In this episode of The Crude Report, senior reporter Chris Knight and associate editor Haik Gugarats discuss the outcomes of Biden’s energy, climate and foreign policy priorities in his first 100 days in office and what to expect in coming months.
President Joe Biden’s first 100 days in office have featured major economic and energy policy initiatives that aim to transform the environment in which oil, gas and renewable industries operate in the decades to come. During that time, many oil and gas companies have started to embrace once taboo ideas, such as a carbon tax. Conversely, on the international arena Biden has moved slower than expected in reviewing sanctions on Iran and Venezuela, but his virtual Climate Summit featured major announcements of emission cut pledges by the US and other countries.
TranscriptHaik: Hello and welcome to The Crude Report, Argus' podcast series on global crude oil markets. My name is Haik Gugarats. I am associate editor at Argus Media and my stories and analysis cover the nexus of US energy and foreign policies. And I am joined by senior reporter, Chris Knight, whose coverage area includes US domestic energy policy and regulatory actions.
So Chris, the first 100 days is a traditional benchmark to judge a new president's performance, and at the very least in terms of enacting multi-trillion-dollar bills and establishing new posts, Biden can count this as a strong start. Can you walk us through the major energy highlights of President Biden's first 100 days?
Chris: Sure. And there's a lot to cover, so bear with me as I go through a lot of the action that's happened on energy in the past 100 days. We'll start with Biden's executive orders. Right out of the gate, he signed two major orders. The first one was on January 20, and that was the one blocking the Keystone XL pipeline and ordering his administration to revisit almost every major Trump energy rule.
And then a week later he signed a sweeping executive order focused on climate change, and that also set some targets to achieve a zero-carbon electricity sector by 2035.
And then after that, he was trying to fulfill some more campaign promises. One of those was the oil and gas permitting freeze on federal land. That order went out also on January 20, his first day in office, and that effectively halted a lot of ongoing permitting, it required an elevated period of review, and it also froze oil and gas leasing indefinitely. And just I think last week the US Interior Department released a statement saying they were canceling lease sales through at least June. So that is one of the big changes that we've seen in the Biden administration.
Finally, there's a lot of Trump deregulation that the Biden administration stopped. There was an oil lending measure that would encourage banks to lend to oil and gas companies. They put that on hold. There was a threshold for regulating greenhouse gases that would have effectively blocked EPA from regulating anything but power plants. That was thrown out by a court or blocked in court. And there was also some offshore oil decommissioning rules that were put on hold.
And finally, we're on the verge of the US Congress invalidating a methane rollback that Trump imposed in 2020. They're using a statute called the Congressional Review Act to disapprove that. So they're basically on track to, in short order, undo a lot of the Trump rollbacks and start the work, the very exhaustive work, of putting new rules in place.
Haik: So in our first podcast, Chris, after Biden became president, we talked about how there was this really surprising reaction from the industry, a reaction of surprise that Biden as president meant what he said as a candidate about climate. So 100 days later, I see a shift within the industry to accepting the premise of his policies and seemingly offering to cooperate by offering solutions that the industry once fought, such as the carbon tax. So what's behind this shift in thinking and tactics?
Chris: Yeah, this was surprising to watch as someone who's been covering a lot of these trade groups for almost 10 years. You become accustomed to trade groups telling you their positions and they don't change that often.
You can guess when you go to a meeting with industry groups or if you see them at a public hearing, they're going to be kind of talking about the same issues that have always been a priority. Oil and gas companies, they're always interested in expanding access to land to develop. They want faster permitting, they want regulatory relief.
And so it's been pretty surprising to see the scale of the switch from many of the top industry groups. Now they're talking, the biggest industry groups like the American Petroleum Institute are saying, we support direct methane regulation now, we want to pursue a carbon tax. And a lot of these things were kind of unthinkable for many years for these groups.
I'm not under any illusion...I don't think these oil groups are under any illusion that they can convince Biden to do all of the policies they would usually advocate for, but they know they've got a better shot at nudging the administration on policies they want to see if they are kind of speaking the same language.
So, you know, if the oil groups are saying, we accept methane regulation, they might have a little bit more pull with the Biden administration to tell them things like technical issues. So like if they visit well sites every three months, they would advocate not to require inspections more often than that. So just little things to try to get sway within this administration.
And I can't tell you how sincerely many of these groups are about their push on some of these new policies. It's possible that some folks are just taking positions that they see as cost-free. So for example, if industry groups know with almost certainty that Congress isn't going to go for an economy-wide carbon tax, and I think that's a pretty good bet, then it doesn't take that much risk to go out and say, "We are in favor of a carbon tax,” just because you know it's not going to go forward.
Same thing with methane regulations. You can say you're for it, but then when they come out, you can come out against a rule because it doesn't completely align with what you want to have happen.
Haik: Yeah. So the US energy industry should have some cause for optimism, at least as the country's strong economic rebound and the progress on vaccination and the lifting of travel restrictions boosts fuel demand. Can you talk about some of Biden's initiatives on the stimulus and the ongoing discussions on his infrastructure bill?
Chris: So we already had a big congressional push on a stimulus bill focused on Covid-19. The cost of that was $1.9 trillion and it didn't really directly affect energy policy. But that scale of spending, the injection of money in the economy, and trying to roll out fast vaccinations, that changes the course of the economy and that's an important thing to watch for the energy sector.
