The USA is discouraging investment. The political risk is real and feeding through into policy instability and uncertainty. The USA has upended traditional notions of friends and allies. Its actions have cost it a lot of friends for good.
A series of blog entries exploring Saudi Arabia's role in the oil markets with a brief look at the history of the royal family and politics that dictate and influence the Kingdom's oil policy
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Many have referred to the current events as a tectonic or seismic shift. We are beyond that now with the destruction of long-held relationships with allies, institutions, and the foundations of democracy. We are in paradigm shift territory. The world has enjoyed, and newer generations have taken for granted, the hard-fought peace since the end of the Second World War and the careful navigation of the Cold War.
The world has since gone through unprecedented times: the fall of the Berlin Wall, the Northern Ireland peace process, 9/11, the invasion of Iraq, the Arab Spring, Brexit, Obama presidency, Khashoggi, the Umbrella Movement, first Trump presidency, COVID-19, the invasion of Ukraine by Russia, and most recently the Israel-Gaza conflict.
But we are now in truly unprecedented times. Many of the above events were consistent with the advancement of liberal democracy: a worthy cause that the US, previously a key proponent, no longer stands behind. Even then, the beginning of the current snowball is evident in events like Brexit and the first Trump presidency.
The US is rapidly shifting to a different system built on outdated views of protectionism and mercantilism, and led by hugely misinformed, conspiracy theorist billionaires with false confidence from the successes that life has gifted them. This group is now running a country and system like a business with blatant disregard for the social wellbeing of its citizens, or the rule of law for that matter. The speed of change and disruption is enormous.
Those with the most money and access to the loudest megaphone, aka X fka Twitter, control the narrative. Unfortunately that narrative is populist, twisted, and self-serving. Then again, what else should we expect from a group of misinformed and conspiracy theorist billionaires. As the recent New Zealand envoy to the US put it, “Trump [and this group] does not understand history” – he was dismissed for making this statement. They treat the world as a playground, with enough wealth to protect them no matter what the consequences of their actions. In fact, some would relish a collapse of the status quo so they can play out their end-of-civilisation fantasies in their far-away, ready to go, fully stocked bunkers. This group has used its money and megaphone to bend Washington to its will. The US is quickly descending into plutocracy.
Trump and his cronies hold the worldview where, quoting [x] “might is right”, and an acquiescing neutered Zuckerberg agrees that we need more “macho energy”. This is coherent with Trump’s view that democracy as a system, exemplified by Europe, is weak, loosely blending into his view that Europe has been freeloading off the US. If Trump, his cronies and his supporters really understood politics and how the world worked, they would realise that overseas defence and aid to counter malign influence is a very good deal for the US. The US and its citizens could not have prospered without the global peace we have enjoyed up until now. Ukrainian soldiers are on the front lines right now to protect this peace, not US soldiers.
Where does this leave the US’ allies? The damage is done. It has been made clear that the US can no longer be relied upon and the defence backstop it once provided is now worthless. The assault on institutions, the very visible weakening separation of executive, legislature and enforcement, the attack on free speech, and the vindictiveness of Trump and his administration is taking the US to a very dark place.
The principle of a Contract-for-Difference or CFD is to provide pricing stability (or at least visibility) on the hydrogen being produced and sold. The government is typically the counterparty on CFDs.
The UK has increased offshore wind maximum strike prices to £73/MWh for fixed-bottom offshore wind installations for the 2024 AR6 Allocation Round.
This is a substantial increase from the £44/MWh set for the AR5 round in 2023 which was too low to attract bids with no capacity being awarded to offshore wind.
The higher price is designed to compensate for a higher cost and interest rate environment.
| Source: S&P |
The EU is making good progress and remains the leader on decarbonisation. Focus over the past decade has been on renewable power installation which has been a massive success - only 61% of EU electricity was from renewable sources in 2022 with only 39% from fossil fuels. Power generation accounted for c.25% of emissions in 2021. With continued roll-out of renewables, which is now cost competitive with fossil fuel power, the EU is on target to decarbonise its power grid by 2050.
Higher hanging fruit
Next step is to decarbonise building emissions (36% of EU emissions) and transport (25% of EU emissions) - these are more difficult to decarbonise, not least because of the direct impact on end use consumers and businesses in terms of cost, retrofitting and replacement.
Whilst the cost of power decarbonisation was largely invisible to the end user (factored into power prices and paid over time through customer bills), decarbonisation of building emissions and transport has immediate upfront costs. In a period of high inflation, the appetite of consumers to take on extra expenses is extremely low.
In fact, consumers have made clear their unwillingness to bear energy transition costs as witnessed in the support for right wing political parties opposing green transition and advocating for lower consumer costs.
Dilution of green policies for the electorate
Europe has seen a wave of policies or proposals being diluted to keep voters on side including:
German domestic political assuaging is resulting in a new budget that could reduce money available for green spending by c.€20 billion. This could delay a number of key initiatives including the establishment of a €20 billion hydrogen grid and €50 billion industrial decarbonisation support programme.
Germany could therefore end up relying more on fines and regulation rather than incentives, which will place additional burdens on households and the private sector. Germany's fiscal balancing act is not unique and other countries in Europe will face or are facing similar issues.
Despite headwinds, sustainability policy is advancing
All elements of the Fit for 55 legislative package have been agreed (55% emissions reduction by 2030) and the corresponding legislation will be finalised ahead of European Parliament elections in June 2024.
RED III was amended to increase the renewables target to 42.5% of the energy mix from 40% previously. RED III came into force on 20 November 2023.
The ETS scheme is being expanded to cover more sectors.
Despite headwinds, sustainability policy in Europe is slowly but surely advancing.