Today’s Key Takeaways: Export restrictions threaten clean energy. Price cap on Russian oil seems to work. G7 drops language supporting LNG. DNR gives Graphite One winter permit. Alaska state income tax proposed.
NEWS OF THE DAY:
NEW CRITICAL MINERALS EXPORT RESTRICTIONS THREATEN CLEAN ENERGY: China is leading a post-2010 rise in export restrictions on critical minerals, according to a new report from the Organization for Economic Cooperation and Development (OECD)–– a trend that it says threatens to restrict availability of rare earth materials and could hinder governments’ efforts to reach climate change fighting targets.
According to the report, more than 13,000 export restrictions had been introduced by the end of 2020––or a roughly fivefold increase over the past decade. (Since 2020, OECD said, even more restrictions have been introduced.)
India, Argentina, Russia, Vietnam, and Kazakhstan were the other leaders in new restrictions. All those countries are also among the world’s top suppliers of critical minerals––threatening global availability for lithium, cobalt, and other key rare earth materials needed for EV production and clean energy projects.
The report found that the restrictions––which most often came in the form of export taxes––now affect roughly a 10th of the global value of critical raw mineral exports.
From the Washington Examiner, Daily on Energy
OIL:
The price cap on Russian oil seems to be working
Mark Phillips, Axios, April 11, 2023
Russia is still shipping crude, but its oil revenues have plunged, fulfilling the twin goals of the energy price cap the U.S. government devised last year.
Why it matters: After it launched its war on Ukraine in 2022, Russia’s position as a major oil supplier to global markets was seen as a constraint on the West’s ability to punish Moscow.
- Now, the price cap may be helping to solve that problem.
The latest: There are fresh signs that Russia’s finances are in trouble.
- Russian oil and gas revenues dove by 45% in the first quarter, as its deficit exploded due to the costs of the war.
- The average price for Russia’s Urals grade crude oil was $47.85 a barrel in March, down from $89.05 last March.
- In a sign of the economic stress Russia faces, the ruble just suffered its worst week of the year, hitting its lowest level against the dollar since April 2022.
Background: Last year global oil prices were soaring — $5 gasoline! — amid widespread uncertainty about access to supplies.
- Effectively, Russia was benefiting from a surge in prices that its own illegal invasion had set off.
What they did: In December, the European Union — long Russia’s largest buyer — imposed an embargo on Russian oil (the U.S. did so back in March 2022)
- Simultaneously, the G7 group of advanced economies, along with allies, agreed to a never-before-attempted plan to impose a price cap of $60 on Russian crude oil that the U.S. Treasury Department had spearheaded.
How it works: In practice, the plan is actually a series of rules and restrictions on companies like shipping giants and insurance providers — almost all based in the West — that are the backbone of the global oil market.
- Basically, shippers and insurers are required to get those buying and moving the oil to officially promise — in signed “attestations” — that the petroleum was sold below $60.
- Violations would open companies to potential criminal and civil penalties.
The big picture: Given the obvious potential loopholes in the plan — for instance, people simply lying about paying less than $60 for Russian oil — there was a fair amount of skepticism that this price cap plan would work.
- But the early evidence suggests that the cap, in conjunction with other sanctions, has been pretty successful at keeping Russian oil flowing — while reducing the amount of money Russia reaps from its sale (predominantly to China, India and Turkey
GAS:
G7 climate ministers drop language on growing LNG demand in draft
Kate Abnett, Makiko Yamazaki, Reuters, April 11, 2023
Climate ministers of the Group of Seven countries have backtracked for now on earlier language touting growing future demand for liquefied natural gas (LNG), instead noting there may be “considerable uncertainty” for consumption.
A previous draft communique for this week’s meeting of G7 climate change and energy ministers had called for “necessary upstream investments in LNG and natural gas” amid the energy fallout from Russia’s invasion of Ukraine and said “demand for LNG will continue to grow”.
