NEWS OF THE DAY:
Biden to Announce Reconciliation Framework in Last-Ditch Effort to Unite Caucus ahead of Foreign Trip
Zachary Evans, National Review, October 28, 2021
President Biden will announce a revised framework for his administration’s reconciliation package on Capitol Hill Thursday after meeting privately with House Democrats, multiple outlets reported.
The move comes as House Democratic leadership attempts to schedule a vote on the $1 trillion bipartisan infrastructure bill that failed to make it across the finish line in August. Biden’s trip to the Hill to announce the reconciliation framework is intended to reassure hesitant progressives who have refused to vote on the infrastructure bill until they’re confident reconciliation will pass.
President Joe Biden campaigns for Democratic candidate for governor of Virginia Terry McAuliffe at a rally in Arlington, Va., October 26, 2021. (Jonathan Ernst/Reuters)
President Biden will announce a revised framework for his administration’s reconciliation package on Capitol Hill Thursday after meeting privately with House Democrats, multiple outlets reported.
The move comes as House Democratic leadership attempts to schedule a vote on the $1 trillion bipartisan infrastructure bill that failed to make it across the finish line in August. Biden’s trip to the Hill to announce the reconciliation framework is intended to reassure hesitant progressives who have refused to vote on the infrastructure bill until they’re confident reconciliation will pass.
However, Biden’s visit may not be enough to persuade hold outs such as House Progressive Caucus head Pramila Jayapal (D., Wash.) and fellow progressive Alexandria Ocasio-Cortez (D., N.Y.), who have said they will not vote in favor of the infrastructure bill based on a reconciliation framework alone and will instead need to see the final language, which is not yet available.
“The President will speak to the House Democratic Caucus this morning to provide an update about the Build Back Better agenda and the bipartisan infrastructure deal,” a White House official told CNN. “Before departing for his foreign trip, he will return to the White House and speak to the American people about the path forward for his economic agenda and the next steps to getting it done.”
“Before departing for his foreign trip, he will return to the White House and speak to the American people about the path forward for his economic agenda and the next steps to getting it done.”
Biden told Democrats last week that the reconciliation package could cost between $1.75 and $1.9 trillion. However, congressional Democrats still have not come to an agreement on the central components of the deal.
Several of Biden’s proposals for the reconciliation package may not be in the final deal due to opposition from Senators Kyrsten Sinema (D., Ariz.) and Joe Manchin (D., W.Va.). At a CNN town hall last week, Biden said an expansion of Medicare to include dental, vision, and hearing services was opposed by Manchin. Biden added that Sinema opposes tax hikes the administration initially sought in order to pay for the package.
The infrastructure bill’s passage would give Biden more leverage heading into an international climate summit in Scotland this week, where he could boast about the $500 billion the bill allocates toward addressing climate change. The bill’s passage would also give a boost to Democrat Terry McAuliffe ahead of Tuesday’s Virginia gubernatorial election.
OIL:
Oil’s Topsy-Turvy Moment
Jinjoo Lee, The Wall Street Journal, October 28, 2021
Eighteen months after the historic moment when crude oil prices briefly went negative, the oil market has turned upside down.
In April 2020, the Covid-19 pandemic triggered such a sharp drop in oil demand in the wake of a Russian-Saudi price war that the world was running out of places to store it. Oil prices briefly dipped below zero, indicating that those holding the contract for the expiring front-month contract at the time had to pay buyers to take oil off their hands.
Today, the opposite dynamic is playing out: The main worry is that the oil inventory level at Cushing, Okla., the pricing hub for the U.S. benchmark West Texas Intermediate crude, is getting too low. Any lower and it could drive WTI prices up dramatically. Last year’s glut that caused oil prices to do the unthinkable seems like a distant memory.
Inventory at Cushing topped out at 65.4 million barrels last year in early May. As of last week, inventories have dropped to 27.3 million barrels, inching closer to the 20 million barrels that Cushing tanks require to maintain normal operations. The landlocked oil-tank capital of the world could be weeks away from being “effectively out of crude,” according to a report last week from JPMorgan Chase.
