Saudis unable to break US shale industry

[Notanaviator]

I’d dare say Germany and Italy are in the worse place. Germany could easily do an about-face and rely on US (or other non-Russian) sources but I’m not sure they want to do that.

The challenge that I think has been discussed on here before is that there’s a pretty robust difficulty for any of these countries to do an about face on Russian natgas. The existing pipeline system from the east- even if often threatened and used as leverage - is still from a practical perspective a lot easier than building up billions in infrastructure to process LNG terminalling for ships coming from US, to say nothing of the challenge of displacing the long term contracts that existing Asian customers have inked for that LNG.

Biden trying to get oil companies and midstream folks to redirect shipments in the near term is commendable but not realistic. That’s a long term shift that needs to occur, but in my view would be smart to support.

 

[sevenhelmet]

Not sure Biden's effort to get shipments redirected is commendable- it sets up the unrealistic expectation that a massive heavy industry can just pivot on a dime, which is simply... unrealistic. Which leads to more of the same.

I'd respect the administration (or ANY administration) more if they would set clear, realistic expectations about what can be done in the short term.

 

[Flash]

I’d dare say Germany and Italy are in the worse place. Germany could easily do an about-face and rely on US (or other non-Russian) sources but I’m not sure they want to do that.

Can they though? I very seriously doubt it was gas has to be shipped all the way across an ocean in ships while they get it straight from Russia via pipeline. Also, do we have the capacity to make up for what Germany consumes in Russian gas? Smaller countries and economies like Poland and Lithuania aren't a good analogy either as their economies and industrial capacity is much smaller than Germany's.

Additional wrinkles are cost and infrastructure. The natural gas market as it was last was explained to me as be fragmented and local versus the single global oil market and its attendant universal pricing. Gas is locally priced though and might be much cheaper in one locale versus another but the specialized storage and transportation cost to transport it by ship is considerably more than oil and there is a lot less infrastructure in place as well.

So a lot of grand ideas on how to replace big bad Russia's oil and gas but reality unfortunately gets in the way, and that is why Germany with the most to lose if Russian gas gets cut off seems to be wavering at times in this latest crises.

 

[sevenhelmet]

The fact is, Russia has Europe over a barrel, and everyone knows it, even if they won't admit it. Two-faced policy toward natural gas hasn't helped matters.

 

[Griz882]

Can they though? I very seriously doubt it was gas has to be shipped all the way across an ocean in ships while they get it straight from Russia via pipeline. Also, do we have the capacity to make up for what Germany consumes in Russian gas? Smaller countries and economies like Poland and Lithuania aren't a good analogy either as their economies and industrial capacity is much smaller than Germany's.

Additional wrinkles are cost and infrastructure. The natural gas market as it was last was explained to me as be fragmented and local versus the single global oil market and its attendant universal pricing. Gas is locally priced though and might be much cheaper in one locale versus another but the specialized storage and transportation cost to transport it by ship is considerably more than oil and there is a lot less infrastructure in place as well.

So a lot of grand ideas on how to replace big bad Russia's oil and gas but reality unfortunately gets in the way, and that is why Germany with the most to lose if Russian gas gets cut off seems to be wavering at times in this latest crises.

I guess I was thinking more along the lines of the NIGAL and Trans-Saharan lines. The options for the EU aren’t pretty and while Russia is the nearest and maybe easiest, it will come at a cost. I’m not sure how much the UK and Norway can provide (EUs largest NG producers) but they strike me as a better bet than Russia. In the end I can’t escape the feeling (and that is all it is) that Germany is looking to reshape a western focused alliance by tilting it east and making itself the pivot point of a new economic system.

 

[Notanaviator]

Not sure Biden's effort to get shipments redirected is commendable- it sets up the unrealistic expectation that a massive heavy industry can just pivot on a dime, which is simply... unrealistic. Which leads to more of the same.

I'd respect the administration (or ANY administration) more if they would set clear, realistic expectations about what can be done in the short term.

I don’t disagree with this. Again, I think this makes more sense as a long term play to minimize the outsize effect the issue has on whether the Europeans can find a set of balls somewhere. As it stands, they cannot and will not.

Biden’s policy against supporting natural gas development domestically is also a headwind, to the question raised separately of whether we can provide enough LNG for Europe and Asia. In nearly all current strategies natgas has to be figured in as a cleanish source of energy that we’ll need for a while, so would rather have a common sense strategy of not neutering that industry domestically even if you’re going to be anti oil.

 

[Randy Daytona]

I guess I was thinking more along the lines of the NIGAL and Trans-Saharan lines. The options for the EU aren’t pretty and while Russia is the nearest and maybe easiest, it will come at a cost. I’m not sure how much the UK and Norway can provide (EUs largest NG producers) but they strike me as a better bet than Russia. In the end I can’t escape the feeling (and that is all it is) that Germany is looking to reshape a western focused alliance by tilting it east and making itself the pivot point of a new economic system.

For those who may not know, the former Chancellor of Germany Gerhard Schroder (Political party is SPD for those looking at German politics) is the Chairman of Rosneft (The energy giant is Russia’s 3rd largest company). He was instrumental in both the original Nordstream and Nordstream 2. Between taking offline all nuclear energy and becoming evermore reliant on Russia for energy- the Germans are stuck. Interesting that the new German chancellor, Olaf Scholz, is also of the center-left SPD. (In between Schroder and Scholz was the long serving Angela Merkel of the center-right CDU)

In addition to energy, there are a number of other items that Russia may embargo if sanctions are placed upon them. Neon (used in semiconductors), palladium (automotive), titanium (aircraft) and ammonium nitrate (agriculture fertilizer). All of these will affect supply chains and inflation.

And on that sour note, back to the indoor go-cart track here at UrbanAir…