But, as negotiations over the communique resumed on Tuesday ahead of the ministerial meeting on April 15-16 in Sapporo, Japan, the wording was changed, the latest draft reviewed by Reuters showed.
“We recognize that, based on the IEA’s (International Energy Agency) analyses, there would be considerable uncertainty for future demand of natural gas and LNG and consequently there are risks of supply and demand gap to be addressed,” the document dated April 5 said.
MINING:
DNR Gives Graphite One Winter Trail Permit
Megan Gannon, The Nome Nugget, April 6, 2023
The Alaska Department of Natural Resources issued a permit, allowing Graphite One to move heavy equipment from the Kougarok Road through Mosquito Pass on a temporary winter trail. But the company no longer hopes to plow the Kougarok Road to mile 28 to access this trail.
According to the permit the heavy equipment, staged at mile 28 of the Kougarok Road, would be “walked” to mile 30, and then veering off west off the unplowed road, it would be taken along Hudson Creek drainage to the Sinuk River, turning north and up the Windy Creek drainage through Mosquito Pass, climbing 1,500 feet in elevation, and down on the northern side along the east side of the Cobblestone River, crossing the river and then turning west toward the Graphite One camp. The mileage of tundra travel is estimated at 20 miles.
Graphite One had applied for a permit to create this route last month. A 36,000-pound D6 dozer and a 72,000-pound Komatsu 290 excavator were among the heavy vehicles the company said it planned to transport.
“Because Graphite One will be using heavy machinery during a short period in the winter months while there is adequate snow coverage and frozen tundra the risk to the vegetative mat will not be minimal,” DNR said in issuing the permit. “The mining section will coordinate with Graphite One on current snow conditions, prior to travel in order to evaluate the potential impacts to state land and resources.”
POLITICS:
To help state budget, legislator proposes income tax: $20 for most Alaskans, more for those with upper incomes
James Brooks, Anchorage Daily News, April 11, 2023
Anchorage independent Rep. Alyse Galvin on Monday introduced a new bill to reimpose a state income tax, part of a broader proposal to address persistent state deficits.
House Bill 156 would tax Alaskans 2% of any annual income above $200,000. If someone makes less than that amount, they’d pay $20. Any income tax could be automatically deducted from that year’s Permanent Fund dividend.
Galvin said she’s still waiting on the results of a full fiscal analysis, but she expects the proposal to generate between $125 million and $150 million per year for the state treasury.
“This is a revenue measure that’s part of a bigger picture,” she said.
On Monday, members of the House deferred action on a draft state budget until at least Wednesday.
If the Senate and Gov. Mike Dunleavy were to adopt the draft without significant changes, the budget would have a deficit of almost $600 million, an amount that would have to be paid from savings if oil prices stay as projected over the 12 months beginning July 1.
Alaska hasn’t had an income tax since 1980. A proposal to reinstate the income tax passed the Alaska House in 2017, but the state Senate rejected it.
Income tax proposals have been occasionally revived since then but haven’t garnered significant attention. Dunleavy has previously said he is uninterested in a broad-based statewide tax without a statewide referendum.
This year, multiple lawmakers have proposed a variety of revenue-generating ideas, including a statewide sales tax and several oil and gas tax bills, all in hopes of resolving the state’s anticipated deficit.
Galvin said her income tax bill shouldn’t be considered the one item that will kill the deficit.
“This is not going to be the silver bullet. I don’t think there is a silver bullet,” she said.
Under Galvin’s proposal, someone earning $250,000 per year would be taxed 2% of $50,000, which equals a $1,000 tax, as well as the $20 tax everyone with income would pay.
Someone earning less than $200,000 would only be taxed $20. Nonresidents would be taxed.
She said the idea behind the tax is to create a “shared responsibility” among Alaskans for the budget choices that need to be made. In other places, she said, income taxes have created an incentive for residents to participate in politics and government.
“Alaskans have to make a choice and given our fiscal situation and all the talk about long-term fiscal planning … we’re going to need revenue,” she said.