Prof. ST Hsieh
Director, US-China Energy Industry Forum
August 11, 2022
These two news reports offer such a contrast. First, IEA concluded that “Sanctions imposed on Russian oil have only had a “limited impact” on production,” it means that Russia keeps its oil export revenue. Second, “Gas and power costs are contributing to a cost-of-living crisis across Europe” already. Severe measures for energy conservation, including “black outs and power shortages,” seems to be inevitable when cold weather hits Europe this winter.
But it is not logical, because the “concerted Western effort” or sanction policy was “to isolate Vladimir Putin’s regime.” It is meant to punish Putin for his transgression against Ukraine to the extent that Putin would surrender Russia to the West. Now, after almost 170 days of bloody war in Ukraine, all the sanctions actually backfired. As of now, Putin only experiencing “limited impact” of western sanctions, but Europe is already facing an energy crisis. Is it time for the west to reassess its overall strategy of stopping Putin in Ukraine?
May be politicians in Europe are now too occupied to climb out of the “energy crisis hole,” but they should have some long term and comprehensive perspectives beyond this winter. A key question that needs to be addressed urgently is how the war in Ukraine could be settled? Is it feasible that this war drags beyond 2022? What would be the global energy prices on February 24, 2023, if the war were still going on after one full year? What would be the global economy by that time? It would not be pretty if the war were still on!
Then we must respect mother nature! Drought is all over the world! The drying up of major waterways in Europe including the Rhine River do not show up overnight. It is just unfortunate drought exacerbates the Europe energy crisis. Then, this winter could be very cold as well as dark all over Europe.
Should European politicians make a sincere effort to end the war in Ukraine?
Western sanctions have ‘limited impact’ on Putin regime, warns International Energy Agency
Louis Ashworth Thu, August 11, 2022 at 10:06 AM
Although Russian oil exports to Europe and the US have dropped in the wake of a crackdown across the Western world, the International Energy Agency (IEA) said that demand has increased from India, China and Turkey in a switch that blunted the financial impact on the Kremlin.
As a result, production in July was less than 3pc below pre-war levels. The IEA expects Russian production to be 800,000 barrels a day higher than previously forecast in 2023.
It said: “Asian buyers have stepped in to take advantage of cheap crude.”
The agency added that Europe will be at the mercy of heavyweight oil producers such as Saudi Arabia this winter as a result of a steep drop in imports of Russian gas.
World oil consumption will jump by 2.1m barrels a day this year as factories and power generators try to dodge rocketing gas prices, it said.
The Paris-based agency said this extra demand would be “overwhelmingly concentrated” in the Middle East and Europe, as much of the continent experiences blazing heatwaves.
Soaring temperatures have also fuelled demand for air conditioning, particularly in the Middle East, where a significant amount of oil is burned during summer to generate electricity.
The IEA warned the rise in oil demand would emerge against a backdrop of tighter supply, with Russia cutting down on production as the EU prepares sanctions on Mr Putin’s oil.
The warning that oil remains a valuable revenue source for Russia will be regarded as a blow to efforts to punish the Kremlin after the invasion of Ukraine.
A thriving market has developed for Moscow’s exports in Asia, with Chinese tankers believed to be taking on shipments from Russian vessels at sea.
The IEA’s predictions clashed with a new report from Opec, the oil producing cartel, which said it expects a surplus this quarter as activity slows.
The prediction comes after Riyadh spurned pleas by US President Joe Biden, who visited Saudi Arabia last month, to open its taps.
Toril Bosoni, the IEA’s oil market head, said in a Bloomberg TV interview: “They’re worried about spare capacity – it’s basically only Saudi Arabia and the UAE that are holding any substantial amount of spare capacity.
“There’s a lot of uncertainty on the demand side, this is also something that OPEC is factoring in.”
Elsewhere, German officials warned the crucial Rhine waterway will fall to even lower levels than previously feared, with a key section expected to become virtually impassable on Friday.
Ms Boson said the drought was driving up costs and could last for months. She said: “We’re expecting this situation to continue towards the end of the year.”
