeans eager for alternatives to Russian gas drove up the price of imports from the US, leading China to cut back. At the same time, Chinese demand slowed. The end result was the near-complete evaporation of the US-China LNG trade, which had been a bright spot in the past few years of trade wars.
The result has been to draw Russia closer to China: US products have partly been replaced by Russian imports, which are up 50%.
“It’s clearly pushing Putin to reorient more toward the East,” Erica Downsa senior research scholar at Columbia University’s Center on Global Energy Policy, told the WSJ.
RELATED – GERMANY MOVES CLOSER TO GAS RATIONING: Germany has entered the second stage of its national gas emergency plan, the last before rationing kicks in, following Russia’s decision last week to throttle supply through the Nord Stream 1 pipeline.
“We are in a gas crisis,” economy minister Robert Habeck said, according to the Financial Times. “From now on, gas is a scarce commodity.”
Germany could be in trouble this winter. Its gas storage facilities are at 58% capacity, but Habeck said that current supplies are not enough to get them to 90% before the winter.
“If we don’t succeed in filling gas storage by the autumn, we’re going to quickly start experiencing gas shortages,” said Jörg Rothermelhead of energy at Germany’s Chemical Industry Association.
Germany is accusing Russia of using natural gas as a weapon. Russia maintains that the reduction in supply is due to maintenance problems at a pipeline compressor station.
Euroactiv Gas drilling projects resurrected around Europe
CNBC World’s largest hybrid ship set to ferry passengers between Britain and France
SUNDAY | JUNE 26
The three-day G7 Leaders’ Summit kicks off in Germany.