The West underestimates the importance of Russian oil & gas to Europe
Sanctions benefit Russia and imperil Europe and the United Kingdom
With annual output of about 13.6 million barrels a day of oil, Russia is the world’s second largest producer. Russia supplies 40% of Europe’s natural gas and 27% of Europe’s oil, and is a major exporter to China and India. The pipe dream of freeing Europe from reliance on Russian fossil fuels and sanctions intended to limit Russia’ exports to pressure on Russia to end the war in Ukraine has had two predictable outcomes - higher fossil fuel prices which benefit Russia and devastating energy shortages in Europe fueling almost catastrophic inflation and threatending a brutal winter.
The Europeans talk about cutting Russia off from exports entirely. How would that work out? Russia’s exports are about 8 million barrels a day of oil and the spare capacity in the rest of the world (according to Scotia) is about 2 million barrels a day. A supply deficit of 6 million barrels day would see dramatic increases in the price of oil and calamitous energy related industry shutdowns across the globe.
Germany is the most exposed and the least capable of finding viable alternatives. Germany’s trillion dollar experiment with “renewables” has been a colossal failure with Germany now turning to coal and extending the life of nuclear facilities to keep the lights on. The United Kingdom is not much better off, with a multi-billion dollar gamble on wind which has left the country with the highest energy costs on Earth and a serious shortage of energy for this winter.
Scotia provides a useful map of key Russian energy infrastructure.
The Druzba pipeline with a nameplate capacity of 2.2 million barrels of oil a day (actual throughput about half of nameplate) is a major supplier to Germany.
Baltic pipelines I and II supply about 1.7 million barrels a day of oil to Europe through Finland.
CPC pipeline supplying 1.4 million barrels a day to export markets and exempt from embargoes since the oil does not originate in Russia but passes through the country.
BTC pipeline supplying 1.2 million barrels a day to Turkey
Nordstream I and Nordstream to supplying over 10 Bcf/day of natural gas to Europe through Germany.
Brotherhood, Northern Lights, Soyuz and Yamal-Europe pipelines supplying over 13 Bcf/day of natural gas to Belarus, Poland, Bulgaria, Ukraine and Germany.
Yamal LNG facility capable of exporting over 16 million tons per annum of LNG
Pipelines that supply over 5 Bcf/day of natural gas to China.
This infrastructure is not incidental to world energy markets but vital to its supply and demand remaining in a reasonable balance.
It will be a cold day in hell (pun intended) when so-called “renewables” are able to displace fossil fuels and the depressing attack on the fossil fuel industry by the “woke” left wing of politics worldwide grounded on the specious theory that CO2 causes climate change will see the global shortage deepen until voters capitulate, abandon the AGW nonsense, and direct major investments into oil & gas. In the interim, expect inflation to rise and economic activity to suffer. While lower economic activity will lessen demand for oil & gas, without major investments available supplies will fall even faster and prices will continue their stepwise upward climb.
The famous words of Francois-Marie de Cloet writing under the pen name Voltaire ring in my ears - “If you can persuade people of absurdities you can make them commit atrocities”. Anthropogenic Global Warming (AGW) theory is an absurdity and left wing energy policies are an atrocity and mankind will suffer as a result.
But not all of mankind, energy investors will be spared.