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Why peak oil signals the world's end, or at least the one we know – Zawya

Why peak oil signals the world’s end, or at least the one we know – Zawya.

By Joel Guglietta

While global financial markets are still levitating somewhere between the stratosphere and the Kingdom of Asgard, by 60°24′31″ North and 172°43′12″ West, in the middle of nowhere, an isolated island of 137.857 sq-mi holds the key of three major economic developments and risks:

  1. November 2013, Lawrence Summers raised the question whether the “secular stagnation” and the impossibility for the US and other major economies to grow without the help of recurring bubbles was not doomed to become the “new normal”.
  2. March 2014, the Conference Board released a study (figure 1) showing the falling trend in global total factor productivity, i.e. in the share of output not explained by the “accumulation of factors” (more on this economic jargon below).
  3. March 2014 again, the NASA published a research paper answering to “widespread concerns that current trends in resource-used are unsustainable, but possibilities of overshoot/collapse remain controversial”. This study tells us that, based on a well-known prey-predator model to which they add “wealth and economic inequality”, a total collapse is “very difficult to avoid” (figure 2).

w
Source: The Conference Board, January 2014

3
Source: NASA, 2014

1. – The tragic fate of the fat caribou, or why we have to fear the reindeer of St Matthew more than the wolves of Wall-Street

During World War II, the US Coast Guard decided to install long range aids to navigation in St Matthew Island, a remote rock in the Bering Sea in Alaska, and to stock emergency food source there. In August the same year, they released 29 reindeer (known as caribou in North America) on the island as a backup food source for the 19 men stationed there. As World War II drew to an end, the Coast Guard left the island and, by the same token, the population of reindeer growing unchecked as their only predators, the 19 men on duty there, were sent back home. It followed a dramatic boom & burst of population dynamics (figure 1). From 1944 to 1966 the number of these herbivores, which did not have to worry anymore about any predator and ate all the available lichen, increased from 29 to 6,000. In 1957, their body weight was found to exceed that of reindeer in domestic herds by 24.5 percent among females and 46.6 percent among males. Then, the following winter, as they faced a limited food supply to sustain their number and their massive body weight, they underwent a crash die-off, the population falling from 6,000 to 42 (figure 3).

There is a lot of food for thought in this story. First, as the NASA study suggests, when one species (for example the top 1 oercent living in the Galapogos, another rock ,as I put it in a paper issued last year “Why Kings of Galapagos are long equity under (mild) Mugabenomics?”) thrive to the abject detriment of another one (the lichen, or the “bottom” 99%), bad things eventually happen.

2
Source: The Conference Board, TED, January 2014

1
Source: Manicore

Second, and more generally, the point of this story boils down to the mundane fact that resources are everything, and when they vanish, the transition from a given state to another one, namely from unchecked growth and exuberance to complete obliteration, is dramatic most often than not. This holds all the more true for the key resource, i.e. oil, which brings us to the second chapter of our tale.

2. – The peak-oil: a conspiracy theory or a mandatory mathematical truism?

Most of the discussions on oil hover around the question of “reserves”. I am going here to state the obvious but the key argument to keep in mind is that these reserves are meant for one and only purpose: oil production. ….woooh!, that’s new, next please! Okay, but bear with me. Till someone proves me I am wrong, I assume that the volume of Earth is finite, so that oil reserves are finite.Now, for a given stock of non-renewable resource, all production functions obey to the same law: they start from zero, grow to a maximum and decline to zero in a “bell-shape” way (figure 4). Now, the area under this curve is called the integral of the production function and it is strictly equal to the oil reserves. Because oil reserves are finite, the integral is necessarily convergent and because they are non-renewable the production function (the derivative function of the oil reserve) cannot have another form than a bell shape. You can stretch it, you can squeeze it, but the general form is this one and not any other. This is mathematical certainty like 2+2=4. The peak-oil is a mandatory mathematical truism, not a “conspiracy theory”.

Obviously, the key question is: the “peak-oil”, is it for now?

Well, running the risk of stating one obvious thing after another, I assume that we all agree that a compulsory task to perform before extracting oil from the ground is to find it. This has profound implications as this makes us certain that a peak is mandatory given the resource potential of the oil field. It also tells us that the higher the proven reserves and the bigger they are with respect to production, the closer the peak of oil production (remember: the integral is the area under the production curve). If I take the example of the United-States, as evidenced by King Hubbert, there is a 35-year lag between discovery and production (figure 5). If evidence proves Hubert peak was a bit bad on timing, possible production curves, based on the world ultimate reserves. i.e. total extractable petroleum, suggest that the peak is now.

4
Source: Laherrere, 2003

f
Source: Manicore

This is old story and, as the world still goes around, one could dismiss all this analysis. However, what is new is that business conditions are becoming more challenging for the oil majors as figure 7 suggests. Indeed since 2009, the capital expenditures of ExxonMobil, Royal Dutch Shell and Chevron have increased by 39-89 percent while their production has stalled. This is the balance-sheet-based proof that the peak-oil is happening now.

d
Source: Wall Street Journal

Now, the last point on the peak-oil, and this is key to understand the third and last chapter of our tale. We have to keep in mind that when we hear that we still have for 20 or 30 years of oil ahead of us it does not mean that we live the “good life” for the next 2 to 3 decades with constant consumption and then, the year after, we fall straight to zero consumption in a crash die-off as our reindeer herd experienced. Actually, consumption will be following the bell-shaped production function, it will be a slow death, and in the meanwhile, as the oil majors experience, the massive rise of capital expenditure will be weighting on the marginal energy return of energy. Indeed, according to Kopits, total upstream industry spendind since 2005 has been USD 4 trillion (about USD 2.5 trillion spent on legacy crude oil production), and legacy oil production has declined by 1 mmb/d since 2005. By comparison, between 1998 and 2005 the industry spent USD 1.5 trillion on upstream development and added 8.6 mmb/d to total crude production. This declining energy return in energy production, which is nothing but the by-product of declining/exhausting oil reserves and the very fact we are experiencing the peak-oil, drives the whole economy down.

