Sep 3, 2019

Axios Generate

By Ben Geman
Ben GemanAmy Harder

Good morning. Today's Smart Brevity count: 959 words, < 4 minutes.

Situational awareness: Florida is already feeling the force of Hurricane Dorian as it crawls slowly toward its coast, with powerful winds and ongoing coastal flooding reported in the state Tuesday morning, per Axios' Rebecca Falconer.

  • This primer from S&P Global Platts shows energy infrastructure in its path.

Finally, at this moment 35 years ago, the indomitable Tina Turner was atop the Billboard singles charts with today's intro tune...

1 big thing: The Saudi oil shakeup

There's new evidence that Saudi Arabia is serious about moving ahead with a mammoth IPO of shares in state oil giant Aramco after years of delays and uncertainty.

Driving the news: Energy Minister Khalid al-Falih will be replaced as chairman of Aramco by Yasir al-Rumayyan, head of the kingdom's sovereign wealth fund.

  • Al-Falih, via Twitter yesterday, called it "an important step to prepare the company for the public offering."
  • Aramco formally (and briefly) announced the move today.

Why it matters: The Aramco IPO is poised to be the biggest in history. Selling a slice of the company is designed to raise tens of billions of dollars to help finance diversification of the kingdom's economy.

  • "I suspect they want to accelerate the IPO timeline," RBC Capital Markets analyst Helima Croft tells Bloomberg.
  • She said the Saudis want to "bring a sense of urgency to the issue as this is a big signature initiative of Crown Prince Mohammed."

Where it stands: Kingdom officials had previously said they're planning a listing in the 2020–2021 timeframe, but hadn't identified an international exchange.

What they're saying: Oil analyst Ellen Wald, author of the book Saudi, Inc., tells me...

"On one hand, the move is good for the upcoming Aramco IPO because it creates plausible separation for legal anti-trust purposes between the company and Saudi Arabia’s OPEC position."
"On the other hand, an oil company needs to be overseen by an oil man or oil woman, not a venture capitalist or financier like Rumayyan, who lacks experience in the energy industry. "

The intrigue: The news hit just 3 days after a royal decree created a new Ministry of Industry and Mineral Resources, which removed al-Falih's oversight of those sectors. He remains the country's oil minister.

  • Per the Wall Street Journal, the reductions in al-Falih's role in recent days are a "diminishment of his once-formidable grip on Saudi economic policy."
2. Big this week: climate's turn onstage for Dems

Illustration: Aïda Amer/Axios

Democratic 2020 hopefuls will talk — and talk and talk — about climate change tomorrow when CNN hosts a 7-hour town hall on the topic.

Driving the news: It coincidentally comes as one effect of a warming world — more intense storms — is in the headlines, thanks to Hurricane Dorian.

Why it matters: Polls show Democratic voters are worried about climate. And the last year has brought major scientific reports on warming's dangers — and the narrow window for aggressive steps to hold temperature rise within 2°C above preindustrial levels.

What we're watching: Here are a few of the many things I'll be looking for...

  • Filibuster discussion: Big climate bills face immense hurdles even if Democrats take the White House and regain the Senate by a narrow margin. So I'll be looking to see how much discussion there is about ending the filibuster. The field is divided.
  • Democrat vs. Democrat: President Trump will be a target for sure. But now that many candidates have released detailed platforms, let's see if candidates seek an edge by attacking each others' plans.
  • Carbon pricing: The frontrunner Joe Biden's plan includes pricing in some form, but it's vague on that point. Will he be drawn out? Will candidates whose plans don't include it, like Sen. Bernie Sanders, be asked to defend the omission?
  • K Street divide: I'll be watching if candidates make hay on a topic that was in the headlines just before Labor Day — how some of the world's biggest oil and auto companies have broken with Trump on emissions policy.
  • Executive authority: I'm curious to see the candidates explain how much — or how little — of their plans to phase down U.S. fossil fuel production could be accomplished via administrative power.
3. Exxon has fallen out of the S&P top 10

ExxonMobil has fallen out of the top 10 largest companies in the S&P 500, per end-of-August rankings by market capitalization.

The big picture: It's first time since the index launched in 1957 that no oil-and-gas companies have been in the top 10, per the Institute for Energy Economics and Financial Analysis.

Why it matters: According to Bloomberg, which predicted Exxon's drop, it's the "consummation of a long-term trend of tech titans replacing industrial giants in the top ranks of U.S. stock market."

  • "With many investors betting on a post-hydrocarbon world, energy faces a battle to stay relevant to generalist investors," their piece notes.

Go deeper: Big Tech's hold on the stock market might not last

4. Chart of the day: auto emissions credits
Expand chart
Data: EPA Automotive Trends Report 2018; Chart: Andrew Witherspoon/Axios

One way carmakers comply with increasing fuel economy standards — even without selling many hybrids or electric cars — is by using the regulatory credits they stockpiled from previous years or purchased from competitors.

Driving the news: The availability of future credits will depend on how the fight between California and the Trump administration shakes out over mileage and emissions rules, Axios' Joann Muller writes.

Go deeper:

* * *

Speaking of EVs, it looks like the timing of Ford's planned battery-powered F-150 pickup is coming into focus. A company executive tells Autocar that it will come "before 2022" (h/t Electrek).

  • Why it matters: Ford is competing with Tesla and others to create an electric version of pickups, a very popular vehicle with U.S. consumers.
  • In late July, Ford circulated a video of a prototype pulling over 1 million pounds, but the company said only that the launch would come "in the next few years."
5. New in business: Facebook, oil, solar

Wind: Via Windpower Monthly this morning, "Facebook will purchase the output from a 38% share of the 525MW Aviator Wind project in Coke Country, central Texas."

  • Why it matters: It's the latest sign of how major corporations, especially tech giants, have been ramping up renewables procurement.
  • Go deeper: The corporate renewables surge

Solar: Per Reuters, "French utility Engie said in a statement it had bought African offgrid solar firm Mobisol, adding the acquisition would make it African market leader in that industry."

Oil-and-gas: MarketWatch reports, "Concho Resources Inc. said Tuesday it has agreed to sell its assets in the New Mexico Shelf to an affiliate of Spur Energy Partners LLC for $925 million."

Ben GemanAmy Harder