World Energy Market
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xizhimen
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Crippling Russia with an oil embargo would send U.S. gas prices soaring. In Europe, it could lead to death
BY SOPHIE MELLORMarch 4, 2022 3:11 AM GMT+8
As the West tries to quit all things Russian, oil seems to be the hardest thing to wean itself from.
In the U.S., President Joe Biden has so far resisted calls from Democrats and Republicans to ban Russian oil imports, as Russian President Vladimir Putin continues to mount his brutal war on Ukraine.
Germany and other European nations have signaled similar opposition, with German Economy Minister Robert Habeck telling reporters on Thursday, “I wouldn’t support an embargo on imports of fossil fuels from Russia.”
He added, “I would even speak out against it, because we would threaten the social peace in the republic with that.”
But for the U.S. and Europe, an oil embargo means two completely different things. For the U.S., which sources only 5% of its crude oil and petroleum from Russia, sanctioning Russian fossil fuels would result in extremely high oil prices and worsening inflationary pressures.
But for countries like Germany, which source half their gas from Russia, “the worst case is that people start dying because they can’t heat their homes,” Adam Pankratz, a professor at the University of British Columbia’s Sauder School of Business, told Fortune.
“It means freezing and possibly dead Germans,” he said.
The safe U.S. position
Russia exports 5 million barrels of crude oil a day, representing around 12% of global trade and making it the world’s largest exporter. It’s the world’s third-largest oil producer.However, around 60% of Russia’s oil exports go to Europe and another 20% to China. The U.S. imports 670,000 barrels of crude oil and petroleum products each day from Russia, according to the U.S. Energy Information Administration, which only accounts for 5% of its crude imports.
But despite the U.S.’s minor reliance on Russian oil, public opposition to the import is mounting. Democrats and Republicans on the Senate Energy Committee floated a bill on Thursday that would end the import of Russian crude oil and liquefied natural gas. West Virginia’s Democratic Sen. Joe Manchin, who is leading the bill, told reporters, “We should stop buying over 600,000 barrels [of Russian oil] a day in America. Can you believe that? No one knew that. No one paid attention to it. And that has to stop.”
Pankratz told Fortune that if there is an embargo of Russian oil, the U.S. won’t be running out of oil. “If it really goes drastic, the U.S. has a strategic petroleum reserve,” he said.
He notes the real concern is if all countries stopped importing oil from Russia, available supply would tighten, and “the price of oil would go through the roof,” which would add inflationary pressure, making heating homes and driving cars more expensive in the West.
Fearing a rise in the price of gas at the pump, White House press secretary Jen Psaki said on CNN on Wednesday that what Biden “does not want to do is topple the global oil markets or the global marketplace, or impact the American people more with higher energy and gas prices.”
Europe’s pain
Europe is facing a different story.Although winter is winding down and the need to heat homes won’t be as great, Western European nations are vacillating on sanctioning the country’s oil.
Neither Gazprombank nor Sberbank were on the list of seven institutions Brussels banned from the SWIFT messaging system, as they both act as the main channels for payments for Russian oil and gas.
Despite understanding the need to end its dependency on Russian fossil fuels, European Union officials also have not considered sanctions on energy because of the damage it would do to the region’s economy.
“For Europe, the situation is much more dramatic,” says Pankratz, who notes that the region “is in such an energy dependent situation on Russia, there is not a lot they can do to drop the hammer.”
Self-sanctioning
But even if sanctions are not put in place, gas traders are steering clear of Russian oil, despite its being traded at an alluring $18 a barrel discount to Brent.A number of European refiners, including Finland’s Neste and Sweden’s Preem, have shunned Russian oil and are looking for supplies elsewhere. The FT reported on Wednesday that Russian oil producer Surgutneftegas had failed to sell Urals crude in its March tenders.
According to S&P Global, traders said the public perception of Western firms and a lack of credit stopped them from buying up the assets at an incredibly cheap price. Many do not want to be seen as funding the invasion of Ukraine.
“Russia’s oil has effectively become toxic,” one banker told the FT.
Whether a direct line can be drawn to buying oil from Russia and funding its war in Ukraine is murky, Pankratz notes.
“A direct line is always tough to draw, but it is, in a lot of ways, an energy war—and if Russia couldn’t sell its energy at all, it would be in much more serious trouble than it already is,” he said.
Crippling Russia with an oil embargo would send U.S. gas prices soaring. In Europe, it could lead to death.
An oil embargo means two completely different things for the U.S. and Europe
xizhimen
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China Sells U.S. LNG to Europe at a Hefty Profit
Bloomberg NewsStephen Stapczynski
Mar 15, 2022
(Bloomberg) — China resold several U.S. liquefied natural gas shipments to Europe, a rare move by the world’s top buyer that highlights how sky-high prices are rerouting trade flows.
