News round-up, May 23, 2023
Words of the editor…
Natural gas is the new golden currency of political trade…
The sooner the world can wean off of the fossil fuel reliance, the more these geopolitical games will lessen. There will of course still be some tied to the critical minerals of batteries, solar panels, etc., but I don't think it will be nearly as impactful as oil and gas players have been on the global scale over the past many decades.
Matt Chester Energy Analyst, Chester Energy and Policy"A Swedish Nightmare"
– Turkish Prime Minister Recep Tayyip Erdoğan
My article "A Swedish Nightmare," published on February 23, delves into the aftermath of a strategic political move by Russian President Vladimir Putin. This move involved gifting a natural gas hub to Turkey, which caused widespread debate on Turkey's role in preventing neutral Sweden from joining the North Atlantic Treaty Organisation (NATO). It was clear that Russia under Putin would go to great lengths to prevent Sweden from becoming a member of NATO.
What are the most significant factors that determine a country's geopolitical power, and how does money affect it?
The issue of natural gas and its impact on the global energy markets cannot be ignored. In the current political climate, the decisions made by Russian President Vladimir Putin and Turkish Prime Minister Recep Tayyip Erdoğan could significantly impact the energy industry. The location of a natural gas hub in Turkey, strategically positioned between Asia and Europe, has the potential to dramatically influence the economies of many countries in the region.
The controversy – especially in Scandinavian countries – surrounding Turkey's veto of Sweden's application for NATO membership has been analysed from various perspectives, including historical, political, gender-related, and even stupid and misogynistic accusations.
It's worth noting that even former Swedish foreign minister Ann Linde was blamed for being a woman, which supposedly made it difficult to negotiate with a state where men have held power for centuries.
Sweden's gift of a 1739 treaty to Turkey that has symbolic meaning for both nations' security didn't do much good either. It evokes centuries of history, including Sweden's King Charles XII seeking refuge at an Ottoman castle after a disastrous defeat against the Russians. Erdoğan surprised Swedish Prime Minister Ulf Kristersson with an undated letter from a Swedish envoy expressing the king's gratitude for financial help from the Ottomans and their mediation between Sweden and Russia. Learning from history and drawing lessons from it are essential if we are to avoid repeating past mistakes.
The reality is that natural gas is the new golden currency of political trade. And all this political news scenario is further evident in the article of Politico EU name:
“Russia and Turkey need each other in every field possible,” Erdoğan told CNN in an interview aired Friday, emphasizing his own “special relationship” with Russian President Putin is deepening.
“The West is not leading a very balanced approach — you need a balanced approach toward a country such as Russia,” Erdoğan said. “We are not at a point where we would impose sanctions on Russia like the West has done.
Most Read…
Erdoğan: I have a ‘special relationship’ with Putin — and it’s only growing
‘Russia and Turkey need each other in every field possible,’ says Turkish president.
POLITICO EU BY GABRIEL GAVIN, MAY 19, 2023 Biden’s Billion-Dollar Oil Trade Faces a Big Test
Washington awaits bids to refill crude reserves with modified price proposal
WSJ By David Uberti, Updated May 22, 2023Saudi Arabia's energy minister warns speculators ahead of OPEC+ meeting
Short sellers are investors who make bets on the decline of oil prices. However, recent unexpected production cuts announced by OPEC+ caused a price rally, resulting in these investors having to close their positions at a loss.
REUTERS By Andrew Mills and Maha El DahanOpinion : Why global hunger is a national security threat
Our people are currently experiencing hunger. We must find a leader who can help provide the necessary resources to feed them.
WP By José Andrés, May 22, 2023 
The AES Corporation President Andrés Gluski, Dominican Republic Minister of Industry and Commerce Victor Bisonó, and Rolando González-Bunster, CEO of InterEnergy Group, spoke at the Latin American Cities Conferences panel on "Facilitating Sustainable Investment in Strategic Sectors" on April 12 in Santo Domingo, Dominican Republic.How can strategic investment achieve both economic growth and social progress?… What is the role of renewable energy and battery storage in achieving the goals of the low-carbon economy?…
In a speech, Recep Tayyip Erdoğan described Vladimir Putin as a "dear friend" | Alexander Nemenov/Editing by Germán & CoErdoğan: I have a ‘special relationship’ with Putin — and it’s only growing
‘Russia and Turkey need each other in every field possible,’ says Turkish president.
POLITICO EU BY GABRIEL GAVIN, MAY 19, 2023 Recep Tayyip Erdoğan ♥ Vladimir Putin.
Turkey will defy pressure from the West and continue to strengthen political and economic ties with Moscow despite its full-scale invasion of Ukraine, the country’s president has insisted a week before he faces voters in a tense runoff election.
