Energy, Politics & Money - 29 and 30 July 2022
Curated news from the ever evolving worlds of energy, geopolitics, and money just for you!
Welcome to the Energy, Politics & Money newsfeed of Friday 29 July 2022, with your daily dose of cutting-edge insight into everything of importance in the connected worlds of energy, geopolitics and the economy.
General Energy News
Oil has been relatively steady this week, as tight fundamentals and fears for a global recession balance each other out. Trading early Friday in Asia was another day characterized by this dynamic, Reuters reports. https://www.reuters.com/business/energy/oil-prices-rise-tight-supply-attention-turns-opec-meeting-2022-07-29/
A day after most of its European competitors, Italy’s ENI also reported record earnings of 3.8 billion euros, as well as a plan to use the additional cash for increased share buy-backs. https://www.reuters.com/business/energy/italys-eni-raises-share-buy-back-after-jump-q2-net-profit-2022-07-29/
CNBC meanwhile has an interesting overview of energy collaborations between Russia and China. https://www.cnbc.com/2022/07/27/map-of-power-of-siberia-gas-pipeline-that-china-russia-are-working-on.html
Energy Transition & Technology News
The reason for why we like Neste? It is because it is focused on producing bio-fuels and bio-plastics from waste. And, it has established a leading position in the waste supply chain. As an example, according to Hydrocarbon Processing, the company has agreed to acquire 100% of Walco Foods, an Irish trader of animal fats. https://www.hydrocarbonprocessing.com/news/2022/07/neste-to-acquire-walco-foods-to-strengthen-its-renewable-raw-material-sourcing
The Macro Environment (economics & geopolitics)
In yesterday’s commentary of the Fed rate hike, we highlighted the hope of Mohammed El Arian that the year-to-date rate increase of 225 base points would be sufficient to bring inflation down. Billionaire investor Bill Ackman said on Thursday that he disagrees. In his view, for inflation to come down to the level of 2%, the Fed must maintain “materially higher” interest rates for an extended period. https://www.reuters.com/markets/us/ackman-says-rates-should-be-materially-higher-kill-inflation-2022-07-29/ Let’s see which of these views the Fed will align with. The fact that the US economy is now officially in recession (technically ;-), after posting negative growth over two consecutive quarters might lead the Fed to conclude less rate-hiking is needed going forward. https://www.ft.com/content/8e4caa59-5799-430b-9896-e494369900dc,
Meanwhile, in Nikkei Asia, William Pesek argues that Fed chair Powell is assuming a position similar Arthur Burns’ in the 1970s, whose stance toward inflation as Fed Chair between 1970 and 1978 helped to foster the crisis that forced Fed chair Volcker to raise rates to 20%. Powell's current attempt to correct past mistakes, he says, puts Asia directly in harm's way. Aggressive Fed tightening cycles tends to hit this region's export-reliant economies the hardest, and he warns of a repeat of the 1997 Asian Tiger crisis which he notes was induced by Federal Reserve policy implemented in 1995. https://asia.nikkei.com/Opinion/Why-Jerome-Powell-is-about-to-wreck-Asia-s-year
The Electrification of Transport
Over at Energy Intel, the always insightful Sarah Miller looks at developments in the global EV market. Forecasts for electric vehicle (EV) sales keep ratcheting up, but they have never quite managed to catch up with super speed reality, she says. Factors that are being overlooked or underplayed by still-too-conservative forecasters include the financial and managerial pressures on automakers to move quickly off internal combustion engine (ICE) vehicles and into EVs. These companies’ fear that those who hesitate will be lost, strengthens with recession looming. Consumers are being similarly drawn to EVs and away from “old-fashioned” ICE cars. Make no mistake, is her warning. EVs are coming to get gasoline and diesel demand — with rapid acceleration. https://www.energyintel.com/00000182-21a9-dd97-a38e-f3fbd2be0000
The Global Energy Crisis
With regard to the European gas use reduction target, we previously mentioned it is likely to be “too little too later”, because the concerned countries differed in their particular circumstances too much, and because there is too little solidarity between them. An opinion piece in Friday’s edition of Reuters agrees with our assessment - it argues that in addition to a gas usage cut deal, Europe also needs to agree a deal to share energy amongst member states. At present, it highlights, only six such deals have been secured, leaving most of the EU's 27 countries without firm terms on how and when they would share gas in a supply crunch or the financial compensation they would give or get for doing so. https://www.reuters.com/business/energy/eu-gas-solidarity-complicated-by-lack-fuel-sharing-deals-2022-07-29/
Climate Politics
Bloomberg carries a deeper analysis of the US $369 billion energy and climate plan we discussed on Thursday. The bill includes $60 billion of incentives to establish clean energy manufacturing in the US. The package includes production tax credits to accelerate manufacturing of solar panels, wind turbines, batteries, and critical minerals processing. The plan also includes investment tax credits to build clean technology manufacturing plants that make electric vehicles, turbines and other products. And, no surprise here, allows for the expansion of oil and gas production. https://www.bloomberg.com/news/articles/2022-07-28/democrat-ossoff-lauds-energy-provisions-in-schumer-manchin-deal
According to CNBC, clean energy backers and climate groups in the US praised the new deal for including clean energy tax credits that could create thousands of new jobs and boost domestic renewable energy. https://www.cnbc.com/2022/07/28/manchins-climate-turnaround-climate-groups-react.html