On Tuesday, March 23rd, the giant container ship, the Ever Given, ran aground in the Suez Canal causing hundreds of ships to get stuck at both ends of the canal. The canal connects the Red Sea to the Mediterranean Sea and carries approximately 10% of global shipping traffic. The Suez Canal is vital for nearly every cargo ship that moves between Asia and Europe, and it is also an important shipping lane for cargo coming from Asia to the East Coast of the United States. At the time of this writing, the Ever Given has been partially refloated and moved alongside the canal bank, but the backup is still impacting oil markets.
Vaccination news has dominated headlines for weeks, painting a rosy picture of the near to midterm future, but it is as important as ever to give yourself and your loved ones a mental health check. The holidays are behind us and the reality of pandemic fatigue is starting to set in. The U.S. has already experienced a harsh winter that shows no signs up slowing up, and the emotional stress of work, parenting and school has been draining. Experts say the first step to combatting this fatigue is by identifying and acknowledging the most egregious stressors and addressing those areas first.
Following a tumultuous 2020, U.S. shale producers face a new dilemma of ramping up production in the face of global oil supply uncertainty. With West Texas Intermediate (WTI) trading above $50/barrel, there is significant temptation for shale producers to surge their output, however, the constant growth strategy of previous years may prove to be costly at this juncture. Daily production is still down about 2 million barrels per day (bpd) from the same time last year, but many industry leaders are calling for a cautious approach to ramping up production again.
Following a series of positive results from multiple vaccines, the conversation on Capitol Hill has shifted to the distribution and logistics of the COVID-19 vaccines. On December 10th, a group of freight industry executives, including Richard Smith, Regional President of the Americas and Executive Vice President at Fedex Express, and Wesley Wheeler, President of Global Health Care at UPS, will testify as witnesses before the Senate Transportation and Safety Subcommittee. The purpose of this hearing is to determine the logistics and transportation partnership needed between the government and the private sector to safely deliver millions of vaccine doses around the country.
Improving highway safety has been a priority for the trucking industry for the past decade, with changes to Hours of Service (HOS) and the switch to electronic logging devices (ELDs), and the Texas Department of Public Safety is adding to these safety measures by opening a new technologically advanced truck inspection facility in Seguin, TX. Seguin is located right along the heavily trafficked I-10 corridor, making it the perfect spot to see if these facility upgrades improve both safety and efficiency. If these investments prove to be successful, this could be a new blueprint for how truck inspection facilities are designed in the future.
Volatility in investing in oil and gas is nothing new, but the COVID-19 pandemic-driven demand destruction is forcing oil and gas companies to reassess the value of their biggest assets, proven reserves. Oil and gas companies have historically held faith in their reserves even during energy downturns, but this time feels different, and oil executives are starting to prepare themselves for large amounts of their oil and gas reserves to become totally worthless.
Last December I wrote about the proposed Transportation and Climate Initiative (TCI), which would require wholesalers of gasoline and diesel in participating states to buy carbon credits to sell their fuel. As a result of the COVID-19 pandemic, the TCI jurisdictions have adjusted their timeline for developing the program, and a final Memorandum of Understanding is now expected in the fall of 2020. TCI notes that work on the program details will continue, as will engagement with stakeholders.
The COVID-19 pandemic has been particularly tough on the oil industry, and it appears as though the impacts will be felt well beyond the immediate future. According to BloombergNEF, peak fuel demand will come sooner than previously predicted, with gasoline demand peaking in 2030 and on road diesel demand peaking shortly after in 2033. While there are other factors in play, COVID-19 certainly appears to be expediting the process.