Daily Energy Report
EU power generation by source, Russia’s secret oil trading, Russia refining, India LNG deal, US oil dominance, Houthis attack ship, Permian nuclear waste war, Rosneft profit, and more.
Chart of the Day: Recession & EU Power Generation by Source
Summary
Figure (1) above shows how the power generation mix in 2023 changed from that of 2022. The figure shows that the share of natural gas and coal declined meaningfully while the share of renewables increased.
EOA’s Main Takeaway
On the surface the chart shows the success story of the EU transitioning from fossil fuel to renewable energy. But as you dig deeper, you discover a completely different story.
EU power generation declined in 2023 by 71 terawatt hours because of recession in some countries and low economic growth in others. The sun will rise, and wind will blow regardless of economic conditions. But when demand declines, managers can control and reduce gas and coal generation. In other words, during periods of recession and low economic growth, the share of renewable energy rises. When economies grow at high rates, the sun rises and wind blows regardless, but to meet the growing demand for energy, managers must use more natural gas and coal. Power consumption rises along with fossil fuel use.
Add to that two facts: 1. Heavy rains in some areas increased the share of hydro power, especially in countries like Spain and Portugal. 2. The winter was relatively mild, which reduced the need for additional fossil fuel power generation.
To conclude, higher economic growth, less rain, and a severe winter will change the picture above: it will increase the share of gas and coal consumption. It might also lead to an increased use of oil (under “others” in Figure 1 above, along with remaining sources).
Story of the Day
WSJ: The Secret Oil-Trading Ring That Funds Russia’s War
Summary
A trader in Azerbaijani is credited with creating a covert network that handled Russian oil exports worth at least $33 billion in 2023. This network involved using various companies to conceal transactions and evade sanctions, making it hard to trace the origins and beneficiaries of the shipments. The U.S. Justice Department is investigating this trader and one in the UAE.