Happy Tuesday! Did you take a road trip this weekend? Did you notice any pain at the pump? Let me know at [email protected].
My latest Harder Line column cuts through the noise to tell you what's driving gasoline prices up — and what could lower them in the near future too.
I'll share that, and then Ben will take back newsletter control for the rest.
1 big thing: who is to blame for higher gas prices
Psychology suggests you probably want to blame someone for how much it’s costing you to drive this summer.
Driving the news: At an average of almost $3 a gallon, pump prices are 60 cents higher than last Memorial Day and the highest in four years.
Economists agree that no person or action can single-handedly affect pump prices over time, which are largely driven by a global oil market. That doesn’t mean we can’t indulge in the human condition of blame:
- President Trump for his decision to withdraw from the Iran nuclear deal.
- OPEC and Russia for cutting oil production in 2016.
- The EPA for requiring cleaner and more expensive gasoline blends in summertime.
Where you live and what you drive: It costs way more to fill up in California ($3.73 a gallon) than it does in Oklahoma ($2.71). This is due to several factors, including higher state taxes and transportation costs of moving fuel.
As for your wheels, a Toyota Prius will save you more than a Ford F-150, which has been America’s top-selling vehicle for decades.
One last fracking thing: America's oil boom of the last decade has helped keep gasoline prices lower than they otherwise likely would have been, but we are still at the whim of a volatile global oil market because we use oil at all.
Drill deeper into my full column in the Axios stream.
Big move afoot in oil sands pipeline fight
Breaking last night: per Bloomberg, the Canadian government could announce as soon as today that it's buying pipeline giant Kinder Morgan's Trans Mountain pipeline in order to ensure that a stalled expansion moves forward.
"A purchase would mark a stunning development for Trudeau’s government — effectively nationalizing the country’s highest-profile infrastructure project until an operator can be found," they report.
- Why it matters: The long-proposed project would expand shipments of oil from Alberta to the country's west coast, providing access to growing Asian markets.
- The report signals the challenge the Canadian government is facing as it seeks market access for massive, but expensive to extract, resources from land-locked oil sands projects in Alberta.
One level deeper: The Globe and Mail reports that negotiations continued late Monday and that multiple outcomes — including an extension of talks — are possible. More info is expected from a cabinet meeting this morning in Ottawa.
The big picture: The project has become one of several high-profile U.S. and Canadian fights over oil and natural gas pipelines, and the project faces opposition from the provincial government and others.
"It will be a key test of Trudeau’s bid to balance the environment and the economy by backing the C$7.4 billion ($5.7 billion) pipeline expansion while pushing a national carbon price to reduce greenhouse gas emissions," Bloomberg notes.
Why sanctions are hard and more petro-notes
Sanctions: A couple of items caught my eye . . .
The Wall Street Journal explores how Chinese and Russian companies are capitalizing as European firms back away in response to the U.S. policy.
- "Many Russian and Chinese companies don’t have as extensive connections with the U.S. financial system as do European firms, allowing many of them able to work there with less fear of retribution," they report.
India, meanwhile, signaled that it's not planning to end purchases of Iranian crude in response to U.S. reimposition of sanctions.
- “India follows only U.N. sanctions, and not unilateral sanctions by any country,” said foreign minister Sushma Swaraj on Monday, per Reuters and other outlets.
Why it matters: the stories together underscore the difficulty the White House faces in seeking to punish Iran's energy sector absent much wider international buy-in for the effort.
Estimates vary, but many analysts doubt that the amount of Iranian crude that comes off the market will approach the drop of 1.2 million barrels per day that stemmed from more multilateral efforts in the Obama era that preceded the nuclear deal.
* * *
Deals: via the New York Times, "In a sign that the American shale gas revolution is spreading to the Middle East, Saudi Aramco reached a deal with Halliburton over the weekend to lift its production program in three Saudi Arabian shale fields."
Finance: the Financial Times reports that the Royal Bank of Scotland on Tuesday became the latest big player to impose new limits on financing carbon-intensive projects.
- "The government-backed bank said on Tuesday that it would stop providing project-specific funding for new coal-fired power stations, thermal coal mines, oil sands projects, Arctic oil projects or unsustainable vegetation and peatland clearance projects," they report.
Three electric vehicle things
Tesla's legacy: energy analyst Robin Mills, writing in The National, looks at the challenges facing Tesla and ponders what an implosion at Tesla would mean for the electric vehicle market more broadly.
- The bottom line: "Mr Musk’s financial engineering may not keep his company aloft. But his blend of vehicle design and salesmanship has moved battery vehicles close to the mainstream. His greatest achievement may be that the success of electric vehicles no longer depends on Tesla alone," writes Mills, CEO of the consultancy Qamar Energy.
The big picture: this brief from the big consultancy McKinsey & Co. is a helpful high-level look at some of the challenges that will accompany the growth of electric vehicles.
- One of them is space for charging in China and Europe as infrastructure needs grow. Already, "only 40 percent of European and 30 percent of Chinese EV owners have access to private parking and wall charging, versus 75 percent of US EV owners."
VW's plans: per Reuters, "Volkswagen's core brand expects to beat the company's stated target of selling 1 million electric cars by 2025, a senior manager said, citing solid demand in China and Europe, as well as untapped potential in the southern hemisphere."
A pension giant's clean energy opportunity
One innovative idea: A piece in our expert voices section unpacks the California Public Employees' Retirement System's (CalPERS) plan to invest directly in private companies, which could enable its members to capitalize on the transition to a low-carbon economy and protect assets against climate risk.
Here's more from Alicia Seiger, managing Director at the Stanford Precourt Institute for Energy . . .
Why it matters: Trillions of dollars in global investment in low- and zero-carbon energy is needed in coming decades to keep warming below 2 degrees Celsius. Accordingly, investors need to find pathways to profitably scale-up spending to three times current levels.
What's needed: This will demand better alignment between climate-wise investment opportunities and pension funds, whose assets make up roughly a quarter of the $100-trillion spread among the world’s major institutional investors.
- As it stands, approximately 1% of total pension assets are invested in infrastructure of any kind, while clean energy represented about 0.01%.
How global warming can affect learning
New finding: Hotter temperatures cut academic achievement by inhibiting cognitive skill development, but more air conditioning in schools can mitigate those harms, new research on U.S. students shows.
- "Without air conditioning, each 1° F increase in school year temperature reduces the amount learned that year by one percent," it finds.
Why it matters: the findings on how heat lowers the "productivity of instructional time" provides new data points on the effect of higher temperatures on human welfare and performance. (The National Bureau of Economic Research circulated the paper on Monday, and it can be downloaded here.)
It concludes that air conditioning's economic benefits far outweigh installation and operation costs.
- "[W]e estimate that school air conditioning would offset over $25,000 per classroom per year in future lost earnings due to temperature increases predicted by climate change models," the study states.
It's authored by experts in economics and policy from Harvard's Kennedy School of Government, the College Board and elsewhere.
What they did: the paper explores 21 million test scores from around 10 million high school kids who took the PSAT exam at least twice, and combines it with local temperature data in the year preceding the test.
One troubling conclusion: "We argue that heat effects account for up to 13 percent of the U.S. racial achievement gap, both because black and Hispanic students live in hotter places than white students and because heat damages minority students’ achievement more than white students’ achievement," the paper notes.
The big picture: the paper adds another dimension to a thorny problem we wrote about recently — how expansion of air conditioning provides a major boost in human well-being but also could make global warming even worse thanks to increased energy demand.