Crude Oil Discussion Board

[JohnCM]

Why it's so hard to quit Russian energy

Ben Geman, author of Axios Generate

Russia's invasion of Ukraine is spurring European Union and U.S. moves to cut imports from Kremlin-backed energy suppliers.

Why it matters: The efforts are especially urgent in Europe, which unlike the U.S. is extraordinarily reliant on Russian oil, gas and coal.

The White House announced a ban on Russian energy Tuesday, but as of last November, Russia provided just 7% of U.S. combined crude and petroleum product imports.

By contrast, Europe's dependence on Russia is a strategic and economic vulnerability and provides large revenues for Vladimir Putin's regime.
Aggressive moves to break that link might also speed movement to climate-friendly energy sources like wind and solar.

The big picture: Russia's role in the overall global energy economy is immense. It's the largest natural gas exporter, and the second-largest crude oil exporter after Saudi Arabia.

By the numbers: Last year, roughly 40% of EU consumption of natural gas — a vital source of heat, power and industrial energy — came from gas imported from Russia.

About a quarter of European oil and petroleum products came from Russia before the invasion. Europe soaks up about 60% of Russia's export of those commodities.

And Russia provides 46% of Europe's coal imports, according to European Commission data.

The plan calls for diversifying suppliers of pipelined and liquefied natural gas from countries including Azerbaijan, Algeria, the U.S. and Qatar.

It also includes faster permitting for renewables projects, greater energy efficiency, development of hydrogen projects, use of home heat pumps and more.

It starts with having enough gas on hand for next winter, something that was not the case this year. A key component of this plan is filling natural gas storage facilities to 90% capacity by Oct. 1.

The EU plan also includes importing more natural gas from friendly nations, such as the U.S., and cutting demand through energy efficiency initiatives and other steps. In total, officials say they could cut the demand for Russian gas by two thirds by the end of 2022.

Reality check: Russia's share of U.S. crude and petroleum product imports isn't trivial, but it's small enough to make the U.S. ban more of a symbolic strike at Putin's regime and revenues.

Plus, it was already starting to happen anyway.

"Most of my member companies had already self-imposed a boycott of Russian crude," Mike Sommers, CEO of the American Petroleum Institute, said in an interview.

"This announcement was already factored into most refiners' situation as they're looking for crude around the world," Sommers added. He cited preliminary federal data showing U.S. imports of Russian crude dropped to nothing in late February.

What we're watching: The European moves to break up with Russian energy are far more complex, especially right now.

"Putin is a very keen student of energy markets and he probably recognized, launching this, that it was a time when oil markets were tight, gas markets were tight and coal markets were tight, so there isn't a lot of spare capacity," Pulitzer-winning energy historian and analyst Dan Yergin said in an interview.

Andrew Freedman contributed reporting.