Indeed, though we live in the age of the “information technology” it is worthwhile to remember that the information society is an energy ogre (not mentioning the globalisation mantra which gives a central role to the transport industry which consumes two-third of total oil). For example, according toASU engineer Eric Williams 227 to 270 kilograms (or 500 to 594 pounds) of carbon dioxide are emitted in manufacturing a laptop computer. Mark Mills , the CEO of the Digital Power Group, teaches us that a medium-size refrigerator will use about 322 kW-h a year whereas the average iPhone uses about 361 kW-h a year once the wireless connections, data usage and battery charging are tallied up.

3. – There is something deeply wrong about macro-economic theory

So how all this relates to the “secular stagnation” scenario and all the fall in total factor productivity. Well, this is where things get a little bit technical and where our tale comes (finally!) to an end.

Most economists are big fan of more or less complex equations designed to explain everything in a highly stylised fashion. In this quest, in order to explain the origin of economic growth, they use the so-called Cobb-Douglas production function which states that GDP (Y) is a function of technology (A), capital (K) and labour (L). More precisely, the Holy Grail equation takes this form: Y = A * Ka * Lb, with “a” and “b” the elasticity of production to capital and labour. Total factor productivity is for instance derived from this equation.

Now, as the purpose of this equation is to explain the origin of economic growth, let’s put ourselves in the shoes of the Neanderthals. While we are planning to go in the wild to bring back some proteins to the tribe, we look around us. We do find sturdy arms, sturdy legs and few well-functioning brains. In a word, we find “labour”. Do we find “capital”? A broad and outstanding No! However, as the time goes by, our species is evolving. We will find primal energy in the form of fire, and then, at a very latter stage fossil energy and we will understand how to use it. “Capital” will appear at a much latter stage based on accumulated labour (whatever it is “inspiration”, aka knowledge, or “transpiration”, aka sweat and hard work) and the use of energy around us.

The point is very simple: the central equation explaining economic growth is plain wrong and we need to transform it in order to make capital an inner feedback loop to the system as it is mentioned in the Report to the Club of Rome (2003) or suggested by Jean-Marc Jancovici . How to do this?

Well in order to make things simple, let’s assume that returns to scale are constant (if I multiply resources by 2, output will be increased by 2, which fares as a reasonable assumption) so that we get b = 1-a, and therefore Y = A * Ka * L1-a. Now, let’s make the capital K dependent on energy (E) and labor (L) (or accumulated labor, (integral of L), so that K = c * E * L (with “c” a constant and simply labour which does not change the qualitative properties of the model). Our equation becomes: Y = A * ba * Ea * L.

Add to this new equation a reasonable assumption about the dynamics of labour (I assume a logistic function for the dynamics of the population with a sharp increase followed by an asymptotic rise) and the knowledge we have gained over the shape of the oil production function and thus of the dynamics of how available reserves evolve, we can build a toy-model and easily simulate the path of the economy (figure 8) on an oil(energy)-dependent computer. This toy-model clearly shows how sensitive an economy can be to the downward shift in oil-production during and after the peak-oil.

Do not get me wrong here. I do not believe that the Stone Age ended because we were short of stones. My point comes down to say that we are smack in the middle of an energetic transition, that this transition has a much more profound current negative effect that many can believe and that the world as we know is coming to an end, evolving towards “something else”. The hope here is that, flawed economic models, lack of political will to manage this energetic transition or ideological foolishness from the Talibans of the “all-green” regarding the nuclear energy as “evil”, will not drive us toward the tragic fate of the reindeer herd of St Matthew Island and other unfortunate raging bulls (figure 9). Indeed, the NASA research suggests that high wealth inequality is sufficient to create a total collapse. Add inequality regarding access to energy, water and food (agriculture is oil-dependent too) on the top of that, and we have a Mad-Max-Moment ahead of us. In this state of urgency, do we attend a rise in global capex in renewable energy that could make us more optimistic? Well, unfortunately not. Global investment in renewable energy fell 11 percent in 2013 to USD 254 billion according to Bloomberg New energy Finance. This is the second decline in renewable investments since 2001. So, yes the crash die-off of our fat caribous is unfortunately still a scenario.

v
Source: Joel Guglietta

Joel Guglietta is Managing Director of OCTIS Asset Management in Singapore

Author Steen Jakobsen, Chief Economist & CIO, Saxo Bank
Saxo Bank provides an execution-only service. The material on this website does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Saxo Bank accepts no responsibility for any use that may be made of these comments and for any consequences that result.

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Why peak oil signals the world’s end, or at least the one we know – Zawya

Why peak oil signals the world’s end, or at least the one we know – Zawya.

By Joel Guglietta

While global financial markets are still levitating somewhere between the stratosphere and the Kingdom of Asgard, by 60°24′31″ North and 172°43′12″ West, in the middle of nowhere, an isolated island of 137.857 sq-mi holds the key of three major economic developments and risks:

  1. November 2013, Lawrence Summers raised the question whether the “secular stagnation” and the impossibility for the US and other major economies to grow without the help of recurring bubbles was not doomed to become the “new normal”.
  2. March 2014, the Conference Board released a study (figure 1) showing the falling trend in global total factor productivity, i.e. in the share of output not explained by the “accumulation of factors” (more on this economic jargon below).
  3. March 2014 again, the NASA published a research paper answering to “widespread concerns that current trends in resource-used are unsustainable, but possibilities of overshoot/collapse remain controversial”. This study tells us that, based on a well-known prey-predator model to which they add “wealth and economic inequality”, a total collapse is “very difficult to avoid” (figure 2).

w
Source: The Conference Board, January 2014

3
Source: NASA, 2014

1. – The tragic fate of the fat caribou, or why we have to fear the reindeer of St Matthew more than the wolves of Wall-Street

During World War II, the US Coast Guard decided to install long range aids to navigation in St Matthew Island, a remote rock in the Bering Sea in Alaska, and to stock emergency food source there. In August the same year, they released 29 reindeer (known as caribou in North America) on the island as a backup food source for the 19 men stationed there. As World War II drew to an end, the Coast Guard left the island and, by the same token, the population of reindeer growing unchecked as their only predators, the 19 men on duty there, were sent back home. It followed a dramatic boom & burst of population dynamics (figure 1). From 1944 to 1966 the number of these herbivores, which did not have to worry anymore about any predator and ate all the available lichen, increased from 29 to 6,000. In 1957, their body weight was found to exceed that of reindeer in domestic herds by 24.5 percent among females and 46.6 percent among males. Then, the following winter, as they faced a limited food supply to sustain their number and their massive body weight, they underwent a crash die-off, the population falling from 6,000 to 42 (figure 3).

