Sep 8, 2020

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity count: 1,316 words, 5 minutes.

🚨 Tonight on "Axios on HBO" Mike Allen asks Mark Zuckerberg about right-wing dominance on Facebook, the CEO's view of his Silicon Valley competitors, and his relationship with President Trump (see clip). Catch the full interview at 11 pm ET/PT on all HBO platforms.

🎵Yesterday marked the birthday of Gloria Gaynor, who opens the edition with a song for our times...

1 big thing: Oil's recovery loses ground
Data: Yahoo; Chart: Axios Visuals

The oil market's recovery from the depths of the pandemic-fueled collapse has gone into reverse lately.

Driving the news: Prices stalled in the low $40s per barrel for the U.S. benchmark WTI several months ago and have been losing ground in recent days.

  • WTI and Brent crude, the global benchmark, are both trading at their lowest levels in over two months this morning.
  • U.S. prices had slid to $37.45 as we hit send this morning, with Brent at $40.46.

Why it matters: They're too low for many producers to profitably drill new wells and ease financial stress, and more bankruptcies are likely.

  • Indebted U.S. shale producers and their contractors are especially exposed.
  • More broadly, prices shows the tragic global persistence of COVID-19, which has slashed demand for oil, although it is come back a lot from earlier in the year.

The big picture: Analysts say COVID-19 and other forces — including U.S.-China trade tensions and higher OPEC+ supply — are together putting downward pressure on prices as summer winds down.

  • "The streak of losses is driven by a stalling crude demand outlook for the rest of the year, with rising cases of COVID-19 and the end of the summer driving season in the US, as well as Asian refineries putting on breaks," Rystad Energy analyst Paola Rodríguez-Masiu said in a note this morning.

Yes, but: Norbert Ruecker of the Swiss bank Julius Baer tells Reuters that the market's macro conditions favor a return to recovery.

  • “Fundamentally, things have not changed,” he said. “Demand is recovering, supply remains constrained, and the storage overhang is slowly disappearing.”

Go deeper: COVID-19 remains oil price’s wild card (FT)

2. Breaking: GM stakes EV startup Nikola

GM CEO Mary Barra. Photo: Bill Pugliano/Getty Images

General Motors is taking an 11% stake in the electric vehicle startup Nikola Corp. and will manufacture its planned Badger pickup truck, the companies said Tuesday.

Why it matters: It's the latest vote of confidence for Nikola, which is among a number of startups that have been attracting significant capital and investor interest before making any profits or vehicles.

  • It also shows how legacy automakers are increasingly teaming up with startups as they position themselves to compete in emerging electrified transport markets.

The impact: Nikola, which is planning both the pickup and a line of semitrucks, was up about 29% in pre-market trading, while GM rose by more than 6%.

The big picture: GM will receive a $2 billion equity stake in Nikola and will become a key technology supplier for the startup.

  • "Nikola will utilize General Motors' Ultium battery system and Hydrotec fuel cell technology," the companies said.
  • GM will be the "exclusive supplier" of fuel cells (outside of Europe) for the semitrucks Nikola is planning.

What they're saying: The companies said the "strategic partnership" will yield financial benefits for both parties.

  • Nikola, which went public in June, said it expects to save over $4 billion in battery and powertrain costs over a decade.
  • GM, meanwhile, expects to see over $4 billion in benefits via the value of its shares in Nikola, the contract for manufacturing the Badger pickup, contracts for batteries and fuel cells, and more.
3. California's power misery

California power giant Pacific Gas & Electric is imposing intentional outages to prevent extreme weather from igniting new wildfires in the state already facing widespread blazes.

Driving the news: The company announced shut-offs last night expected to affect 172,000 customers in parts of 22 counties and tribal communities.

  • The utility cited forecasts through Wednesday morning of "widespread, severely dry conditions and strong, gusty winds that create critical fire weather with high ignition risk."
  • However, the company said distributed generation and other tactics will allow about 69,000 customers and several medical facilities to maintain power.
  • More than 500,000 people overall could be impacted, per WSJ.

