The Weekly Brief: US Global Impact

April 17, 2017 edition— Wind energy tax credits are finished; new US pipelines ready; and Wall Street take a geopolitical hit.






Last Week in a Minute or Less


Renewables & Electricity. Oklahoma ended its wind energy tax credits; California’s energy generation is up; and electric vehicles may be in jeopardy.


Natural Gas & Liquid Fuels. New US pipelines are ready for natural gas export and US crude oil imports are up.


Oil & Gas Upstream. CO2 oil emissions were up 1.1% in 2016.


Money & Power. Wall Street suffered from geopolitics; US relations with North Korea heated up but cooled with Russia.



Keeping Track of Trump


G7 and Trump quarreled over climate change. While G7 ministers “reaffirmed their commitment towards the Paris agreement”, US Energy Secretary refused to ensure US support of the agreement (English). US officials pressed the group to support clean coal.


Trump’s Florida travel bill reaches US$21.6m. President Donald Trump’s travels to Mar-A-Lago have cost US$21.6m in 80 days in office, after criticizing his predecessor for taking holiday trips to Hawaii (English). If Trump keeps up the pace, he will quickly surpass former President Barack Obama’s expense travels for his eight years in office.


Trump’s foreign policy in flux. Doubts and a lack of clarity surround President Donald Trump’s foreign policy on Syria (English) (English). Trump opposed intervention in the war for years and Assad even called him a “natural ally” until Trump decided to attack a Syrian airbase after the April 4 chemical attack.


Pruitt’s bodyguards may hit environmental programs. Scott Pruitt requested funds for a 24/7 personal security detail, while environment and health programs show big cuts in the last EPA draft budget (English). At-risk communities will be the first to suffer the cuts in EPA programs designed to lower health risks (English).



Energy Policy


CO2 emissions dropped 1.7% in 2016. US energy-related carbon dioxide emissions fell to 5,170 million metric tons (MMmt) in 2016, 1.7% below 2015 levels (English). Following electricity generators’ changes in fuel consumption, coal-related emissions dropped 8.6%, while natural gas and petroleum emissions increased 0.9% and 1.1%, respectively.


Oklahoma blew away wind energy tax credits. The Oklahoma Senate approved the end of income tax credits for wind production three years early (English). The bill will now head to Governor Mary Fallin, after being praised by the leadership in both chambers.


Electric vehicles may be in danger. According to a new report published by Edmunds,  the upcoming end of federal tax incentives may crash the electric vehicles market (English). The case study examined the electric vehicle market in Georgia before and after the state’s EV tax credit expired.


California’s solar generation is up, wholesale electricity prices down. Solar generation within the California Independent System Operator (CAISO) territory represented 40% of net grid power produced (English). Power prices in CAISO markets dropped in March due to California’s seasonal electricity demand trends.



Boundary Issues


Trump pledges “surprises” on NAFTA. President Donald Trump announced before a group of business executives that there will be “pleasant surprises” on NAFTA, distancing from an early draft memo which suggested modest changes (English). The renewed NAFTA agreement could be redesigned to defend its members against Asian goods (English).


Vietnam and the U.S. are mending ties. President Donald Trump sent a letter to his Vietnamese counterpart suggesting a two-way cooperation between both nations (English). After the US withdrawal from the TPP, Vietnam feared a financial blow due to the possible increase in border taxes imposed on furniture that the country produces for Wal-Mart (English).


New US pipelines will propel natural gas exports. US energy companies are working to finish the pipelines which will boost output from shale fields in Ohio, Pennsylvania, and West Virginia (English). The pipelines could supply a third of the US’ growing natural gas demand.


US crude oil imports were up in 2016. In 2016, crude oil imports increased to 7.9 million barrels per day (b/d), 514,000 b/d over the 2015 average (English). Canada remained the largest source of US crude oil imports and Mexico’s share keep decreasing after six years of declines.



International Affairs


Trump offered China a better trade deal to face North Korea together… President Donald Trump offered President Xi Jinping more favorable trade terms in exchange for his support facing North Korea’s threat (English) (German). Trump believes they “have a very good relationship” and “great chemistry together” (English).


…and tensions with North Korea grew. North Korea declared that if the US shows any sign of aggression, a nuclear attack on the US could be launched (English). Japan sent warships to join the US fleet heading for the Korean peninsula (English). Japan’s Prime Minister worried that North Korea may use sarin-tipped missiles (English).


US and Russia relations cool over Syria. President Donald Trump declared that the US relationship with Russia was “at an all-time low” (English). The Trump administration accused Russia of protecting Assad’s government from being accused of the chemical attack (English). Russia blocked the UN Security Council condemnation of Syria’s gas attack (English).


Trump changed his mind on NATO. President Donald Trump noted that although he earlier said “it was obsolete” now “it’s no longer obsolete” (English) (German). Trump insisted on the need for NATO members to “meet their financial obligations and pay what they owe” (English).



Macro Trends


Wall Street shaken by geopolitics and Trump’s comments… President Donald Trump’s suggestion that “the dollar was getting too strong,” along with the rise in tensions with North Korea, Russia, and Syria, affected Wall Street. US stocks ended down and the S&P 500 dropped below a key technical level since the elections (English).


… and gold and the yen took the baton. Gold and the yen rose to five-month highs (English). Meanwhile, Treasury 10-year note yields reached the lowest levels of the year due to geopolitical risks, and seven of 11 sectors in the S&P 500 declined, excluding the real estate sector.


New interest rate increases could be expected… Federal Reserve Bank President John Williams believes the central bank should raise interest rates between three and four times in 2017 (English). The goal is to normalize the Fed’s balance sheet by the end of the year. The outlook expects no change in imported products’ tariffs.


…and Yellen worries over the Fed’s freedom. Fed Chair Janet Yellen considers two bills in the US Congress “some threat” to the Federal Reserve’s monetary policy freedom from political pressures (English). One of the bills could require the central bank to follow a rule for establishing interest rates and to justify deviations from that rule.


US government hit a US$176bn budget deficit in March. The Treasury Department announced that in March the US government had a US$176bn budget deficit, as spending exceeded revenue (English). The fiscal 2017 deficit was US$527bn compared to US$479bn in the same period in 2016.



Lateral Thinking


A great cold spot was found in Jupiter. By using ground telescopes and NASA’s Juno, scientists located a dark 7,500-mile-wide expanse located in the upper atmosphere (English). The place was named Great Cold Spot, being much cooler than the hot surroundings.



Quote of the Week


“Whenever the powers of government are placed in any hands other than those of the community, whether those of one man, of a few, or of several, those principles of human nature which imply that government is at all necessary, imply that those persons will make use of them to defeat the very end for which government exists.”


-James Mill (1773-1836), British economist, historian and political theorist



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