Quote of the Week
“Higher oil prices seem inevitable and, in our view, $100/barrel is easily within reach.”
Bank of America/Merrill Lynch
Graphic of the Week
Contents
1. Oil and the Global Economy
2. The Middle East & North Africa
3. China
4. Russia
5. The IPCC Report
6. The Briefs
1. Oil and the Global Economy
Oil futures fell by over $4 a barrel on Wednesday and Thursday but then stabilized on Friday to close at $71 in New York and $80 in London. Behind the selloff were a sharp drop in the equity markets, profit-taking in the wake of a $14 a barrel price increase since mid-August, and concerns that the Sino/US trade war may reduce global demand for oil. EIA, IEA, and OPEC revised their forecasts downward for the size of next year’s demand increase. The International Monetary Fund cut its forecast for global growth to 3.7 percent for 2018 and 2019, down from a previous estimate of 3.9 percent, and the EIA reported that US crude stocks increased by 6 million barrels the week before last.
Major players in the oil industry are still in disagreement as to where oil prices will go in the near future. A few weeks ago, many financial writers were talking about $100 oil, but the sudden surge of volatility and turmoil in global financial markets has caused many to rethink their forecasts. Brent futures lost almost $4 per barrel over two days last week. There are plenty of reasons why oil could resume its upward climb, with the supply losses in Iran and Venezuela at the top of the list. But a new report from Barclays argues that even if oil prices spike, the spike would only be temporary.
International Energy Agency: Last week, the agency lowered its oil-demand growth forecasts by 110,000 b/d for 2018 and 2019 to 1.3 million b/d and 1.4 million b/d respectively. It also reported that the global oil supply is growing fast; in September, world oil production, at around 100 million b/d, was 2.6 million b/d higher than a year ago. Non-OPEC output is forecast to expand by 2.2 million b/d and 1.8 million b/d in 2018 and 2019, respectively, led by the US.
The head of IEA, Fatih Birol, told a conference last week that oil prices are set to enter the “red zone” during the fourth quarter of 2018, and are threatening to slow demand growth as the strength of the global economy slows. The loss of Iranian oil supply due to US sanctions and deteriorating output from Venezuela will see oil markets further tightening. Birol said he expects Venezuelan oil production could fall below 1 million b/d “sometime soon.”
OPEC: The cartel’s crude oil production rose by 100 kb/d in September to a one-year high of 32.78 million b/d. Since May, OPEC output has increased by 735 kb/d, led by the main Gulf producers and supported by Nigeria and Libya, offsetting falls in Iran and Venezuela. In its Monthly Oil Market Report, OPEC revised down its global oil demand growth to 1.54 million b/d this year, down by 80,000 b/d from the September estimate. In its latest forecast, OPEC now sees global oil demand growth next year at 1.36 million b/d, down by around 50,000 b/d from last month’s assessment, to reflect expectations for lower economic growth for Turkey, Brazil, and Argentina.
According to OPEC’s monthly report, Venezuela’s September oil production was just under 1.2 million b/d, down by 42,000 from August. While Venezuelan officials say its September crude oil production fell to 1.4 million b/d, other estimates say it is now in the vicinity of 1 million.
Like the IEA, OPEC sees the oil market as currently well supplied and is wary of creating a glut next year. This suggests producers are in no rush to expand a June agreement that allows output to increase.
US Shale Oil Production: In its weekly status report, the EIA estimated that US oil production increased by 100,000 b/d last week to 11.2 million, an increase of 1.7 million b/d over this time last year. While next week’s report will be lower due to the disruption to offshore production caused by hurricane Michael, the EIA’s estimate for shale oil production has it increasing at a spectacular annualized rate of over 5 million b/d. These numbers are still only educated estimates. Better production figures will be available in about six weeks.
EPIC Midstream said it will temporarily convert the multibillion-dollar natural gas liquids pipeline it is building in Texas to transporting crude oil to help alleviate the shortage of pipeline capacity for moving crude from the Permian Basin. EPIC plans to bring its 730-mile NGL pipeline online in the third quarter of 2019 and says the pipeline will deliver crude oil at least until January 2020 when its adjacent crude oil pipeline is supposed to start up.
