Energy, Politics & Money - 24 April 2023
Independent, objective, and politically neutral analysis of global developments curated from sources covering the world of energy, geopolitics, and investment.
In this roundup, we look at:
India’s growing imports of Russian oil, hitting 30% of total crude oil imports in March and expected to rise further to 50% in April; and what this meant for OPEC
China’s growing confidence that Russian crude oil does not come with geopolitical consequences
Niall Ferguson’s perspective on the “de-dollarization” narrative, which he too sees as overblown; however, the narrative is popular with traders which could create a self-fulfilling prophecy, we at EPM recognize
Where and how the world is spending over $1 trillion on new energy technology
The potential of floating offshore wind energy
The next big piece of legislation to drive forward the energy transition in the US, on permitting
The rapid electrification of transport in China
Toyota’s plan to reduce GHG emissions per car by 50% by 2035
The news that 69% of the U.S. population favors steps towards a goal of the country being carbon neutral by the year 2050
General Energy News
India's dependence on Russian oil has increased to 30% in March, Nikkei Asia writes. The country, which had previously relied almost exclusively on the Middle East, imported more than 6 million tonnes of Russian oil. The percentage is expected to increase further to 40% to 50% for April. In January 2022, Russia accounted for slightly under 2% of India's imports.
Consequently, OPEC’s share of crude oil sales to India fell to a 22-year low, Reuters reports. They totaled 59% in the fiscal year to March 2023, from about 72% in 2021/22.
Meanwhile, China's imports of Russia crude oil reached 10% of total, Nikkei Asia says in its same report. Reuters goes into more detail, noting that it is in particular the Chinese state oil giants and major private refiners are sweeping up more Russian crude. They had shied away from Russian crude in the immediate aftermath of Western sanctions on Moscow over its invasion of Ukraine, but now show growing confidence in the trade and less fear for geopolitical consequence. China's overall Russian crude imports, including pipeline and ships, rose to a record 9.61 million tonnes, or 2.26 million barrels per day (bpd) in March.
Macroeconomics
Rumors of the death of the US currency are as exaggerated as they are frequently repeated, writes Niall Ferguson for Bloomberg. Being fed up with the dominance of the mighty dollar is nothing new, he says, and neither are attempts to break free from its powerful embrace. The facts are, that at 59% the share of US dollar trade in international reserves is now less than at its peak of 70% in 1999, it is still higher than it was in 1995. The decline is less due to a weakening dollar, but more due to the arrival of the euro, which is now a steady “number two” reserve currency. The Chinese yuan hardly features for the reasons EPM highlighted last week – too much government control over its value and capital controls.
However, Bloomberg notes the “de-dollarization” narrative is popular with traders – and that could create a self-fulfilling prophecy, which we at EPM recognize as a distinct possibility.
Energy Transition & Technology News
Bloomberg looks at how much the world is currently spending on new energy technologies, and where. It also mentions many of the most exciting startups combine private and public backing – something that doesn’t surprise EPM, and we refer to Maria Mazzucato’s book “The Entrepreneurial State” if you too want to know why.
The floating wind industry is poised for explosive growth in the coming decade, Reuters writes. About 80% of the world's offshore wind power potential lies in waters deeper than 60 metres, according to the Global Wind Energy Council (GWEC), which is the potential floating wind aims to tap. Winds are also stronger and more continuous there, further out to sea, so floating turbines can generate more power than those fixed to the seabed near to shore. They also do that less visible from the coast, reducing the risk of resistance from local communities. So far for the positives. On the negative side, technology costs for floating wind are far higher than for fixed turbines. According to DNV, the average levelized cost of energy (LCOE) for floating wind was about 250 euros per megawatt hour (MWh) in 2020, compared with around 50 euros/MWh for fixed turbines. But, the expectation is that as more projects are launched, the opportunities for innovation and economies of scale increase. The key current challenge are the supply bottlenecks, therefore, as these delays and in some cases even cancel announced projects.
Indian steel maker Tata Steel has initiated a trial for injecting hydrogen gas at its blast furnace, the world’s largest trial to date using 40% of the injection systems, writes Reuters. The trial is planned to continue for four to five days this week, on a continuous basis. It has the potential to reduce coke rate by 10%, translating into a 7% to 10% reduction in carbon dioxide emissions per ton of crude steel produced.
The next big piece of legislation to drive forward the energy transition in the US is likely to be in the field of permitting. Senator Manchin said as much during the most recent CERAWeek. The Financial Times notes that since permitting issues hold back both fossil and renewable projects, these two sectors of the economy are now “unlikely allies” in the lobbying effort to push this change forward.
Climate Politics
Norway's $1.4 trillion sovereign wealth fund, one of the world's largest investors, said on Saturday it will vote against a resolution filed by activist group Follow This, which calls on BP to align its emissions targets with the Paris climate deal's goal to limit global warming, writes Reuters.
The Electrification of Transport
The internal combustion engine is on its way out in China, writes Bloomberg. Traditional barriers to EV ownership in China, such as cost and range anxiety, are fading. BYD Co. unveiled a hatchback that sells for as little as 78,800 yuan ($11,400), and both private and public companies have built out a charging network across the country that’s so big it’s barely used. BloombergNEF now expects a 34% jump in EV sales this year, to 8.1 million units. EPM notes that the Chinese refining industry is preparing to deal with this challenge. Almost all recently completed and announced projects are highly integrated with petrochemicals to reduce the overall output of transport fuels.
Toyota’s new CEO will promote a shift from gasoline-powered cars to hybrid vehicles, electric vehicles and fuel cells, in order to deliver a GHG emissions per car reduction of 50% by 2035, writes Nikkei Asia. The reason the company looks at different drivetrains, is that it believes not all markets will open up for EVs. "We will pursue a shift to automotive electrification in our 'multi-pathway' approach by taking regional conditions into account," Sato said. "Top priority is the reduction of CO2 emissions. EVs and others are tools for the goal. Means of achieving it change depending on the situation." Forecasting that the growth of auto markets will stall in developed countries, Toyota will promote EVs, plug-in HVs and fuel cell vehicles there. In emerging markets, it will seek to raise the sales ratio of HVs in expectation of an increase in demand.
Other
According to a new poll from Pew Research looking at attitudes towards the environment, 69% of the U.S. population favors steps towards a goal of the country being carbon neutral by the year 2050, writes Forbes. Americans don’t fully trust the reliability of renewable sources and 67% of the population favors a mix of renewables and fossil fuels, with only about 31% in favor of completely phasing out fossil fuels altogether. That said, Americans favor government action toward improving renewables, with two-thirds of the population in favor of the federal government encouraging production of wind and solar power.