Today’s Key Takeaways: Germany no longer opposed to Russian oil embargo – oil prices rally in response. Momentum for U.S. LNG builds. Highest bid for lithium in an online sale – up 140% in six months. Rooftop solar in Florida got a last-minute reprieve with Governor DeSantis’ unexpected veto of net metering bill. States ask Supremes to stop “social costs” metric.
NEWS OF THE DAY:
GOP-led states ask Supreme Court to block key Biden climate accounting measure
John Kruzel, The Hill, April 28, 2022
A group of Republican-led states on Thursday asked the Supreme Court to reinstate a court order blocking a key climate accounting measure put in place by the Biden administration amid a legal dispute with potentially high stakes for climate change regulation.
Led by Louisiana, the GOP-led states urged the justices to revive a federal judge’s February ruling that temporarily stopped the Biden administration’s use of a metric known as the “social costs” of planet-warming gases to quantify the climate costs and benefits of regulatory actions.
That ruling, by Trump-appointed U.S. Judge James Cain in Louisiana, was halted last month by a New Orleans-based federal appeals court.
In court papers filed Thursday, Republican attorneys general from 10 states trained their fire on the metric at issue, formally known as the Social Cost of Greenhouse Gas Estimates, which was first implemented under then-President Obama.
“The Estimates are a power grab designed to manipulate America’s entire federal regulatory apparatus through speculative costs and benefits so that the Administration can impose its preferred policy outcomes on every sector of the American economy,” the group of GOP-led states wrote in their brief.
The Obama-era figures gave much more weight to climate damages than figures used under the Trump administration. These “social costs” have been used to help quantify the climate benefits of regulation — or, conversely, the climate costs of deregulation — in agency rulemaking. Higher costs of greenhouse gases can be used to justify more stringent regulations.
The Biden administration last year temporarily returned to Obama-era figures for calculating the costs of these planet-warming gases, and it was expected to soon issue its own findings.
In his February ruling, Cain sided with the Republican-led challengers, who argued they would be harmed if those values resulted in less production of fossil fuels — and less revenue for the states.
But a panel of judges from the U.S. Court of Appeals for the 5th Circuit last month halted Cain’s preliminary injunction, saying that the states’ claims are largely hypothetical, coming from potential regulations that may happen rather than actual harm.
OIL:
Oil prices rally on report that Germany drops opposition to Russian oil embargo
Laura Sanicola, Reuters, April 28, 2022
Oil prices rallied on Thursday after reports that Germany is no longer opposed to an embargo on Russian oil, which could further tighten supplies in the already stressed global crude market.
German representatives to the European Union are no longer objecting a full Russian oil embargo as long as Berlin is given time to secure alternative supplies, the Wall Street Journal reported on Thursday.
The article echoes comments from Germany’s Economy Minister Robert Habeck on Tuesday, when he said the EU’s largest economy, could cope with an EU embargo on Russian oil imports and it was hoping to find ways to replace Russian oil with other supply. read more
Brent crude futures rose $1.41 to $106.73 a barrel by 11:35 a.m. EDT (1535 GMT.) U.S. West Texas Intermediate crude rose $1.95, or 1.9% to $104.05.
Germany is heavily reliant on Russian energy imports and had previously opposed a full ban.
Before the war in Ukraine, Russian oil accounted for about a third of Germany’s supply. A month ago, Germany’s economic minister said that Germany had reduced its dependence on Russian oil to 25% of its imports.
“As a result of this, oil from the free world is going to be more expensive, and Iron Curtain oil will plunge further in value and be discounted more heavily,” said John Kilduff, partner at Again Capital LLC in New York.
Russia has started to use energy exports as a cudgel following the response by the United States and allies over Moscow’s invasion of Ukraine.
Russia has cut off gas supply to Poland and Bulgaria and is trying to push the EU to adopt its new gas payments system that involves opening accounts at Gazprombank where payments in euros or dollars would be converted to roubles. read more
Russian oil production could fall by as much as 17% in 2022, according to an economy ministry document seen by Reuters, as the country contends with Western sanctions. read more
Despite this expected shortfall, the OPEC+ group of producers comprising the Organization of the Petroleum Exporting Countries and allies led by Russia is expected to maintain its modest pace of increasing output when it meets on May 5, sources told Reuters. read more
The U.S. dollar surged to its highest levels in two decades on Thursday, propelled by weakness in its major rivals, such as the yen and the euro. A stronger dollar is usually bearish for oil prices which are priced in the greenback, as it makes it more expensive to holders of other currencies.
In China, Beijing closed some public spaces and stepped up COVID-19 checks at others as most of the city’s 22 million residents embarked on more mass testing in an effort to avert a Shanghai-like lockdown. The most recent lockdown has disrupted factories and supply chains, raising fears over the country’s economic growth. read more
But Asia’s biggest oil refiner, Sinopec Corp (600028.SS), expects the country’s demand for refined oil products to recover in the second quarter as COVID-19 outbreaks are gradually brought under control. read more
A slowdown in global growth owing to higher commodity prices and an escalation in the Russia-Ukraine conflict could further exacerbate oil demand fears.
GAS:
From the Washington Examiner, Daily on Energy:
MOMENTUM FOR US LNG: Gazprom’s shut-off of gas supplies to Poland and Bulgaria puts even more momentum behind growing U.S. liquefied natural gas as the EU seeks out alternatives to Russian imports.
European leaders slammed the Russians’ “blackmail” in cutting off supplies to those countries, while EU Commission President Ursula von der Leyen looked forward to an era of a Russian energy-dependent Europe coming to an end.
