May 12, 2020

Axios Generate

Good morning readers. Today's Smart Brevity count: 1,348 words, 5 minutes.

Situational awareness: "The Trump administration approved a proposal Monday to construct and operate the largest solar power project in U.S. history, issuing a final permit for a massive facility just north of Las Vegas." (Washington Examiner)

🎤 And let's honor the pioneering talent of Little Richard, who died Saturday but lives on in music like today's intro tune...

1 big thing: Tesla emerges as focal point in reopening battles

People waiting to see the unveiling of the new Tesla Model Y at the Tesla Design Center in California on March 14, 2019. Photo: Frederic J. Brown/AFP via Getty Images

Tesla's California factory is now ground zero in the politically fraught debate about how revive economic activity nationwide — and the decisions can have potentially life-or-death consequences for workers.

Driving the news: Tesla CEO Elon Musk yesterday announced reopening the electric automaker's Fremont manufacturing plant in defiance of county officials.

  • "I will be on the line with everyone else. If anyone is arrested, I ask that it only be me," Musk said via Twitter.
  • The company says it's employing "comprehensive safety measures."
  • But the Washington Post quotes several workers, who spoke anonymously to protect their jobs, saying safety practices were inadequate.

Why it matters: Tesla dominates U.S. EV sales and has a growing global footprint, despite its volatile economic performance for years before becoming slightly profitable in recent quarters.

  • And as Axios' Dan Primack notes, this is the highest-profile battle so far between a private company and public health officials.

What they're saying: Alameda County health officials yesterday said Tesla was in violation of their orders.

  • They said in a statement that they hoped Tesla would comply with local rules "without further enforcement measures," and that they look forward to an agreement on a "protocol and timeline" to safely reopen.
  • Tesla filed a lawsuit against the county over the weekend.

Threat level: Tesla CFO Zach Kirkhorn said during their first quarter earnings call that the shutdown will "have an impact on our near-term financial performance."

  • But Kirkhorn expressed confidence they'll have "sufficient liquidity" to proceed with key investments based on various scenarios modeled into 2021.
  • Tesla's battle with county officials comes as Detroit auto giants like Ford and GM prepare to restart plants in coming days.

The big picture: Bloomberg's coverage sums it up well...

"To Musk supporters, he’s a hero fighting back against unnecessary government intervention. To his detractors, he’s a reckless and impulsive leader who’s encouraging dangerous behavior that could set back efforts to quell the pandemic."

The intrigue: Musk is no stranger to controversy, but he's in uncharted waters — legally and image-wise — with his open defiance of country orders in a state that's Tesla's largest market.

  • None of his past imbroglios, such as the ill-fated take-private plans, have been so tethered to public health decisions.

One big question: Is Musk — who has been attacking lockdowns for weeks — risking a consumer backlash at a time when competitors plan to bring a suite of new models to market?

  • The Sacramento Bee on Sunday posted a scathing editorial, calling Musk a "bullying troll with no regard for anything beyond his own business interests."
Bonus: Tesla's new friends

The Trump administration is not exactly pro-electric vehicles, but Tesla has Treasury Secretary Steven Mnuchin in its corner in the company's battle to restart its California factory.

Driving the news: "I agree with Elon Musk," Mnuchin told CNBC Monday.

  • "He’s one of the biggest employers and manufacturers in California, and California should prioritize doing whatever they need to do to solve those health issues so that he can open quickly and safely," he said.

The big picture: Various Texas politicians and officials have taken quick notice of Musk's weekend threat to pull his company HQ and some operations out of California and relocate to Texas or Nevada.

  • GOP Gov. Greg Abbott retweeted Musk's threat with an eyes-open emoji.
  • GOP. Rep Dan Crenshaw said "Good conservative principles make good governance, and attract the best and the brightest" as he also circulated Musk's comment.
2. Mounting signs of driving's revival
Data: Descartes Labs; Chart: Axios Visuals

The latest sign that driving is coming back? Analysis from the data science company Descartes Labs shows substantial increases in mobility in recent weeks after driving reached its pandemic-related trough about a month ago.

