Energy
Trump and Energy
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From the Frontier Centre for Public Policy
By Terry Etam
Did you know that the United States Secret Service has a Chief of Communications? Does that not seem a little odd? To excel at his job, would he be perfectly silent?
Well, he’s not…Over the weekend the Chief of Communications of the United States Secret Service took to Twitter to start acting not very secret at all. How is this for a tweet: “…three charter flights filed with @SecretService agents, technicians, officers & mission support personnel safely arrived in Milwaukee.” He included a picture of one of the planes and all the debarked people standing on the tarmac.
I guess my definition of “Secret Service” is not that of the government’s, but then again, I’m not caught up in the same civil war-esque brouhaha over just what sort of curtain of madness would have descended over the world if Trump hadn’t turned his head that instant. Indeed, the past few days have been astonishing, watching players from across the spectrum and around the world reorient to accommodate what has happened.
Things are so complex, tense, and volatile that even the secret service feels the need to point out what it is doing, in great detail (though I’m sure the Director is muzzled re: the juicy stuff). In this environment predictions seem unwise, but hey that issue has never stopped me before, so here goes with a few observations of relevance to the energy industry.
As a building block of discussion, it is now highly probable that Trump will win the upcoming election. That ridiculously iconic photo of his bloody self with fist raised in front of the US flag is creating new Trump supporters out of not-insignificant online commentators that have spent years bashing him. Even Trump’s vice-presidential nominee, J.D. Vance, once expressed dislike for the big goofball (yes, he is: Exhibit A would be his tweet of a photo-shopped Trump tower in a Greenland village with the plea: “I promise not to do this to Greenland!” Of course he was many other things as well, but who could forget that…).
On the energy front, we know where Trump stands – drill baby drill. He wants to unleash American energy to drive down prices for consumers and increase competitiveness for US business. One aspect that goes unnoticed in this general discussion though is that there are material differences in what this means to the oil business/market versus the natural gas business/market.
He will focus on oil first. It will be symbolically important at a minimum for Trump to lower gasoline prices; they are a flashpoint because of the incessant visibility, the constant updating to a fraction of a cent in huge neon font as one drives down the road. Lowering gasoline prices will not be as easy as many think; for example, opening federal lands to drilling activity will not have any influence on gasoline prices for a long time, if at all. Trump could lower some forms of taxes in a bid to lower prices, but the effect of that would not be huge.
His main goal would be to expand oil production in a bid to lower prices, but this is where things get complicated in the modern age. The US is now a net exporter of oil, some 1.6 million b/d in 2023, a reversal of the situation of prior years. Now, the US still imports significant quantities of oil because its refineries require certain grades in greater quantities than it produces, and exports the grades it cannot utilize (mostly light oil).
This dynamic will make it tough for the US to drive down global prices on its own (oil is very much priced on the global stage), no matter what Trump does in the short term. A drilling frenzy, even if he could orchestrate one, would simply result in more oil exports until the quantity was large enough that it made a new global impact. But at that point, OPEC would be involved and pulling whatever strings it wanted to get the price where it wanted.
So, under Trump we should expect a flurry of feel-good vibes for the oil sector, with more friendly legislation, rules, and land leasing opportunities, but the impact on oil production will take time to achieve any price reductions. All other potential levers to reduce gasoline prices will be on the table, including existing federal regulations that are negatively impacting any downstream activity.
Natural gas is going to be more interesting. It is the unsung hero of industry; a vital cog that is critical to many industries and real estate ventures, but one that gets scant attention until something weird happens, like a shortage.
Natural gas shortages have historically been short term phenomena related to extreme weather events, and the price mechanism fixed the problem in a big hurry. Gas drillers are very good at what they do.
What has made natural gas so beneficial tot he US economy over the last decade is the fact that producers have reliably glutted the market, giving the US (and Canada) the lowest sustained natural gas prices on the planet. The economic benefit of that is hard to overestimate, since cheap natural gas enables so many beneficial industrial processes and keeps power and heating bills reasonable for consumers.
But if all that LNG export capacity is built, and if all the proposed AI data centres are built as planned, there will be significant strain on North American producers to meet that surge in demand. New LNG capacity and expected data center demand could, by 2030, add 20-30 bcf/d of new demand, in a 100 bcf/d market. Adding those volumes will be an enormous challenge and will require higher prices to incentivize producers to make it happen.
