Sep 26, 2019

Axios Generate

Good morning. Today's Smart Brevity: 1,143 words, ~ 4 minutes.

And this week in 1976, Stevie Wonder released "Songs in the Key of Life," which provides today's masterpiece of an intro tune...

1 big thing: The fading Saudi freakout
Expand chart
Data: FactSet; Chart: Axios Visuals

Remember the Jurassic era of oil markets in, uh, mid-September, when aerial attacks left the Saudis reeling and talk of big geopolitical risk premium was all the rage? Things look rather different now.

Driving the news: Both Brent and WTI prices have come down a lot since soaring after the attacks that initially knocked 5.7 million barrels per day of Saudi production offline. The chart above captures WTI's moves.

  • Prices this morning were around $61.15 for Brent and $56.14 for WTI.

Why it matters: The return of prices to nearly pre-attack levels shows the market effect of the Saudi moves to bring back output fast. But it's also a sign that soft economic conditions have reasserted their influence.

What they're saying: “Less than two weeks after the attacks on Saudi Arabia, the oil market has returned to business as usual,” Norbert Ruecker, head of economics at Julius Baer, tells Bloomberg.

What's new: "Oil steadied on Thursday due to optimism that the United States and China could resolve their trade dispute, though prices came under pressure from Saudi Arabia’s moves to restore output quickly after attacks on its oil installations," Reuters writes.

2. The BP CEO's case for staying in trade groups
Bob Dudley at the Milken Institute Global Conference in April. Photo: Michael Kovac/Getty Images

Axios' Amy Harder reports that BP CEO Robert Dudley is signaling that his company is likely to stay in industry trade groups despite differences over climate policy.

What they’re saying: "BP believes that you can influence trade associations and other groups by being a part of them rather than outside of them," Dudley said in an interview this week.

Driving the news: BP Chairman Helge Lund had said earlier this year that BP is reviewing its trade group memberships and will report back to shareholders in 2020.

  • Dudley didn't comment directly on the review, but his remarks hint that the oil giant isn't likely to part company with the K Street establishment despite the differences.

The big picture: Facing public, investor and legal pressures, oil companies are increasingly backing action on climate change while staying in trade associations whose positions don’t align with that shift.

  • ExxonMobil is opting to stay in groups like American Fuel and Petrochemical Manufacturers, which represents refining interests, to try to influence them on climate change, an official said this summer.
  • Virtually all oil companies are sticking with the powerful American Petroleum Institute, which sets standards across the sector in addition to its lobbying.
  • However, Shell said in April that it's leaving AFPM.

One level deeper: Dudley said trade groups serve more than one purpose, so it’s beneficial to stay involved.

  • "I respect Shell’s position," Dudley said about that company’s moves. "I think collaboration inside organizations is a better track. It doesn’t always work. We’ve left associations in the past."

Flashback: A high-profile example is when BP left the conservative American Legislative Exchange Council in 2015. That group has lost several corporate members due to its position doubting established climate change science.

3. A new look for EVs and their business model

Canoo, an electric vehicle prototype that will be available by subscription. Photo: Courtesy of Canoo

Electric vehicles, which don't have an engine, transmission or other space-eating components, allow automotive designers the freedom to rethink what a car should be.

What's new: One example is Canoo, which debuted its first vehicle Tuesday night in Los Angeles, Axios' Joann Muller reports.

Why it matters: Canoo reimagines everything about the automobile, including the business model. Instead of buying a Canoo, consumers will only be able to get one via monthly subscription starting in 2021.

  • “We promised a truly different approach for EVs, and our canoo proves that we can deliver on that vision," according to a statement by Ulrich Kranz, whose title, "In Charge" at Canoo, has its own unique flair.

Details: Canoo, founded less than 2 years ago, plans to market a 4-model range that will include personal commuter and "lifestyle" vehicles, as well as commercial vehicles for ride and delivery services, according to Reuters.

  • The urban loft on wheels is about the size of a compact car, with a spacious, lounge-like interior and room for 7.
  • Passengers "bring their own device" to control non-driving features such as navigation, music or climate.
  • The electric "skateboard" platform can support different vehicle designs and the 250-mile range battery can be recharged to 80% in about 30 minutes.
4. A big down payment on energy emissions cuts

New research from the Rhodium Group consultancy finds that extension and broadening of federal tax incentives for climate-friendly energy and transportation could yield substantial carbon emissions cuts.

Why it matters: As Rhodium points out, big climate legislation isn't on the menu right now.

  • But they argue that there's at least some political opening in this Congress for agreement on legislation around federal tax credits for renewable power, storage, nuclear energy, EVs and more.

What they found: "Extending and expanding tax credits through 2025 for zero-emitting generation including wind, solar or nuclear could achieve reductions of up to 125 million tons compared to current policy in 2025," the note states.

  • This could meet one-fourth of the "gap" between projected U.S. emissions under current policy and the U.S. pledge under the Paris agreement, it finds.
  • That pledge, offered under then-President Obama, calls for reducing U.S. emissions by 26%–28% below 2005 levels by 2025.
  • And extending and broadening separate credits for EVs and carbon capture could yield even more cuts than just boosting power generation incentives.

Read the note

5. Mining giant working with China on steel emissions

This caught my eye: Mining behemoth Rio Tinto announced a new partnership with China Baowu Steel Group, which is China's largest steel producer, and Tsinghua University on making production more climate-friendly.

Driving the news: Rio Tinto said yesterday that the parties will work together on "identifying a pathway to support the goal of reducing carbon emissions across the entire steel value chain."

Why it matters: The company, citing World Steel Association data, said the entirety of steel development is responsible for 7%–9% of global CO2 emissions.

  • Let's see what actually comes out of it, but overall, it's a sign of efforts to address industrial emissions, which get less attention than power plants and cars and are often tricky to tackle.

Go deeper:

6. Catch up fast: R&D, regulations, activism

Research: Via the New York Times, "[B]illionaires Stewart and Lynda Resnick are set to announce on Thursday the second-largest donation ever to an American university: $750 million to the California Institute of Technology ... much of it focused on technological solutions to combat climate change."

Regulations: Per Bloomberg, Democratic governors of New Mexico and Minnesota have "lined their up states to join the 13 others in adopting California’s rules to curb automobile greenhouse gas emissions, even after the Trump administration moved to nullify state authority on fuel-efficiency rules."

Activism: Axios' Rebecca Falconer looks at attacks against climate activist Greta Thunberg and the Swedish teenager's response.

  • The Washington Post, meanwhile, looks at the role of teenage girls in the new wave of youth climate activism on display in last Friday's climate strikes.
  • "In a survey of more than 100 U.S. organizers of the climate strike and nearly 200 participants in Friday’s Washington protest, [University of Maryland sociologist Dana] Fisher found that 68 percent of organizers and 58 percent of participants identified as female."
  • In addition, "At least twice as many black and Hispanic teens participated in school walkouts on climate change than their white counterparts."