Big Oil profits are rarely a crowd pleaser and especially so when energy prices are high. President Joe Biden regularly bashes the industry for gouging customers, reflecting, among other things, the fact that any White House tends to draw blame for pump prices while having few tools to ease them. Easier to try shifting that blame instead, even if it carries its own logical contortions. After all, lower fuel prices don’t encourage conservation and higher production taxes don’t spur more output.
Yet with Biden’s big energy legislation already done and his party likely to take losses in next week’s midterms, the moment for a windfall tax seems to have passed. Clearly, Woods isn’t sure. Possibly, he may be sending a message about other talked-about interventions, such as a ban on fuel exports. Possibly, he may be looking beyond Washington: Governor Gavin Newsom of California has called for a tax on his state’s refiners. That would hit Exxon’s rival Chevron Corp. harder. But, like the European windfall tax — sorry, solidarity contribution — that Woods also decried, precedent begets contagion. And states can claw back oil profits just by modifying existing breaks rather than instituting new levies.
Woods may also be looking beyond the midterms. Even Republicans aren’t necessarily above imposing higher taxes on oil majors when prices are high, as they did under President George W. Bush (a former oilman). Plus, populism is a vibrant, and bipartisan, feature of today’s politics. As Kevin Book of ClearView Energy Partners, a Washington-based analysis firm, puts it: “The next chapter, the 2024 election, begins on November 9, and I suspect it may involve a fight for the forgotten man.”
–Liam Denning, Bloomberg Opinion
With two months to go, the Bloomberg Commodity Index is up 14% so far this year. That owes everything to the surge in global energy prices following Russia’s invasion of Ukraine. But that same surge has dragged down the rest of the commodities basket, as inflation both undermines end-user demand and spurs higher bond yields. Having been up 38% at one point this summer, the index is now back to within a point of where it was in February, just before Russia attacked.
Ships loaded with grain are beginning to leave Ukraine, as the United Nations and Turkey work to salvage the agreement to keep seaborne exports flowing even after Russia’s weekend announcement that it was suspending its involvement in the deal.
Luiz Inacio Lula da Silva won Brazil’s presidential election in a dramatic comeback for the left-wing politician who was languishing in a jail cell for corruption just three years ago. A smooth transition of power in one the world’s biggest commodities exporters would be a relief to traders.
Natural gas fell in Europe after two days of gains as unseasonably warm weather reduces demand and eases concerns about shortages for the winter. The recent collapse in prices may leave utilities who spent big to fill storage this summer in a difficult position.
Europe faces continued pressure on the oil front and will have to rely on extra crude from the US next year to make up for a loss of supply from Russia, according to the boss of Italian energy giant Eni SpA.
And if you missed it on Sunday, Bloomberg Opinion’s Julian Lee writes on why Africa illustrates the world’s problems, maintaining current levels of oil production let alone increasing them.
• With new sanctions on Russian energy soon to kick in, with unknown consequences, The New Yorker traces the recent history of US efforts to deter the Kremlin and asks: “Will Sanctions Against Russia End the War in Ukraine?”
• As COP 27 gets set to kick off in Egypt, the fifth installment of the Oxford Institute for Energy Studies’ series of podcasts on the climate conference examines the crucial role of new technologies in delivering on net-zero pledges.
• Besides fighting climate change, we will also have to learn to live with it. David Wallace-Wells imagines our likeliest future in the latest edition of The New York Times Magazine.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.
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