Energy, Politics & Money - 19 May 2023
In this roundup, we look at:
- The massive increase in Indian purchases of Russian crude oil
- The big increase in the number of Americans struggling to make ends meet – 90 million by now
- The Economist interview with Henry Kissinger on the US – China conflict
- Beijing’s response to the G-7 that appeared designed to move forward the US plan to economically and politically isolate, and militarily encircle China: a face-to-face summit with the leaders of five Central Asian countries, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan
- The first hints at Shell’s new strategy, in which New Energies are no longer a priority, but just profit and cash will be – just like in the “good old days” before the energy transition.
- The wave of investment in battery recycling capacity in Europe
General Energy News
Refiners in India, the world's third-biggest oil importer and consumer, are on a Russian oil-buying binge, writes Reuters. Asia's third-largest economy imported about 1.9 million barrels per day (bpd) of Russian oil in April, about 4.4% higher than the previous month. That accounts for about two-fifths of the nation's overall purchases. That narrowed the share of the Middle Eastern grades, which traditionally have accounted for the bulk of total oil imports. At EPM we remember that one year ago the US threatened India not to increase its purchases of Russian crude oil. Clearly, this has not had the (then) desired effect.
Macroeconomics
When looking at corporate profitability there are no major signs of recession in the US at present. When looking at household income and expenditure, however, all signs are red. More Americans struggle to meet expenses now than in the immediate aftermath of the Covid-19 pandemic, Bloomberg reports. About 38.5% of American adults — or 89.1 million people — faced difficulty in paying for usual home expenses between April 26 and May 8. That’s up from 34.4% a year ago and 26.7% during the same period in 2021.
Geopolitics
The Economist interviewed Henry Kissinger on the US – China conflict. Kissinger is worried, the Economist said. “Both sides have convinced themselves that the other represents a strategic danger,” he says. “We are on the path to great-power confrontation.” Beijing has concluded that America will do anything to keep China down, a view which we at EPM believe is supported by facts such as first the Trade War, then the semiconductor sanctions, and now the military encirclement policy. In Washington they are adamant that China is scheming to supplant the United States as the world’s leading power, a view which we at EPM believe has less merit, as China has not articulated a “global world view”, i.e. an independent perspective on how the world should be organized. China is just looking out for its own interests, and has communicated it does not want to be limited by rules that the US has established for the world, the so-called “international rules based order”. Anyway, back to the views of Kissinger… “We’re in the classic pre-world war one situation,” he says, “where neither side has much margin of political concession and in which any disturbance of the equilibrium can lead to catastrophic consequences.” In his view, the fate of humanity depends on whether America and China can get along. He believes the rapid progress of AI, in particular, leaves them only five-to-ten years to find a way. Kissinger also seems to agree with the EPM view that China is not really trying to establish its own world order. In Washington, “They say China wants world domination…The answer is that they [in China] want to be powerful,” he says. “They’re not heading for world domination in a Hitlerian sense,” he says. “That is not how they think or have ever thought of world order.” “If they (China) achieved superiority that can genuinely be used, would they drive it to the point of imposing Chinese culture?” he asks. “I don’t know. My instinct is No…” Kissinger suggests the US and China should take small and slow steps towards an agreement to co-exists. But the interview highlights that deep down, he too believes the US should be the only nation that sets global rules. “I think it’s possible that you can create a world order on the basis of rules that Europe, China and India could join.” That mindset, in the EPM view, which has clearly permeated deeply inside DC establishments we note, is what will always cause a threat of war whenever a nation develops to the point where it does not want to be ruled over by others, we believe.
On the heels of a G-7 that appeared designed to move forward the US plan to economically and politically isolate, and militarily encircle China (this is not just the EPM view, Reuters and Bloomberg see it in the same way), Beijing is hosting the first face-to-face summit meeting with the leaders of five Central Asian countries this week, writes Nikkei Asia. Chinese President Xi Jinping will host the presidents of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan in Xi'an on Thursday and Friday. The place of meeting was consciously chosen, because of its ancient ties to Central Asia. Xi'an was the starting point of the historical Silk Road East-West trade route. By choosing it as the venue for the summit, China seeks to remind Central Asia of their strong ties, going back to when the countries once prospered as a strategic point on the Silk Road.
During the meeting China's President Xi Jinping on Friday unveiled an ambitious plan to help elevate Central Asia to the next level of its development - from building infrastructure networks to boosting trade - while shunning "external interference" at the same time, writes Reuters.
Energy Transition & Technology News
Shell executives are telling their renewable power business that it needs to become more profitable, not just deliver lower carbon emissions, and pull back from the less successful elements of its clean-energy strategy, writes Bloomberg. The instruction is part of a revamped strategy from new Chief Executive Officer Wael Sawan that will be fully revealed in June. He seeks to improve Shell’s performance and eliminate businesses that aren’t producing adequate returns. What this tells us at EPM is that Shell is no longer focused on building the businesses that will be at the heart of the future energy system. Its focus is now squarely back to where it was before the energy transition started, on delivering profits and cash to shareholders. There’s different ways to look at this strategic pivot. But if you are about longevity, and thus about investing today in the businesses of tomorrow, then you can’t be pleased.
Europe is experiencing a wave of investment in battery recycling capacity as automakers and battery manufacturers seek to offset the anticipated global shortfall in critical metals such as lithium, nickel, cobalt and copper, writes S&P Global.
CNBC reports on a company that works on a new idea for offshore wind that, if built, would look very different. Wind Catching Systems from Norway is focused on the development of what it calls a “floating wind power plant based on a multi-turbine design.” CEO Ole Heggheim said the “large model” would have a height of 300 meters (around 984 feet) and a width of 350 meters. While the large version of the Windcatcher would use 126 turbines of 1 megawatt, Heggheim said a planned pilot model will have “between seven and 12,” with the exact number to be decided over the next few months.
Climate Politics
The Electrification of Transport
The Global Energy Crisis
Other