News Round-up, August 14, 2023
The Best in the Biz – August 10, 2023
Posted to Energy Centralin the Utility Management GroupEPA Plan Would Impose Drastic Cuts on Power Plant Emissions by 2040
Link to original article: https://energycentral.com/c/ee/epa-plan-would-impose-drastic-cuts-power-plant-emissions-2040
The Biden administration is preparing to unveil a proposal to require power plants to drastically reduce their greenhouse-gas emissions by 2040, another attempt to regulate one of the country’s biggest contributors to climate change after the Supreme Court struck down the first effort, according to three people familiar with the plans.
I want to express my deepest gratitude to Matt Chester for his immense support, but my appreciation does not end with Matt. I also extend my thanks to everyone of you who has supported me. Your support has made all the difference, and I am forever grateful.
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The Clean Energy Future Is Arriving Faster Than You Think
The United States is pivoting away from fossil fuels and toward wind, solar and other renewable energy, even in areas dominated by the oil and gas industries.
NYT, David Gelles reported from Tulsa, Okla.; Brad Plumer and Jim Tankersley from Washington; and Jack Ewing from New York to see how an accelerated energy transition is playing out. Photographs by Mason Trinca, August 13, 2023Electric Vehicle Myths
Electric Vehicles: Will they save or destroy us?
Source: https://www.epa.gov/greenvehicles/electric-vehicle-myths#Myth1The Economic Losers in the New World Order
Giant subsidies and rising protectionism are upending decades of free trade. Smaller countries, from the U.K. to Singapore, are getting left behind.
WSJ by Ed Ballard, Jason Douglas, and Jon Emont, August 14, 2023 The Economic Losers in the New World OrderOpinion: In Iowa, Mike Pence delivers a powerful message against Trump
TWP by Karen Tumulty, Deputy opinion editor and columnist, August 13, 2023 The hunt for Russia’s secret ships
Turkey’s strategic straits are a trade superhighway — and a lifeline for the Kremlin’s war machine.
POLITICO EU BY GABRIEL GAVIN, AUGUST 14, 2023Oil Firms Face Hard Choices After a Year of Big Spending
The industry’s wartime windfall is dwindling
TWSJ by David Uberti, August 14, 2023The AES Corporation is committed to accelerating the future of energy transitions by delivering greener and more innovative solutions. AES firmly believes that energy infrastructure plays a crucial role in ensuring the sustainability of our sector. Recently, the AES President and CEO, Andrés Gluski, had the privilege of moderating a captivating discussion titled "Harnessing Diplomacy for the Energy Transition and Universal Access" at the @EEI_Intl panel. This engaging conversation highlights the importance of collaboration and innovative approaches in driving the energy transition forward.
A big shift in the way America produces energy is already underway.The Clean Energy Future Is Arriving Faster Than You Think
The United States is pivoting away from fossil fuels and toward wind, solar and other renewable energy, even in areas dominated by the oil and gas industries.
NYT, David Gelles reported from Tulsa, Okla.; Brad Plumer and Jim Tankersley from Washington; and Jack Ewing from New York to see how an accelerated energy transition is playing out. Photographs by Mason Trinca, August 13, 2023This is the first article in a three-part series examining the speed, challenges and politics of the American economy moving toward clean energy.
Delivery vans in Pittsburgh. Buses in Milwaukee. Cranes loading freight at the Port of Los Angeles. Every municipal building in Houston. All are powered by electricity derived from the sun, wind or other sources of clean energy.
Across the country, a profound shift is taking place that is nearly invisible to most Americans. The nation that burned coal, oil and gas for more than a century to become the richest economy on the planet, as well as historically the most polluting, is rapidly shifting away from fossil fuels.
A similar energy transition is already well underway in Europe and elsewhere. But the United States is catching up, and globally, change is happening at a pace that is surprising even the experts who track it closely.
Wind and solar power are breaking records, and renewables are now expected to overtake coal by 2025 as the world’s largest source of electricity. Automakers have made electric vehicles central to their business strategies and are openly talking about an expiration date on the internal combustion engine. Heating, cooling, cooking and some manufacturing are going electric.
As the planet registers the highest temperatures on record, rising in some places to levels incompatible with human life, governments around the world are pouring trillions of dollars into clean energy to cut the carbon pollution that is broiling the planet.
The cost of generating electricity from the sun and wind is falling fast and in many areas is now cheaper than gas, oil or coal. Private investment is flooding into companies that are jockeying for advantage in emerging green industries.
“We look at energy data on a daily basis, and it’s astonishing what’s happening,” said Fatih Birol, the executive director of the International Energy Agency. “Clean energy is moving faster than many people think, and it’s become turbocharged lately.”
More than $1.7 trillion worldwide is expected to be invested in technologies such as wind, solar power, electric vehicles and batteries globally this year, according to the I.E.A., compared with just over $1 trillion in fossil fuels. That is by far the most ever spent on clean energy in a year.
Those investments are driving explosive growth. China, which already leads the world in the sheer amount of electricity produced by wind and solar power, is expected to double its capacity by 2025, five years ahead of schedule. In Britain, roughly one-third of electricity is generated by wind, solar and hydropower. And in the United States, 23 percent of electricity is expected to come from renewable sources this year, up 10 percentage points from a decade ago.
“The nature of these exponential curves sometimes causes us to underestimate how quickly changes occur once they reach these inflection points and begin accelerating,” said former Vice President Al Gore, who called attention to what he termed a “planetary crisis” 17 years ago in his film “An Inconvenient Truth.” “The trend is definitely in favor of more and more renewable energy and less fossil energy.”
Even as the pace of change in the United States is surprising everyone from energy experts to automobile executives, fossil fuels still dominate energy production at home and abroad.
Corporations are building new coal mines, oil rigs and gas pipelines. The government continues to award leases for drilling projects on public lands and in federal waters and still subsidizes the industries. After posting record profits last year, leading oil companies are backing away from recent promises to invest more heavily in renewable energy.
The scale of change required to remake the systems that power the United States — all the infrastructure that needs to be removed, re-engineered and replaced — is mind-boggling. There are major challenges involved in adding large amounts of renewable energy to antiquated electric grids and mining enough minerals for clean technologies. Some politicians, including most Republicans, want the country to continue burning fossil fuels, even in the face of overwhelming scientific consensus that their use is endangering life on the planet. Dozens of conservative groups organized by the Heritage Foundation have created a policy playbook, should a Republican win the 2024 presidential election, that would reverse course on lowering emissions. It would shred regulations designed to curb greenhouse gases, dismantle nearly every federal clean energy program and boost the production of fossil fuels.
