Mar 8, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Happy Friday!

At this moment 40 years ago, Gloria Gaynor was about to ascend the top of the Billboard Hot 100 charts with today's immortal and defiant intro tune...

1 big thing: Norway's wealth fund looks to dump oil

Onshore rig at sunset. Photo: Education Images/UIG via Getty Images

Norway's finance ministry proposed Friday that the country's huge sovereign wealth fund should drop holdings in oil exploration and production companies in order to "reduce the aggregate oil price risk in the Norwegian economy."

Why it matters: It's the biggest sovereign wealth fund in the world, and, as the Financial Times points out...

"The move is likely to be seized upon by environmentalists as a template for other big global investors and marks the biggest proposed divestment of fossil fuel assets."

The plan applies to holdings currently worth roughly $8 billion in 134 companies. The list includes some big U.S.-based oil-and-gas producers such as Anadarko, Marathon Oil, Continental Resources, Chesapeake Energy and several others.

But, but, but: The divestment applies only to oil-and-gas companies specifically, not big integrated majors — including Norway's own Equinor — that have renewable energy as a small but growing part of their business.

  • "It is anticipated that almost all of the growth in listed renewable energy over the next decade will be driven by companies that do not have renewable energy as their main business. The Fund should be able to participate in this growth," Finance Minister Siv Jensen said in a statement.

Where it stands: Bloomberg posted a helpful explainer that gets into why Norway, a major energy producer that controls 67% of the oil-and-gas giant Equinor, would make this move.

  • "The fund contends that it makes little sense for Norway to be doubly exposed to the oil markets. As western Europe’s biggest oil and gas producer, its fortunes are already heavily linked to petroleum, deriving almost half its exports and more than 20 percent of the state’s revenue from the commodities," it notes.

What they're saying: Fossil fuel divestment advocates cheered the move. Mark Campanale, executive director of the Carbon Tracker Initiative, tells Axios it shows that the finance ministry "understands that the future belongs to those who transition away from fossil fuels."

  • "Now is the time for smart investors around the world to follow their lead and make decisions driven by the reality of the energy transition," he says.

Go deeper: Oil-rich Norway, loved by Trump, tries to go big on climate change

2. Geopolitics and oil will collide at confab

A first-ever address by a sitting secretary of state and the economic crisis in oil-rich Venezuela are set to drive the agenda at a conference next week in Houston of the world’s biggest energy companies.

Why it matters: This is the first time the conference, held for almost 40 years, is occurring with America as the world’s biggest crude oil producer, a milestone reached last year.

  • Daniel Yergin, host of the conference dubbed CERAWeek, calls the U.S. boom, driven by surging production from shale formations, an “earthquake” in the world oil market.

Secretary of State Mike Pompeo will give a speech Tuesday addressing “how America’s energy revolution strengthens national security in an age of renewed great power competition.”

Background: The weeklong event is bringing together a record 4,500 attendees, Yergin told Axios in an interview on Thursday.

  • CERAWeek will include CEOs of the world’s biggest oil and natural gas producers and, increasingly, companies and leaders banking on renewable energy.
  • Yergin, a Pulitzer-Prize winning author, is the vice chairman of conference host IHS Markit and co-founder of Cambridge Energy Research Associates (which IHS bought in 2004).

Read more of Amy's CERAWeek preview.

3. The electric race for the skies

The Ford Mach I Levacar (1959) never went into production. Photo: Archive Photos/Getty

Axios' Steve LeVine has a cool story about competition for who will dominate a shift in motor traffic from the road to the air that's still well off into the future, but maybe not that far.

Why it matters: This will eventually create multiple new industries worth tens or hundreds of billions of dollars in sales a year as travel moves toward electrified, automated short flights.

"The Jetsons" has become a catch-all metaphor for almost any futuristic vision, but Boeing CEO Dennis Muilenburg, in an interview with Axios, painted a picture very much resembling the 1960s cartoon.

  • In January, Boeing flew a prototype of its small pilotless vehicle. In the early part of the next decade, Muilenburg said he expects to deploy such vehicles commercially in rural areas along fixed routes.
  • And then, in just a decade, he said, the skies in U.S. cities will be filled with electric, autonomous flying vehicles, ferrying people to their destinations and averting roads that today are often impossibly congested.

