September 12, 2018
Happy Wednesday! And happy birthday to the late Barry White, whose unmistakable voice provides today's intro song...
1 big thing: Energy stakes of Hurricane Florence
Even though it's not heading for the Gulf Coast oil belt, Hurricane Florence could create some serious energy disruptions.
Threat level: Infrastructure in the storm's path includes the Colonial and Plantation Pipelines that carry refined products through the Carolinas.
What we're hearing...
- S&P Global Platts has a helpful primer that notes Florence could disrupt two East Coast LNG terminals and adds:
The most likely impacts are prolonged power outages across utility footprints, disruptions in natural gas production and transportation, delays in pipeline construction schedules and potential reductions in refined product supply to the Northeast.
- The Financial Times and the Wall Street Journal report on how the storm may shake up East Coast gasoline markets. MarketWatch writes:
U.S. oil prices remained higher early Wednesday traded as Hurricane Florence barreled toward the East Coast, boosting demand for crude and raising worries about disruptions to gasoline flows and pipelines in the region.
- AAA's Jeanette Casselano warns in a statement:
A storm like this typically causes an increase in fuel purchases in the market and a slowdown in retail demand. Motorists can expect spikes in pump prices to be brief, but possibly dramatic.
Separately, Axios' Andrew Freedman explores the nexus between Hurricane Florence and climate change. Although global warming is not a direct cause of such storms, the changing climate can increase the risk of damage from the storm. A couple of his points...
- There has been a poleward migration in where storms are reaching their peak intensity, which is related to the expansion of the tropics in a warming world. Florence fits this pattern, as it's unusually far north for such an intense storm.
- Hurricanes that do form are tending to be more intense overall, and bring more rainfall, due to warming air and sea surface temperatures. The waters ahead of Hurricane Florence are about 3 to 4 degrees Fahrenheit above average.
- Go deeper: Read Andrew's full story in the Axios stream.
2. Tesla: When a company isn't investable
Axios' Felix Salmon reports ...Tesla has a market value of nearly $48 billion, making it one of the 150 most valuable companies in America. Yet Nomura Instinet analyst Romit Shah yesterday put out research saying that Tesla is "no longer investable."
The reason: What Shah refers to as "the erratic behavior of Elon Musk."
The big picture: Shah says that Tesla could be a good bet with a different leader, but chaos monkey CEOs aren't the only reason that securities are sometimes considered uninvestable. Some other reasons include...
- The S&P 500 won't include unprofitable companies, which is why Tesla isn't in the index.
- Memories are still raw when it comes to synthetic derivatives, which no one really understood and which therefore no one should have been investing in before the financial crisis.
- Similar arguments can be and often are made about cryptocurrencies today.
- Environmental, social and governance considerations can also make a stock uninvestable for some investors.
- For instance, many investors won't touch gun manufacturers, tobacco companies, or companies like Snap that give shareholders no voting rights.
3. Oil market news and notes
Possible futures: Looking longer term at the global supply and demand balance in coming years, an HSBC research note Wednesday argues that market fundamentals support at least the current price, and that risks "still look skewed to the upside." Possibly way up...
- "While we aren’t explicitly forecasting Brent to rise to [$100 per barrel] we see real risks of this happening. The fact that much higher supply is already needed from the likes of Saudi Arabia — and the low levels of spare capacity remaining — leave the global system highly vulnerable to any further significant outage," analyst Gordon Gray writes.
State of the Permian: More evidence is emerging of infrastructure constraints trimming the explosive growth in the region.
- The Energy Information Administration trimmed its total U.S. production outlook for next year by 200,000 barrels per day. They now see production averaging 11.5 million bpd.
- "The lower production reflects more severe constraints in Permian region pipeline takeaway capacity than previously expected, which results in slower expected crude oil production growth in that region," EIA's short-term outlook states.
- It also sees Gulf of Mexico production at a slower pace than previously assumed.
Another sign comes via the Houston Chronicle's piece on a new Wood Mackenzie analysis.
- "Permian oil producers increased their 2020 hedging positions by a whopping 431 percent during the second quarter, suggesting a fear that pipeline constraints could extend into 2020," they report.
