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From the "energy led" to "shale crisis", the epidemic has hit the "US priority" pause button.

drc_iite @ 2020/05/23

The new crown outbreak has led to a decline in global energy demand, a loss of us energy exports, and a serious impact on the energy industry of Russia's crude oil price war. The US's long-term strategy of seeking global energy dominance through crude oil exports will be adjusted.

Thanks to the shale revolution, the United States has successfully transformed into the world's largest oil and gas producer and main exporter of oil and gas. IEA data show that in 2017, US crude oil production accounted for 13% of the world's total crude oil output, and natural gas accounted for 20%. Over the same period, domestic energy production met 98% of the primary energy consumption in the United States, and almost achieved full energy independence. Under such a transformation, the United States adjusts its energy policy homeopathic, from the initial pursuit of "energy independence" to "energy led", and has shown the ambition of seeking world energy hegemony in the fields of oil, natural gas, nuclear energy and new energy. The new crown disease has led to a decline in global energy demand, a loss of energy exports in the United States, and a serious impact on the energy industry by Russia's crude oil price war. The US's long-term strategy of seeking global energy dominance through crude oil exports will be adjusted.

First, the strategic transformation of the United States from "energy independence" to "energy led".

Seeking "US energy dominance" is the core goal of the Trump administration's "energy priority" strategy. In order to achieve "energy led", the Trump administration's policy choices in international and domestic affairs are very different from those of the past, and have a significant and far-reaching impact on the political, diplomatic and military aspects of the United States. Its core initiatives include: withdrawal from the Paris climate agreement to reduce the regulatory obstacles of the international community in its energy production; simplify the export approval system for fossil fuels to expand energy production; sanction other countries' energy projects to enhance their energy influence; legislation promotes nuclear energy innovation to restore their nuclear leading position; layout new energy industry chain to establish a key that does not depend on foreign countries. Material safety supply chain; attaches great importance to energy technology research and development to maintain its leading position in global energy technology. Under the policy change, a large number of oil and natural gas in the United States enter the international market, impacting the oil market structure dominated by OPEC, and its layout in nuclear energy and new energy has far-reaching impact on the emerging energy market.

Two, seeking global leadership through energy exports is the core goal of Trump's "American priority" strategy.

The core goal of the Trump administration's "US energy priority" strategy is to seek global market dominance through energy exports. From the perspective of government behavior, In order to increase energy exports, the Trump administration has made a lot of efforts, including relaxing oil control, simplifying export approvals, restarting multiple oil pipeline projects, and even sanctions other countries' energy projects. During the Sino US trade negotiations, the Trump administration asked China to purchase large quantities of crude oil from the United States. In addition, Trump also hopes to further expand energy exports and transport crude oil to Europe and Japan to occupy a larger market share. Judging from the export situation, Since 2017, the average daily crude oil export volume in the United States has increased significantly. In 2019, the average daily export volume of crude oil in the United States was 2 million 980 thousand barrels, an increase of 45% over 2018. In 2018, the average daily export volume of crude oil in the United States reached 2 million barrels, an increase of 70% over 2017, and the export areas covered nearly 40 countries and regions in Asia, Europe and South America. From the point of view of influence, The increase in US crude oil output and exports can not only boost the traditional industries such as domestic petrochemicals, promote the return of manufacturing industry, drive the US economy and employment, but also play a role in diplomacy and trade to help the United States pursue greater national interests. Secretary of state Pompeio has said that US energy exports can also serve as a diplomatic chip for "US priority" policy to help the US expand its influence in international trade and further seek US dominance in the global market.

Three, the superimposed crude oil price war has multiple impacts on the US energy industry.

(1) exacerbate the financial and financial difficulties of American shale enterprises.

Before the oil price war and the outbreak of the new crown pneumonia, most American shale enterprises were hard to make profits. According to Moodie's data, North American oil and gas company will face $200 billion in maturity in the next four years, of which $40 billion will expire in 2020. The outbreak of the crude oil price war further exacerbated the financial and financial difficulties of the shale industry in the United States. It is estimated that the average price of the shale oil in the United States is about $40 per barrel. Only the Exxon Mobil, Chevron, Western oil and Crownquest five shale drilling companies can keep Nii's cost at the level of 31 US dollars / barrel. The oil price slump has increased the cash flow pressure of shale oil company. The impact of global economic recession on the global spread of the new crown epidemic has caused oil demand and industry investment to shrink, and some shale oil companies with tight cash flow and higher debt ratio may have the possibility of breaking up the capital chain.

