Outside the Box: Energy disruptions are now inevitable and most likely imminent — here are all the ways that could happen

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More has gone horribly, horribly wrong in European-Russian affairs in the last week than in the 25 years I’ve been following them. It’s…impossible to sugar coat this. Energy breakdowns are inevitable, and most likely imminent.

Energy shortages could be accidental. Over the weekend, Russian artillery accidentally (?!) struck one of the Chernobyl hazardous material storage facilities. Oil and natural gas pipes, pumps and depots are not hardened.

Breakdowns could be intentional, with Moscow brandishing its energy power like a cudgel as it has done to great effect at so many points these past two decades.

Sanctions could trigger a payments failure; the Russian central bank is now under the broadest, deepest financial sanctions in history.

The disruption could be due to insurance; Lloyd’s of London was – rightly – spooked when Russian missiles struck non-Ukrainian vessels in the Black Sea, and is likely to cancel all maritime insurance in the area. Oil tankers included.

It could happen because of the Turks. Ankara has already invoked the Montreux Treaty, enabling it to halt the sailing of vessels through the Turkish Straits. That’s the route used by exports from southern Russian and northeastern Kazakh oil fields.

The Ukrainians could blow up their own pipes. Once the Russians fully occupy Ukraine, Ukrainian partisans will savage the infrastructure the Russians depend upon, both in Ukraine and neighboring Belarus.

Pick your poison, but the end result is the same: Russian oil and natural gas will fall offline. Some 1.5 million barrels of daily oil shipments and 3 billion cubic feet of natural gas are directly in the line of fire at this very moment, with triple that at risk in-region.

If you’re in the United States, this is an interesting…exercise. Russia supplies the United States with about 700,000 barrels of medium-sulfur crude. Should that flow be threatened and U.S. energy prices rise, President Joe Biden has the authority, as granted to the presidency in the 2015 Omnibus spending bill, to end all exports of U.S. crude
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American refiners would grumble; they import low quality oil, process it into high-demand products like diesel, sell it abroad, and gorge on high margins — but it isn’t like they cannot process domestic shale crude.

The U.S. electricity market wouldn’t even blink. The United States doesn’t use a single molecule of natural gas
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from Russia.

If you’re in Europe, the situation is more of an aaiyeeeeeeeeeeeee! On average the Europeans import 90% of their energy needs, with nearly half that coming from Russia. Like everything in Europe, dependency levels vary heavily based on location. Austria, Germany Hungary, Poland and Italy are hard-wired into Russian shipments and are, in a word, stressed. Spain and Portugal could be forgiven for not being able to find Russia on a map. As in all things, France and the Low Countries sit somewhere in the middle.

Poland’s solution is simple: coal. Poland only uses Russian fuel at all because the EU threatened to sue the Poles on environmental grounds. Italy is an energy hub as well as one of the few locations in Europe that is sunny enough to make an honest go of alternatives (*fingers crossed*). They’ll be fine. In a few years. If nothing else goes wrong. At all. Hungary is…kind of in a box (part of why Hungarian President Viktor Orban has been chummy with Putin until just a few days ago).

Austria and Germany? Phbbbbbt. Both have sworn off nuclear power completely, and neither have the sun for solar or breeze for wind despite spending metric gob-tons in greentech build-outs. Nor do either have the physical infrastructure in place to take natural gas from other suppliers.

Once Berlin realized this past weekend that the excrement truly was striking the rotary oscillator, the government started a blitzkrieg approval process for building port facilities to accept natural gas in liquefied form from other places. Normally, such re-gasification facilities take a few years to build. We’re about to find out if the Germans can still build big pieces of infrastructure on inhuman timetables.

Even if they succeed in a six-month build-out, the lights will still go out, the heat will still fail, and German manufacturing will still grind to a halt.

The only other patch – more coal and a reverse of the nuclear ban – is something the environmentally conscious German government has already dismissed out of hand, but it could be that minds have not yet been suitably focused.

More mind-focusing actions are already in progress. As I write this on the evening of Feb. 28, Russian forces have captured big slices of territory in Ukraine’s south, southeast and northeast, and are posed to surround the capital within a day or two. They’ll likely be in the commercial capital of Odessa on a similar timeframe. Ukraine is not long for this world.

Read: Intense shelling targets Kharkiv as 40-mile Russian tank convoy nears Kyiv

Which means it’s time to start thinking about what is next. The Europeans are rapidly vacillating between fear and fury. Anyone who knows European history can tell you that’s bad for…everyone. My personal nightmare: German Chancellor Olaf Schloz is a socialist. A pacifist. And he’s already announced plans to double military spending within two years.

We have seen this movie before.

Peter Zeihan is a geopolitical strategist whose clients include energy corporations, financial institutions and the U.S. military. He is the author of the forthcoming book “The End of the World is Just the Beginning: Mapping the Collapse of Globalization.” Follow him on Twitter @PeterZeihan.

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