Unipec, the trading arm of China’s state-owned Sinopec, sold at least three LNG cargoes for delivery through June to ports in Europe via a tender that closed late last week, according to traders with knowledge of the matter. The shipments will load from Venture Global LNG Inc.’s Calcasieu Pass export facility in Louisiana, where Sinopec has a deal to purchase LNG, they said, requesting anonymity to discuss private details.
European natural gas rates surged to a record high last week on fears that the war in Ukraine will curb flows from top supplier Russia. The rally prompted Unipec’s traders to turn away from the lower-priced Chinese market, even as Beijing demand its importers secure more fuel amid concerns over wartime disruptions.
European gas usually trades at a discount to LNG in North Asia, home to the top importers. But Europe’s plan to ditch Russian gas means that it will need to significantly boost LNG imports, with the continent’s prices primed to stay higher than Asian rates as it seeks to attract every last drop of fuel from the spot market.
- Sakhalin Energy, which operates the Sakhalin II project in Russia’s Far East, plans to release a tender this week offering an LNG cargo for loading around April 25
- South Korea’s LNG imports plunged 33% in February from a year earlier to 3.5 million tons as prices soared
- Eni declares force majeure on Nigeria shipments of Brass crude after a blast on a pipeline in Bayelsa state, while Nigeria LNG is also affected
Russia warns of sharp Caspian pipeline oil export drop after storm
Russian and Kazakhstan oil exports via the Caspian Pipeline Consortium (CPC) from the Black Sea may fall by up to 1 million barrels per day (bpd), or 1% of global oil production, due to storm-damaged berths, a Russian official said on Tuesday.
Pavel Sorokin, a deputy energy minister, said the second berth could also turn out to be damaged after initial information about one of the three being damaged by a storm.
Sorokin said the maintenance could take up to two months, which could lead to exports falling by up to 1 million bpd.
A storm in Russia's section of the Black Sea has damaged loading equipment of CPC, one of the world's biggest oil pipelines, which ships crude from Kazakhstan to global markets, its operator said earlier on Tuesday.
The CPC pipeline has been in the spotlight since Russia's invasion of Ukraine, which has restricted Russian exports and led to an oil price spike. The United States has imposed sanctions on Russian oil, but said flows from Kazakhstan through Russia should run uninterrupted.
The pipeline ships around 1.2 million barrels per day, or 1.2% of the global demand. Any major disruption to its flows will put further strain on a global oil market facing one of the worst supply crunches since the Arab oil embargo in the 1970s.
Most of the oil in the pipeline belongs to Russia, Kazakhstan and international oil majors such as Chevron (CVX.N). It exports oil from Russia's Black Sea port of Novorossiisk.
A Chevron spokesperson said the company was "currently assessing the situation."
The operator of the CPC pipeline initially said one of three mooring points has been damaged by the storm and it will take at least three weeks to repair while waiting for a vessel. It said it hoped exports will not be affected, as two other berths could continue to operate normally.
"Due to the weather anomaly, CPC facilities were damaged. ... There is risk that (a second berth) is also damaged," he said in a video posted by the Energy Ministry.
Major global trading houses such as Vitol and Trafigura said on Tuesday they estimated the current Russian oil disruption at 2 million to 3 million bpd. They said the world could barely cope with a disruption exceeding 2 million bpd because it would lead to a further price spike and economic recession. read more
Russia has said Western sanctions over Ukraine amount to an economic war against it. Officials have said Moscow would resort to all available tools to defend itself, including possibly limiting gas supplies to Europe.
The U.S. Treasury on Friday told buyers to be cautious if they think certificates stating crude from the CPC is not of Russian origin have been falsified.
Russia warns of sharp Caspian pipeline oil export drop after storm
Russian and Kazakhstan oil exports via the Caspian Pipeline Consortium (CPC) from the Black Sea may fall by up to 1 million barrels per day (bpd), or 1% of global oil production, due to storm-damaged berths, a Russian official said on Tuesday.
Looking to replace Russia, Europe doesn't use LNG terminals at full capacity
Europe, which has turned to the liquefied natural gas (LNG) alternative to reduce its natural gas dependence on Russia, is using its existing LNG terminals at half capacity.
Last year, 380 million tons of LNG were in trade in the global market, with about 80 million tons of this was purchased by Europe.
In the global market, %70 of LNG is exported under long-term contracts. Therefore, the remaining %30 LNG is sold to the country with the highest bid in the spot market. Many European countries that have not actively used LNG until now are seriously considering this option.