And while energy systems are changing fast, so is the climate. It is far from certain whether the United States and other polluting countries will do what scientists say is required to avert catastrophe: stop adding greenhouse gases to the atmosphere by 2050. All of the investment so far has slowed the pace at which emissions are growing worldwide, but the amount of carbon dioxide pumped into the atmosphere is at record levels.
And yet, from Beijing to London, Tokyo to Washington, Oslo to Dubai, the energy transition is undeniably racing ahead. Change is here, even in oil country.
‘Energy Is Energy’
As the workday begins in Tulsa, Okla., the assembly line at the electric school bus factory rattles to life. Crews fan out across the city to install solar panels on century-old Tudor homes. Teslas and Ford F-150 Lightnings pull up to charging stations powered in part by the country’s second-largest wind farm. And at the University of Tulsa’s School of Petroleum Engineering, faculty are working on ways to use hydrogen as a clean energy source.
Tulsa, a former boomtown once known as the “Oil Capital of the World” where the minor league baseball team is the Drillers, is immersed in a new energy revolution.
At the port, an Italian company, Enel, is building a $1 billion solar panel factory. The bus factory is operated by Navistar, one of the biggest commercial vehicle makers in the world. And the city’s main electric utility, Public Service Company of Oklahoma, now harvests more than 28 percent of its power from wind.
Clean energy entrepreneurs are flocking to Oklahoma, too. Francis Energy, a fast-growing maker of electric vehicle charging stations, is based in Tulsa. Canoo, an electric vehicle start-up, is building a 100,000-square-foot battery factory at a nearby industrial park and a manufacturing plant for its trucks in Oklahoma City, though there are questions about whether the company will have enough funding to realize its plans. And teams from Solar Power of Oklahoma are busy fastening photovoltaic panels to the roofs of homes and businesses around Tulsa.
The city is embracing its shifting identity.
“We have a tremendous sense of pride in our history,” said Dewey F. Bartlett Jr., the Republican former mayor of Tulsa who was an oil and gas executive but now helps recruit clean energy companies to the region. “But we also understand that energy is energy, whether it is generated by wind, steam or whatever it might be.”
Around the country, clean energy is taking root in unlikely locales.
Houston, home to more than 500 oil and gas companies, also has more than 130 solar- and wind-related companies. Some of the country’s largest wind and solar farms are in the Texas flatlands outside the city, and a huge wind farm has been proposed off the coast of Galveston.
In Arkansas, a planned solar farm — the state’s biggest — is expected to help power a nearby U.S. Steel factory that is undergoing a $3 billion upgrade. When complete, the plant will use electric furnaces to mold scrap steel into new products. That will result in about 80 percent less greenhouse gases, the company says, and set the pace for an industry that has been a major polluter.
About two-thirds of the new investment in clean energy is in Republican-controlled states, where policymakers have historically resisted renewables. But with each passing month, the politics seem to matter less than the economics.
“We’re the reddest state in the country, and we’re an oil and gas state,” said J.W. Peters, president of Solar Power of Oklahoma. “So it took a lot of time to convince people that this wasn’t snake oil.”
Mr. Peters was broke six years ago, with less than $400 in his checking account after his contracting business slowed down. Then he responded to a help-wanted ad looking for workers to install solar panels, which were becoming more popular in Tulsa. He now employs 61 workers and has $18 million in annual sales. “The environmental benefits are nice,” he said, “but most people are doing this for the financial opportunity.”
‘Something Very Dramatic’
Fifteen years ago, solar panels, wind turbines and battery-powered vehicles were widely viewed as niche technologies, too expensive and unreliable for mainstream use.
But clean energy became cheap far faster than anyone expected. Since 2009, the cost of solar power has plunged by 83 percent, while the cost of producing wind power has fallen by more than half. The price of lithium-ion battery cells fell 97 percent over the past three decades.
Today, solar and wind power are the least expensive new sources of electricity in many markets, generating 12 percent of global electricity and rising. This year, for the first time, global investors are expected to pour more money into solar power — some $380 billion — than into drilling for oil.
The rapid drop in costs for solar energy, wind power and batteries can be traced to early government investment and steady improvements over time by hundreds of researchers, engineers and entrepreneurs around the world.
Source: Lazard. Notes: Charts reflect the mean levelized cost of energy, which captures the price of building and running new power plants but excludes other electrical system costs. Lazard did not release data for 2022. In 2023, costs rose because of supply-chain problems, inflation and other issues.“The world has produced nearly three billion solar panels at this point, and every one of those has been an opportunity for people to try to improve the process,” said Gregory Nemet, a solar power expert at the University of Wisconsin-Madison. “And all of those incremental improvements add up to something very dramatic.”
An equally potent force, along with the technological advances, has been an influx of money — in particular, a gusher since 2020 of government subsidies.
In the United States, President Biden signed a trio of laws during his first two years in office that allocated unprecedented funds for clean energy: A $1 trillion bipartisan infrastructure law provided money to enhance the power grid, buy electric buses for schools and build a national network of electric vehicle chargers. The bipartisan CHIPS and Science Act set aside billions of dollars for semiconductors vital to car manufacturing. And the Inflation Reduction Act, which marks its first anniversary on Aug. 16, is by far the most ambitious attempt to fight climate change in American history.
The United States is ramping up its capacity to produce electric vehicles, batteries, solar panels and wind turbines.
That landmark law provided tax breaks related to electric vehicles, heat pumps and energy efficiency upgrades, solar panel and wind turbine manufacturing and clean hydrogen production. The government is also investing in efforts to capture carbon emissions and store them before they can reach the atmosphere, as well as technology that can remove them directly from the air.
Originally estimated to cost roughly $391 billion between 2022 and 2031, the tax breaks are proving so popular with manufacturers and consumers that estimates now put the cost as high as $1.2 trillion over the next decade.
Combined, the three laws have prompted companies to announce at least $230 billion in manufacturing investments so far. In Georgia, a Korean solar manufacturer, Qcells, is building a $2.5 billion plant. In Nevada, Tesla is building a new $3.6 billion electric truck factory. And in Oklahoma, the Enel and Canoo facilities are primed to benefit from the Inflation Reduction Act, as is a new $4.4 billion battery factory being considered by Panasonic, the Japanese conglomerate.
“There’s a lot of appetite to invest in the United States thanks to that law,” said Giovanni Bertolino, an executive at Enel, adding that the plant his company is building in Tulsa would not exist without the Inflation Reduction Act.
Regulations are also hastening the energy transition. Mr. Biden has proposed tough new federal pollution limits on tailpipes and smokestacks, but several states are acting on their own. California, with market muscle that influences the entire auto industry, plans to halt sales of new gas-powered cars by 2035 and new diesel-powered trucks by 2036 — and a handful of states are following suit. In May, New York became the first state to ban gas hookups in most new buildings, requiring all-electric heating and cooking starting in 2026. Several cities, including New York and San Francisco, have similar prohibitions, although some Republican-controlled states have blocked their municipalities from banning gas.