There is a lot of food for thought in this story. First, as the NASA study suggests, when one species (for example the top 1 oercent living in the Galapogos, another rock ,as I put it in a paper issued last year “Why Kings of Galapagos are long equity under (mild) Mugabenomics?”) thrive to the abject detriment of another one (the lichen, or the “bottom” 99%), bad things eventually happen.

2
Source: The Conference Board, TED, January 2014

1
Source: Manicore

Second, and more generally, the point of this story boils down to the mundane fact that resources are everything, and when they vanish, the transition from a given state to another one, namely from unchecked growth and exuberance to complete obliteration, is dramatic most often than not. This holds all the more true for the key resource, i.e. oil, which brings us to the second chapter of our tale.

2. – The peak-oil: a conspiracy theory or a mandatory mathematical truism?

Most of the discussions on oil hover around the question of “reserves”. I am going here to state the obvious but the key argument to keep in mind is that these reserves are meant for one and only purpose: oil production. ….woooh!, that’s new, next please! Okay, but bear with me. Till someone proves me I am wrong, I assume that the volume of Earth is finite, so that oil reserves are finite.Now, for a given stock of non-renewable resource, all production functions obey to the same law: they start from zero, grow to a maximum and decline to zero in a “bell-shape” way (figure 4). Now, the area under this curve is called the integral of the production function and it is strictly equal to the oil reserves. Because oil reserves are finite, the integral is necessarily convergent and because they are non-renewable the production function (the derivative function of the oil reserve) cannot have another form than a bell shape. You can stretch it, you can squeeze it, but the general form is this one and not any other. This is mathematical certainty like 2+2=4. The peak-oil is a mandatory mathematical truism, not a “conspiracy theory”.

Obviously, the key question is: the “peak-oil”, is it for now?

Well, running the risk of stating one obvious thing after another, I assume that we all agree that a compulsory task to perform before extracting oil from the ground is to find it. This has profound implications as this makes us certain that a peak is mandatory given the resource potential of the oil field. It also tells us that the higher the proven reserves and the bigger they are with respect to production, the closer the peak of oil production (remember: the integral is the area under the production curve). If I take the example of the United-States, as evidenced by King Hubbert, there is a 35-year lag between discovery and production (figure 5). If evidence proves Hubert peak was a bit bad on timing, possible production curves, based on the world ultimate reserves. i.e. total extractable petroleum, suggest that the peak is now.

4
Source: Laherrere, 2003

f
Source: Manicore

This is old story and, as the world still goes around, one could dismiss all this analysis. However, what is new is that business conditions are becoming more challenging for the oil majors as figure 7 suggests. Indeed since 2009, the capital expenditures of ExxonMobil, Royal Dutch Shell and Chevron have increased by 39-89 percent while their production has stalled. This is the balance-sheet-based proof that the peak-oil is happening now.

d
Source: Wall Street Journal

Now, the last point on the peak-oil, and this is key to understand the third and last chapter of our tale. We have to keep in mind that when we hear that we still have for 20 or 30 years of oil ahead of us it does not mean that we live the “good life” for the next 2 to 3 decades with constant consumption and then, the year after, we fall straight to zero consumption in a crash die-off as our reindeer herd experienced. Actually, consumption will be following the bell-shaped production function, it will be a slow death, and in the meanwhile, as the oil majors experience, the massive rise of capital expenditure will be weighting on the marginal energy return of energy. Indeed, according to Kopits, total upstream industry spendind since 2005 has been USD 4 trillion (about USD 2.5 trillion spent on legacy crude oil production), and legacy oil production has declined by 1 mmb/d since 2005. By comparison, between 1998 and 2005 the industry spent USD 1.5 trillion on upstream development and added 8.6 mmb/d to total crude production. This declining energy return in energy production, which is nothing but the by-product of declining/exhausting oil reserves and the very fact we are experiencing the peak-oil, drives the whole economy down.

Indeed, though we live in the age of the “information technology” it is worthwhile to remember that the information society is an energy ogre (not mentioning the globalisation mantra which gives a central role to the transport industry which consumes two-third of total oil). For example, according toASU engineer Eric Williams 227 to 270 kilograms (or 500 to 594 pounds) of carbon dioxide are emitted in manufacturing a laptop computer. Mark Mills , the CEO of the Digital Power Group, teaches us that a medium-size refrigerator will use about 322 kW-h a year whereas the average iPhone uses about 361 kW-h a year once the wireless connections, data usage and battery charging are tallied up.

3. – There is something deeply wrong about macro-economic theory

So how all this relates to the “secular stagnation” scenario and all the fall in total factor productivity. Well, this is where things get a little bit technical and where our tale comes (finally!) to an end.

Most economists are big fan of more or less complex equations designed to explain everything in a highly stylised fashion. In this quest, in order to explain the origin of economic growth, they use the so-called Cobb-Douglas production function which states that GDP (Y) is a function of technology (A), capital (K) and labour (L). More precisely, the Holy Grail equation takes this form: Y = A * Ka * Lb, with “a” and “b” the elasticity of production to capital and labour. Total factor productivity is for instance derived from this equation.

Now, as the purpose of this equation is to explain the origin of economic growth, let’s put ourselves in the shoes of the Neanderthals. While we are planning to go in the wild to bring back some proteins to the tribe, we look around us. We do find sturdy arms, sturdy legs and few well-functioning brains. In a word, we find “labour”. Do we find “capital”? A broad and outstanding No! However, as the time goes by, our species is evolving. We will find primal energy in the form of fire, and then, at a very latter stage fossil energy and we will understand how to use it. “Capital” will appear at a much latter stage based on accumulated labour (whatever it is “inspiration”, aka knowledge, or “transpiration”, aka sweat and hard work) and the use of energy around us.

The point is very simple: the central equation explaining economic growth is plain wrong and we need to transform it in order to make capital an inner feedback loop to the system as it is mentioned in the Report to the Club of Rome (2003) or suggested by Jean-Marc Jancovici . How to do this?

