The President's Daily Brief - June 21st, 2022. Putin Reduces Supply of Gas to Europe Causing an Energy Crisis and a Return to Coal.

Episode Date: June 21, 2022

It’s June 21st. You’re listening to the President’s Daily Brief. Your morning intel starts now. ------ First up, Europe is in a major crisis running out of natural gas this morning to power the continent. And they’re scrambling to replace it with coal. We’re going to talk about what’s going on and why it matters to people here in America. As always, I’m keeping an eye out for developing stories. Put this one on your radar. China is importing a record amount of Russian oil. You probably saw that headline a day or two ago. But we’re going to go beyond the headlines and talk about why there’s a hidden cost to you. All up next on the President's Daily Brief. ------ Please remember to subscribe if you enjoyed this episode of the President's Daily Brief. Learn more about your ad choices. Visit megaphone.fm/adchoices

It's June 21st. You're listening to the President's Daily Brief. I'm your host and former CIA officer Brian Dean Wright. Your morning intel starts now. The brief you're about to hear is in the same spirit of the actual President's Daily Brief, which is a top secret summary of the most critical events in the past 24 hours, all delivered to the president each day by the nation's spymasters. And so, ladies and gentlemen, I am your spy and this is your brief. Here's what we're going to be talking about this morning. First up, Europe is in a major crisis running out of natural gas this morning to power the continent, and they're scrambling to replace it with coal. We're going to talk about what's going on and why it matters to people here in America. As always, I'm keeping an eye out for developing stories. Put this one on your radar. China is importing a record amount of Russian oil. You probably saw that headline a day or two ago.

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up this morning on the PDB, the continent of Europe is in a major crisis. They're running short of power this morning because over the past week there's been two important developments. First, a record-setting heat wave, but secondly and more critically, Russia has reduced their supply of natural gas to the continent. And that means that Europe may be unable to power some of their homes and factories, perhaps as early as the summer, but most definitely by the winter. It's gotten so bad that in the past 48 hours, at least four European nations have announced that they're either restarting coal-fired plants that were long ago shut down, or they're converting natural gas plants back to coal. So we're going to talk about all of that this morning and how this could have a major impact

on our economy to include workers like you. Finally, we're also going to talk about how this very dramatic development should be a warning to America's leaders about the perils of abolishing traditional sources of energy. So let's start first with. the breaking headlines over the past 48 hours. First, there's been a big spike in power demand throughout Europe because of a heat wave. So we've got parts of France and Spain that are both hitting 110 degrees. Same thing for Germany and Austria, both experiencing record highs. That means that people across the continent are cranking up their air conditioners, which of course means more power plants are having to pump out more electricity to satisfy all that demand.

But that's actually a problem, because Europe has been shutting down their nuclear and coal-fire plants for years now, and instead they've switched to renewables and natural gas. But that gas is supplied by Russia. And as you all know, Russia invaded Ukraine months ago, and that prompted Europe to vow that it would wean itself off of Russian gas. And they're trying. For instance, in Germany, which is, by the way, the largest economy in Europe, they've gone from 55% of their natural gas coming from Russia to 35%. But still, that's not zero. and Russia knows it. So this past week, Russia started squeezing them.

The main Russian pipeline is down to 45% of its normal capacity. That means that Germany is getting about half of its normal delivery. The same thing is true with Italy. And France is getting zero. So said differently, ladies and gentlemen, we've got a natural gas war on our hands. And that gets us to the second big development coming out of Europe this morning. Without natural gas, they're going back to coal. So on Sunday, Austria announced that it would reopen a coal power station that they had shut down a long time ago.

In Italy, they're increasing coal power from existing plants and rationing natural gas. In the Netherlands, they announced that they are no longer restricting producers on how much coal power that they can produce. And that's a big change, because they used to have very tight regulations on coal, all because of climate change. And finally, the Germans are restarting multiple coal plants that were long ago shut down, their energy, minister announced that just a couple of days ago. Now, while all of that is remarkable that you turn back to coal, there's a very desperate element to this, and it's something that you might not know. Europe needs natural gas, most especially in the winter, to heat homes.