Heavy investment by the United States has spurred a spirited reaction from other wealthy nations. Countries that initially complained that the United States was unfairly subsidizing clean energy manufacturers have since engaged in a sort of friendly subsidy race.
Canada, South Korea and others have pushed for their companies to have better access to the American incentives, while offering similar subsidies to their domestic manufacturers. After Russia invaded Ukraine last year, the European Union moved to lessen its dependence on Russian oil and gas. In May, for the first time ever, wind and solar power in the E.U. generated more electricity than fossil fuels.
And in China, which is currently both the world’s top polluter and the global leader for renewable power, the government continues to invest in every stage of clean energy production, from solar cells to batteries, wind turbines and more. Like the United States, China provides subsidies to buyers of electric vehicles. Last year it spent $546 billion on clean energy, far more than any other country in the world.
With costs falling fast, manufacturing has picked up and installations of solar and wind projects have increased. The U.S. solar industry installed a record 6.1 gigawatts of capacity in the first quarter of 2023, a 47 percent increase over the same period last year.
And those low costs have led many of the United States’ biggest corporations, such as Alphabet, Amazon and General Motors, to purchase large amounts of wind and solar power, because it burnishes their reputations and because it makes good economic sense.
“We’re seeing the nonlinear change happen before us,” said Jon Creyts, chief executive of RMI, a nonprofit organization that promotes the energy transition. “And that’s important, because we’re facing a climate crisis right now.”
‘A National Phenomenon’
Steve Uerling’s Tulsa home is a model of energy efficiency. He replaced all his incandescent light bulbs with LEDs. He installed a heat pump and rooftop solar panels this year. And he drives a plug-in hybrid Ford Fusion and a Tesla Model 3.
Mr. Uerling, a mechanical engineer, said he wanted to see renewable power take off in Oklahoma and was trying to do his part. But he was also driven by his wallet.
Source: International Energy AgencyNote: Sales share of battery electric vehicles excludes plug-in hybrids. By The New York Times“My fuel cost is equivalent to getting 200 miles a gallon on gasoline,” he said. “We charge at night, when we get a much cheaper rate on our electricity.”
Millions of people around the country are making similar calculations. Electric vehicles are by far the fastest-growing segment of the auto industry, with record sales of 300,000 in the second quarter of 2023, a 48 percent increase from a year earlier. Teslas are now among the best-selling cars in the country, and Ford has expanded its production of the F-150 Lightning, the electric version of its popular pickup truck, after a surge of initial demand created a waiting list.
Concerns among consumers about the availability of charging stations as well as the cost of some models have helped to cool sales somewhat, leading some automakers to slash prices. Still, federal tax credits of up to $7,500 have made the least expensive electric vehicles competitive with gas-powered cars. And about two dozen states offer additional tax credits, rebates or reduced fees, further pushing down their cost.
Government action is also helping heavier vehicles go electric. Sales of electric school buses are soaring, largely because of $5 billion in federal grants that can cover 100 percent of the cost for low-income communities. The Postal Service plans to spend nearly $10 billion to purchase 66,000 electric mail trucks — roughly 30 percent of its fleet — over the next five years.
Electric vehicles sales are growing quickly, but consumers are still concerned about high upfront costs and charging availability.
In the private sector, Amazon has ordered 100,000 electric delivery trucks from Rivian. Tesla has an electric semitruck, as do several other manufacturers, including Peterbilt.
Companies that provide charging stations are springing up to meet the demand. Francis Energy has more than 400 chargers across Oklahoma and is expanding nationwide. EVgo, which has one of the largest fast-charging networks in the United States, plans to more than double the 3,000 charging stalls it operates.
“It is not a red-state, blue-state thing,” said Cathy Zoi, EVgo’s chief executive. “It is a national phenomenon.”
In an unusual move, seven carmakers — BMW Group, General Motors, Honda, Hyundai, Kia, Mercedes-Benz Group and Stellantis — are spending $1 billion in a joint venture to build 30,000 charging ports on major highways and other locations in the United States and Canada.
The shift is happening so quickly that some of America’s most iconic automakers are preparing for a world beyond gasoline-powered cars and trucks.
General Motors, which has the largest market share of any carmaker in the United States, has committed to selling only zero-emissions vehicles by 2035. It’s a “once-in-a-generation inflection point” for the 114-year-old automaker, according to Mary Barra, G.M.’s chief executive.
In an interview, Ms. Barra said her company began to consider an all-electric future in 2020. “We started to see this happening with the consumer research we did,” said Ms. Barra, who has subsequently bet billions on G.M.’s efforts to reorient its engineering, overhaul its manufacturing facilities and processes and build new battery plants.
As the cost of batteries comes down, and the number of charging stations nationwide goes up, Ms. Barra expects exponential growth. “I think it’s going to be definitely an upward trajectory,” she said. “It’ll be a little bumpy, but bumpy growing.”
Source: MediaElectric Vehicle Myths
Source: https://www.epa.gov/greenvehicles/electric-vehicle-myths#Myth1
Electric Vehicles: Will they save or destroy us?
https://www.youtube.com/watch?v=UNBLhGsjHQIMyth #1: Electric vehicles are worse for the climate than gasoline cars because of the power plant emissions.
FACT: Electric vehicles typically have a smaller carbon footprint than gasoline cars, even when accounting for the electricity used for charging.
Electric vehicles (EVs) have no tailpipe emissions. Generating the electricity used to charge EVs, however, may create carbon pollution. The amount varies widely based on how local power is generated, e.g., using coal or natural gas, which emit carbon pollution, versus renewable resources like wind or solar, which do not. Even accounting for these electricity emissions, research shows that an EV is typically responsible for lower levels of greenhouse gases (GHGs) than an average new gasoline car. To the extent that more renewable energy sources like wind and solar are used to generate electricity, the total GHGs associated with EVs could be even lower. (In 2020, renewables became the second-most prevalent U.S. electricity source.1 ) Learn more about electricity production in your area by visiting EPA’s Power Profiler interactive web page. By simply inputting your zip code, you can find the energy mix in your region.
EPA and Department of Energy's (DOE’s) Beyond Tailpipe Emissions Calculator can help you estimate the greenhouse gas emissions associated with charging and driving an EV or a plug-in hybrid electric vehicle (PHEV) where you live. You can select an EV or PHEV model and type in your zip code to see the CO2 emissions and how they stack up against those associated with a gasoline car.
