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X75's avatar

Another excellent piece putting facts out there. As an ex employee of 42 years with one of the worlds biggest energy (Oil and Gas) companies I am only too well aware of long it takes to build the supply infrastructure for energy. I am also very well aware of the risks associated with hydrocarbon exploration and production. A company can spend billions hunting for oil and gas in a promising new zone only to find its wells come in "dry". That company can also spend billions developing an oil and gas field only to find the wells produce a fraction of that originally estimated or if located abroad, can find a government wanting to change the terms and conditions impacting the original profit expectations significantly. Those aforesaid negatives are of course outweighed by the fact that when done well, production can produce large revenues and when oil rises in value (usually unexpectedly) bumper profits. Unfortunately the latter sometime cause the host governments to increase their offtake tax takes and sometimes impose windfall profits taxes. All of the aforementioned have happened throughout history and also to the company I worked for.

What is NEW today, is the dominant green agenda and the vilification of the business providing the worlds energy supply. The drive to get oil and gas companies to develop solar and wind is foolish. It is the lack of oil and gas that is going to bring our western civilization low. Oil (and gas) are the BLOOD of our industrial post WW2 world and SHALL remain so for decades. What is going to happen today though, is that people and governments have forgotten the criticality of energy security. What Europe in general and Germany in particular is about to find out, is they have traded away their energy security and placed it into the hands of an "enemy". The real impact on Germany has not yet been seen. Just wait till the reality actually sets in.

Three final comments:

1. CO2 emissions are going to soar in the next few years, I look forward to the increasing panic by the COP signatories as they witness their turn to solar and wind does not produce energy security, indeed it produces the opposite!

2. The green "anti nuclear" faction have pointed a Benelli semi automatic at both their feet. Modern nuclear is the ONLY ANSWER folks. I suggest you start shouting about this loudly now and even then it will take a decade to really make a big difference!

3. Finally, and I know this will generate some negative responses, I STRONGLY suggest to you that Putin is fully aware of all of this. Our media is currently full of Ukraine fear mongering and Putin vilification (much like 2020/21 were full of Covid fear mongering). What Putin has done in Ukraine to civilians is just terrible in the 21st century, but humans haven't really changed for millennia and so this won't be the last time we see very bad behaved humans wreaking havoc on the neighbors. However, Russias position as a major energy, materials and agricultural exporter means it is no Afghanistan, Libya, Syria or Iraq. As we can also see things don't seem to be going quite the way the EU thought (or the US perhaps) with sanctions.

While principle demands the economic pressure is maintained on Russia hoping they will end the war sooner rather than later, common pragmatic sense dictates the West tell Ukraine to work with Russia to end the conflict soonest and if that means holding referenda in the eastern provinces to see if they want to be part of Russia or independent or not, so be it.

My apologies at the length of this response but at my age and with a reasonably strong geopolitical / historical "bent (and library) I have earned the right to be very suspicious of ANY narrative put of there by elected officials or their bureaucrats. I firmly believe the "Long Emergency" that started in 2009 is well underway and has yet to peak. Get ready to see economic and political chaos in the Western democracies.

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AMLC's avatar

Great Doomberg analysis.

What additionally needs to be factored in is the cost differentials between ‘shipping’ ‘Gas’ via LNG carriers and ‘delivering’ gas via pipeline. Gas being exported via LNG tanker needs to be ‘liquefied’ (costs $1-$1.30 per 1000 cubic feet); then shipped on an LNG carrier (and charter rates can go through the roof-they’ve ranged recently from $150k a day to $350k(!) a day- and US Gulf to Europe time is circa 18 days); then the LNG needs to be ‘re-gasified’ at a cost of between 0.35-0.50 cents per 1000 cubic feet.

So the gas price arbitrage has to be ‘attractive’ enough to make the switch from the US (& Asia) to Europe (which may have the effect of keeping EU gas prices high!).

The economic impact on European industry and citizens will be massive-& will severely impact any chance of a European recovery. Factor in on top of that that fossil fuel prices (coal, oil and gas) are ‘elevated’ and likely to go significantly higher-which in turn feeds into the cost of ‘manufacturing’ the required European LNG facilities- and also critically ‘Renewables’-which consume gargantuan quantities of ‘natural resources’ in their manufacture & render them even more economically unviable and capital destructive.

(And just think of all the CO2 that is going to be emitted in all of the above processes!)

Energy ‘IS’ GDP.

What matters is ‘EROEI’- ‘Energy Return On Energy Invested’ which are approximately-Nuclear 1:100; Hydro 1:36; Coal & Gas 1:30; Wind & Solar 1:4 - and one can appreciate a growing ‘problem’.

Throw into the mix the levels of European sovereign debt; the Target 2 balances of €1.6 trillion (approx) (GDR on the hook for €1.150 trillion!) and the ECB’s ‘balance sheet which is approaching €9 trillion-none of which is sustainable without massive QE-which will drive inflation and increase the costs of fossil fuels- so potentially setting off a vicious upward commodity price spiral possibility in what should be a ‘rising interest rate’ environment.

Even a basic analysis shows just how ruinous a multi decade long misguided mismanaged ‘energy policy’ has been.

Just where have all the political & economic ‘strategic planning genuises’ been over the last three decades? Pursuing ‘Net Zero’ and ‘ESG’ programs?

What could possibly go wrong?

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