Russia’s military assault on Ukraine is wreaking havoc on energy markets, dragging US and European leaders into an economic quagmire that is upending plans to address climate change.
Just one example: Leaders of the wealthiest industrial democracies released a statement today that watered down earlier commitments to divest from fossil fuels, reports Sara Schonhardt.
They also called for new long-term investments in producing and shipping liquefied natural gas around the world, a move that speaks to how costly it would be to cut off the Russian spigot.
In one of their most attention-grabbing steps, the Group of Seven leaders who met in the Bavarian Alps agreed to seek a plan to cap the price of Russian oil.
But analysts are skeptical that it’s more than a rhetorical effort to wrest control of the world economy from major oil producers, with some saying it would only exacerbate the underlying problem.
“It’s like having too many beers at the ballpark and thinking you can drive home,” said Ed Hirs, energy fellow at the University of Houston. “Somebody call them an Uber.”
The novel price cap, backed by Treasury Secretary Janet Yellen, is a way to avoid a full embargo of Russian oil after major oil-consuming countries fumbled their early efforts to strip Moscow of its petroleum lever.
Rather than hamstringing Vladimir Putin’s regime, the embargo effort caused fuel prices to soar in the US and Europe.
In theory, finding ways to enforce such a price cap plan would keep Russian oil flowing, but leave the Kremlin with a lot less cash.
One catch is that oil’s a huge, open market. Buyers have less leverage than sellers: Saudi-led OPEC still holds enough cards to keep prices high.
Here’s another catch: China and India.
“China is an insatiable buyer,” said Tom Kloza, global head of energy analysis for Oil Price Information Service. “They may decide they’re going to buy even more Russian oil.”
And low prices have a way of attracting customers, especially oil-dependent, price-sensitive buyers like India.
“The global oil market is very fluid. It’s very dynamic. It’s extremely complicated, “said Ben Cahill, a senior fellow at the Center for Strategic and International Studies. “But if you’re offering deeply discounted crude, someone’s gonna buy it.”
Energy transition, anyone?
For Europe, the turmoil caused by Russia’s invasion of Ukraine has underscored the need to transition away from fossil fuels.
Some European countries say they’re willing to pay higher prices. They’re pushing to cut natural gas demand and promote new technologies like heat pumps.
But in the US, the response has been mixed. President Joe Biden has backed an increase in domestic fossil fuel production to lower the price.
“The signals have not been received in the same way on both sides of the Atlantic,” Cahill said.
Other summit reading – Our colleagues at POLITICO Europe offer this wrap-up: “A self-defeating G7 fails on all fronts.”
It’s Tuesday – thank you for tuning into POLITICO’s Power Switch. I’m your host, Arianna Skibell.“,”_id”:”00000181-aa53-d7eb-adad-eb535ed40000″,”_type”:”02ec1f82-5e56-3b8c-af6e-6fc7c8772266″}”>Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to [email protected]
These numbers are only expected to grow in the coming years. The latest UN climate report projected several possible outcomes for global migrations driven by climate change – none of them good.
One estimate found that by 2050, up to 72 million people – larger than the population of France – across sub-Saharan Africa, South Asia and Latin America would be displaced due to sea-level rise, water shortages and crop failure.
The Institute for Economics and Peace, an international think tank, predicted that climate disruptions could displace as many as 1.2 billion people by midcentury.
As the Biden administration prepares to issue a new regulation for the liquefied natural gas industry For the first time in 42 years, the industry is gearing up to argue for a light-handed approach, write Mike Soraghan and Mike Lee.
But near-misses and freak accidents highlight the risk. Most recently, an explosion at a plant near Freeport, Texas, touched off a fire that burned for 40 minutes and knocked about 20 percent of US export capacity offline for months, disrupting the United States’ plan to replace Russian gas in Europe. Read the full story.
Show me the climate money!
Wall Street lenders are railing against key provisions of a proposed rule that would require them to include climate-related information in financial disclosures, writes Avery Ellfeldt.
The largest US banks say the climate disclosure rule is overly burdensome.
“We believe that these requirements introduce unnecessary complexities by focusing on immaterial matters to investors,” said Muneera Carr, Wells Fargo & Co.’s chief accounting officer. Check out the story here.
EVs split German government
A plan to phase out internal combustion engines in Europe by 2035 is tearing apart Germany’s ruling three-party coalition, write Joshua Posaner and Hans from Burchard.
The stakes are enormous as the European Commission’s proposal could revolutionize Germany’s largest and most powerful industry. Full story here.
The nation’s top energy regulator has proposed a massive clean energy overhaul of the US electric transmission system. Figuring out how to pay for it is another story.
A global mining company is slated to open a lithium processing plant in the United States, in an effort to shore up the domestic supply chain for electric vehicle batteries.
Global clean energy spending is expected to surge 12 percent in 2022but the world is still not on track to reach net-zero emissions by 2050.
Jobs in the renewable energy sector rose last year, offsetting a drop in fossil fuel employment.
– “Deaths, costs of climate-linked disasters may be grossly undercounted” (Bloomberg)
– “Oil tanker stopped by US in transit from Russian port to New Orleans” (The Wall Street Journal)
– “Here’s the latest data on climate and food and it’s not good” (Forbes)
– “Why Big Tech is pouring money into carbon removal” (CNBC)
Today in POLITICO’s energy podcast: Zack Colman explains how the sentencing of Ngụy Thị Khanh, Vietnam’s highest-profile environmental voice, has sparked questions about whether Western governments should help pay for the country’s commitment to ditching coal.
Wine O’Clock: This piece in The Atlantic, “Full-bodied with notes of Band-Aid and medicine,” takes a deep dive into how wildfires and warmer temperatures are transforming the flavor of wine. Time to finally get going on that wine cellar ….
Questions? We’re here for it
The science, policy and politics driving the energy transition can feel miles away. But we’re all affected on an individual and communal level – from hotter days and higher gas prices to home insurance rates and food supply.
Send me your questions about what the news means for you with “Question Corner” in the subject line. We’ll pick a handful to answer each week in the newsletter.
That’s it for today, folks! Thanks for tuning in.