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US energy secretary urges oil sector to diversify

  • Market: Crude oil, Emissions, Natural gas
  • 26/04/21

Oil companies that are slow to shift toward cleaner energy source risk of being left behind as the world reduces carbon emissions, US energy secretary Jennifer Granholm said.

Her remarks today are the latest from cabinet members serving under President Joe Biden who are urging the industry to decarbonize. Granholm said diversifying would help the oil sector remain competitive over the long term, as the US steps up efforts to reach new commitments under the Paris climate accord.

"The bottom line is you have got to move," Granholm said today during an event hosted by news outlet Politico. "You cannot hang on and be the Kodak or the Blockbuster Video of the energy world. You have got to diversify."

Blockbuster and Kodak were household names in video rental and film but lost business as their industries went digital. The companies sought bankruptcy protection in 2010 and 2012, respectively.

The US over time will shift to clean electricity as it reduces carbon emissions, Granholm said, with a likely continued role for biofuels in hard-to-decarbonize industries such as air travel. Granholm said companies like ExxonMobil are offering proposals like a hub for carbon capture in Houston because they see where the world is headed.

"Some of the oil companies have decided that they are going to diversify and become diversified energy companies," she said. "The proof will be in the pudding. You do not want to just assume that somebody is greenwashing."

ExxonMobil, Chevron, BP and other major oil companies have urged the US to put a price on carbon emissions to achieve its climate goals. Biden has sought to increase an existing tax credit for carbon sequestration as part of a $2 trillion infrastructure plan named the "American Jobs Plan," but he has yet to embrace an economy-wide price on carbon.

"A lot of economists believe this is the most efficient thing to do, but this administration is not there yet," Granholm said. "They want to use the American Jobs Plan using the carrots that they have to incentivize and move away from carbon polluting industries."

Despite the lack of an existing price on carbon, Biden is "particularly interested" in evaluating whether to deploy a US border adjustment mechanism that would reflect carbon emissions, White House climate envoy John Kerry said last week during an interview with Bloomberg TV. The EU is considering its own carbon adjustment on trade, which could offset the economic incentive to shift carbon-intensive businesses outside of the trading bloc to avoid carbon pricing.


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31/01/25

Opec+ key panel meets in shadow of Trump

Opec+ key panel meets in shadow of Trump

Dubai, 31 January (Argus) — A group of key Opec+ ministers will hold their bi-monthly meeting next week to discuss the state of the market and, for the first time in four years, they will do so with an expectant and highly vocal US president watching from afar. The meeting of the Joint Ministerial Monitoring Committee (JMMC) on Monday, 3 February, will be its first since eight Opec+ members, led by Saudi Arabia, opted in December to again delay the gradual return of 2.2mn b/d of production to the market, this time by three months to April. They also agreed to slow the pace of the return, so the full amount would come back over 18 months rather than 12. The delay and slowdown were designed "to support market stability," the Opec secretariat said at the time, an implicit nod to an uncertain demand picture and projections of a looming supply surplus. One month on the market landscape looks much the same, with the IEA most recently estimating a 720,000 b/d excess in 2025 even if Opec+ does not begin unwinding its cuts. With the eight not due to begin returning any output for two months, little was expected of the 3 February meeting beyond a swift thumbs-up to the current policy. The JMMC remit is limited to making recommendations, with policy decisions made at full meetings of the Opec+ group — the next is scheduled for 28 May. But new US President Donald Trump, just three days into his new term, appeared to throw those expectations into disarray. "I'm… going to ask Saudi Arabia and Opec to bring down the cost of oil," Trump told the World Economic Forum in Davos on 23 January, something they could only realistically do by raising production. "I'm surprised they didn't [do that] before the [US] election," Trump said. Déjà vu all over again With that, Trump reverted to his tactic of negotiating with, and putting pressure on, the producer group through the media ꟷ a regular feature of his first term, albeit one that had mixed results. "Historically, when Trump speaks, [Opec] will hear him out. And more times than not, it will be discussed internally," a delegate source said. "That is the reality." Kazakhstan's energy minister Almasadam Satkaliev said as much this week, confirming the group "will attempt to reach a common position" on Trump's call. But some delegates said that listening to someone and acting on that are different things, and they stressed the group will ultimately do what is in the best interest of the oil market and of the collective. Opec+ "remains committed to its strategy, which is based on market fundamentals, rather than external political statements… [or] short-term remarks," one said. Another echoed this, saying Opec+ will always lean towards keeping the oil market balanced "regardless of what Trump says." A fourth delegate did say however that the group may ultimately be pressured into "compromising" with Trump, particularly if the US president makes good on his campaign promises to tighten the sanctions screws on the likes of Iran and Venezuela, which could in turn hit oil supply. "In this context, I feel Opec may have no choice but to compromise with Trump," the delegate said. That the group of eight plans to raise output steadily from the second quarter should keep Trump at bay for now, particularly with global crude prices below $80/bl. But if demand concerns persist, and spark debate among the eight about whether they should again delay the unwind, the Trump factor could tip the scales for proceeding. By Nader Itayim, Bachar Halabi and Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Tariffs may throw Canada-US crude flows into turmoil


