Germany wants more Kazakh oil

Germany, the European Union’s largest economy, is also the most vocal supporter of the transition away from oil and gas. Despite this policy, Germany is one of the largest importers of liquefied natural gas. Now, it wants to significantly increase its crude oil imports from Kazakhstan.

Media reported this week that the German government has asked its Kazakh counterparts to more than double the flow of crude oil to Germany by 18.32 million barrels, from 1.2 million tons to 2.5 million tons. And that’s just for this year.

“We plan to export 1.2 million tonnes to Germany by the end of the year and there is a request from them to increase this to 2.5 million tonnes in total,” Kazakhstan’s Energy Minister Almasadam Satkaliev told local Kazinform news agency. Russia’s Interfax noted in its report on the news that the minister did not say whether Kazakhstan would be able to meet the German request, with Satkaliev saying only that Kazakhstan would send an additional 1.5 million tons of oil to Europe via Baku-Tbilisi-Ceyhan. pipeline ending in Turkey.

However, the demand raises a question – and that question has to do with the energy transition that the German government is supporting, funding and doubling down on so ardently. What does it take to increase crude oil supply if Germany is decarbonizing as fast as proponents claim?

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Germany’s solar generation capacity represents 38% of the country’s energy mix. That’s more than 28 percent of coal, oil and gas capacity combined, according to GlobalData. Indeed, Germany is decarbonizing. It’s also electrifying. Sales of electric vehicles in Germany grew by 11% last year and accounted for 18.4% of the total new car market. Unfortunately, this year has seen a reversal of the electrification trend, after the German government removed subsidies for the purchase of electric vehicles last December.

However, even with the current crisis, electric vehicles already on German roads should have affected oil demand in a negative rather than a positive direction. After all, UBS estimated earlier this year that the electrification of transportation has removed 1 million barrels a day from global oil demand, predicting that trend will continue. The Swiss bank also predicted that by 2025, the electrification of the transport sector will replace 2.5 million barrels per day of oil demand. In return, Germany, Europe’s largest market for electric vehicles, is demanding more oil from Kazakhstan.

This is interesting because oil consumption in Germany has been declining. In 2012, the country consumed about 2.28 million barrels of crude oil daily. By 2023, this has fallen to 1.95 million bpd. Of course, a decline of 330,000 bpd in 11 years may not be cause for major celebration, but a decline is nonetheless.

However, Reuters reported in April 2023 that Germany’s crude oil imports rose in 2022 from the previous pandemic-ridden year as its economy recovered. The economic recovery was therefore directly linked to crude oil consumption – a link underlined by the fact that Germany imported most of its oil from Russia, despite the barrage of sanctions the EU imposed on Moscow that year. So the news that Germany has requested more Kazakh oil can therefore be seen as an acknowledgment that the energy transition is very good, unless you need cheap and reliable energy for industrial purposes.

Germany’s economy shrank by 0.3% last year. Businesses have blamed high energy prices amid the build-up of wind and solar power. The government has recognized that energy prices are high and has offered more wind and solar as a solution. Germany’s economy is likely to shrink again this year by 0.1%, according to forecasts. This means that the biggest and strongest economy in the EU is now the weakest. It is definitely time to step up oil imports.

By Irina Slav for Oilprice.com

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