The Weekly Brief: US Global Impact

May 1, 2017 edition— NAFTA on the table; new executive order on drilling; and natural gas inventories up.






Last Week in a Minute or Less



Renewables & Electricity. Red states also bet on renewable energy and a new bill in Colorado could transform coal plants into renewable ones.


Natural Gas & Liquid Fuels. Natural gas inventories remained up after the winter; US pipeline developers are unhappy with Trump’s decision on domestic steel; and Mexico’s crude shipments to the US fell again.


Oil & Gas Upstream. Trump signed a new executive order on drilling.


Money & Power. Trump still supports NAFTA, announced his tax cut plan, and faced his first 100 days with a potential shutdown and low approval rates.


Déjà vu all over again. Last week’s readers were particularly interested in natural gas as the largest source (English) (English); the import-export balance of US energy (English); and Trump’s fight over Canadian dairy (English).



Keeping Track of Trump


Trump signed executive orders on drilling and the environment. President Donald Trump signed an order to review the available locations for offshore oil and gas exploration (English) (English). Analysts expect the Trump administration to develop a new Five Year Program, abandoning the current 2017-2022 Program (English).


Trump announced his tax cut plan. President Donald Trump presented a one-page plan, including a 15% tax rate for all businesses (English) (German). The proposal fell short of the expected comprehensive tax reform awaited by both parties and Democrats considered it “short on details” and too beneficial for big corporations (English).


Trump dropped the fight on Obamacare to prevent the shutdown. The White House stopped fighting the Cost Sharing Reductions, a subsidy in the Affordable Care Act, to facilitate reaching a budget agreement before government funding runs out (English). Republican negotiators published the terms as part of a one-week extension to fund the government.


Trump’s first 100 days threatened by government shutdown and unpopularity. President Donald Trump faced a government shutdown when celebrating his first 100 days in office (English) (German). US Congress did ultimately agree to a one-week extension to finish negotiations and present a US$1trillion spending plan (English).



Energy Policy


US pipeline developers like their imports. US pipeline developers are fighting back President Donald Trump’s call to use domestic steel in the construction of future pipelines (English). Energy Transfer Partners declared the requirement would have a “significant adverse impact”, delaying project schedules and increasing costs.


King coal’s comeback or does retirement beckon? The Center on Global Energy Policy studied the future of coal, concluding that it depends on natural gas prices (English). A new bill in Colorado will create bonds to retire coal plants, reinvest in clean energy plants, and finance workers to retrain (English).


Natural gas inventories remained up after the cold. By the end of the heating season, 2,051 billion feet (Bcf) remained in storage, almost 15% above the average of the last five years (English). The inventory shows seasonal patterns for withdrawals during the winter and injections in the summer.


Red states also believe in renewable energy. Depending on what is measured, different states lead the renewable energy initiative, with Kansas having the largest increase in renewable energy generation between 2011 and 2015. Iowa’s in-state companies led procurement of renewable energy from utilities and third-party providers in 2016 (English).



Boundary Issues


Trump believes in NAFTA…for now… After a call with Pres. Peña Nieto and Prime Minister Trudeau, Trump asserted that “relationships are good” and insisted if negotiations are not fair, NAFTA will be terminated (English) (Spanish). The calls took place after the White House finished a draft for an executive order to withdraw from the agreement.


…after fighting over Canadian softwood and Mexican tuna. The Trump administration imposed a 20% tariff on Canada’s softwood lumber for subsidizing loggers’ reduced rates (English). The World Trade organization ruled on Mexico’s dispute with the US over trade in tuna fish, in favor of Mexico (English).


Mexico’s oil doesn’t get around much anymore. Mexico’s crude shipments to the US fell to a new low, continuing a longstanding trend (English). The reasons for falling export volume are an increase in refinery rates, Mexico’s steadily declining production, and increasing use of crude by Mexican refineries.


Merkel hopes for an EU-US trade deal. German Chancellor Angela Merkel said she was “very encouraged” after her trip to Washington on a future EU-US trade deal (English). Merkel assured she would continue working on trade agreements such as the one between the EU and Canada.



International Affairs


The call between Trump and the Taiwan president may repeat itself… Taiwan President Tsai Ing-wen announced that another direct phone call with President Donald Trump can happen (English). Tsai Ing-wen urged China to carry through its global responsibility to keep peace in the region.


…and tensions with North Korea escalates. North Korea assured it was ready to attack a US aircraft carrier to prove its military strength (English). President Donald Trump briefed the full Senate on the issue and the US Commander in Chief emphasized his lack of confidence in North Korea’s restraint (English) (English).


US role in Libya under the spotlight. After the Italian Prime Minister pointed out the “critical” role of the US and Italy in Libya, Trump declared that the US had “no role” in the country (English). Analysts were unsure whether Trump referred to support for Tripoli’s government or US military activity in Libya.


Ivanka Trump tried back channeling in Berlin. German Chancellor Angela Merkel hoped Ivanka Trump could become a back channel to moderate Trump’s policies (English). The First Daughter was jeered when she tried to defend her father’s attitude towards women at the G20 women’s summit (English).



Macro Trends


The Fed could oppose Trump’s tax cut. Fed officials might need to discuss a faster pace of rate hikes or to maintain a measured pace after President Donald Trump’ plan for tax cuts was published (English). An estimate of US$700bn per year in tax cuts could destabilize the Fed’s aim for 2% inflation.


Oil prices can’t catch a break. Oil prices increased slightly, but a preliminary report showed a rise in US crude inventories (English). Prices have suffered for the last 14 weeks with continuous rigs increases and will remain under pressure if inventories continue increasing.


Markets are fine with Trump’s tax reform, but Dragui’s comments not so much. Stock markets had a positive reaction to President Donald Trump’s tax plan, with details expected by investors (English). The euro weakened after the French election result bust with European Central Bank President Mario Draghi’s comments on monetary policy (English).


The Fed’s Kashkari thinks education is key to US growth, not infrastructure spending. Federal Reserve Bank President Neel Kashkari trusts the education system as a boost for economic growth, not spending in infrastructure (English). Others point to immigration as a way to boost economic growth and wage increases (English).



Lateral Thinking


Boats and whales collide more often than you might think. Marine scientists have found that in the southern Gulf of Maine 15% of the whales suffered injuries consistent with vessel strikes (English). Researchers believe their number of strikes is underestimated because it does not consider whales killed in ship strikes.



Quote of the Week


“Society, in the aggregate, is no fool. It is astonishing what an amount of “eccentricity” it will stand from anybody who takes the bull by the horns, too fearless or too indifferent to think of consequences.”


-Dinah Craik (1826-1887), English novelist and poet



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