Last week it was announced that two key pipelines that are to transport US natural gas into Mexico had been delayed by at least three months. When completed, these pipelines will reduce the need to ship LNG into Mexico and are expected to play a significant role in reducing the bottleneck that keeps Permian natural gas from being delivered to markets. There are already reports that limitations on flaring excess natural gas produced in the basin may force drillers to reduce oil production until the bottlenecks are eliminated.
Debt levels among US shale oil drillers have had some industry observers worried in the past few years despite the recent recovery in oil prices. During the oil-price downturn, more than 140 companies filed for bankruptcy with their combined debt reaching US$90 billion. Even with oil prices recovering to over $70 a barrel, the uncertainty remains that despite cost improvements, high debt levels could yet force exploration and production companies that keep borrowing to boost production into economic difficulties.
As one observer put it, “Given the higher decline rate from shale wells and their short life as compared to conventional wells, shale producers need to accelerate CapEx spending to maintain production rates. Accordingly, the rise in capital spending puts the producers deeper in debt, reflecting in rising total debt for these companies amid rising interest rates.”
According to Moody’s, US oil producers are facing a debt of $240 billion maturing in the next five years, of which some 15 percent will be rated with the lowest rating of Caa. Exploration and production companies account for the bulk of the total US$240 billion maturing by 2023, at $93 billion. The lack of profitability and the diminishing number of highly productive “sweet spots” in which to drill new wells are the two primary reasons that the great US shale oil boom will not last as long as many hope.
2. The Middle East & North Africa
Iran: Tehran’s crude oil exports fell to 1.1 million b/d in the first seven days of October, down from 1.6 million b/d in September. Condensate exports fell by 46 percent between March to September according to customs data. Iran, which derives a large part of its foreign currencies and state revenues from oil exports, is seeking creative ways to sell its oil ahead of the re-imposition of US sanctions on November 4. Plans under consideration to circumvent the sanctions include an initiative to revive “middlemen” who would be allowed to buy barrels of crude through a domestic energy exchange, or “bourse,” and sell them in world markets under the guise of Iran’s “private sector.” The measure is a sign of how desperate the government is to maintain even the smallest amount of oil exports.
Iran’s economy is expected to shrink by 1.5 percent in 2018 and by another 3.6 percent in 2019, the International Monetary Fund said in the October update of its World Economic Outlook, heavily downgrading the Islamic Republic’s growth prospects due to the sanctions.
Iran took a step to combat banking isolation by passing a bill to comply with the regulations of the Financial Action Task Force; a group set up in 1989 to combat the financing of terrorism. Iran has long been on the Task Force’s blacklist for supplying funds to “terrorist” groups. If Tehran can convince the organization that it is not laundering money or providing funds to black-listed organizations, it might be in a better position to make its way around US banking restrictions.
Although Iranian oil shipments are believed to have fallen in September and early October, these numbers are compiled from shipments that can be observed through vessel tracking. However, clandestine deliveries may also still be happening, according to shipping and trading sources. There is growing evidence of attempts by Iran to continue shipments to its key buyers while minimizing public visibility.
India hasn’t worked out yet a payment system for purchases of oil from Iran, the economic affairs secretary at India’s finance ministry, said last week. India’s Oil Minister has indicated that his country would continue to buy some Iranian oil and is continuing negotiations with Washington for waivers in return for doing some cutting of its Iranian imports. Analysts at Commerzbank say, “The US appears to be abandoning its tough stance on buyers of Iranian oil, and it appears that consumer countries are to be given more time, after all, to replace their oil shipments from Iran.”
Syria/Iraq: Russia and Syria are discussing the possibility of rebuilding Syria’s gas transportation infrastructure, underground gas storage facilities, oil and gas production, and oil refineries, Russian Energy Minister Alexander Novak was quoted as saying. By intervening in Syria, Moscow now has the responsibility of caring for and feeding a country that has been ravished by war.