(two) not conducive to the Trump administration's long-term development strategy of "energy first".

Since Trump took office in January 2017, a series of fossil energy policies have been put in place to superimpose shale oil technology development, and the US shale oil output has been greatly improved. According to the US Department of energy data, the US crude oil output in January 2020 was close to 13 million barrels / day, about 4 million barrels / day higher than that of 8 million 900 thousand barrels / day in January 2017. Seeking oil exports has become the core demand of the US energy companies. Through massive oil exports, the employment and economic prosperity in the United States and the dominant position in the global oil market are the core objectives of the "energy priority" strategy of the United States. The collapse of oil prices caused by the oil price war led to the loss of most of the shale oil companies in the United States. A large number of oil and gas producers went bankrupt, resulting in a sharp decline in shale oil output. Under the influence of the epidemic, global energy demand declined and US oil and gas exports further declined, which will have a negative impact on the Trump administration's long-term development strategy of "energy priority".

(three) speed up the clearing rate of the shale market in the United States or increase its overall competitiveness.

Affected by the outbreak and the oil price war, more and more shale oil companies in the United States are deeply involved in the debt crisis. Many energy companies have filed for bankruptcy, and the number of oil drilling rig has been reduced to the lowest level in recent years. The collapse of the US shale oil business, which is the result of the low oil price environment, may also be the long-awaited acquisition opportunity of large oil and gas companies in the United States. According to foreign media reports, a senior trader in a European energy brokerage firm in New York has said that apart from Russia and Saudi Arabia, large oil and gas companies in the United States are also preventing Trump from saving shale oil because they want to buy the assets of the bankrupt shale oil company at a low price and thus occupy more market share. The big oil companies led by Exxon Mobil and Chevron have made clear their position repeatedly against the government's implementation of any oil production reduction measures in the face of heavy energy prices. Under the combined influence of the epidemic and the oil price war, the scale and quantity of the merger and reorganization of the shale oil and gas market in the United States have increased significantly. The non scale production is forced to withdraw from the market in large numbers, which will speed up the clearing rate of the shale industry in the United States. In the long run, it will help to increase the overall competitiveness of the market.

Four, the plan and measures to support energy industry in the United States

(1) internal policy

In order to protect shale oil industry, the US government has four main aspects of its internal policy. The first is to provide strategic oil reserves for oil producers. With the sharp drop in oil demand and the oversupply of crude oil, the US commercial oil storage facilities are overburdened. Lack of storage will force the oil wells to shut too early, which will adversely affect the US energy industry. In response, the US Department of energy in April 3rd provided 30 million barrels of strategic oil reserve space to us oil producers affected by the epidemic and plans to increase oil reserves by 47 million barrels to alleviate the crisis of oversupply of shale oil. The two is to improve energy demand. According to foreign media reports, US Treasury Secretary Mnuchin has said that the Trump administration is considering ways to save the energy industry in many ways, including buying fuel ahead of schedule and buying tickets in advance, so as to help the shale industry overcome the crisis through ways of improving energy demand. The three is to invest in the energy sector. Kudelo, director of the National Economic Commission of the White House, has said that Trump will help the shale enterprises ease their financial pressure by buying energy companies in the federal government. The four is to reduce business expenses, such as reducing royalties from the federal land to extract oil and natural gas.

(two) foreign policy

In order to reduce oil imports, the US government mainly considers taxation of foreign oil imports or suing Saudi Arabia and other countries through a non OPEC bill. In March, American shale oil producer Hamm (also an informal adviser to Trump's energy policy) lodged a complaint with the US Department of Commerce, accusing Saudi Arabia of "illegally" dumping crude oil, and investigating the Saudi Arabia with the union of domestic energy producers. In April, when Trump met with us energy executives, he said he would impose punitive trade measures on Saudi Arabia's crude oil imports. In addition, Trump also directly indicated that he would stop importing crude oil from Saudi Arabia.

author Energy Research Laboratory

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Chinese:技经观察 | 从 “能源主导”到“页岩危机”,疫情按下了“美国优先”的暂停键