One thing to start: US shale producers are beginning to worry that a surge in drilling activity could spoil the sector’s recent rally. (Watch this space for a deep dive into the future of the shale patch coming next week.)

On to today’s newsletter: Joe Biden has not yet been president for a week, but his overhaul of American energy policy is well under way.

The president has rejoined the Paris climate agreement, scrapped the Keystone XL pipeline, suspended new leases on oil and gas developments on federal lands and ordered all government agencies to look into reversing the effects of Donald Trump’s regulatory bonfire.

We are expecting another flurry of activity from the Oval Office on climate tomorrow including an omnibus order to tackle the issue domestically and elevate it to a national security priority.

Today’s newsletter considers the reverberations of Mr Biden’s two main oil and gas edicts so far. Our first item takes a look at the fallout from the Keystone decision in Canada. Our second drills into the implications of the leasing freeze and what the move means for US output.

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“The company knew, the Alberta government knew, and we knew that we needed to get our ducks in a row. We have known this since the day that President Biden won the election.”

So said Seamus O’Regan, Canada’s natural resources minister, in an interview with me last week about President Biden’s decision to revoke a key permit for the Keystone XL pipeline. The move has effectively killed the project, which would have carried bitumen from the oil sands of northern Alberta to refineries in Texas.

Yet the fallout in Canada rumbles on, especially in Alberta, the oil-rich western province. Politicians there think Prime Minister Justin Trudeau’s government abandoned their oil interests. Recent events, including the crash that has ravaged the province’s fossil fuels-dependent economy, have worsened their sense of grievance.

Mr Kenney wants Canada to hit the US with punitive sanctions, or seek compensation for the cancellation of the $8bn KXL project. Alberta’s government had itself paid $1.1bn to take a stake in the project, and lent TC Energy another $4.7bn to pay for construction.

Mr O’Regan expressed plenty of sympathy for the province, especially the 1,000 job losses that have followed the permit cancellation. He insists that Ottawa did its best to get the project through.

But the Trudeau government is not going to launch an economic war over KXL. When we spoke on Friday, Mr O’Regan made clear that his country’s future is as a partner, not opponent, in Mr Biden’s clean-energy ambitions.

Starting a new diplomatic spat in defence of arguably one the most environmentally controversial oil projects in the world is not in Mr Trudeau’s interests.

A decade or more ago, when investors were rushing to back developments in the oil sands, the project made sense — Alberta needed new export pipelines to support new growth.

Even just two years ago, the project’s rationale seemed obvious.“Existing pipeline infrastructure to transport crude oil production is at capacity and it is uncertain when additional pipeline capacity will become available,” said the Canadian Association of Petroleum Producers in its 2019 forecast. That was before the crash upended projections.

The high-carbon projects can now barely raise funding from international investors and even big oil producers like Total and Equinor have fled. Long-term supply growth is likely to be much more modest.

Despite the political furore, Alberta’s producers — who last week helped the country’s exports to the US reach 4m barrels a day, near a record high — can cope without Keystone XL, argues Samir Kayande, an independent analyst and midstream expert based in Calgary.

Two other pipeline projects — an upgrade of Enbridge’s existing Line 3 in the US Midwest, which received its construction permit in December, and the federally owned Trans Mountain Expansion pipeline project to ship Alberta’s oil to Canada’s West Coast — will give producers enough capacity to handle future growth, he said.

That’s if Line 3 goes ahead. That, more than trying to revive the KXL, may be Mr Kenney’s next worry.

“This is not just about Keystone XL,” he said. “And it's certainly not just about our billion-dollar investment.”

