Market turmOIL

Q: What is going on with oil markets now? Is it:

Peak,
Valley,
Demand-driven,
Supply-driven,
Globalization,
Deglobalization,
Calamity,
Opportunity,
Orchestrated,
or Accidental?

A: Yes.

All of these realities really do seem to be part of the oil-market landscape in this pandemic season in which the futures market for oil went sharply negative for the first time in history, two days ahead of the 50th anniversary of Earth Day.

This did not mean that we were being paid to fuel our jalopies, but it did mean that many changes are afoot in this most important industry. The causes and consequences for economies, employment, and the environment are complicated.

Pumping Oil at Negative (in theory) Prices
Image: Getty via On Point

Journalist extraordinaire Meghna Chakrabarti led an excellent discussion of the countervailing winds facing the oil industry in Low Prices, Full Storage Tanks: What's Next For The Oil Industry, part of the On Point program's Coronavirus Hours series. She gathered an interesting guest list for this discussion. The hour opens with an energy and economy reporter and the owner of a small oil company, both from Texas. Most of the time is spent with a petroleum economist and an international affairs specialist. The combination is an excellent one, and even the economist has some valuable insights.

Most intriguing: the economist suggests that some oil might be left in the ground at the end of all the transitions being discussed. Whether or not this is possible is, from the point of view of climate disruption, the most important of the many topics covered in this fascinating hour.

Bonus: The On Point production team has included an extensive reading list on the episode web page for exploring all of these questions further.

Lagniappe:

Clean Water Win

A couple of days after the 50th anniversary of Earth Day, the U.S. Supreme Court issued a surprising ruling on a complicated case involving the Clean Water Act, a 1972 law signed by Nixon (originally under a different name) and often seen as one of the signal achievements of the original Earth Day.

Before reading about the ruling, it may be helpful to listen to NPR journalist Ryan Finnerty's  reporting on the case as it was heard by SCOTUS in November 2019.

I somehow missed news of last week's ruling until I saw a link to Steve Hanley's article US Supreme Court Decides Clean Water Act Applies To Groundwater on a site called CleanTecnica, which describes the case in terms of its partisan implications. Journalist Adam Liptak provides a more dispassionate description of the case in Clean Water Act Covers Groundwater Discharges, Supreme Court Rules for the New York Times. Writing for SCOTUS Blog, Lisa Heinzerling dissects the legal philosophies at play.

Connections between ground water and surface water vary,
but often are this simple.
Image: BYJU'S

The result is considered a victory by the environmental groups that filed the suit, because it reduces polluters' ability to claim that water flowing underground is immune from the Clean Water Act -- what plaintiffs and some justices consider a loophole.

I use the phrase "is considered a victory" because nobody is quite certain what the ultimate impact of this case will be. As often happens, the Court has returned the case to a lower court with some direction, but that court might have more than the usual latitude in deciphering the court's intent.

Underlying (pun intended, I guess) all of this complication is the fact that Federal jurisdiction over water has in many ways been limited to navigable waterways, a term that originated in the 1899 Rivers and Harbors Act, and whose definition has never engendered a lot of consensus.

For me, this ruling will have been a victory for the environment only if it helps to bring about an end to the dangerous practice of oil extraction through hydraulic fracturing (fracking). The current drop in oil prices will sideline fracking for the next year or two, but legal action will be needed to prevent it from continuing to destroy the quality of ground water in places with minimally accessible petroleum deposits. See my Imagine No Fracking (2012) Non-Oil Futures (2012), and More Than Modified (2014) posts for more on the dangers of pumping toxic solutions into damaged aquifers.