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The Morning Dispatch: Europe's Continuing Energy Crisis
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The Morning Dispatch: Europe’s Continuing Energy Crisis

The energy-importing EU is feeling the squeeze as global fossil fuel demand outstrips current supply.

Happy Friday! Two years ago today, Axios published arguably the most consequential scoop in the history of journalism: “Steve Hayes and Jonah Goldberg to launch The Dispatch.”

The first-ever Morning Dispatch went out the following day, and the rest, as they say, is history.

Quick Hits: Today’s Top Stories

  • The Senate voted along party lines Thursday to raise the United States’ debt limit by $480 billion and push off a potential default into December. Only Democrats voted for the debt ceiling increase itself, but 11 Republicans sided with Democrats to overcome a legislative filibuster and allow the body to proceed to the vote. The House plans to vote on the short-term debt limit increase on Tuesday, and the White House has indicated President Biden will sign it into law.

  • Pfizer and BioNTech said Thursday that they formally asked the Food and Drug Administration to authorize their COVID-19 vaccine for children ages 5 to 11. The FDA could grant an emergency use authorization in a matter of weeks.

  • The daily average of confirmed new coronavirus infections has fallen 22 percent nationwide over the past two weeks as the summer’s Delta surge continues to wane. COVID-19 hospitalizations have dropped 20 percent over the same time period, while daily COVID-19 deaths—a lagging indicator—have fallen 13 percent.

  • CIA Director William Burns announced a significant overhaul to the agency’s structure on Thursday, establishing the China Mission Center to “address the global challenge posed by the People’s Republic of China that cuts across all of the Agency’s mission areas” and the Transnational and Technology Mission Center to “address global issues critical to US competitiveness—including new and emerging technologies, economic security, climate change, and global health.”

  • The January 6 Select Committee issued additional subpoenas on Thursday, demanding testimony and records from two individuals—Ali Alexander and Nathan Martin—who were involved in the day’s ‘Stop the Steal’ rally. President Trump and his lawyers yesterday instructed an earlier batch of subpoena recipients—Mark Meadows, Steve Bannon, Dan Scavino, and Kash Patel—not to comply with the committee’s requests by a Thursday deadline, potentially leading committee leaders to issue criminal referrals in the coming days. 

  • Initial jobless claims decreased by 38,000 week-over-week to 326,000 last week, the Labor Department reported on Thursday.

Europe’s Continuing Energy Crisis

European Commission Executive Vice-President for the European Green Deal Frans Timmermans. (Photo by Michael Owens / Getty Images.)

As temperatures start to drop across Europe, the continent is preparing for an impending energy crisis amid skyrocketing prices and increasingly depleted stockpiles. For months, energy markets—from natural gas, to carbon, to renewable resources—have been stretched thin as European economies emerge from COVID-19 lockdowns and drive up demand. 

Now, Europeans are calling into question the practicality of the European Union’s hasty transition away from fossil fuels and commitment to net-zero emissions by 2050, pointing to climbing energy bills as indicators that consumers may be forced to bear the brunt of its “Fit for 55” climate initiative. The proposed legislation, crafted as a step toward the EU’s binding goal of climate neutrality by 2050, aims to cut emissions by at least 55 percent by the end of the decade. 

As the EU shifts toward cleaner energy sources, oil prices have skyrocketed, with international oil benchmark Brent crude futures hovering over $80 per barrel this week for the first time in three years. Spain, in an effort to make clean energy more affordable during the transition, recently declared an emergency resolution to confiscate and redistribute some 2.6 billion Euros of profits from energy companies over the next six months. Greece and Italy, which have also been hit hard by rising prices, have also taken action to subsidize the cost of energy for consumers. 

Meanwhile, EU climate chief Frans Timmermans has insisted that Europe’s current energy shortages are a function of its failure to switch to renewable energy sooner. “Had we had the green deal five years earlier,” he said last month, “we would not be in this position, because then we would have less dependency on fossil fuels and natural gas.”

Americans are also experiencing energy shortages and are paying the most they have for gas since 2014, with the U.S. national average for gas prices hitting $3.24 per gallon Thursday, according to AAA. West Texas Intermediate crude futures, the U.S. benchmark for oil prices, traded around $78 per barrel on Thursday. As is the case now in Europe, oil production simply isn’t keeping pace with increased demand for gas among American consumers as revitalized economic activity ups energy use. 

Even though consumer demand for gas has skyrocketed in recent months, oil exporting countries have been hesitant to drastically increase production levels out of fear of what the next Delta variant downturn might look like in terms of slashing demand. On Monday, an OPEC Plus ministerial meeting concluded that the 23-member group will stick to its plan of gradually increasing oil output by 400,000 barrels per month through April 2022. 

Henning Gloystein, director of energy, climate and resources at Eurasia Group, said that OPEC Plus’s supply cuts have forced Russian oil producers to operate at reduced capacity in recent months. “State-controlled Gazprom has therefore likely been asked by the government to fill the domestic shortfall caused by private producers to prevent a winter shortage in Russia,” Gloystein told The Dispatch

These OPEC Plus-induced production shortfalls have drastically reduced Russia’s ability to export gas to its neighbors, a problem the Kremlin hopes to solve by expediting the approval process for its Nord Stream pipeline, an undersea pipeline that stretches 764 miles from Germany to Russia. 