Baghdad is planning to contract for major infrastructure projects to add millions of barrels per day of export capacity to keep pace with ambitious plans to raise production. The Oil Ministry is looking to jump-start work on a long-delayed pipeline contract with an Australian company and will contract to build an artificial island which is likely to be built by a Dutch firm.
Lukoil’s massive discovery in southern Iraq will start production in 2021, according to the head of Iraq’s regional oil company. Russia’s Lukoil announced earlier this year that “recoverable reserves of 2.5 billion barrels of crude” from the Eridu-1 well was the biggest find in Iraq in 20 years.
Iraq’s Cabinet has named Jabbar al-Luiebi, the current oil minister, to head the new Iraqi National Oil Company. This appointment should give new momentum to a fundamental restructuring of the country’s oil sector.
Saudi Arabia: The disappearance of a Saudi journalist while visiting the Saudi consulate in Istanbul last week has overshadowed all other news about the kingdom. The Turks are saying they have solid evidence that the journalist was killed in the consulate, but the Saudis deny the allegation. The affair has already disrupted a major economic conference that is to launch a round of massive foreign investment in Saudi Arabia. So many foreign dignitaries have already announced their withdrawal from the conference that the Saudis are no longer posting the attendees list.
This affair has serious implications for US-Saudi relations and perhaps for the future of the kingdom. The Trump administration has very close ties with the Saudi leadership. If the Turks can prove their allegations, then US-Saudi relations are sure to change at a critical time. If, as many believe, the crown prince and de facto day-to-day leader turns out to be involved, his position as the next king could be in doubt. This could lead to political instability in the kingdom with implications for Saudi oil exports. For now, all we know is that the Saudi’s Future Investment Initiative conference is in serious trouble as could be the prospects for large foreign investments in the Saudi economy.
3. China
The UN climate change report has many serious implications for the world but in particular for China’s economy which has been built on coal for the last 70 years. China now consumes close to 4 billion tons of coal a year or nearly half of global coal production. According to the IEA, within five years China will be the world’s biggest renewable energy user. For Beijing, the prime reason for replacing coal with renewables is to clean up the air in the cities where it had become unbreathable. Until recently China has been more concerned with dirty air and economic growth rather than the consequences of climate change. Despite its share of floods, droughts, and massive typhoons slamming into its coasts, the need to sustain economic growth still trumps concerns about global warming. China’s reaction to the IPCC report over the next few years will be interesting. As the largest consumer of coal Beijing has the most to lose as climatic conditions become so bad that its use has to be curtailed.
Some believe that China may already be suffering from the US/China trade war which only seems likely to intensify. Last week the Bank of China said it was cutting the reserve requirement ratio for most banks by 100 basis points, which will result in an injection of $109.2 billion into China’s banking system. The move is intended to provide easier lending and more liquidity in China’s economy as the impact of US sanctions start to hit manufacturing and the overall economy. Analysts are saying that this move shows China is getting nervous about a protracted trade war.
Senior White House officials say that recent exchanges between the US and China in what appears a new Cold War aren’t the exception to President Trump’s China policy. They are exactly what the administration wants. Vice President Mike Pence last week gave a blistering speech on US-China relations, saying “the United States has adopted a new approach to China” with the message to China: “This president will not back down.”
Assuming the US slaps tariffs on all Chinese imports, the effect on consumer and business confidence combined with the negative financial market reaction would cut the GDP of the United States by more than 0.9 percent in 2019. Chinese economic output would be 1.6 percent lower than it otherwise would be, according to the IMF.
Although the Chinese government has not yet gone so far in the trade war as to sanction US oil, imports are drying up anyway as Chinese buyers shy away from US crude. After Washington lifted restrictions on exports at the end of 2015, China began buying large quantities of US crude. Chinese imports represented 23 percent of total US crude exports in 2017 and averaged 22 percent this year–until August. Now imports have completely stopped.
Despite the boycott of US crude, China imported 9.05 million b/d of crude oil in September, which was the highest rate of crude oil imports since May. The amount was 10,000 b/d higher than the August import rate and was also the third monthly increase in a row as teapot refiners prepare for winter. For the first nine months of 2018, crude oil imports into China rose 6 percent on the year to 8.98 million b/d despite worry that demand would slow down this year because of a domestic fuel glut.
