1) Europe’s energy crisis set to worsen next winter after it burns through current gas stocks
Reuters, 5 October 2022
HELSINKI/BRUSSELS, Oct 5 (Reuters) – Europe may face an even more acute energy crunch next year after draining its natural gas tanks to get through the cold of this winter, the head of the International Energy Agency said on Wednesday, as the EU looks for ways to ease the crisis.
European countries have filled storage tanks to around 90% of their capacity after Russia cut gas supplies in response to Western sanctions imposed over its invasion of Ukraine.
Gas prices , which surged in the months after the invasion in February, have retreated. But that could be short-lived as countries compete to buy liquefied natural gas (LNG) and other alternatives to Russian pipeline deliveries.
To help tackle the pain, the European Union is considering a gas price cap, an issue that has divided the 27-nation bloc as some countries worry it could make securing supplies harder.
“With gas storages almost at 90%, Europe will survive the coming winter with just some bruises as long as there are no political or technical surprises,” said Fatih Birol, executive director of the Paris-based IEA.
The real challenges facing Europe, which had historically relied on Russia for around 40% of its natural gas, will begin in February or March when storage needs to be refilled after high winter demand has drained them to 25%-30%.
“This winter is difficult but next winter may also be very difficult,” Birol told journalists in Finland.
European governments have moved to cushion consumers from the impact of higher prices and on Wednesday, Germany said it will subsidise power bills next year by paying just under 13 billion euros ($12.8 billion) towards the usage fees charged by the four high-voltage transmission grid companies (TSOs).
The fees form part of electricity bills, accounting for around 10% of overall costs for retail customers and a third for industrial companies in sectors such as steel or chemicals.
Berlin’s intervention stabilises the fees, which otherwise would have risen three-fold given runaway wholesale power prices and rising operational costs for the TSOs, Germany’s economy minister Robert Habeck said.
Until the Ukraine war broke out in late February, the Nord Stream 1 pipeline beneath the Baltic Sea from Russia to Germany was one of western Europe’s main sources of gas.
Nord Stream 1 comprises two separate lines as does Nord Stream 2, which was filled with gas, but never allowed to deliver supplies to Europe as Germany suspended authorisation just before Russia invaded Ukraine on Feb. 24.
Three of the four lines have been disabled by what the West and Russia say was sabotage causing huge leaks and the Danish authorities said the fourth was being depressurised on Tuesday.
2) Inside the White House’s failed effort to dissuade OPEC from cutting oil production to avoid a ‘total disaster’
CNN, 5 October 2022
For Biden, a dramatic cut in oil production could not come at a worse time.
The Biden administration launched a full-scale pressure campaign in a last-ditch effort to dissuade Middle Eastern allies from dramatically cutting oil production, according to multiple sources familiar with the matter.
But that effort appears to have failed, following Wednesday’s crucial meeting of OPEC+, the international cartel of oil producers that, as expected, announced a significant cut to output in an effort to raise oil prices. That in turn will likely cause US gasoline prices to rise at a precarious time for the Biden administration, just five weeks before the midterm elections.
On Wednesday morning, OPEC+ oil ministers meeting in Vienna agreed to an even larger production cut than the White House had feared — 2 million barrels per day, beginning in November, according to a readout of the meeting released on Wednesday. The ministers said the cuts were necessary “in light of the uncertainty that surrounds the global economic and oil market outlooks.”
President Joe Biden told CNN’s Arlette Saenz on Wednesday that he was “concerned” about the cuts, which he viewed as “unnecessary.” Secretary of State Antony Blinken told reporters when asked about the move that “when it comes to OPEC, we’ve made clear our views to the OPEC members.”
For the past several days, Biden’s senior-most energy, economic and foreign policy officials were enlisted to lobby their foreign counterparts in Middle Eastern allied countries including Kuwait, Saudi Arabia, and the United Arab Emirates to vote against cutting oil production. Wednesday’s production cut amounts to the largest cut since the beginning of the pandemic and could lead to a dramatic spike in oil prices.
