Germany, the European Union’s biggest economy, is also the most vocal advocate of a transition away from oil and gas. Despite this policy, Germany is one of the biggest importers of liquefied natural gas. Now, it also wants to significantly boost its crude oil imports—from Kazakhstan.
Media reported this week that the German government had asked its Kazakh counterparts to more than double the flow of crude oil in Germany’s direction from 1.2 million tons to 2.5 million tons, equal to some 18.32 million barrels. And that’s for this year alone.
“We plan to export 1.2 million tons to Germany by the end of the year, and there is a request from their side to increase this to 2.5 million tons in total,” Kazakhstan’s energy minister, Almasadam Satkaliev, told local news agency Kazinform. Russia’s Interfax noted in its report on the news that the minister had not said whether Kazakhstan would be able to fulfill the German request, with Satkaliev only saying Kazakhstan was going to ship another 1.5 million tons of oil to Europe via the Baku-Tbilisi-Ceyhan pipeline that terminates in Turkey.
The request, however, raises a question—and that question has to do with the energy transition that the German government is so fervently supporting, funding, and doubling down on. What necessitates the increase of crude oil supply if Germany is decarbonizing as fast as advocates claim it is?
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Solar generation capacity in Germany accounts for 38% of the country’s energy mix. That’s more than the 28% of coal, oil, and gas capacity combined, according to GlobalData. Indeed, Germany is decarbonizing. It is also electrifying. EV sales in Germany rose 11% last year and represented 18.4% of the overall new car market. Alas, this year has seen a reversal of the electrification trend after the German government focused EV purchase subsidies in December last year.
Yet even with the current slump, the already existing EVs on German roads should have affected oil demand in a negative, rather than positive, direction. After all, UBS estimated earlier this year that the electrification of transport has eliminated 1 million bpd in global oil demand, predicting that the trend would continue. The Swiss bank also predicted that by 2025, transport sector electrification will displace 2.5 million barrels daily in oil demand. Instead, Germany, this biggest European EV market is asking Kazakhstan for more oil.
This interesting is because oil consumption in Germany has been on the decline. In 2012, the country consumed some 2.28 million barrels of crude daily. By 2023, this had declined to 1.95 million bpd. Granted, a decline of 330,000 bpd over 11 years may not be cause for major celebration, but a decline it is, nevertheless.
Yet Reuters reported in April 2023 that Germany’s crude oil imports had risen in 2022 from the previous pandemic-lockdown-ridden year as its economy recovered. Economic recovery, then, was directly linked to crude oil consumption – a link highlighted by the fact that Germany imported the biggest chunk of its oil from Russia despite the barrage of sanctions the EU leveled against Moscow that year. So, the news that Germany has requested more Kazakh oil may, therefore, be seen as an acknowledgment that the energy transition is all very well except when 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 wind and solar buildup. The government has acknowledged energy prices are high and has offered as a solution more wind and solar. Germany’s economy will likely shrink again this year as well, by 0.1%, per forecasts. This means that the EU’s largest and previously strongest economy is now its weakest. It is definitely time to ramp up oil imports.
By Irina Slav for Oilprice.com
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