Energy, (Geo)Politics & Money - 2024.04.09
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 look at:
The Vitol view that oil price are likely to remain in the $80-$100 per barrel range this year, supported by oil demand growth of 1.9 million barrels per day
JP Morgan Chase CEO Jamie Dimon’s view that the oil & gas divestment movement is “wrong” and “enormously naïve”
The US plan to continue increasing sanctions on Russian energy exports
The meeting between Chinese Foreign Minister Wang Yi and his Russian counterpart Sergey Lavrov in Beijing, just days after the visit to China by U.S. Treasury Secretary Janet Yellen
The “drumbeats of war” that in the EPM view can be heard in the hallways of the buildings where the EU political and military elites gather; where EPM explains why we believe this is not in the EU’s economic interests
The political pressure on Israeli prime minister Netanyahu to attack Rafah, in defiance of the Biden administration’s wishes
The view that €800bn investment is necessary to meet the EU 2030 climate targets, and a total of €2.5tn is needed for the bloc to complete the green transition by 2050 and stay in business
TotalEnergy’s energy transition strategy
Photo by Matt Palmer on Unsplash
General Energy News
OIL TO TRADE AT $80 TO $100 IN 2024
Oil prices will trade in a range of $80-$100 per barrel and global oil demand will grow by 1.9 million barrels per day in 2024, Russell Hardy, chief executive of the world's largest energy trader Vitol, told the Financial Times Commodities Global Summit in Lausanne, Switzerland on Tuesday according to Reuters. This demand growth would be about 500,000 barrels a day higher than the International Energy Agency currently forecasts, and would mean that a previously anticipated slowdown in consumption growth this year would have virtually disappeared, Bloomberg notes.
DIMON SAYS NAIVE POLITICS WRONGLY SLOWED GLOBAL ENERGY PROJECTS
Jamie Dimon said US delays of liquefied natural gas projects were done for political reasons to pacify those who believe oil and gas projects should simply be stopped — a position he calls “wrong” and “enormously naïve”, writes Bloomberg. The head of JPMorgan Chase made the comments in his annual shareholder letter, in which he touted replacing coal with natural gas as one of the best ways to reduce carbon dioxide emissions for the next few decades. Dimon also called LNG exports a “great economic boon” for the US as well as a “realpolitik goal.”
US SANCTIONS RAMPED UP TO ENFORCE PRICE CAP ON RUSSIAN OIL
The US plans to continue sanctioning more oil tankers to ramp up enforcement of the G7's so-called 'price cap' on Russian oil exports which has been successful in denting Moscow's oil revenues, the US assistant secretary of state for energy, Geoffrey Pyatt said according to S&P Global. In January, the US Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions against 19 tankers that transported Russian oil under the flags of Liberia and Panama."We're trying to drive down Russia's oil and gas revenue as fast as we can, without destabilizing our global energy market," Pryatt told the FT Commodities Global Summit. "You should expect the continued steady drumbeat of US and coalition enforcement actions."
Geopolitics
CHINESE AND RUSSIAN FOREIGN MINISTERS MEET IN CHINA
Chinese Foreign Minister Wang Yi hosted his Russian counterpart Sergey Lavrov on Tuesday in Beijing, writes Nikkei Asia. The meeting also came on the heels of a visit to China by U.S. Treasury Secretary Janet Yellen, during which she warned against Chinese support for Russia's war in Ukraine. Wang described the Chinese - Russian relationship as "mature, resilient and profound". He also stressed that the two countries prioritize cooperation under their comprehensive strategic partnership, the highest level of diplomatic ties. He further stressed that China and Russia advocate globalization and will continue to oppose any attempts "to erect barriers and [promote] decoupling" in order to "maintain the stability" to global industries and supply chains – in the EPM view very clearly a job at the U.S. and aligned countries which target diversification of their economies away from China and restricting its access to key technologies.
US, UK AND AUSTRALIA CONSIDERING TO INCLUDE JAPAN IN AUKUS
Meanwhile, the US, UK and Australia are considering working with Japan on advanced technology projects in the trilateral AUKUS security pact, writes the Financial Times. The AUKUS Defence ministers said they would consider bringing Japan into Pillar II, the part of the security pact that focuses on advanced technology, ranging from artificial intelligence and quantum computing to undersea capabilities and hypersonic weapons.
