Oil prices crashed on Monday when the US Senate failed to reach a deal on the Stimulus Bill over the weekend. The idea was to quickly pass legislation that would help the healthcare systems, small businesses, industries, and Americans struggling in the face of the coronavirus. Unfortunately, the two parties could not come together on the terms over the weekend, with one of the points of contention being green legislation that the Democratic leadership proposed during the final stretch of the bill's negotiation.
Those green initiatives are, in large part, precisely what stymied the deal.
While some in the Senate called for every item in the bill to be specific to coronavirus issues, others naturally got greedy, hoping to capitalize on the desperate need to pass the bill by trying to squeeze their own hard-to-pass agendas onto the hot button bill.
But such efforts proved too ambitious.
It's Not Easy Being Green
The Democrat Party has put green initiatives such as renewable energy and greenhouse gas legislation in a prominent position in their campaigns. Still, legislation in this arena has been difficult to pass, as it remains a partisan issue with a sharp divide.
It was logical, therefore, to try to get legislation in the bill that may otherwise stagnate into infinity.
"Democrats won't let us fund hospitals or save small businesses unless they get to dust off the Green New Deal," Senate Majority Leader Mitch McConnell said, simplifying the position into a snappy soundbite.
Related: Oil Climbs As U.S. Pushes For An End To The Price War So what were the specific environmental issues that sprung up in the 11th hour?
There was no question that airlines would get some tideover money to keep the industry afloat after overseas travel restrictions went into effect that were to last for weeks or months, and domestic travel dropped off considerably. But eight Democratic Senators, including those from some of the hardest-hit states including Michigan's Debbie Stabenow and New Jersey's Cory Booker, wanted to attach strings to the money given to the sector. The strings would increase environmental requirements to address the considerable pollution stemming from the industry. The rationale? Addressing the carbon footprint of the airlines would help prevent future economic collapse that may be triggered by climate change, according to a press release from the supporting senators.
The proposal was for airlines receiving federal money to reduce carbon emissions by 50%. But that's a hard pill to swallow for an industry that isn't even in the air at all right now and losing money hand over fist.
"We can both stimulate the economy ... and we can lay the foundation for a lower-carbon future," economist Michael Greenstone, who served as the Chief Economist for President Obama's Council of Economic Advisers, tweeted in response to suggestions that the bill shouldn't attempt to address non-coronavirus issues.
But Republicans held their ground, and they didn't make those concessions over the weekend just to pass the bill.
The Sierra Club was lobbying hard to attach green initiatives on the coronavirus bill's coattails, referring to the stimulus money that will be handed out to airlines as "money that would see the industry's future. Let's insist that the future be a lower-emissions one." But regardless of where you stand on the environmental issue, the stimulus money was never meant as a seed for the future, but as a life raft for today.
Green Tax Credits
Senator Mitch McConnel alleges that the Democrats were filibustering the bill on other grounds, too, such as extending tax credits for the solar and wind energy industries. The solar and wind industries have been hit by the coronavirus, too, and have claimed that they will lose as much as half of the solar jobs this year due to the virus. For wind specifically, an estimated 25 GW of wind projects and $43 billion in investments and payments to rural communities will be in jeopardy, according to the American Wind Energy Association (AWEA). That is, unless they get help.
"To best protect these jobs and the health of our existing workforce, we are asking Congress to immediately extend the schedule and improve the liquidity of our existing tax credits," the AWEA said in a plea to Congress.
Other tax credits proposed for inclusion into the bill was an extension of the electric vehicle tax credit for which GM and Tesla - both of which have already hit the limit for available tax credits - have been lobbying.
Green With Fossil Fuel Envy
The oil and gas industries are part of the rescue package, and green energy advocates argue that the renewables industry, cup in hand, should get a piece of the stimulus pie too. The difference, however, is that the fossil fuel industry - for better or for worse - is today an essential part of America's national security. The oil and gas industry has increased in prominence in recent years, ramping up production from 8.9 million bpd at the beginning of 2017, to more than 13 million bpd today. This surge has distanced the United States from its dependence on foreign - notably OPEC-derived - oil.
Finally, a Deal?
On Tuesday, the Senate announced it had finally reached a deal. With the specifics of the bill not yet available, it will now go to the House. But the House on Tuesday said it would not vote immediately on the bill.
The delay, according to a senior Democratic aid who spoke to CNN, was because lawmakers would need at least 24 hours to review all the ins and outs of the bill and discuss it before approving it, suggesting that further changes could be in the works. To some, this seems to lack some sense of urgency. Others see taking the time to review details of a bill before approving it fiscally responsible.
Without seeing the full text, we can only assume the oil and gas industry will, as initially planned, get a chunk of the money as they have been hit not only by the virus but by an oil price war between Saudi Arabia and Russia. Also, workers from every industry - including in the renewables industry - will benefit from increased unemployment compensation that will last months, as well as one-time checks, at a minimum.
It is unlikely, though, that more strict regulations for airlines with regards to their carbon footprint or other green deal initiatives would have survived the final cut, regardless of the pressure put on both parties to get the deal done.
Oil prices received a bump on the news that the stimulus deal had succeeded in the Senate, with WTI increasing by 2.5% on Wednesday but then falling back significantly on Thursday.
By Julianne Geiger for Oilprice.com
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