According to the information compiled by the Anadolu Agency from the International Gas Association and Gas Infrastructure Europe data, Turkiye and Israel were also included in the list in which LNG terminals were examined.
When Turkiye's LNG terminals are included, Europe, which has a total of 28 LNG import terminals, uses these terminals at half capacity. Spain is listed as the country with the most LNG terminals in Europe, with six terminals with an annual capacity of 43.8 million tons.
The UK, which has 3 LNG terminals with an annual capacity of 38.1 million tons, is followed by France with 4 LNG terminals with a capacity of 25 million tons and Italy with an import capacity of 11 million tons with three terminals.
While Turkiye has 2 LNG import terminals, Belgium, Greece, Portugal, the Netherlands and Poland each have one. In addition, Turkiye purchases LNG through two floating terminals. Also, Israel, Lithuania and Croatia have one floating terminal each.
In addition, small-scale terminals in countries such as Norway, Sweden and Malta are not included in the list of LNG import terminals.
- Europe does not use LNG terminals at full capacity
Terminals in Europe currently have an annual LNG purchase capacity of close to 150 million tons. However, Europe, which imported 85 million tons of LNG in 2019, bought 82 million LNG in 2020.
Europe, which meets a quarter of its gas needs as LNG, uses just over half of its import capacity. This means that there is about 70-75 million tons of spare capacity.
According to the calculations, Spain uses %37 of its capacity, the UK %38, Italy %82, the Netherlands %77, Belgium %90, France %66, Portugal %70 and Greece %49.
The annual natural gas need of EU countries varies between 340-350 billion cubic meters in total. Last year, EU countries imported 140 billion cubic meters of gas and 15 billion cubic meters of gas as LNG from Russia through pipelines.
About %40 of the EU's total gas consumption in 2021 came from Russia.
- New terminals planned
Europe plans to build 26 new LNG terminals in the coming period to diversify its natural gas supply.
Germany, which does not currently have any LNG terminals, will build 2 LNG terminals. France and Spain will add five units to their existing LNG terminals. Ireland 3, Estonia 2, Croatia, Finland, Denmark, Poland, Ukraine, Malta and the United Kingdom will each build 1 LNG terminal.
Many LNG projects were planned in previous years but could not get enough investment, but after the war between Russia and Ukraine, LNG is expected to be on the agenda more in the coming period.
Looking to replace Russia, Europe doesn't use LNG terminals at full capacity
- Last year, 380 million tons of LNG traded in the global market. About 80 million tons of this is purchased by Europe - Anadolu Agency
www.aa.com.tr
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Not surprised tbh
Putin is in a pinch rn, it is rumored that the Russian Central Bank spent around 40 billion dollars in one month alone to bring the ruble back to the 80s range again. Since Putin got his ass screwed in Ukraine and he will apparently take more than 3 days
to get Ukraine; probably a year or 2 if not more, then he will go bankrupt in around 8 months and by then, all what Russia accumulated in 20 years will be gonePutin's move is an act of desperation; he is betting everything on the fact that Europeans will be consumed by Greed and buy that cheap Russian gas which will help Putin in managing finances in the short to medium term until he finds a way to win the war he BLINDLY entered
Soaring Cost of Diesel Ripples Through the Global Economy
Farmers are spending more to keep tractors and combines running. Shipping and trucking companies are passing higher costs to retailers, which are beginning to pass them on to shoppers. And local governments are paying hundreds of thousands of dollars extra to fill up school buses. Construction costs could soon rise, too.
The source is the sudden surge in the price of diesel, which is quietly undercutting the American and global economies by pushing up inflation and pressuring supply chains from manufacturing to retail. It is one more cost of the war in Ukraine. Russia is a major exporter of both diesel and the crude oil that diesel is made from in refineries.
Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel, which plays a critical role in the global economy because it powers so many different kinds of vehicles and equipment. A gallon of diesel is selling for an average of $5.19 in the United States, according to government figures, up from $3.61 in January. In Germany, the retail price has shot up to 2.15 euros a liter, or $9.10 a gallon, from €1.66 at the end of February, according to ADAC, the country’s version of AAA.
Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago.
“Not only is it a historic level, but it’s increased at a historic pace,” said Mac Pinkerton, president of North American surface transportation for C.H. Robinson, which provides supply chain services to trucking companies and other customers. “We have never experienced anything like this before.”
The sharp jump is putting immense pressure on trucking firms, especially smaller operations that are already suffering from driver shortages and scarce spare parts. Many can pass increased fuel costs on to their customers only after a few weeks or months.
Eventually consumers will feel the effect in higher prices for all manner of goods. While hard to quantify, inflation will be most visible for big-ticket items like automobiles or home appliances, economists say.
