At the end of a busy day, a few thoughts on today’s SPR release: 🧵 #OOTT
Effectiveness should be measured not by price response today but what it would have been absent the “verbal intervention” of the past few weeks. Expectations of a release contributed (tho not entirely responsible) to drop of $8/b since Oct & helped stem price run up.
It’s notable because it is not an emergency response to a severe supply disruption, as required for a major sale, but (as an exchange) an effort to tame higher oil price expectations amidst deep concerns about inflation.
At a time when the economic recovery from a historic pandemic has led to disruptions and lags in supply chains, investment etc, incl for energy sector, administration comments suggest a rationale of using SPR to help smooth the path back to normalcy & shave peaks in pump prices.
The risk for admin is projections of markets loosening next year prove too optimistic. If markets are tight and/or there are unexpected supply disruptions, few tools remain to curb high prices (and OPEC+ may have little spare capacity left by then).
Another risk is OPEC+ responds by slowing its plan to put more oil on the market, just offsetting the impact. Not at all clear all OPEC+ members would support holding back supply, however, and that would risk putting a target on OPEC+ (e.g., Congressional interest in NOPEC).
Notable that this was not done through the IEA, but with China, India etc. IEA was created as an agreement among consumer countries to hold strategic oil stocks. Today’s big consumers are not those of the 1970s, however, so need different partners.
There may be potentially significant geopolitical implications if oil market dynamics become a new area of cooperation/coordination between US and China, in particular.
Re climate, it’s not inconsistent to ensure affordable & reliable energy supplies for consumers today while also taking historically unprecedented actions to accelerate a clean energy transition in the future. The world we have today & want in the future are two different things.
As I’ve testified & written many times, prices at pump are set in a global market & consumers remain vulnerable to global shocks regardless of how much or little we import.…
That’s why it’s foolish to sell off SPR and why the best way to protect the economy and consumers from inevitable shocks and volatility in oil market, not to mention curb climate change, is to reduce how much oil we use in the first place.…
The path to net-zero is going to be messy, unpredictable, disruptive, & volatile.  We need more, not fewer, tools to manage volatility and smooth the transition, not just to avoid economic harm but avoid undermining political support for climate ambition.…
Most importantly, have a Happy Thanksgiving everyone!

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More from @JasonBordoff

19 Feb 19
Just back from @MunSecConf, where @ColumbiaUEnergy organized a side event on energy’s use as a geopolitical weapon, and I moderated a breakfast discussion on #NordStream2. Here are a few reflections from this year’s #MSC2019 & intersection with energy/climate. (Thread)
At a broad level, the dominant theme was concern among participants about the perception that America was retreating from the global stage and its leadership role in the rules-based international order.
It was notable that the US sent its largest contingent ever of members of Congress from both sides of the aisle, perceived by many as an effort to send a signal that the USG is comprised of more than just the White House.
Read 29 tweets
26 Jan 19
THREAD: We wrapped @Davos #WEF19 today & I want to share my thoughts on the mood this year. Discussions focused on geopolitical & economic risks to the energy sector, #climatechange, optimism abt the pace & promise of technological innovation & outlook for clean energy.
Compared to 2018, the economic mood @Davos was more grim & subdued. Ongoing US-China trade dispute weighed heavily.. Many expect some resolution before March 2 deadline, but thorny issues in relationship will persist & China digging in for long-term. Brexit added to worries.
Last year’s lamenting by world leaders that the U.S. had withdrawn from the Paris climate agreement were replaced w/ deep concern that the U.S. has exited the world stage completely.
Read 28 tweets
26 Jan 18
A few thoughts on the energy and climate mood in #Davos2018 this year as my train rolls away through the gorgeous Swiss countryside. Three big themes around climate, energy markets, technology.
The most striking thing about the mood in Davos this year is the tremendous optimism business leaders have about the global economic outlook. That's bullish for energy demand and prices (not great for GHG emissions btw)
Many of the most prominent world leaders noted the threat of climate change as among the top challenges the world faces today. Modi placed it first, along with terrorism & globalization backlash. Macron pledged to shut down coal plants by 2021.
Read 21 tweets

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