Yves here. Gee, the normally upbeat IEA is rattled by all of the energy market anomalies. Notice the remarkable lack of agency! The words “Russia” and “sanctions” appear nowhere in this story! The level of self-censorship is impressive.
A related story, The Spice Must Flow, um, IEA: The World Needs Russian Oil To Flow Regardless Of The Price Cap, by another OilPrice regular, Tsvetana Paraskova, also does quite a bit of tap dancing. Perhaps in this case the two writers are reflecting the sanctimoniousness of the IEA.
The Paraksova piece has the IEA messaging, while pointed avoiding straight talk, that the oil markets can’t take Russia delivering on its threat to withhold supply rather than selling oil at a capped price. For instance:
The global oil market will still need Russian oil to flow even with the planned price cap, Fatih Birol, the Executive Director of the International Energy Agency (IEA), said on Tuesday…
Many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing because top importers China and India haven’t signed onto the price cap, and because Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice
- The executive director of the International Energy Agency has said that the world is currently in the middle of the first truly global energy crisis.
- Natural gas markets are particularly tight, and they are set to worsen next year as demand climbs and Europe struggles to replace Russian pipeline gas.
- As well as being more expensive than pipeline gas, the lack of infrastructure to import LNG to Europe is resulting in delivery delays.
“The world is in the middle of the first truly global energy crisis,” the executive director of the International Energy Agency, Fatih Birol, said today in Singapore.
The official went on to warn that natural gas and LNG markets would tighten further in 2023, with only 20 million tons of new liquefaction capacity scheduled to come online in that year, Reuters reported.
Speaking at the Singapore International Energy Week, the head of the IEA also said that while supply remains tight, demand for gas will continue to be strong, especially in Europe and possibly in China.
Birol’s warning comes amid expectations that this winter will not be the toughest for Europe. Next winter is believed to be potentially much worse because, during the first half of this year, the EU could stock up on Russian pipeline gas, which is unlikely to come back next year, leaving the EU with a supply gap that other suppliers would be hard-pressed to fill.
Meanwhile, as many as 60 LNG tankers have turned into floating storage off European coasts as there is not enough regasification capacity on the continent to unload the cargo.
This, CNBC reports, is delaying some of the tankers’ return to the Gulf Coast to reload, and pushes gas inventories higher, Andrew Lipow from Lipow Oil Associates told the network.
“The wave of LNG tankers has overwhelmed the ability of the European regasification facilities to unload the cargoes in a timely manner,” Lipow said.
The shortage of LNG import capacity is aggravating Europe’s gas supply crisis but there is no quick solution to this problem except floating regasification units that Germany, for one, is seeking to deploy by the end of the year.
Price is also challenging, with LNG a lot costlier than the pipeline gas Europe was used to. Earlier this month, French president Emmanuel Macron slammed the U.S. for setting double standards in this respect, pointing to how gas cost much less on the U.S. market than on the international LNG market.
Overstating the obvious: Is not that last sentence one of the primary reasons for this stupid war? With the added benefit of once more drawing investors to what had been here to fore the Ponzi scheme of natural gas fracking.
Let’s see. Eight US LNG tankers cooling their heels, around Spain? HOW many old MANPATS did we dump on Aryan Ukrainian FREEDOM fighters? If somebody’s careless with matches & we end up with Congress resembling a casting call for “Justified,” I wonder who’ll benefit from working out a deal with all the usual oilgarchs? Trying to picture a LNG tanker, lit up by a Javelin?
Syriana (George Clooney).
LNG will burn but not explode. See experiments at US Navy facility at China lake. They tried to detonate LNG but could not.
Crude oil won’t blow up either, but that doesn’t mean it hasn’t exploded and killed many people in the past. Its always down to the chain of circumstances. LNG is not explosive, but when exposed to the atmosphere rapidly warms and gasifies.
Atmospheric air with a high methane content is very explosive, as any coal miner will tell you. For an LNG ship to blow up it would require the right combination of rapid release with the timing of ignition. LNG facilities are usually located well away from population centres for a very good reason.
It could be a matter of luck, or it could be a matter of someone with technical knowledge carrying out an attack. The ‘good’ thing about methane is that it disperses very rapidly in normal conditions (unlike, say, butane or propane).
Aside from the Ponzi aspects, my father has done a lot of work with EOG and the analysts they follow expect gas production to peak in 2030 domestically. So much for the 100 year supply they have always talked about. Only saving grace at this point is to move the next invasion to the tar sands (which also doesn’t have great returns) and finally open up the rest of the seaboard outside of the gulf to deep well drilling which can actually be profitable when the large upfront capital costs are sorted. But is the current administration going to support that?
Interesting article on this – is there a gas price bubble ? https://unherd.com/thepost/is-there-a-bubble-in-the-european-gas-market/
Unprecedented? There seems to be a lot of that going around. I suppose that what we are seeing is a battle between those who seek to create their own realities and real-world reality itself. It’s like that old quote-
‘We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out.’
Well reality itself has now spoken up as far as things like energy are concerned and said ‘Yeah, about that…’
In February, the EU’s reality was a dead russian economy withing weeks.
Bidensky talked about turning the russian Ruble into rubble.
8 months later, the opposite is true.
Germany is now de-industrializing – the beginning of the end!
Re Germany: what do you mean?
