World Energy News for 5 July 2022
General Energy News
Something to watch. Bloomberg reports:
“(Russian) cargoes bound for Asia — a crucial market where China and India have stepped in to prop up Russian exports others have shunned in response to its invasion of Ukraine — were down by more than 15% on both a weekly and four-week average basis from the highs seen at the end of May.”
The key question is whether this is simply economics at play, or whether there are some geopolitical decisions underlying the decrease. If it’s the latter, the global supply / demand balance is in for another shock.
Energy Transition & Technology News
New Dutch legislation will make it mandatory for companies to invest in all possible energy saving measures, if the investment can be recovered within five years.
Push back against the practice of carbon offsetting is growing globally. This is evidenced by what Shell faces in The Netherlands, as reported by Bloomberg, where:
“(the) advertising watchdog ruled for the fourth time this year that an ad campaign by Shell Plc about its efforts to reduce carbon-dioxide emissions is misleading and must be pulled from circulation. Shell’s advertisements say customers can pay extra when they buy fuels in order to ‘compensate’ for the pollution generated by those products. The campaign is itself a reboot after the regulator ruled last year that ads saying Shell customers could ‘drive CO2 neutral’ were misleading.”
This highlights the risk of basing a decarbonization strategy on offsetting. If organizations go down the offsetting path, they must ensure that they manage their efforts very tightly. Organizations cannot just rely on “carbon markets”. They need to go out in the world and find the right offsetting projects that can prove their bottom-line impact in a clear and transparent manner.
The Macro Environment (economics & geopolitics)
The always insightful Paul Hodges shares his view on the current macro-outlook over at New Normal:
“We are facing a perfect storm of global food, energy and financial crises set off by the war in Ukraine. Analysts need to stop focusing on monetary policy and the inversion of the yield curve. They need to look out of the window and start dealing with the geopolitical reality of Putinflation.”
Bloomberg reports on a recent report by Japanese bank Nomura on the short-term future of the global economy. “Many major economies will enter recessions over the next 12 months amid tightening government policies and rising living costs, pushing the global economy into a synchronized growth slowdown”. The language chosen by the Bank, “slowdown” and “mild recession” gives the impression that everything is under control. But in reality, things are not under control; the number of factors at play that are coming together simultaneously and accelerating the impact each has on other factors is gaining speed. Inflation by itself can be managed. A supply chain disruption by itself can be managed. An energy disruption by itself can be managed. A debt crisis by itself can be managed. A decoupling of the Western and Eastern economies by itself can be managed. Not easily, but these can be managed. But, coming all together, at the same time, is a completely different story for policy makers and consumers!
As to the current state in the Ukraine War, there is a very interesting discrepancy in the analysis provided by Reuters and by the AsiaTimes. Reuters downplays Russia’s recent conquest of the city of Lysychansk, and with it the region of Luhansk, arguing: “Though Russia can claim a prize with its capture of Ukraine's eastern Luhansk region, it is far from Moscow's ambitious early war aims and does not deal Kyiv a decisive military blow.”
The AsiaTimes sees it as a harbinger of things to come:
“The rapid Russian victory at Lysychansk and the substantial territorial gains within little more than 48 hours have surprised most observers… The issue going forward is qualified manpower, indeed, manpower, period. In a war of attrition, other things being equal, the side with the larger manpower reserves wins.”
What both assessments agree on, however, is that the fall of Luhansk is not the end of the war. Russia will continue to push into additional territories, targeting the Donbas region and the southern Black Sea coastal area.
https://asiatimes.com/2022/07/ukraine-the-situation-july-4-2022/
The Electrification of Transport
We’ve previously reported on the EU’s decision to class lithium as toxic, and what this will mean for the EV industry in the bloc. Clearly, it won’t help the electrification of transport because it will significantly increase the costs associated with mining, battery manufacturing, and recycling. According to Bloomberg, lithium and battery producers are therefore pushing back and have “warned the European Union that a proposal to classify the metal as a reproductive toxin could severely hurt Europe’s burgeoning electric-vehicle industry.”
ESG
Nothing to share today.
Special features – The Global Energy Crisis
Slowly but steadily the economic crisis that awaits Europe should becoming clear to all (we have highlighted the forthcoming crisis for months). The news, reported by Reuters, is that Germany is preparing financial bail outs for companies negatively affected by the Energy Crisis and highlight the fact that this crisis threatens to undermine European industrial competitiveness comprehensively. This crisis will not only be about inflationary pressures caused by high energy prices. It will be about energy not being available, or, if available, only at economically prohibitive prices!
Germany’s captains of industry are waking up to how the EU’s set of sanction policies against Russia will affect them. Reuters quoted the CEO of E.ON : “We are in the midst of a massive energy crisis and it has potential to turn into a massive economic crisis”.
Other
Nothing to post today.