Today’s Key Takeaways: Biden continues to blame oil and gas companies. U.S. Department of Energy gives LNG exporter permission for additional sales to every country entirely in Europe. BLM tells AIDEA it has suspended a 50-year right-of-way covering 25 miles of proposed 211-mile road connecting Ambler District to Alaska’s highway system.
NEWS OF THE DAY:
Biden’s Vast Oil Conspiracy
Editorial Board, The Wall Street Journal, March 16, 2022
The President takes to Twitter to show what he doesn’t know about the retail gasoline market.
President Biden is adopting Donald Trump’s habit of venting his political frustrations on Twitter. “Oil prices are decreasing, gas prices should too,” Mr. Biden tweeted Wednesday. “Oil and gas companies shouldn’t pad their profits at the expense of hardworking Americans.” Sorry, Mr. President. There’s no vast industry conspiracy to raise gasoline prices.
Gas prices almost always rise faster than they fall, as the Federal Reserve Bank of St. Louis explained in a 2014 report. “When oil prices rise after being steady for some time—gasoline prices shoot up quickly,” the Fed paper explained. “In contrast, when oil prices fall after being steady for some time, gasoline prices retreat slowly.”
Individual retailers set gas prices based on what they expect their future fuel deliveries to cost. But they have no clue right now due to all of the global uncertainty. Oil prices have plunged this past week in part because the United Arab Emirates said it would urge OPEC to pump more. But the cartel might not.
Markets also forecast that China’s lockdowns, if they continue, will dampen global growth and fuel demand this year. But they may not. Ukrainian President Volodymyr Zelensky also raised hopes on Tuesday that peace talks with Russia were beginning to “sound more realistic.” But the war could go on for weeks. Who knows what crude prices will be a week or even a few days from now.
By the way, the vast majority of the nation’s 150,000 gas retailers are mom-and-pop operations. Fewer than 5% are owned by refiners. Profit margins are only about 10 to 15 cents a gallon even when prices shoot up. These small businesses aren’t padding their profits. They’re trying to hedge against big losses if oil prices spike.
Markets are complicated, we know. But maybe Mr. Biden could try to understand how they work, for a change.
OIL:
Pierre Andurand: Oil Could Jump To $200 By Year-End
Tsvetana Paraskova, OilPrice.Com, March 17, 2022
- Andurand: Oil producers around the world will struggle to replace Russian barrels.
- Andurand: around 4 million barrels per day (bpd) of Russian oil supply is already out of trade on the market.
- Actual demand destruction would only begin at around $200 per barrel.
Oil prices could jump to an all-time high of $200 per barrel by the end of this year, as oil producers ranging from African members of OPEC+ to the U.S. shale patch will struggle to replace the Russian crude that is going off the market, popular hedge-fund manager Pierre Andurand told the latest episode of Bloomberg’s Odd Lots podcast.
Andurand, CIO at Andurand Capital, believes that around 4 million barrels per day (bpd) of Russian oil supply is already out of trade on the market after the financial sanctions against Russia over its invasion of Ukraine and after many Western majors and traders refuse to deal with Russia’s oil.
Even if Russia and Ukraine reach a ceasefire right now, Russian oil will not return, said Andurand.
“I don’t think that suddenly they stop fighting, the oil comes back. It’s not going to be the case. The oil’s going to be gone for good,” Andurand told the Odd Lots podcast.
“We’ll have to live with higher prices to keep demand down, for it to be treated a bit more as a luxury product and also to accelerate the energy transition,” said the hedge fund manager.
According to Andurand, the actual demand destruction would begin at $200 a barrel oil.
“I feel like there’s no demand destruction at $110 a barrel and we’ll have to go significantly higher before demand can go down by enough. But that’s also assuming there’s no government mandate and some kind of confinement, where let’s say two days a month, we are not doing anything,” he said.
Just after Russia invaded Ukraine, Andurand warned that the oil markets were worse off than many traders believe, The Wall Street Journal reported.
In the first week of March, options traders significantly increased bets that oil could hit $200 as early as this month. Traders would profit from those call options if oil prices were to rally to those levels.
Related: Why Oil Crashed Back Below $100
GAS:
Cheniere’s Louisiana, Texas LNG plants OK’d for more exports
Associated Press, March 16, 2022
The U.S. Department of Energy has given a liquefied natural gas exporter operating in Louisiana and Texas permission for additional sales to every country entirely in Europe as they seek to move away from Russian oil and gas because of that country’s war on Ukraine.
As Europe works to phase out its reliance on Russian energy, “the world needs every molecule it can get” from other sources, said Dustin Meyer, the American Petroleum Institute’s vice president for natural gas markets.
Cheniere Energy Inc. said its Sabine Pass facility in Louisiana and its Corpus Christi plant in Texas have been improved and are making more gas than covered by previous export permits. Wednesday’s orders “will allow for additional operational flexibility for us and our customers during this pivotal time and for decades to come,” it said in a statement released by a public relations firm.