But higher prices will be exactly what Trump does not want. So, one can safely assume he will be pushing hard on US producers to expand output and will make it much easier to build infrastructure. That will help, but it is going to be a tough balancing act to ensure production increases sufficiently while at the same time keeping the cost of the vital fuel low. Natural gas markets would most certainly benefit from the relative stability of oil prices, however that is much harder to do in a “just in time” market which natural gas essentially is.
And then on top of it all, despite the importance of energy prices and availability, all will be background noise compared to the circus that will accompany his second run at presidency. The world is becoming more bifurcated and the US’ position in it is changing. There are enough active wars to make any human sick, and the US has to balance where to be involved and where not, which is as far from simple as can be. Additionally, the world is tectonically drifting into the wealthy west, the golden billion, and the ‘rest of the world’, the 7 billion that aspire to live like the west does.
On top of that, the people that hate Trump really, really hate Trump. One reason the west is in such turmoil is because of the polarizing nature of not just Trump, but of the reaction to Trump.
We will see though – at time of writing, Trump, in a post-shooting interview, said that he had ripped up his planned speech for the Republican National Convention. It was going to be a “humdinger” (his word, or course) attacking Biden’s record. However, his latest version will focus on unifying the nation. Let’s hope it works, rooting for you my American friends. No one will be better off if the US does not regain its footing.
Terry Etam is a columnist with the BOE Report, a leading energy industry newsletter based in Calgary. He is the author of The End of Fossil Fuel Insanity. You can watch his Policy on the Frontier session from May 5, 2022 here.
Alberta
New children’s book demonstrates how the everyday world is connected to natural resources
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From the Canadian Energy Centre
‘Today’s youth have the opportunity to lead us into the future with innovative solutions for environmental challenges’
After a 24-year career in oil sands land reclamation, author Tanya Richens is sharing her knowledge with young minds.
Her new book, From the Earth to Us: Discovering the Origins of Everyday Things, explores the relationship between natural resources and the things we use in everyday life, from computers and water bottles to batteries and solar panels.
“There is a gap in society’s understanding of where things come from. We are a society driven by consumerism and immediate gratification. We order something online, and it arrives on our doorstep the next day. We don’t stop to think about where it really came from or how it was made,” Richens says.
“There’s an ever-increasing societal position that mining is bad, and oil is even worse… But there’s a simple hypocrisy in those beliefs, since so many things in our lives are made from the raw materials that come from mining and oil and natural gas,” she says.
The book, illustrated by reclamation artist Shannon Carla King, follows young Hennessy Rose and her Cavalier King Charles Spaniel Riley on a trip to a children’s summer camp.
Hennessy’s mom is a guest speaker on the origin of everyday items and the relationship between humans and the earth. Through detailed explanations of items surrounding her, Hennessy’s mom teaches the kids how rocks, minerals, oil and gas from the earth are used to power and aid our lives, creating items such as building supplies, food and hair products, camping and sports equipment, and cell phones.
Author Tanya Richens poses with her two books for children about natural resources. Photo for Canadian Energy Centre
“I thought a simple and fun book explaining the raw materials needed to make everyday items would be valuable for all ages,” Richens says.
“When people feel personally connected to natural resources, they are more likely to promote sustainable practices. Today’s youth will have the opportunity to lead us into the future with innovative solutions for environmental challenges.”
Richens‘ career began with Alberta Environment, where she was a coordinator of reclamation approvals in the oil sands. She oversaw technical reviews of oil sands reclamation applications, communicated with statement of concern filers, coordinated public hearings and provided support for legislative changes.
She moved from government to Suncor Energy, ensuring the company’s compliance on reclamation projects and led initiatives to obtain reclamation certificates. She now works as an independent consultant.
Drawing on her wealth of experience in the field, Richens’ first book, Adventures in Land Reclamation: Exploring Jobs for a Greener Future, seeks to excite kids aged 9-12 years about jobs related to the environment and land reclamation.
Hoping to get From the Earth to Us into the hands of teachers, Richens is heading to the Edmonton Teachers Convention in late February. She says the book supports multiple learning outcomes in Alberta’s new science curriculum for grades 3, 4, 5 and 6.
“Ultimately, I’d like people to understand and acknowledge their individual part in the need for mining and oil and natural gas development. Until the naivety and hypocrisy in the world is addressed, I’m not sure that real environmental change is possible.”
Richens’ books can be purchased on her website at tcrenvironmental.com.
Energy
Federal Government Suddenly Reverses on Critical Minerals – Over Three Years Too Late – MP Greg McLean
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From Energy Now
By Calgary MP Greg McLean
Government in Full Reverse
Canada-U.S. Trade Relations is obviously the most pressing issue facing Canadians today.
