The implications are tremendous. Europe is now assured sufficient energy supply well into 2024 at a minimum, providing enough time for cheaper alternative energy supplies—both renewables and bridge fuels—to be fully onboarded and operating within Europe. This includes the completion of an additional 200 bcm/year in LNG export capacity by 2024—enough to fully and permanently replace Russia’s 200 bcm/year gas exports once and for all.
Furthermore, the days of globally expensive energy amid “Russia-driven supply squeezes” are over for good. In addition to Europe’s lower expected demand for LNG, China is
pivoting away from global LNG in favor of domestic sources. Coupled with the rapidly increasing LNG supply, it is little surprise that the gas futures market is now pricing gas to be
cheaper than prewar levels for years to come.
Putin, on the other hand, has zero remaining leverage and no way to replace his erstwhile primary customer; he is finding out the hard way that it is much easier for consumers to replace unreliable commodity suppliers than it is for suppliers to find new markets. Already, Putin is drawing practically no profit from gas sales, as his prior 150 bcm sales of piped gas to Europe have been replaced by a
measly 16 bcm to China and pocket change in global LNG sales, barely enough to cover expenses. There are no markets for Putin to replace anything close to that 150 bcm shortfall: China lacks the necessary
pipeline capacity to take any more for at least a decade and prefers domestic and diversified sources of energy anyhow, while Russia’s laggard technology makes it
impossible to scale LNG exports beyond a slow trickle.
Putin’s oil leverage is likewise diminishing. Gone are the days when fear of Putin taking Russian oil supplies off the market caused oil prices to skyrocket by
40 percent over two weeks. In fact, when—in response to last month’s rollout of the
G-7 oil price cap, which we helped develop—Putin announced a ban, from Feb. 1, on
oil exports to countries that accepted the price cap, oil prices actually
went down.