Some of the draft talking points circulated by the White House to the Treasury Department on Monday that were obtained by CNN framed the prospect of a production cut as a “total disaster” and warned that it could be taken as a “hostile act.”
“It’s important everyone is aware of just how high the stakes are,” said a US official of what was framed as a broad administration effort that is expected to continue in the lead up to the Wednesday OPEC+ meeting.
The White House is “having a spasm and panicking,” another US official said, describing this latest administration effort as “taking the gloves off.” According to a White House official, the talking points were being drafted and exchanged by staffers and not approved by White House leadership or used with foreign partners.
In a statement to CNN, National Security Council spokesperson Adrienne Watson said, “We’ve been clear that energy supply should meet demand to support economic growth and lower prices for consumers around the world and we will continue to talk with our partners about that.”
For Biden, a dramatic cut in oil production could not come at a worse time. The administration has for months engaged in an intensive domestic and foreign policy effort to mitigate soaring energy prices in the wake of Russia’s invasion of Ukraine. That work appeared to pay off, with US gasoline prices falling for almost 100 days in a row.
But with just a month to go before the critical midterm elections, US gasoline prices have begun to creep up again, posing a political risk the White House is desperately trying to avoid. As US officials have moved to gauge potential domestic options to head off gradual increases over the last several weeks, the news of major OPEC+ action presents a particularly acute challenge.
3) ‘Disastrous for Europe!’ Biden considers banning gas and oil exports as EU scrambles to avoid Putin’s squeeze
Daily Express, 5 October 2022
US President Joe Biden is reportedly planning to halt gas and other energy exports, in a bid to lower fuel prices at home. This move could end up throwing plunging Europe into further chaos, as countries, including the UK, scramble to secure additional energy supplies for this winter.
As Russia gradually ends its supply of gas to the European Union, countries that were heavily dependent on Moscow for gas have now been left scrambling to find additional suppliers before winter, or face blackouts. Even countries like the UK, which did not import much gas from Russia, face a crisis this winter as the competition for gas begins to grow.
This competition could get worse in Mr Biden, under pressure ahead of the US midterm elections in November, decides to limit US fuel exports in a bid to lower prices.
Giovanni Staunovo, a commodity analyst tweeted: “White House officials have asked the US Energy Department to analyze whether a ban on exports of gasoline, diesel and other refined petroleum products would lower fuel prices, even as top oil industry trade groups warned the Biden administration the move could backfire.”
Meanwhile, Karim Fawaz, an oil market analyst warned: “Trade bans are disruptive and counterproductive for well-documented reasons. But there are shades of bad.”
He added that while a gasoline export ban is bad, it “can be partly mitigated (e.g Jones Act waivers)”, and said that a “diesel export ban is awful and could have disastrous global consequences (especially Europe)”.
The idea was first proposed months ago but was largely dismissed by the oil industry. However now experts are increasingly concerned that Washington might go ahead with this plan.
As a result, the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers have written a joint letter to Energy Secretary Jennifer Granholm warning against the move.
The groups said in their letter that recent discussions raised “significant concerns” that the government may pursue a ban or limit on fuel exports, which would “alienate US allies in Europe.
They wrote: “Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate US allies during a time of war. For these reasons, we urge the Biden administration to take this option off the table.”
4) Green Tory MPs plotting against Prime Minister to kill fracking
The Guardian, 3 October 2022
The Conservative Environment Network, which boasts 150 Tory members of parliament, is currently planning how to force a U-turn.
[…] As well as disquiet over spending cuts, a revolt against the government’s policy on fracking is also gathering steam. Chris Skidmore, the MP who is in charge of the government’s net zero review, admitted he was “surprised at the U-turn by Truss” but said it was a good indicator of future battles. “It means fracking’s definitely dead if she U-turned on this.”
