Energy companies spent the first quarter of 2021 recharging from a draining year. Wall Street expects that growth to continue as energy companies and many of the other companies beaten down by the virus benefit from the vaccine push aimed at bringing the pandemic to an end.
Marathon Oil, Exxon Mobil and other stocks in the sector have jumped as the economy recovers from the virus pandemic, driving demand for oil.
Analysts polled by FactSet expect the energy sector to make overall stock gains of up to 45% this year, based on current median target prices. That would make the sector the biggest gainer of the year, far outpacing 20% gains expected in the technology sector.
The energy sector is already the biggest gainer in the S&P 500 so far this year, rising nearly 30%, while the broader index is only up about 5%. The gains mark a sharp turnaround from last year, when the sector shed 37% of its value as people stopped traveling and commuting to work. Their profits disappeared, with many swinging to a loss.
“Investors are coming around to the fact that the recovery is going to be pretty robust,” said Brian Levitt, global market strategist at Invesco. “What we’re seeing is very much aligned with what you would expect in a recovery trade.”
OPEC is also maintaining its production cuts to support prices as demand recovers. It cut production by 9.7 million barrels per day after the pandemic hit last year, but eased that to 7.7 million barrels per day by the end of 2020.
That’s helped lift oil prices 20% in 2021, a sharp turnaround from last year’s 20% drop. Oil prices are now back to pre-pandemic levels.
Oil producers are expected to continue benefiting from the tighter global supply of oil at a time of increasing demand. Most OPEC oil cartel countries are leaving voluntary production cuts in place through April.
Global oil consumption has just about returned to its pre-pandemic levels and is expected to steadily rise through the rest of 2021 and 2022, according to the U.S. Energy Information Administration. It expects production cuts from OPEC to ease beginning in May, which could temper oil prices moving into the second half of the year.
“They (OPEC) can easily open the valve and they will at some point,” said David Lefkowitz, head of Americas equities at UBS Global Wealth Management.
A continued slump in air travel is still holding back a bigger increase in oil demand and OPEC will likely time the resumption of full production with that demand, he said. Meanwhile, many U.S. companies are focusing on cutting costs and building up cash reserves instead of investing in production.
Marathon Oil told investors in February that even if stronger crude oil prices hold, it will continue to focus on its cash flow and cost cuts. Exxon Mobil said it is also pacing its investments to build up a cash cushion.
By DAMIAN J. TROISE
Microsoft pledges to let EU users keep data inside bloc
Microsoft is pledging to let business and public sector customers in the European Union keep cloud computing data inside the 27-nation bloc to avert concerns about U.S. government access to sensitive information.
Microsoft “will go beyond our existing data storage commitments and enable you to process and store all your data in the EU,” said Brad Smith, the U.S. technology giant’s president.
“In other words, we will not need to move your data outside the EU,” Smith wrote in a blog post Thursday.
Microsoft is responding to customers that want stronger commitments on so-called data residency, Smith said. The updates will apply to the company’s core cloud services including Azure, Microsoft 365, and Dynamics 365.
Transatlantic data protection has been a growing concern since the European Union’s top court struck down a data sharing agreement last year known as Privacy Shield. The court said the agreement, which allowed businesses to transfer data to the U.S. under the EU’s strict data privacy rules, was invalid because it didn’t go far enough to prevent the American government from snooping on user data.
Microsoft, which operates data centers in 13 European countries including France, Germany and Switzerland, will challenge any government request for an EU public sector or commercial customer’s personal data when there’s a lawful basis for doing so, Smith said.
Public transit hopes to win back riders after crushing year
Taking the Los Angeles Metro for his first trip in months, Brad Hudson felt a moment of normalcy when the train rolled into the station in South Pasadena, California, harkening back to his daily commute into LA before the coronavirus pandemic.
Then Hudson boarded the train, and reality set in.
Not everyone wore masks. Metro staffing levels appeared much lighter. There was more trash on the trains. He worried about security.
As President Joe Biden urges more f ederal spending for public transportation, transit agencies decimated by COVID-19 are trying to figure out how to win back passengers.
It’s made more urgent by the climate change crisis. Biden has pledged to cut U.S. greenhouse gas emissions at least in half by the end of the decade. That aggressive target will require Americans to ditch gas-guzzling cars for electric vehicles or embrace mass transit.
