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Why Oil Won’t Trade Above $100 This Year

Why Oil Won’t Trade Above $100 This Year

Commodity analysts at Standard Chartered…

Germany Faces Coal Supply Crisis As Rhine River Waters Dwindle

Power plants in Germany are finding it increasingly difficult to source coal amid an energy crisis that is spiraling out of control as falling water levels on the Rhine river add to supply challenges caused by Russia’s war on Ukraine. 

Switzerland, which also sits along the 800-mile Rhine river leading to the North Sea, is facing complications with oil product supplies due to the falling water levels, according to a Bloomberg report on Thursday. 

The report, which cites government data, indicates that the Rhine’s water level is at its lowest since 2007 for this time of year. 

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The Rhine handles an enormous amount of supplies for Europe, including fuel and coal, adding to supply chain issues that have already mounted for other means of transportation, including bottlenecked German rail. 

Two German power plants in particular–one in Mannheim and one in Karlsruhe–are lacking sufficient coal supplies for operations. Those supplies would typically be shipped in through the Rhine. 

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According to Bloomberg, citing S&P Global Commodity Insights,  in the coming months, Germany will only be able to access some 65% of its coal supply due to transportation issues. 

While lower water levels on the Rhine have been wreaking havoc on commodity supplies to Germany for over a week, speaking to traders Friday, Reuters reported an even sharper decline in levels at a key chokepoint, making it difficult for fully loaded barges to get through. 

The level of difficulty also means that barge operators charge higher rates for cargo owners, suggesting further increased prices for consumers for oil products, grain, and other commodities shipped on the Rhine.  

Overall, the Rhine has become an even more important transit route for commodities in Germany and Switzerland since Russia invaded Ukraine in February. 

By Charles Kennedy for Oilprice.com 

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  • Mamdouh Salameh on July 16 2022 said:
    Germany seems to have lost its direction in energy policies. It wanted to project itself as the greenest country in Europe so under pressure from the Green parties and environmental activists it decided to de-commission its nuclear and also end the use of coal-powered electricity plants at a later date.

    German-led EU followed hasty policies to accelerate energy transition at the expense of fossil fuels and decided to end long-term contracts for the supply of gas preferring to buy its needs in the spot market which is at best unreliable.

    This short-sightedness and green ambitions plunged Germany and the EU in their worst energy crisis since the end of World War II. Then came the Ukraine conflict.

    Germany which under Angela Merkel prided itself in challenging unfair policies from the United States and stood its grounds against US pressure in the case of Nord Stream 2, began to succumb to US pressure under the new Chancellor Olaf Scholz.

    Scholz tried to be muscular with President Putin to please the Americans. But Putin knows about German affairs particularly energy issues probably more than the new Chancellor himself. After all, he served as the former head of the KGP Intelligence agency in East Germany. It was Putin who was chosen by the Siloviki, a highly influential and patriotic Russian group, to persuade Germany to become Russia’s partner and help modernize Russia. As a result of Putin’s efforts, over 6,000 German companies are now operating in Russia.

    Chancellor Scholz has been trying to please the Americans by trying to kill Nord Stream 2 and sever energy ties with Russia. But he doesn’t know the reach of Putin. He can easily pull the rug from under German industry altogether and cause a collapse of the German economy by cutting all energy supplies from coal to gas and oil.

    Sooner or later the Ukraine conflict will be over and the EU will realize that Russia is the answer to its future energy needs. It will also realize that its biggest geopolitical blunder was letting itself being led inadvertently into a US war with Russia via its Ukraine proxy.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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