MPs are organising behind the scenes to make a public, joint intervention to show that the government would not have a parliamentary majority for any vote on fracking. The Conservative Environment Network, which boasts 150 Tory members of parliament, is currently planning how to force a U-turn.
Both welfare changes and fracking are more difficult to defeat in parliament for MPs because changes may not require primary legislation.
Labour is planning to make fracking one of the first opposition day debates in order to force a rebellion. One Conservative minister said there was “absolutely no way we are ever going to do fracking, the parliamentary numbers don’t stack up”.
See also: Some Tory MPs Suspect Fracking Plans Could Be “Quietly Shelved”
5) UK scrambling to ‘protect energy supply’ after ‘utterly unacceptable’ pipelines attack
Daily Express, 4 October 2022
Britain’s undersea energy infrastructure could be vulnerable, and Russia claims to have the capability to target it.
Britain’s ambassador to the UN has pledged to protect the UK’s energy supplies amid fears its critical infrastructure is at risk following the alleged sabotage of the Nord Stream 1 and 2 gas pipelines.
James Kariuki said Britain is working alongside Europe to protect supplies as he is “deeply concerned” over the incident that occurred in the Baltic Sea between Swedish and Danish waters last week. It comes after seismologists confirmed that “explosions” likely triggered gas leaks from Russia’s pipeline systems which were designed to send Russia’s gas to Germany. While Moscow has denied any involvement, the Kremlin has been accused of deliberately sabotaging the systems. Now, there are fears Russia could target UK systems.
Mr Kariuki told the UN Security Council: “The damage to the Nord Stream 1 and Nord Stream 2 pipelines in the Baltic Sea is of deep concern.
“These leaks are not only causing risks to shipping but also substantial environmental damage in the Baltic Sea. They are releasing enormous amounts of methane into the earth’s atmosphere.”
Meanwhile, the Russian ambassador to the UN claimed at the council meeting that the US has much to gain in gas trade due to the sabotaged pipelines, although he stopped short of explicitly placing the blame on Washington.
But on Friday, Russian President Vladimir Putin went all guns blazing and directly accused the US and its allies of blowing up the pipelines. He said: “The sanctions were not enough for the Anglo-Saxons: they moved onto sabotage.”
Mr Kariuki responded by tearing up such claims, arguing: “We have heard some absurd Russian claims and conspiracy theories this afternoon.”
Richard Mills, the US deputy representative to the United Nations, also strongly refuted Moscow’s claims. He said at the meeting: “Let me be clear, the United States categorically denies any involvement in this incident and we reject an assertion saying the contrary.
“Germany, Sweden and Denmark have launched investigations to determine the cause behind the damage to the pipelines. A Danish report has so far found that the leaks to the pipelines were more than one kilometre in diameter. Danish Prime Minister Mette Frederiksen said that this proves “these are deliberate actions. It was not an accident.”
Mr Kariuki agreed, and signalled his full support for all the investigations. He said: “We agree with the assessment that all currently available information indicates this damage is the result of sabotage. We strongly support the investigations by Denmark, Sweden and Germany.”
He then called on the Security Council to take action, saying: “We must establish clear international norms that such damage is utterly unacceptable”, later confirming “the UK will continue to work alongside our partners to protect Europe’s energy security.”
6) Javier Blas: The Saudi-Russian oil axis snubs Biden with production cuts
Bloomberg, 5 October 2022
The OPEC+ cartel has just delivered a massive snub to Western governments facing the worst energy crisis in half a century.
Look past the buzzwords accompanying Wednesday’s cut in oil production — preemptive move, uncertain outlook — and it’s difficult to see the move as anything but an attack on a global economy that desperately needs the price of crude to remain subdued.
In all its history, OPEC — and its new incarnation, the OPEC+ alliance — has never curbed output so much, and so quickly, while Brent was still flirting with $100 a barrel. Triple-digit prices used to push the group into output-boost mode, not the reverse.