Well in order to make things simple, let’s assume that returns to scale are constant (if I multiply resources by 2, output will be increased by 2, which fares as a reasonable assumption) so that we get b = 1-a, and therefore Y = A * Ka * L1-a. Now, let’s make the capital K dependent on energy (E) and labor (L) (or accumulated labor, (integral of L), so that K = c * E * L (with “c” a constant and simply labour which does not change the qualitative properties of the model). Our equation becomes: Y = A * ba * Ea * L.

Add to this new equation a reasonable assumption about the dynamics of labour (I assume a logistic function for the dynamics of the population with a sharp increase followed by an asymptotic rise) and the knowledge we have gained over the shape of the oil production function and thus of the dynamics of how available reserves evolve, we can build a toy-model and easily simulate the path of the economy (figure 8) on an oil(energy)-dependent computer. This toy-model clearly shows how sensitive an economy can be to the downward shift in oil-production during and after the peak-oil.

Do not get me wrong here. I do not believe that the Stone Age ended because we were short of stones. My point comes down to say that we are smack in the middle of an energetic transition, that this transition has a much more profound current negative effect that many can believe and that the world as we know is coming to an end, evolving towards “something else”. The hope here is that, flawed economic models, lack of political will to manage this energetic transition or ideological foolishness from the Talibans of the “all-green” regarding the nuclear energy as “evil”, will not drive us toward the tragic fate of the reindeer herd of St Matthew Island and other unfortunate raging bulls (figure 9). Indeed, the NASA research suggests that high wealth inequality is sufficient to create a total collapse. Add inequality regarding access to energy, water and food (agriculture is oil-dependent too) on the top of that, and we have a Mad-Max-Moment ahead of us. In this state of urgency, do we attend a rise in global capex in renewable energy that could make us more optimistic? Well, unfortunately not. Global investment in renewable energy fell 11 percent in 2013 to USD 254 billion according to Bloomberg New energy Finance. This is the second decline in renewable investments since 2001. So, yes the crash die-off of our fat caribous is unfortunately still a scenario.

v
Source: Joel Guglietta

Joel Guglietta is Managing Director of OCTIS Asset Management in Singapore

Author Steen Jakobsen, Chief Economist & CIO, Saxo Bank
Saxo Bank provides an execution-only service. The material on this website does not contain (and should not be construed as containing) investment advice or an investment recommendation, or a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Saxo Bank accepts no responsibility for any use that may be made of these comments and for any consequences that result.

Survive Peak Oil: Peak Oil: Laherrère, Real Curves, and Official Curves

Survive Peak Oil: Peak Oil: Laherrère, Real Curves, and Official Curves.

Sunday, March 23, 2014

Peak Oil: Laherrère, Real Curves, and Official Curves

The graph above is Figure 11 from Jean Laherrère, “World Oil and Gas Production Forecasts up to 2100,” The Oil Drum, July 16, 2013. Retrieved from www.theoildrum.com/node/10009
Notes on some of Laherrère’s abbreviations:
AEO = Annual Energy Outlook (from EIA) (= US Energy Information Administration)
NOPEC = non-OPEC
Tb = trillion barrels
U = ultimate recoverable
WEO = World Energy Outlook (from IEA) ( = International Energy Agency)
WOO = World Oil Outlook (from OPEC)
The thin blue line at the top right is Laherrère’s prediction of the grand totals, differing considerably from the others.
He explains: “The confidential technical data on [mean values of proven + probable reserves] is only available from expensive and very large scout databases. . . . There is a huge difference between the political/financial proved reserves [so-called], and the confidential technical [proven + probable] reserves. . . . Most economists . . . rely only on the proved reserves coming from [the Oil and Gas Journal, the US Energy Information Administration], BP and OPEC data, which are wrong; they have no access to the confidential technical data.”
The difference between his figures and the various government figures is enormous. It reminds me of the 1950s, when M.K. Hubbert and others were saying one thing, and the government was saying quite the opposite.
A few years ago I met someone who told me that his father had been a geoscientist in the 1950s. Back in those early days, the father had told the son about “peak oil” (in the years to come), but the father also said he would risk being fired if he made any public statement.
It’s considered bad for business to tell your investors that you’re going to be running out of product to sell. To me that sounds in some ways like superstitious nonsense. Surely if a product becomes rarer, each unit of that product gains more financial value for its owner. I suspect the real answer to that question, though, is closer to what Colin Campbell said to Adam Porter in 2004: “If the real figures were to come out there would be panic on the stock markets. . . .”
The general public must be kept happy but ignorant. Well, maybe not too happy, but certainly ignorant, as anyone knows who has had tried to deal with any important global issue, from pollution to population. Newspapers aren’t allowed to print bad news, at least not bad news that would shake anyone up. And the only books one is supposed to read are high-school romances. Orwell had it right, a perfect score (except for the title) when he wrote 1984. Reminds me of a conversation I have at irregular intervals with people I meet. They say, “Everyone knows what Freud/Marx/Darwin said. He was a terrible man.” “Have you ever read any of his books?” Without embarrassment, the answer is an angry “no!” In other words,”Why should I read the books of such a terrible man?”
Oh, well, even Galileo had to deal with disinformation, so who am I to complain?
FURTHER READING
BP. (2013). Global statistical review of world energy. Retrieved fromhttp://www.bp.com/statisticalreview
Heinberg, R. (2013). Snake oil: How fracking’s false promise of plenty imperils our future. Santa Rosa, California: Post Carbon Institute.
Höök, M., Hirsch, R., & Aleklett, K. (2009, June). Giant oil field decline rates and their influence on world oil production. Energy Policy, Volume 37, Issue 6, pp. 2262-72. Retrieved fromhttp://dx.doi.org/10.1016/j.enpol.2009.02.020
Hughes, J. D. (2013, Feb.) Drill, baby, drill; Can unconventional fuels usher in a new era of energy abundance? Executive Summary. Post Carbon Institute. Retrieved fromhttp://www.postcarbon.org/reports/DBD-report-FINAL.pdf
Klare, M.T. (2012).The race for what’s left: The scramble for the world’s last resources. New York: Picador.
Simmons, M. R. (2006). Twilight in the desert: The coming Saudi oil shock and the world economy. Hoboken, New Jersey: John Wiley & Sons.

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge.