Myth #2: Electric vehicles are worse for the climate than gasoline cars because of battery manufacturing.
FACT: The greenhouse gas emissions associated with an electric vehicle over its lifetime are typically lower than those from an average gasoline-powered vehicle, even when accounting for manufacturing.
Some studies have shown that making a typical EV can create more carbon pollution than making a gasoline car. This is because of the additional energy required to manufacture an EV’s battery. Still, over the lifetime of the vehicle, total GHG emissions associated with manufacturing, charging, and driving an EV are typically lower than the total GHGs associated with a gasoline car. That’s because EVs have zero tailpipe emissions and are typically responsible for significantly fewer GHGs during operation (see Myth 1 above).For example, researchers at Argonne National Laboratory estimated emissions for both a gasoline car and an EV with a 300-mile electric range. In their estimates, while GHG emissions from EV manufacturing and end-of-life are higher (shown in orange below), total GHGs for the EV are still lower than those for the gasoline car.
Source: EPAEstimates shown2 from GREET 2 2021 are intended to be illustrative only. Estimates represent model year 2020. Emissions will vary based on assumptions about the specific vehicles being compared, EV battery size and chemistry, vehicle lifetimes, and the electricity grid used to recharge the EV, among other factors.
Above, the blue bar represents emissions associated with the battery. The orange bars encompass the rest of the vehicle manufacturing (e.g., extracting materials, manufacturing and assembling other parts, and vehicle assembly) and end-of-life (recycling or disposal). The gray bars represent upstream emissions associated with producing gasoline or electricity (U.S. mix), and the yellow bar shows tailpipe emissions during vehicle operations.
Recycling EV batteries can reduce the emissions associated with making an EV by reducing the need for new materials. While some challenges exist today, research is ongoing to improve the process and rate of EV battery recycling.
Myth #3: The increase in electric vehicles entering the market will collapse the U.S. power grid.
FACT: Electric vehicles have charging strategies that can prevent overloading the grid, and, in some cases, support grid reliability.
It is true that the increasing number of electric vehicles (EVs) on the road will lead to increased electricity demand. Yet, how that impacts the grid will depend on several factors, such as the power level and time of day when vehicles are charged, and the potential for vehicle-to-grid (V2G) charging 3 among others.
EVs can be charged at off-peak times, such as overnight, when rates are often cheaper. Even with a mix of charging times (so not all nighttime charging), research indicates that sufficient capacity will exist to cover EVs entering the market in the coming years.4 And further down the road, when renewables make up a larger part of our energy mix in many regions, switching to more daytime charging (when some renewables like solar generate energy) with some energy storage capability should allow the grid to handle increases in EV charging.5 California leads the country with more than 1 million electric vehicles and EV charging currently makes up less than 1% of the state’s grid total load, even during peak hours.6
Vehicle-to-grid (V2G) charging allows EVs to act as a power source that may help with grid reliability by pushing energy back to the grid from an EV battery. This is done by allowing EVs to charge when electricity demand is low and drawing on them when that demand is high.
Long term, higher electricity demand from EV growth may drive the need for upgrades to transmission and distribution infrastructure. Planning for this possibility is underway. The Department of Energy’s (DOE) Build a Better Grid Initiative, launched as part of the Bipartisan Infrastructure Law, will provide over $13 billion towards improving the reliability and efficiency of the grid over the next decade. Visit DOE’s Bipartisan Infrastructure Programs and search “grid infrastructure” to see where the initial investments will be made.
Myth #4: There is nowhere to charge.
FACT: Electric vehicles can be plugged into the same type of outlet as your toaster! When you need to charge while on the road, you’ll find over 51,000 stations in the U.S. available to the public.
Many people can meet their driving needs by plugging in only at home. Most EVs can be charged with a standard 120 Volt (Level 1) outlet. To charge the vehicle more quickly, you can install a dedicated 240 Volt (Level 2) outlet or charging system. And for those who live in apartments or condominiums, EV charging stations are becoming a more common building amenity.Access to EV charging will increase significantly in the coming years as a result of government initiatives put in place as part of the Bipartisan Infrastructure Law, including an investment of up to $7.5 billion to build out a national network of electric vehicle chargers along highways, and in communities and neighborhoods. In February 2023, the White House announced major progress toward a made-in-America national network of EV chargers.
Interested in seeing how many chargers may be needed in your area? Use DOE’s EV Pro Lite Tool to get an estimate on charging needs in your state or metropolitan area as EV adoption grows.
For up-to-date information on EV charging locations, visit DOE’s Alternative Fuel Data Center.
Myth #5: Electric vehicles don’t have enough range to handle daily travel demands.
FACT: Electric vehicle range is more than enough for typical daily use in the U.S.
EVs have sufficient range to cover a typical household’s daily travel, which is approximately 50 miles on average per day.7 The majority of households (roughly 85%) travel under 100 miles on a typical day. Most EV models go above 200 miles on a fully-charged battery, with nearly all new models traveling more than 100 miles on a single charge. And automakers have announced plans to release even more long-range models in the coming years.Range estimates for specific EVs are available from the Find A Car tool on www.fueleconomy.gov—click on the car you are interested in, and check out the “EPA Fuel Economy” line in the table.
How you drive your vehicle and the driving conditions, including hot and cold weather, also affect the range of an EV; for instance, researchers found on average range could decrease about 40% due to cold temperatures and the use of heat.8
Myth #6: Electric vehicles only come as sedans.
FACT: Electric vehicles now come in a variety of shapes and sizes.
EVs and PHEVs are now available in many vehicle classes, extending beyond small sedan/compact models. There are currently more than 50 PHEV and EV models on the market. More models are being released in the coming years, so vehicle class options are likely to expand.
Myth #7: Electric vehicles are not as safe as comparable gasoline vehicles.
FACT: Electric vehicles must meet the same safety standards as conventional vehicles.
All light duty cars and trucks sold in the United States must meet the Federal Motor Vehicle Safety Standards. To meet these standards, vehicles must undergo an extensive, long-established testing process, regardless of whether the vehicle operates on gasoline or electricity. Separately, EV battery packs must meet their own testing standards. Moreover, EVs are designed with additional safety features that shut down the electrical system when they detect a collision or short circuit.
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Source: MediaThe Economic Losers in the New World Order
Giant subsidies and rising protectionism are upending decades of free trade. Smaller countries, from the U.K. to Singapore, are getting left behind.
WSJ by Ed Ballard, Jason Douglas, and Jon Emont, August 14, 2023 The Economic Losers in the New World Order
The world’s biggest economies are offering huge subsidies in a cutthroat race to win the industries of the future. The losers: all the countries that can’t pay up.
