The Weekly Brief: US Global Impact

March 6, 2017 edition— Perry confirmed; coal plants converted to natural gas; and US crude stockpiles rise.





Last Week in a Minute or Less



Renewables & Electricity. Minnesota looking to increase its renewable energy standard.


Natural Gas & Liquid Fuels. Coal plants are being converted into natural gas plants and crude-by-rail to the East keeps dropping.


Oil & Gas Upstream. No executive order on the biofuels program; US crude stockpiles keep increasing and OPEC attained 94 percent compliance.


Money & Power. Perry is confirmed; Trump plans bold actions on US energy; and Fed is expected to raise rates by March.


Déjà vu all over again. Last week’s readers were particularly interested in Pruitt killing the Clean Power Plan (English) and Clinton’s tweet over Trump’s time spent playing golf (English).



Keeping Track of Trump


Trump bets on military spending to project strength abroad. President Donald Trump announced a “historic” increase in military spending of US$54bn to project power abroad and raise the Pentagon Budget to US$603bn (English) (English) (French) (German). Some Republicans in Congress immediately opposed the plan, considering it too low to meet the defense needs (English).


Perry was confirmed, but the Energy Department’s budget may be in trouble. The Senate voted 62-37 for Rick Perry’s confirmation as Secretary of Energy. Certain presidential advisers want to eliminate the Energy Department’s funding for technologies, while Perry has defended its role in developing inventions (English).


Trump accused Obama of being behind the security leaks and protests… President Donald Trump believes Barack Obama is responsible for the leaks and protests at Republicans town halls (English) (Spanish). President Trump did not provide evidence to support the accusation, and Obama made no comment.


…and the Obama administration did worry over Russian election hacking. White House officials in the last days of the Obama administration researched information on the Russian intervention on the election (English). The aim was to avoid future interference in American or European elections and to leave a trail of intelligence.



Energy Policy


Trump plans “bold action” on energy and severe budget cuts for the EPA. According to sources, the White House proposed slashing EPA’s budget by a quarter (English). In a speech at the Conservative Political Action Conference, President Donald Trump promised “bold action” to end restrictions on US energy (English).


No order on the biofuels program despite rumors. The White House denied that President Donald Trump was considering an executive order to transform the national biofuels program (English). Rumors affected fuel futures and corn prices, making investors wonder over its effect on gasoline and ethanol prices.


Coal is getting a “clean” makeover. US coal plants are being converted to national gas using the same infrastructure, polluting less but needing fewer workers (English). The coal industry is pushing for a tax bill to increase government subsidies to reduce the environmental impact of coal (English).


Minnesota could propel its renewable energy standard to 50% by 2030. Minnesota Lieutenant Governor Tina Smith presented a bipartisan plan to double the state’s renewable energy standard to 50% by 2030 (English). The goal is to reduce renewable energy costs, improve air quality and generate “thousands of new energy jobs”.


US crude stockpiles keep growing after eight consecutive weeks. The US Energy Information Administration announced an eight-consecutive-week increase in US commercial crude oil inventories (English). US crude stockpiles rose 1.5 million bbl, positioning US crude inventories at 520.2 million bbl, above the average range for February.



Boundary Issues


Crude-by-rail to the East keeps dropping. Lower rail shipments of crude oil were sent from the Midwest to the East Coast, 88 thousand barrels per day compared to 91 thousand in November 2016 (English). Crude oil movements to the West coast also fell to 126 thousand barrels per day from 194 in November 2016.


Canada is the US’s largest energy trading partner. According to the US Census Bureau, Canada is the largest energy trading partner, exporting more than 19% of the value of all US imports and buying 5% of all US exports (English). The value of US energy imports from Canada was US$53bn, while the value of US exports to the northern neighbor was US$14bn.


The Trade Facilitation Agreement was implemented and celebrated. The global Trade Facilitation Agreement received the required acceptance from two-thirds of the 164 member countries, considering it a “historic achievement”. The goal of the agreement is to expedite goods’ movement, release, and clearance across borders boosting multilateral trading (English).


Mexico threatened to end NAFTA if the US proposes tariffs. Ildefonso Guajardo, Mexico’s Finance Minister, assured that Mexico will end the NAFTA renegotiations if the United States insists on including tariffs on products (English). Mexico is considering including energy opportunities in the NAFTA renegotiation (Spanish).


… and Mexico’s government will meet Ford and GM over border tariffs. Mexico’s Economy Minister will meet with Ford and General Motors executives in Detroit to discuss US-Mexico trade and the NAFTA renegotiation (English). According to Mexico’s Foreign Minister, thanks to NAFTA, Mexico was Michigan’s second biggest trade partner.



International Affairs


The Russian contacts drama continue. Attorney General Jeff Sessions has been called on to quit after it was learned that he met the Russian ambassador twice in 2016 (English). Trump considered the accusations “a total witch hunt” and Sessions recused himself from related investigations (English). The Russian diplomat has been accused of being Russia’s number one spy in Washington (English)


US and China see eye to eye on economic relationship. Secretary of State Rex Tillerson and Chinese Councilor Yang Jiechi agreed on a “mutually beneficial economic relationship” between both nations (English) (Spanish). Tillerson and Yang discussed the importance of “regular high-level engagement” to promote a healthy development of the China-US relations.


New immigration rules followed US stand. Trump announced that some undocumented immigrants could be allowed to remain in the US (English). Meanwhile, growing numbers of people are fleeing the US to enter Canada and the European Parliament is considering requiring Americans to apply for visas to visit Europe (English) (English).


ZTE will plead guilty over Iran sales. The Chinese company is expected to plead guilty to US criminal charges related with the sale of restricted US technology to Iran (English). Although a deal has not yet been signed it is expected to take place before the latest temporary reprieve expires.



Macro Trends


OPEC attains 94 percent compliance in oil cuts. According to a Reuters survey, OPEC complied with 94% of its output cut in February and the IEA was impressed with OPEC’s observance (English). Russia’s oil output stayed at 11.11 million barrels per day, unchanged from January (English).


The US economy walks on eggshells since 2016 fourth quarter. The US economy grew at a lower pace, 1.9% annual rate, in the fourth quarter (English). Trump pledged to achieve a 4% annual economic growth with deregulation, infrastructure spending, and tax cuts.


Fed rates rise in sight. The dollar traded higher and treasury yields rose on positive US data pointing to a speedy rise of interest rates (English). Morgan Stanley expects the Federal Reserve to raise US interest rates to a 0.75%-1% range in March (English).


Investors are looking to Europe again at the US’ expense. After worries over the Brexit vote and the Italian banking crisis, investors are optimists again over Europe’s future (English). Banks including Goldman Sachs and JPMorgan consider European stock returns in 2017 could exceed those of the US.



Lateral Thinking


Astronomers are chasing radio bursts across the universe. Detected a decade ago, fast radio bursts (FRBs) are now considered a genuine class of extragalactic signal to follow. Duncan Lorimer first discovered a FRB in 2007 and now 30 telescopes are looking for FRBs to locate dwarf galaxies (English).



Quote of the Week


“The theory of democratic government is not that the will of the people is always right, but rather that normal human beings of average intelligence will, if given a chance, learn the right and best course by bitter experience.”


-E. B. Du Bois (1906-2008), American historian, civil rights activist and writer



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