Oil Prices Have Fallen below $0 a Barrel. What Does It Mean for the Climate? This Could Be an Opportunity to Reshape Our Energy System. But It Could Also Simply Lead to a Bailout of Oil Companies.

April 24, 2020

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by Adele Peters (Fast Company) ... Fracking companies have lost billions over the past decade. Some investors may be even more reluctant to invest in the sector now. “I think on the financial side, I would think twice as a lender until it became really clear what the trends were going to be in the transport sector,” Manion says. “Again, if there’s some stickiness to some of the new patterns and technologies that we’ve developed, along with hopefully at some point some strong policy signals from the United States and some of the other leading economies, you might see a real progression similar to what’s happened with coal, which is that it’s getting tougher and tougher to finance.”

Fossil fuel companies want a government bailout now, and Trump has suggested going farther to pay for oil that hasn’t even been extracted yet. But the U.S. government could also move in a different direction as it invests in economic recovery: Will the recovery embrace the necessary green technologies of the future? “We’re hopeful that if there’s an infrastructure package that it does take the long view,” says Manion, adding that some of the fastest-growing jobs before the pandemic were in the green sector, including energy efficiency jobs.

“If you want to accelerate recovery and neutralize to some extent some of the negative impact of COVID on the economy, you’ve got to make investments in greening the economy, reindustrializing, changing our processes, and putting people back to work almost the way that they did in the ’30s,” says Paula DiPerna, special adviser for the nonprofit CDP. “To address climate change is an enormous economic opportunity, and to fail to do so is to miss potentially the greatest opportunity to rethink our economic direction in a generation.” READ MORE

Oil sector skeptical of Trump plans (Politico's Morning Energy)

COVID-19 Impact Underscores Need for Biofuels (Morning Consult)

DIESEL TRUCKS HAVEN’T STOPPED ROLLING DURING THE PANDEMIC, AND NOW THE AIR IS CLEANER. WHAT GIVES? (Diesel Technology Forum)

Farm and Food: We have to start somewhere (Lincoln Journal Star)

As Oil Trades Below $0, Will Corn or Ethanol be Next? (Farm Journal AgWeb)

Jerry Gulke: Are Markets, COVID-19 Forcing Acreage Changes? (Farm Journal AgWeb)

Europe Pushes for Green Stimulus, Will Congressional Republicans Finally See the Light? (Our Daily Planet)

Big Flares, Big Bankruptcy, Big Relief? Oil Sector Experiencing “Tectonic Shift” (Our Daily Planet)

EARTH DAY PERSPECTIVES AND A GREEN RECOVERY (Diesel Technology Forum)

POLL — MORE THAN HALF OF VOTERS SUPPORT RENEWABLE BAILOUT: (Politico's Morning Energy)

Bail out clean energy before oil, most Americans say (E&E News)

TEXAS UNLIKELY TO CUT PRODUCTION: (Politico's Morning Energy)

Trump pulls back on oil rescue: TRUMP TAKES FOOT OF THE GAS: (Politico's Morning Energy)

US fossil fuel giants set for a coronavirus bailout bonanza: Exclusive: oil, coal and fracking companies in line to benefit from $750bn bond scheme (The Guardian)

Citi Announces Inaugural USD-denominated Benchmark Green Bond Issuance (Citi/Yahoo! Finance)

Special Report: Millions of abandoned oil wells are leaking methane, a climate menace (Reuters)

Politico's Morning Energy: Energy officials say they are growing skeptical that any workable plan from the Trump administration will emerge to prop up the struggling oil industry.

— Fossil fuel and clean energy interests are getting in line for the next coronavirus relief package, with former Vice President Joe Biden adding his voice to those pushing for green infrastructure.

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OIL INDUSTRY DOUBTFUL OF TRUMP PLANS:Energy officials are becoming more and more skeptical the Trump administration will be able to come up with a workable plan to help the oil industry hit by a one-two punch from the coronavirus and a crash in prices, Pro's Ben Lefebvre and Zack Colman report this morning. The Trump administration has already jettisoned plans to buy oil for the Strategic Petroleum Reserve, nixed an idea to eliminate royalty payments for energy produced on federal lands, and dropped a discussion of paying oil companies not to produce oil.

