September 28, 2021
☀️ Hello, hello, hello. Today's Smart Brevity count is 1,282 words, 5 minutes.
📊 Data point of the day: $80 a barrel, which Brent crude oil hit today for the first time since October 2018. Go deeper
🚨 Situational awareness: House Speaker Nancy Pelosi is moving ahead with the bipartisan infrastructure bill, untethering it from Democrats' reconciliation plan that has far larger climate investments but remains in limbo. Read more
🎸 Tom Waits' album "Rain Dogs" came out this week in 1985 and provides today's beautiful, aching intro tune...
1 big thing: The energy crises roiling Europe and China — and beyond
Energy crises in Europe and China are spilling into economic forecasts, supply chains and beyond, Ben writes.
Driving the news: Europe has for weeks been facing sky-high natural gas and power prices, while China — the world's second-largest economy — is facing electricity shortages that are hobbling factories.
Here are a few takeaways on the big, multi-continental energy crunches.
1. They defy simple narratives. There are many reasons behind both regions' woes.
- Via the NYT, in China, they include growing demand on the country's power-hungry factories as the global COVID recovery continues — including the need for energy-intensive metals.
- That has pushed up coal prices, the piece notes, yet regulators have not allowed power companies to raise rates, so "utilities have been slow" to boost operations.
- That story and others also point to Chinese officials' efforts to curb energy consumption and its emissions are also playing a role.
- In Europe, where natural gas prices are tethered to both regional and global forces, it's a perfect storm ranging from higher gas demand due to the cold winter and then summer heat in multiple regions; but also EU carbon permit policies; lighter winds; constrained Russian supply and more.
2. They are making supply chain problems even worse. There's a lot of reporting on interrupted output from Chinese factories that make all sorts of things.
For example, this detailed WSJ piece notes that over 10 semiconductor-related facilities have announced temporary closures.
That story and others also say multiple Apple suppliers have been affected. More broadly, the shutdowns are coming at a time when global supply chains are already facing problems.
AP warns of "possible shortages of smartphones and other goods" ahead of Christmas. In Europe, meanwhile, high gas prices have cut the output of fertilizer and other goods.
3. Analysts see significant economic impact. Per CNBC, Goldman Sachs has reduced its forecast for China's GDP growth this year to 7.8% from 8.2%. Nomura analysts, among others, reached largely the same conclusion.
4. Conventional wisdom can be wrong. Commentary from the Center for Strategic and International Studies' Nikos Tsafos delves into Europe's problems — and the limits of the common idea that U.S. LNG can help Europe counter Russian gas disruption or limits.
That's wrong in the short term, Tsafos notes, because "U.S. LNG, like other LNG, responds to market forces, and if other markets are willing to pay more than Europe, Europe has no immediate remedy." (It does provide a bargaining tool to limit gas prices in the medium and long term, he adds.)
5. Winter is coming. "Even a normally cold winter in the Northern Hemisphere is expected to drive up natural gas prices further across much of the world," Bloomberg reports.
6. So is the UN climate summit. A key thing to watch in Glasgow in just a month is whether the crises boost momentum for speeding up energy transition, or show that national initiatives that raise costs — through carbon taxes or other policies — lack political support.
2. Unpacking Ford's big electric move
Axios' Joann Muller reports...Ford's new $11 billion manufacturing plan, the biggest component of which will sit just outside Memphis, is part of a much bigger effort to put the U.S. at the center of the electric vehicle revolution, executive chairman Bill Ford says.
The big picture: Ford’s plans — for enormous facilities in both Tennessee and Kentucky, employing a combined 11,000 workers — are ambitious manufacturing efforts designed to minimize their environmental impact.
But Ford says these investments will also help the U.S. build its own supply chain for batteries, rather than continuing to import them from Asia — providing economic security, insulation from supply chain disruptions and ultimately bringing down the price of EVs.
- "We need to, as a country, decide — do we want to have a domestic battery industry? And that's something that's kind of starting tomorrow,” Ford said in an interview Monday before the announcement.
How it works: The company is building two battery manufacturing plants in Kentucky, as well as an enormous new complex near Memphis that will include both battery manufacturing and vehicle assembly for electric F-series pickup trucks.
- Long term, the plan is to perpetually recycle EV batteries in the U.S., and end imports of batteries made with precious metals like nickel, lithium, cobalt and copper from foreign mines.
- “We'll be importing a lot of these batteries initially, but then they stay within our country and start to be remade into American batteries if you will,” Ford told Axios.
- Ultimately, he said, a more robust U.S. supply chain will help bring down the cost of EVs.
🎧 Joann discusses Ford's move on this morning's episode of the Axios Today podcast.
Bonus: GM's new electric delivery van
That thing above is the new addition to GM's recently launched division, called BrightDrop, that's looking to compete in the race to electrify goods delivery and work vehicles, Ben writes.
Driving the news: GM this morning introduced the EV410, a midsize commercial vehicle — "designed for smaller, more frequent trips" — that goes along with the previously unveiled EV600, which GM says will hit the road this year.
What's next: The EV410 will go into production in 2023, GM said, and Verizon is slated to be the first customer.
3. Americans' concern about climate hits all-time highs
After disaster-filled summer, a record number of Americans are concerned about global warming, according to a new poll from the Yale Program on Climate Change Communication, Andrew writes.
- The number of Americans who said they are “very” or “somewhat worried” about global warming has reached an all-time high of 70%, the Yale group found as part of a survey it has been conducting since 2008.
Why it matters: The polling suggests that the extreme weather seen this summer may be shifting minds. It comes the same week that Congress is debating pivotal infrastructure bills that would boost federal support for electric vehicles and move the electricity sector toward renewables.
Details: The percentage of respondents in the nationally representative survey who said they are “very worried” about global warming increased by 10 points between March and September, the center stated in a report.
- In addition, Americans’ belief that global warming is happening has increased 6 percentage points since March, with those who think it is occurring outnumbering those who don’t by more than 6-to-1, the report states.
- And in another significant swing, a majority of Americans — 55% —now say people in this country are being harmed “right now” by global warming. Previous surveys had never found that question to garner 50% support or greater.
Background: The poll conducted Sept. 10-20 has a sample size of 1,006 and a margin of error of plus or minus 3%.
4. Catch up fast: Pipelines, disasters, investment
Cancellations: "PennEast Pipeline said on Monday it would stop developing a proposed pipeline from Pennsylvania to New Jersey, the latest in a series of natural gas lines to run aground due to legal and regulatory challenges." (Reuters)
Disasters: "Southern California Gas Company and its parent company announced Monday they've agreed to pay up to $1.8 billion in settlement claims over the 2015 Aliso Canyon natural gas storage facility blowout." (Axios)
Money: "Former US vice-president Al Gore’s sustainable investment fund has agreed to take a stake of up to 13 per cent in the British energy company Octopus as part of deal that values the start-up at as much as $4.6bn." (Financial Times)
5. Quote of the day
"The Exxon fight was a great way to prove our thesis, which is people will appreciate an economic argument and that’s how you get something done."
Who said it: Jennifer Grancio, CEO of the activist hedge fund Engine No. 1, quoted in Bloomberg.
The fund's candidates won three Exxon board seats earlier this year after arguing Exxon's climate and oil capex plans left it poorly positioned.