30/01/25
News
30/01/25

Tariffs may throw Canada-US crude flows into turmoil

Calgary, 30 January (Argus) — Impending US tariffs on Canadian and Mexican imports could mean significant changes for millions of barrels of daily cross-border crude flows between the countries. President Donald Trump on Thursday repeated his threat to impose 25pc tariffs on all trade with Canada and Mexico effective 1 February. Trump said the US "... may or may not" exclude oil" from the tariffs, depending on crude price levels. That decision could come later today. Canadian officials have also weighed targeted retaliatory tariffs on the US and even withholding crude outright. A long history of crude and refined products flows between the three countries under well-established trade agreements has tightly bound together operations on all sides. This means adaptations on short notice could be difficult, leading to higher road fuel prices for some US drivers and businesses. February volumes have already been purchased, but not yet moved across the border, so importers could still be on the hook for the added tax if tariffs are imposed on 1 February. Since Trump's initial pronouncement weeks ago, market participants on both sides of the border have been trying to determine potential impacts on movements and price. The Canadian trade cycle for March starts 3 February, with mixed opinions leading to volatility in the financial market for heavy Western Canadian Select (WCS) in Hardisty, Alberta. Thursday trading put March WCS at a $14.25-13.75/bl discount to the CMA Nymex WTI, after averaging a $12.25/bl discount to the benchmark during the February trade cycle. About 80pc of Canada's 5mn b/d of crude production flows downstream to US refiners, with US imports of Canadian crude reaching a record high of 4.42mn b/d in the week ending 3 January, according to Energy Information Administration (EIA) data. The single largest conduit is Enbridge's 3mn b/d Mainline system, which reaches into Chicago to serve midcontinent refiners and hands off crude to other lines that go to the US Gulf coast for refining or export. South Bow's 622,000 b/d Keystone pipeline also serves US markets via a more westerly route. Two-way dependence Alberta oil sands producers are highly dependent on those US customers, but the dependence is two-way, as 4.25mn b/d of US midcontinent refining capacity relies on heavy sour Canadian crudes for up to 70pc of their supplies. In theory, US midcontinent refiners could run lighter, US-produced grades. But there are relatively few pipelines serving the midcontinent with such grades and those grades would be much less profitable than using a pre-tariff WCS barrel. Canadian heavy crudes already have become less price advantaged relative to lighter grades in the wake of the startup of 590,000 b/d Trans Mountain Expansion (TMX) pipeline in May 2024 sending crude to Canada's west coast. The Argus WCS Cushing discount to the CMA Nymex averaged about $4.90/bl for February delivery, down from about $8/bl during the February 2024 trade month. Some market participants have already seen an uptick in demand for Canadian crude amid the uncertain impact of US import tariffs. US Gulf coast flows Canadian crude is also suited for many refineries on the US Gulf coast, but these refiners are less reliant on Canadian imports because of the region's access to alternative Latin American and Middle Eastern waterborne heavy sour supplies. Currently, Canadian crude makes up just over a quarter of crude imports to the US Gulf coast, with domestic US crude production encompassing a large majority of the refinery feedstock in the region. Canadian crude values at the Texas Gulf coast have also risen over the last year. The Argus WCS Houston discount to the CMA Nymex is roughly $4/bl for February delivery this year, tightening from over $7/bl a year earlier. Higher values have likely led some refineries to shift to lighter, sweeter crudes already as the price advantage for heavies decreased. But recent refinery operational issues and the pending closure of LyondellBassell's 268,000 b/d Houston refinery is weighing on Houston-area prices lately. West coast also has options On the US west coast, TMX's startup increased imports of Canadian grades in the region. Since May, west coast refiners have imported about 170,000 b/d of crude from Vancouver's Westridge Marine terminal, up from just under 40,000 b/d a year earlier according to data analytics firm Vortexa. But tariffs would make TMX cargoes less affordable from Vancouver and decrease its competitiveness relative to heavy sour alternatives. This could allow demand for Latin American medium and heavy sour crudes such as Napo and Oriente to recover after being displaced by cheaper and more convenient TMX supplies. Argus' fob Vancouver Cold Lake assessment is averaging a roughly $7.60/bl discount to Ice Brent during the January calendar month so far, narrower than the $8.70-$8.80/bl discounts to the international benchmark for November and December. Notwithstanding potential Canadian retaliatory tariffs, market participants also lack clarity on how Canadian imports of US diluent will be handled under potential US import tariffs once blended with Albertan bitumen and re-exported to US refiners. Although a majority of the diluent used for blending in Alberta is domestically sourced, considerable condensate demand is satisfied via Pembina's 110,000 b/d Cochin and Enbridge's 180,000 b/d Southern Lights pipelines, both of which transport condensate from Illinois to the Edmonton region. By Kyle Tsang and Amanda Smith Major Canada-to-US crude flows Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Trump to impose 25pc tariffs on Canada, Mexico