“Really, everything that we buy online or in a store is on a truck at some point,” said Bob Costello, the chief economist for American Trucking Associations.
Manufacturers are also heavy users of diesel, leading to higher prices for factory goods. Food will go up in price because farm equipment generally runs on diesel.
“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”
At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.
“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”
Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.
Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting firm in Dallas.
Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.
Diesel prices and Germany’s dependence on Russian energy were among the factors that on Wednesday prompted Germany’s Council of Economic Experts to cut its forecast for growth in 2022 by more than half, to 1.8 percent.
Russian diesel has been flowing to Europe since the invasion last month, but traders, banks, insurance companies and shippers are increasingly turning away from the country’s diesel, oil and other exports.
Several large European oil companies have announced that they are leaving Russia. TotalEnergies, the French oil giant, said this month that it would stop buying Russian diesel and oil by the end of the year.
The market for oil and diesel is global, and companies can usually find another source if their main supplier can’t deliver. But no oil company or country can quickly make up for the loss of Russian energy.
Saudi Arabia, for example, has not increased diesel exports because one of its largest refineries is undergoing maintenance. The kingdom and its allies in OPEC Plus have also refused to ramp up crude oil production because they are happy to have oil prices stay high. Russia belongs to the group and has significant sway over its fellow members.
Christine Hemmel is a manager of a trucking company in Ober-Ramstadt, Germany, that has been in her family for four generations. Her family’s business has almost all the challenges that medium-size haulers have faced since the pandemic’s outbreak.
Prices for tires and spare parts have often doubled. The price of wood used for freight pallets has soared. Experienced drivers are hard to find. AdBlue, a fluid that trucks require to meet emissions regulations, costs four times as much as it used to and is sometimes unobtainable, she said.
Ms. Hemmel’s company, Spedition Schanz, which has 35 trucks, pays twice as much for diesel as it did a year ago, she said. That translates into an extra €252,000, or $280,000, in expenses every three months. Under contracts with customers, the firm can pass on the increase, but with a delay of three months.
“It’s insane the way prices are exploding,” Ms. Hemmel said Tuesday. She expected them to stabilize, she said, but “there is no end in sight.”
Eventually, she said, “we will pass it on to our customers, and they will pass it on to the consumers.”
European energy companies are scrambling to find alternate supplies of crude as they stop buying Russian oil. Among the challenges is that oil from the Persian Gulf tends to have more sulfur. Some European refineries can’t process that oil, and others have to make expensive changes to handle it.
Adding to European refineries’ problems, the price of natural gas has risen a lot, increasing electricity costs. Refineries also use natural gas to make hydrogen, which, in turn, is used to remove sulfur from diesel to reduce air pollution. The German government on Wednesday began preparing to ration gas if shortages become acute.
“It is one market for the price of diesel,” said Richard Joswick, head of global oil analysis for S&P Global Platts, an energy research company. “Going up in Europe pulls the price of diesel up everywhere.”
Mr. Joswick warned that as refiners rushed to make more diesel, they would inevitably produce less gasoline and other products, which could raise energy prices across the board.
U.S. refineries have exported more diesel to Europe from New York and the Gulf Coast in recent months. That’s unusual because those refineries typically sell most of their products domestically during the winter, when demand for diesel tends to be higher than in the summer.
“The Europeans produce as much as they can, but they are still short,” said Debnil Chowdhury, a vice president and head of Americas Refining at IHS Markit, a research firm. “And so the U.S. needs to fill that gap.’’
U.S. diesel exports to Europe have, in turn, helped drive up prices domestically by reducing supplies. That could become a bigger problem. Diesel stockpiles in the United States have been dropping over the last year and a half, and are at their lowest levels in eight years, according to the Energy Department.
“There is some terror” in the diesel market right now, said Linda Salinas, vice president for operations at Texmark Chemicals, a Texas company that converts imported undistilled diesel — made from used cooking oil and waste — into a renewable jet fuel. “How often do we have a major power like Russia invade another country and have a global impact like this? All the fuel streams are connected.”
Soaring Cost of Diesel Ripples Through the Global Economy (Published 2022)
Russia’s war in Ukraine has caused a steep rise in a fuel essential to truckers, farmers and industry. Europe is hardest hit.
RogerRanger
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As a European I am far more worried about even greater US control of Europe. Than I am about the balance between American/Russian/Middle East oil and gas. What's happening now is the Americans gaining even greater control over Europe to support its own economy. If the Europeans had any sense they would keep buy Russian stuff to drive the Americans out of Europe once and for all.
mulj
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there is no concern, europe is screwed for at least 10 years, in that time they need to invest a lot in infrastructure and new energy routes if decided that russia is ditched for good, consequences will be recession and social disruptions for while until new sources stabilize demands.
