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Hello Power Up readers! We’re glad to be back from hiatus and getting into the mix again with what’s going on. The G7 has certainly been active, talking up more goals for solar and wind, while the group has also elected to stick with the current Russian oil price cap that has limited that nation’s revenues to a point. Here’s the deal:  

A Russian oil outpost.

The G7 nations are going to stick with a price cap of $60 per barrel on seaborne Russian oil, Andrea Shalal reported, even though prices have been rising worldwide – and amid calls from some countries to try to throttle Moscow’s revenue even more. That cap was set back in December to reduce overall revenue so Moscow cannot finance its war in Ukraine.  

In recent weeks, crude prices have been on the rise – which could theoretically help Russia as it can more easily take advantage of the higher price by selling oil to those who are not specifically subscribing to the G7 cap. The country has been sending copious barrels to India and China, which have been all too happy to buy up Urals crude at a discount to Brent. If those prices kept rising, even with the discount, Russia could benefit from the higher price.  

How well has the cap worked? It has certainly cut Russia’s revenue – which was down 43% from a year ago – and the price of oil has stayed relatively subdued, not spiking to anywhere near $100 a barrel as some had feared. Instead, oil was most lately at $80 or so – built on the recent OPEC decision to cut output.  

Lots of ministers walking! G7 Foreign Ministers’ Meeting in Japan. Andrew Harnik/REUTERS

The G7 closed their big climate meeting in Japan on Sunday by setting ambitious goals for solar power and offshore wind capacity, as Katya Golubkova and Yuka Obayashi report here. The group didn’t go as far as some wanted, but overall they said they would increase offshore wind capacity by 150 gigawatts by 2030 and solar capacity to more than 1 terawatt.  

“The solar and wind commitments are huge statements to the importance that they will rely on the energy superpowers of solar and wind in order to phase out fossil fuels,” said Dave Jones, who is head of data insights at energy think tank Ember. 

Right now global solar comes to a shade under a full terawatt but of course that includes the entire globe and not just the big 7, which include the United States and Japan. The nations however noted that additional investment in fossil fuels – particularly gas – may still be needed more definitively in the next decade-plus, and that will temper a wholesale switch. But the G7 is still looking at phasing out fossil fuels by 2030.  

Demand is set to outstrip supply later this year. (IEA data/Noah Browning)

The International Energy Agency doesn’t love the decision by OPEC+ producers to cut output, as Noah Browning reports here, saying exacerbating the oil supply deficit is not a good move, and would make costs higher for consumers and overall economic activity. 

OPEC and its allies known as OPEC+ are cutting output, though the IEA pointed out that global stockpiles may benefit from additional production from the United States and Norway. Still, global oil stocks have been on the rise – and as for January, would still be their highest level at that time. But that’s just expected in the second half of the year and could hurt consumers and global economic recovery, the International Energy Agency (IEA) said on Friday. 

Consumer countries represented by the IEA have argued that tightening supplies drive up prices and could threaten a recession, while OPEC+ blames Western monetary policy for market volatility and inflation that undercuts the value of its oil. 

That’s the Pemex logo.

The government of Mexico is going to help bolster its state-owned Pemex oil firm’s ability to pay debt through deferring taxes, as Jorgelina do Rosario and Anthony Esposito report here. The oil company is one of the most indebted state oil firms in the world, owing about $108 billion.  

The company has another $2.5 billion in payments for 2023 after already plunking down $6 billion so far this year. The delay in Pemex’s tax payments should free up some cash for the company, Mexican Deputy Finance Minister Gabriel Yorio said late last week.  

Leftist oil nationalist President Andres Manuel Lopez Obrador has made a big deal out of reviving Pemex, including the construction of a giant refining facility in the central part of the state. The refinery is open, though some units are not yet completed.  

“We underline our commitment, in the context of a global effort, to accelerate the phase-out of unabated fossil fuels so as to achieve net zero in energy systems by 2050 at the latest.” 

Excerpt from the G7 climate, energy and environmental ministers’ communique

Refiners in China and other Asian nations face higher prices on Middle Eastern benchmark crude grades.

The big crude grades traded in the Middle East, like the benchmarks out of Dubai and Oman, have been increasing in expectation of more fuel demand, especially in Asia, as Muyu Xu reports here. The Middle East is a key hub for delivering barrels to India and Southeast Asia, and right now, with crude prices higher, that’s going to boost the cost for imports into the busiest import area of the world. 

In addition, oil giant Saudi Aramco unexpectedly raised official selling prices (OSPs) in May, making those purchases more expensive. Refiners in turn have been buying up more in the spot market in anticipation of a busy summer, boosting the prices of sour benchmarks like Qatari al-Shaheen, and Abu Dhabi’s Upper Zakum, Das and Murban. The rising cost of crude is hitting refiners’ margins, with gasoil and gasoline cracks down 28% and 23% respectively, so far this month. 

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