Why it matters: The revival of travel in the U.S. and worldwide will affect how quickly oil demand recovers from its unprecedented collapse (if it ever indeed comes all the way back).

How it works: Descartes Labs has created a "mobility index" based on geolocation data derived from phones and other devices reporting throughout the day, calculating the maximum distance moved from the first reported location.

What they found: Co-founder Mike Warren tells me that they're seeing increases nationwide.

  • "In mid-March, the drop in mobility seems to have started before a lot of the states had implemented the stay-at-home orders and closures, so I'm not surprised that people would be deciding for themselves what is safe to do," he said.

What we don't know: "We can't tell from the data if people went for a drive by themselves to get out of the house, or if they went to join some gathering of people, which would have very different consequences for the spread of COVID-19," he says.

The big picture: Our chart above is a national snapshot, but Descartes Labs says their far more granular localized and state-level analysis can help combat the pandemic.

  • "We're getting a lot of positive feedback from local health agencies who are using these data combined with their own local knowledge to understand the dynamics of the disease better," Warren adds.

Go deeper:

3. A bridge between CO2 plans and COVID-19 response

Illustration: Sarah Grillo/Axios

Coming soon (perhaps) to a country near you: A coronavirus-Paris climate deal crossover.

Driving the news: The World Bank wants to help nations ensure their upcoming emissions pledges under the Paris climate agreement are transformed into a "pipeline of shovel-ready activities."

Why it matters: The plan signals how multilateral institutions want climate-friendly investments stitched into the fabric of huge economic recovery packages.

Catch up fast: This year, countries are supposed to submit revised pledges, called "nationally determined contributions," ahead of what was slated to be a pivotal UN climate summit in November.

  • The event has been postponed until some time next year due to the pandemic.
  • But the World Bank says countries should nonetheless look at the NDCs and other climate plans as components of their coronavirus response.

How it works: Bank officials are offering guidance to governments for how to integrate NDCs into stimulus packages.

  • "Building the bridge between NDCs and a sustainable recovery will require significant coordination, both between the ministries of each government and externally, including with international institutions," World Bank officials said in a post on the topic last week.

But, but, but: It's not clear how many countries will buy into the idea of "green" economic recovery packages, which brings me to this new Reuters piece...

"[T]here are already signs that China and other Asian giants like South Korea and Japan will steer recovery funds into struggling coal-focused state financers, equipment suppliers and construction firms."
4. BP boss: Peak oil demand may have just happened

Illustration: Eniola Odetunde/Axios

Add BP CEO Bernard Looney to the list of people who think oil demand may never fully recover after the coronavirus pandemic, even though it's already coming back from the depths of the collapse.

Driving the news: “I don’t think we know how this is going to play out. I certainly don't know,” he told the Financial Times ($).

  • “Could it be peak oil? Possibly. Possibly. I would not write that off," he said in the interview where he notes the proliferation of remote-working technology.

Why it matters: The remarks show how COVID-19 has upended oil markets in a way that's likely to last for a long time.

  • Looney's comments are similar to recent remarks by Royal Dutch Shell CEO Ben van Beurden.

The big picture: A new Oxford Institute for Energy Studies analysis sees demand reaching "pre-shock" levels in the fourth quarter of 2021.

  • But they also cite modeling challenges and known unknowns, such as whether there's another wave of lockdowns — a prospect other analysts are weighing too.
  • "It may be hard to comprehend now. But barring a second wave of the pandemic, nearly all pre-COVID demand could return by the second half of 2021," IHS Markit's Roger Diwan said in a new note.

Go deeper: Coronavirus leaves experts pondering if the planet already hit peak oil demand

5. Catch up fast: oil industry finances

Speaking of oil, here's some news on industry finances.

"Saudi Aramco said its first-quarter profit fell and it would cut spending this year, underscoring the twin impact of an oil-price rout and the coronavirus pandemic on the kingdom’s worsening finances." (Wall Street Journal)

"Chesapeake Energy Corp said on Monday it was unable to access financing and was considering a bankruptcy court restructuring of its over $9 billion debt if oil prices don’t recover from the sharp fall caused by the COVID-19 pandemic." (Reuters)