Breaking with tradition, OPEC+ on Wednesday announced it will reduce output by 2 million barrels a day — on paper — in November. Because so many of its members aren’t meeting their output targets, the real cut would be smaller, about 950,000 barrels per day, and shouldered mostly by Saudi Arabia, the United Arab Emirates and Kuwait.
For much of the past two years, the oil cartel has opted for a gradual, phased approach to managing supply. On Wednesday, it opted for “shock and awe” — it’s difficult to reconcile the big cut with the word moderation. OPEC+ officials offered no explanation for why the cartel needs to cut immediately and by so much, other than saying they wanted to be ahead of the curve. Has oil demand growth collapsed? Is non-OPEC supply growing fast? Are oil inventories increasing? None of these appear to be the case.
If anything, the fourth quarter looks tighter than the one just ended. Saudi Energy Minister Prince Abdulaziz bin Salman justified the move saying he couldn’t gamble with the market. By cutting so early and so quickly, OPEC+ is gambling with the global economy instead.
Riyadh and its allies also extended for a year, until the end of 2023, their alliance with Russia, the “plus” in the OPEC+ acronym. The Riyadh-Moscow alliance, which started six years ago, is becoming a permanent axis, redrawing energy geopolitics. Make no mistake, these are dangerous developments for the future of energy security.
In a world where even China has concerns and questions about Russian policy, Saudi Arabia is today one of the only sure-friends that Putin has left. It may be just pure business — an oil price that’s good for Moscow also suits Riyadh — but it increasingly looks like politics, too.
Coming four weeks before the US midterm elections, many in Washington took the unexpectedly large output cut as a personal attack on President Joseph Biden. The fact that OPEC+ hastily gathered in person in Vienna, rather than via video-conference as scheduled, reinforced that perception. The form of the meeting mattered as much as the substance. As Roger Diwan, a veteran OPEC watcher noted, it was “eerie” to observe the cartel jumping into major action on Yom Kippur, almost 49 years to the day of the start of the 1973 Arab oil embargo.
The in-person meeting allowed Alexander Novak, the Russian deputy prime minister under US sanctions, to travel to Vienna. He took the occasion to warn that Russia will stop supplying any country that accepts the G7 oil price cap. The OPEC+ cuts make the threat easier to implement, and therefore more worrying.
The oil-output cut will have two major consequences. Economically, it will keep inflation elevated for longer, forcing the Federal Reserve and every other major central bank into even more restrictive monetary policies, increasing the odds of a global recession. Politically, it’s a boost for Russian President Vladimir Putin in two ways. It channels more money to the Kremlin, which is desperate for revenue to keep its war machine in Ukraine alive and buy local support for the faltering military campaign. And it signals that Riyadh is in the Russian camp, willing to publicly snub Washington. Others in the Middle East, Africa and Asia will feel more comfortable cozying up to Russia.
Riyadh and its allies have a point about recession risks, nonetheless. The business cycle has turned. Look at plastic production, for example, which is quickly collapsing. History has taught OPEC that demand growth can weaken quickly, as it did in 1997, 2008 and in 2020.
But there are counterbalancing forces that would buy OPEC+ time before it needs to act, allowing a more gradual approach. For example, global oil inventories are well below their five-year average, and diesel stocks are very low going into winter. Supply risk also helps OPEC: European sanctions on Russian oil exports are about to kick in, amid slower-than-expected US shale production growth and the tail-end of American and European sales from their strategic petroleum reserves.
For all that OPEC+ officials complain about US monetary policy, the resulting strong dollar works in their favor. Unlike during the last big oil price collapse in 2008, when the trade-weighted value of the American currency was at a multi-decade low, the purchasing power of a barrel of oil, priced and traded in greenbacks, is now strong. That matters for Saudi Arabia, which imports 60% of the goods it buys overseas from Asia and Europe.
