Analysis | The global energy order is rapidly unraveling: welcome to the E
Today’s Tasks: World War E
It’s October and we’ve avoided going into World War III for almost eight months, so that’s true for us. However, things are escalating on the energy front, and not just between Russia and the West.
Russian President Vladimir Putin denies involvement in the explosions of the Nord Stream gas pipeline. Still, he claims the “precedent” means that “any critically important object of transportation, energy or utility infrastructure” is now fair game. He is already demonstrating that in Ukraine, although Putin has made it clear that it should not be considered safe anywhere. Even if the military war is not global, the energy front can be. Anyone who can remember the May 2021 Colonial Pipeline hack knows that there are many ways to escalate and miscalculate in this vital sector.
Things also escalated when OPEC+ announced a production cut of 2 million barrels per day. The justifications can be discussed; the gulf that has been opened – or, perhaps more accurately, put on display – between Riyadh and Washington cannot. Russia’s role as Saudi Arabia’s co-lead in OPEC+ has added a powerful and destabilizing element to an already tense relationship.
The US itself is no stranger to the use of energy weapons, although mostly in terms of sanctions for the production and distribution of others. One way of looking at the recent escalation, which transcends Ukraine itself, is indeed an attempt by Russia and Saudi Arabia to assert their primacy in global energy.
Like the manipulation of gas flows to Europe, Putin’s gossamer threat to infrastructure can be read as a reminder to the West that for all its talk of decoupling and decarbonisation, it relies on the delicate fossil fuel supply system of which Russia is a major part.
Likewise, while the G-7’s planned price cap is focused on Russian oil, Saudi Arabia might want such an oil buyers’ club to prevail, especially when so many members also have net-zero targets. On that note, it’s worth noting that the Biden administration’s National Security Strategy, released this week, specifically cites the US steel and aluminum agreement with the European Union as a template for using “economic weight to drive decarbonization” elsewhere. stimulate. The crisis in Ukraine is part of a wider unraveling, where the mutual need that connects energy producers and consumers is giving way to a fiercer battle over who needs who.
— Liam Denning, Bloomberg Opinion
The diesel market on both sides of the Atlantic is under pressure as increased refining capacity, winter demand and the switch from gas to oil in Europe are putting pressure on stocks. In New York’s main port market, spot prices are rapidly rising towards the records set earlier this year. That will be a concern for the Biden administration as New Englanders fill their fuel tanks for the cold months to come.
Germany reached a critical natural gas storage target more than two weeks ahead of schedule, but the regulator warned that this was not enough to guarantee supplies during the coldest months. European natural gas prices are heading for a weekly loss. Scientists with the Copernicus Climate Change Service, which updated its seasonal forecast on Thursday, said temperatures in Europe are likely to be significantly above normal during the peak season between December and February. China’s hunger for overseas oil has yet to make a meaningful recovery, as concerns over virus lockdowns limit travel and overshadow an increase in fuel export quotas to support economic growth. Oil was heading for a weekly loss. President Joe Biden again criticized high gasoline prices in the US and said he would announce new actions next week to combat what he described as a key driver of inflation. Exxon Mobil is making record profits, but the oil giant has its highest turnover since its merger with Mobil in 1999. A survey that includes interviews with more than 40 current and former employees and reviews of dozens of internal documents reveals an overriding reason why talent is on the run: a culture that is increasingly out of step with the world around it.
• Mohammed Alyahya, a Saudi commentator close to the royal palace, says in an op-ed for the Wall Street Journal that Joe Biden is using Riyadh as a scapegoat to deviate from his own failed energy policy.
• Bloomberg’s Will Kennedy just returned to the Energy Transition Show podcast for a new episode. A year after his first gig to discuss the then “Global Energy Crunch,” things have only gotten crunchier. “We seem to be facing a new extraordinary economic, social and political crisis.”
• New transmission lines could make Texas electricity greener and cheaper. So why aren’t more being built, Chris Tomlinson asks in a column for the Houston Chronicle.
This column does not necessarily reflect the views of the editors or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist on energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’ Lex column.
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