When teenagers write energy policy
Russia is in Ukraine because Greta made Europe dependent on Russia
As images of a convoy of Russian troops headed to Kyiv flood onto our TVs and phones, Canada took the incredibly brave and “powerful” step of banning Russian oil imports. Said Supreme Ruler Justin Trudeau:
“While Canada has imported very little amounts [of crude oil] in recent years, this measure sends a powerful message,”
And there it is. The powerful message? Virtue signaling. Canada hasn’t imported Russian crude since 2019. Meanwhile, his announcement move comes the week after jailing the leaders of the Freedom convoy without parole and invoking emergency measures to freeze citizens bank accounts that donated to a cause that protested the government. As a movie that starred Ryan Reynolds in a fat suit, it would be funny. Sadly, it’s not a movie.
Meanwhile in Europe, they can’t even virtue signal. Financial sanctions have excluded oil and gas transactions and Italy was able to get an exemption for “luxury goods.” Vladimir Putin has the entire continent’s figurative nuts in a vice (and by nuts, I mean environmentalists) and there is nothing anyone can do about it without freezing their citizens. Said Michael Shellenberger:
Putin knows that Europe produces 3.6 million barrels of oil a day but uses 15 million barrels of oil a day. Putin knows that Europe produces 230 billion cubic meters of natural gas a year but uses 560 billion cubic meters. He knows that Europe uses 950 million tons of coal a year but produces half that.
The former KGB agent knows Russia produces 11 million barrels of oil per day but only uses 3.4 million. He knows Russia now produces over 700 billion cubic meters of gas a year but only uses around 400 billion. Russia mines 800 million tons of coal each year but uses 300.
That’s how Russia ends up supplying about 20 percent of Europe’s oil, 40 percent of its gas, and 20 percent of its coal.
The math is simple. A child could do it.
At the heart of the climate battle is the stark reality that LCOE calculations don’t include back up power for renewables- such as batteries and fossil fuel generation, and the promise of cheap, clean energy for all is an outright lie because of physics and energy density. I have been saying for months that millions of Europeans would freeze to death this winter and 10s of millions would go bankrupt trying to pay for what little energy was available. Energy policy has been a disaster, and it traces back to Greta Thunberg.
German politicians are acutely aware their policy has failed and are quickly backtracking to salvage what they can. Chancellor Scholz’s has moved to make energy a central plank in his foreign policy and the left Greens have agreed to support LNG terminals while showing a willingness to extend coal-fired power past the desired 2030 cutoff, and look at extending the lives of Germany’s three remaining nuclear power plants, which are due to shut down this year. In the great shrug, the only answer was to let prices rise and have consumers yell.
Foreign Minister Annalena Baerbock, a Green former co-leader, put it starkly when asked if her party really would accept extended use of coal: “Yes, that is the price we’ll pay.” She went on to describe Putin’s violence toward Ukraine to explain this policy change.
The world is quickly learning the stakes of the game, and Putin has masterfully used his leverage to move into Ukraine effectively uncontested.
Meanwhile, in part due to the invasion, oil is over $100/bbl and Russia sells 7.6 mmbbls a day to the rest of the world. As Russian soldiers are paid in rubles that depreciated 30% against the USD yesterday, all those American petrodollars can support a quick blintz to the Ukraine capital. Like the game of risk, hit your opponent before they cash in their cards for more troops.
Energy policy around the globe is F@&Ked because we let 15 year olds skip school and cry on television. The results are pouring into Kyiv right now. We now see the failings of governments COVID policies and mask/vaccine mandates. Will the world wake up to the climate policy disaster as well? They better, or you too may need to learn to shoot an AK-47 as soldiers roll into your neighborhood next.
I sure hope President Biden addresses his release of 30 mmbbls of oil from the strategic reserve in November tonight in the State of the Union. How’s that going?
One final note. Yesterday I was saddened to learn of the passing of Bud Isaacs. I had him on the podcast in 2020 and had been planning on having him back next week after he returned from Florida. He was a wonderful man and I was very thankful for the time I got to spend with him golfing, chatting and everyday, him fighting to make the world a better place. Check out his book Oil and Water and here’s the podcast if you missed it. RIP, Bud. You will be missed by all that knew you.
It’s a translation to English. Both are probably right- as long as you know where I’m talking about - we are good. Maybe I’ll spell it Key-ev from now on.
It was 15 years ago when George Bush famously said that US is addicted to foreign oil. And that's as true today as it was back then. And even when it was declared that we were a net exporter, it was never of oil, but of all petroleum products, using LNG and NGLs to offset the oil deficit.
I believe the closest we came was when demand dropped during the COVID shutdown we were within 4MMBOED. The problem is the US consumer is addicted to cheap gasoline. And as domestic producers, there is no way we can produce enough to offset the difference at a price that is acceptable to the American consumer. No matter what the politics say.
So either we find a way to reduce demand in this country. Or we get Saudi Arabia to open up the spigot again to drive the prices back down. But after taking the lower margins for the last 5 years, I doubt they are in any hurry to do that.
Meanwhile permits are back up. US rig count after bottoming out around 250 looks to be back around 650 in the last report I saw. Higher prices is what drives activity. This industry works in two modes, produce every bbl when prices are high, then drop everything and go into value harvesting when prices are low. Now it looks we are going back on the higher price cycle.