New tax credits for manufacturing batteries, solar-power equipment and other green technology are drawing a flood of capital to the U.S. The European Union is trying to respond with its own green-energy support package. Japan has announced plans for $150 billion of borrowing to finance a wave of investment in green technology. All of them are working to become less dependent on China, which has a big lead in areas including batteries and the minerals to make them.
Foreign direct investment flowsSource: United NationsNote: EU figures exclude LuxembourgNow, some smaller players are getting left behind. Many are nimble economies that were on the rise during decades of free trade, but are at a disadvantage in a new era of aggressive industrial policy. Industrialized nations such as the U.K. and Singapore lack the scale to compete against the biggest economic blocs in offering subsidies. Emerging markets such as Indonesia, which had hoped to use its natural resources to climb the economic ladder, are also threatened by the shift.
Intel has been offered $11 billion in subsidies from the German government to build two semiconductor plants, in what Prime Minister Olaf Scholz called the largest foreign direct investment in German history. The pledged government financing is substantially more than the annual budget of Singapore’s Ministry of Trade and Industry.
“Let me tell you plainly: We cannot afford to outbid the big boys,” deputy Prime Minister Lawrence Wong told supporters at a recent political rally.
For many tech companies nurtured in the U.K., growth lies elsewhere. British battery-technology startup Nexeon, which developed its technology near Oxford, helped by government funding, raised over $200 million last year. Its first commercial factory will be in South Korea, likely followed by a plant in North America.
“But not the U.K., sadly,” said Scott Brown, Nexeon’s chief executive. Nexeon doesn’t see that changing without more government support for the battery industry.
AMTE Power, one of the U.K.’s few homegrown battery manufacturers, has said it may rethink plans to locate a proposed $200-million-plus factory in Scotland given the difference in subsidies on offer in the U.S. and Europe. Arrival, an electric-vehicle startup, said last year it wants to focus its manufacturing in the U.S. instead of the U.K, citing the tax breaks.
The U.S., which is offering $369 billion in incentives and funding for clean energy as part of the Inflation Reduction Act, is seeing a windfall of foreign investment. German carmaker BMW just broke ground for a new battery plant in South Carolina. South Korean firms Hyundai and LG announced a $4.3 billion battery plant in Georgia. Panasonic of Japan is building a plant in Kansas.
Unwinding globalization
The subsidy race marks a step away from the economic integration that for decades broke down barriers to trade and investment between countries.
Globalization transformed once-poor countries such as South Korea and Taiwan into high-tech, developed economies, lifting hundreds of millions of people out of poverty. Western consumers got an abundance of affordable consumer goods and a higher standard of living. Technological advances and new management ideas also moved more freely between countries, along with goods and financial resources.
The model also had steep costs. Once-thriving communities in the U.S. and Western Europe were hollowed out as manufacturing jobs moved to Asia or the former Soviet states. Environmental concerns mushroomed as the global economy consumed more natural resources. Some economies faced destabilizing bouts of capital flight as foreign money flooded in and out.
Unwinding that global integration—whether for reasons of national security, geopolitical rivalry or supply-chain anxieties—comes with its own problems, economists say. Especially at risk are smaller, developing economies that need access to global markets if they’re to trade their way to greater prosperity.
“The world as a whole is becoming more inward and turning away from open trade and investment,” said David Loevinger, a former U.S. Treasury official who is managing director for emerging markets at asset manager TCW Group. “Europe, the U.S. and China are in a subsidy competition and the losers in that competition are poorer economies with less fiscal resources.”
The Western embrace of industrial policy could be especially painful for countries that had hoped to exploit the adoption of green technologies to turbocharge their own economic development.
Indonesia has ambitions to parlay its abundant nickel resources into a world-leading battery industry. But U.S. rules, put in place as part of the IRA, deny subsidies for EV batteries that contain large amounts of minerals from nations that are not American free-trade partners. Indonesia is among them.
“We have all the natural resources. We have the human resources. And we are a country that’s a democracy,” said Arsjad Rasjid, the head of the Indonesian Chamber of Commerce and Industry, in an interview. “Please don’t shut us down.”
The winners
As a leader in the subsidy race, the U.S. is experiencing an investment boom. The U.S. took in about 22% of global foreign direct investment last year, making it the world’s top recipient, according to United Nations data. That is slightly lower than the 26% it received in 2021 when global investment bounced back after a lull during the pandemic, but significantly higher than the 13% it got in 2019. Spending on construction related to manufacturing rose 76% in May compared with a year earlier, to a seasonally-adjusted annual rate of $194 billion, Census Bureau data show.
In the U.K., Nexeon’s funding underscores the power of the U.S. purse to skew the playing field. As well as the private capital it raised last year, Nexeon received two million pounds, worth about $2.55 million, from a U.K. government EV-industry fund.
Weeks later, two U.S. rivals, Sila Nanotechnologies and Group14 Technologies, both got $100 million from the Energy Department under a battery-industry funding program introduced in the 2021 infrastructure law. Like Nexeon, those companies are making silicon-based materials to be used in battery anodes to improve performance.
“The economics of projects in the U.S. are just out of sight,” said Guy Debelle, a former deputy governor of Australia’s central bank and now director of Fortescue Future Industries, the green energy unit of West Australia miner Fortescue Metals. The company is scouting investment opportunities and currently sees the U.S. as the most likely location due to subsidies that could knock up to 60% off a project’s price tag, said Debelle.
The European Union is preparing its own support package, relaxing limits on subsidies member countries can give industry. By 2030, the EU wants 40% of the key technologies needed for the green transition to be manufactured in the bloc, including solar equipment—a sector currently dominated by China—wind turbines and batteries.
The U.S. battery production pipeline, which measures capacity from projects in the works, has jumped 67% since the IRA was announced and now matches the size of Europe’s, which grew by 26% over that period, according to estimates by Benchmark Minerals Intelligence, a U.K. based firm that gathers industry data.
The Brexit problem
The shift in global trade comes at a particularly awkward time for the U.K., which has been struggling to chart a new course in the global economy after leaving the European Union in 2020, which meant it no longer had easy access to its giant single market.
Brexit proponents said the U.K. could strike bilateral trade deals with other countries and double down on globalization. Since then, momentum for free trade has stalled and now appears to be in retreat.
“Back during the Brexit vote, nobody had any idea that we’d see a resurgence of industrial policy in the U.S.,” said Gernot Wagner, a climate economist at Columbia Business School.
Now, the U.K. government is facing calls from all corners of the country’s economy to respond to the interventionist turn in global economics with its own reinvigorated industrial strategy.
The U.K.’s auto sector got a boost recently when the owner of Jaguar Land Rover chose to build a new EV-battery plant there, but the overall scale of green subsidies lags far behind the U.S.
