An energy conundrum
- Thread starter RMHawk
- Start date
A number of reasons:
Germany has a new government that appears skeptical of NS2
Biden just struck a deal with Germany to not sanction the project
Biden is trying to repair relations with a critical European ally (Germany)
Cruz's bill didn't target just Russia, it also targeted German citizens involved in the project
Cruz's bill was a straight sanction without any trigger, like the invasion of Ukraine - in other words, we'd be sanctioning a key ally (Germany) for no good, defensible reason.
I daresay that if WTC prices had dropped 20% under Biden, he'd be claiming credit; if "it" occurs during his administration,n he owns it in world of politics. I haven't heard any substantive proposal/policy idea come from the administration to deal with inflation beyond tilting at port of entry windmills. Per WS Jnl, number of freighters backed up off LA and Long Beach is greater than 4 months ago.
Re Germany using Nordstream 2 to restrict Putin in Ukraine, both Chancellor Scholz and defense minister have stated it's a private sector project and must be separated from political discussions. So relying on Germany to do anything consequential re NS2 seems more hope than reality-based. Russia has also implied that any signficant sanctions resulting from actions toward Ukraine will cause a review of its energy exporting.
By removing restrictions on NS2, Pres Biden has played directly into Putin's hand. Russia has also implied that serious restrictions such as being deprived of participation in SWIFT intl banking will result in decline/shut off of gas exports. We helped the NS2 project to make nice with Germany after Trump, but in doing so participated in at least perception of increased strength for Putin, which he desperately needs.
Re Germany using Nordstream 2 to restrict Putin in Ukraine, both Chancellor Scholz and defense minister have stated it's a private sector project and must be separated from political discussions. So relying on Germany to do anything consequential re NS2 seems more hope than reality-based. Russia has also implied that any signficant sanctions resulting from actions toward Ukraine will cause a review of its energy exporting.
By removing restrictions on NS2, Pres Biden has played directly into Putin's hand. Russia has also implied that serious restrictions such as being deprived of participation in SWIFT intl banking will result in decline/shut off of gas exports. We helped the NS2 project to make nice with Germany after Trump, but in doing so participated in at least perception of increased strength for Putin, which he desperately needs.
So Russia desperately needs NS2 but is also threatening to shut it off if the US levies sanctions? How does that work?
Isn't supply chain issues like cargo ships and port management a private sector issue or would you like the government to nationalize this part of the supply chain?
Putin can shut down NS2 anytime he wants, regardless of sanctions but with that comes a significant loss in revenues. Shutting them out of SWIFT would nearly decimate the Russian economy, couple that with the loss in gas revenues and Russia as a country is in serious trouble. If we go after Oligarch assets as well we could feasibly bankrupt many Oligarchs and seriously damage Putin's wealth, as well as possibly find Russian cash in GOP campaign coffers.
The most naive act Biden has done is ask OPEC to increase production to bring down oil prices. OPEC?? Pardon me while I laugh. Presidents get inflation credit/blame they rarely earn but often make a bad situation worse by, uh, like asking a cartel for help.
I think that was performative. He knew they wouldn't do anything, but he has to 'make a demand' so he can check it off the list. You know the question he'll get from the press - like Doocy - is, "Have asked OPEC politely if they would help us out?"
I mean, I don't disagree, but that was also just low-hanging political fruit of shifting the blame to the unpopular foreign cartel. I don't really think it made anything worse, just broadened the blame game.
Yeah, I think this is it. He'd catch hell if he didn't try to blame Opec for oil prices. And to be fair, it's not entirely inaccurate, even if it is wildly oversimplistic.
Per W S Jnl sanctiuons article today, prior ones due to annexation of Crimea prompted Putin to embark on strategy to buffer effect of future ones. C sanctions inflicted pain but for a limited time and in response Russia barred many Western imports which in some cases stimulated Russian domestic production. Russia's GDP has grown slower than most of developed world since then;
IMF estimates sanctions affected Russian GDP by 0.2%. In anticipation of future sanctions, Russia has diversified its exports; dramatically increased dollar reserves to almost $700M, among the world's largest; opened a major gas pipeline with China; signficantly increased trade with China; and run conservative fiscal policy such that its debt is 20% of GDP (ours is 133% of GDP). Per a Finnish official, "Russia is prepared this time". Expelling Russia from intnl finance SWIFT would inflict short-term cost but they could effect workarounds. Pry the most effective sanction would be for US to ban sale to Russia by any entity of products that contain US-source microelectronics and software. But then what would Germany do (see below).