The latest idea floated last week calls for the Treasury Department to create a new fund to lend money to struggling oil producers — and take partial ownership stakes in the companies while requiring them to reduce their output. "This is whack-a-mole stuff," said one industry source. "There is a huge interest to 'do something' to help. But it all sounds good until step two."

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But skeptics in the industry say that would be all but unworkable politically and financially. "When I heard that, it was in the context of 'We could be totally insane and try this,'" said one person in the oil and gas industry who requested anonymity because they weren't authorized to talk to the press. "Are we really talking about nationalizing our oil industry? Is the government equipped to do something like this? The answer is no."

Asked on Fox News Sunday about a bailout for oil companies, Treasury Secretary Steven Mnuchin said the president has made clear there would be no bailouts to any companies — including the oil producers. "We will consider, again, loans to companies in a proper scenario with strategic importance, but no bailouts. No shareholder bailouts," he said. Mnuchin however said the administration is looking "carefully" at loans to oil companies. "The secretary of Energy and I are studying it and we're looking at it very carefully," he said.

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The presumptive Democratic nominee suggested the next package should include a "trillion-dollar infrastructure program that can be implemented really rapidly," as well as "dealing with environmental things that create good-paying jobs." President Donald Trump and Senate Majority Leader Mitch McConnell have suggested that "green stimulus" would be a non-starter with Republicans, but Biden said investments in light rail, clean drinking water, and half a million electric vehicle chargers on the nation's highways could help retool the economy for the future.

Trump campaign spokesman Tim Murtaughresponded to the comments by accusing Biden of trying to exploit the coronavirus crisis to push a Green New Deal, which Murtaugh said would create "millions of job losses in the energy sector."

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POLITICO reported last week that while new polling across 14 countries in the G-20 shows a majority in every country surveyed agrees economic recovery should "prioritize climate change," lawmakers will have to balance that sentiment with requests for bailouts and regulatory relief from sectors that are both hard-hit and high-polluting, including aviation, auto makers and fossil fuels.

Still, five energy-state Republican senators, led by Sen. Kevin Cramer of North Dakota, are demanding any assistance for the renewable energy sector be paired with accompanying benefits for the fossil fuel sector, Pro's Anthony Adragna reports. While they oppose extending any clean energy credits, the Republicans said in a letter to McConnell that any move along those lines must be paired with "immediate action to properly compensate" coal and nuclear facilities, enhanced carbon capture and sequestration credits, an extension of the refined coal tax credit and legislative action to reduce the time lines for permitting reviews.

Sen. Ron Wyden, ranking member of the Finance Committee, told ME Democrats would not support aid for fossil fuel companies in future packages. "In this time of crisis, Democrats are committed to ensuring that COVID-related disruptions do not threaten the clean energy jobs and investments that have helped put the U.S. on a path to a more sustainable future," Wyden said. "The fossil fuel industry has received taxpayer support for more than a century — it's long past time America stopped coddling them."

CONSIDER THIS: The National Wildlife Federation told ME it will make a series of new policy recommendations on natural climate solutions to lawmakers this week, focusing on natural ways to sequester carbon and address climate change. READ MORE

Excerpt from Morning Consult: Fine particulate air pollution — specifically tiny particles called “particulate matter” that are generated in part by fuel combustion from cars — continues to be a significant health threat. In fact, the American Lung Association just released The State of the Air 2020, and one of the key findings is “that too many cities across the nation increased the number of days when particle pollution soared to often record-breaking levels.”

While there have been reports it has temporarily improved as a result of our “new normal,” we owe it to ourselves to ensure we get on path to keep it that way. This is even more critical now — since recent research found a link between high exposure to fine particulate air pollution and pre-existing conditions that contribute to more severe outcomes from COVID-19.