7) WSJ: The Saudis Snub Biden Again
The Wall Street Journal, 6 October 2022
The Biden White House has tried every gimmick to lower gas prices other than the one that would really matter: Call off its political and regulatory campaign against American oil and gas production.
As diplomatic humiliations go, it’s hard to top Wednesday’s decision by Saudi Arabia and its OPEC+ allies to cut oil production by two million barrels a day despite U.S. entreaties and a looming global recession.
News broke over the weekend that OPEC and its allies, including Russia, were contemplating cutting their production targets by one million barrels a day at their meeting this week. They want higher prices, and the prospect that this means rising gasoline prices before the November election sent the White House into overdrive.
CNN reported that senior Biden officials lobbied the Saudis, Kuwait and the United Arab Emirates to oppose the production cuts. According to CNN, draft White House talking points for Treasury Secretary Janet Yellen suggested that she inform our Mideast allies that “There is great political risk to your reputation and relations with the United States and the west if you move forward.”
The talking points also explained that production cuts would be a “total disaster.” A White House official told CNN “it’s important everyone is aware of just how high the stakes are.” The stakes certainly are high for the Biden Administration, which has claimed credit for this summer’s decline in gasoline prices.
The Saudis heard all this—and then raised their production cuts by an additional million barrels a day. They don’t seem to think risking relations with the U.S. is all that big a deal. And they put friendly relations with Russia above their “reputation” in the U.S.
The White House reacted in a statement on Wednesday—from national security adviser Jake Sullivan and economic adviser Brian Deese—by calling the production cuts “shortsighted.” The statement also said the decision is “a reminder of why it is so critical that the United States reduce its reliance on fossil fuels.”
Do these people know how preposterous they sound? No American President has done more to make the U.S. more dependent on foreign energy than Mr. Biden has in less than two years. He came into office promising to slash U.S. oil and gas production, and his regulators and the Democratic Congress are doing everything they can to make drilling difficult and investment non-economic.
Mr. Biden called Saudi Arabia a “pariah” during the 2020 campaign, delayed a planned arms shipment, and continues to pursue a nuclear deal with Iran that would give the Saudis’ main enemy hundreds of billions of dollars to promote terrorism and other trouble. The President had to go hat in hand to the Saudi Crown Prince in July to ask for more oil production, and all he got was a lousy fist bump.
Oil prices have been rising since Monday amid news of the OPEC productions cuts, and those cuts will flow into pump prices for U.S. consumers. Brent crude is back above $93 a barrel, and OPEC seems to want the price to go above $100. That will finance Russia’s war in Ukraine and help the domestic finances of the Arab governments.
The Biden White House has tried every gimmick to lower gas prices other than the one that would really matter: Call off its political and regulatory campaign against American oil and gas production. A statement from Mr. Biden to that effect would spur more production immediately in the Permian Basin and encourage new investment.
But the Administration won’t do it because it is too afraid of, or shares the beliefs of, the climate left that wants to ban fossil fuels. That’s the definition of “shortsighted,” and it leads to humiliations like the one Wednesday and higher prices for American families.
8) African countries to push for more fossil fuel projects at UN climate summit COP27
Reuters, 4 October 2022
CAPE TOWN, Oct 4 (Reuters) – African countries will use the COP27 climate talks in Egypt next month to advocate for a common energy position that sees fossil fuels as necessary to expanding economies and electricity access, the continent’s top energy official said on Tuesday.
The African position, criticised by environmental groups, could overshadow global climate talks in Sharm El-Sheikh seeking to build on the previous Glasgow summit and make good on financing targets by rich nations to poorer countries that have fallen far short of the promised $100 billion a year by 2020.
“We recognize that some countries may have to use fossil fuels for now, but it’s not one solution fits all,” said Amani Abou-Zeid, the African Union (AU) Commissioner for Infrastructure and Energy.
“It is not time to exclude, but it is the time to tailor solutions for a context,” she told Reuters on the sidelines of an oil and gas conference.