And they normally start filling up the natural gas storage tanks in the summertime now. And they need for those tanks to be at 90% full by November. Or people could end up freezing, literally. But as of Monday, those tanks, those tanks. tanks were only 54% full. That's well behind schedule. Analysts are predicting that if Russia continues to cut back, those tanks will only get at most 70% full by November, nowhere close to 90.

Now, one of the things that the Europeans are doing to beat that deadline and get that gas they need is to lease four very big, very special ships that can hold what's called liquefied natural gas or LNG. So those ships are going to be parked off the coast of Germany. The hope is that LNG suppliers from around the world will fill up those four ships, replacing the gas that normally comes from Russia. And that's not a bad idea. Except a lot of that LNG is supposed to come from us, from America. And there are two problems with that.

First, we need that natural gas too. As I briefed you on previously, we use it to fuel our power plants. And the more that we export, the less, that we have, and the higher that our utility bills will likely go. Second, a major LNG facility in Texas was hit with a massive explosion in an accident about a week ago, and that's preventing any exports through at least the end of the year. In other words, our supply is in doubt, and that leaves Europe in even bigger trouble. So all of this is awful, of course, but why should you care?

So the biggest reason I think is actually about trade. Each year we do around $1.1 trillion in trade. Exports are around $470 billion and imports around $600 billion. And so that means that a whole bunch of us, including maybe some of you, work at companies or factories or farms and ranches that send products and services to Europe. But if those trading partners and their economies start to freeze up, literally in some cases, they're not going to be buying our stuff. And your company, your factory, your farm or ranch, you will pay a price. In other words, this issue of European energy is important no matter if you're in Frankfurt, Kentucky or Frankfurt, Germany.

Okay, with that, let's quickly recap this brief. And then I'm going to share with you my counsel on what we should do. For the past 20 years, European nations have shut down many of their coal fire plants because of climate change, and in their place stood up natural gas plants. Plus, they built some renewable resources like wind and solar farms. Well, it turns out that was a really big mistake. And that's because they don't produce much of their own natural gas to feed their power plants. They get it from Russia.

And now that Russia is cutting off their supply, they're in really big trouble. Now, America might be able to help somewhat with sending our own natural gas, but one, we need that gas for our own utilities. And second, the major LNG facility that could ship that gas out, well, it blew up a week ago, and it likely won't be back online for at least six months. And meanwhile, their renewable energy portfolio, well, it's not helping. You just can't quickly increase power from solar or wind like you can with fuels like coal. And so capitals from Paris to Berlin are doing just that. They're firing up their old coal plants and diverting whatever natural gas that they can get a hold of into those storage tanks. And they need those tanks to be 90% full by November because otherwise winter hits and people start to freeze.

Unfortunately, analysts don't think that they're going to make it to that 90% goal. And that means that there's likely going to be a lot of suffering. Yes, obviously for Europeans, but also for us. us because they are our trade partners around a trillion dollars in total trade each year. And if their economy tanks, we'll fuel it too. So that's the recap. But one last thing on this energy issue. Yesterday, you might have seen headlines of Joe Biden talking to reporters about this global energy crisis, especially in Europe, but also here in the U.S. with our very high fuel prices and the very distinct possibility of a recession. So if you didn't hear you.