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Additional benefits of ethanol include the potential for rural economic stimulus, and just as important — but often not highlighted — reduced emissions and health costs.

E30 gasoline is the “sweet spot” as far as ethanol blends go. It can significantly reduce toxic emissions from gasoline. These tiny emissions exacerbate air pollution and hurt our health — increasing instances of preterm births, cancer, IQ loss, neurological disorders and a multitude of respiratory diseases.

In fact, research in a Guardian article noted that “the impact of different pollutants on many ailments remains to be established, suggesting well-known heart and lung damage is only ‘the tip of the iceberg.’” And similar to the research linking fine particulate air pollution and COVID-19, these particles have been proven to disproportionality affect low-income communities and vulnerable populations such as pregnant women.

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A solution exists: enforcement of the mandatory provision of the Clean Air Act that requires the Environmental Protection Agency to reduce the toxic carcinogens that refiners use to increase octane in gasoline. And all this would take is the stroke of the president’s pen. Frankly, the SAFE Rule was a huge missed opportunity to make it right.

Thankfully, experts are bringing this issue back to the forefront. Earlier this year — even before COVID-19 was widespread in the United States — a distinguished group of energy and policy experts discussed the topic in the National Clean Fuels Technology and Health Effects Leadership Forum.

One of the forum’s speakers, Reid Detchon, senior adviser for climate solutions at the UN Foundation, spoke about the smoking gun — the fact that the EPA itself admitted it was wrong about the dangers of gasoline aromatics. Another participant, former Sen. Tim Wirth (D-Colo.), joined Sen. Charles Grassley (R-Iowa) late last year to urge environmental advocates to take another look at biofuels. READ MORE

Excerpt from Farm Journal AgWeb: “We may be seeing a paradigm shift in ethanol, where plant become more of a protein or a DDG-maker and ethanol is a byproduct,” he (Jerry Gulke, president of the Gulke Group) says. “That’s is a total shift in what we started out with back in 2005.”

With all the price and demand uncertainty, Gulke says farmers may make more last-minute acreage shifts that ever before.

“Some people are switching a pivot from corn to alfalfa,” he says. “Some are going into specialty crops, non-GMO or expanding organic production. I just switched some more corn ground to bean ground. Why would I plant corn now when I know it is a negative result?”

Gulke urges any farmers with time to carefully analyze the profit potential for the crops they plan to plant—don’t just follow your standard rotation.

“People like to say for the long term, they don’t change because of rotation,” he says. “In the long term, we're all going to be dead. In the short term, we want to make money, so we don't have to sell the farm. Now is when being flexible and using futures and options can help you make good decisions quickly.”

Manage your short-term risk and key your eye on the big picture, Gulke says.

“We have a long road ahead of us in mitigating the problems that are affecting agriculture,” he says. “It may take years of work our way out of this.” READ MORE

Excerpt from Diesel Technology Forum: The opportunity for a green recovery, one that invests in new fuels and energy technologies guided by greenhouse gas emissions profiles, is prescient. In this tumultuous time, we would be wise to set aside the “either-or’s”, “either you are 100% behind a 100% renewable clean energy future, or you are not”, in favor of certainty and accommodation; a little give and take on all sides. Do what is possible right now to help dig out of this hole. Some future plans and milestones will inevitably be delayed or shelved entirely until clearer days are ahead, and that’s reasonable and okay.

