By C.J. Atkins
With his illegal invasion of Ukraine, Russian President Vladimir Putin may have played right into the hands of major Western oil and gas companies who were hoping a war in Europe would open up new profit opportunities for them at the expense of Russia.
Later this week, leaders of the European Union will meet in Versailles, France, where they are expected to agree on a plan to “phase out” the continent’s reliance on imported Russian natural gas, oil, and coal. According to a draft statement released late Monday, the energy shift is part of a wider discussion on boosting EU military capabilities and bringing Ukraine into the trading bloc.
“Russia’s war of aggression constitutes a tectonic shift in European history,” the text of a draft statement said. “We agree to phase out our dependency on Russia.” If the war succeeds in severing the Russian-EU energy trade, it would upset a relationship that stretches back decades.
Rushing in to take the Russians’ place are multinational oil and gas monopolies like ExxonMobil, Shell, BP, and others—along with the network of drilling and transport companies associated with them.
Just before the Russian invasion, the energy industry’s chief lobbyist, the American Petroleum Institute’s Frank J. Macchiarola, announced that “U.S. oil and natural gas producers [could] help” fill any gap in production that resulted from fighting in Ukraine. He said U.S. corporations were positioned to provide what he called “stability.”
Russia is the world’s second biggest oil producer, after Saudi Arabia. Removing it from the world market, or even just drastically curtailing its market share, could bring a bonanza for Western energy corporations.
And when it comes to natural gas, before the war, Western companies’ share of gas sales to Europe was effectively capped because Russian gas—sold by state-owned Gazprom—has long been affordable and plentiful. It travels via pipelines that cross overland through Ukraine or under the Baltic Sea directly to Germany.
U.S. natural gas, by contrast, is much more expensive to produce, given that it comes mostly from fracking and has to be turned into liquefied natural gas (LNG) and shipped across the ocean on massive tankers. These boats require pricey specialized terminals on both sides of the Atlantic for loading and unloading.
Prior to the war, U.S. companies simply couldn’t compete with the cheaper Russian fuel and were stuck holding only about 30% of the European market. With the invasion of Ukraine, the dynamics have shifted as world prices soar to a level that makes U.S. gas more competitive and Europe begins pondering how to lessen its purchases from the east.
The geopolitical earthquake could mean hefty profit premiums for Western energy giants. Global oil prices recorded a 14-year high on Monday, hitting $139-a-barrel at one point. That will mean higher prices at the pump for drivers—already at over $4.00 per gallon on average nationally—and massively increased transport costs for everything else from food to clothes to building materials and more. Out-of-control inflation—fueled both by legitimate supply chain constraints and outright price-gouging—will worsen.
When it comes to natural gas, wholesale prices for next-day delivery have more than doubled. The impact of this will be felt most in Europe, where imported gas still heats most homes and powers most factories.
The biggest advocates the U.S. fossil fuel corporations have right now are the Biden administration and a bipartisan consensus of Democrats and Republicans in Congress.
The petroleum lobby’s CEO, Mike Sommers, sent a letter to President Joe Biden March 1 saying the government had to “work collaboratively with industry to ensure…energy and economic security” for the U.S. and “our allies in Europe and around the world.” He told the president that desires to address climate change or reduce emissions cannot be allowed “to detract from the clear and present need for continued…investment in oil and natural gas development.”
In light of the war, Sommers asked for the U.S. government to openly commit to stepped-up exports of oil and gas products, to quickly give a thumbs-up to all the liquefied natural gas industry’s applications, and to speed up approval of offshore oil and gas drilling leases in the Gulf of Mexico and other sites.
The administration made no official response to the API’s letter, as far as is known. But the government is making moves to clear the way for increased U.S. sales to Europe.
In an interview with NBC News, U.S. Secretary of State Antony Blinken announced Sunday, “We are in very active discussions with our European partners about banning the import of Russian oil to our countries.” He is currently on a cross-continent trip, meeting with multiple European leaders in an attempt to get them on board with Washington’s preferred response to the war.
The U.S. government is pushing Europe to turn off the gas pipelines to Russia and halt all ships, trucks, and trains bringing energy westward. Already, it convinced Germany to indefinitely delay switching on a second pipeline from Russia under the Baltic—Nord Stream 2—which was completed late last year. It was due to become operational later this summer and would have seriously damaged hopes of boosting U.S. sales.
For its part, the United States is already moving to ban purchases of Russian oil and gas. House Speaker Nancy Pelosi said Sunday that Congress is exploring a total Russian ban this week alongside a plan to approve $10 billion in new military aid to Ukraine. In the Senate, a group of GOP and Democratic senators already joined together to introduce a bill outlawing Russian oil last Thursday.
Biden, meanwhile, it expected to possibly travel to the Middle East to ask the repressive religious fundamentalist state of Saudi Arabia to temporarily increase oil production and help accelerate the squeezing out of Russia. Though Democratic lawmakers criticized the close ties between former President Donald Trump and the murderous Crown Prince Mohammed bin Salman before the 2020 elections, the de-facto Saudi ruler may now play a key role in Washington’s plan.
There are also reports the U.S. may even move to advance negotiations with Iran and Venezuela—both countries it has targeted with punishing economic sanctions—in order to get more oil onto the world market in the short term and allow Europe to cut ties with Russia without going broke.
Despite the U.S.’ insistence, though, the flow of Russian energy resources into Europe can’t be switched off overnight. The EU currently buys 45% of its imported gas, a third of its oil, and nearly half its coal from Russia. Prior to the Russian military invasion of Ukraine, trade in energy was a central pillar of EU-Russian relations.
In the short-term, there is no immediate source of replacement for those imports, despite the Biden administration’s best efforts. There simply are not yet enough LNG terminals in Europe to offload American gas in sufficient quantities. And even energy giants like Shell were still purchasing oil from Russia on the side to fulfill their own contracts, at least up until Tuesday morning when the company apologized and pledged not to do so again. (IPA Service)
Courtesy: People’s World
Needs Of Female Seasonal Migrant Labourers Must Be Addressed 