Straight to the three big energy stories this week:
If ever there was an opportunity for President Trump to easily prove his campaign promise of draining the swamp, it arrived in the last week.
#Ethanol? Really? : Trump’s EPA has been slashing regulations and rolling back support of renewable energy and climate change awareness at just about every turn. The long history of patronage politics in Ethanol seemed to provide perhaps to best chance for the President to confirm his commitment to ‘swamp draining’ by slowing down, if not completely crippling the Frankenstein monster of the Renewable Fuel Standard (RFS). The EPA writes the mandates for refiners on what percentage of ethanol must be blended into gasoline. With the 2018 review coming, the EPA, and Trump had an easy hammer to wield against a government mandate that destroys jobs, hinders private business and costs Federal money in renewable fuel subsidies. But in the end, the swamp had its way, as Trump himself intervened – not only to confirm that blending percentages wouldn’t be lowered but are being increased. Even the Wall Street Journal noted the disconnect. And I’ll have to be more careful in using the Ethanol hashtag in the future myself – I attracted quite a few swampy lobbyists defending their subsidies in the comments. One question: Whatever happened to General Wesley Clark?
Saudi Arabia, Reborn: Last week, I focused on the quick pre-meeting of OPEC members in front of their November 30th meeting – and their unity in extending production cuts. This week, with their big blowout ‘Davos in the Desert’, the Saudis continued to prove their commitment to pushing oil prices higher and maintaining them there, unilaterally, if need be. All of this, of course, is dependent upon a very successful IPO of the national Saudi Aramco oil company, which will float a mere 5% of itself on the London Stock Exchange sometime in 2018. The Saudis are, uh, more than hopeful about the money to come from this deal – and they better be………..their 32-year old wunderkind bin Salman is floating the idea of building a $500 billion mega-city by their western shore of the Red Sea using part of the proceeds.
Big Oil Reporting! : Yah, the majors are preparing to report, starting with Conoco-Philips on Thursday and Exxon-Mobil on Friday. Sure, expectations are easily met here, at least comparative to last year. On the back of the last two years of efficiency gains and top line cuts, the raw numbers will be good. But MORE important, if you’re looking for the longer trend in oil company investing – as we all are – is that the majors are also turning their aircraft carriers of CapEx spending around in their respective canals. Anadarko was first to announce this change in oil strategy, concentrating on returns and less on increasing production. A confirmation of this change inside the big boys would confirm all of our theses that the next two years are going to be golden for oil investors. THAT’S what we’ll be watching with extreme interest – not the raw numbers.
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