Congress Working On Bill That Could Mean Big Changes For U.S. Energy Policy

Energy markets are ticking modestly higher to start Tuesday’s session after Monday’s euphoria over a U.S.-China trade deal Monday morning calmed down noticeably by the afternoon. While the opening of direct discussions is certainly welcome news for markets all around the world, a great deal of geopolitical uncertainty remains.

The U.S. President is visiting Saudi Arabia today to start a Middle East trip which is in part to encourage the OPEC members to increase their oil output, which is exactly what U.S. producers don’t want.

Meanwhile, European leaders are preparing new sanctions on Russia’s shadow fleet that’s helped the country evade previous attempts to squeeze oil exports. Similar efforts by the US have been modestly effective and seem to contribute to China buying more Saudi crude in recent months as their options to take advantage of discounted Russian supplies are shrinking.

Big changes may or may not be coming to U.S. energy policy as congress works on major tax and spending bills this week. A draft bill released Monday intends to put an end to EV tax incentives and phase out other credits for lower-carbon energy sources such as EV chargers and rooftop solar projects. The House Ways and Means committee also proposed to extend the new Clean Fuel Producer’s Credit (AKA 45Z) to 2031, while excluding most imported feedstocks and making other changes to the calculations to determine the carbon intensity scores of various fuels, which in turns sets the level of credit available. That proposal seems to counter efforts by several industry lobbying groups to reinstate the Blender’s Tax Credit that expired last year, which had far fewer restrictions and requirements than the new law.

RIN values have pulled back slightly after reaching 20 month highs last week, but both D4 and D6 values are nearly double what they were at the start of the year as the production and imports of RD and biodiesel has plummeted without the $1/gallon BTC subsidy.

Total reported another upset at its Port Arthur TX refinery Monday after a separate emissions event was registered on Friday. Both the cause and effect of this latest event, which lasted 5 hours are unclear, but there was no noticeable impact in USGC basis values on Monday to suggest it’s going to be a meaningful event.

Gasoline basis values in San Francisco have been sliding this week on signs of easing supply after numerous refinery upsets across the state last week. Prompt CARBOB values are already down more than 35 cents from the peak last week, but remain the most expensive in the country by a wide margin.

The April CPI reading came in at .2% for the month and 2.3% for the year, with lower energy prices once again acting as the key counterbalance to rising inflation. Gasoline prices were down nearly 12% year on year, while diesel prices were down nearly 10% both of which helped to offset increases in natural gas and electricity costs, along with stubbornly high prices for food, shelter and medical services.