The big picture: The new outages are just the latest woes in a state facing a brutal summer of extreme heat and bad fires.

  • The state's grid manager imposed rolling blackouts last month amid high demand, but was able to avoid repeating that step in recent days as it urged people to ease consumption.

Why it matters: Beyond the immediate danger and misery, the state is feeling the effects of climate change, which worsens extreme heat and also is one of the forces fueling western wildfires.

What they're saying: The Washington Post writes, "Michael Wehner, who researches extreme weather events at Lawrence Berkeley National Laboratory, estimates 'climate change has caused extreme heat waves to be 3 to 4 degrees Fahrenheit warmer in California.'"

Go deeper:

4. U.S. lags on green energy stimulus
Data: Rhodium Group; Chart: Axios Visuals

Axios' Amy Harder reports: The U.S. has spent the biggest share of its GDP on discretionary stimulus spending compared to other major economies, but it’s spent the smallest share on clean energy, per a new analysis from consultancy Rhodium Group.

Why it matters: To what degree the world invests in clean-energy technologies as it recovers from the pandemic-induced recession could go a long way toward reaching climate goals.

By the numbers:

  • The U.S. has spent roughly 12% of its GDP on discretionary stimulus spending, but it’s spent the smallest share on green spending, at just 1.1%.
  • That’s compared to the European Union, which has spent so far 10.4% of its GDP on discretionary stimulus but more than 20% is going toward clean energy.
5. Big this week: EVs, oil projections, emissions tech

EVs: Tomorrow brings the unveiling of Lucid Air, the long-awaited sedan from the Saudi-backed startup Lucid Motors.

  • What we're watching: How the Silicon Valley startup's pricing will compare to offerings from Tesla, which dominates the U.S. EV market.
  • Why it matters: There are lots of new EVs coming to market, but the Air comes with lots of hype and the company is making some eye-catching claims about its performance.

Oil-and-gas: Wednesday brings the latest monthly projections from the Energy Information Administration, including their sense of pace and extent of eventual recovery of oil production from the pandemic-fueled decline.

Climate change: On Thursday, the International Energy Agency will release "Energy Technology Perspectives 2020."

  • "The report’s comprehensive analysis will map out the technologies needed to tackle emissions in all parts of the energy sector, including areas where technology progress is still lacking such as long-distance transport and heavy industries," the agency said.
6. The great battery race

Illustration: Sarah Grillo/Axios

Axios' Joann Muller reports that the promise of a new generation of low-cost, long-lasting batteries is catalyzing a long-awaited shift to EVs.

Why it matters: Two big obstacles stand in the way of widespread adoption: cost and driving range. But steady advancements in battery technology are already helping to mitigate both issues, and could make EVs more affordable and desirable to consumers within just a few years.

  • The target is batteries that cost less than $100 per kilowatt-hour to produce, putting the cost of owning an EV on par with conventional vehicle.
  • The industry might not hit the target until 2030, BCG predicts. But by 2022 or 2023, cheaper batteries will cause EV sales to take off, growing to one-third of the global market by 2025 and one-half by 2030, says BCG.

What's happening: The most anticipated battery news could come Sept. 22 from Tesla, the global leader in electric vehicles. It plans to share its latest innovations at a special "Battery Day" tied to its annual shareholder meeting.

  • CEO Elon Musk hinted in a Tweet this week that big leaps in energy density are close, and suggested these vastly improved batteries could be mass-produced within three to four years.

We've already seen a barrage of EV battery milestones in 2020, with more news expected in the coming weeks.

Read the whole story

Bonus: Battery news from Tesla and Total-Groupe PSA
  • Human rights: "Tesla Inc. is backing a new initiative to support informal cobalt miners in the Democratic Republic of Congo as carmakers and miners seek to reassure customers about ethically mined supplies of the battery metal." (Bloomberg)
  • Joint ventures: "Oil major Total and carmaker Groupe PSA have taken the next step in their lithium-ion battery manufacturing collaboration with the launch of a new joint venture company and the first management appointments." (Greentech Media)
Ben GemanAmy Harder