4. Russia
Hardliners in the Trump administration have been stepping up their rhetoric against Russia recently. President Trump’s chief economic adviser Larry Kudlow said in a television interview that the US should focus more on the energy sector as a way to challenge Russia. “We are the dominant energy power. We will be producing 15 million barrels of oil per day in a couple of years. We’re passing the Saudis. We’re passing Russia,” Kudlow said. “Get this stuff to the northeast, get this stuff to Europe and challenge Russia’s hegemony on natural gas and LNG,” he added. This is doable.”
American LNG is still expensive compared to Russian piped gas. Using a Henry Hub gas price of $2.85/MMBtu as a base, Gazprom recently estimated that adding processing and transportation costs, the price of U.S.-sourced LNG in Europe would reach $6/MMBtu or higher – a steep markup. Russian gas sells for around $5/MMBtu in European markets and could even trade at lower prices in the future as Gazprom removes the commodity’s oil price indexation.
In the meantime, BP Chief Executive Bob Dudley said if the United States imposed sanctions on Russian energy firms Gazprom and Rosneft such as it did on aluminum producer Rusal, it would virtually shut down Europe’s energy systems. Russia’s energy minister said last week that the Nord Stream 2 pipeline which will transport Russian gas to Germany would be completed on time even if new sanctions are imposed on Moscow.
5. Climate Change
The UN’s Intergovernmental Panel on Climate Change report has significant implications for the future of the fossil fuel industry, either now or in the long run. If, as seems likely, the report’s recommendations are ignored, eventually climatic conditions become so bad that steps to curtail the havoc will have to be taken. The new report says that the climate is deteriorating so rapidly that steps must be taken immediately to keep global warming to a 1.5oC increase from the current goal of “below 2.0oC.” Half a degree may not sound like much. But even that much warming could expose tens of millions more people worldwide to life-threatening heat waves, water shortages, and coastal flooding. Half a degree may mean the difference between a world with coral reefs and Arctic summer sea ice and a world without them. At 1.5°C, sea ice will remain during most summers. At 2°C ice-free summers are ten times more likely.
To avoid the disasters which could be much worse in only 20 years, the scientists say that at least $2.4 trillion a year must be spent between now and 2035 to replace coal as a fuel and seriously reduce the use of other fossil fuels. According to the International Energy Agency, carbon emissions, which plateaued in 2015 and 2016, are likely to increase this year.
As could be expected a report that recommends replacing 85 percent of current energy with something more benign was greeted with global silence. While many newspapers took the report as a sober warning of what is in store, nearly all of the world’s leaders, notably President Trump, remained unmoved by the report. The assertion that trillions in spending would have to be diverted from the fossil fuel industry to developing other sources of energy was too much for some to ignore.
The Wall Street Journal responded with an Op-Ed accusing the UN of ignoring the reality of economics and asserting that no climatic conditions could be so bad that it would be worth spending some $50 trillion to mitigate. Rather than a crash program, the Journal recommends spending more on R&D so that new cheaper sources of energy could be developed. On Capitol Hill, a parade of GOP lawmakers dismissed the report’s policy recommendations as wildly impractical, using ridicule to do so. “They might as well be calling on me to sprout wings and fly to Canada for the summer,” Sen. Roger Wicker (R-Miss.), a climate change skeptic, said of the actions urged by the report. “It’s totally unrealistic,” Sen. John Kennedy (R-La.) said. “They must have parachuted in from another planet.”
From the reactions to the report, it was evident that a critical mass realizing that climate change is a significant threat to human civilization has not yet formed. While the endless succession of drought, floods, and unprecedented storms continues, they are not yet deemed frequent or damaging enough to overcome the costs and dislocations that would be caused by a rapid shift away from the fossil fuels that supply some 85 percent of the world’s energy.