hear about this, here's what he said. Quote, out of everything lousy, something good will happen if you look hard enough for it. This crisis gives us the chance to make a fundamental turn towards renewable energy to electric vehicles and not just electric vehicles, but across the board, end quote. Biden then followed up that exchange by telling another reporter that he and his team would sit down with oil executives this week to demand that they produce more oil. that they refine more gas and diesel, and that they justify their high oil profits. So putting all that together, the president on one hand wants to shut down the oil and gas industry

because of climate change for us to go to renewables just like Europe did. But on the other hand, he's telling that same industry to immediately increase oil production and refining. So that's confusing, isn't it? if I were briefing the president this morning, I'd do things a little bit differently. I would wrap up this brief and then I would excuse the staff, leaving just the president and I in the Oval Office, because it would be time for a very candid conversation and to speak truth to power. And this is what I'd say. Mr. President, you are taking America down a very dangerous path, and here's why. Europe is teetering towards absolute ruin because they put

the entire continent in the hands of either Vladimir Putin and his gas, or they shut down reliable power plants like coal, well before renewable energy technologies could replace them. And now, one of our most important trade partners is on the brink of freezing to death this winter, unless they can unwind some of that horrible mistake, firing up their old coal plants like a 1964 chival that's been sitting in the barn. And the consequence of all that is that we could lose even more jobs and factories in this country because our European trading partners are freezing and they can't buy our stuff. Why then, with those very clear sober lessons about energy right in front of our faces, why would you keep saying that we have to use this crisis as an

opportunity to embrace renewable energy across the board? And to make matters worse, you confuse things by demanding that the oil and gas industry pump more oil, but also Also, they need to go out of business because of climate change. In other words, you're pushing on the gas pedal on the brake at the same time. It's illogical. It's nonsensical. And with all due respect, it makes you look very dumb and weak. Not to me, but to our enemies in Moscow and Beijing all around the world.

So the bottom line, Mr. President, is no matter how earnest you might feel about climate change or getting us to 100% renewable energy. your rhetoric and your actions are jeopardizing America's national security. It is compromising our economy. And Mr. President, it is leading us down a very dangerous path. Coming up, a closer look at what's on my radar. Spring is the season everyone refreshes everything except their blinds. People put it off because they think it's complicated.

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of Russian oil surged over 50% last month. They also increased their purchases of Russian coal, up 24% from April. So all told, China's imports of Russian goods rose 80% in May to $10.3 billion. So there are two key takeaways here that I think that you should know about from these various headlines, one of which hasn't been widely reported. First, China actually got the green light to make these purchases from the White House. So the backstory here is that many weeks ago, reporters on Air Force One asked Biden's team about what would happen if Beijing purchased all these Russian goods, oil and coal mostly, and whether that would run a foul of Western sanctions. Well, the White House apparently said no, the purchases would be fine.

So China moved forward without any concern. And obviously, Russia made a bunch of money from that, which gets to the second key takeaway. Yesterday, I briefed you all on the war of attrition between Russia and Ukraine. And as you'll recall, that means that basically neither side has a distinct military advantage over the other, so they both try to just very slowly wear down the other. And that requires both Moscow and Kiev to have lots of weaponry and lots of fighters over the long haul. And that requires obviously lots of money to pay for both of those things. So if Russia gets revenue from Europe when they buy Moscow's natural gas, as we just discussed, plus revenue from China when Beijing buys its coal and oil, well, where does Ukraine get its revenue?

You all know the answer to that question. It's not from wheat exports. Russia has that all tied up or they're stealing it. Ukraine's getting their revenue from us. Not from Europe. Not from anybody else. From us. And that is massively expensive.

As you know, we're talking about $100 billion a year based on our spend rates so far, this year. And I want to emphasize something. We don't have that money to give. We're actually issuing debt. We're putting it on our national credit card because America engages in deficit spending and we have for a long time. And by the way, did you know the second largest holder of our debt is China? They hold 1.07 trillion of it. Japan, by the way, is the largest holder. So I defer to you on what you think of this situation? We're going to pay out $100 billion annually to Ukraine, and we're going to put that on our national credit card. All the while, we're going to be making debt payments to China, our greatest adversary. Well, to me, it seems problematic at best, but I'll defer to you.

And that, ladies and gentlemen, concludes your morning brief. As always, we close out the show, reminding each other of why we are here talking about our country and our world. It's the every good spy and every smart American. It's from John chapter 8 verse 32. And you shall know the truth. And the truth shall make you free. Good day.