30/01/25
News
30/01/25

Trump to impose 25pc tariffs on Canada, Mexico

Washington, 30 January (Argus) — President Donald Trump said today he will proceed with plans to impose tariffs on imports from Canada and Mexico on 1 February and explicitly referenced their potential application to crude imports. "I'll be putting the tariff of 25pc on Canada, and separately, 25pc on Mexico," Trump told reporters at the White House. "We will really have to do that, because we have very big deficits with those countries. Those tariffs may or may not rise with time." Pressed to explain if his tariffs may exempt crude imports, Trump said he was not inclined to exclude them but has yet to make a decision. "We may or may not" exclude oil, Trump said. "It depends on what the price is, if the oil is properly priced, if they treat us properly." Trump added: "We're going to make that determination, probably tonight, on oil." The looming face-off on tariffs has unnerved US oil producers and refiners, which are warning of severe impacts to the integrated North American energy markets if taxes are imposed on flows from Canada and Mexico to the US. Industry trade group the American Petroleum Institute has lobbied the administration to exclude crude from tariffs. US refiner Valero said today that a 25pc tariff on Canadian imports would force it to find alternative sources of crude, potentially resulting in a 10pc cut to throughputs. Valero's refining footprint in the US Gulf coast allows it to source feedstocks from around the world, but there is a point where a limit on heavy feedstocks like those from Canada could affect production of refined products, said chief operating officer Gary Simmons. Nearly all of Mexico's roughly 500,000 b/d of crude shipments to the US in January-November 2024 were waterborne cargoes sent to US Gulf coast refiners. Those shipments in the future could be diverted to Asia or Europe. Canadian producers have much less flexibility, as more than 4mn b/d of Canada's exports are wholly dependent on pipeline routes to and through the US. Canadian crude that flows through the US for export from Gulf coast ports would be exempt from tariffs under current trade rules, providing another potential outlet for Alberta producers — unless Trump's potential executive action on Canada tariffs eliminates that loophole. Trump frequently makes the case that foreign suppliers are solely responsible for paying tariffs. In reality, US importers pay the tariffs, and such costs are typically passed on to consumers. In the case of Canadian and Mexican crude, the US refiners that buy from those countries would pay a tax on the value of crude imports. Whether the price of Canadian crude falls by a sufficient amount to offset the 25pc tariff would depend on the market power of individual US refiners and Canadian producers, as well as actions by the Alberta government, according to a recent report by the Congressional Research Service. US refineries with access to alternative suppliers could source crude from non-Canadian producers, potentially keeping their additional costs below 25pc. Conversely, import reductions could pressure prices for Western Canadian Select (WCS) crude. In turn, Alberta could reimpose a production curtailment policy in a bid to narrow WCS discounts, the report said. By Haik Gugarats Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Study calls for e-fuels bunker subsidies, GHG tax