A full closure of the river could disrupt the daily trade of 400,000 barrels of oil products, according to the consultant Facts Global Energy, piling further pressure on Europe’s energy-supply chain.
The Rhine is the single most important method of transport for oil products from Amsterdam-Rotterdam-Antwerp to Germany and Switzerland. Last year, 240,000 barrels a day were hauled upriver by barge for unloading in Germany.
Facts Global Energy said in its report: “A major disruption to an important gasoil/diesel supply route from Amsterdam-Rotterdam-Antwerp to inland Europe could not come at a worse time.”
Europe is scrambling to build up its energy stockpiles ahead of the winter, amid expectations the Kremlin will move to cut off gas supplies to raise pressure on the West over sanctions.
The process is being frustrated by a huge summer heatwave, which has damaged energy systems by drying rivers and lowering wind turbine output. European electricity prices – closely tied to the cost of gas – hit record highs on Thursday, with 2023 futures prices for German baseload power hitting €455 (£385) per megawatt hour.
German chancellor Olaf Scholz promised more relief for households, but warned “it will get difficult”.
He threw his support behind the idea of a new gas pipeline that would link the Iberian peninsula to central Europe, saying such a project would improve the bloc’s energy security.
In Egypt, ministers backed a plan to ration electricity usage as part of efforts to preserve natural gas for export to the EU and elsewhere.
Shops will have to limit the use of strong lighting and keep air conditioning temperatures above 25 degrees.
The predictions came on another fraught day for the UK’s energy market, which is caught up in the Continental crisis.
JP Morgan economist Allan Monks said the UK was running out of time to avoid a recession brought on by soaring gas prices.
The UK is the latest country to ready for blackouts and power shortages this winter, as Europe’s energy crisis intensifies, according to a report
George Glover Thu, August 11, 2022 at 7:29 AM
- The UK government is planning for a worst-case scenario this winter that could involve planned blackouts, Bloomberg reported.
- Cold weather could combine with natural gas shortages as the European energy crisis intensifies.
- UK natural gas prices have soared over 130% year-to-date as Western sanctions on Russia lead to shortages.
The UK is the latest country preparing to implement emergency measures this winter as soaring gas and electricity prices fuel an energy crisis in Europe.
The British government is prepared to trigger emergency measures in January to conserve gas as electricity imports fall, according to Bloomberg. A number of countries, including Germany, the Netherlands and Denmark have drawn up plans to deal with energy shortages over the winter, including switching to coal-fired power and even forms of rationing.
UK measures could include organized power cuts affecting both businesses and households to avoid potential gas shortfalls, Bloomberg said.
“Rationing can’t be ruled out in the colder months. This will impact everyone, but especially energy intensive industries like car makers, chemical companies and cryptocurrency mining,” Simon Tucker, global head of energy, utilities and resources at Infosys Consulting, said.
“Fundamentally, there is huge demand for natural gas and especially liquid natural gas (LNG) in Europe. Even with a large increase in shipments of LNG from the Middle East and North America, supply is still limited and particularly cold spells in winter pose a serious risk,” he added.
Gas and power costs are contributing to a cost-of-living crisis across Europe, with key benchmark prices soaring since Russia invaded Ukraine in February. Red-hot inflation is forcing central banks to raise interest rates, delivering an additional blow to cash-strapped households everywhere.
Part of the increase is down to a drop in flows of energy from Russia, which has traditionally been Europe’s go-to provider, supplying 40% of the region’s natural gas. EU sanctions on Moscow over the war in Ukraine have resulted in Russian exports of gas slowing to a trickle through at least one major pipeline.
Britain produces natural gas itself and gets additional supply in the form of super-cooled fuel that arrives on tankers. It often has a glut of unused gas because of a shortage of storage options, but its capacity to export any excess to the rest of Europe is constrained by the size of the pipelines that connect it to the mainland. Even so, it still imports much of its electricity from its neighbours in Norway and France.
Norway, a major exporter of electricity and natural gas, has warned it may ration power exports to the rest of the continent as it grapples with a lack of rainfall that has depleted the reservoirs it relies on for hydropower.