U.S. companies are already exporting at or near their maximum capacity and Wednesday’s orders mean “every operating U.S. LNG export project has approval from DOE to export its full capacity to any country where not prohibited by U.S. law or policy,” the energy department said in a news release.
It said Cheniere’s plants may now export the equivalent of 0.72 billion cubic feet (20.4 million cubic meters) per day of natural gas as LNG to any country with which the U.S. does not have a free trade agreement— including, it noted, all of Europe.
That works out to about 5.5 metric tons (6 tons) a year, and U.S. exports run about 11.5 metric tons (12.7 tons) a year, Meyer said.
The department said the U.S. is the world’s top exporter of liquified natural gas, with exports expected to grow 20% this year as additional capacity comes online. Half of Europe’s imports in January came from the United States, it said.
Four applications from other facilities have been pending for more than a year, said Marty Durbin, president of the U.S. Chamber of Commerce’s Global Energy Institute. They “should also be approved expeditiously,” he said in a statement released by a public relations firm.
MINING:
White House puts up an Ambler roadblock – North of 60 Mining News (miningnewsnorth.com)
Shane Lasley, North of 60 Mining News, March 16, 2022
BLM suspends right-of-way to mineral-rich district in Alaska North of 60 Mining News
The U.S. Bureau of Land Management is leveraging its control over federal land along the Dalton Highway corridor to throw up a roadblock on the proposed industrial access to Alaska’s Ambler Mining District.
On March 11, BLM notified the Alaska Industrial Development and Export Authority that it has suspended a previously issued 50-year right-of-way that covers 25 miles of the proposed 211-mile road connecting the Ambler District to Alaska’s highway system.
Despite the receipt of more than 36,000 public comments, 50 letters sent to federally recognized tribes, 30 public hearings, and 30 consultation meetings over a seven-year federal permitting process that began under the Obama administration, the Department of Interior under the Biden administration determined that the BLM did not appropriately evaluate the effects the proposed Ambler Road might have on subsistence uses and did not adequately consult with tribes prior to issuing the right-of-way.
Responding to the news, Alaska Gov. Mike Dunleavy said, “This suspension is another hasty move on the part of the Biden administration.”
A move that isolates a rich domestic supply of the copper, zinc, cobalt, and other minerals critical to the administration’s renewable energy, electric vehicle, and infrastructure initiatives.
The Upper Kobuk Mineral Projects, a 448,217-acre land package made up primarily of Alaska Native and state lands at the western terminus of the proposed road, hosts roughly 8.9 billion lb of copper, 3.6 billion lb of zinc, 626 million lb of lead, 88 million lb of cobalt, 770,000 ounces of gold, and 58.3 million oz of silver in the indicated and inferred resource categories.
“The Biden administration blocks the development of a road to a mining district with the cobalt for the lithium batteries and the copper for the wires for charging stations,” Dunleavy said.
These metals are found in high-grade deposits, which minimizes the mining footprint, that also hosts other critical technology metals that could be recovered as byproducts.
“By suspending the right-of-way for the Ambler Road project, the Biden administration ignores the gallium and germanium there that will be needed for the solar panels, smartphones, and computer chips of tomorrow,” the Alaska governor added.
The richness and importance of the Ambler Mining District has been recognized by U.S. policymakers for more than 40 years.
In fact, Congress included special provisions in the 1980 Alaska National Interest Lands Conservation Act (ANILCA) meant to guarantee that the surface access needed to transport metal-rich concentrates from the Ambler District to world markets would be approved.
Section 201 (4) of ANILCA reads, “Congress finds that there is a need for access for surface transportation purposes across the Western (Kobuk River) unit of the Gates of the Arctic National Preserve (from the Ambler Mining District to the Alaska Pipeline Haul Road) and the Secretary shall permit such access in accordance with the provisions of this subsection.”
The Biden administration has not challenged the 26 miles of access through Gates of the Arctic. Instead, the right-of-way on BLM lands along the Dalton Highway at the eastern end of the proposed road was suspended.
AIDEA says this withdrawal of previously granted access “is continuing to sow confusion” over a road that crosses roughly 128 miles of state lands, 32 miles of Alaska Native lands, and 51 miles of federal lands.
“The federal government does not have jurisdiction on state and private lands within the state of Alaska,” said AIDEA Chair Dana Pruhs.
Considering the BLM manages a corridor along the Dalton Highway, however, there is no way of connecting the Ambler District to Alaska’s contiguous road system without a right-of-way from the federal land manager.
The decision to suspend right-of-way on federal lands outside of Gates of the Arctic may provide BLM a case if AIDEA or others decide to advance a legal challenge based on ANILCA.
Outside of court, AIDEA – established in 1967 to develop and advance the prosperity and economic welfare of Alaskans – argues that providing access to Ambler is in the best interests of Alaska and the nation.
