Germany’s flip-flops over energy

Germany’s flip-flops over energy

European Union To Phase Out Russian Oil And Gas As It Seeks Energy Independence

On Tuesday, the European Commission published a new ambitious energy strategy to “make Europe independent from Russian fossil fuels well before 2030,” according to NYTimes

“We must become independent from Russian oil, coal, and gas,” the commission’s president, Ursula von der Leyen, said in a news release. 

We simply cannot rely on a supplier who explicitly threatens us,” he said. 

The commission said it aims to reduce as much as two-thirds of its natural gas needs from Russia within a year and seeks to halt all imports of LNG and natgas by the end of the decade. It expects to increase gas imports from other countries this year. If implemented, this could be a massive boon for LNG supplies in Qatar and around the Gulf of Mexico. 

The Russian invasion of Ukraine has been a turning point for Europe to become energy independent. Russia supplies the 27-country bloc about a third of its gas, 27% of its oil imports, and 46% of its coal imports. Add it all up, and it’s tens of billions of dollars a year for President Vladimir Putin. 

“It is time we tackle our vulnerabilities and rapidly become more independent in our energy choices,” EU climate policy chief Frans Timmermans said. “Putin’s war in Ukraine demonstrates the urgency of accelerating our clean energy transition.”

The UK also appears to be on board with phasing out Russian oil, a person familiar with the matter told Bloomberg. It’s expected to be in sync with the US. 

Europe’s push for energy independence could be extremely painful for businesses and households who are already dealing with record-high natgas prices, soaring power, and rising petrol prices, along with rapid food inflation. EU lawmakers are already considering joint bond sales to lessen the impact from Russia’s invasion of Ukraine.

We noted Monday, as there was buzz the commission would propose steps such as tapping new gas supplies on Tuesday, there is a problem: as the following JPMorgan chart shows, European oil and gas production has been steadily declining in recent years as a result of the continent’s infatuation with ESG, even as imports from Russia have been steadily growing.

Goldman noted today that Europe should “shift its short-term focus from decarbonization to energy security, likely relying for now on more coal, more nuclear, and gas generation, and overall allowing for more carbon emissions.” And by doing so, this will need to be a world effort. 

Germany’s Economic And Environment Ministries Advise Against Extending Nuclear Plants To Combat Energy Fears

The flip flopping in Germany over nuclear power continues, with Germany’s economy and environment ministries now reverting back to their old tune of advising against extending the life of three existing nuclear power plants in the country. 

The ministries had “examined if and how extending the life of the power plants in question would contribute to easing Germany’s reliance on Russian energy imports following Russia’s invasion of Ukraine,” Bloomberg wrote in a Tuesday morning wrap-up. 

After considering whether or not the steps would ease supply bottlenecks for the coming winter and next “several years”, they concluded that it would only have a “very limited” impact in remediating the country’s need for power. 

This remediation would come at a “very high economic cost”, the ministries found. It could also “carry constitutional and security risks,” the report says. Instead, Germany is going to implement a plan of “placing energy procurement on ‘more robust pillars’ to reduce dependence on Russia and advance the expansion of renewables,” Bloomberg wrote.

It was reported earlier in the month that the country was potentially considering extending the life-span of its remaining nuclear plants as a way to help secure the country’s energy supply, given the ongoing geopolitical crisis in Ukraine. 

“The harsh realities of war have led the proverbial energy horse to water in terms of what the most practical solution is to maintain energy in Germany. Now, the country needs to also understand that this isn’t just a temporary solution to their energy problem. Instead, nuclear represents the keys to its long-term energy independence if it wants it,” one Zero Hedge contributor wrote days ago. 

We’ll wait for Germany to come back around.

Let’s check in when crude hits $150…and then again at $200…

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