Re who's more vulnerable to NS2 leverage, probably is Germany, being a true democracy with new Chancellor; has increased its import of gas from Russia by factor of 25% in last couple years; has highest relative fuel/energy costs among all major Euro countries; and is mothballing energy plants including nuclear at rate that far exceeds their ability to compensate through renewables.
Germany has allowed UK to fly planes over Germany for intelligence-gathering purposes but Britain's airlift of anti-tank weapons (i.e. defensive weapons) has had to fly around German airspace. So allowing them would "poke the bear"? Don't expect Germany to support any truly effective sanctions on Boris and the Boys.
I agree, RMHawk, Joe requesting OPEC to increase production to make up for US production declines, naive in extreme. Savvy negotiator, he.
Typo, Russia now holds between 600-700 Billion in US dollar reserves. I wrote million. My one misteak for the yeer.
If Russia is barred from SWIFT they are virtually shut out of the world banking system and unable to make any electronic transfer of funds, none. Not sure how they find a work around to that. I'm looking through the journal, can't find any article that references this yet. Got a headline or a reporter's name?
It was Thurs edition, about middle of Sec A. I get paper edition, we tossed it with recycle stuff picked up Fri. Sorry, one other article included comment about SWIFT exclusion being a possibility, that Russia could work through friendly intermediary like China.
I seem to recall Floydmaster crowing in Nov about oil at ~$70/barrel and room to go lower. About 2 months later, WTI in vicinity of $90 and energy analysts all predicting >$100 this year. In addition to fundamentals, futures reflect market pyschology/anticipation of future/world situation. Futures today reflect perception of administration that is resistant to fossil-fuels, and, as evidenced by comments by Grantham, is committed to higher gas and coal costs so that cost of energy from renewables looks comparatively better. Two quotes from WSJ analysis: "The self-created energy vulnerability of the West is one of the horrifying marvels of the age. You have to go back to the disarmament of the 20s to recall a time of such willful self-delusion. " And: "Even as Europe becomes more dependent on Russia, Russia is becoming less dependent on Europe".
I read the WSJ but I also take a lot of what it prints with a grain of salt. Ever since Murdoch bought it it hasn't been the same.
Two months ago the market was worried about the demand impacts of a new Covid variant. Those worries have dissipated and now there’s a growing risk premium being priced in due to the Russia-Ukraine and Yemen-UAE situations, as well as demand forecasts increasingly outrunning anticipated supply growth.
Fundamentals and geopolitical risk are driving the current increase in oil and gas prices. It has nothing to do with the “perception of administration that is resistant to fossil-fuels.”
You need to start providing links if you’re going to repeatedly quote the WSJ. Especially if you’re going to cite their batshit editorial page.
Last edited:
The WSJ’s actual reporting is strong. Their editorial page, however, is on par with the New York Post.
I only rely on editorials that contain verifiable facts and don't use ambiguous wording. But even they criticized Trump about 1/3 of the time that their editorials involved him, and 100% when topic is his claim of stolen election
and Jan 6.
Piece on the effect of sanctions was article, not "batshit" editorial, and I thought informative and in depth. May have missed it but haven't seen any response stating its facts or even overall depiction are erroneous/far-fetched.
I wonder if their editorial approach is intended to counter
NYT, to appeal to segment who want international daily but dislike the NYT slant.
Got off the phone a few minutes ago after talking with HS/KU bud who's sr management with a mid-sized energy company and they are holding back investing in all different mechanisms due to concern that after expending resources, project(s) will get blocked or impeded by the administration, they are waiting pout the elections. So they initiate no new activity related to increased production except existing activities. One company not the whole industry, but if some number of others feel likewise, demand likely to continue to exceed supply for some time.
and Jan 6.
Piece on the effect of sanctions was article, not "batshit" editorial, and I thought informative and in depth. May have missed it but haven't seen any response stating its facts or even overall depiction are erroneous/far-fetched.
I wonder if their editorial approach is intended to counter
NYT, to appeal to segment who want international daily but dislike the NYT slant.
Got off the phone a few minutes ago after talking with HS/KU bud who's sr management with a mid-sized energy company and they are holding back investing in all different mechanisms due to concern that after expending resources, project(s) will get blocked or impeded by the administration, they are waiting pout the elections. So they initiate no new activity related to increased production except existing activities. One company not the whole industry, but if some number of others feel likewise, demand likely to continue to exceed supply for some time.
How are we supposed to respond to the facts or overall depiction presented in an article when you haven't provided any links?
I don't understand what you mean regarding the editorial approach and the "NYT slant." Are you conflating the editorial page with the news side?