It’s important to remember how we arrived at this point, but also to question the sincerity of the Liberal Ministers and leadership contenders who are now posing solutions, such as:
- We need to diversify our resource trade
- We need to build pipelines and infrastructure to get our exports to tidewater
- We need to streamline our regulatory burden that stands in the way of development
- We need to halt the escalating carbon tax
- We need to reverse the capital gains tax increase
The Liberals are turning themselves inside out on the policy choices they have made over nine years, and put Canada in a precarious economic position vis-à-vis our trade position.
If you believe what they are saying now, these Liberal Ministers and leadership contenders are saying that Canada needs EXACTLY THE OPPOSITE of what they have delivered over these past nine years.
I can’t comment on whether these NEW Liberal policy positions completely lack sincerity, or whether they are the result of a ‘deathbed conversion’, but nine years of moving in the exact opposite direction to their new words has led Canada to where it is today – and that is nine lost years for Canadians, our prosperity, and our role in a complex world.
Below is another example of a specific morphing of a Liberal policy – to the one I helped put forth – 3 ½ years ago – regarding Canada’s policy on critical minerals.
Minister Late to Critical Mineral Strategy
Here’s a gem of wisdom from December’s Fall Economic Statement:
Canada will work with the United States and other likeminded partners to address the impacts of non-market policies and practices that unduly distort critical mineral prices. This includes ensuring that market participants recognize the value of critical minerals produced responsibly, with due regard for high environmental standards and labour practices.
Then, on January 16th, the following from Canada’s Natural Resource Minister, Jonathan Wilkinson:
During a panel discussion in Washington on Wednesday, Natural Resources Minister Jonathan Wilkinson proposed that enforcing a floor on metals prices could be “one of the centerpieces of the conversations we would then be having at the G7” summit later this year.
Western nations have long warned that China’s dominance in everything from nickel to lithium has let the country’s producers flood the market with supply, thereby keeping prices artificially low for competitors. Wilkinson has touted price floors as a way to combat that market control.
What a great idea!
Here’s the relevant excerpt from June, 2021, from a dissenting report on the Natural Resources Committee, when I served as my party’s critic, in contrast to the government’s critical minerals approach at that time:
Recommendation 4: Coordinate with our allies to establish a dedicated supply stock of critical minerals, possibly through a physical storage and floor pricing mechanism for visibility and pricing purposes.
Excerpt: Canada is too small of a market to undertake this effort on its own, but it can play a key role with its longstanding leadership as the mining jurisdiction of choice in the world. Canada’s pre-eminent role as a financing jurisdiction for international mining is well understood. Although we are at the early stages of losing this historical leadership to Australia, acting quickly to solidify Canada’s leadership will be a strong signal. Australia and Europe have already established critical mineral strategies to offset the dominance of the market that China has exerted. At the very least, Canada’s coordination needs to include the United States, and probably Mexico (through CUSMA), as the ongoing funding of a critical mineral supply may require backstopping developments with a price amelioration mechanism. In essence, a floor price to ensure the protection of critical mineral developments from manipulating price volatility – and which has held back developments, or caused the insolvency of several of these developments, due to non-transparent world market pricing mechanisms. … Establishing a steady supply of these critical minerals will lead to more value-added opportunities, in conjunction with our trade partners.
Conservative Dissenting Recommendations
My question to the Minister: ‘What took you so long?’
This approach was presented three and a half years ago – and the Government chose to ignore it then.
No surprise now, perhaps, as we’ve seen this Minister flip-flop on so many of the nonsense policies he’s put forth or acquiesced in at Cabinet:
- The Clean Electricity Regulations (still opaque)
- Canada’ role in shipping hydrocarbons to the world
- Building energy infrastructure
To say nothing of the various Cabinet decisions he has been a part of that have led to Canada’s current weak negotiating position with our allies. We effectively have not had a Minister of Natural Resources under his tenure.
Nothing topped it off more succinctly than his speech at the World Petroleum Show, held in Calgary in September 2023, when his remarks on behalf of the Government of Canada left industry participants around the world questioning whether the Minister was ‘tone-deaf’ or if, in fact, he knew anything about natural resources.
It seems his move to the position I promoted – three and a half years ago – shows that he’s finally listening and learning (or un-learning his previous narratives, perhaps)– but it’s quite late in the day. Time and our future have been wasted.
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