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It’s all about Iran and Saudi Arabia.
What starts in Israel can turn the global energy market upside down. That’s a lesson from the 1973 Yom Kippur War, which started almost exactly 50 years ago with a surprise attack by Egypt and Syria on Israel and helped kick off an embargo from Arab members of the Organization of Petroleum Exporting Countries to punish the United States for supporting the Israeli military.
But despite the superficial similarities between the two conflicts, few analysts expect spiraling oil prices — at least not yet.
“Neither Israel nor its direct neighbors are large oil producers. Hence, we judge the near-term risk to oil supply as limited,” Morgan Stanley analysts wrote in a note to clients. “That could change in case the conflict were to extend to other countries in the region.”
The risk to oil supplies largely stem from how the conflict in Gaza affects oil-producing nations in the Middle East, namely Saudi Arabia and Iran.
“The big risk to oil is the odds of the conflict escalating into the Persian Gulf. There could be disruption to oil flows stemming from a U.S. or Israeli escalation against Iran, if it becomes clear that Iran was directly involved in the conflict,” Eurasia Group analyst Greg Brew told me. “That could come in the form of a U.S. crackdown on Iran oil exports — which the U.S. has been disinclined to do this year — which would trigger an Iranian response in the Persian Gulf.”
Rory Johnston, founder of Commodity Context, said that up to one million barrels per day of Iranian exports were at risk if Israel and the United States determined Iran was responsible for the attacks and responded accordingly. “Will Israel attack Iranian infrastructure in retaliation? U.S. sanctions enforcement has been weak over the past year as part of a suite of efforts aimed at getting Iran back in some kind of nuclear deal — does that reverse?”
“If the U.S. or Israel decides to take the fight to Iran, [it] would spin things out in a way that would disrupt oil flows and push prices upward,” Brew told me.
The other major player is Saudi Arabia, which was in the process of negotiating a U.S.-brokered deal to formally recognize Israel, which would be a tectonic shift in the politics of the Middle East.
Last week, oil prices actually declined meaningfully thanks to optimism about the Saudi-Israeli-American deal. The Wall Street Journal reported on Friday that “Saudi Arabia has told the White House it would be willing to boost oil production early next year if crude prices are high,” explicitly in order to help pave the way for a deal with Israel.
Earlier this year, Saudi Arabia announced that it would cut production down by a million barrels a day to nine million, a move which immediately raised suspicions that it would, intentionally or not, damage the Biden administration by leading to a hike in gas prices. Towards the end of last year, average gas prices fell as low as $3.09 per gallon, before rising to $3.87 in August. They are around $3.80 today.
The Biden administration has been trying to navigate twin goals of containing consumer prices — including for gasoline — and transitioning away from fossil fuels. Alongside the unprecedented investments in clean energy from the Inflation Reduction Act, this has meant using federal policy to lower gasoline prices by releasing oil from the Strategic Petroleum Reserve last year and then trying to bolster U.S. production in the short term by buying oil at prices just above the breakeven price for profitable drilling.
Last Wednesday, OPEC announced that Saudi Arabia and Russia would maintain its previously announced production cuts through the end of this year. Prices for Brent crude went over $96 a barrel late last month and then fell to $84 by the end of the last week, before jumping up to around $87.50 today.
“At least part of last week’s…selloff was the news that the Saudis were negotiating with the Biden admin officials regarding Riyadh officially recognizing Israel, and as part of that deal Saudis were saying that they might ease the current production cuts early next year,” Johnston told me.
“Hard to imagine that the prospects of such a deal remain as strong given what we know Israel is going to do in Gaza in retaliation. Indeed, wedging Israel and Saudi exactly like this is one of the working theories for Iran’s possible involvement.”
At least so far, Israel and the United States have been cautious about blaming Iran for the attacks, thus likely limiting fears that the global energy market will spin out of control. For now.
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The Loan Programs Office is good for more than just nuclear funding.
That China has a whip hand over the rare earths mining and refining industry is one of the few things Washington can agree on.