Finance Minister Jeremy Hunt has promised to unveil the U.K.’s response this fall, but has downplayed expectations and said Britain will not “go toe-to-toe with our friends and allies in some distortive global subsidy race.” He said the U.K. will look to target funding to areas where Britain has a clear competitive advantage.
New alliances
One solution for countries that can’t compete is to draw rich trade partners closer and benefit from their industrial policies, as Canada and Mexico have done through their free-trade deal with the U.S., said Chad Bown, a trade expert and former World Bank official at the Peterson Institute for International Economics, a think tank in Washington, D.C. Indonesia’s government is participating in the American-led Indo-Pacific Economic Framework for Prosperity, an economic pact that it hopes will improve market access for its minerals.
Last year, Investment Minister Bahlil Lahadalia said Indonesia would seek to form an OPEC-like cartel for nickel, a battery mineral whose production Indonesia dominates, as a response to protectionism by countries that make EVs. An OPEC-modeled organization would coordinate nickel production levels with other major exporters to ensure elevated prices.
Analysts doubt the plan, in part because other nickel producers don’t want to alienate powerful trading partners such as the U.S. and China. Similar ideas for an OPEC-like organization of lithium producers have been floated by left-wing leaders in Latin America, but haven’t been enacted.
Indonesia and Zimbabwe have put in place export restrictions on minerals such as nickel, bauxite and lithium, along with requirements that foreign companies build processing facilities in the country as a condition for exporting.
“I’m not a fan of these policies but they’re clearly very popular,” said Simon Evenett, a professor of international trade and economic development at the University of St. Gallen in Switzerland. “Clearly it will drive up prices and it will increase uncertainty and risk.”
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Former vice president Mike Pence speaks at the Iowa State Fair in Des Moines on Aug 10. (Demetrius Freeman/The Washington Post)Opinion: In Iowa, Mike Pence delivers a powerful message against Trump
TWP by Karen Tumulty, Deputy opinion editor and columnist, August 13, 2023 DES MOINES — When former vice president Mike Pence took his turn on the Des Moines Register’s soapbox at the Iowa State Fair last Thursday — a quadrennial ritual for presidential contenders — there were, as expected, some hostile shots from the audience.
One man asked Pence why he committed “treason” on Jan. 6, 2021. Another, referring to a brutal interview he had recently done with the right’s favorite provocateur, mocked: “How’s life going since Tucker Carlson ruined your career?”
But afterward, as Pence lingered to shake hands, there came quieter encounters. Nathaniel Gavronsky, 41, pushed forward to thank Pence for standing on principle that day in the Capitol and refusing Donald Trump’s demands that the vice president, in what was a ceremonial role, toss out the electoral votes that made Joe Biden president.
Even as rioters were swarming the Capitol chanting, “Hang Mike Pence,” he performed what the Constitution required, Gavronsky told me. “I’ve researched the heck out of it, and I don’t believe there was anything else he could have done.”
So will he vote for Pence at January’s Republican caucuses in Wayne County, where he lives? Not a chance, Gavronsky said. Which I had already figured out, given that he was wearing a T-shirt that said: TEAM TRUMP.
There has rarely, if ever, been a candidacy more bound in conundrum than this one. As Trump continues to hold what looks like an insurmountable lead in the polls, his once-devoted lieutenant has reluctantly become an essential witness for the prosecution in the Justice Department’s case against the former president for criminal conspiracy to overturn the 2020 election. Meanwhile, Pence’s struggling campaign has barely gained enough traction to qualify for the stage of the first GOP primary debate.
It doesn’t help that social media comes to life every time a heckler calls Pence a traitor or worse. But just as frequent are those rarely recorded moments of affirmation for what history will surely regard as his highest service to the nation during the four years he held its second-highest office.
“Really, from the time we moved home to Indiana, began to travel the country with some regularity, my overwhelming experience has been very humbling expressions of gratitude — standing in an aisle on an airplane, stopped at a grocery store,” Pence said when we sat down for an interview a couple of days later in Ankeny. “And now that we’ve got a campaign going on, more and more people are coming up and saying that now.”
His wife, Karen, added: “People at the fair came up with tears in their eyes, just holding back emotion, saying, ‘Thank you for saving our country.’”
He is more eager than he once was to remind voters of what he did that day, and his criticism of Trump is increasingly direct and pointed.
The day after the Justice Department released its second indictment, Pence told reporters that his former boss had surrounded himself with “a group of crackpot lawyers that kept telling him what his itching ears wanted to hear.” His campaign has started selling red-lettered T-shirts that say “TOO HONEST” — a reference to an episode mentioned in the 45-page document, in which Trump berated his vice president for refusing to buckle, saying: “You’re too honest.”
But, ultimately, Pence maintains, the events of Jan. 6 will not be what voters have uppermost when they go to the polls. “Elections are about the future,” he said.
And therein lies another conundrum, one that Pence will have an even harder time overcoming. It is possible that there will be enough voters in the Republican base looking for a way to move on from Trump. But it is hard to imagine that a vice president who never expressed a significant disagreement with Trump in public until Jan. 6 will be the choice amid a slate of fresher faces in 2024.
Still, Pence assured me, there will be plenty to distinguish him from others on the debate stage in Milwaukee on Aug. 23, as well as from the front-runner, who is likely to be absent.
He is solidly in favor of supporting Ukraine and is dismayed “when I see the former president, when I see others in the field that are walking away from American leadership on the world stage, beginning to embrace the kind of a rising tide of isolationism on the populist right.”
Whereas most of the others — including Trump — have put Social Security and Medicare off-limits, Pence regularly argues that the nation’s long-term debt problem cannot be solved unless spending for those programs can be brought under control. And even amid growing evidence that the abortion issue is becoming a drag on his party’s prospects, he is pushing for nationwide restrictions, rather than leaving the question to the states.
All of this, he said, represents a return to the classic conservatism of his idol, Ronald Reagan. That there is an appetite for that in the GOP is a dubious proposition in the era of Trumpism, a transformation that took place in the party as Pence stood unwaveringly at the president’s side. His four years of fealty to Trump are also the reason he is hardly the ideal tribune for what he said is a longing in the country “for us to restore a threshold of civility in public life. Washington has lost a sense of treating one another the way you want to be treated.”
Given how doubtful his prospects, it is fair to ask why Pence is running. “I believe I am the most qualified candidate on the stage to bring this country back to the mainstream conservative agenda that always made America strong and prosperous and free,” Pence said.
And I, for one, am glad he will be there when the candidates get together in Milwaukee. Because no one could serve as a better reminder of how close the country came to losing that freedom, which starts with respecting its democratic institutions. Now comes his best chance to make that case, even if many in the Republican base don’t want to hear it.
