Reader JohnH* citation Coverage
EU officers assault Joe Biden over exorbitant fuel costs, arms gross sales and commerce as Vladimir Putin’s battle threatens to destroy Western unity.
…“The very fact is, in the event you take a look at it soberly, the nation that advantages probably the most from this battle is the USA as a result of it sells extra fuel and at larger costs, and since it sells extra weapons,” a senior official advised POLITICO. ”
Though the quote is taken verbatim from Politico, it’s not clear to me that pure fuel costs are skyrocketing within the European context. Right here is the information for US pure fuel futures (blue line) versus Dutch TFF futures (inexperienced line).
Determine 1: US pure fuel, USD/MMbtu, (blue, left scale) and TTF pure fuel, EUR/MWh (inexperienced, proper axis). Supply: Tradingeconomics.com, accessed 29/11/2022.
Costs are proven in several models (Eur/MWh for TTF, USD/MMbtu for US), so a direct comparability just isn’t potential. Nonetheless, we are able to see that TTF costs are a lot decrease than they have been earlier within the yr (though a lot larger than they have been two years in the past).
What about LNG. Right here, as I famous, the markets are segmented because of the skill to move and convert from liquid to gaseous type. EIA Notes for the week ending 11/16:
Actions in worldwide pure fuel futures costs have been combined this week. Based on Bloomberg Finance, LP, weekly common futures costs for liquefied pure fuel (LNG) cargoes in East Asia fell 85 cents to a weekly common of $27.06/MMBtu, and contracts at pure fuel futures for supply to the Title Switch Facility (TTF) within the Netherlands, Europe’s most liquid pure fuel market, rose 15 cents to a weekly common of 34, $10/MMBtu.
Ought to this be anticipated (relatively than whether or not this can be a “good” or “truthful” consequence)? I’d say sure, given what we all know concerning the market (see this Publish). The quote within the submit is from Loureiro et al. (2022):
…[T]This research performs progress convergence checks and clustering evaluation on a panel of 4 established fuel value benchmarks and two rising benchmarks that stretch to the pre-Covid-19 interval. Probably the most important discovering is that no fuel value convergence might be discovered exterior of Europe. This regardless of the existence of episodes of partial convergence that are recognized within the literature, and reproduced and defined right here. Importantly, the outcomes strongly reject the idea that elevated LNG flows function a value leveling arbitrage mechanism.
As soon as one sees the relative magnitudes of flows a couple of years earlier, one can see why value equalization can be unlikely.
Supply: Loureiro et al. (2022)
*If you happen to have been questioning, sure, this is identical JohnH who’s having bother determining the place median actual revenue knowledge lie, what ONS knowledge is reportedand doubts of Ukrainian measures to take Kherson.