“Russia and Turkey need each other in every field possible,” Erdoğan told CNN in an interview aired Friday, emphasizing his own “special relationship” with Russian President Putin is deepening.
“The West is not leading a very balanced approach — you need a balanced approach toward a country such as Russia,” Erdoğan said. “We are not at a point where we would impose sanctions on Russia like the West has done.”
Despite the country’s membership of NATO, Ankara has stepped up its economic ties with Moscow since the start of the war, increasing imports of cheap Russian oil embargoed by other European countries.
While supplying Ukraine with humanitarian assistance and its domestically made Bayraktar attack drones, Turkey has positioned itself as a neutral party in the conflict, playing host to a series of talks between the two sides.
Erdoğan has also played up his role as a broker in the recently renewed Black Sea grain deal that has allowed supplies from Ukraine’s blockaded ports to reach the global market. In a speech Wednesday, he trumpeted the success of the agreement, describing Putin as a “dear friend.”
The Russia issue has come to the fore of Turkey’s presidential elections after Erdoğan’s liberal democratic challenger, Kemal Kılıçdaroğlu, last week accused Moscow of having a hand in conspiracies and deep fakes designed to turn voters against him.
As neither candidate received the majority required to win the election outright last Sunday, the two will face off once again next weekend. However, with Erdoğan having attracted more than 49 percent of the vote, Kılıçdaroğlu faces an uphill battle to turn the tables on the two-decade incumbent.
In his interview with CNN, Erdoğan hinted that he is unlikely to change his foreign policy stance if he wins a new term, saying that his opposition to Sweden’s NATO membership application would continue.
“We’re not ready for Sweden right now,” he claimed, “because a NATO country should have a strong stance when it comes to fighting terrorism.”
Ankara has repeatedly accused Stockholm of turning a blind eye to members of outlawed Kurdish groups living in exile in the country, demanding Stockholm extradite dozens of “terrorists” back to Turkey as part of an agreement on its accession to the transatlantic military alliance.
Image: Germán & CoCooperate with objective and ethical thinking…
Image: Strategic Petroleum Reserve storage in Texas. The U.S.’s second effort to buy oil for the SPR is based on price differentials. PHOTO: BRANDON BELL/Editing by Germán & CoBiden’s Billion-Dollar Oil Trade Faces a Big Test
Washington awaits bids to refill crude reserves with modified price proposal
WSJ By David Uberti, Updated May 22, 2023The U.S. government’s attempt to refill the skyscraper-sized caverns that hold the country’s emergency oil reserves is coming with a crash course in energy markets: How to think more like a trader.
President Biden last year authorized an emergency sale of more than 180 million barrels from the U.S. Strategic Petroleum Reserve to ease gasoline prices that skyrocketed after Russia’s invasion of Ukraine. The Energy Department sold high, averaging roughly $95 a barrel.
Now the agency is learning that replenishing those stockpiles at the lower rate it wants—between $67 to $72—is more difficult, despite prices sliding near those levels at various points this year. On Monday, benchmark U.S. crude closed at $71.99 a barrel, within Washington’s window to buy.
Biden has deployed the SPR more aggressively than his predecessors, forcing Wall Street to pay attention to moves that could affect oil markets. As crude sputtered in recent months amid a cooling U.S. economy and a gusher of global supplies, some investors have looked to Washington’s proposed purchases as a potential support for prices.
The Energy Department’s first attempt at buying oil this year—and beginning a potential billion-dollar trade—failed. That prompted the agency to revamp its approach to bids in a way some analysts say is more reflective of how crude is traded. The tweaked pricing approach underscores the government’s steep learning curve on how oil companies weigh volatility and risk in a market that can unexpectedly turn on natural disasters, geopolitical tensions or production changes by the Organization of the Petroleum Exporting Countries.
The four reserve sites near the Gulf Coast have about 358 million barrels of crude, down from about 593 million at the beginning of last year, according to the Energy Information Administration. Many analysts say the stockpile is more than enough to weather supply shocks, particularly since drilling output in fast-growing shale regions of Texas and New Mexico has propelled near-record domestic production.
Benchmark U.S. crude pricesSource: Argus MediaThe SPR periodically loans oil to refiners and receives additional supplies in return. But outright purchases have been rare in recent decades.
The Biden administration, which previously said it aims to buy 60 million barrels, has suggested it is in no hurry to refill the SPR without maximizing taxpayer returns. If successful, the new request for proposals could offer a blueprint for additional purchases.
After authorizing the largest release ever from the U.S. emergency Strategic Petroleum Reserve, the Biden administration is signaling it will soon try to refill the stockpile. WSJ explains how this strategy can lower gas prices, and why some are skeptical that it will work. Illustration: Ali Larkin
The Energy Department’s attempt to buy domestically produced sour crude earlier this year sought fixed-price proposals for up to 3 million barrels. But bids came in with higher prices than the agency expected or otherwise missed its specifications.