EUROPE MARCHING TO THE DRUM BEATS OF WAR
Meanwhile, the drumbeat of war continues in Europe. Europe must prepare for potential war, as a full-scale conflict on the continent beyond Ukraine is “no longer a fantasy”, the EU’s chief diplomat Josep Borrell has said, according to Financial Times. “Russia threatens Europe,” both through its ongoing war in Ukraine and hybrid attacks on EU member states, Josep Borrell said on Tuesday in a speech in Brussels. “War is certainly looming around us,” said Borrell. “A high-intensity, conventional war in Europe is no longer a fantasy.” EPM calls these statements “drumbeats of war” because in our view, there is no factual support for them. and as such, we see them as scaremongering of the EU populations, in order to make them accept a more aggressive stance by the EU against Russia.
The facts as EPM knowS them are: Russia has since the 1990s has consistently stated NATO enlargement eastward was an issue for it as it sees such a move as a strategic, if not existential, threat because the country lacks a natural defensive border on its western edges. The Russian invasion of Georgia and Ukraine are explained by this Russian perspective, as they both followed the NATO invitation to these countries. At no stage has Putin said anything about restoring the Communist or Tsarist empire, or an invasion of Europe. There is also no historical precedent that could indicate a deep-seated Russian longing to invade Europe. In fact, things are the opposite, since Europe invaded Russia twice. The EPM view remains, therefore, the EU does not need to be at war with Russia. It is heading down this path because of the geopolitical choices it is making. Unfortunately for the European economic interests, we believe this makes escalation in the conflict on the EU’s eastern border the most likely scenario, as that is what the political and military elites in Europe are driving toward.
NETANYAHU UNDER PRESSURE TO ATTACK RAFAH
Israeli prime minister Netanyahu is under political pressure to attack Rafah, in defiance of the Biden administration’s wishes, writes the Financial Times. His far-right coalition partners lashed out at the Israeli military’s withdrawal of some troops from Gaza on Sunday, with ultranationalist security minister Itamar Ben-Gvir warning that “if the prime minister decides to end the war without a large-scale offensive in Rafah to defeat Hamas, he will not have a mandate to continue”.
Energy Transition & Technology News
TOTALENERGY’S ENERGY TRANSITION STRATEGY - INVEST WISELY IN BOTH NEW AND LEGACY ENERGY
The Economist has analysed TotalEnergy’s energy transition strategy – EPM’s favorite oil company in the energy transition. The French firm’s big European rivals, BP and Shell, invested heavily in “electrons” businesses like wind and solar energy—until weak returns and sagging share prices forced them into embarrassing U-turns. Its American counterparts, ExxonMobil and Chevron, have instead doubled down on oil and gas, while backing “clean-molecule” businesses like hydrogen and carbon capture—and have been rewarded with higher valuations. TotalEnergy has consistently said it will continue to invest in “System A”, as it calls the oil and gas that the world still needs. Examples include its recent hydrocarbon projects in Brazil, Suriname, Namibia and the United Arab Emirates, where the focus is on low cost and low carbon barrels. This should spin out plenty of cash to invest in “System B”, the low-carbon business. While this neatly sets out the high-level thinking, EPM believes the Economist unfortunately did not go into the details of TotalEnergy’s System B strategy. That is where it really sets itself apart. It is in solar, but the entire value chain: solar panels manufacturing, installation, solar park operations, and electricity trading and marketing. It is also in battery technology via SAFT, to provide electricity storage, and in gas-to-power to provide back in. And it is in EV charging, another home for the electrons, where it is very wisely managing the home charging, commercial real estate charging and roadside charging. In addition, it is biofuels and biogas, to help decarbonize customers for whom electrons will not do the trick.
Climate Politics
EUROPE ENERGY INFRASTRUCTURE NEEDS €800bn BY 2030 TO MEET CLIMATE GOALS
Europe will need to invest €800bn by 2030 in its energy infrastructure alone to meet climate goals and keep its industry competitive, the European Round Table for Industry (ERT), an influential Brussels lobby group, said in a report according to the Financial Times. While the €800bn investment tag was necessary to meet the 2030 climate targets, a total of €2.5tn is needed for the bloc to complete the green transition by 2050 and stay in business, the report said. “We don’t want decarbonisation by deindustrialisation, that’s the core point,” the ERT says.
Other
SWISS CITIZENS WIN CLIMATE CHANGE COURT CASE IN EU
Yesterday EPM discussed the various human rights centered court cases taking place in Europe at the moment, which are designed to increase pressure on governments to accelerate their decarbonization policies. Today Reuters writes the claimants won one of these cases, as the European Court of Human Rights (ECtHR) ruled in favour of a group of elderly Swiss women who had argued that their government's inadequate efforts to combat climate change put them at risk of dying during heatwaves. At the same time, the court threw out two other similar cases, the first brought by six Portuguese youth against 32 European governments and another by a former French mayor against the French government. The Swiss verdict, which cannot be appealed, could compel the government to take greater action on reducing emissions.