I also can't speak to whoever your friend is, but he's pulling your chain. US-based oil companies are not chasing production growth like they were a few years back because their investors are demanding more focus on fiscal discipline and shareholder returns. The Biden administration has done nothing to suppress production in the near or even medium term, and there's nothing being proposed or discussed that would do so.
I should add that US oil prices nearing $90 per barrel will likely motivate some producers to start drilling more again.
Last edited:
My poiunt about WSJ editorial slant is that maybe they saw opportunity to counter NYT editorial slant, thought that was obvious, sorry. Article today in WSJ also said that future oil production will be flat to very slight growth, in part due to stockholder demands for fiscal discipline, so that supports your comment on that. However, another piece describes the uncertainty and discomfort energy companies have with several of Sliden Biden's nominees/appointments including Sarah Raskin for Fed, who has repeatedly manifested antipathy toward fossil fuel companies. She even stated in May '20 NYT that such companies shouldn't be eligible for pandemic emergency funds. And don't get me started on Jennifer Grantham. My friend isn't pulling my chain, he's reflecting the discomfort felt due to non-elected people in administration who can affect many policies, and have a track record of demonizing or at least discounting fossil fuel companies.
The WSJ has always been conservative, there was never really a perceived opportunity to counter the NYT because they were always that way. What they did do, however, is go hard right into the NYPost territory when they were sold. It's why a lot of WSJ folks resigned with the paper's sale because they lost a lot of editorial integrity.
There are a lot of factors playing into fossil fuel futures. The biggest thing hurting them isn't Biden, but the fact the world is moving away from fossil fuels overall. Biden thus far hasn't been bad to fossil fuel companies and approved more permits for drilling than Trump did. He's pushing climate change initiatives, but really hasn't done anything to drastically cut into the fossil fuel industry's ability to operate.
What I see time and time and time again with this is businesses either operate normally, or do planned roll backs but blame the elected officials for forcing them to do it. It's easier for an energy company to say, "we can't drill here because the Biden administration is making economic futures uncertain" than to say, "we can't drill here because the market simply isn't there and we've known that for a while." Best to place blame elsewhere.
I
The NYT Editorial page has conservatives, liberals and some very drippy in-betweens. So I still don’t understand what the WSJ’s batshit Editorial page is countering. If this is the tired old “NYT is liberal media!” canard, come on.
I’m also not making this energy stuff up. I’m not talking to friends in the industry, I work adjacent to the industry and we deal with this stuff every day.
One thing that’s important to understand is that oil industry executives and their lobbyists are going to complain about regulations no matter what is happening. Exxon just posted their strongly quarterly profits in years — and yet Darren Woods is still complaining about “regulatory overreach” and other bugaboos. They will always, always work the refs.
So of course they’re going to say they’re upset and concerned and doomed because the Biden administration wants to try to do something about climate change. But the fact remains that there has been zilch done so far by this administration to suppress oil and gas production or revenues.
And you’re citing Raskin and Granholm because they’ve been in the news the last couple days. Republicans gave Raskin hell today because she previously criticized the Fed for shelling out billions of dollars in Covid relief to oil companies in 2020 instead of investing in lower-carbon energy ventures. That’s a perspective that’s going to age very, very well. And I can’t imagine what problem you have with Granholm other than possibly her recent problems with stock filings?
I guess the larger question this is leading to: Do you believe climate change is real and an extremely pressing concern?
I don’t understand why you can’t provide links to these articles you’re citing.
The NYT Editorial page has conservatives, liberals and some very drippy in-betweens. So I still don’t understand what the WSJ’s batshit Editorial page is countering. If this is the tired old “NYT is liberal media!” canard, come on.
I’m also not making this energy stuff up. I’m not talking to friends in the industry, I work adjacent to the industry and we deal with this stuff every day.
One thing that’s important to understand is that oil industry executives and their lobbyists are going to complain about regulations no matter what is happening. Exxon just posted their strongly quarterly profits in years — and yet Darren Woods is still complaining about “regulatory overreach” and other bugaboos. They will always, always work the refs.
So of course they’re going to say they’re upset and concerned and doomed because the Biden administration wants to try to do something about climate change. But the fact remains that there has been zilch done so far by this administration to suppress oil and gas production or revenues.
And you’re citing Raskin and Granholm because they’ve been in the news the last couple days. Republicans gave Raskin hell today because she previously criticized the Fed for shelling out billions of dollars in Covid relief to oil companies in 2020 instead of investing in lower-carbon energy ventures. That’s a perspective that’s going to age very, very well. And I can’t imagine what problem you have with Granholm other than possibly her recent problems with stock filings?
I guess the larger question this is leading to: Do you believe climate change is real and an extremely pressing concern?
