Nov 12, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning readers. Today's Smart Brevity count: 993 words, < 4 minutes.

Situational awareness: "The Trump administration is preparing to significantly limit the scientific and medical research that the government can use to determine public health regulations, overriding protests from scientists and physicians who say the new rule would undermine the scientific underpinnings of government policymaking," the NYT reports.

And happy, happy, happy birthday to Neil Young, who alongside Crazy Horse has today's intro tune...

1 big thing: Peak oil demand's new moment

Illustration: Rebecca Zisser/Axios

The release of the Saudi Aramco IPO prospectus is putting a fresh spotlight on a big question: the date when global oil demand will peak.

Driving the news: The document released over the weekend includes estimates that demand will grow until around 2035 before leveling off, but that the inflection point could occur by the late 2020s.

  • And this week the International Energy Agency will unveil its closely watched annual World Energy Outlook.
  • IEA's three main scenarios project future demand through 2040 based on existing policies, on announced plans, and on a world with policies aligned with the Paris agreement goals.

Why it matters: The timing of peak demand has big repercussions for the planet, and the strategy and future of oil producers.

The big picture: The prospectus makes the case that Aramco is very nicely positioned to increase market share in a world where global thirst for oil is flat or declining.

  • They argue that their comparatively low per-barrel production costs and emissions give them an edge.
  • The 658-page document sees Saudi crude, condensate and natural gas liquid supplies growing through at least 2050.

But, but, but: Bloomberg's Liam Denning connects the dots between the upcoming Aramco IPO and the flop of Brazil's big offshore auction late last week, which he notes is a sign of "expectations on the part of many investors that oil has entered its twilight years."

  • Plus, while the prospectus is largely meant to promote the company ahead of the offering, the various disclosures on climate-related risk state:
"Climate change concerns and impacts could reduce global demand for hydrocarbons and hydrocarbon-based products and could cause the Company to incur costs or invest additional capital."

* * *

Speaking of Saudi Arabia, a new Axios piece notes how the IPO is a lens onto U.S.-based companies' willingness to work with autocratic regimes.

  • The list of joint global coordinators for the upcoming trillion-dollar Saudi Aramco IPO includes all the big U.S. investment banks, among others, notes Axios' Felix Salmon, Dan Primack and Kia Kokalitcheva.
  • The banks — Morgan Stanley, Goldman Sachs, Citigroup, JPMorgan and others — all stand to make millions of dollars in fees when the Saudi state oil company goes public, they report.
  • The whole story is worthy of your time.
Bonus: The biggest global IPOs
Expand chart
Data: Renaissance Capital; Chart: Axios Visuals

Known unknowns abound about the Aramco IPO expected this year on the Saudis' domestic exchange, including what the offer price will be and just how much of the company will be floated.

But, but, but: The expected sale of just a tiny percentage of the company valued at well over a trillion dollars could be the biggest IPO in history. The chart above shows the rankings to date

Go deeper:

2. Bloomberg has a green challenge if he runs

Lots of environmentalists like Mike Bloomberg, but I'm not expecting a groundswell of activist support for his potential White House run.

Driving the news: The billionaire philanthropist and ex-New York mayor last week began flirting with a late entry into the Democratic field.

Why it matters: Climate change has long been a major priority for Bloomberg, who for years has poured resources into speeding the closure of coal-fired power plants.

  • This year brought the launch of the $500 million "Beyond Carbon" campaign, which expands on that anti-coal work by calling, among other things, for blocking construction of new natural gas plants.

Where it stands: Environmentalists applaud his climate work, but stories yesterday in the Washington Post and the Washington Examiner quote activists who aren't thrilled by his maybe-campaign.

My own conversations with activists in recent days are consistent with those pieces. There are a few reasons for the missing embrace...

  • Bloomberg, as the stories note, earlier this year knocked the Green New Deal deal as unrealistic.
  • A billionaire parachuting into the race? That's out of step with the zeitgeist on the left, where Sens. Elizabeth Warren and Bernie Sanders are putting a major focus on inequality.

But, but, but: If Bloomberg runs and somehow becomes the nominee, major environmental groups would certainly pour all kinds of resources into electing him over President Trump.

Go deeper: Why Bloomberg might not run

3. The Fed is waking up to climate change

Illustration: Aïda Amer/Axios

Top economists say the economic effects of climate change are just starting to be felt — and they're likely to start snowballing, Axios' Courtenay Brown reports.

Why it matters: Wildfires, floods, and other natural disasters could harm the nation's financial backbone, damaging vital electronic payment systems, causing bank failures, and disrupting the economy in myriad unanticipated ways.

Driving the news: The Federal Reserve — arguably the most influential economic body in the world — held its first-ever climate change research conference on Friday, where economists sounded the alarm about the toll the U.S. economy could face.

Among the findings:

  • Global GDP per capita could fall 7% by 2100 in the absence of climate change mitigation effects, according to a paper presented by Hashem Pesaran, an economist at the University of Southern California.
  • If countries abide by the Paris Agreement, that would bring that loss down to 1%, the paper said.
  • Extreme heat impacts the productivity of workers. For each degree the temperature rises above above a daily average temperature of 59°F, productivity declines by 1.7% — a figure that Sandra Batten, a senior research economist at the Bank of England, cited in research presented Friday.

Read more

4. Latest in business: solar, coal, crude oil

Renewables: Per Greentech Media, "SunPower announced a plan Monday to split into two companies, one focused on the U.S. distributed solar and storage market and the other on overseas PV manufacturing — with China’s Tianjin Zhonghuan Semiconductor to invest nearly $300 million into the newly formed manufacturing group."

Coal: Bloomberg reports this morning that mining giant Anglo American "dropped another hint that its days of mining the world’s most polluting fuel are limited."

  • "In a slew of presentations released for an investor visit to Anglo assets in Australia, thermal coal was noticeably absent from a list of units seen to have long-term potential. The company is on a trajectory away from thermal coal, and will do so responsibly, an Anglo spokesman said," they report.

Oil markets: Via Reuters, "Intercontinental Exchange Inc said on Monday that oil majors including BP, Total and Shell would be partners in a new exchange it is launching in the United Arab Emirates next year to list Abu Dhabi National Oil Co’s (ADNOC) flagship Murban crude grade."

Ben GemanAmy Harder