Prof. ST Hsieh
Director, US-China Energy Industry Forum
March 22, 2022
The attached reports from the Federal Reserve Bank of Dallas — has sent oil prices surging past $100 a barrel, with some experts predicting even higher prices to come. Many good points, especially “We’ll have to live with higher prices to keep demand down,” is well taken. But we note the following issues must also be studied carefully:
- “The European Union is weighing a ban on Russian energy exports this week.”
EU is not weighing a ban on Russian all energy exports; only Russian oil is under scrutiny. No major economy in EU can survive without Russian gas now. EU’s plan for energy independence from Russian energy is at least three to five years away.
- Before EU decide on banning Russian oil, a major factor must be thoroughly discussed is the effectiveness of such a move: would such a move stop the war? Or would it make it worse for everyone: what happens to EU if Putin cuts off Russian gas supply to Europe? Is there a Plan B?
- It is true that China-Russia pipelines are in full capacity already. But one cannot discount other land-based energy transportation means. For example, US-Canada do transport crude oil by rail. According to EIA: In December 2017, U.S. imports of Canadian crude oil by rail set a monthly record of 203,000 b/d, nearly matching domestic intra-U.S. crude oil by rail movements of 240,000 b/d for the same month.
- Russia and China railroads are interconnected already. (CNN) — A new bridge that will link Russia and China’s railway systems was completed on August 17, 2021.
The structure’s full name is the China-Russia Tongjiang-Nizhneleninskoye Bridge. It connects Tongjiang, a city in China’s far northeastern Heilongjiang province, with Nizhneleninskoye, a town across the border with Russia along the banks of the Amur River.
This means that China’s northeast railway network can now be connected with the Russian Siberian Railway.
- Another news item: BEIJING, January 18. 2022 /TASS/. The first freight train departed from the port city of Quanzhou in Eastern China to Moscow, Xinhua news agency said on Tuesday. This is the first freight train traveling from China to Europe from the city of Quanzhou in the Fujian Province. The train laden with 445 tonnes of goods is expected to arrive at the Russian capital in about 20 days.
- Besides railroad, trucks travel on highways could transport crude oil, gasoline and even LNG.
Russia’s oil may not save its economy as China lacks infrastructure to take on more supply and Europe mulls formal ban
Tue, March 22, 2022, 10:49 AM
- Russian oil may not save Putin’s economy from crumbling amid the war in Ukraine.
- The European Union is weighing a ban on Russian energy exports this week.
- China, for its part, is unlikely to be able to take new supply from Russia, according to the Dallas Fed.
Not even Russia’s oil may be able to save its economy from crumbling under the weight of international sanctions.
That’s because the US and UK have already barred Russian oil; the European Union is weighing a possible ban of its own, and China, for its part, may not have the capacity or infrastructure to take on more of Vladimir Putin’s petroleum.
Russia’s attack on Ukraine last month prompted widespread sanctions from the West that have tanked the Russian ruble and put the country on the verge of of defaulting on its debts. The country’s saving grace may have been its oil production — but that hope is waning.
Since the war began, around 3 million barrels of petroleum per day, or 3% of global production, has been effectively removed from the worldwide oil market. That supply shock — the largest in decades, according to a Tuesday report from the Federal Reserve Bank of Dallas — has sent oil prices surging past $100 a barrel, with some experts predicting even higher prices to come.
The Dallas Fed suggested one way to address the shortfall would be for China to use heavily discounted oil from Russia in place of more expensive imports from elsewhere. That idea, however, is “unlikely anytime soon,” the monetary authority said.
“There is very limited spare capacity in oil pipelines connecting China to Russia, and it is unclear where China would procure the oil tankers required for shipping more oil to China and at what cost,” the Dallas Fed wrote.
The European Union, for its part, is considering whether to join the US and the UK in sanctioning Russian energy exports this week, though leaders remain divided on the matter.
Famed French commodities trader Pierre Andurand told Bloomberg News last week that many countries are avoiding Russian oil even without government sanctions. He said banks — including Chinese banks — don’t want to finance Russian oil cargo amid Putin’s attack on Ukraine, and soon Russia will have to stop production when they run out of storage capacity. Until the world can once again trust Russia, he said oil from the country is likely “gone for good.”
Read the original article on Business Insider
This is the first freight train traveling from China to Europe from the city of Quanzhou in the Fujian Province. The train laden with 445 tonnes of goods is expected to arrive at the Russian capital in about 20 days. The distance for freight delivery by rail will take 25 days smaller than using the route with seaborne transportation. The distance between Quanzhou and Moscow stands at 10,900 km.