Biden Sets Sights On Scrapping Oil And Gas Subsidies
The Biden administration is planning to eliminate subsidies for the oil and gas industry in its next budget, Reuters has reported, citing a White House document. The report notes that the suggestion to remove government incentives for the oil and gas industry does not exactly stand a great chance of succeeding in Congress given Republican’s weight after the latest midterms. Yet the stipulation will be very much in character for this administration, which has targeted the oil and gas industry for being an oil and gas industry, then for not producing enough oil, and most recently for booking record profits on last year’s price surge and not investing these in more production. According to Reuters, annual subsidies for the industry, in the form of tax breaks, amount to between $10 and $50 billion. Besides the administration, these subsidies have been a favorite topic for environmentalist activists, who have called repeatedly for an end to government support for the oil and gas industry, not just in the U.S. but in Europe as well. In 2021, the International Monetary Fund reported that the global fossil fuel industry received subsidies worth a total $5.9 trillion. Most of these were implicit with only a small portion of the massive total taking the form of explicit subsidies, Yale Environment 360 noted in a report on the news. Tax breaks—what appears to be the most common form of government support for oil and gas in the U.S.—were also common as implicit subsidies globally, too. Yet a lot bigger part of the $5.9 trillion calculated by the IMF was in the form of what Yale Environment called health and environmental damages that were not priced into the cost of oil, gas, and coal. President Biden vowed to put an end to fossil fuel subsidies before he took office, in line with his focus on the energy transition. He also vowed to end oil and gas drilling on federal lands and, for a while, fulfilled that promise. Yet the president does not have the powers to put an end to tax breaks for the oil and gas industry single-handedly. For that, he needs Congress. And Congress may not be on board with the idea.
Govt plans to create carryover stock of ethanol for next year
The government is planning to create a carryover stock of ethanol for the next year anticipating a rise in demand for E20 fuel in the country, according to a senior food ministry official. E20 fuel is a blend of 20 percent ethanol with petrol. The government aims to achieve the 20 percent ethanol blending target by 2025. “Ethanol blending is going well. Oil Marketing Companies (OMCs) have started dispensing E20 fuel in about 100 outlets in 31 cities in the country. We have started E20 fuel, if it goes well then, the requirement will be more,” said Subodh Kumar, Additional Secretary in the food ministry. Like sugar, the government plans to create a carryover stock of ethanol with OMCs and distilleries for 2023-24 ethanol year (December-November) and more sugar would be diverted for the same, he said. The government has kept the 12 percent ethanol blending target in the ongoing 2022-23 ethanol year while 15 percent for the next year. “About 1.20 billion litres has been blended with petrol till February-end. We are continuously blending 12 percent. The ethanol availability and production capacity are sufficient to meet this year’s target,” the official said. To meet 15 percent blending target next year, the official said that additional 1.50 billion litres of ethanol would be required, and the government is encouraging sugar mills and distilleries to enhance production capacity. The ethanol production capacity has gone up to 10.40 billion litres till February this year. The government is encouraging ethanol capacity creation under an interest subvention scheme. The official said that the government has approved 243 projects and banks have already sanctioned Rs 203.34 billion loans and out of which Rs 110.93 billion has been disbursed. Last week, the government reviewed the upcoming projects and about 2.50-3.00 billion litres of ethanol capacity will come in the next 9-10 months, he added.
GAIL India issues swap tender for LNG cargo
GAIL (India) Ltd has issued a swap tender offering one liquefied natural gas (LNG) cargo for loading in the United States in exchange for another cargo for delivery to India, said two industry sources on Wednesday. India’s largest gas distributor is offering the cargo for loading from May 21-23 from Cove Point, Maryland, on a free-on-board (FOB) basis. It is seeking a cargo for delivery to India’s Dahej terminal for 27-31 May on a delivered ex-ship (DES) basis. The tender closes on March 9, said the sources. GAIL has 20-year deals to buy 5.8 million tonnes a year of U.S. LNG, split between Dominion Energy’s Cove Point plant and Cheniere Energy’s Sabine Pass site in Louisiana.