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Truck, engine and equipment makers are looking for the best for their customers, and recognize the opportunities of alternatives. That means that diesel will yield some of its 97 percent market share in the heavy-duty side of commercial trucking to new alternatives like hydrogen fuel cells or battery-electric technology. Use of low-carbon fuels including biodiesel and renewable diesel fuel have proven capabilities and can bring valuable near-term benefits. The largest trucks and heaviest equipment and machines continue to rely on diesel, and manufacturers are improving on diesel’s energy efficiency and low emissions, along with meeting new government efficiency and upcoming further low emission mandates. Last mile deliveries in urban areas are being made today with all electric trucks, albeit in very limited test markets. Exactly how much and when new technologies become more mainstream now must factor in the economic impacts of COVID-19. READ MORE

Excerpt from Politico’s Morning Energy: POLL — MORE THAN HALF OF VOTERS SUPPORT RENEWABLE BAILOUT: Support among U.S. voters for a government bailout of the renewable energy industry amid the coronavirus pandemic has remained steadily above 50 percent, according to a new Morning Consult poll. The poll, conducted from April 29-30, found 56 percent of voters supported a bailout of the renewables industry, up just 2 percent from an earlier survey from March 31-April 1 that asked the same question. The U.S. renewable energy industry has seen delayed construction and thousands of jobs lost amid the pandemic, as the Associated Press highlighted over the weekend.

The Morning Consult poll released early this morning also shows that support for the renewable industry is higher than that for a bailout of the oil and gas industry, but it showed support for the latter also went unchanged between the two polls, even as oil prices dipped below zero last month. Thirty-eight percent of voters said they would support a bailout of the oil and gas industry. READ MORE

Excerpt from Politico's Morninge Energy: TEXAS UNLIKELY TO CUT PRODUCTION: ... (Texas Railroad Commissioner Ryan) Sitton said Monday he believed that some larger oil companies would use their Washington, D.C., connections to seek their own financial assistance from the federal government. "I do think absolutely there are going to be some companies who argued against proration who are going to the federal government and asking for stimulus dollars, loans, asking to block imports of oil," Sitton said in the interview. "You've got different companies all over the map on this. Almost everybody is arguing for what's in their interest as opposed to the nation's or the industry's interest." READ MORE

Excerpt from Politico's Morning Energy: TRUMP TAKES FOOT OF THE GAS: Industry officials in contact with the White House and Energy Department say there seem to be no new plans coming out of the Trump administration to aid struggling oil companies since the Treasury Department said it would allow the Federal Reserve to relax some restrictions on buying debt from companies with poor credit ratings, Pro's Ben Lefebvre, Anthony Adragna and Zack Colman report this morning. Instead, the administration appears to be content to let states address the fallout of the oil market meltdown.

The administration hasn't closed the door to more aid, White House allies said. But President Donald Trump, who called the recent uptick in prices "good for jobs" and "good for the economy" during a press briefing Thursday, seems to consider the modest rebound reason enough to move on, sources said. "Until the president says 'no' publicly it's not dead — and even if he does say 'no' it doesn't mean he won't change his mind," said Paul Blair, strategic director of Americans for Tax Reform. "[But] I don't think it is the current top priority in the administration."

The White House is still mulling tariffs on oil imports and "all options are on the table," said Stephen Moore, an economist with the Heritage Foundation whom Trump briefly sought to appoint to the Federal Reserve. And Treasury Secretary Steven Mnuchin and Energy Secretary Dan Brouillette are still exploring an emergency lending program for oil and gas companies, multiple people said, though details on that effort remained scarce.

But while major firms like Exxon Mobil — which posted its first quarterly loss in more than 30 years last week — are likely to be able withstand the low prices for some time, many smaller and mid-sized companies have said they need some form of government assistance or they risk going out of business.

"Why this administration can stand idly by while entire sections of the oil and gas industry are cratering is mystifying," said one industry official who requested anonymity to talk about discussions he had with administration officials. "I'm glad the president has such a good relationship with the Saudis because in a few years he is going to be buying a lot of oil from Saudi Arabia. So much for American Energy Dominance."

Looking ahead: IHS Markit expects the second quarter of 2020 will see the largest volume of petroleum liquids production cuts in the history of the oil industry, including shut-in production, according to analysis released this morning. IHS expects cuts or shut-ins of as much as 17 million barrels per day, including a drop of nearly 14 million bpd of crude oil production, between April and June 2020. Oil demand in the second quarter is also expected to be 22 million bpd less than a year ago. READ MORE