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TAKEAWAYS: Some takeaways from the news of the European Union’s Russian oil ban:
Hungary was bypassed: Notably, the plan exempts Russian exports sent via the so-called “friendship,” or Druzhba, pipeline—a Soviet-era line that supplies crude to the landlocked countries of Hungary, Slovakia, and the Czech Republic. In total, the pipeline provides an estimated 600,000 barrels of Russian crude per day, representing a combined total of 10% of EU oil imports.
The plan will take effect over the next six to eight months, leaders said—a timeline purposely designed to help cushion the pain for countries transitioning to new suppliers.
But Hungary’s approval was critical. For weeks, Prime Minister Viktor Orban had been a thorn in the side of EU leaders, threatening to blow up the deal due to the economic harm he said it would cause his country. Ultimately, leaders were forced to capitulate to his demands —delivering him a birthday gift (he’s 59 as of today).
Even so, the ban is a victory for the EU, which has struggled to unify its member nations behind an oil ban. "The sanctions have one clear goal: To prompt Russia to end this war, to withdraw its troops, and to agree a sensible and fair peace with Ukraine," German Chancellor Olaf Scholz told reporters.
In the short-term, pain in the West will increase. In the weeks since the Russian invasion, oil exports have remained largely stable, and some believe the ban will simply reorient, rather than restrict, Russian crude to buyers in India and Asia, who have seized on the discounted supply and helped cushion the blow caused by Western sanctions.
Within hours, potential new buyers were lining up to secure additional Russian supplies: India is expected to continue to keep purchasing at at least current levels, eager to cash in on the discounted crude. This month, it purchased roughly 700,000 barrels per day from Moscow, according to an estimate from the petroleum shipping firm Kpler. Reuters reports that China has also increased its purchases of Russian oil. That demand from other buyers is expected to help offset any pain to Moscow, at least in the short term, and cushion the impact the sanctions package might have.
Analysts say that for now it will likely be EU countries who feel the most pain as they struggle to secure alternative supplies.
News of the embargo touched off another day of market volatility, sending oil futures skyrocketing: International benchmark Brent Crude saw a 1.90% increase, rising to $123.98 a barrel in the early hours of trading. And futures for the U.S.-based West Texas Intermediate climbed to their highest levels in more than a decade, rising as high as $119.10 a barrel — a roughly 3.50% spike.
Longer-term, Moscow is expected to feel the squeeze: The EU’s new restrictions are expected to decrease Russian output by roughly one million barrels per day once they are fully in effect, according to a Kpler analysis—representing a roughly 10% drop in production.
Bigger picture: The tortured, weeks-long process is just the end of the beginning for EU leaders, who vowed to pass additional sanctions packages targeting Moscow’s energy sector. Next up, they’ll be looking to phase out Russian gas. In 2021, the EU imported roughly 45% of its natural gas from Russia, according to the International Energy Agency.
Already, there’s been interest by some EU members in beginning work on a seventh round of sanctions that would include a gas provision, but others quickly threw cold water on the idea.
"Russian oil is much easier to compensate for ... gas is completely different, which is why a gas embargo will not be an issue in the next sanctions package," Austrian Chancellor Karl Nehammer told reporters.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email jbeaman@washingtonexaminer.com or bdeppisch@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
GREEN GROUP SUES STATE OVER HOCHSTEIN FOIA: Friends of the Earth filed suit against the State Department today in an attempt to compel it to release information about senior adviser for energy security Amos Hochstein, whom the group accused of serving fossil fuel interests in his role leading the administration’s energy diplomacy.
FOE filed its complaint in D.C. federal court after the department declined to expedite the Freedom of Information Act request, which it filed with State earlier this month.
DEUTSCHE BANK RAIDED AS PART OF GREENWASHING PROBE: German law enforcement searched the Frankfurt offices of Deutsche Bank and asset management subsidiary DWS Group earlier today as part of an investigation into whether they misled investors about green investment products, according to multiple reports.
Around 50 people were involved in the raid, including federal police, according to Bloomberg, which broke the story.
The search was sparked by reports that DWS, “when marketing so-called ‘green financial products’ had sold these financial products as ‘greener’ or ‘more sustainable’ than they actually were,” the city’s public prosecutors’ office said.
SEC: The development follows news from August that the SEC began investigating DWS after former executive Desiree Fixler said the firm had been misleading about its environmental, social, and governance investment credentials.
A commission spokesperson declined to confirm or deny the investigation at the time.
Since then, SEC has proposed new rules to crack down on greenwashing. The commission announced the proposals last week, one of which would increase the disclosure requirements for ESG investment funds.
EPA WAIVES VAPOR PRESSURE RESTRICTIONS IN TEXAS COUNTIES: The EPA issued a temporary waiver on Saturday allowing the sale of higher volatility gasoline in 34 eastern Texas counties in response to a refinery outage.
The Texas Commission on Environmental Quality requested the waiver in order to help alleviate fuel shortages after a crude unit failed at the Delek Refinery in Tyler, Texas. The waiver allows sale of gasoline with a Reid vapor pressure of no more than 9 psi, rather than 7.8 psi under the typical restriction for the region.
The EPA regulates gasoline volatility under authority granted by the Clean Air Act to limit gasoline emissions during the summer months.
SMR TECH POSES LARGER WASTE CHALLENGE: STUDY: Small modular nuclear reactor technologies will generate more radioactive waste than conventional nuclear power plants, according to a new study from researchers with Stanford University and the University of British Columbia.
Stanford previewed the research, which will be published this week, in a blog yesterday. Researchers concluded that SMRs are “inferior to conventional reactors with respect to radioactive waste generation, management requirements, and disposal options.”
One researcher said the SMR designs studied, which include Toshiba’s, NuScale’s, and Terrestrial Energy’s designs, will increase the volume of nuclear waste by factors of between 2 to 30.
The study could feed anti-nuclear sentiments which tend to be based on worries about radioactive waste management.
A number of western nations, including the U.S. and U.K., are banking on the commercial viability of SMRs to help them reduce carbon emissions.
HHS INTRODUCES ENVIRONMENTAL JUSTICE OFFICE: The Department of Health and Human Services announced a new Office of Environmental Justice today whose mission is to help protect “disadvantaged communities and vulnerable populations on the frontlines of pollution and other environmental health issues.”
The office will be part of HHS’s larger Office of Climate Change and Health Equity, which President Joe Biden established via executive order during his first week in office.
The Rundown
Wall Street Journal While electric vehicles proliferate, charging stations lag behind
Bloomberg Why tiny solar projects play an outsized role in powering Puerto Rico
Calendar
WEDNESDAY | JUNE 8
10:00 a.m. 406 Dirksen The Senate Environment and Public Works Committee will consider the nominations of Annie Caputo and Bradley R. Crowell to be members of the Nuclear Regulatory Commission.