Brent yawned at the announcement of the buyer's cartel.
G7 Ministers Forge Ahead with Russian Oil Price Cap
Group of Seven finance ministers agreed on Friday to impose a price cap on Russian oil aimed at slashing revenues for Moscow's war in Ukraine while keeping oil flowing to avoid price spikes, but Russia vowed to halt sales to countries imposing it.
The ministers confirmed their commitment to forming a buyer's cartel after meeting virtually. They said, however, that key details, including the per-barrel level of the cap would be determined later "based on a range of technical inputs" to be agreed by the coalition of countries implementing it.
Oleg Ustenko, a senior economic adviser to Ukrainian President Volodymyr Zelenskiy, welcomed the development, and said he expected the price range to be between $40 and $60.
"This is fantastic. It's exactly what we needed" to reduce the revenues that Russia was collecting, he told Reuters. Brent crude futures rose 66 cents to $93.02 a barrel on Friday.
Details are thin because the plan cannot possibly work.
Russia is the biggest exporter of oil and oil products to the EU, supplying 2.2 million barrels per day (bpd) of oil and 1.2 million bpd of oil products, according to the International Energy Agency (IEA).
China and India will not go along, and Russia has stated it will not sell oil to any country that supports the plan.
The price of Brent Crude is currently $93 per barrel. Both China and India would gladly take oil at $10 discount of say $83 per barrel if much higher.
Talk of $40 is crazy. Russia would supply no oil and the price would skyrocket in response.
Putin's reaction to the plan was swift.
He made the claim that routine maintenance of the Nord Stream 1 pipeline discovered a problem and the entire Nord Stream supply would be shut down indefinitely.
Putin’s ‘Economic War’ Has UK ‘Panicking,’ Ex- Energy Boss Says
Bloomberg reports Putin’s ‘Economic War’ Has UK ‘Panicking,’ Ex- Energy Boss Says
Vladimir Putin has left the UK "panicking" by "waging economic and psychological war" with tactics such as closing a major gas pipeline to Europe, a former energy industry boss has said.
Angela Knight, former chief executive of trade association Energy UK, spoke after Russia's state energy firm Gazprom announced its Nord Stream 1 pipeline to Germany will remain closed indefinitely.
It had been shut down for three days, reportedly for maintenance work, but will remain closed for longer after Gazprom claimed it had found an oil leak in a turbine, sparking fears of further increases in energy prices around Europe.
She said: "He's (Putin's) actually playing the economic war extremely well. He's playing the psychological war extremely well.
"We have been panicking as a country - Europe has been panicking as well - and it's not surprising and I'm not critical of it.
Whose Economic War?
Putin started a war with Ukraine. US meddling led to that result. Nonetheless, place the blame 100% on Putin for the invasion if you like.
In response to the invasion, the US and EU started the economic war with a series of escalating sanctions on Russia, the latest of which is a nonsensical buyer's cartel.
If you put yourself in Putin's shoes, his reaction was the logical one.
This will lead to nonsensical charges that I support Putin. I don't. I never support starting wars nor trade wars that are not winnable.
The asininity of all these sanctions and coordinated actions is that they have driven up the price of oil and natural gas to the point Russia is making more money than ever before while selling less oil and gas to the EU.
How stupid is that?
And is there any reason to believe Putin would not shut off all oil exports if the buyer's cartel price cap actually held firm?
In Putin’s closure of Nord Stream 1 has left Britain Exposed, the Spectator complains "It is pretty blatant what game Russia is playing."
Gas supplies to Germany from Russia were already down to 20 per cent of the level they were before the Ukraine invasion. No one should count on the gas being turned on again. Eventually, Europe will manage just fine without Russian gas, once we have commissioned more terminals to receive liquified natural gas (LNG) from the US, Qatar and elsewhere. But that will not be this winter.
Britain and Europe face an additional problem which Russia does not: climate protesters who will automatically oppose any initiative to produce more oil and gas in Europe, or to construct infrastructure to import it, either. That, apparently, is leading us down the wrong road and we should be investing in more wind and solar instead. Except that in 2019 wind and solar accounted for just 4.2 per cent of Britain’s total energy needs – and, in the absence of more than a token amount of energy storage, we are absolutely reliant on gas power stations to fill in when the wind is not blowing and the sun is not shining.
True, it takes time to bring new oil and gas capacity on line. But we are decades away from constructing energy self-sufficiency based on renewables. We are already waging economic war with Russia, and not winning. To keep the lights on, the government is going to have to win the battle against Just Stop Oil and all others who are opposed to any investment in oil and gas.
Reality of Blatant Games
The Spectator headline caught my eye and I was mentally prepared to debate the article.
Instead, I praise writer Ross Clark for getting to the heart of the matter.
Wind and Solar Only Appear Cheaper
I made that claim the other day, that wind and solar are not cheap, knowing full well that solar energy, where the sun reliably shines, appears to be cheaper than natural gas.
But what about night? What about clouds? What about winter when the sun only shines for eight hours?
OK solar is cheaper, provided you can rely on it. Perhaps the US desert or Spain. But cloudy UK? Germany?
What about storage? What about getting daylight energy from Spain to Germany? Arizona to Chicago? How much suitable land is there in Europe?
Does storage scale? How much minerals will we need to mine and how cheap would they be if we went totally green dependent on batteries?
It seems we are getting to the crux of the matter.
Clean energy is cheaper provided you ignore all of the reasons you cannot rely on it. The setup is even worse because natural gas as a backup only for nighttime and winter is hugely uneconomical.
Solar Dealer: This beautiful system is really cheap.
Me: Does it run at night? In the Winter? In Canada? In the UK?
Dealer: No, no, no, no.
Me: If it is not reliable, is it cheap?
Dealer: Don't worry, we will solve this problem by 2040 at an unknown expense.
Me: I think, I'll wait.
Please note that the state of California just asked people not to charge their cars due to the heat wave and electricity capacity.
So here we are. "To keep the lights on, the government is going to have to win the battle against Just Stop Oil and all others who are opposed to any investment in oil and gas."
Some day we may solve all of the problems with clean energy, but mandating its use before that time comes will add to problems and costs, not solve them.
Telling everyone that solar is cheaper without solving all of the problems of relying on solar is the unfounded hype of the day.
If it's not reliable, and storage to scale is not implied, then it's not really cheap, is it?
Meanwhile, economic insanity continues.
Major Stress Test in Europe as Russia Shuts Down the Natural Gas Pipeline
For more background on events in Europe, please see Major Stress Test in Europe as Russia Shuts Down the Natural Gas Pipeline
This post originated at MishTalk.Com.
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