Saturday, April 2, 2022

"A Rubicon of Methane"

"A Rubicon of Methane"
by Joel Bowman

Buenos Aires, Argentina -  "A not-so funny thing happened on the way to... global petrodollar hegemony. (Didn’t see that coming, did ya?) As the rest of the world debated what must (“MUST!”) be done to address the Russo-Ukrainian conflict, one Vladimir Vladimirovich Putin quietly declared that the Rubicon shall henceforth flow (or not) with methane. The newswires were on the story..."March 31 (Reuters) - Russian President Vladimir Putin said on Thursday that he had signed a decree saying foreign buyers must pay in roubles for Russian gas from April 1, and contracts would be halted if these payments were not made.

"In order to purchase Russian natural gas, they must open rouble accounts in Russian banks. It is from these accounts that payments will be made for gas delivered starting from tomorrow," Putin said in televised remarks. If such payments are not made, we will consider this a default on the part of buyers, with all the ensuing consequences. Nobody sells us anything for free, and we are not going to do charity either - that is, existing contracts will be stopped."

As of this writing, Russian gas heats and lights up one in every three homes across Europe, a not-insignificant contribution to the power supply for the entire continent. And, as our friend Byron King mentioned in this space before, Europe has been steadfastly hampering its own ability to produce energy, from shuttering nuclear plants in Germany to “going green” elsewhere.

As such, more than a few nations are fast approaching a crucial decision point: abide by western sanctions and freeze in the dark... or renegotiate in Vlad’s rubles? For quick reference, Russia accounted for about 45% of Europe’s total gas imports in 2021, with Germany, Turkey, Italy, Belarus, and France receiving most of the feed.

Plenty are those happy to stand with their Ukrainian brothers... as long as they can do so from a safe, warm, well-lit distance. The world will see who is left standing after this latest development. As for importers of Russian oil, China leads the pack... followed by Germany, the Netherlands, the U.S., Poland and South Korea.

Meanwhile... At the behest of democratic lawmakers, President Biden this week announced an unprecedented release from the nation’s Strategic Petroleum Reserves – 1 million barrels per day for the next 180 days. For those doing the sums at home, 1 million barrels equals roughly 1/20th of the US daily consumption... or about the same amount as the Keystone XL pipeline is NOT delivering from your friendly, NATO card-carrying neighbors north of the 49th parallel. (That project was friendly-fired on Mr. Biden’s first day in office.)

Bonus Irony: Readers will recall that it was Senator Chuck Schumer who, last November, began urging Biden to tap the nation’s Strategic Petroleum Reserve. “We’re here today because we need immediate relief at the gas pump and the place to look is the Strategic Petroleum Reserve,” Schumer pleaded at a press conference in New York at the time.

If you feel like you’ve heard Chucky’s name in conjunction with the SPR before, that’s because you have. It was the very same Senator Schumer who was seen crowing from the rafters not two short years ago, after having proudly blocked the previous administration’s initiative to refill the reserve tanks “to the brim” back in March, 2020. Crude oil was $24.49 per barrel at the time, or about a quarter of today’s price. Boy, that extra capacity sure would have been nice to have on tap now, eh? Oh well..."

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