“We have a huge opportunity here to provide fast, safe, reliable, clean transportation in this country, and transit is part of the infrastructure,” Biden said at an event Friday to promote rail and public transportation.
With fewer transportation alternatives, lower-income people are more reliant on public transportation for commuting and their daily lives.
Los Angeles Mayor Eric Garcetti promises free transit fares for them and for students. The city’s Metro ridership has fallen to about half its peak of 1.2 million, and Garcetti said getting more people on board would accelerate economic recovery “for our most vulnerable” and reduce traffic and emissions.
In Washington D.C., where many federal employees now telework due to COVID-19 restrictions, transit officials are mulling lowering fares. New York City has deployed several hundred additional police officers in recent months after a series of subway attacks. The Chicago area is looking at rejiggering train schedules to accommodate more passengers traveling throughout the day, part of a pandemic shift from traditional 9-to-5 work days. Houston is pledging improvements to 17 of its higher-frequency bus routes, including adding brightly lit sheltered stops with digital arrival information.
Biden’s $2.3 trillion infrastructure plan would provide $85 billion over eight years to update and replace subway cars and repair aging tracks and stations; of that amount, $25 billion would go to expanding bus routes and rail lines. Another $25 billion would pay to convert gasoline- and diesel-powered mass transit buses to zero-emission electric vehicles.
Congressional Republicans are balking at the price, as well as Biden’s plan to increase corporate taxes to pay for it. A Senate GOP counteroffer proposes $568 billion for infrastructure, resulting in cuts to public transit funding.
A year ago, transit ridership drained to almost nothing as tens of millions of Americans stayed home and shunned trains and buses. To stay afloat, transit agencies cut payroll and slashed services.
Three rounds of nearly $70 billion total in federal COVID-19 emergency assistance pulled transit agencies from the brink of financial collapse. That federal aid is now expected to cover operating deficits from declining passenger revenue and COVID-19 cleaning and safety protocols through at least 2022.
Still, even as vaccinations become more widespread, it’s uncertain how many riders will come back.
Work-from-home arrangements initially seen as temporary appear to be a more durable trend. Transportation alternatives such as Uber and Lyft ride-share programs — and bike shares and scooters, not to mention driverless cars — threaten to eat away at transit ridership. Some city-dwellers have moved away.
Transportation officials say a key to increasing ridership will be employers reopening offices. Even so, it could take years to get all riders back, if ever, putting lower-income workers at a greater disadvantage if levels of service drop off.
In the Chicago area, transit ridership was down 71% in March compared with the same time in 2020, according to the Regional Transportation Authority.
Those who continue to rely on public transportation are mostly Black, Latino and low-income workers. For that reason, the Chicago Transit Authority, which runs 24 hours, didn’t cut routes or service even as ridership plunged.
“We recognized that we’re carrying primarily essential workers who relied on and needed to use public transit to carry out their functions on a daily basis,” said CTA President Dorval Carter.
Although empty train cars are common in some parts of the city, 34-year-old Ryan Patrick Thomas says Chicago’s Green Line trains connecting the south and west sides to downtown remain busy. Sometimes it’s standing room only.
Thomas, who’s Black, says train cars that used to have mixed crowds are now mostly Black, noting the virus has disproportionately hit people of color.
“These trains seem to be just as full of people in more vulnerable demographics,” he said.
New York’s subway system lost billions in revenue and more than 90% of its riders at the height of the pandemic; also about 150 employees who died of COVID-19. The Metropolitan Transportation Authority has spent hundreds of millions on disinfecting train cars and the system’s nearly 500 stations, even taking the unprecedented move of shutting the system down overnight; it remains closed between 2 a.m. and 4 a.m.
Subway ridership remains down close to 70%, though it continues to rise gradually. There’s a slower recovery on the Metro-North and Long Island Rail Road lines that serve the suburbs, where many white-collar workers have the option of working from home.
More than $14 billion in federal aid has put the agency on sound fiscal footing until mid-2024, MTA Chairman Patrick Foye said.
“If we can’t get people back in the next couple of months, it’s going to be harder to get them back in the future,” said Sarah Feinberg, interim head of New York City Transit, which runs subways and buses.