EU Energy Commissioner Kadri Simson emphasized the necessity of buying energy elsewhere, saying to help Ukraine through the war, the Europeans “have to reduce the financing of Putin’s war machine.”
“We need alternatives for imported natural gas and oil products from Russia,” Simson said yesterday during a forum on offshore wind alongside Energy Secretary Jennifer Granholm.
The green focus: The EU, like the Biden administration, sees green energy as best available too able to help usher in the end of that era of dependency.
Simson said “renewables are the obvious choice” alternative to Russian energy.
But: The EU and the administration have made clear more U.S. LNG and LNG from other countries will be necessary to wean Europeans off Russian fuels, and EU countries are planning new LNG terminals where, in at least one notable case, they had been passed up previously in favor of greener alternatives.
Simson also said that if more of the EU’s allies were to increase renewables, it would reduce overall demand for Russian fossil fuels and suggested it would allow more gas to enter the global market for the Europeans to purchase.
“We have mapped all the available volumes worldwide, and that means that even if our trading partners can replace some of their consumption with renewables, [this] also helps us achieve our goals,” she said.
Helping out a friend: President Joe Biden has already promised to help Europe field an additional 15 billion cubic meters of gas from the U.S. and other sources this year to help the EU fill its stores before winter.
The administration also committed to providing 50 bcm of additional U.S. gas per annum in the coming years, and the Energy Department is making headway to that end.
DOE issued orders yesterday authorizing nearly four million metric tons worth of additional exports from two in-the-works LNG facilities on the Gulf Coast.
MINING:
Top bid for lithium up 140% after Musk’s ‘insane levels’ call
Bloomberg News/Mining.Com, April 28, 2022
The highest bid for lithium at an online sale surged by 140% in just six months, an indication the stampede for supplies of the main ingredient used in electric vehicle batteries could get even more intense.
Pilbara Minerals Ltd.’s auction of spodumene concentrate — a partly-processed form of lithium — attracted a top bid of $5,650 a ton on Wednesday for a cargo of 5,000 tons. That compares with $2,350 at the previous sale in late October on the Australian miner’s Battery Metal Exchange.
The surging prices are unnerving battery makers and EV firms. Tesla Inc. Chief Executive Officer Elon Musk said this month that lithium had gone to “insane levels” and is the “fundamental limiting factor” for EV adoption, adding the car giant might consider mining or refining it directly. Contemporary Amperex Technology Co. Ltd., the world’s largest battery maker, said last week it had won exploration rights for a lithium clay deposit in China.
“The pricing received on the BMX sales trading platform is indicative of the critical shortage that exists in respect of lithium raw material supply,” Pilbara Minerals said in a statement. It’s the company’s fourth online spodumene sale.
The jump in the auction bid is roughly in line with the increase in lithium carbonate — a chemical used in battery production — in China. It started rising in the middle of last year as the global recovery from the pandemic coincided with a surge in EV demand.
The rally has lost momentum in recent weeks — prices are currently at 467,500 yuan ($71,182) a ton, according to Asian Metal Inc. — as the worsening virus outbreaks upended supply chains and clouded the consumption outlook. The auction result suggests Chinese lithium compound prices are unlikely to drop below 400,000 yuan a ton, Daiwa Capital Markets’ analysts Dennis Ip and Leo Ho said in a note.
Miners are cranking up production to meet the skyrocketing demand and also enjoying bumper profits. Chinese producer Ganfeng Lithium Co. reported a more than 600% jump in first-quarter net income from a year earlier, while Pilbara’s share price rose as much as 6.5% on Wednesday.
The Perth-based miner said it plans to hold the auctions more frequently as it ramps up production at its Ngungaju mine in Western Australia. However, it also warned that virus-related labor disruptions may result in output being in the lower half of the 340,000-380,000 ton guidance for the year through June.
POLITICS:
Florida Gov. DeSantis surprises with veto of solar net-metering bill
Canary Media, April 28, 2022
Florida Governor Ron DeSantis (R) vetoed an unpopular solar net-metering bill on Wednesday. The surprise move handed a last-minute reprieve to solar industry groups and supporters who feared the utility-backed legislation would have undermined the economics of rooftop solar systems in the state.
In issuing the veto, DeSantis cited the bill’s potential to raise costs on Florida residents in the midst of increasing prices for food and gasoline. “The state of Florida should not contribute to the financial crunch that our citizens are experiencing,” he wrote in a four-paragraph veto letter.
The bill, HB 741, has faced public opposition from solar companies, consumer groups, businesses and veterans organizations. A recent poll commissioned by pro-solar groups found that more than eight in 10 respondents expressed support for net-metering as it now exists, including 76 percent of registered Republicans.
“There’s extremely broad bipartisan support for solar in Florida,” said Heaven Campbell, Florida director of the Solar United Neighbors nonprofit group, in a Wednesday interview. “People want to go solar for many different reasons,” but one chief reason is to reduce electric bills that are among the highest in the Southeast U.S., she said.
HB 741 would have changed the net-metering structure in the state, reducing the rates that utilities pay rooftop-solar owners for the excess power their solar systems produce starting in 2024, from the current rate of 11 cents per kilowatt-hour down to 2 cents per kilowatt-hour by 2029. The bill, which would have applied to new solar customers but not the roughly 100,000 existing net-metered solar customers in the state, would also have allowed state regulators to consider additional fees on owners of new net-metered solar systems.