Biden has now moved on. He's got a $2.3 trillion infrastructure plan that would do everything from rebuilding roads, to fund public transit, to subsidizing manufacturing. It would extend clean energy tax credits for many years, it would try to subsidize carbon capture. So those are huge priorities.
He's also got a separate plan that is focused on childcare and other issues that aren't really energy-facing. The debate on that is ongoing, but even moderate Democrats that have been reluctant on some of these spending bills have said they want to see a big infrastructure bill, and I don't think they are going to give that up easily.
I've got some questions for you Haik. US producers are part of a global energy market, and their European peers have not only talked the talk, but they've also announced major corporate transformations to change their energy policies. The US administration is playing catch up on climate change after four years of Trump. Could you talk about Biden's climate summit that happened earlier this month and broadly, how does climate and energy transition feature in U.S foreign policy?
Haik: So it shouldn't come as a surprise that Biden chose to prioritize climate change in his first major foreign policy initiative. This is, after all, a global challenge. Also getting other countries to match what Biden wants to accomplish here in the United States would address criticism that the emerging economies, where energy demand is still growing strongly — especially China and India — would gain a competitive edge if the US moves too quickly to achieve net-zero emissions.
And the key takeaway from the climate summit was actually the US’ own big news that the White House made with a plan to reduce US greenhouse gas emissions by 50% to 52% from a 2005 base year by the year 2030.
You've talked about Biden's policies just now. So these numbers are the net total of what they amount to in emission terms, the so-called nationally determined contribution. This target doesn't specify any sector-by-sector emission cuts, as the White House says there are multiple paths to reducing US emissions.
We know that President Biden has talked about eliminating greenhouse gas estimations from the electricity sector by 2035, and he supports setting more aggressive fuel economy and tailpipe CO2 standards for new cars and trucks.
If you've watched Biden's first address to Congress, he stressed that other countries are following the US lead on with climate initiative. The U.K. at the climate summit made perhaps the most ambitious emission cut announcements, and then came the EU, Japan, and Canada, and even Chinese President Xi Jinping for the first time talked about limiting China's coal use after 2026 and phasing it out after 2031, even though he did not offer concrete commitments. All of this previews the UN Climate Change Conference scheduled to take place in Glasgow later this year.
And one final point on this, and this may or may not have been intentional, but the summit itself showed that the US is back in business of international diplomacy. Biden talked about re-engaging with the world when he became president, and here's a virtual forum that was able to get 40 global leaders together, including some that the US does not get along on any other issue.
If you remember, the Trump administration last year did not hold a G7 leaders' forum, even in a virtual format, and all of them were closest US allies.
Chris: When Biden became president, a lot of people expected there'd be some fast action on the Iran nuclear deal, and that country has returned to oil markets. How is that looking 100 days in? And broadly, what can you tell us about what the Biden administration is looking to do to address sanctions?
Haik: There was early on a mismatch in expectations held by Tehran and Washington on how to revive the Joint Comprehensive Plan of Action. Its acronym, JCPOA, five letters, we'll hear a lot in connection with oil markets later this year.
Domestic politics is certainly complex in Iran, just as it is in the US. The Biden administration has made, by all accounts, an offer in good faith to lift US sanctions against Iran if Tehran resumes compliance with restrictions on its nuclear program, but both countries sort of expected the other one to make the first move.
Now, after some back and forth, US and Iran are actually negotiating finally. They are doing so indirectly through European and other intermediaries, but at least they are discussing how to accomplish the lifting of sanctions and Iran's return to compliance. That's taking place in Vienna. And after at least negotiations started, surprisingly or not, all participants have called them productive. And even Iranian negotiators now sound a lot more optimistic than their US counterparts.
Iran's president, Hassan Rouhani, suggested that 70% of issues have been resolved. If you ask US negotiators, they will say that we are not halfway done, but the general thrust is that things are moving along.
There is a big bucket of sanctions that were imposed under former President Trump in 2018 and 2019, and they include “terrorism” designations against Iran's central bank, its state-owned oil company, and the US has said that it can lift any sanctions that would go against the promise in the JCPOA to reintegrate Iran into international trade and finance.
Tehran wants all of those sanctions to come off. And, you know, that is not something that either the Biden administration or any other US administration will do so long as Washington views Iran as hostile towards its interests in the Middle East. But there is more urgency to make progress on these issues now than in the beginning of Biden's term because there is a realization that external circumstances can get worse.
Just in the past month, we have seen attacks from Yemen against Saudi oil installations, sabotage against Iranian nuclear facilities. A US Navy vessel for the first time in four years fired warning shots against Iranian Islamic Revolutionary Guard Corps vessel off the Mideast gulf.
Iran will hold its presidential election in June so there is this sense of urgency that is contributing to the talks moving along. And broadly on sanctions, Democrats and Republicans in the White House have used sanctions as a tool. I think the Biden administration has come in and they don't want to make big changes to the program, but they are doing a major review of programs, not only against Iran, but also every other major producer that has been affected by US sanctions.
There is a sense that United States needs to fine tune how it's sanctioning other countries and that a review will conclude sometime later this year.
And with that, we have come to the end of this podcast. You can find our stories and more in-depth coverage of politics and policy and geopolitical news and insights as it specifically relates to oil markets in both Argus Americas Crude and Petroleum Argus. You can find more information on both services at www.argusmedia.com. Thanks for tuning in, and we hope you'll join us on the next episode of The Crude Report.