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OPEC’S ‘MASTERSTROKE’: The oil market is up today and showed immediate signs of stability after OPEC+ elected to move forward with its planned production boost yesterday.
Going into the meeting yesterday, the market was showing significant volatility, with crude under $70 per barrel as traders weighed the worries about the omicron variant’s potential effect on demand with the possibility that OPEC+ would cut production in response.
It was the cartel’s decision to keep open the door to pausing the production plan, depending on the virus variant’s effects, that maintained stability in the market and resulted in prices going up yesterday, Claudio Galimberti, vice president of analysis at Rystad Energy, told Jeremy.
“OPEC has been extraordinarily successful in the past 18 months in rebalancing the market in the wake of the pandemic, and the decision... was a masterstroke,” Galimberti said. "Despite announcing that they will increase production ... the market went up.”
Considering the prospects of additional supply on the market in conjunction with the possibility of a drop in demand due to the omicron variant, moving forward with the 400,000 per-barrel boost for January would have been expected to have the opposite effect, Galimberti said, adding that OPEC+ craftily accounted for that.
“Nobody expected OPEC not to complete the meeting. Had they said, ‘We are continuing with the production increase and the next time we meet we’ll make a decision in January,’ that would have been completely closing the option,” Galimberti said, adding that it would have sent crude prices downward. “They kept the option open.”
Biden at the mercy of OPEC: It’s been quite a ride for the Biden administration, which is eager to staunch the political bleeding over high gas prices but is at the mercy of OPEC+ in the current environment.
Crude prices are down from their October peak at around $85, and although Brent crude hovered near $80 last week, it slid dramatically last Friday in response to news about the omicron variant.
Notably, the market budged little last week with President Joe Biden’s announcement on opening the U.S. oil stockpile to try bringing down gasoline prices — in fact, crude prices rose on the day of the announcement — and analysts suggested the market had already priced in the potential for new stockpiled oil after weeks of chatter.
A sign of how eager the administration is for gas price pressures to abate: The Democratic Congressional Campaign Committee put out a chart crediting Biden for a less-than-two-cent drop in gasoline prices over the last week. The chart drew criticism online and showed a certain eagerness that the party is anxious to insulate itself against political fallout from high prices.
Gas prices have fallen about three cents from the November high, but still are up about a dollar since Biden took office.
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REPUBLICANS LEADERS THREATEN BOYCOTT: A group of Republican elected officials overseeing 15 states’ financial assets has threatened to curtail business with banks that have policies against financing coal, oil, and natural gas operations.
Sixteen state treasurers, auditors, and comptrollers, led by Treasurer Riley Moore of fossil fuel-producing West Virginia, wrote a general letter to the banking industry last week saying they would take steps “to select financial institutions that support a free market” for their collective $600 billion in assets.
“Any financial institution that has adopted policies aimed at diminishing a large portion of our states’ revenue has a major conflict of interest against holding, maintaining, or managing those funds,” the officials wrote.
SHELL PULLS OUT OF OFFSHORE OIL PROJECT: Shell withdrew its involvement from an oil project in the North Sea amid criticism from environmentalists and Scottish leaders.
A company spokesperson emphasized Shell’s view that investment in oil and gas production “remains critical” for the U.K. but that the project wasn’t financially viable.
“The economic case for investment in this project is not strong enough at this time, as well as having the potential for delays,” the spokesperson said.
The Cambo oil field is about 75 miles to the west of Shetland.
REPORT: PERMIAN SAW 135% PRODUCTION BOOST OVER FIVE YEARS: U.S. oil production in the Permian Basin grew 135% between 2015 and 2020 after Congress repealed the crude export ban, per a new joint report put out by Oil Change International, Earthworks, and the Center for International Environmental Law.
The boost in production was concurrent with a 600% increase in crude exports over the same period, according to the report.
The analysis comes alongside the Democrats’ efforts to crack down on the fossil fuel industry by limiting production and new infrastructure builds in pursuit of the Biden administration’s climate goals, and it could add fuel to requests by multiple Democratic lawmakers that Biden reimpose an export ban amid high gasoline and natural gas prices.
NIMBYISM UPDATE — MAINE HYDROPOWER PROJECT’S FATE UP TO COURT: Whether New England will be able to move forward and add 1,200 megawatts of Canadian hydropower to its electricity grid is now in the hands of a Maine court after voters passed a referendum last month to prohibit transmission line projects like the New England Clean Energy Connect through the state’s Upper Kennebec Region, as Jeremy writes for our latest magazine.
Project developers filed suit last month against state agencies and the legislature, asking the court to block enforcement of the referendum. The suit is a microcosm of “NIMBYism” (NIMBY standing for “not in my backyard”) as local objections to the land-use changes and environmental effects, such as deforestation, in support of alternative energy projects clash with state and national goals to reduce fossil fuel use.
CEI WARNS AGAINST CARBON TAX: The libertarian Competitive Enterprise Institute’s Marlo Lewis is out with a new paper making the case against a carbon tax, geared particularly at dissuading conservatives from embracing the policy.
“Carbon taxes would inflict substantial losses on household income, job creation, and GDP; and studies show even the most aggressive carbon tax would have negligible effect on the climate, meaning the costs would far exceed the benefits,” Lewis said of the paper. “Supporting such a policy would have obvious and disastrous political consequences for conservatives, especially.”
Republican support for a carbon tax is still thin. One of the carbon taxes examined in the CEI study is the MARKET CHOICE Act, co-written by Rep. Brian Fitzpatrick, a Pennsylvania Republican. Notably, Sen. Mitt Romney of Utah has also expressed interest in a carbon tax. Otherwise, though, it is mostly outside GOP groups pushing for carbon pricing.
GIANT GREEN HYDROGEN PROJECT PLANNED FOR IBERIAN PENINSULA: Swedish H2 Green Steel and Iberdrola, a renewable energy company headquartered in Spain, announced Thursday a $2.6 billion plan to build 1GW plant to produce hydrogen somewhere in the Iberian Peninsula. The new plant will produce and feed green hydrogen — that is, hydrogen generated using renewable energy — to a 2 million-ton direct reduction tower, enabling “Green Steel” production with a reduction of CO2 emissions by 95%, according to H2 Green Steel.
Bloomberg Europe’s carbon price has almost tripled in 2021
New York Times Meet an ecologist who works for God (and against lawns)
TUESDAY | DEC. 7
10:30 a.m. Rayburn 2123 The House Energy and Commerce Committee will hold a hearing on entitled “Securing our Energy Infrastructure: Legislation to Enhance Pipeline Reliability.”