India’s oil deals with Russia dent decades-old dollar dominance
U.S.-led international sanctions on Russia have begun to erode the dollar’s decades-old dominance of international oil trade as most deals with India – Russia’s top outlet for seaborne crude – have been settled in other currencies. The dollar’s pre-eminence has periodically been called into question and yet it has continued because of the overwhelming advantages of using the most widely-accepted currency for business. India’s oil trade, in response to the turmoil of sanctions and the Ukraine war, provides the strongest evidence so far of a shift into other currencies that could prove lasting. The country is the world’s number three importer of oil and Russia became its leading supplier after Europe shunned Moscow’s supplies following its invasion of Ukraine begun in February last year. After a coalition opposed to the war imposed an oil price cap on Russia on Dec. 5, Indian customers have paid for most Russian oil in non-dollar currencies, including the United Arab Emirates dirham and more recently the Russian rouble, multiple oil trading and banking sources said. The transactions in the last three months total the equivalent of several hundred million dollars, the sources added, in a shift that has not previously been reported. The Group of Seven economies, the European Union and Australia, agreed the price cap late last year to bar Western services and shipping from trading Russian oil unless sold at an enforced low price to deprive Moscow of funds for its war. Some Dubai-based traders, and Russian energy companies Gazprom and Rosneft are seeking non-dollar payments for certain niche grades of Russian oil that have in recent weeks been sold above the $60 a barrel price cap, three sources with direct knowledge said. The sources asked not to be named because of the sensitivity of the issue. Those sales represent a small share of Russia’s total sales to India and do not appear to violate the sanctions, which U.S. officials and analysts predicted could be skirted by non-Western services, such as Russian shipping and insurance. Three Indian banks backed some of the transactions, as Moscow seeks to de-dollarise its economy and traders to avoid sanctions, the trade sources, as well as former Russian and U.S. economic officials, told Reuters. But continued payment in dirhams for Russian oil could become harder after the United States and Britain last month added Moscow and Abu Dhabi-based Russian bank MTS to the Russian financial institutions on the sanctions list. MTS had facilitated some Indian oil non-dollar payments, the trade sources said. Neither MTS nor the U.S. Treasury immediately responded to a Reuters request for comment. An Indian refining source said most Russian banks have faced sanctions since the war but Indian customers and Russian suppliers are determined to keep trading Russian oil. “Russian suppliers will find some other banks for receiving payments,” the source told Reuters. “As it is, the government is not asking us to stop buying Russian oil, so we are hopeful that an alternative payment mechanism will be found in case the current system is blocked.” FRIENDLY VERSUS UNFRIENDLY Paying for oil in dollars has been the nearly universal practice for decades. By comparison, the currency’s share of overall international payments is much smaller at 40%, according to January figures from payment system SWIFT. Daniel Ahn, a former chief economist at the U.S. State Department and now a global fellow at the Woodrow Wilson International Center for Scholars, says the dollar’s strength is unmatched, but the sanctions could undermine the West’s financial systems while failing to achieve their aim. “Russia’s short-term efforts to try and sell things in return for currencies other than the dollar is not the real threat to Western sanctions,” he said. “(The West) is weakening the competitiveness of their own financial services by adding yet another administrative layer.” The price cap coincided with an EU embargo on imports of Russian seaborne oil, rounding off a year of bans and sanctions, including largely expelling Russia from the SWIFT global payments system. Around half of its gold and foreign exchange reserves, which stood near $640 billion, were frozen. In response, Russia said it would seek payment for its energy in the currency of “friendly” countries and last year ordered “unfriendly” EU states to pay for gas in roubles. For Russian firms – as payments were blocked or delayed even if they were not violating any sanctions, due to overly zealous compliance – dollars became potentially a “toxic asset”, independent analyst and former adviser at the Bank of Russia Alexandra Prokopenko, said. “Russia desperately needs to trade with the rest of the world because it’s still dependent on its oil and gas revenues so they are trying all options they have,” she told Reuters. “They’re working on building a direct infrastructure between the Russian and Indian banking systems.” India’s largest lender State Bank of India has a nostro, or foreign currency, account in Russia. Similarly, many banks from Russia have opened accounts with Indian banks to facilitate trade. IMF Deputy Managing Director Gita Gopinath said in the month after Russia’s invasion of Ukraine that sanctions on Russia could erode the dollar’s dominance by encouraging smaller trading blocs using other currencies. “The dollar would remain the major global currency even in that landscape but fragmentation at a smaller level is certainly quite possible,” she told the Financial Times. The IMF did not respond to a Reuters request for comment. Beyond Russia, tensions between China and the West are also eroding the long-established norms of dollar-dominated global trade. Russia holds a chunk of its currency reserves in renminbi while China has reduced its holdings of dollars, and Russian President Vladimir Putin said in September Moscow had agreed to sell gas supplies to China for yuan and roubles instead of dollars. INDIA DISPLACES EUROPE India in the last year displaced Europe as Russia’s top customer for seaborne oil, snapping up cheap barrels and increasing imports of Russian crude 16-fold compared to before the war, according to the Paris-based International Energy Agency. Russian crude accounted
Russian Oil Gets More Pricey as Pool of Asian Buyers Expands
The price of Russian crude and fuel is rising for buyers in Asia as a pool of bigger customers from China and India expands, putting pressure on smaller refiners that have eagerly consumed the cheap oil. Offer levels for Russia’s Urals and ESPO crude, as well as fuel oil, surged over the past weeks, according to traders with knowledge of the matter. Increased interest from Chinese state-owned and large private refiners such as Sinopec, PetroChina Co. and Hengli Petrochemical Co., in addition to a jump in Indian demand, led cargoes to be snapped up at higher prices, they said. The larger refiners have muscled in to a patch typically dominated by China’s smaller independent processors, known as teapots, which have been consistent consumers of discounted Russian crude. ESPO oil from the nation’s Far East has been a particular favorite due to its short shipping distances Offers for ESPO that’s typically loaded at Kozmino port was close to $6.50 to $7 a barrel below ICE Brent on a delivered basis to China, while flagship Urals shipped from western ports was around $10 under the same benchmark, said traders. That’s an increase of as much as $2 from last month, marking one of the steepest jumps since sanctions were imposed on Dec 5, they added