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining.Shipments are down over 4% from the prior week and also lower to Ukraine. This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up…

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

 

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

 

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else…

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

 

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

 

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

It is too early to see a trend, but for now, the direction is not hopeful for Europe.

Furthermore, Gazprom has cut its Diesel output by the most in 7 months…

 

and then… (via NY Times),

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

 

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that’s not clear enough…

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge

Russia Is Slowly Turning The NatGas Tap Off To Europe | Zero Hedge.

While Naftogaz (Ukraine’s gas pipeline operator) states that all gas transportation from Russia to Europe is running normally, Bloomberg reports that Russian natgas exports to Europe are declining.Shipments are down over 4% from the prior week and also lower to Ukraine. This ‘adjustment’ follows increased sanctions by the West as Medvedev’s notable statement this morning that Ukraine owes Russia $16bn.

NatGas output is tumbling

The good news:

Gazprom today said natgas transit to Europe via Ukraine, supplies for Ukrainian consumption  

But Pay Up…

Ukraine owes Russia $11b after collapse of 2010 deal, Russian Prime Minsiter Dmitry Medvedev says to President Vladimir Putin at Security Council meeting, according to transcript on Kremlin website.

 

Medvedev adds $3b Ukraine bonds bought in Dec., ~$2b debt to Gazprom for natgas supplies

 

NOTE: In 2010, Russia agreed to sell natgas at discount in exchange for extending lease to Black Sea naval port of Sevastopol in Crimea to 2042 from 2017

Or Else…

Russian natgas exports to Europe and Turkey, excl. former Soviet Union, declined to 405.3mcm as of March 22,  according to Bloomberg calculations based on preliminary data from Energy Ministry’s CDU-TEK unit.

 

Avg daily exports to region were ~457mcm in March, lower than yr earlier: calculations based on CDU-TEK data

 

Shipments March 16-22 were 3.04bcm, 4% decrease vs level in week ended March 15

It is too early to see a trend, but for now, the direction is not hopeful for Europe.

Furthermore, Gazprom has cut its Diesel output by the most in 7 months…

 

and then… (via NY Times),

Russia is now asking close to $500 for 1,000 cubic meters of gas, the standard unit for gas trade in Europe, which is a price about a third higher than what Russia’s gas company, Gazprom, charges clients elsewhere.

 

Russia says the increase is justified because it seized control of the Crimean Peninsula, where its Black Sea naval fleet is stationed, ending the need to pay rent for the Sevastopol base. The base rent had been paid in the form of a $100 per 1,000 cubic meter discount on natural gas for Ukraine’s national energy company, Naftogaz.

And if that’s not clear enough…

25 years later, oil spilled from Exxon Valdez still clings to lives, Alaska habitat | State News | ADN.com

25 years later, oil spilled from Exxon Valdez still clings to lives, Alaska habitat | State News | ADN.com.

BY SEAN COCKERHAM

Anchorage Daily NewsMarch 21, 2014 Updated 2 hours ago

FILE – In this April 9, 1989 file photo, crude oil from the tanker Exxon Valdez, top, swirls on the surface of Alaska’s Prince William Sound near Naked Island. The 987-foot tanker, carrying 53 million gallons of crude, struck Bligh Reef at 12:04 a.m. on March 24, 1989, and within hours unleashed an estimated 10.8 million gallons of thick, toxic crude oil into the water. Storms and currents then smeared it over 1,300 miles of shoreline. Twenty five years later, the region, its people and its wildfire are still recovering. JOHN GAPS III, FILE — AP Photo

Andy Wills was sleeping on a friend’s couch in Cordova, Alaska, on March 24, 1989, ready to head out and harvest spring herring in Prince William Sound.

“My buddy had just handed me a cup of coffee in the morning and we’re watching ‘Good Morning America,’ ” Wills said. “And there’s the Exxon Valdez on TV, spilling oil.”

“We were like, ‘No!’ It was just the start of a nightmare,” Wills said.

The herring of Prince William Sound still have not recovered. Neither have killer whales, and legal issues remain unresolved a quarter of a century later. Monday is the 25th anniversary of the disaster, in which the tanker Exxon Valdez ran aground on Bligh Reef and spilled at least 11 million gallons of oil into the pristine waters of the sound.

Prince William Sound today looks spectacular, a stunning landscape of mountainous fjords, blue-green waters and thickly forested islands. Pick up a stone on a rocky beach, maybe dig a little, though, and it is possible to still find pockets of oil.

“I think the big surprise for all of us who have worked on this thing for the last 25 years has been the continued presence of relatively fresh oil,” said Gary Shigenaka, a marine biologist for the National Oceanic and Atmospheric Administration.

The question of how well Prince William Sound has recovered from what at the time was the nation’s largest oil spill is a contentious one. Exxon Mobil Corp. cites studies showing a rebound.

“The sound is thriving environmentally and we’ve had a very solid, complete recovery,” said Richard Keil, senior media relations adviser with Exxon Mobil.

Government scientists have a different view.

The Exxon Valdez Oil Spill Trustee Council, a state-federal group set up to oversee restoration of Prince William Sound, considers the pink and sockeye salmon to be recovered, as well as the bald eagles and harbor seals. Several other species are listed as recovering but not recovered.

Sea otters have had a rough time. Thousands died in the months following the spill, and the population has struggled to recover in the 25 years since. The U.S. Geological Survey reported earlier this month that the sea otters of the area had finally returned to their pre-spill numbers.

Listed as still not recovering are the herring, a group of killer whales and the pigeon guillemots, a North Pacific seabird.

Rick Steiner, an oceans activist and former professor at the University of Alaska, said the “spill is not over. The damage persists in quite remarkable ways.”

Wills, who fished salmon as well as herring, said the spill left a huge mark on those who made a living from Prince William Sound.

Exxon compensation checks were too late and too little, he said.

“A lot of people got real hurt. I know a lot of guys committed suicide and all that stuff. I got divorced, had an ulcer. It was rough,” said Wills, who now runs a bookshop and cafe in Homer, Alaska.

Among the scientific puzzles of the spill, the fate of the herring is a particular mystery. It’s a vital species for the ecosystem, giving protein to whales, salmon, birds and others.

Prince William Sound was home to a lucrative spring herring fishery that supported fishermen badly in need of cash coming off the long winter in between fishing seasons.