But, but, but: There is no telling whether this future will materialize like Muilenburg and others forecast.

Where it stands: Boeing, Airbus and Uber are among the largest players in this evolving new industry. There are also numerous small startups in Silicon Valley and elsewhere.

What to watch: Venkat Viswanathan, a professor at Carnegie Mellon University who advises flying vehicle startups, said huge improvements in lithium-ion batteries are a key enabler of this new age, but that much more progress is required.

  • Right now, he said, commercial electric car batteries can last about 1,000 cycles of charging and recharging, enough for hundreds of thousands of miles of driving.
  • But flying passenger vehicles will require batteries that can endure many thousand more cycles, he said, in order to make the vehicles work economically.
  • That is the next hurdle — developing more durable lithium-ion batteries.

Go deeper: Read Steve's whole piece.

4. A petro-tipping point: Surpassing Saudi exports

Rising U.S. exports of crude oil and petroleum products (like gasoline) combined are poised to overtake Saudi Arabia's by the end of the year, Rystad Energy predicts in a new analysis.

Why it matters: It's just symbolically interesting and a testament to how the U.S. oil boom is increasingly affecting global trade.

  • "This remarkable turnaround is made possible by the continued rise in oil production from US shale plays and the increased oil export capacity from the Gulf Coast," the consultancy said in a brief report.

But, but, but: The U.S. is not rivaling the Saudis when it comes to crude oil exports anytime soon, even as the U.S. crude shipments grow.

  • Numbers bounce around but overall the Saudis are exporting around 7 million barrels per day of crude. The U.S. levels — which have grown sharply in recent years —  are still typically much less than half that amount.
  • But the U.S. exports lots of gasoline, diesel and other petroleum products.

The bottom line: The Saudis are at around 9 million barrels per day when you combine crude, natural gas liquids, and other petroleum products. The U.S. is at around 8 million and rising.

5. Chart of the day
U.S. vehicle miles traveled. Chart: Dallas Fed's updated Energy Slideshow

As we've reported before many times, it's tough to cut carbon emissions from the transportation sector, which has now surpassed electricity as the biggest source of CO2 in the U.S.

The chart above, courtesy of the Dallas Fed, helps explain one of the reasons why it's such a challenge — increases in vehicle fuel efficiency are battling against increased driving.

What's new: EPA data released this week show that those efficiency gains are happening pretty slowly. Reuters breaks it down the newly available model year 2017 data here...

  • "For the 13 major automakers that sell vehicles in the United States, the average increase in fuel efficiency was a modest 0.2 miles per gallon (mpg) to 24.9 mpg from 24.7 mpg in 2016, in part because Americans were buying more large SUVs and pickups and fewer cars," they report.
  • EPA also said preliminary data points to another efficiency gain to 25.4 mpg in model year 2018.

What's next: EPA and the Transportation Department are crafting final rules to weaken Obama-era mandates on vehicle emissions and mileage during the first half of the 2020s.

6. The stakes of DOE's efficiency slowdown

A home in New York. Photo: Jumping Rocks/UIG via Getty Images

Axios Expert Voices contributor David Friedman of Consumer Reports writes ... The Department of Energy has been declining to update and strengthen many energy efficiency standards for home appliances and equipment.

Driving the news: A newly proposed process rule from the department could slow or freeze further updates to the standards and provide for additional product exemptions.

Why it matters: These efficiency rules have been instrumental in cutting Americans' energy use, even as home appliances have expanded their features and improved their performance.

  • They have also saved Americans money on their utility bills — about $63 billion in 2015 alone. Failing to update them could cost households billions of dollars over the next several years.

Where it stands: The DOE is seeking to roll back the scope of congressionally established lighting efficiency standards that would otherwise take effect in 2020.

  • It's also changing its process rules to allow more room for industry to contest standards and test procedures, and to set a new energy-savings threshold that a product must meet before being considered for new or stronger efficiency standards.

Go deeper: Read the full post.

Friedman is VP of advocacy at Consumer Reports and a former DOE deputy and acting assistant secretary. He testified Thursday at a House Energy Subcommittee hearing on the DOE policies.

Ben GemanAmy Harder