The Biden plan would invest $621 billion to modernize transportation infrastructure. Projects in the pipeline likely stand to gain the most, including a planned extension of the Bay Area Rapid Transit rail system to San Jose and Santa Clara, California; bus rapid transit lines in St. Paul, Minnesota, Charleston, South Carolina, and Las Vegas; and New York City’s long-awaited Second Avenue subway line.
There’s also Atlanta’s proposed $5 billion upgrade of its transit system, including light rail for its Beltline; and a $7.1 billion transit expansion in Austin, Texas, approved by voters in November, featuring new rail and rapid bus routes connecting downtown to suburbs, an all-electric bus fleet, on-demand shuttles and park-and-ride facilities.
WASHINGTON (AP) — By HOPE YEN, CHRISTOPHER WEBER, SOPHIA TAREEN and DAVID PORTER Associated Press..
Weber reported from Los Angeles, Tareen from Chicago and Porter from New York. AP writers Juan Lozano in Houston and Ashraf Khalil in Washington contributed.
Biden pushes for diversity in transition to clean energy
As the nation pushes to reduce its reliance on fossil fuels and use cleaner energy sources, President Joe Biden’s administration says it wants to ensure diversity among the communities that benefit from the transition and the people who are hired to do the work.
The administration says it wants more solar arrays erected in communities that have suffered from pollution caused by fossil fuels. It’s also directing research grants and opportunities to students and faculty members at historically Black colleges and minority-serving institutions.
The Department of Energy on Tuesday announced $15.5 million in new funding to deploy solar energy in underserved communities and to build a more diverse, skilled workforce to help reach the administration’s ambitious goal of 100% clean energy by 2035.
Another $17.3 million, announced Monday, was awarded for internships and research opportunities designed to connect students and faculty in science, technology, engineering and math with resources at the Department of Energy’s National Laboratories.
Biden has set a goal that 40% of overall benefits of federal climate and clean-energy investments goes to disadvantaged communities.
“This administration is really committed to making the transition to clean energy an inclusive transition, offering benefits to every community, because not every community has benefited up to this point,” Energy Secretary Jennifer Granholm said in a discussion at Howard University, a historically Black college, Monday. “In fact, some communities, particularly communities that are indigenous and Black and people of color, have disproportionately been negatively affected by pollution, and so we want to make sure that voices are at the table that are representative of communities who can benefit from this transition.”
Historically Black colleges have faced unequal access to federal funding for research, Granholm said.
The problem stems from inequities in research infrastructure such as grants and personnel to administer them, as well as access to top laboratories at some of the historically Black colleges, said Kim Lewis, associate dean for research, graduate programs and natural sciences at Howard University.
“For example, not having state-of-the-art research laboratories could prevent or minimize faculty members from getting or obtaining preliminary data to demonstrate a proof of concept that’s needed to compete for these research funds,” Lewis said.
Many faculty members also have a heavy teaching workload, and there may be implicit bias during the review process, she added.
Data shows that the U.S. needs diversity in science, technology, engineering and math, and “it’s a huge priority for the Biden administration,” Granholm said.
The Energy Department under Biden has awarded research grants to students and faculty from 57 institutions — nearly half of which were minority-serving institutions — to collaborate with staff from the department’s National Laboratories this summer.
The solar funding announced Tuesday will provide free technical assistance to communities to streamline the process for installing solar. That, in turn, helps attract investment and lowers energy costs for consumers.
The Energy Department is also planning a series of meetings with environmental-justice organizations, government leaders, solar developers and others to talk about how to address energy challenges in underserved communities.
“We’re willing to use the force of federal contracting and policy incentives to achieve greater diversity in hiring and equity in pay,” Granholm said in a discussion with solar industry stakeholders Tuesday.
When a large array of solar panels and batteries was built to provide power to a predominantly Black community in Chicago, it was important to hire Black, Hispanic and local workers, said Van Vincent, president and CEO VLV Development, which built the array.
“It’s going to take a collaborative effort,” Vincent said in the discussion Tuesday. “There is no silver bullet … there needs to be a commitment to including the people who live in the communities.”
NEW YORK (AP) — By CATHY BUSSEWITZ Business Writer.
AP Writer Matthew Daly in Washington contributed to this report.
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