Researchers found lesions and larval abnormalities in herring exposed to the oil. Then, four years after the spill, the herring population crashed dramatically. The reasons are a subject of intense debate, with suggestions that the effects of the spill could have made the herring vulnerable to disease.

“No other stock in Alaska crashed in 1993, so that’s indirect evidence it is spill-related,” said Jeep Rice, who studied the spill for more than two decades as a federal scientist. “That’s kind of weak, and yet it is about as good as we can get in terms of explaining why it happened in that year.”

The herring never really recovered, and the current population is too low to overcome predators. Herring fishing, with a brief exception, has been closed for more than 20 years.

The killer whales of Prince William Sound also have suffered. Two groups were hit especially hard. Scientists saw killer whales from one of the groups swimming through heavy sheens of oil. A Los Angeles Times photo showed whales from the other group swimming near the tanker as it gushed oil. Populations dropped dramatically in the year after the spill.

“The evidence is pretty compelling that it was a spill-related effect on those two groups of killer whales,” said federal marine biologist Shigenaka.

One of the groups continues its slow recovery. The other numbered 22 killer whales at the time of the spill and is down to just seven. Scientists now expect it to go extinct, the end of a genetic line that researchers say has hunted in the area for thousands of years, maybe since the last Ice Age.

The federal and state governments are still weighing the science of the spill’s effects and deciding whether to seek more money from Exxon Mobil for cleaning up remaining oil.

If there is evidence the spill is causing unexpected, continuing damage, the company could be forced to pay up to $100 million on top of the $900 million civil settlement that Exxon paid in 1991. The case lives on in the courts.

The federal and state governments have said more studies are needed, a frustration for federal Alaska District Court Judge H. Russel Holland.

“The court is dismayed that so few of the projects that the governments had expected to be completed by now have been completed,” Holland wrote in a filing last year.

Studies measuring the effects on sea otters and harlequin ducks have now been completed and are awaiting peer review before being released to the public, the federal and state governments said in their latest court filing last week. They said they are still awaiting a study on the effectiveness of techniques for lessening the remaining oil; they figure it is at least two months away from release.

The governments said they are reviewing the results of other studies and will be consulting with the Department of Justice about whether to proceed with seeking money from Exxon Mobil.

They told the judge their next update on the case will be in October, as it approaches 26 years since the Exxon Valdez became the most notorious tanker in history.

Sean Cockerham is a reporter in the Daily News Washington bureau. Emailscockerham@mcclatchydc.com.

25 years later, oil spilled from Exxon Valdez still clings to lives, Alaska habitat | State News | ADN.com

25 years later, oil spilled from Exxon Valdez still clings to lives, Alaska habitat | State News | ADN.com.

BY SEAN COCKERHAM

Anchorage Daily NewsMarch 21, 2014 Updated 2 hours ago

FILE – In this April 9, 1989 file photo, crude oil from the tanker Exxon Valdez, top, swirls on the surface of Alaska’s Prince William Sound near Naked Island. The 987-foot tanker, carrying 53 million gallons of crude, struck Bligh Reef at 12:04 a.m. on March 24, 1989, and within hours unleashed an estimated 10.8 million gallons of thick, toxic crude oil into the water. Storms and currents then smeared it over 1,300 miles of shoreline. Twenty five years later, the region, its people and its wildfire are still recovering. JOHN GAPS III, FILE — AP Photo

Andy Wills was sleeping on a friend’s couch in Cordova, Alaska, on March 24, 1989, ready to head out and harvest spring herring in Prince William Sound.

“My buddy had just handed me a cup of coffee in the morning and we’re watching ‘Good Morning America,’ ” Wills said. “And there’s the Exxon Valdez on TV, spilling oil.”

“We were like, ‘No!’ It was just the start of a nightmare,” Wills said.

The herring of Prince William Sound still have not recovered. Neither have killer whales, and legal issues remain unresolved a quarter of a century later. Monday is the 25th anniversary of the disaster, in which the tanker Exxon Valdez ran aground on Bligh Reef and spilled at least 11 million gallons of oil into the pristine waters of the sound.

Prince William Sound today looks spectacular, a stunning landscape of mountainous fjords, blue-green waters and thickly forested islands. Pick up a stone on a rocky beach, maybe dig a little, though, and it is possible to still find pockets of oil.

“I think the big surprise for all of us who have worked on this thing for the last 25 years has been the continued presence of relatively fresh oil,” said Gary Shigenaka, a marine biologist for the National Oceanic and Atmospheric Administration.

The question of how well Prince William Sound has recovered from what at the time was the nation’s largest oil spill is a contentious one. Exxon Mobil Corp. cites studies showing a rebound.

“The sound is thriving environmentally and we’ve had a very solid, complete recovery,” said Richard Keil, senior media relations adviser with Exxon Mobil.

Government scientists have a different view.

The Exxon Valdez Oil Spill Trustee Council, a state-federal group set up to oversee restoration of Prince William Sound, considers the pink and sockeye salmon to be recovered, as well as the bald eagles and harbor seals. Several other species are listed as recovering but not recovered.

Sea otters have had a rough time. Thousands died in the months following the spill, and the population has struggled to recover in the 25 years since. The U.S. Geological Survey reported earlier this month that the sea otters of the area had finally returned to their pre-spill numbers.

Listed as still not recovering are the herring, a group of killer whales and the pigeon guillemots, a North Pacific seabird.

Rick Steiner, an oceans activist and former professor at the University of Alaska, said the “spill is not over. The damage persists in quite remarkable ways.”

Wills, who fished salmon as well as herring, said the spill left a huge mark on those who made a living from Prince William Sound.

Exxon compensation checks were too late and too little, he said.

“A lot of people got real hurt. I know a lot of guys committed suicide and all that stuff. I got divorced, had an ulcer. It was rough,” said Wills, who now runs a bookshop and cafe in Homer, Alaska.

Among the scientific puzzles of the spill, the fate of the herring is a particular mystery. It’s a vital species for the ecosystem, giving protein to whales, salmon, birds and others.

Prince William Sound was home to a lucrative spring herring fishery that supported fishermen badly in need of cash coming off the long winter in between fishing seasons.