With road access, mines developed in the Ambler District are anticipated to create more than 3,900 direct, indirect, and induced jobs; generate more than $300 million in annual wages; and provide significant new revenues for both local and state governments.
In addition to benefits for the state and Northwest Alaska Native communities, AIDEA points out that the current global geopolitical events showcase the need for America’s energy and natural resource independence.
“Suspending our right-of-way is a major setback for Alaska and the nation in accessing domestic and reliable supplies of the critical and strategic minerals so essential to our nation’s transition to clean and advanced technologies,” said AIDEA CEO Alan Weitzner. “The more our federal government prevents access to these minerals in Alaska, the more we remain reliant on supply chains from sanctioned nations.”
AIDEA says the right-of-way suspension notice it received from BLM does not identify any specific deficiencies or corrective action plan, which leaves the development authority at a federal roadblock without any indications of what needs to be done or how long it will take to gain access to the Ambler District.
POLITICS:
A Russian lawmaker wants Alaska back. ‘Good luck with that!’
Iris Samuels, Anchorage Daily News, March 16, 2022
A Russian parliament member has called for the return of Alaska to Russian, prompting a quick dismissal from Alaska politicians and others.
The statement came as Russian President Vladimir Putin has attempted to rewrite history in an effort to explain away his war in Ukraine. But Russia has not seriously considered reclaiming Alaska since the territory was sold to the U.S. for $7.2 million in 1867, and Putin himself indicated in 2014 that he had no interest in retaking Alaska.
Still, on a Sunday news program in Russia, parliament member Oleg Matveychev included Alaska in a list of demands in response to the war in Ukraine and the economic harm caused to the country by U.S. sanctions.
“Let’s think about reparations. The harm these sanctions caused us cost money. Return of possessions, including possessions of the Russian Empire, Soviet Union and even parts of Russia that are now occupied by the United States,” Matveychev said in the interview.
“What about the return of Alaska and Fort Ross?” the host asked, a reference to a former Russian outpost on the California coast north of San Francisco.
“This is my next point – recognizing Alaska, Fort Ross and Antarctica,” he said. “We actually discovered it, so it rightfully belongs to us.”
Historians point out that Russia’s hold on Alaska was not very strong even before the territory was purchased by the U.S., and Russia was eager to get rid of the land in the 19th century as the Russian Empire faced economic downturn and struggled to defend the territory.
“What about the return of Alaska and Fort Ross?” the host asked, a reference to a former Russian outpost on the California coast north of San Francisco.
“This is my next point – recognizing Alaska, Fort Ross and Antarctica,” he said. “We actually discovered it, so it rightfully belongs to us.”
Historians point out that Russia’s hold on Alaska was not very strong even before the territory was purchased by the U.S., and Russia was eager to get rid of the land in the 19th century as the Russian Empire faced economic downturn and struggled to defend the territory.
Alaska and Fort Ross made up what was called Russian America. The largest number of Russians in the territory never exceeded 600 people, according to historian Stephen Haycox, an emeritus professor of history at the University of Alaska Anchorage.
“Alaska was simply too far away and too expensive to think of defending,” Haycox said.
Andrei Znamenski, a historian at the University of Memphis, said this type of demand is brought up occasionally by Russian politicians because of its nationalist appeal, rather than any rooting to reality. Similar comments have been made previously by Russian politicians during periods of Russian aggression, Znamenski said.
“Some Russian still do believe that somehow Alaska had been rented to the United States for 99 years,” he said. “It’s a bunch of urban folklore.”
Such myths get attention among the uneducated who have “a defensive sense of injustice,” said Haycox. But they have “no hold for the Russian economic or political elite.”
“For Russia, having Alaska today would be more problem than it would be worth,” Haycox said.
Still, such comments are helpful to Putin, Znamenski said.
“He does not discourage this talk,” Znamenski said. “It gives him power.”
Alaska’s U.S. Sen. Lisa Murkowski turned to Twitter to emphasize the implausibility of Alaska returning to Russian hands, posting a meme featuring singer Taylor Swift and the words, “That will never, ever, ever happen!”
Gov. Mike Dunleavy wrote on Twitter “Good luck with that! Not if we have something to say about it.”
And he snuck in an implied threat: “We have hundreds of thousands of armed Alaskans and military members that will see it differently.”
The State Department did not comment on Matveychev’s comments, but in a statement provided to the Anchorage Daily News, a spokesperson reiterated that the U.S. has issued “unprecedented and devastating sanctions that will impose immediate and long-term costs on Russia’s financial system and economy, cutting off Russia’s access to critical trade and Putin’s ability to project power.”
“Putin is the aggressor and he must pay the price. He cannot pursue a war that threatens the very foundations of peace and stability and then expect to benefit from it. Putin’s cronies must also feel the pain,” the spokesperson said.