Germany is the industrial engine of Europe, without affordable Russian gas, major industries will be forced to close. This is already happening. Unless the sanctions against Russia are lifted, the war in Ukraine ends or some other miracle happens, Germany is doomed.
Not just gas but oil, coal and lubricants. too. And metals. And basic chemicals.
German success story is largely based on using (cheap Turkish labor and) cheap Russian energy to turn cheap Russian natural resources to high value products.
Hmmm! Something about not letting a good crisis languish unexplained comes to mind. As much as oilys hate certain kinds of government intervention, Sec. Blinken’s heralding the great opportunity afforded the US (gras producers) by the, er, unfortunate disabling of NS 1 & 2, suppressing a smile borrowed from a certain Cheshire cat cannot be suppressed.
The IEA’s name makes it sound like an impartial international organization, but a quick glance at its membership list shows that it’s actually a closed shop of the usual suspects (EU/USA/ANZAC, plus Japan and ROK), so I would be wary of anything the IEA says:
https://www.iea.org/about/membership
I discounted it at the gitgo.
The IEA is a little like WHO or the IMF. You can’t trust the leadership, policy recommendations or their press releases, but their research analyses are often very good and produced by reasonably independent experts with access to a lot of data.
They do have a slant towards fossil fuels/nuclear due to the background of the researchers and the people they seek for external inputs, but when you balance up their assessments with the better quality external critiques, you’ll get as clear a picture as it is possible to get with such a complex topic.
Hmmm….I wonder how many people are planning to defend those LNG tankers in the event hot war breaks out because of Ukraine? Because it seems to me that sinking those floating targets would be an easy first opening move in any decisive strike against Europe.
The other bit that strikes me as odd throughout all of this reporting is how no one is acknowledging what the reality of the situation was pre-war. Based on GDP and a number of other metrics, Russia was this backwards country with nukes. Nothing to worry about. We could sanction them to smithereens.
But now… we realize they were the only reason Germany could function as an industrial powerhouse, they supplied critical materials to the world, and they had market changing power in numerous markets. Makes you wonder what else our elites think that has no bearing on reality. Because if they’re all using things like GDP and other official statistics to make decisions, then they are likely wrong about a great many things.
I never trusted the GDP as a means of comparing the economic output of different countries.
Just one example: Russia produces S-400 ABMS that is more performant than the US PAC3.
Russia sells its S-400 to Turkey/India/China at 1/10th the cost of a comparable PAC3.
If I consider only this item, I’ll say that the US GDP is 10x Russia’s. In reality, it’s not. Russia sells a better equipment 10x cheaper.
We’re living in a fiction where physical economy has no meaning. For how long?
“. For how long?”
As long as it pays off for China. And when they get bored or no longer pay off, they will say: “We check who has what’s in hand” And it will be the end of the game.
(translated from Polish by Google translator)
Boom, right on point. GDP works I guess (not well, but sometimes good enough) for democracies, but I have always been curious what more centrally planned economies use for measure of wealth, power, resource measures for analyzing their success?
I suppose when people focus on just GDP they miss all the other things like how many homeless, dying from opiates, educational performance or anything else we know that is sliding in our country.
It’s kind of like a white collar vs blue collar mindset.
Countries like the USA now exalt financial products and software as the most important contributions to GDP.
Another example: I have read in MSM that Russia spends around $60 billion annually on its military. That amount is less than what US has spent on Ukraine so far and the latter is still a sitting duck begging for weapons.
This is how the EU “garden” is managed!
Borrel believes that the “garden” is surrounded by the “jungle” but I bet they’ll become part of the jungle by 2023!
The US is just trying to spread some Chinese democracy. So to honor such valiant efforts and NCs vaulted musical traditions, maybe I can inspire the tunes in links to be a bit more Gen Y trendy… I do t even try to be creative:
Welcome to the Jungle EU, its worse here every day. Learn to live with the fallout honey, cause you trusted USA. We are the people… who’llnuke everything for greed, but as long as we make money honey we won’t cure your radiology
Welcome to the Jungle Brussels, its no longer 4d chess we play. Wanna see people turn into Animals?keep the world moving this way. The US is hungry for Germany, they’ll just take eventually. Congress can have all the cash it wants, just to give guns to Zalinski.
Welcome to the Jungle baby! We gonna bring Europe to its kna na na na knees.
Time to “bur-dur-dur-dur freeze.”
Ain’t got no kerosene?… Mewaha, we’re gonna watch you freeze!
The bridge:
Inflation so high, its never never gonna come down…
And the shout:
You know were the EU is baby?
Its in the jungle!
You gonna die!
Haha, well done!!
In that ridiculous speech I wonder if Borrel realised that according to his definition the US was part of that jungle and that as a result the dealings of the US with Europe are subject to the law of the jungle – the fittest prosper at the expense of the weak. True, of course, but Borrel clearly hasn’t recognised that particular outcome of his parable.
What I think Borrel was actually envisaging was that the world outside Europe was like a garden around a mansion, once beautiful and well-managed by the gardeners of Empire but now overgrown and run to seed needing only the shears and spades of its benevolent owners to return it to splendour.
Huh. Should I call it a self-own (politics and gamers) or shooting their cuffs (hunting)? It’s a mystery. / oy
Adding, (and being very snarky): the climate change called “winter” is coming. / sheesh