6. The Briefs (date of the article in Peak Oil News is in parentheses)
The oil market’s value is larger than the world’s valuable raw metal markets combined, with an annual production valued at $1.7 trillion. A flourishing black market is no surprise, with about $133 billion worth of fuels stolen or adulterated every year. These practices fund dangerous non-state actors such as the Islamic State, Mexican drug cartels, Italian Mafia, Eastern European criminal groups, Libyan militias, Nigerian rebels and more – and are a major global security concern. (10/12)
Petrochemicals’ role: The debate about peak oil demand always tends to focus on how quickly electric vehicles will replace the internal-combustion engine, especially as EV sales are accelerating. However, the petrochemical sector will be much more difficult to dislodge, and with alternatives far behind, petrochemicals will account for an increasing share of crude oil demand growth in the years ahead. (10/8)
Natural gas to grow: Energy companies are betting demand for natural gas will rise at a break-neck pace for decades, undermining warnings that tackling climate change would require a rapid switch to renewable energy. The majors see oil, and especially natural gas, playing a major role throughout the decades of transition and beyond as demand for electricity and plastics grows. (10/10)
Marine fuels: Gasoil refining margins could spike to $40 a barrel in 2020 as more shippers shift to middle distillate fuels when new rules limiting sulfur emissions take effect, Bank of America Merrill Lynch said on Tuesday. From 2020, the U.N. International Maritime Organization will ban ships using fuels with sulfur content above 0.5 percent, compared with 3.5 percent now, to curb pollution. The bank estimated the current global demand for marine fuels at 5 million b/d, of which 70 percent is comprised of dirtier fuel oil. (10/10)
Fracking in the UK is resuming on Saturday for the first time since 2011—when it was linked to earthquakes—after a court dismissed on Friday a last-minute request for an injunction. (10/13)
UK fracking take two: Cuadrilla Resources has returned with a government-enforced go-slow approach. It has set up a chain of seismic monitors three miles beyond its dig to gauge tremors. Contractors from Schlumberger, the oilfield services firm, plan to pace themselves and spend up to three months stimulating the wells using the process known as fracking. In the U.S., a similar effort would take just a few days. (10/12)
UK fracking protest: Three men have been jailed for up to 16 months for causing a public nuisance during protests at a Lancashire fracking site. The men are believed to be the first anti-fracking protesters in the UK to be jailed. (10/10)
Protesting the sentencing: More than 200 academics have signed a letter calling for a judicial review of “absurdly harsh” prison sentences handed to three fracking protesters on Wednesday. (10/10)
In Norway, Chevron will become the first oil major to formally exit the continental shelf as the company transfers its last stake in an exploration license. Chevron is also seeking to sell assets in the British North Sea in order to focus on growing US onshore shale production as well as the giant Tengiz field in Kazakhstan. (10/11)
Israel’s Energy Ministry unveiled on Tuesday a plan to end the sale of new gasoline and diesel-powered cars by 2030 and replace them with electric vehicles and trucks running on compressed natural gas as part of a more ambitious plan to totally cut Israel off reliance on coal, gasoline, and diesel. The Israeli government is expected to approve by the end of this year the energy ministry’s plan for zero-emission vehicles by 2030. (10/10)
Qatar on LNG: The head of Qatar Petroleum on Tuesday warned there would be a significant shortage of LNG on global markets sooner than expected as he reaffirmed the company’s plans to reach a final investment decision on its domestic LNG expansion project by end-2019.
