Apr
17

ANALYSIS: Russia-Ukraine Crisis & Its Implications for Energy Markets

 
What are the implications of the Russia-Ukraine crisis for oil and natural gas markets? How do these implications vary should the situation escalate? What is the likelihood of sanctions against Russia’s energy sector? What other policy options remain for the West? Today, Securing America’s Future Energy (SAFE) and Roubini Global Economics (RGE) are releasing an Intelligence Report, “Russia-Ukraine Crisis and Its Implications for Global Energy Markets,” which provides in-depth insight into how energy and geopolitics have both enabled and exacerbated the unfolding crisis. Most troublingly, the report finds that not only is conflict between Russia and Ukraine increasingly likely, but high oil prices have enabled Russia to finance its muscular foreign policy, and continued escalation has potentially significant implications for oil and natural gas markets, including higher and more volatile prices. In the report, SAFE and RGE see three possible scenarios developing: further Russian military incursion into Eastern Ukraine (the most likely scenario at 50 percent); continued destabilization of Eastern and Southern Ukraine (less likely at 40 percent); and de-escalation (least likely at 10 percent). The report explores the potential short-term and long-term energy and geopolitical implications of each of these scenarios.

In the event of any additional Russian military incursions into Eastern Ukraine, the report finds that energy prices would strengthen, especially for natural gas, given the possibility of supply disruptions. As SAFE explored earlier this year in “Oil Security 2025: U.S. National Security in an Era of Domestic Abundance,” high oil revenues have increased Russian foreign policy leverage, indicating the likelihood of a more assertive Russian foreign policy in a world where $100 barrel oil is the “new normal,” and where Russia continues to reap vast oil and natural gas export earnings. Given Russia’s dominant role in global energy markets, the SAFE-RGE report argues that no biting energy sanctions will likely be implemented to decelerate the Russia-Ukraine conflict. From an energy policy perspective, today’s report notes that U.S. LNG exports would help liberalize gas markets and put pressure on Russian revenues; however, increased European natural gas production and improved energy efficiency would provide more lasting measures of security for countries heavily reliant on Russian gas. “Ultimately, the best antidote to Europe’s reliance on Russian energy is greater domestic production in Europe,” the report finds. “The United States could stimulate European domestic oil and gas production by sharing expertise on unconventional production techniques and exporting U.S. production technology to Europe.” This SAFE-RGE Intelligence Report is the first in a series that will explore breaking events affecting the global energy landscape. All SAFE-RGE Intelligence Reports can be found at www.secureenergy.org.
Apr
15

UPDATED: Saudi Arabia’s Military Spending Surge

 

Thanks to a new report from the Stockholm International Peace Research Institute (SIPRI), we have learned that Saudi Arabia, among other Middle Eastern nations, is pumping billions of dollars into its military spending. The Kingdom now has the fourth largest military budget in the world. Spending jumped 14 percent from 2012 to 2013 leapfrogging that of the UK, Japan, and France. Perhaps most ...

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Apr
11

VIDEO: Robbie Diamond on CNBC Squawk Box

 

Earlier this week, SAFE's CEO Robbie Diamond spoke about the recent update to SAFE's Oil Security Index, in which the United States moves from 5th to 6th place. In addition to new rankings, the update contains the latest data, and features a spotlight on Russia, which has fallen to last place (or least energy secure) of the countries surveyed. Click ...

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Apr
11

An Expensive Path to Energy Security

 

This week, the Energy Information Administration updated its estimates of United States crude oil and natural gas reserves, and found that U.S. crude oil reserves have reached their highest point in 36 years. By the numbers: U.S. oil reserves (including both crude oil and lease condensate) increased by 4.5 billion barrels, or 15.4 percent, since 2011. This is the largest annual ...

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Apr
11

Russia, Energy Security, and Political Risk

 

Russia has fallen to dead last in the latest update of the SAFE-RGE Oil Security Index, making it the least energy secure of the thirteen countries ranked. This ranking might surprise some, given Russia’s recent aggression in Ukraine and its track record of demonstrating its energy clout by cutting off European energy supplies.  The costs and political struggles Europe faces ...

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