30/01/25
News
30/01/25

Study calls for e-fuels bunker subsidies, GHG tax

New York, 30 January (Argus) — E-fuel subsidies and a greenhouse gas (GHG) emissions tax is needed for e-fuels to compete as a bunkering fuel before 2044, said a study by maritime consultancy University Maritime Advisory Services (Umas) and the UCL Energy Institute. The study found that adding a multiplier of the GHG intensity credit given to e-fuels could help to make e-fuel use financially competitive, but it would have to be set at high levels at the start. Using a multiplier of two, where one ship running on zero emissions e-fuel could generate credits to offset three other similar ships operating on conventional fossil fuels, was not able to make e-fuels more competitive before 2041. The multiplier would have to be set initially at 15 in 2030, falling to 10 by 2035, to enable the competitiveness of e-fuels, concludes the study. Additionally, levying a GHG tax or fee of $150-$300/t of CO2-equivalent would also make e-fuels more competitive. A tax of $30-$120/t CO2e is close to the aggregate level of subsidies, and would not create a sustained promotion of e-fuels. Under the current marine fuel standards, a combination of fossil fuels, including LNG, biofuels and carbon capture and storage systems would be most competitive up until 2036. After, blue ammonia dual fuel ships would be the lowest-cost solution until 2044. Ships that were more competitive from 2027-2035 would have at least 25pc higher operating cost from 2040 onwards. Thus, if ship owners order newbuild vessels to maximize short-term competitiveness, the sector is at a "major risk of technology lock-in" and will not be as cost-effective for reaching net zero by 2050. The study models a 2027-build, 14,000 twenty-foot equivalent unit container ship. The vessel sails between Asia and Latin America using different marine fuels such as bio-methanol, e-methanol, LNG, bio-LNG, e-LNG, bio-marine gasoil (MGO), e-MGO and very low-sulphur fuel oil. By Stefka Wechsler Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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Tariffs could cut refinery throughput by 10pc: Valero


30/01/25
News
30/01/25

Tariffs could cut refinery throughput by 10pc: Valero

Houston, 30 January (Argus) — US refiner Valero is in a strong position to find alternative sources of crude if the US imposes a 25pc tariff on Canadian imports, but the switch could still cut throughputs by 10pc, the company said today. Valero's refining footprint in the US Gulf coast allows it to source feedstocks from around the world, but there is a point where a limit on heavy feedstocks like those from Canada could affect production of refined products, said chief operating officer Gary Simmons during a fourth quarter earnings call. "You might see a 10pc change in throughputs" depending on how long the tariffs go and how fast they are implemented, he said. Valero operates 1.6mn b/d of refining capacity in the US. President Donald Trump has threatened to impose 25pc tariffs on all imports from Canada and Mexico as soon as 1 February. But commerce secretary nominee Howard Lutnick said earlier this week that the tariffs may not be imposed if the countries cooperate on border security. Trump frequently makes the case that foreign suppliers are solely responsible for paying tariffs, while it is actually US importers that pay the tariffs. In the case of Canadian and Mexican crude, the US refiners that buy from those countries would pay a tax on the value of crude imports. Whether the price of Canadian crude falls by a sufficient amount to offset the 25pc tariff would depend on the market power of individual US refiners and Canadian producers, as well as actions by the Alberta government, according to a recent report by the Congressional Research Service. Valero does not have any details on how the tariffs would be applied and will just "have to deal with it when it comes up," Simmons said. The company reported record high throughputs of heavy sour crude in the fourth quarter of 2024. Heavy sour crude runs averaged 608,000 b/d, compared with 485,00 b/d in the same period in 2023. The increase showed the refining system's flexibility and the company's ability to secure and process the most economic crude oils, Valero said. By Eunice Bridges Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

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