Researchers found lesions and larval abnormalities in herring exposed to the oil. Then, four years after the spill, the herring population crashed dramatically. The reasons are a subject of intense debate, with suggestions that the effects of the spill could have made the herring vulnerable to disease.

“No other stock in Alaska crashed in 1993, so that’s indirect evidence it is spill-related,” said Jeep Rice, who studied the spill for more than two decades as a federal scientist. “That’s kind of weak, and yet it is about as good as we can get in terms of explaining why it happened in that year.”

The herring never really recovered, and the current population is too low to overcome predators. Herring fishing, with a brief exception, has been closed for more than 20 years.

The killer whales of Prince William Sound also have suffered. Two groups were hit especially hard. Scientists saw killer whales from one of the groups swimming through heavy sheens of oil. A Los Angeles Times photo showed whales from the other group swimming near the tanker as it gushed oil. Populations dropped dramatically in the year after the spill.

“The evidence is pretty compelling that it was a spill-related effect on those two groups of killer whales,” said federal marine biologist Shigenaka.

One of the groups continues its slow recovery. The other numbered 22 killer whales at the time of the spill and is down to just seven. Scientists now expect it to go extinct, the end of a genetic line that researchers say has hunted in the area for thousands of years, maybe since the last Ice Age.

The federal and state governments are still weighing the science of the spill’s effects and deciding whether to seek more money from Exxon Mobil for cleaning up remaining oil.

If there is evidence the spill is causing unexpected, continuing damage, the company could be forced to pay up to $100 million on top of the $900 million civil settlement that Exxon paid in 1991. The case lives on in the courts.

The federal and state governments have said more studies are needed, a frustration for federal Alaska District Court Judge H. Russel Holland.

“The court is dismayed that so few of the projects that the governments had expected to be completed by now have been completed,” Holland wrote in a filing last year.

Studies measuring the effects on sea otters and harlequin ducks have now been completed and are awaiting peer review before being released to the public, the federal and state governments said in their latest court filing last week. They said they are still awaiting a study on the effectiveness of techniques for lessening the remaining oil; they figure it is at least two months away from release.

The governments said they are reviewing the results of other studies and will be consulting with the Department of Justice about whether to proceed with seeking money from Exxon Mobil.

They told the judge their next update on the case will be in October, as it approaches 26 years since the Exxon Valdez became the most notorious tanker in history.

Sean Cockerham is a reporter in the Daily News Washington bureau. Emailscockerham@mcclatchydc.com.

Major oil spill after million-gallon barge collides with ship in Texas | wwltv.com New Orleans

Major oil spill after million-gallon barge collides with ship in Texas | wwltv.com New Orleans.

wwltv.com

Posted on March 23, 2014 at 5:57 PM

Updated yesterday at 6:01 PM

Associated Press

McALLEN, Texas — A barge carrying nearly a million gallons of especially thick, sticky oil collided with a ship in Galveston Bay on Saturday, leaking an unknown amount of the fuel into the popular bird habitat as the peak of the migratory shorebird season was approaching.

Booms were brought in to try to contain the spill, which the Coast Guard said was reported at around 12:30 p.m. by the captain of the 585-foot ship, Summer Wind. Coast Guard Lt. j.g. Kristopher Kidd said the spill hadn’t been contained as of 10 p.m., and that the collision was still being investigated.

The ship collided with a barge carrying 924,000 gallons of marine fuel oil, also known as special bunker, that was being towed by the vessel Miss Susan, the Coast Guard said. It didn’t give an estimate of how much fuel had spilled into the bay, but there was a visible sheen of oil at the scene.

Officials believe only one of the barge’s tanks was breached, but that tank had a capacity of 168,000 gallons.

“A large amount of that has been discharged,” Kidd said. He said a plan was being developed to remove the remaining oil from the barge, but the removal had not begun.

The barge was resting on the bottom of the channel, with part of it submerged. He said boom was being set up in the water to protect environmentally-sensitive areas and that people would be working through the night with infrared cameras to locate and skim the oil.

The barge was being towed from Texas City to Bolivar at the time. The Coast Guard said that Kirby Inland Marine, which owns the tow vessel and barge, was working with it and the Texas General Land Office at the scene.

The Coast Guard said six crew members from the tow vessel were in stable condition, but it offered no details about their injuries.

Jim Suydam, spokesman for the General Land Office, described the type of oil the barge was carrying as “sticky, gooey, thick, tarry stuff.”

“That stuff is terrible to have to clean up,” he said.

Mild weather and calm water seemed to help containment efforts, but stormy weather was forecast for the area on Sunday. Suydam said almost every private cleanup outfit in the area was out there helping out under the coordination of the Coast Guard and General Land Office.

Bruce Clawson, the director of the Texas City Homeland Security, told The Daily News in Galveston that the barge sank, but that there is no danger to the community, which is about 40 miles southeast of downtown Houston. Suydam said he could not confirm whether the barge sank.

Tara Kilgore, an operations coordinator with Kirby Inland Marine, declined to comment Saturday.

On its Facebook page, Texas City Emergency Management said the dike and all parks on the water are closed until further notice. And the Coast Guard said that part of the Houston ship channel was closed to traffic.

Richard Gibbons, the conservation director of the Houston Audubon Society, said there is very important shorebird habitat on both sides of the Houston ship channel.

Audubon has the internationally-recognized Bolivar Flats Shorebird Sanctuary just to the east, which Gibbons said attracts 50,000 to 70,000 shorebirds to shallow mud flats that are perfect foraging habitat. He did not know how much oil had been spilled, but said authorities were aware of the sanctuaries and had practiced using containment booms in the past.

“The timing really couldn’t be much worse since we’re approaching the peak shorebird migration season,” Gibbons said. He added that tens of thousands of wintering birds remain in the area.

Monday marks the 25th anniversary of the Exxon Valdez spill off the coast of Alaska. Suydam said that spill spurred the creation of the General Land Office’s Oil Spill and Prevention Division, which is funded by a tax on imported oil that the state legislature passed after the Valdez spill. The division does extensive response planning including pre-positioned equipment along the Texas coast.

