I appeared alongside Dr. Hashem Aqel, Oil and Energy Expert, Associate Fellow at Oxford Institute for Energy Studies, who contributed several insights. Asharq News is the Mideast Bloomberg partner. My further analysis follows:
The recent rise in EU gas prices and the rapid depletion of what had been a significant surplus in EU storage, is principally a two-sided story.
- One side is indeed about the impending cutoff of Russian gas, still flowing across Ukraine. This has been expected for months, and so is already largely priced in. Expectations of new transit across Ukraine of Russian-origin gas re-labelled as Azerbaijani was being negotiated. However, this deal fell apart, with the final nail in its coffin being when Ukraine’s President Zelensky asserted that Ukraine would not transit any further Russian-origin gas after 31 December unless payments to Russia are withheld until after the war ends. This seems a very reasonable demand for a country fighting for its survival against a Russian invasion. [See “Ukraine will not allow transit of Russian gas with Azeri label, Zelenskyy says, dashing Slovak hopes,” EuroNews, Jorge Liboreir 19 Dec. 2024.] This marks the end of the five-year contract, which was only agreed to at the last moment before New Year 2020, when the US Senate finally forced then-President Trump to agree to sanctions on Nord Stream 2 construction (I was in Kyiv, for Naftogaz, and on Ukrainian television, analyzing Washington sanctions, Kyiv-Moscow negotiations, and the pro-Nord Stream position of Berlin.)
- The other side is a story of yet another European energy own-goal, a consequence of its over-reliance on weather-dependent renewable energy generation. This overreliance has made its electricity supply increasingly volatile, in sync with the weather. In November and early December, especially north and western Europe experienced what the Germans call “Dunkelflaute“, a protracted wind and solar drought. Batteries can only substitute for perhaps 40 minutes, or at best an hour. So, the de facto long-term, grid-scale “storage” backing up Europe’s plethora of wind and sun generation is really just natural-gas turbine electrical generation plants. The reality of increased generation (and hence, electricity market) volatility and dependence on gas backup generation was analyzed this week in a data-driven manner by the Oxford Institute for Energy Studies. [See: “Dunkelflaute: Driving Europe Gas Demand Volatility” Energy Insight: 161, by Anouk Honoré and Jack Sharples, Senior Research Fellows, OIES, 2024/12.]
The Global Barrel 