Energy, (Geo) Politics & Money - 2024.03.26
Non-partisan, objective & neutral analysis where global developments in energy, business & geopolitics intersect & curated from leading global sources & resources.
Welcome to EPM, where we take our daily look at the interconnected worlds of Energy, (Geo)Politics and Money. Curated from the world’s leading sources of information, we provide you both the information and the objective, neutral commentary that you need to make sense of it all – and beat the market.
In this roundup, we take a closer look at the important turn in the U.S. position at the United Nations regarding Israel’s War on Gaza. There, namely, the U.S. allowed passage of a Gaza ceasefire resolution on Monday. This has greatly angered Israeli prime minister Netanyanhu, who in response cancelled a planned visit by his officials to Washington DC this week, which was designed to discuss the planned invasion of Rafah. However, the Israeli defense minister will still meet with U.S. officials to discuss the subject.
In the EPM view, this confirms our thesis from last week, which was that that there are different and competing camps in both the U.S. and Israel. Both countries have a faction in their political elite that views things “the Netanyahu way”, i.e. solve the “Palestinian issue” through expulsion of Palestinians, and both have a faction that sees things “the Biden way”, i.e. solve the issue via the two-state solution. These factions are no longer talking together to find a consensus solution. Instead, they are actively working to undermine each other in order to push their preferred solution though in a “winner takes all” manner.
In the EPM view, in the U.S. the Biden faction is strengthening, as even Donald Trump over the weekend stated that it was time for Israel to “finish up your war” and “get to peace”.
Furthermore, we look at:
Why Australia's Woodside Energy Group plans to significantly step up liquefied natural gas (LNG) purchases from North America, even though its home country is one of the top three producers of the fuel globally
The threat by Yemen’s Houthi’s that they will attack Saudi oil infrastructure should the Saudi’s decide to support the U.S. attacks on the Houthi’s
Donald Trump’s proposed policies regarding international trade, and what this is likely to mean for the trend towards regionalization of the global economy
The U.S. decision to allow passage of a Gaza ceasefire resolution at the United Nations on Monday
The continuing military standoff between China and India in the Himalaya’s
How the subject “energy security” is politicizing in the U.S.
The U.S. efforts to block an OECD agreement to reduce or even end export credit agency loans and guarantees for oil, gas and coal mining projects
Photo by Chris Pagan on Unsplash
General Energy News
AUSTRALIAN NAT GAS SUPPLIES DWINDLE FORCING SUPPLIERS TO LOOK GLOBALLY FOR MORE
Australia's Woodside Energy Group plans to significantly step up liquefied natural gas (LNG) purchases from North America, as rising costs and other issues make procurement in its home market more challenging, writes Nikkei Asia. It expects to source 4.7 million tonnes of LNG annually from North America at that point, five times current levels and equivalent to almost half the capacity of the production rights it holds in Australia. The company is seeking opportunities in western Canada as well. The reasons behind the shift in focus are that existing Australian gas fields are running dry, while environmental regulation and general inflation is making new Australian gas developments very difficult. In other words, EPM notes, the economics of U.S. LNG simply outperform those of Australia.
On the topic of Australian PNG, in a speech to the Australian Domestic Gas Outlook (ADGO) conference ExxonMobil representatives said they believe the country’s gas production will enter strong decline if new investment in domestic gas supply and infrastructure is not urgently enabled via policy, writes Reuters. "Without investment, ExxonMobil Australia estimates by 2030 domestic gas supply available to southern states will decrease by 44%," it said.
HOUTHIS TO TARGET SAUDI INFRASTRUCTURE IF US USES THEIR AIRSPACE
Lastly, Yemen's Houthi rebels have threatened to target Saudi Arabia's oil installations should the country allow a U.S.-led coalition to use its airspace to counter the group's attacks, a Houthi spokesperson said in an interview, according to S&P Global. “We have sent a message to Saudi Arabia that it will be a target if it allows American fighter jets to use its territory or airspace in their aggression on Yemen," Mohammed Ali al-Houthi, a member of the group's Supreme Political Council, said in the interview.
Macroeconomics
BLOOMBERG TRACKING MONETARY POLICIES WORLD WIDE
Bloomberg has launched a project to track developments in the world of monetary policy. It says it is expecting a gradual decline in interest rates globally this year, and therefore will publish a monthly summary of developments in this area.
TRUMP’S POLICIES ON INTERNATIONAL TRADE EXAMINED
As EPM mentioned earlier, we will be looking at the U.S. presidential elections more over coming months, in order to provide clarity as to how the outcome of this election could affect interconnected worlds of Energy, (Geo)Politics and Money. Today, we look at Donald Trump’s proposed policies regarding international trade. According Nikkei Asia, Trump has indicated his intention to impose a 60% tariff on all imports from China and a 10% "universal baseline" tariff on imports from elsewhere should he recapture the presidency. The proposed 60% tariff on all Chinese imports, but also the 10% universal tariff, would stretch the spirit, if not the letter, of WTO rules beyond the breaking point and constitute a massive frontal assault on the organization that would likely leave the already teetering body on life support. Also, if the past is prologue, major U.S. trading partners would feel compelled to respond by slapping retaliatory tariffs on American products, leading to additional tariffs by the Trump administration and instigating the most significant global trade war since the 1930s. As such, EPM notes, Trump’s plans are likely to greatly accelerate the trend towards regionalization of the global economy.
