Oil tensions threaten unity over war in Ukraine

Good evening,

Today’s meeting of the Opec+ oil producers in Vienna could well be its most significant gathering in years.

Saudi Arabia and Russia have led the push for deep cuts in production to lift prices, much to the dismay of US president Joe Biden, who had been banking on keeping them down ahead of crucial midterm elections next month.

The reduction of 2mn barrels a day, or 2 per cent of global supply, agreed this afternoon, sets Opec “on a collision course with the free world”, according to one analyst. “They have sided with Russia in the name of protective oil market management — just as consumers across the world are battling inflation and the rising cost of living.”

The head of Saudi Aramco, the world’s biggest crude oil producer and the world’s most valuable company, warned yesterday that global markets were incredibly tight. Supply could be dented further later this year when western sanctions tighten against Russian exports.

The surge in global energy costs triggered by Russian’s invasion of Ukraine is increasing tensions over support for Kyiv and is set to dominate next week’s annual meetings of the IMF and World Bank, while the G7 has been working on proposals to cap the price of Russian oil. As well as punishing Moscow, the cap will also save emerging markets $160bn a year, according to the US Treasury.

Preliminary support for the cap was agreed by EU member states today, while European Commission chief Ursula von der Leyen said the EU should also adopt a ceiling on the price of gas to help contain electricity prices.

But, as our Europe Express newsletter (premium) points out, EU capitals remain at odds over much of the bloc’s response to the energy crisis, ahead of an informal leaders summit in Prague on Friday.

Germany in particular has come under fire for failing to co-ordinate with fellow EU members over its €200bn fiscal stimulus. The “double ka-boom”, says the FT editorial board, risks undermining EU unity.

Charles Michel, president of the European Council, writes in the FT today of the need for a genuine “energy union” to tackle the crisis by slowing consumption, ensuring security of supply and reducing prices.

“The global financial crisis and sovereign debt crisis spurred the EU to create a banking union, to ensure the stability of the banking sector. The pandemic taught us to pool our resources in the health sector . . . We must now do the same in the energy sector . . . Doing too little too late is not an option. It’s time to take a quantum leap.”

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Some good news . . . 

For anyone dreaming of the ultimate retro runaround (or who just has a problem with parking), we have some great news: the bubble car is back! The Microlino comes from the same Swiss inventor as the Micro Scooter. And you can fit three of them into a standard parking space.