The fixed price meant companies would have to swallow the risk of the market sliding over a 13-day window as the agency evaluated proposals, said Ilia Bouchouev, managing partner at Pentathlon Investments. Producers likely bumped up their prices to account for the costs of hedging against the risk of oil prices swinging by several dollars a barrel.
“That’s a lot of risk to hold a fixed price for two weeks,” Bouchouev said. “Nobody trades [on a] flat price.”
Instead, the market moves based largely on price differentials between types of crude or locations where they are produced, bought and sold. Those spreads allow traders to account for costs such as transportation and give producers the opportunity to limit the threat of volatility by buying financial instruments such as futures or options contracts.
The Energy Department’s second try at buying up to 3 million barrels of sour crude, with proposals due May 31 and contracts expected to be awarded June 9, swaps its previous pricing approach for one based on differentials. That could help suppliers more accurately forecast costs and help limit potential losses.
Government officials asked companies to propose offers on sour-crude differentials. That figure factors in the average spread between West Texas Intermediate, the U.S. crude benchmark, and an American sour crude gauge known as Mars in the three days after notice of the award.
Those benchmarks were separated by 98 cents as of Friday, according to price-reporting agency Argus Media, meaning companies’ financial risk in the event of market choppiness could be in cents, rather than dollars, per barrel.
Strategic Petroleum Reserve stockpilesSource: Energy Information AdministrationWhat impact do you think the federal government’s moves will have on oil markets? Join the conversation below.
“In theory, the same problem still remains because dealers have to hold this differential for two weeks while waiting for the decision,” said Bouchouev, a longtime trader. “However, the differential is significantly less volatile than the oil price.”
For now, the more pressing question for Biden’s potential oil trade may be whether prices stay within the Energy Department’s target range.
Wall Street was bullish on oil late last year, but many analysts more recently slashed forecasts as Western economies slowed, Russia continued pumping out crude and China’s appetite for energy failed to push prices higher.
Seaboard: pioneers in power generation in the country…
…“More than 32 years ago, back in January 1990, Seaboard began operations as the first independent power producer (IPP) in the Dominican Republic. They became pioneers in the electricity market by way of the commercial operations of Estrella del Norte, a 40MW floating power generation plant and the first of three built for Seaboard by Wärtsilä.
Saudi Arabia's Minister of Energy P. Abdulaziz bin Salman Al-Saud and OPEC Secretary-General Haitham al-Ghais shake hands at the Organisation of the Petroleum Exporting Countries(OPEC)/REUTERS/Editing by Germán & CoSaudi Arabia's energy minister warns speculators ahead of OPEC+ meeting
Short sellers are investors who make bets on the decline of oil prices. However, recent unexpected production cuts announced by OPEC+ caused a price rally, resulting in these investors having to close their positions at a loss.
REUTERS By Andrew Mills and Maha El DahanDOHA, May 23 (Reuters) - Saudi Arabia's energy minister Prince Abdulaziz bin Salman said on Tuesday he would keep short sellers "ouching" and told them to "watch out", days before a planned OPEC+ meeting to decide on future oil policy.
"Speculators, like in any market they are there to stay, I keep advising them that they will be ouching, they did ouch in April, I don't have to show my cards I'm not a poker player... but I would just tell them watch out," he told the Qatar Economic Forum organised by Bloomberg.
Short sellers are investors that bet on oil prices falling, and hence when an unexpected move by OPEC+ to cut production causes a rally, they are forced to close their positions at a loss.
Saudi Arabia, the world's largest oil exporter, and other OPEC+ producers announced surprise voluntary cuts in April that lifted prices after a slump driven by concerns that a banking crisis could impact demand.
Analysts at Standard Chartered bank said in a note this week that short speculative positions are now as bearish as they were at the start of the pandemic in 2020.
"We think the latest build-up in short positions significantly increases the probability of further production cuts when OPEC+ meets," the analysts said.
Brent prices were trading flat at $76.01 a barrel at 1020 GMT, more than $10 below their peak after OPEC+ announced the additional cuts in April.
OPEC+ members are due to meet on June 4 in Vienna to decide on their next course of action.
The April cuts were described as "inadvisable" by Washington, which had also been critical of the group's decision to cut production in October.
The minister said the alliance would continue to be proactive, preemptive and hedge against what may come in the future, regardless of any criticism.
"We should be brave enough to attend to the future without continuing the so-called 'kicking the can' policies, those policies that may allow us to fend the situation for this month, next month or the month after but with that we are losing sight of our intentions and our more important objectives," he said.
The Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, known as OPEC+, would continue to be a responsible market regulator, the prince added.
He again blamed the Paris-based International Energy Agency (IEA) and its initial predictions for a 3 million barrel per day (bpd) fall in Russian production on the back of the Ukraine war for misleading the market.
"Look who did the most in trying to bring forecasts and data and projections that really created most of the volatility that we have had in 2022 and continue to do so?" Prince Abdulaziz said.
"There is an organisation called the IEA, I think they have proven that it really takes special talent to be consistently wrong."
The IEA did not immediately respond to a request for comment.
Migrant families from Nicaragua and Honduras walk along the U.S. southern border on Jan. 23, 2022, near Sasabe, Ariz. (Salwan Georges/The Washington Post)/Editing by Germán & CoOpinion : Why global hunger is a national security threat
Our people are currently experiencing hunger. We must find a leader who can help provide the necessary resources to feed them.
WP By José Andrés, May 22, 2023 *José Andrés is a chef and founder of the new Global Food Institute at George Washington University.
Threats to U.S. national security are not just measured in missiles, armies and terrorists. Political and economic turmoil, in countries that are important to America and its allies, can also be overwhelming.
That’s why fighting hunger and thirst is no longer just a challenge for aid workers. The scale of the global crisis is so great that hunger now represents a threat to our security, our borders and our projection of power.
Don’t take a chef’s word for it. Over the past decade or so, the U.S. intelligence community assessed the likely impact of global food and water insecurity.
U.S. security agencies predicted a world, right around now, when water shortages and floods would “risk instability and state failure, increase regional tensions, and distract them from working with the United States on important US policy objectives.”
They forecast that in countries of strategic importance to us, “declining food security will almost certainly contribute to social disruptions and political instability.”
José Andrés: What the pandemic can teach us about treating hunger
I have argued for a national security adviser for food and a secretary of food. I have proposed the creation of a National Food Agency to center food policy on the needs of American citizens.
But I have not succeeded in convincing my friends on either side of the aisle on Capitol Hill or at the White House that food must stop being a policy afterthought.
The time has come for us all to prioritize food in our public policy — at home and internationally.
Consider one of the most divisive factors in politics today, both in the United States and in Europe: immigration from the Global South.
What is driving so many families to risk their lives on perilous journeys through the jungle, across rivers or on the open seas?
Violence, corruption and lack of opportunity are nothing new in the Western Hemisphere. Though they are clearly factors in the surge to the U.S. southern border, there is something new about what is moving so many people today.
That is food. To be precise: malnutrition, hunger and food price inflation.
Three years ago, the majority of migrants came from the Northern Triangle countries: Honduras, Guatemala and El Savador. Now, most migrants at our border come from other countries, including Venezuela, Colombia, Nicaragua and Cuba.
What ties these countries together?
Cuba is suffering extraordinary food shortages and price hikes. About three-quarters of Venezuelans live on less than $1.90 a day, which, economists say, is nowhere near enough to feed one person, never mind a family. In some regions of Nicaragua, almost 1 in 4 children under the age of 5 has chronic malnutrition.
I could tell you the same stories about the Northern Triangle countries a few years ago. Or I could tell you about the Honduran family we fed as they sheltered under a bridge in McAllen, Tex. They recognized the logo of World Central Kitchen, the nonprofit I founded, because we had fed them in Honduras the year before, when back-to-back hurricanes wiped out their farm.
As severe drought devastates crops across South America, the World Food Program recently warned that “the whole continent is on the move.”
We cannot build a wall high enough to stop the army of mothers with hungry children in their arms.
Our problem is not that we lack the resources or know-how to relieve these unbearable pressures. Our problem is that we lack focus.
José Andrés: Our people are hungry. We need a leader who will feed them.
The United States spends around $25 billion a year on Customs and Border Protection and Immigration and Customs Enforcement. Texas alone wants to spend $4 billion on the border.
That’s what the United States spends on feeding the whole planet through the World Food Program in a normal year. It’s four times what the administration proposes to spend on stabilizing the democracies and economies of Central America to help stop migration.
Food is not just an existential challenge beyond our borders. In the United States, about half of the adult population either has diabetes or is prediabetic. Two in five adults are obese. Last year, supplies of baby formula collapsed because of contamination at one factory, and the shortages endure.
The Government Accountability Office recently found that the federal government leads 200 different efforts across 21 different agencies to improve our diets. Yet we still cannot match our farming subsidies to our nutritional needs.
Everybody and nobody is in charge of food.
Food can be the solution to multiple crises: from our health to our climate, from immigration to global security. But only if we think differently and prioritize our food.
Our global food systems are broken, and we urgently need structural change. That starts right here in Washington.