That’s why Alex Jacquez, who worked on industrial policy for Joe Biden’s National Economic Council, found it “astounding”when he read in the Washington Post this week that the White House was trying to figure out on the fly what to do about China restricting exports of rare earth metals in response to President Trump’s massive tariffs on the country’s imports.
Rare earth metals have a wide variety of applications, including for magnets in medical technology, defense, and energy productssuch as wind turbines and electric motors.
Jacquez told me there has been “years of work, including by the first Trump administration, that has pointed to this exact case as the worst-case scenario that could happen in an escalation with China.” It stands to reason, then, that experienced policymakers in the Trump administration might have been mindful of forestalling this when developing their tariff plan. But apparently not.
“The lines of attack here are numerous,” Jacquez said. “The fact that the National Economic Council and others are apparently just thinking about this for the first time is pretty shocking.”
And that’s not the only thing the Trump administration is doing that could hamper American access to rare earths and critical minerals.
Though China still effectively controls the global pipeline for most critical minerals (a broader category that includes rare earths as well as more commonly known metals and minerals such as lithium and cobalt), the U.S. has been at work for at least the past five years developing its own domestic supply chain. Much of that work has fallen to the Department of Energy, whose Loan Programs Office has funded mining and processing facilities, and whose Office of Manufacturing and Energy Supply Chains hasfunded and overseen demonstration projects for rare earths and critical minerals mining and refining.
The LPO is in line for dramatic cuts, as Heatmap has reported. So, too, are other departments working on rare earths, including the Office of Manufacturing and Energy Supply Chains. In its zeal to slash the federal government, the Trump administration may have to start from scratch in its efforts to build up a rare earths supply chain.
The Department of Energy did not reply to a request for comment.
This vulnerability to China has been well known in Washington for years, including by the first Trump administration.
“Our dependence on one country, the People's Republic of China (China), for multiple critical minerals is particularly concerning,” then-President Trump said in a 2020 executive order declaring a “national emergency” to deal with “our Nation's undue reliance on critical minerals.” At around the same time, the Loan Programs Office issued guidance “stating a preference for projects related to critical mineral” for applicants for the office’s funding, noting that “80 percent of its rare earth elements directly from China.” Using the Defense Production Act, the Trump administration also issued a grant to the company operating America's sole rare earth mine, MP Materials, to help fund a processing facility at the site of its California mine.
The Biden administration’s work on rare earths and critical minerals was almost entirely consistent with its predecessor’s, just at a greater scale and more focused on energy. About a month after taking office, President Bidenissued an executive order calling for, among other things, a Defense Department report “identifying risks in the supply chain for critical minerals and other identified strategic materials, including rare earth elements.”
Then as part of the Inflation Reduction Act in 2022, the Biden administration increased funding for LPO, which supported a number of critical minerals projects. It also funneled more money into MP Materials — including a $35 million contract from the Department of Defense in 2022 for the California project. In 2024, it awarded the company a competitive tax credit worth $58.5 million to help finance construction of its neodymium-iron-boron magnet factory in Texas. That facilitybegan commercial operation earlier this year.
The finished magnets will be bought by General Motors for its electric vehicles. But even operating at full capacity, it won’t be able to do much to replace China’s production. The MP Metals facility is projected to produce 1,000 tons of the magnets per year.China produced 138,000 tons of NdFeB magnets in 2018.
The Trump administration is not averse to direct financial support for mining and minerals projects, but they seem to want to do it a different way. Secretary of the Interior Doug Burgum has proposed using a sovereign wealth fund to invest in critical mineral mines. There is one big problem with that plan, however: the U.S. doesn’t have one (for the moment, at least).
“LPO can invest in mining projects now,” Jacquez told me. “Cutting 60% of their staff and the experts who work on this is not going to give certainty to the business community if they’re looking to invest in a mine that needs some government backstop.”
And while the fate of the Inflation Reduction Act remains very much in doubt, the subsidies it provided for electric vehicles, solar, and wind, along with domestic content requirements have been a major source of demand for critical minerals mining and refining projects in the United States.
