Out strolling through the headlines of today I came across these two little gems. Boy what a difference a day makes. The first article from the Business Standard warms of a impeding diesel fuel shortage due to new sanctions in February that will be bestowed upon Russia as further punishment for invading Ukraine.
An unprecedented chunk of the global diesel market, the workhorse fuel of the global economy, is just weeks away from being subject to aggressive sanctions.
From 5 February, the European Union, the G-7 and its allies will attempt to impose a cap on the price of Russia's fuel exports — the latest punishment for its invasion of Ukraine. That will coincide with an EU prohibition on almost all imports of Russian oil products.
Similar measures are already in place on the country's crude shipments, but it is the cap and ban on refined fuels — and in particular diesel — that has some oil-market watchers concerned about the potential for price spikes.
Prior to its invasion of Ukraine, Russia was Europe's largest external supplier of the fuel and the continent has continued to buy in big volumes right up to the cutoff. As a result, the sanctions are likely to see a great rerouting of global diesel flows — aided by Russia's new crude buyers sending fuel back to Europe. In the short-term, there's a risk of higher prices.
"The loss of Russian barrels is huge and replacing them will be a huge logistical challenge," said Keshav Lohiya, founder of consultant Oilytics. "But the market is pricing in less panic as markets and trade flows have proven resilient. This will be a new rerouting of diesel."
When she is talking about the markets and trade flows having proven resilience she must be speaking of Europe's transitional phase away from Russia as a major gas supplier. That's highlighted the next day in an article in The Express.
Russian President Vladimir Putin’s weaponization of energy supplies may have backfired on the dictator as European economies appear to be faring better than expected while sanctions batter the Russian economy. While Russia’s curtailing of gas deliveries to Europe in the build-up to and during the war in Ukraine did send wholesale energy costs spiraling out of control, European countries are finally appearing to bounce back from the crisis.
Those are some pretty strong words being describe for a man who apparently has kept them in diesel fuel during this weaponization period. I am trying to envision what type of ruthless dictator does it take to tear a country apart, shut off the gas to many others but when it comes to diesel fuel he offers up continued supplies plus agrees to "sneak" it through the backdoor via India if you should so feel compelled to sanction direct shipments.
Before Russia invaded Ukraine in mid-February 2022, Russian gas accounted for around 40 percent of its total supplies. Along with Putin’s deliberate move to withhold gas from the bloc, supply chain issues due to the war made matters worse for Europeans, who kept seeing their energy bills climb.
Retaliating to sanctions, Moscow’s later move to completely halt supplies travelling through the major Nord Stream pipeline that runs from Russia into Germany via the Baltic Sea added insult to injury and sparked serious fears of gas shortages this winter
**
To combat the looming energy shortage, European nations raced to fill up their gas storage sites ahead of the winter, with impressive effect. European Governments also rolled out measures to soften the impact for their citizens and businesses with state subsidies, while households even took it upon themselves to slash consumption as prices soared.
Don't you just love the descriptiveness of it all. The $$impressive effects$$ put billions of dollars of profit into the pockets of the oil and gas conglomerates and had Europeans outraged demonstrating in the streets by the hundred of thousands.
Meanwhile, the bloc scrambled to find alternatives to expensive Russian gas, while the EU unveiled its REPoweEU strategy, the blueprint to phase out Russian fossil fuels entirely by the end of the decade.
Wait. Wait. Wait a minute...there was a plan all along to do this? Well of course there was and that's why in the next paragraph you hear described what's actually taking place.
According to Professor Ben Moll of the London School of Economics, the impacts of Russia’s energy war games have been far less severe than originally feared.
I guess that depends upon which side of the dividing line one is standing on because many have lost their lives in this energy war game, that's a reality not a game.
He told the Financial Times: "The demand response was much larger and the economic costs were much smaller than many observers predicted earlier last year, in particular industry CEOs and lobbyists who predicted economic Armageddon if Russian energy were to stop flowing."
The global population paid heavily for that much larger demand response. I highly doubt those fear mongering CEO and lobbyists who profited enormously off it won't be refunding back any of those smaller economic cost. Not only should one not expect a dime back from those greedy conglomerates but they are setting up the exact same scenario in phase two of the European transition away from Russian energy. One in which, again, the infrastructure has already been set in place for.
The European Union will have to replace about 600,000 barrels a day of diesel imports, and Russia will need to find new buyers for those supplies, store the fuel on ships, or cut production at its refineries.