The widening price gap between front-month futures contracts, which are currently more expensive than those for deliveries further in the future, suggests that the market thinks the oil inventory level at Cushing might actually hit the bottom, notes Ilia Bouchouev, managing partner at Pentathlon Investments. The price of WTI oil for December delivery today is $82.11 a barrel, $1.15 more expensive than the oil for January delivery, widening from $1.04 a week earlier.
The difference is even more stark when comparing the price of oil for delivery in December 2021 and 2022; that spread touched $12.50 a barrel Monday and is now about $10.48. Put another way, the market is so desperate for oil today that it is willing to pay a roughly 87 cent premium per barrel for every month of earlier delivery. Mr. Bouchouev dubs this “super-backwardation,” noting that the spread seen Monday was the third widest in WTI’s history. That is the inverse of last year’s situation, when the oil markets saw a super-contango, as prices for future delivery of oil were much costlier than oil delivery in the near term.
Both JPMorgan and Mr. Bouchouev note that it is unlikely for Cushing storage to actually hit bottom, just as the oil glut last year didn’t actually lead to Cushing’s storage reaching tank tops. JPMorgan, for example, said in its report that there is an increasing flow of crude oil from Canada and signs that U.S. oil production will increase in the fourth quarter. In previous bouts of low storage at Cushing, physical traders were nimble enough to react and redirect oil to the depleted hub. Moreover, WTI is now priced at only a small discount to Brent crude, the international benchmark, which should curb further flows of oil abroad. Additional draws at Cushing still could send prices higher, though.
Will there be any pain when that happens? Last year, super-contango and the plunge below zero meant several funds that tracked front-month oil futures—including the popular United States Oil Fund —suffered huge losses, hurting many individual investors. Today, that same strategy would make the same investors a lot of money. Ironically, changes those funds made to mitigate risk have limited their gains. Still, USO has gained 72% year-to-date and has outperformed its benchmark front-month WTI futures by 3.1 percentage points.
While the ride might be smoother for financial investors, motorists won’t be so fortunate.
GAS:
Natural gas prices tumble in Europe after Putin orders Gazprom and others to fill up EU storages
Market Watch, October 28, 2021
European gas prices dropped Thursday after Russian President Vladimir Putin instructed the country’s major natural gas company to pump more gas into EU storages.
Europe’s gas prices have soared in recent weeks amid strong demand in Asia driven by the economic recovery from the pandemic and due to depleted European Union stocks from a cold winter.
During a call with officials late Wednesday, Putin told Alexei Miller, the head of state-controlled gas giant Gazprom, to start pumping gas into the company’s storage facilities in Austria and Germany after it fills domestic depots by Nov. 8. The Russian leader’s direction immediately drove European gas prices down GWMF22, -9.18%.
“This will make it possible to fulfil our contractual commitments in a reliable, stable and consistent manner and to supply our European partners with gas in the autumn and winter,” Putin said. “This will create a favorable situation, at any rate, a better situation in the European energy market in general.”
The 27-country European Union depends on Russia for more than 40% of its gas imports.
While Gazprom RU:SIBN has met its obligations under long-term agreements, it has not sold additional gas on the EU spot market, opting to fill domestic storages. Some European politicians alleged that Russia was withholding gas deliberately to pressure German and EU authorities into speeding final regulatory approval for the recently completed Nord Stream 2 pipeline.
Putin noted last week one of the two links of the new pipeline under the Baltic Sea already has been filled with gas as part of preparations for its launch, adding that supplies could start “the day after” after regulators give their approval.
Nord Stream 2, with an annual capacity of 55 billion cubic meters of gas is designed to deliver gas directly to Germany, bypassing Poland, and Ukraine, which have vehemently opposed the project along with the U.S.