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Yörük Işık has been watching the waters in his native Istanbul for over a decade | Ozan Kose/AFPThe hunt for Russia’s secret ships
Turkey’s strategic straits are a trade superhighway — and a lifeline for the Kremlin’s war machine.
POLITICO EU BY GABRIEL GAVIN, AUGUST 14, 2023ISTANBUL — Yörük Işık puts down his espresso cup suddenly and picks up his camera. “This one is carrying diesel,” he says, training the long lens on a rusted red tanker bobbing into view in the distance. “Maybe in violation of the price cap.”
For more than a decade, he’s watched the waters in his native Istanbul, tracking the comings and goings of the tens of thousands of grain carriers, container vessels and warships that chart a course along the Bosphorus Strait every year. The natural canal flowing through the heart of Europe’s largest city links the Black Sea to the Mediterranean, connecting Russia and Ukraine to the rest of the world.
“I’m obsessive,” he explains, “I don’t like to go too far inland because I have this fear I’ll miss something. You never know what’s going to happen and often you don’t realize it’s suspicious until afterwards. Even when I have free time or I’m writing a report, I sit on my balcony so I can keep an eye out.”
With his long hair and grey beard, Işık doesn’t stand out among the fishermen, tug captains and dock workers making a living in Turkey’s ports. But as a non-resident scholar at the Middle East Institute, a Washington-based think-tank, the 52-year-old has built up unparalleled evidence of Russia’s efforts to quietly acquire sanctioned goods and military hardware — while keeping energy and agricultural exports flowing to help pay for them. A regular analyst in Turkish media and on television, his Bosphorus Observer site has become a go-to resource for those tracking the Kremlin’s supply routes.
Ultimately, it’s a battle that could decide the outcome of the war in Ukraine.
“It’s all about finding out what they’re hiding,” he said, looking out from the café on the Bosphorus as the call to prayer wafts across the water from the half-dozen or so white minarets that dot the hillside.
“Sometimes they’ll lie and say a ship is going from one perfectly innocent place to another. They’ll turn their tracking off and go dark in the Black Sea or spoof their location. Along the waterway is endless traffic, it’s like watching an Istanbul taxi rank, but when you look closer and see the ship physically isn’t there, that tells you a lot. The camera doesn’t lie.”
Troubled waters
Just 500 kilometers away across the Black Sea, Russia’s war is raging in Ukraine. Since the full-scale invasion in February 2022, Western nations have imposed sweeping sanctions on Moscow in an effort to cut it off from luxury products and dual-use goods that could be repurposed for use on the battlefield. Meanwhile, the G7 club of nations has imposed a $60 per barrel cap on Russian crude oil, threatening steep penalties for traders who flout the rules.
But analysts and policymakers fear not enough is being done to make the restrictions stick and helping Russia get hold of what it wants has become big business for middlemen — both companies and countries — prepared to take the risk.
“It’s very difficult to track what’s coming from Europe to Russia and vice versa,” said George Voloshin, an expert in sanctions circumvention with financial crime watchdog ACAMS. “We have a very incomplete picture because Russia is trying to adapt to increasingly stringent sanctions and once you have a control in place, they find a way around it. Turkey is the gateway for that kind of trade — particularly for European consumer goods.”
According to statistics collated by analytics platform Trade Data Monitor, seen by POLITICO, Turkey is the fifth-biggest source of Russia’s imports, shipping more than $3.6 billion worth of goods and commodities last year alone. Machinery and electronic components are among its top exports for 2023, up 200 percent and 183 percent respectively in the first six months of this year. And that doesn’t even include the supplies that simply transit the Bosphorus without ever formally entering Turkey.
“Ankara has carved a role for itself where on one hand it’s an intermediary in the conflict, but on the other a convenient geographical hub for the re-export of things that Moscow needs,” said Maria Shagina, a senior fellow working on sanctions policy at the International Institute for Strategic Studies.
Yörük Işık has spent years building evidence on Russia’s efforts to circumvent sanctions and move military hardware into and out of the Black Sea | Gabriel Gavin/POLITICO
“That ranges from oil and diesel shipments to military hardware. For Russia, this comes at a cost — but, at the moment, it’s profitable and it’s hell-bent on winning a war of attrition this way over time.”
Chasing a shadow
Meanwhile, a so-called shadow fleet of hundreds of aging tankers has emerged on the global market over the past year to haul embargoed Russian energy exports and buy oil above the price cap, giving the Kremlin much-needed revenues to pay its troops and purchase weaponry. Without proper maintenance or insurance, they frequently turn off their transponders to hide the origin of their fuel or carry out ship-to-ship transfers to confuse those watching from afar.
In June, the EU moved to bar these vessels from its ports — but many continue to sail through the Bosphorus.
“The shadow fleet was all under the flag of the Marshall Islands, and they were all deregistered thanks to successful U.S. diplomacy,” said Işık. “Then, in one night, the whole shadow fleet moved to Gabon registration. Maybe next it will move to Cameroon or Palau. When you see these flags, it’s not that they’re immediately guilty, but there’s a higher chance you’ll find something compared to others.”
With warnings that circumvention could prolong the war, costing more Ukrainian lives, Brussels is ramping up pressure to tighten existing loopholes. According to Voloshin, those like Işık who monitor ports and waterways can be “very useful” in piecing together the full scale of the problem and helping target sanctions against those involved. “You need people like that at every single dock and airport, but unfortunately that’s impossible.”
Worse still for the maritime industry, unprecedented Western sanctions mean unsuspecting companies could fall foul of the existing rules inadvertently. “The EU’s latest sanctions package has introduced the first ban on spoofing anywhere in the world,” said Ami Daniel, co-founder of Windward, an Israeli tech firm that tracks vessels suspected of sanctions circumvention using satellite imagery.
“Anyone doing business with vessels suspected of that kind of activity as well as vessel who turn off transmissions or conduct unreported ship-to-ship transfer could face criminal charges, fines or see their goods impounded. If a container under the transit ban — chemicals, automotive, technology — makes an unscheduled stop in Russia, it becomes untradeable, and without due diligence major companies could be caught up in that.”
Playing both sides
Of even greater concern are the ships said to be covertly supplying Russia’s armed forces.
“With naval ships, you can see their flags, it’s not something secret. But some are now disguising themselves as merchant vessels — they might do commercial jobs, or hire civilian crews to hide it, but they’re carrying Russian Armed Forces equipment and not flying a naval flag,” said Işık.
