World Energy News - Weekend Edition for 16 July 2022
Welcome to the Weekender edition of the Energy, Politics & Money news feed, for cutting edge insight into everything of importance in the connected worlds of energy, geopolitics and the economy.
In this roundup, we deep dive into Biden’s visit to Saudi Arabia and what this is likely to mean for the oil market. There’s also further analysis of the global energy crisis, as we investigate the question how this crisis compares to that of the 1970s. And we pay significant attention to the macro environment, the rise of the US dollar and what this could mean for the global economy near- to medium-term.
General Energy News
While Saudi Arabia and the United Arab Emirates hold the bulk of spare capacity within the OPEC+ group, as Reuters reports, neither should be expected to be able to increase production significantly over the short term. As such, if Bloomberg is correct, Biden is likely to end up disappointed
According to Bloomberg, the first signs of demand destruction have appeared, “The four-week rolling average for US gasoline consumption slid 2.9% to 8.73 million barrels a day as of July 8 … the lowest seasonal demand in 21 years.”
Energy Transition & Technology News
The Financial Times features a special report on hydrogen, looking at how it should be made (blue versus green), used (burned as fuel or chemically reacted), and where (transportation versus heavy industry versus power). It’s an excellent read for your weekend thinking on the energy transition. Our view is that there will certainly be a future for hydrogen. But equally certainly it will not be a drop-in alternative for convention fuels everywhere and for all applications. For many potential hydrogen applications, such as a fuel for transportation, there are superior alternatives that can be deployed at much lower cost.
The Macro Environment (economics & geopolitics)
Reuters uses “crashing currencies, 1,000 basis point bond spreads and burned FX reserves” to identify the countries that are likely to go into default during the current economic crisis: “Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone”, while Argentina, Ukraine, Tunisia, Ghana, Egypt, Kenya, Ethiopia, El Salvador, Ecuador, Nigeria and Pakistan are also discussed.
We highlighted the declining value of the euro recently, as it further worsens energy related inflation in Europe – if not in absolute terms (in case crude oil and natural prices decline), certainly in relative terms (Europe versus the US). The Financial Times reports today that analysts and investors are betting the euro will continue as Europe’s economic outlook darkens and the US Federal Reserve raises rates to tackle inflation.
The US dollar has gained not only 16% against the euro, but also 15% against the British pound and 23% against the Japanese yen. The Asia Times looks at the implications for the global economy: more inflation, developing country stress, a bigger US trade deficit, further de-globalization, and fears for the Eurozone.
In a piece of premium content, AsiaTimes reviews China’s latest growth numbers. As we have been mentioning, the country’s Zero Covid strategy will significantly hinder growth. Now, as it turns out, Asia’s top economic power managed to deliver just 0.4% growth in the second quarter, year-on-year.
ESG
Project Syndicate has an analysis looking at how well deforestation and biodiversity featured in corporate ESG pledges. Apparently, out of 148 major companies assessed, only nine – or 6% – are making strong progress to end deforestation.
Special features – The Global Energy Crisis
This energy crisis is serious, and potentially worse than in the 1970s, warns Daniel Yergin on the pages of Project Syndicate. “In the 1970s, only oil was involved, whereas this crisis encompasses natural gas, coal, and even the nuclear-fuel cycle. In addition to stoking inflation, today’s crisis is transforming a previously global market into one that is fragmented and more vulnerable to disruption, crimping economic growth. And, together with the geopolitical crisis arising from the war in Ukraine, it is further deepening the world’s great-power rivalries.”
Bloomberg’s interview with Meg Jacob, author of Panic at the Pump, probes the similarities and differences between the oil crisis of the 1970s and today.