Geopolitics
U.S. SUPPORTED UN RESOLUTION ON GAZA CEASE FIRE
The U.S. allowed passage of a Gaza ceasefire resolution at the United Nations on Monday, writes Reuters. In response, Netanyahu abruptly scrapped the planned visit to Washington this week by a senior delegation to discuss Israel’s threatened offensive in the southern Gaza city of Rafah, which EPM reported on yesterday.
We at EPM remind out readers the objective of the meeting was to discuss the different perspectives on Rafah, which Israel wants to threat in the same way it treated Northern and Central Gaza, while the U.S. wants Israel to limit its attack on Rafah to “surgical strikes”. These talks will still take place, as Israeli Defense Minister Yoav Gallant went ahead with high-level meetings in Washington on Monday. This, to us at EPM, indicates conversations are taking place without Netanyahu. In other words, the affair further proves our point from last week, that there are different and competing camps in both the U.S. and Israel.
Both countries have a faction in their political elite that views things “the Netanyahu way”, i.e. solve the “Palestinian issue” through expulsion of Palestinians, and both have a faction that sees things “the Biden way”, i.e. solve the issue via the two-state solution. Biden and Netanyahu have not been able to find a common ground, and are now in active conflict. EPM explained last week how Biden is trying to tighten the thumbscrews on Netanyahu, as well as how Netanyahu is working with elements in America’s political elite to counter this.
Yesterday’s developments mean that the gap between the factions is widening, making a compromise solution less likely and a winner takes all outcome more likely. As far as the U.S. is concerned, the EPM view is that the Biden faction is strengthening, as according to CNN, even Donald Trump over the weekend stated that it was time for Israel to “finish up your war” and “get to peace”.
We note, however, that this trajectory could push Netanyahu over the edge and make him decide to do what he wants to do now, even without U.S. backing. This would risk a strong U.S. response, however, such as reduction or even pause in the delivery of American weapons to Israel. And, most importantly, further worsen the global image of both Israel and the U.S., which, as NPR writes, has already taking a severe beating and is unlikely to be restored fully for generations to come.
CHINA & INDIA CONTINUE STANDOFF IN THE HIMALAYAS
Nikkei Asia looks at the continuing military standoff between China and India in the Himalaya’s. The threat of the standoff leading to armed conflict should not be discounted, it says. The current standoff was triggered by Chinese encroachments into India's northernmost territory of Ladakh in April 2020. Apparently, both sides have been significantly ramping up deployments of troops and weapons, girding for the possibility of war. India moved an additional 10,000 troops to the frontier. China has also been expanding its troop presence and building warfare-related infrastructure along the inhospitable frontier. This has included boring tunnels and shafts in mountainsides to set up command positions, reinforced troop shelters and weapons-storage facilities. Talks to de-escalate tensions along the frontier have made little progress.
Energy Transition & Technology News
OIL INDUSTRY CONTINUES TO PROMOTE OUTDATED VIEWS ON ENERGY SECURITY
Bloomberg notes that fifty years ago, the term “energy security” meant “we need oil and we need it now”, but that in the modern world, where energy comes in many forms, security doesn’t have to be so fuel-specific. Nevertheless, it says, the oil industry continues to promote the “outdated” view on energy security, as a means to preserve its interests. Which of course comes at the expense of the energy transition. One of the outcomes of this lobbying is the attacks by U.S. politicians on the IEA, Bloomberg says. It mentions former Robert McNally, former adviser to President George W. Bush, by name, who recently wrote an OpEd for the Wall Street Journal accusing the IEA of having caved to “zealous green censors”. Last week, two Republican lawmakers joined McNally (and OPEC) in bashing the IEA in a letter accusing it of “undermining energy security” and being an “energy transition cheerleader.” The evidence for their accusation, the lawmakers say, is the discrepancy between the IEA’s forecasts with those of “respectable energy modeling organizations” such as BP, ExxonMobil and OPEC.
Climate Politics
OECD CLOSED DOOR TALKS OVER CREDIT GUARANTEES FOR OIL, GAS, AND COAL MINING PROJECTS
OECD countries have held a second round of closed-door talks in Paris to debate export credit agency loans and guarantees for oil, gas and coal mining projects, writes the Financial Times. The U.S., Canada, France, Germany and the UK were among countries that agreed around the UN COP26 climate summit in Glasgow in 2021 to align their public finance institutions with a Paris agreement goal to limit global warming to ideally 1.5C above pre-industrial levels. Practically, this requires reducing export credit agency loans and guarantees for fossil energy projects. While the EU is now pushing for agreements to move forward with this commitment, the U.S. has applied the brakes.