- The price of gasoline is determined by the price of crude oil. The world oil market is fine tuned and all prices are registering the “fear factor”.
- People are “self-sanctioning” and rejecting Russian oil. USA natural gas now competes with Russian natural gas.
- “The Big Three”: #1 is the USA by far (it’s self-sufficient), #2 is Russia and #3 is Saudi Arabia.
- Even before the current crisis oil prices were rising because of low supply.
- In 2003 it was thought thought that the USA would start importing more natural gas but then fracking started.
- LNG (Liquified Natural Gas) is a very expensive process, it costs 10 billion to build a facility.
- Putin shouted at Yergin at an oil conference Q&A because he didn’t want the USA to do fracking/shale and compete with Russian LNG.
- Putin regards the energy business as his business and has a level of mastery over it (knowledge, savvy).
- BUT he miscalculated in thinking that there was limited supply and that Europe would bend in the context of Ukraine.
- The German view (Merkel’s view) is/was peace through trade.
- LNG is a process where gas is frozen into liquid, then transported and finally unfrozen and put into the importing country pipelines.
- LNG/shale has been a huge strategic boon for the USA. The USA is going to be the biggest exporter of LNG.
- The oil market is a truly global market and has been for many decades. Natural gas was a much more regional market (Europe had a Dutch gas field for ex.).
- But there’s been LNG innovation and increasingly it is a global market.
- The shale revolution made Iran sanctions work as Iran didn’t understand that there wasn’t unlimited demand for their oil.
- Until the early 1990’s China was an exporter of oil and then they became an importer (now import 75% of oil). They have developed energy companies that are world players. China’s status as an importer is the basis of the Xi-Putin alliance.
- The intimate Xi-Putin relationship has its basis in overturning the world energy balance. Putin has said “the future is in Asia” and he calls Europe and USA decadent countries in decline. Do the Chinese step back from Putin’s behaviour?
- The Russians have dethroned the Saudis as the #1 oil supplier to China.
- That said, China is signing long term contracts for USA LNG.
- The Chinese and USA economies are integrated (prescription meds etc.). China is the “workshop of the world”.
- That said, the language and feeling of the China-USA relationship have changed.
- There was once the notion of peeling Russia away from China but it’s over.
- “So often history is writing about people’s miscalculations”. Putin miscalculated with regards to European determination/resolve.
- Putin has “taken steps to impoverish Russia”.
- Oil and gas had been as high as 46% of Putin’s budget and he will not have those earnings. Russia’s infrastructure is built into Europe so India/China are not as easy to sell to in any event.
- Russia’s days as an energy super power are over and Putin “signed the death warrant”.
- Canada is the largest supplier to the USA.
- The Ukrainian military gets diesel fuel from Russian oil (or at least it’s critical).
- It takes 7 years to get a permit for an on shore wind turbine (according to one wind turbine executive).
- Solar costs have dropped dramatically but China is the manufacturer. China also controls the supply chain for electronic vehicles. Electronic vehicles use lots of plastic (a petroleum product). Electric vehicles use a lot of copper.
- It’s hard to open a new mine in the USA.
- The view of energy politics and policy should be of a “war footing”.
- Batteries and energy storage are key for renewables.
- The USA could be exporting more natural gas to China, displacing coal.
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