The pipeline is currently awaiting regulatory approval from German and European Union authorities, and has created fears that it would make European countries dependent on the Kremlin for their oil supply. The Biden administration has allowed the construction of the pipeline to proceed unimpeded in an effort to repair relations with Berlin in July, drawing criticism from Democratic and Republican lawmakers alike. 

Russian Deputy Prime Minister Alexander Novak said Wednesday that an expedited clearance process for the Nord Stream 2 pipeline by German and European Union regulators could “cool off the current situation” by boosting supply and lowering gas prices for European consumers. 

But experts warn that even a fast-tracked regulatory approval process is unlikely to help Nord Stream 2 solve Europe’s supply shortage this winter. “Approval from Germany is set for four months from the start of the review period (last month, September), followed by approximately two months review period in Brussels,” Gloystein said. Moreover, considering Russian oil producers are struggling to meet domestic demand for gas, it’s unlikely that state-controlled companies like Gazprom will have enough oil to put the pipeline to full use once it gets approved.

“There are plenty of other lines that Russia could use to deliver gas into Europe besides Nord Stream 2, and they have the very best chess-versus-checkers kinds of reasons for wanting to wait until Nord Stream 2 can be the solution,” said Kevin Book, a  managing partner at Clearview Energy Partners. 

“So no, it would not solve European gas problems overnight,” Book added. “But if Nord Stream 2 were to be commissioned, say, in late October or early November instead of late January or early February, Russia knows—and so does Europe—that it would make a difference.”

For all the European Union’s talk of getting to net zero carbon emissions by 2050, it’s worth pointing out that the continent is still the biggest import market in the world for oil and gas. “Europe has made big strides towards diversifying away from fossil fuels, but you’re not going to get past the fact that they’re still using a lot of them,” Book said.

Gloystein predicts that moving forward, “this gas and coal supply crunch will lead to a doubling down, not slowing, of the green energy transition” in Europe and China. “That said, this crisis shows that the energy transition will be volatile, and there’s clearly still a need to optimize natural gas supply chains for the coming years,” Gloystein said.

Worth Your Time

  • “Is it just me, or does it feel like America is running out of everything?” Derek Thompson asks in his latest piece for The Atlantic. “Americans are settling into a new phase of the pandemic economy, in which GDP is growing but we’re also suffering from a dearth of a shocking array of things—test kits, car parts, semiconductors, ships, shipping containers, workers. This is the Everything Shortage. The Everything Shortage is not the result of one big bottleneck in, say, Vietnamese factories or the American trucking industry. We are running low on supplies of all kinds due to a veritable hydra of bottlenecks.”

  • It’s hardened into conventional wisdom on the left that two senators—Joe Manchin and Kyrsten Sinema—are single-handedly obstructing President Biden’s congressional agenda. “2 senators cannot be allowed to defeat what 48 senators and 210 House members want,” Sen. Bernie Sanders tweeted last week. But as Eric Boehm argues in Reason, this trope suffers from a math problem. “If Manchin and Sinema cannot be convinced to vote for the package … it would not be two senators preventing 48 others from passing the reconciliation bill,” he notes. “It would be 52 senators opposing what 48 want. … There are 100 members of the United States Senate. Forty-eight don’t get to run the show.”

  • In his Thursday Washington Post column, Perry Bacon Jr. laments that so much of the national political discussion is oriented around elections—not issues. “Read political reporting, scroll Twitter or watch cable news, and you’ll notice that much discourse ostensibly about, say, the infrastructure bill, Afghanistan or President Biden is really focused on one all-consuming question: ‘How will this affect what swing voters in Wisconsin — or Pennsylvania, or Arizona — do in 2022 and 2024?’” he writes. “We can have election month, maybe even election season, but when every day is Election Day, we are robbing our politics of real, substantive debates to instead concentrate on possible electoral outcomes that we can’t predict or control anyway.”

Presented Without Comment

Toeing the Company Line

  • On yesterday’s edition of Advisory Opinions, Sarah and David discuss the latest on Texas’ heartbeat bill, a Supreme Court case about Mississippi’s groundwater, the Department of Justice’s new emphasis on threats against school board members, and much more.

  • David’s Thursday French Press (🔒) focused on recent reporting on the events of January 6 that illustrates just how close the country was to a true constitutional crisis. “How close did we come to a monumental disaster?” he writes. “DOJ resistance hurt the president. Secretaries of state stymied his plan. But at the pivotal moment in history, even though he possessed a document that outlined a plan that would have made him a hero to the mob, Pence said no. … Mike Pence may have wanted to yield to Trump, he may even have tried to find a way to yield to Trump, but at the end of the day he did not yield. That single decision saved our nation from a political fire that it might not have been able to contain.”

  • Former FDA Commissioner Scott Gottlieb joined Jonah on The Remnant yesterday for a conversation about all things COVID-19. When is the Delta wave going to pass? How badly did early bureaucratic failures sink our national response? Are we better prepared for the next pandemic? Are acquired immunity and vaccine-induced immunity interchangeable?

Let Us Know

In honor of The Dispatch’s second birthday, drop any questions you have for us in the comments below. The Morning Dispatch team will do our best to answer as many as we can.

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@lawsonreports), Audrey Fahlberg (@AudreyFahlberg), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), and Steve Hayes (@stephenfhayes).