Today’s Key Takeaways: A D Day look at oil in WW2. A bit chilly after OPEC’s hot weekend. New energy battle – insurance for LNG terminals. Key metals for the energy utopia. Silent majority in auto industry doubt EV’s as only option.
NEWS OF THE DAY:
How Important Was Oil in World War II?
Keith Miller, History News Network, June 6, 2019
Let me begin with a short story. The great tank commander–George S. Patton–found out the hard way how important oil was (in the form of gasoline) to the war effort. His tanks were moving so fast as they approached the Seigfried Line of Germany, they all ran out of gasoline. To get more fuel to the fiery general, as quickly as possible, it had to be airlifted from Normandy.
But, many more stories of a similar kind could be told. The truth is–oil was the indispensable product, in all its forms, to the Allied campaigns around the world. Without it World War Two could never have been won. For oil, once processed or refined in various ways, became the source or indispensable material for laying runways, making toluene (the chief component of TNT) for bombs, the manufacturing of synthetic rubber for tires, and the distilling into gasoline (particularly at 100-octane levels) for use in trucks, tanks, jeeps, and airplanes. And, that is not to mention the need for oil as a lubricant for guns and machinery.
To provide all the oil, or at least most of it, for the Allied war effort, the United States enlisted the aid of American oil companies, all of which responded without hesitation to the challenge. Meeting what everyone in government knew would amount to a demand for oil in unprecedented quantities required much organization.
On 28 May 1941, even then before the Japanese attack on Pearl Harbor, President Franklin D. Roosevelt established by a letter what became known officially as the Petroleum Administration for War (PAW), on 2 December 1942. To head that agency Roosevelt appointed the very capable Harold L. Ickes, who had been Secretary of the Interior. Ickes, soon after his appointment, selected 72 leaders of America’s oil industry for the Petroleum Industry Council for National Defense, which later became known as the Petroleum Industry War Council (PIWC). Interestingly enough, the PIWC held its first meeting,” ‘one of the great coincidences of history,'” (as Ickes referred to the matter in his fine book Fightin’ Oil), the day after Pearl Harbor.
OIL:
The chill after OPEC’s hot weekend
Ben Geman, Axios, June 6, 2023
The White House and crude traders both had shrug-emoji responses to Saudi Arabia’s oil production cut.
Catch up fast: A contentious weekend OPEC+ meeting brought Saudi plans toslash output by 1 million barrels per day next month — and possibly longer.
- In addition, the wider group will extend its 2023 output limits through 2024.
State of play: Oil prices briefly jumped on the news before paring gains. Early this morning, Brent crude prices were trading below Friday’s close (as of late morning they’re slightly above).
- Meanwhile the White House — which was furious at cuts last fall — did not criticize the move.
- “We are focused on prices for American consumers, not barrels, and prices have come down significantly since last year,” a White House official told Axios.
What they’re saying: Ben Cahill, an oil analyst with the Center for Strategic and International Studies, said traders had been anticipating a cut, noting the Saudi oil minister recently warned speculators to “watch out.”
- “The small price bounce on Monday shows the trend that is frustrating the Saudis: Negative sentiment is keeping prices down, even after multiple OPEC+ cuts,” he said via email.
- “They’re fighting speculators and so far they’re not winning.”
The intrigue: Barclays analyst Amarpreet Singh wrote in a note that the measured market response stems from “lack of clarity” on what would prompt the Saudis to extend their unilateral reduction beyond July.
Quick take: The White House has reason to avoid inflaming tensions with the Saudis.
- As Axios’ Barak Ravid reports, U.S. Secretary of State Antony Blinken is visiting Saudi Arabia this week as the U.S. seeks a Saudi-Israel normalization deal.
GAS:
A new energy battleground: Insurance for LNG terminals
Mike Soraghan, Energywire, June 5, 2023
Critics of liquefied natural gas are launching a campaign to pressure companies to stop insuring LNG terminals such as Freeport LNG in Texas.
Environmentalists have been pushing insurance companies for years to stop writing policies for fossil fuel companies. Now, they’re opening a new front in their fight — natural gas exports.
A coalition led by Public Citizen and Rainforest Action Network is launching a campaign to get insurers to stop covering liquefied natural gas terminals along the Gulf Coast.
Exhibit A for the groups will be Freeport LNG, about 70 miles south of Houston. The facility had an explosion nearly a year ago, and campaigners have obtained an insurance certificate showing that some of the world’s largest insurers have issued policies to the Texas export facility.
While those companies haven’t committed to stop insuring all fossil fuel companies, they do have broad goals for net-zero greenhouse gas emissions. Covering giant LNG export terminals, in the environmentalists’ opinion, violates at least the spirit of those goals.
“Insurers aren’t going to make changes to how they cover fossil fuels, and especially LNG, on their own,” said Kerrina Williams, an organizer with Public Citizen, a consumer advocacy group. “Pressuring the industry to make the changes is vital to slowing climate change.”