Rather, Mr Kenney added, his campaign is about making sure other infrastructure to ship Alberta’s oil is not now threatened too. Yet, after their success with KXL, American oil sands opponents now have Line 3’s expansion, as well as North Dakota’s suspended Dakota Access pipeline, in their sights. Prominent campaigners are pressing Mr Biden:

Last year, the campaign to stop Line 3 got a notable new supporter: Gina McCarthy, Mr Biden’s new climate tsar. (Derek Brower)

We hate to break it to climate activists, but the Biden administration’s two-month suspension of new oil and gas activities on federal lands — potentially just the first step towards a more permanent ban — isn’t likely to put much of a dent in US oil production or emissions, at least not anytime soon.

Even though Oceana, an advocacy group, argues in a new report that an end to offshore drilling would prevent more than 19bn tonnes of future greenhouse gas emissions (that’s equivalent to three years of total annual US emissions), the oil and gas industry has gotten a head start.

Since President Joe Biden campaigned on a promise to ban drilling on federal lands, it gave the oil and gas industry plenty of time to plan for the move. They used the advanced notice to stockpile permits, especially in New Mexico’s fast-growing Delaware section of the Permian.

Oil and gas producers were awarded 60 per cent more permits to drill on federal lands in 2020 than they were in 2019, a figure all the more striking considering last year’s historic price rout, according to data from IHS Markit.

Producers “have been preparing for actions of this type, because it was very well telegraphed,” said Raoul LeBlanc, a vice-president at IHS Markit. “It is frankly not much of a hindrance to ongoing activity.”

Rystad Energy’s head of shale research Artem Abramov said that producers can keep drilling with the permits they already have for another three years at their current pace without seeing operations disrupted.

Even if the temporary ban becomes permanent, which would almost certainly ignite industry legal challenges, any threat to future drilling and production could be blunted by producers shifting capital spending from their federal leases to nearby private and state lands.

New Mexico’s federal lands hold some “dynamite acreage” and have seen strong output growth, said Mr LeBlanc, but the shale boom has mostly taken place on private and state lands because “that is where the oil and gas is”.

Federal lands account for around 5 per cent of total oil production, although that figure rises substantially to more than 20 per cent when including federally controlled waters in the Gulf of Mexico, which are also covered by the new rules.

The Interior Department’s secretarial order said the suspension of new leases and permits would be in place for 60 days during a review of “fact, law and policy”. And if new leases on federal land were to be banned permanently, companies would be required to have permits to drill new wells or carry out other activities on their existing leases.

While producers have laid down plenty of runway to keep activity going for the foreseeable future, investors were still spooked, especially as the “one, two punch” of the federal lands and Keystone XL actions signalled a swifter crack down on oil and gas than expected, said Matt Portillo, an analyst at Tudor, Pickering and Holt.

Companies with heavy exposure to federal lands saw their share prices drop sharply. EOG Resources fell around 10 per cent on the news. Devon Energy fell 12 per cent. Apache fell around 8 per cent.

If the two-month ban isn’t likely to move the needle much on drilling or emissions, a permanent one could be different — so long as it survives the inevitable legal challenges. (Justin Jacobs)

The automotive sector accounts for the largest proportion of US emissions, and Joe Biden has promised tough new fuel economy standards to push people towards electric vehicles.

Sales of EVs in America are set to rocket over the coming years — though not quite as quickly as some European countries that plan to prohibit the sale of petrol-burning vehicles within the next decade.

Column chart of Number  of vehicles sold (m) showing US electric vehicle sales will soar in the 2030s

But even as sales jump — with EVs set to account for 90 per cent of all new cars bought in the US by 2040 — carbon emitting combustion engines will still dominate America’s highways.

Column chart of Number of vehicles in fleet (m) showing But petrol engines will still make up the bulk of the fleet

And the country’s addiction to petrol? The US is the biggest consumer of petrol globally and will remain so for at least the next two decades.

Global gasoline demand was 26.5m barrels a day in 2019, a quarter of total crude demand. The bulk of this is made up by the 10 countries listed below where usage is likely to peak in 2026.

Column chart of Gasoline consumption (million barrels a day) showing And the US will still account for the largest share of petrol demand