“Turkey isn’t inspecting these ships. During the Syrian war, when there was lots of tension with Russia, Turkey created lots of headaches for naval auxillary vessels, and there’s plenty of evidence put out by people like me that these ships are operating in this way. But Ankara isn’t being creative or coming up with new approaches at the moment.”
Despite being a member of NATO, Turkey has refused to impose sanctions on Moscow, instead hosting a series of ill-fated peace talks and stepping up economic relations with both sides. That policy seems to reflect public opinion inside the country where, according to a poll last year from Aksoy Research, nearly two thirds of Turkish people worry that the war is having a negative impact on their country — but 80 percent believe they still need to stay neutral.
As part of efforts to insulate itself from the consequences of the conflict, Ankara also underwrote the U.N.-brokered grain deal, credited with helping get food supplies from Ukraine’s blockaded ports to the developing world. Its collapse following the Kremlin’s withdrawal last month has sparked fears of famine and led to a spate of Russian attacks on Ukrainian export infrastructure. Turkey’s National Security Council has since warned tension in the Black Sea “is not in anyone’s benefit,” but stopped at calling for the two sides to return to the negotiating table.
“The Turkish government would rather see predictability than not, but it’s clear their government has been compensated from the conflict,” Ryan Gingeras, a professor at the U.S. Naval Postgraduate School, told POLITICO. “They’ve abetted stolen shipments of grain out of Ukraine — they’ve made sure they’ve stayed on good relations with Moscow, as well as Kyiv, but the collapse of the grain deal shows the limits to which Ankara can exert influence over the Black Sea.”
War on the waves
Ukraine is now evidently intent on dealing with the threat Russia poses itself.
Last week, Kyiv declared the waters around Russia’s Black Sea ports a “war risk area” from August 23 until further notice. Speaking to POLITICO, Oleg Ustenko, an economic adviser to Ukrainian President Volodymyr Zelenskyy, said that his country views “everything the Russians are moving back and forth on the Black Sea [as] our valid military targets.”
Hours earlier, the Ukrainian armed forces reportedly hit a Russian fuel tanker, the Sig, with a sea drone, causing it serious damage. The ship, sanctioned by the U.S. Treasury in 2019, had been sailing close to Ukraine’s occupied Crimean peninsula, carrying 43,123 barrels of fuel oils.
“The target they chose was the most wonderful one,” Işık beamed.
“The Sig is a ship that, along with its sister ship Yaz, has been assisting the Russian armed forces for more than half a decade now. Hitting the Sig, which is a secret Russian naval auxillary vessel carrying kerosene from refineries in occupied Crimea, hits Russian logistics in Syria, it hurts the profits of the Kremlin-linked elites making money from that trade and cuts the money being used to pay their private militaries.”
“If my work helped Ukraine identify it then I’m proud, because I’ve been after it for a long, long, long time,” he said.“There’s 15-20 other targets like that, and I think Ukraine knows about them all. Given the world has chosen not to take action, they have acted.”
But for Işık, Istanbul isn’t just a place to watch the war unfold — it holds the key to ending it.
“This city has been here for thousands of years because of the waterway,” he said, swilling coffee grounds around the bottom of his cup. “If you control the water, you control the trade — and then you get to decide how the world works.”
TREVOR PAULHUS FOR THE WALL STREET JOURNALOil Firms Face Hard Choices After a Year of Big Spending
The industry’s wartime windfall is dwindling
TWSJ by David Uberti, August 14, 2023Wall Street wants Big Oil’s cash. Washington wants it to drill more. Keeping them both happy is about to get a lot tougher.
Armed with a mountain of cash after Russia’s invasion of Ukraine sent oil prices skyrocketing, U.S. oil-and-gas firms cranked up production near record levels while also raining money on shareholders with dividends and buybacks.
The continuing investor windfall and a recent run-up in oil prices helped make the energy sector the S&P 500’s best performer over the past month.
But oil prices are still considerably below last summer’s highs, dragging down producer revenues. That is going to mean hard choices for businesses such as international major oil companies and independent drillers, as well as for energy investors and policy makers who have benefited from the past year’s largess.
“It is moving toward companies spending what they can while they can,” said Mark Young, a senior analyst at data-analytics firm Evaluate Energy.
How the industry uses its cash in coming years has huge implications for U.S. drivers and energy investors. Oil executives last year buoyed their stock prices by funneling most of their wartime windfalls to investors—not new drilling. As a surge in fuel costs supercharged inflation to 40-year highs, President Biden accused oil firms of profiteering and urged them to invest in boosting capacity.
Higher oil prices gradually encouraged the industry to do just that. Exxon Mobil and Chevron increased capital spending last quarter from a year ago while paying a combined $15.2 billion in dividends and buybacks.
But companies’ ability to keep investing while extending shareholder returns will get harder as their cash piles dwindle from spending and acquisitions. Exxon Mobil and Chevron have a combined $39.4 billion in cash, down from $48.4 billion at the end of the first quarter, according to FactSet.
Investment in the American oil patch last quarter outpaced shareholder returns for the first time since the Kremlin’s invasion, according to Evaluate Energy. The more than 40 oil-and-gas producers tracked by the firm boosted capital spending to $28.4 billion, while funneling a combined $25.4 billion to investors.
In 2019, that group spent an average of $24.3 billion per quarter on projects and $11.3 billion on shareholder returns. Capital spending fell sharply after the pandemic derailed U.S. demand for fuels, only recently surpassing pre-Covid levels.
Better-than-expected production in recent months led federal officials to bump their U.S. output projections for this year to a record 12.8 million barrels of crude a day. A gusher of oil this year blunted the impact of Russian and Saudi production cuts and pushed down gasoline and diesel costs in the first half of 2023.
Smaller exploration and production companies have continued to spend a greater portion of their cash on new projects.
“We never said that we didn’t want to grow. We just don’t want growth to be the target,” Vicki Hollub, chief executive of Occidental Petroleum, told analysts during an earnings call.
Cash is concentrated among six firms in theS&P 500 energy sector. Source: FactIvaMany Wall Street analysts expect the recent rebound in oil prices to continue, potentially giving an incentive for more drilling. The tightening market has contributed to what Goldman Sachs recently described as a turning point in capital spending—fueled by a promise of higher returns and a growing focus on energy security.
Other investors remain wary about boosting production. The U.S. and European Union are encouraging more clean energy with a wave of subsidies intended to curb fossil-fuel use in the coming decades. Some experts warn that the best land for oil-and-gas extraction in the U.S. has already been drilled.
That has left many companies trumpeting cost cuts and new technologies that can more quickly drill longer wells through shale rock. The message to investors: Oil-and-gas producers can increasingly do more with less.
“This is not just one-off execution,” Toby Rice, CEO of independent natural-gas producer EQT, told analysts last month.