The Energy War

Normally, New York Times columnist Tom Friedman is a bit of a magical thinker. He loved the Green New Deal; he has been all-in with renewables; he loves clean energy and wants to save the planet by replacing dirty fossil fuels with nice clean energy.

In short, he is with the program.

And yet, Friedman concludes, after consulting his crystal ball, we are currently involved in an energy war with Russia. Don’t be quite so worried about the chance that Putin is going to drop a nuclear weapon on Kiev. Worry about him shutting down his oil and gas exports. It is a useful counterargument for those who moon over the glory of Ukraine’s fighting force and who mock the less than proficient Red Army.

If Putin does so, the result will be a spike in the price of energy and a lot of collateral calamities. So, let’s war game the situation.

Friedman begins:

As the Russian Army continues to falter in Ukraine, the world is worrying that Vladimir Putin could use a tactical nuclear weapon. Maybe — but for now, I think Putin is assembling a different weapon. It’s an oil and gas bomb that he’s fusing right before our eyes and with our inadvertent help — and he could easily detonate it this winter.

If he does, it could send prices of home heating oil and gasoline into the stratosphere. The political fallout, Putin surely hopes, will divide the Western alliance and prompt many countries — including ours, where both MAGA Republicans and progressives are expressing concerns about the spiraling cost of the Ukraine conflict — to seek a dirty deal with the man in the Kremlin, pronto.

As for energy policy, we, like most of Europe have a lot more magical thinking and adolescent aspirations than we do policy:

 In an energy war like the one we’re in now, you need to be clear about your goals and priorities. As a country, and as a Western alliance, we have no ladder of priorities on energy, just competing aspirations and magical thinking that we can have it all.

Friedman does not mention the drawdown of diesel fuel, situation that is an accident waiting to happen, but he does reject the Biden administration policy of drawing down the Strategic Petroleum Reserve.

If Putin is as clever as Biden is not, he will want the United States to do what Biden is doing-- greatly enhancing out vulnerability:

It starts with getting the United States to draw down its Strategic Petroleum Reserve. It is a huge stock of crude oil stored in giant caverns that we can draw on in an emergency to offset any cutoff in our domestic production or imports. Last Wednesday, President Biden announced the release of 15 million more barrels from the reserve in December, completing a plan he laid out earlier to release a total of 180 million barrels in an effort to keep gasoline prices at the pump as low as possible — in advance of the midterm elections. 

Evidently, Friedman does not approve. No one really does:

People were really hurting from $5- and $6-a-gallon gasoline. But using the reserve — which was designed to cushion us in the face of a sudden shut-off in domestic or global production — to shave a dime or a quarter off a gallon of gasoline before elections is a dicey business, even if the president has a plan for refilling it in the coming months.

Next, the European Union is getting ready to ban crude oil imports from Russia:

Next, Putin is watching the European Union gear up for a ban on seaborne imports of crude oil from Russia, starting Dec. 5. This embargo — along with Germany and Poland’s move to stop pipeline imports — should cover roughly 90 percent of the European Union’s current oil imports from Russia.

The policy will be designed to fix the price of Russian oil. Will it work? Friedman says it will not:

My sources in the oil industry tell me they seriously doubt this Western price fixing will work. Russia’s OPEC Plus partner Saudi Arabia is certainly not interested in seeing such a buyers’ price-fixing precedent set.

If China comes back into the market in a serious way, it will increase demand and also prices:

Now that Xi has locked in his third term as general secretary of the Communist Party, many expect that he will ease up on his lockdowns. If China goes back to anything near its normal gas consumption and stops re-exporting its excess, the global gas market will become even more scarily tight.

And then there is the situation in Ukraine-- where Putin is hard at work destroying Ukraine’s ability to generate electricity-- a cold, dark winter beckons:

Last, as I noted, Putin is trying to destroy Ukraine’s ability to generate electricity. Today more than one million Ukrainians are without power, and as one Ukrainian lawmaker tweeted last week, “Total darkness and cold are coming.”

If, in December Putin halts Russian oil and gas exports to countries supporting Ukraine, the problems will be calamitous:

So add all of this up and then suppose, come December, Putin announces he is halting all Russian oil and gas exports for 30 or 60 days to countries supporting Ukraine, rather than submit to the European Union’s fixing of his oil price. He could afford that for a short while. That would be Putin’s energy bomb and Christmas present to the West. In this tight market, oil could go to $200 a barrel, with a commensurate rise in the price of natural gas. We’re talking $10 to $12 a gallon at the pump in the United States.

In the end, we seem to be preparing to be taught a rather dire lesson, of what happens when you shut down fossil fuel production and make yourself dependent on outside forces that do not necessarily have your best interests at heart. Friedman does not quite say that this form of energy war is the normal consequence of a grossly mismanaged government energy policy, but you and I know that it is. Increasing our dependence on renewables is whistling past the graveyard.