The groups want to make it difficult, or at least much more expensive, for LNG exporters to get insurance for the facilities that take natural gas, refrigerate it to temperatures so low it turns into a liquid and load it onto ships. They want insurance companies to stop underwriting new plants and the expansion of existing ones.
The insurers and the exporters themselves defend LNG as a valid — and needed — part of the transition to lower-emissions energy.
AXA SA, which in 2015 became the first multinational underwriter to rule out new investments in the coal industry, insures Freeport LNG. AXA spokesperson Baptiste Denis said the firm doesn’t exclude LNG projects but has ceased underwriting new “greenfield” oil and gas development by companies without sufficient climate transition plans.
“The energy transition cannot be achieved without the energy sector,” Baptiste said in an emailed statement. “The AXA Group’s energy policy aims to exclude activities with high environmental and social risks, while supporting energy sector players on their transition path.”
Daphne Magnuson, spokesperson for the Center for LNG, which represents LNG companies, said LNG is a “net positive” for the environment because it replaces high-emissions fuels such as coal.
“This seems like a desperation move by groups that don’t like natural gas no matter how many benefits it brings to people,” Magnuson said in an emailed response to questions.
MINING:
Why Copper and Nickel Are the Key Metals for Energy Utopia
Govind Bhutada, Visual Capitalist, June 6, 2023
Copper and Nickel: The Key Metals for Energy Utopia
The raw materials required to transport and store clean energy are critical for the energy transition. Copper and nickel are two such metals.
Copper is essential for the transmission and distribution of clean electricity, while nickel powers lithium-ion batteries for EVs and energy storage systems.
The infographic below, sponsored by CanAlaska Uranium, explores how copper and nickel are enabling green technologies and highlights why they are essential for a utopian energy future.
POLITICS:
Targeting Toyota for Its Electric-Vehicle Heresy
The Editorial Board, The Wall Street Journal, June 4, 2023
Public pensions and proxy advisers try to punish the company using corporate governance as a pretext.
It wasn’t long ago that Toyota’s hybrid vehicles were all the rage with the climate-change left. Now progressive investors and government pension funds are targeting the Prius manufacturer in a proxy campaign because it has questioned the climate lobby’s electric-vehicle orthodoxy.
Toyota discloses its CO2 emissions and has pledged to make all its vehicles carbon neutral by 2050. This should please the climate crowd. Yet progressive investors are seeking to oust Chairman Akio Toyoda and are pushing a resolution at its June 14 shareholder meeting to make the world’s largest auto maker disclose its climate-related lobbying.
News reports say the California Public Employees’ Retirement System (Calpers) and New York City’s public-worker pension funds have voted against Mr. Toyoda’s re-election, and the proxy advisory firm Glass Lewis has recommended that shareholders do so as well. They say Mr. Toyoda deserves the boot because Toyota’s board isn’t sufficiently independent of management.
But Toyota’s corporate governance model is old news. The sudden concern suggests it is merely a pretext for punishing Mr. Toyoda for the heresy of doubting the West’s hell-bent EV transition. He made news in December when he claimed that a “silent majority” in the auto industry “is wondering whether EVs are really OK to have as a single option. But they think it’s the trend so they can’t speak out loudly.”
He also emphasized that battery-powered EVs “are not the only way to achieve the world’s carbon neutrality goals.” Toyota is promoting its hybrids and plug-in hybrids as alternatives to battery-powered EVs. Plug-in hybrids contain an internal combustion engine that can kick in when the battery runs low, which alleviates range anxiety. They are also cheaper than EVs.
A Toyota memo to auto dealers in April explained the challenges to full electrification. For instance, “most public chargers can take anywhere from 8-30 hours to charge. To meet the federal [zero-emissions vehicle] sales targets, 1.2M public chargers are needed by 2030. That amounts to approximately 400 new chargers per day.” The U.S. isn’t close to meeting that goal.
Toyota also noted that “more than 300 new lithium, cobalt, nickel and graphite mines are needed to meet the expected battery demand by 2035,” and they could take decades to develop. “The amount of raw materials in one long-range battery electric vehicle could instead be used to make 6 plug-in hybrid electric vehicles or 90 hybrid electric vehicles.”
And here’s an even more striking statistic: “The overall carbon reduction of those 90 hybrids over their lifetimes is 37 times as much as a single battery electric vehicle.” These inconvenient truths undermine the climate religion and government mandates.
Speaking of which, progressives have attacked Toyota for lobbying against aggressive EV mandates. Toyota backed the Trump Administration’s lawsuit against California’s stringent emissions rules. It also pressed West Virginia Sen. Joe Manchin to oppose a $4,500 tax credit bonus for union-made EVs. Toyota isn’t unionized and has a large plant in West Virginia.
The shareholder campaign against Toyota shows how public pension funds and the proxy advisory duopooly of Glass Lewis and Institutional Shareholder Services (ISS) work in concert to exploit corporate governance to push progressive political goals. ISS, Calpers and New York city’s pension funds have all backed the shareholder resolution calling on Toyota to disclose its climate-related lobbying.
Mr. Toyoda deserves support for speaking the truth about EVs, and it’s a shame he’s the only auto leader with the courage to do it.