Shipments into the EU from the US and India have already been on the rise as they produce more than they consume, allowing them to export their surfeit. China is also expected to send more of the fuel into its nearby markets, indirectly pushing cargoes from other suppliers toward Europe.
"Product flows from net-long regions will intensify as the continent's embargo on Russian products takes effect February 5th, which we see compounding a tight diesel situation," Bernstein analysts including Oswald Clint wrote in a note to clients.
What surfeit? We didn't have enough surfeit remember, that's why we paid skyrocketing prices for gasoline last year, that's why there wasn't enough fuel for airplanes, that's why diesel fuel prices rose. It was a mirage built up in Americans heads during a slumping economy that saturated the market and that somehow sludge transported via a new pipeline out of Canada was going to have us all bathing in oil. The only reason they left any change in our pockets for the holidays is because Europe has had a milder winter.
Now, we are seeing that European gas prices have plunged to pre-Ukraine war levels thanks, in part, to warmer weather.
Product flow from net long regions with China's participation to allow indirect flow from other suppliers. Meaning that oil refineries build in cooperation and in conjunction with each other in China and India will be the biggest players directly or indirectly pushing cargo towards Europe. The last several years have seen China, Europe and the United States working through the use of development bank monies to build refineries in China, India and eventually the completion of refineries in Africa that have been delayed due to covid.
India's role in supplying Europe is notable because it has become one of the biggest buyers of discounted Russian crude since the war broke out.
A big increase in Indian diesel flows would all-but guarantee that Russian crude was being purchased and refined into diesel in India before being sold back to Europe.
Apparently Saudi Arabia is going to jump into the game also as it's about to start up new refineries.
Among Moscow's new — or bigger — buyers will be traders in Africa, Latin America and possibly Asia. Europe meanwhile will likely turn to the Middle East, where giant new refineries are ramping up operations.
It all sounds so crazy doesn't it? All these players, many of whom we are being told don't play well together, so what's going on here? What's going on is they are transforming how energy is distributed throughout the world. It's not just what is mention in one of the articles...
For now, there's little immediate sign of panic in oil markets. The key question in the coming weeks is whether enough heavy lifting can be done to transform the world's diesel flows.
"The market will always solve it," said Eugene Lindell head of refined products at consultant FGE. "It's just how much pain is it going to incur?"
but what is also mentioned in a pdf released by Deloitte in 2021 that outlines the plans for redistribution of energy across the globe entitled, ironically the same name I did a series on but is of no relation to, The Last Barrel Standing. The pdf release outlines the competitive nature that energy will become in the future and that driving value over cost will be the winners. There's some important issues addressed in this pdf but the most important point to focus on, because none of it can happen without it, and explains all this craziness unfolding among seemingly countries who don't play well together is this:
. This
model focuses on operators’ driving value versus cost, getting
the ecosystem of players to collaborate versus compete and focus
on capabilities versus size.
That's what we are witnessing, collaborators working together to transform energy across the globe. There are four groups depicted in the pdf: The Stalwarts, Producers, Followers (green energy), Pioneers (new energies), the article argues that the stalwarts cannot survive into the future without:
Regardless of which strategic position
a company chooses, adopting a lean
operating model mindset can help
maximize asset productivity and
minimize transition risks, which may
include depressed asset values, stranded
assets, and changing market demand.
What does operating a lean operating model consist of? Offshoring energy production in the least regulatory environment with the lowest cost. So when this article talks about a European refinery sitting idle because it no longer has Russian oil or gas to refine that's what they mean by a depressed asset, stranded, like some in the United States. Oil companies here have much said the same, they won't put money into them, reopen them because they know what's coming. Refining capacity, in order to compete in the new global transition of energy, will be offshored to the least regulatory environment with the lowest cost of operation attached. China, India and Africa.
A threat of renewed strikes in France could shut down some of the nation's fuelmakers a day after the sanctions on Russia come into effect.
Two oil refineries in eastern Germany — previously supplied with piped Russian crude — are having to make less fuel than they normally would because those flows have halted.
Thousands of jobs across the globe being lost on the premise of competitiveness of new energy sources that haven't proved to be reliable, established or in some instances any less energy intensive to produce. I encourage people to read it, it will enlighten you, get you to start asking yourself questions on what's really going on. It just doesn't add up. It'd be the same as telling countries sanctioning you, taking all your billions and freezing them, funding military equipment being used against you, "Hey guys, it's all good I'll make sure you have plenty of diesel fuel to get those weapons to the airports, send you some extra just to ensure you can get them to the front lines."
