Why Europe’s Energy Crisis Is A Disaster For Emerging Economies
The surge in natural gas demand from Europe has led to a surge in prices that has devastated emerging economies in other parts of the world and this devastation could drag on for years, Bloomberg reports. “Energy security concerns in Europe are driving energy poverty in the emerging world,” Saul Kavonic, Credit Suisse energy analyst, told Bloomberg. “Europe is sucking gas away from other countries whatever the cost.” The fact is that European countries can afford to pay a premium for natural gas while poorer nations such as Pakistan or Bangladesh don’t have the money to afford such a premium. Pakistan, by the way, is already suffering blackouts for most of the day and there is little chance of that changing anytime soon because of exorbitant LNG prices. “Suppliers don’t need to focus on securing their LNG to low affordability markets,” Wood Mackenzie analyst Raghav Mathur told Bloomberg. What’s more, the spot market is so lucrative at the moment that producers can breach their long-term contracts and afford to pay the penalties with money made on that market. The situation is unlikely to change in the observable future. On the contrary, Europe is building LNG import terminals, meaning the current level of demand might extend over a longer period of time despite the EU’s bold emission-cutting ambitions. And this means emerging economies’ energy supply troubles may well extend over a longer period of time as well as they are forced to compete for the limited supply of LNG with some of the wealthiest economies in the world. Russia, meanwhile, is only too happy to step in and supply LNG to Pakistan, which is only too happy to take it. As the Pakistani ambassador to Russia told TASS news agency recently, “If the rich countries take away all the LNG, what is going to happen to us?”
The U.S. Believes India Will Benefit From A Price Cap On Russian Oil
The United States hopes that India could see the benefits of a price cap on Russian oil, U.S. Treasury Secretary Janet Yellen told news outlet PTI in an exclusive interview ahead of her trip to India at the end of this week. Secretary Yellen’s visit to India on November 11 could be crucial to the U.S. and G7 efforts to persuade the world’s third-largest crude oil importer to join the coalition of countries applying the price cap on Russian oil. “Our objective is to hold down the price that Russia receives for its oil and keep that oil trading. The gainers from this will be particularly those countries that do buy cheap Russian oil, and our hope would be that India would take advantage of this price cap, though its firms are bargaining with Russia,” Secretary Yellen told PTI. “If they (India) want to use Western financial services like insurance, the price cap would apply to their purchases. But even if they use other financial services, we believe the price cap will give them leverage to negotiate good discounts from world markets,” she added. Earlier this year, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin’s oil revenues for his war chest. The G7, the EU, and the UK will ban as of December 5 maritime transportation services for Russian oil unless the products are purchased at or below a certain price cap. Yet, many analysts and experts doubt that the price cap would serve its dual purpose of cutting revenues for Putin while keeping Russian oil flowing. One reason is that top importers China and India haven’t signed onto the price cap, and another is that Putin could simply make good on his promise to halt all energy supply—including crude, fuels, natural gas, and coal—to the countries that sign up to cap the price of Russian oil.
Ukrainians Face Weeks Of Emergency Energy Shutdowns
Russian attacks on Ukraine’s energy infrastructure will leave Ukraine under emergency shutdowns for up to five weeks, with President Volodymyr Zelensky warning that more attacks may follow and the mayor of Kyiv urging residents to prepare for temporary evacuation if water and power supplies are cut off. The director of Ukraine’s Energy Research Center, Oleksandr Kharchenko said on Monday that the country’s energy companies need two to five weeks to restore stability to Ukraine’s energy system in the aftermath of Russian attacks on infrastructure. That timeframe is only relevant if there are no further Russian attacks on energy facilities. More than 4.5 million consumers are already without power, Euractiv cited Zelensky as saying, while3 Kharchenko points out that enough electricity is being produced but damage to transportation routes is undermining distribution. On Monday, Ukraine faced a projected shortfall of 32% in power supply, according to Euractiv, citing energy provider YASNO. Ukrainians are being called upon now to conserve energy to the maximum. On Sunday, Zelensky warned of the potential for more attacks, noting that Russia is “concentrating forces and means for a possible repetition of mass attacks on our infrastructure. First of all, energy.” Also on Sunday, Kyiv Mayor Vitali Klitschko raised alarms about potential losses of power and water in the capital city, urging residents to be prepared to evacuate. “If you have extended family or friends outside Kyiv, where there is autonomous water supply, an oven, heating, please keep in mind the possibility of staying there for a certain amount of time,” Klitschko said. Putin’s aim, Klitschko said, was “for us to die, to freeze, or to make us flee our land so that he can have it”. In the south, Russia is clearly continuing with its energy infrastructure attacks, with the Kherson regional governor noting that Moscow’s forces had now destroyed some 1.5 kilometers of power lines in the region, severing supply to the city of Beryslav. Russian news agencies have also accused Ukrainian forces of damaging the Nova Kakhovka dam in Russian-occupied territory near Kherson. That claim has not been independently verified.
Airlines set to benefit from new ATF pricing mechanism
New mechanism will be more transparent and cushion airlines from price fluctuations, say industry players. India has introduced a new pricing mechanism for ATF (jet fuel) beginning Q3 FY23 (October – December period). The new price mechanism – which replaces the Import Parity Price based system – will be benchmarked on the MOPAG or Mean of Platts Arab Gulf and could bring in more parity between global crude price and jet fuel price in India. Those in the know say, the new pricing mechanism will be “more transparent” and cushion airlines from ATF price fluctuations. MOPAG pricing refers to paying the same price that is paid in Dubai for ATF. The mechanism could see 10 -15 per cent reduction in price say some industry sources, while others say it’s too early to comment. The decision to use MOPAG as a benchmark was taken after a meeting of the airlines top brass, oil marketing companies (OMCs), the Ministry of Petroleum and Natural Gas and the Civil Aviation Ministry. “Indian airlines are also expected to benefit from the new pricing mechanism of aviation turbine fuel (ATF) in India, with oil marketing companies (OMCs) and airlines planning to set MOPAG as the global benchmark,” Motilal Oswal said in a recent report. IndiGo’s CFO, Gaurav Negi, during an analysts call had said, “The way the pricing of ATF is being done is undergoing a change as we speak.“ IndiGo, the country’s largest carrier, saw fuel costs rise over 214 per cent y-o-y in Q2 FY23 (July – Sept) to ₹62.58 billion against ₹19.89 billion in Q2 FY22.