From Turkmenistan, Russia’s Gazprom plans to resume imports of gas at the start of 2019, CEO Alexei Miller said this week, having ceased purchases in January 2016 on poor economics. Relations between Turkmengaz and Gazprom worsened over 2014 and 2015 when the two became embroiled in a dispute over payments and supply volumes. In January 2016, Gazprom ceased purchases altogether. (10/11)
In Zimbabwe, fuel shortages intensified across the country as long queues formed at service stations that were selling the commodity amid widespread panic-buying of basic goods blamed on government’s new austerity measures. (10/9)
Total Nigeria attributed accidents caused by oil tankers’ in Nigeria to illiteracy among tanker drivers, aging equipment, substandard tank construction and low quality of road infrastructure. Total’s Management System for Transport manager, Mr. Ajibola Alaga, said that in aggregate terms, 120 major tankers accidents had been recorded since 2014, comprising 94 rollovers, 16 collisions, and 10 fires. (19/8)
The US oil rig count increased by 8 to reach 869, Baker Hughes reported. Gas rigs increased by 4 to reach 193, bringing the total number of active oil and gas rigs to 1,063—considerably higher than a year ago when 743 rigs were active. (10/13)
US crude oil exports could increase to 3.9 million b/d by 2020, mostly driven by rising production in the Permian, according to a new report by S&P Global Platts. US crude oil exports are expected to reach 2.2 million b/d next year, according to the estimates. EIA reports that US crude oil exports hit the 2 million-b/d monthly mark for the first time in May this year. (10/10) [Ed note: the US still has net imports averaging just over 3 million b/d during 2018. Further, the US will continue importing oil to meet the mix that our refineries were designed for.]
Colorado’s oil and natural gas industry will likely defeat an effective drilling ban on November’s ballot, a key state lawmaker predicted Friday, but she cautioned that the effort would return stronger in 2020 if state legislators do not find common ground on regulating abandoned wells and other issues. (10/13)
Nymex natural gas prices have jumped nearly 15 percent over the past month, rising to roughly $3.30 per million Btu. The market has clearly grown a little concerned about adequate supplies heading into the winter and that is reflected in natural gas prices rising to their highest point since the beginning of the year. For the week ending on September 28, natural gas inventories stood at 2,866 billion cubic feet (Bcf), or 636 Bcf lower than at the same point a year earlier, as well as 607 Bcf below the five-year average. (10/11)
Most heating bills will be higher this winter season while the weather may also be on average about one percent colder than last year — with potential fuel “supply issues” in cases of severe weather. On average, the US EIA expects natural gas bills to rise by five percent, home heating oil by 20 percent and electricity by three percent. (10/12)
Ethanol dustup: US President Donald Trump said Tuesday before heading to Iowa to announce an end to the summertime ban on higher ethanol blends that he wants lower US fuel prices. But the policy change to allow year-round use of gasoline blended with 15% ethanol, or E15, will not have an immediate impact on fuel prices or trade flows as it will have to go through a long rulemaking process by the EPA. And oil refiners have already promised to challenge it in court. (10/10)
Ethanol issue: The US EPA currently prohibits summer sales of gasoline blended with 15 percent ethanol, or E15, due to smog concerns. Because ethanol is cheaper than gasoline, the administration hopes it will bring down retail prices, which currently average $2.91 a gallon. (10/9)
EV partnership: Audi unveiled last month its first fully electric SUV, the e-Tron, at an event on Tesla’s home turf in San Francisco—the electric vehicle industry’s latest step toward mass adoption of EVs. What’s unusual about this particular launch is that Audi teamed up with Amazon for a home charging solution, letting Amazon into the energy and transportation businesses. (10/12)
A plus for EVs: Tesla’s competition is about to get more crowded next year with many legacy automakers and luxury brands launching a record number of battery electric vehicles and plug-in hybrids. All EV makers will have one common element that could help lift demand for battery vehicles—rising oil prices leading to fuel prices at four-year highs, which could turn consumers towards EVs. (10/8)
Vanadium is lithium on steroids—wildly bigger and the only way forward from here. We may have already reached the peak of our electric revolution through batteries with lithium. We need bigger batteries, preferably the size of a football field—or 20. That’s vanadium—Element 23. The answer to our issue of scale. (10/11)
Looming generation retirements: More than 37 GW of generation capacity—4% of today’s total—has been proposed to retire by September 2021, including 16.3 GW of coal-fired capacity, 12 GW of gas-fired power and 8 GW of nuclear generation, according to the US Federal Energy Regulatory Commission staff’s monthly infrastructure report. There is 897 GW of coal, nuclear and gas-fired capacity online today. (10/10)
