Demand for US oil remains high despite rising prices

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Welcome back to your Tuesday energy source

The latest report of the IPCC has been published and made for some wonderful reading. Despite some pockets of progress, greenhouse gas emissions rose six percent last year and are expected to rise again this year – the chances of limiting warming to 1.5C degrees are slim.

UN Secretary-General Antonio Guterres has sounded the alarm: “We are on the verge of more than doubling the 1.5-degree threshold agreed in Paris.” . . Some government and business leaders are saying one thing, but doing another. Simply put, they are lying. “

In today’s newsletter, I have a note on America’s growing energy demand. Record-high pump prices are still not the reason people reduce driving. Miles has reported on the response to the atrocities committed by Russian troops in Bucharest, Ukraine, which may have included harsh crackdowns on Russian oil and gas flows. As Amanda shows in the data drill, the steps taken so far have not hindered the flow of Russian energy, which is the main engine of the country’s economy.

And another reminder that our Energy Source Live Conference is coming to Houston (and online) on Thursday, April 7th. If you haven’t already, sign up and join us.

Thank you as always for reading!

Justin

US drivers are willing to pay at the pump

Record high prices at fuel pumps are not reducing Americans.

As I reported this weekend, the demand for gasoline in the United States continues to grow. Despite petrol prices hitting record highs earlier this month and above $ 4 per gallon, buyers are, so far, not moving away from large gas-gazelle trucks and sport utility vehicles. It may not sound like much more expensive to our European readers who pay a lot more to meet, but it does bite harder in the United States where travel trends are longer and cars are much less fuel efficient.

Why high fuel prices are not persuading people to reduce? There are a couple of factors in the game.

For one, American consumers are in relatively good financial shape even after storing cash during the epidemic. Although fuel prices are high, they are not eating into Americans’ wallets the way they did in the past.

Petrol spending averages about 3.1 percent of total personal spending, according to Michael Tran, an analyst at RBC. In the past, where high prices forced people to burn less fuel, it was about 4 percent – or more, indicating that current prices are not expanding people’s money as much as they seem at first glance.

Despite the $ 4 petrol sticker shock, “the psychological impact is worse than reality,” Tran says.

Another important reason for the increase in demand despite the high prices is that the country is still recovering from the epidemic. Analysts say people are likely to make trips that they have postponed for two years, even if high fuel costs make road trips or flights more expensive.

“If you have to pay an extra 50 or 60 cents a gallon to visit your parents, grandparents or friends that you haven’t seen in two years, you’re going to do it anyway,” Tran added.

Analysts say fuel demand, already back in pre-epidemic levels in the United States, will continue to rise higher in the summer, usually during the peak driving season, even if prices are high.

There’s not even a hint that the high price of gasoline is breaking America’s ever-present love affair with big trucks and SUVs. Sales of electric cars are growing rapidly, but a small portion of total car sales remain at less than 5 percent. I’ve talked to a number of auto dealers around Houston who say the demand for big trucks and SUVs is as strong as ever – they make up about three-quarters of all sales.

When can we see consumers begin to bow? Analysts say the national average price is likely to rise above $ 5 per gallon.

The last severe fuel demand hit in 2008, when the price of the pump was about what it is now. But when adjusted for inflation, it would indicate an average pump price of about 20 5.20 per gallon, which is about $ 1 gallon higher than today. The price of crude oil worldwide will have to rise to about $ 200 per barrel to raise the price of fuel so much. (Justin Jacobs)

Europe bans Russian coal and oil after Bucha assassination

A European embargo on Russian coal and oil imports is on the table as part of a new wave of sanctions in response to reports of atrocities perpetrated by Russian troops in Ukraine.

Footage has surfaced over the weekend of civilian killings and mass graves in the town of Bucha, just outside Kiev. The United States and the European Union have said they will respond with tougher sanctions.

French President Emmanuel Macron said yesterday that there were “very clear indications” that war crimes had been committed and that any new sanctions should include coal and oil. EU Environment Commissioner Virginias Cinquevicius echoed that call.

The commissioners are expected to formally approve the fifth package of sanctions on Russia today, which member states will vote on tomorrow. Given the dependence of member states on Russian imports, any given intensity could exclude gas.

Macron said French authorities were coordinating with other EU member states in the next steps – particularly Germany, which is wary of cutting off Russian energy imports.

Pointing to the state of European energy policy, meanwhile, the head of Enel, the world’s second-largest utility, said the bloc should have tackled its dependence on imported gas “aggressively” long ago.

U.S. President Joe Biden has said a war crimes tribunal should be set up to investigate the killings, and said the United States would consider adding more sanctions. Washington has already banned Russian coal, oil and gas, and the White House has indicated it is considering expanding the net on some existing sanctions to hurt third parties.

Our Lex columnists argue that unilateral imposition of such so-called “secondary sanctions” by the United States could be prevented.

Beijing, meanwhile, has been silent on alleged war crimes, whose response would be crucial to any attempt to isolate Russia from the world market. (Miles McCormick)

Data drill

The United States, the EU and its allies have imposed tough sanctions on Russia, including a US embargo on Russian oil and gas imports and the exclusion of several Russian banks from the international financial system. Although it is difficult to measure the effectiveness of sanctions, analysts’ data from Cairo suggest that the current round of sanctions has not done much harm to the Russian economy.

According to Cairos, key indicators of Russia’s economic activity – coal power generation and cement production – have not yet deviated from historical levels. The agency also observed an increase in the number of crude oil tankers leaving Russian ports after a sharp collapse following the Ukraine invasion. Cairos points to India, a top consumer of oil and a country highly dependent on oil imports, as an emerging market for cheap Russian crude oil. (Amanda Chu)

The line chart of the number of crude oil tankers leaving Russian ports rose 6 percent, indicating that Russia's oil trade continues despite sanctions.

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Energy Source is a bi-weekly energy newsletter of the Financial Times. It is written and edited Derek Brower, Miles McCormick, Justin Jacobs And Emily Goldberg.

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