“It’s not something we’re going to solve overnight,” Jacquez said. “But in the midst of a maximalist trade with China, it is something we will have to deal with on an overnight basis, unless and until there’s some kind of de-escalation or agreement.”
A conversation with VDE Americas CEO Brian Grenko.
This week’s Q&A is about hail. Last week, we explained how and why hail storm damage in Texas may have helped galvanize opposition to renewable energy there. So I decided to reach out to Brian Grenko, CEO of renewables engineering advisory firm VDE Americas, to talk about how developers can make sure their projects are not only resistant to hail but also prevent that sort of pushback.
The following conversation has been lightly edited for clarity.
Hiya Brian. So why’d you get into the hail issue?
Obviously solar panels are made with glass that can allow the sunlight to come through. People have to remember that when you install a project, you’re financing it for 35 to 40 years. While the odds of you getting significant hail in California or Arizona are low, it happens a lot throughout the country. And if you think about some of these large projects, they may be in the middle of nowhere, but they are taking hundreds if not thousands of acres of land in some cases. So the chances of them encountering large hail over that lifespan is pretty significant.
We partnered with one of the country’s foremost experts on hail and developed a really interesting technology that can digest radar data and tell folks if they’re developing a project what the [likelihood] will be if there’s significant hail.
Solar panels can withstand one-inch hail – a golfball size – but once you get over two inches, that’s when hail starts breaking solar panels. So it’s important to understand, first and foremost, if you’re developing a project, you need to know the frequency of those events. Once you know that, you need to start thinking about how to design a system to mitigate that risk.
The government agencies that look over land use, how do they handle this particular issue? Are there regulations in place to deal with hail risk?
The regulatory aspects still to consider are about land use. There are authorities with jurisdiction at the federal, state, and local level. Usually, it starts with the local level and with a use permit – a conditional use permit. The developer goes in front of the township or the city or the county, whoever has jurisdiction of wherever the property is going to go. That’s where it gets political.
To answer your question about hail, I don’t know if any of the [authority having jurisdictions] really care about hail. There are folks out there that don’t like solar because it’s an eyesore. I respect that – I don’t agree with that, per se, but I understand and appreciate it. There’s folks with an agenda that just don’t want solar.
So okay, how can developers approach hail risk in a way that makes communities more comfortable?
The bad news is that solar panels use a lot of glass. They take up a lot of land. If you have hail dropping from the sky, that’s a risk.
The good news is that you can design a system to be resilient to that. Even in places like Texas, where you get large hail, preparing can mean the difference between a project that is destroyed and a project that isn’t. We did a case study about a project in the East Texas area called Fighting Jays that had catastrophic damage. We’re very familiar with the area, we work with a lot of clients, and we found three other projects within a five-mile radius that all had minimal damage. That simple decision [to be ready for when storms hit] can make the complete difference.
And more of the week’s big fights around renewable energy.
1. Long Island, New York – We saw the face of the resistance to the war on renewable energy in the Big Apple this week, as protestors rallied in support of offshore wind for a change.
2. Elsewhere on Long Island – The city of Glen Cove is on the verge of being the next New York City-area community with a battery storage ban, discussing this week whether to ban BESS for at least one year amid fire fears.
3. Garrett County, Maryland – Fight readers tell me they’d like to hear a piece of good news for once, so here’s this: A 300-megawatt solar project proposed by REV Solar in rural Maryland appears to be moving forward without a hitch.
4. Stark County, Ohio – The Ohio Public Siting Board rejected Samsung C&T’s Stark Solar project, citing “consistent opposition to the project from each of the local government entities and their impacted constituents.”
5. Ingham County, Michigan – GOP lawmakers in the Michigan State Capitol are advancing legislation to undo the state’s permitting primacy law, which allows developers to evade municipalities that deny projects on unreasonable grounds. It’s unlikely the legislation will become law.
6. Churchill County, Nevada – Commissioners have upheld the special use permit for the Redwood Materials battery storage project we told you about last week.