Nuke export tighten-up: The US will strengthen controls on nuclear technology exports to China. The new rules, which take effect immediately, include a presumption of denial for the export of nuclear goods to China’s largest nuclear power company, the state-backed China General Nuclear Power Co., or CGN. Officials said they had evidence China was accelerating efforts to gain the technology for its military, including for use on islands in the South China Sea (10/12)
Fusion, again: The International Thermonuclear Experimental Reactor (ITER), the world’s largest experimental fusion facility in which India is a scientific partner, will start generating “a new, clean, safe and unlimited light” by 2025. (10/12)
Renewable energy is growing at a blistering rate, but clean energy is also nowhere near what is needed to avoid some of the worst effects of climate change. Renewable energy accounted for half of the increase in new electricity generation in 2017, a remarkable feat, according to a new report from the IEA. By 2023, renewables will account for 12.4 percent of total global energy demand (not just for electricity), a sign that the adoption of wind and solar around the world is gaining steam. (10/9)
Australia has rejected a call by scientists to phase out coal use by 2050 to prevent the world overshooting targets in the Paris Climate Change agreement with potentially disastrous consequences. The world’s biggest coal exporter on Tuesday said it would be “irresponsible” to comply with the recommendation by the UN’s Intergovernmental Panel on Climate Change (IPCC) to stop using coal to generate electricity. Canberra also reiterated its priority is to cut domestic electricity prices rather than curb greenhouse gas emissions, which have risen for four consecutive years. (10/9)
Climate investment: Exxon Mobil Corp’s latest shift on climate includes a $1 million donation to a political action committee’s lobbying campaign to promote a US tax on carbon-gas emissions, a central factor in global warming. The contribution was disclosed less than a month after Exxon agreed to contribute $100 million to oil companies’ efforts to develop technologies to reduce greenhouse gas emissions. (10/10)
Carbon tax: Exxon sees a carbon tax as an alternative to patchwork regulations, putting one cost on all carbon emitters nationwide, eliminating regulatory uncertainty hovering over Exxon’s business in states that might seek to target oil companies. Exxon’s contribution will go to Americans for Carbon Dividends, a new group co-chaired by former Senate Majority Leader Trent Lott. It is promoting a carbon tax-plus-dividend policy first proposed by two former secretaries of state, James Baker III and George Shultz, last year. All three figures are Republicans. The idea is to discourage companies from emitting carbon through the tax but to avoid burdening consumers by returning the money to Americans through what the group calls a “carbon dividend” that it estimates could be as much as $2,000 annually per family. (10/9)
Emissions target: The European Council agreed on setting a target of a 35 percent average reduction in CO 2 emissions from new cars by 2030. Average CO 2 emissions of new passenger cars registered in the EU will have to be 15% lower in 2025. (10/10)
Aviation target: The EU will miss its 2030 aviation emissions target by almost 100m tons if it adopts a new industry-backed standard being rolled out next year, a transport campaigning group has claimed. (10/9)
Cleaning up big-city air: Many major cities around the world are still engulfed in a daily cloud of smog. Even in a state like California, which demands the toughest emission standards, Los Angeles leads the list of US cities for poor air quality. Today, there is a very dynamic movement to switch to all-electric cars as soon as possible, but that might not be the definite solution to such complex air pollution problems. (10/13)
$240/gal gasoline tax? A new U.N. report suggests a $240 per gallon gas tax equivalent is needed to fight global warming. The U.N. says a carbon tax would need to be as high as $27,000 per ton in the year 2100. If you think that’s unlikely to ever happen, you’re probably right. (10/9)
Insurers on the hook: Extreme weather of one sort or another has been a regular feature of 2018—the same as last year. According to research from Swiss Re, there were $144bn of insured losses from natural catastrophes and man-made disasters last year, making it the most expensive year so far. “We have been looking into climate change for 30 years,” says Edi Schmid, the chief underwriting officer at insurer Swiss Re. “Clearly, there are effects — temperatures are rising, and there are more frequent heat waves and droughts.” Mr. Schmid points out that not all of the costs can be directly connected to climate change. Claims in future years could well be higher if insurance cover spreads. Total economic losses globally from last year’s disasters were $337 billion, meaning that more than half of the damage was not covered by insurance. (10/9)