Major oil spill after million-gallon barge collides with ship in Texas | wwltv.com New Orleans

Major oil spill after million-gallon barge collides with ship in Texas | wwltv.com New Orleans.

wwltv.com

Posted on March 23, 2014 at 5:57 PM

Updated yesterday at 6:01 PM

Associated Press

McALLEN, Texas — A barge carrying nearly a million gallons of especially thick, sticky oil collided with a ship in Galveston Bay on Saturday, leaking an unknown amount of the fuel into the popular bird habitat as the peak of the migratory shorebird season was approaching.

Booms were brought in to try to contain the spill, which the Coast Guard said was reported at around 12:30 p.m. by the captain of the 585-foot ship, Summer Wind. Coast Guard Lt. j.g. Kristopher Kidd said the spill hadn’t been contained as of 10 p.m., and that the collision was still being investigated.

The ship collided with a barge carrying 924,000 gallons of marine fuel oil, also known as special bunker, that was being towed by the vessel Miss Susan, the Coast Guard said. It didn’t give an estimate of how much fuel had spilled into the bay, but there was a visible sheen of oil at the scene.

Officials believe only one of the barge’s tanks was breached, but that tank had a capacity of 168,000 gallons.

“A large amount of that has been discharged,” Kidd said. He said a plan was being developed to remove the remaining oil from the barge, but the removal had not begun.

The barge was resting on the bottom of the channel, with part of it submerged. He said boom was being set up in the water to protect environmentally-sensitive areas and that people would be working through the night with infrared cameras to locate and skim the oil.

The barge was being towed from Texas City to Bolivar at the time. The Coast Guard said that Kirby Inland Marine, which owns the tow vessel and barge, was working with it and the Texas General Land Office at the scene.

The Coast Guard said six crew members from the tow vessel were in stable condition, but it offered no details about their injuries.

Jim Suydam, spokesman for the General Land Office, described the type of oil the barge was carrying as “sticky, gooey, thick, tarry stuff.”

“That stuff is terrible to have to clean up,” he said.

Mild weather and calm water seemed to help containment efforts, but stormy weather was forecast for the area on Sunday. Suydam said almost every private cleanup outfit in the area was out there helping out under the coordination of the Coast Guard and General Land Office.

Bruce Clawson, the director of the Texas City Homeland Security, told The Daily News in Galveston that the barge sank, but that there is no danger to the community, which is about 40 miles southeast of downtown Houston. Suydam said he could not confirm whether the barge sank.

Tara Kilgore, an operations coordinator with Kirby Inland Marine, declined to comment Saturday.

On its Facebook page, Texas City Emergency Management said the dike and all parks on the water are closed until further notice. And the Coast Guard said that part of the Houston ship channel was closed to traffic.

Richard Gibbons, the conservation director of the Houston Audubon Society, said there is very important shorebird habitat on both sides of the Houston ship channel.

Audubon has the internationally-recognized Bolivar Flats Shorebird Sanctuary just to the east, which Gibbons said attracts 50,000 to 70,000 shorebirds to shallow mud flats that are perfect foraging habitat. He did not know how much oil had been spilled, but said authorities were aware of the sanctuaries and had practiced using containment booms in the past.

“The timing really couldn’t be much worse since we’re approaching the peak shorebird migration season,” Gibbons said. He added that tens of thousands of wintering birds remain in the area.

Monday marks the 25th anniversary of the Exxon Valdez spill off the coast of Alaska. Suydam said that spill spurred the creation of the General Land Office’s Oil Spill and Prevention Division, which is funded by a tax on imported oil that the state legislature passed after the Valdez spill. The division does extensive response planning including pre-positioned equipment along the Texas coast.

U.S. could start energy war with Russia – Winnipeg Free Press

U.S. could start energy war with Russia – Winnipeg Free Press.

By: Washington Post

Posted: 03/23/2014 1:41 PM |

A woman holds a banner that reads:

Enlarge Image

A woman holds a banner that reads: “Putin is Occupier” during a rally against the breakup of the country in Simferopol, Crimea, Ukraine, Tuesday, March 11, 2014. (DARKO VOJINOVIC / THE ASSOCIATED PRESS FILES)

Debate has raged over whether the United States can fight Vladimir Putin on the Russian president’s most favourable ground: energy politics. It can, and it should, particularly because there’s an obvious path forward that coincides with American — indeed, world — economic interests. That path is lifting irrational restrictions on exports and making it easier to build natural gas export terminals.

For years, Putin has used his nation’s wealth of oil and natural gas as a cudgel to bully his neighbours. At present, the European Union’s large imports of Russian natural gas discourage a forceful Western response to Russia’s aggressive actions in Ukraine. Meanwhile, the United States is tapping massive reserves of unconventional natural gas. That has not only made the U.S. self-sustaining in gas, but also driven down the price of U.S. gas to a point well below what Europeans are paying for the Russian stuff. If the federal government allowed more of it to be liquefied and exported, would the Russians lose a share of the European market?

The story is more complicated than that. Russian gas, which doesn’t need to be liquefied to move (by pipeline) into the European market, would enjoy significant price advantages over imported U.S. gas. The interaction of private buyers and sellers would probably direct U.S. exports to places where gas is more profitable to sell, such as Japan and Korea. The result would be a bounty for the U.S. economy and an improved American trade deficit — but not much direct displacement of Russian gas in Europe.

But that’s also not the end of the story. The U.S. entry into the Asian market would diminish Russia’s opportunity to profit there, as it aims to do. Contributing to an already widening and more diverse global supply of liquefied natural gas (LNG) would also give European importers more flexibility in sourcing their fuel — from the United States, Qatar, or others — the sort of market conditions that have already enabled Europeans to renegotiate gas contracts with Russia. The Council on Foreign Relations’ Michael Levi points out that Putin might end up with an uncomfortable choice between maintaining market share in Europe and slashing his prices more.

Ramping up U.S. exports would take years, but the effects would not only be long-term, as some critics charge. Action that communicates a certain intent to allow more LNG exports would send a signal that “the U.S. is open for business,” as the Eurasia Group’s Leslie Palti-Guzman puts it. That could deter Putin from playing the energy card and help many buyers in negotiating long-term contracts.

The economic case for allowing natural gas exports is compelling on its own. Doing so would bring money into the country and uphold the vital principle that energy resources should flow freely around the globe, making the markets for the fuels the world economy needs as flexible and robust as possible. The more major suppliers there are following that principle, the less control predatory regimes such as Putin’s will have over the market.

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