An AU technical study attended by 45 African countries on 16 June seen by Reuters outlined that oil and coal will play a “crucial role” in expanding modern energy access over the short to medium term.
In tandem with renewable sources, Africa also sees key roles for natural gas and nuclear energy.
“Our ambition is to have fast-growing economies, competitive and industrialised,” Abou-Zeid said.
9) The Climate-Change Censorship Campaign
Editorial, The Wall Street Journal, 6 October 2022
The left is demanding that social media shut down debate even on solutions.
Elon Musk said this week he’ll buy Twitter after all, and the hopeful view for online speech is that his rockets-and-flamethrowers heterodoxy might be an answer for what ails social media. He won’t have it easy. On Tuesday more than a dozen environmental outfits, including Greenpeace and the Union of Concerned Scientists, wrote to the big tech companies to blame them for “amplifying and perpetuating climate disinformation.”
What the letter asks for sounds modest, but the implication is clear. The Digital Services Act recently enacted by the European Union includes transparency rules, and the green groups want Silicon Valley “to commit to including climate disinformation as a separately-acknowledged category in its reporting and content moderation policies in and outside of the EU.” Then they could proceed to complain that the tech giants aren’t doing enough censoring.
The letter was directed to Twitter, Facebook, Google and YouTube, TikTok and Pinterest. At least the public can read it. How much of this lobbying goes on behind the scenes?
“We partnered with Google,” Melissa Fleming, the communications undersecretary for the United Nations, told a panel last month. “If you Google ‘climate change,’ at the top of your search, you will get all kinds of UN resources. We started this partnership when we were shocked to see that when we Googled ‘climate change,’ we were getting incredibly distorted information right at the top.”
Huh. Who else has “partnered” with Silicon Valley? It is hardly fake news, to pick a phrase, to point out that the internet is full of bad information. Amid the pandemic, Facebook worked with the Centers for Disease Control and Prevention to fact-check claims that Covid-19 vaccines might cause “magnetism” or “alter blood color.” Twitter asked the CDC if it could flag “examples of fraud—such as fraudulent covid cures, fraudulent vaccines cards.”
Yet it was also initially dismissed as tinfoil-hat lunacy to wonder if the Covid-19 virus might have leaked from a Chinese laboratory. Shortly thereafter, experts with scientific standing acknowledged that as a real possibility to be discussed in earnest. It’s a bad sign when one side of a political debate demands to cut off the microphones of the people on the other—and the tech censors these days are almost uniformly progressives.
On climate change, the disinformation tag gets liberally applied even to people who agree that it’s real, caused by fossil fuels, and a problem . . . but who also think humanity can adapt, apocalyptic predictions are overwrought, or subsidies for green energy are a poor investment.
“We need the tech companies to really jump in,” White House climate adviser Gina McCarthy said this summer. Dissent has shifted from climate-change “denial” to “the values of solar energy, the values of wind energy,” she continued, but “that is equally dangerous to denial.”
In other words, censorship must increase the more the public resists the climate lobby’s preferred solutions. If Gina McCarthy’s ideas lose a debate, the cause must be “disinformation.” With statements like that from White House bigs, is it any wonder that skeptics of big tech’s power are gaining ground?
The left increasingly wants Silicon Valley to deploy its mute buttons as a way to stifle opposition, especially on climate. If the platforms give in, they’ll be begging the next Republican Congress to rewrite the liability shield under Section 230. Sen. Josh Hawley proposed a bill in 2019 to make internet sites get a federal certificate proving lack of bias. This is a bad idea, but one that the continuing censorship push is doing its best to popularize.
Which brings us back to Mr. Musk, assuming his Twitter purchase goes through. His plans for the social site are far from clear, but he has spoken or tweeted in the past that Twitter should be the modern town square and should be an “inclusive arena for free speech.” A good place to send that message would be to shut down the climate censors.