Ukrainian authorities fear the pipeline will deprive the country of $2 billion in annual gas transit fees and erode its international standing amid a tug-of-war with Russia following its 2014 annexation of Ukraine’s Crimean Peninsula and support for separatists’ insurgents in eastern Ukraine.
MINING:
Antofagasta to appeal US plan to block Twin Metals copper mine
Mining.Com, October 27, 2021
Antofagasta Plc said on Wednesday it would ask U.S. officials to reconsider a proposed 20-year ban on mining in Minnesota’s Boundary Waters region, a plan announced last week that would block its Twin Metals copper and nickel project.
The company called the moves by U.S. President Joe Biden’s administration, which also rejected the Chile-based company’s lease applications, politically motivated.
“If we can prove that we can meet or exceed all (environmental) standards in place, we have a right to move this project forward,” said Twin Metals chief regulatory officer Julie Padilla.
The U.S. Forest Service last week proposed the 20-year ban, reversing a decision by former President Donald Trump and setting off a review of how mining could affect the popular outdoor recreational area on the U.S.-Canada border.
The Forest Service, part of the Agriculture Department, controls the surface land at the site. The U.S. Bureau of Land Management, part of the Interior Department, controls the underground copper deposit and must approve plans to extract minerals.
Antofagasta will comment on the proposed ban during the public review period. It is also asking federal regulators to reconsider their rejection of several lease applications, which would give the company exclusive mining rights in the area.
The rejection means the company would lose access to an area it has already paid to explore. The government could let another company mine the area in the future, though such a step is improbable. “We’ve done the work and now they’re taking it away,” Padilla said.
The Interior Department said federal regulations require it to deny pending lease and permit applications because of plans for the 20-year ban.
The company has two other leases in the area, though they are being challenged in court.
The Campaign To Save The Boundary Waters, an environmental group opposed to the Antofagasta project, said the appeal was “unfortunate for Minnesota” and the country.
“It’s very clear that the most toxic industry in America has no place next to the Boundary Waters,” said Becky Rom, the campaign’s national chair.
POLITICS:
Watch live: Exxon, Shell, Chevron executives testify on climate change
The Hill, October 28, 2021
Exxon, Shell, Chevron, and other oil industry executives are scheduled to testify on climate change before the House Oversight Committee on Thursday.
The hearing is slated to begin at 9 a.m. ET.
Watch the live video above.
CLIMATE CHANGE:
Consumer Energy Group Dismayed To See One Federal Agency Thwart U.S. Development of Critical Minerals Needed for Electric Vehicles on Same Day as Another Agency Promotes Electric Vehicles
Consumer Energy Alliance, October 21, 2021
Ahead of COP21, President Biden’s top climate advisor, Gina McCarthy, and Transportation Secretary Pete Buttigieg cheered the accomplishments of America’s nascent electric vehicle industry, encouraging growth and acknowledging that, “One of the key pieces of President Biden’s Build Back Better agenda is supercharging America’s ability to get more EVs on the road, to make them affordable for families and for businesses.”
“Unfortunately, Ms. McCarthy and Secretary Buttigieg failed to check with the U.S. Departments of the Interior and Agriculture who announced minutes later that they plan to bar any development of critical minerals these electric vehicles and clean energy industries need to actually build a cleaner energy future for all Americans,” CEA Director Chris Ventura said.
“America’s auto manufacturers are already suffering from their dependence on overseas supply chains, shutting down production at plants across the country as consumers scramble to find affordable vehicles at dealerships.”
“The International Energy Agency warned earlier this year that governments need to act fast to shore up supplies of minerals essential to clean energy technologies like copper and nickel – two minerals that can be mined more responsibly in Minnesota than in any other country in the world – with greater protections for the environment and worker safety.”
“We encourage the Biden Administration and our government agencies to develop coherent, coordinated plans that would actually accomplish some of their stated goals in the real world. The consequences of these uncoordinated actions will only increase costs, harm U.S. strategic interests, thwart development of job creation. Without these critical minerals those families across the country who are interested in an electric vehicle will not be able to actually find one.”