4. How to make climate diplomacy work better
A new Atlantic Council paper argues global climate diplomacy actually has lots of untapped potential in the Trump-era.
- But effective multilateral work to achieve larger emissions cuts could be accomplished by, ironically, thinking smaller, the authors say.
- Their pitch: "disaggregate the climate-pollution problem."
Why it matters: Current national pledges won't cut global emissions anywhere close to enough to the level scientists say is needed to avoid temperature increases well beyond 2° C.
The big picture: "Nations may resist the idea of doing more simply to take on a larger share of a global climate goal," University of Texas' Joshua Busby and Climate Advisers' Nigel Purvis write.
- Instead, they argue, nations are "they are far more likely to agree to specific, manageable actions in particular sectors when the solutions advance other societal goals and are affordable."
The details: There are already many sector-specific multinational initiatives around forests, shipping pollution, refrigerants and more — and these should be doubled, they say. Areas ripe for expansion include...
- Expanding work and "political will" around forests and land-use policy and other so-called natural climate solutions.
- Creating a "frontrunner alliance" of countries committed to going carbon neutral before 2050.
- Complimenting existing work on electric vehicles with a new national compact among "high-ambition" countries.
- More international collaboration to curb emissions from cities in Asia, and more efforts to work with China overall.
The bottom line: Per the report...
Policymakers and diplomats need to continue moving away from the idea of a single global negotiation over emissions levels, and toward a multi-pronged approach.
5. The evolving negative emissions tech movement
Axios' Amy Harder reports ... A nonprofit pushing technology that captures carbon-dioxide emissions from the sky is rebranding and redoubling its focus as the zany-sounding tech gains steam.
Why it matters: The evolution of the group, Center for Carbon Removal, reflects growing interest in the technology among foundations and other groups. Experts say it’s increasingly essential for limiting Earth’s temperature rise and avoiding the worst impacts of a warmer world.
The reason: There's already so much buildup of greenhouse gases in the atmosphere, we’ve reached a point that some needs to be taken out.
The details: The group, launched in 2015, is rebranding as Carbon180.
- The name is designed to emphasize that it's not just talking about the technology, but actually working to support its commercialization too. That ranges from capturing carbon directly from the sky to using forests, which soak up CO2.
- The group’s rebranding comes alongside a new report laying out how it hopes to do that, like upping R&D, and creating training programs to support what's known as the new carbon economy.
The big picture: Carbon180’s renewed focus follows similar action elsewhere in the energy and climate space, including...
- A think tank led by Ernest Moniz, President Obama’s energy secretary, announced earlier this week it was developing a plan for this same type of technology, per E&E.
- The University of Michigan launched a multi-million dollarGlobal CO2 Initiative last month aimed at putting the captured CO2 to use.
Go deeper: Read Amy's full story in the Axios stream.
6. Chinese EV firm NIO raises $1 billion in IPO
NIO, a Chinese electric car company whose backers include Baidu and Tencent, raised at least $1 billion in an IPO that priced at $6.25 per share, according to Reuters.
It will begin trading today on the New York Stock Exchange.
The bottom line: Axios' Dan Primack notes that while NIO may someday become a rival to Tesla, so far it makes Musk's manufacturing output look prodigious.
The Chinese upstart only began making deliveries this past June, with fewer than 2,000 vehicles shipped through the end of August.
7. On my screen: gas markets and EPA
Natural gas: Axios Expert Voices contributor Anna Mikulska explores how Europe's natural gas market is "not only growing but also diversifying its suppliers, routes and delivery forms."
- There's considerable push for further liberalization to provide greater transparency and market-based pricing, features that attract competition and increase exporter interest.
- The growth thus provides a way to both decarbonize Europe's economy and fortify its energy security.
- Read more of Mikulska's piece in the Axios stream.
Policy: Amy writes about EPA's announcement Tuesday that it's easing up on requirements for oil and gas producers and making other changes to an Obama-era rule cutting emissions of methane as it works toward a broader repeal in the coming months.