Energy market analysis June 17, 2025

“Oil prices at the bottom of recent historical averages are favorable for America from an inflationary perspective, as long as they do not get too low, and Washington has made this clear to the Saudis.

Is a new oil price war breaking out between the West and OPEC?

Saudi Arabia’s 2014-2016 and 2020 price wars did not have the desired effect as U.S. shale producers became leaner and more efficient. The country drained hundreds of billions in reserves and ran up against mounting fiscal deficits without achieving its goal of delivering a final blow to the U.S. shale industry. However, the low break-even cost resilience of America’s shale sector is not the same as before.

The intent of these price wars was to destroy or cripple the U.S. shale oil industry as analyzed in Simon Watkins’ book The Complete Guide to Global Oil Market Trading. In both 2014 to 2016 and 2020, Saudi Arabia and OPEC sought to undermine the U.S. shale industry by artificially lowering oil prices through overproduction. The goal was to regain market share and restore OPEC’s dominance.

In 2014 to 2016, OPEC flooded the market with oil on the assumption that U.S. producers could not survive at prices below $70 a barrel. In 2020, the cartel repeated this strategy. However this time the conflict was ended early due to political pressure under President Trump.

Both wars failed in their intentions. U.S. shale companies became more efficient and lowered their break-even costs. Saudi Arabia and other OPEC countries suffered huge financial losses. Oil prices fell sharply, but recovered each time after political, or market, interventions.

Watkins emphasizes that these price wars caused huge price swings, which presented opportunities for traders. He argues that understanding the geopolitical motivations and economic interests of oil-producing countries is essential for successful action. According to him, similar conflicts are likely to recur in the future. He offers strategies for anticipating them.

OPEC members and their ally Russia mull over maintaining oil production levels on the high side of historical averages. The key question for the oil markets is whether the cartel is considering launching another oil price war with the same strategy.

Currently, the low break-even cost resilience of the U.S. shale sector is not the same as before. This level is approximately around $65 per barrel for newly drilled wells. For existing wells, this level is significantly lower. The cost for the Saudis to get the oil out of the ground has also increased since 2014: from $1-2 to $3-5 per barrel now.

The fiscal breakeven price of the Brent crude oil benchmark is at a minimum of $90.9 according to IMF figures. So the country cannot afford a prolonged drop in oil prices as it could in 2014-2016 and 2020.

A source close to the U.S. government expects the Saudis to take a more gradual approach to further oil production increases. From an inflation perspective, America benefits from oil prices on the lower side of recent historical averages, provided they do not fall too far. For the Saudis, there are longer-term financial and security benefits to be gained from this less harsh approach, even if oil prices trade below needed levels in the short term. To bridge the gap, Saudi Arabia will have no problem borrowing on the capital markets.

The market reaction to the conflict between Iran and Israel had the most effect on oil prices. It rose more than 13% Friday, June 13, to a peak of $77.62.

After the usual retracement, the Brent price rose again by 5.5% on Sunday due to mutual attacks by Iran and Israel on each other’s territory. The price then sank again when short speculators, who would incur massive losses in the event of a short squeeze (i.e., if the price rises further) doubled their short positions in the hope that the crisis will de-escalate.

The biggest market concern now centers on the Strait of Hormuz. Oil prices could rise further if Iran attempts to block this trade route.

Price Crude oil – Brent August 2025 ($/barrel) – 2-hour cloud candle, log scale

“Let it sink in: China secretly built technology into components shipped to America that could have caused a massive power outage.” – Gary Abernathy, American political commentator

Foreign powers can mess with power grid via “kill switch”

It has long been recognized that America’s infrastructure is not particularly safe, a concern magnified by the lack of a central planning process for the power grid. Tackling this problem has been slow, apparently discouraged just by the size and scope of the challenges that the needed upgrades would pose. The recent news that China had hidden kill switches in solar equipment sold to America is the latest in a long list of reasons for the emerging concerns about electricity infrastructure and the persistent rush to replace traditional energy sources with “renewable,” using technology mostly sourced in China.

Reuters reports that unauthorized communication devices have been found in some Chinese solar inverters by U.S. experts. The devices are not listed in the product documentation. Using the unauthorized communication devices to bypass firewalls and remotely disable inverters or change their settings could destabilize power grids, damage energy infrastructure and cause widespread power outages.

Even more worrying is the fact that this is not limited to America. Britain’s GB News writes that Chinese companies dominate the inverter market, with companies like Huawei and Sungrow holding more than half the market by 2023, according to research by Wood Mackenzie. The European Solar Manufacturing Council estimates that more than 200 gigawatts of European solar power capacity depends on inverters manufactured in China. Christoph Podewils, secretary general of the European Solar Manufacturing Council, aptly describes it as meaning that Europe has effectively handed over the remote control of much of its electricity infrastructure. The Chinese Embassy in Washington rejects this accusation.

If ever there was a wake-up call to be even more committed to energy independence, it has arrived in the form of China’s ability to remotely shut down the U.S. power grid. Trump’s declaration of a national energy crisis defines the dangers of leaning on foreign energy sources. Several steps would be needed, including upgrades to energy infrastructure. But the additional knowledge of Chinese artifice in crucial components installed in U.S. power grids increases the need, in addition to increased production of domestic energy, to make more components themselves for domestic development of technology that currently must still be imported.

There is growing concern in Europe and certainly in the Netherlands about the presence of kill switches in solar panel inverters, possibly also in charging stations, batteries and heat pumps. This is being explored further with partners and relevant agencies such as the National Cyber Security Center and the National Digital Infrastructure Inspectorate. A motion to ban this is being prepared.

Price Baseload Electricity supply year 2026 (eur/MWh) – week cloud candle, log scale

“Russian gas still represents more than 15% of gas supplies to the EU, including through pipelines and LNG imports.”

Russian natural gas deliveries via pipeline to Europe rose 10.3% in May from April, according to data from Reuters. Last month, Gazprom sent 46 million cubic meters (m3) of natural gas to Europe via the only remaining route: the Turkstream. This is estimated by Reuters based on data from ENTSOG, the European gas transmission group.

So far this year, Russian deliveries through Turkstream have increased compared to the first five months of 2024. From 6.6 billion cubic meters last year to 7.2 billion cubic meters this year. Russian gas supply through pipelines to Europe has fallen sharply since 2022 after Russia cut off many EU customers from their gas deliveries. Moreover, Nordstream stopped supply toward Germany after Russia reduced deliveries and after a sabotage in September 2022.

Russian gas still accounts for more than 15% of EU gas supplies, including via pipeline and LNG imports. The EU has reduced the share of Russian gas imports, from 45% of all gas imports before 2022, to currently 18%, European Commission President Ursula von der Leyen reported in late April.

Russian pipeline gas supply through Ukraine stopped on Jan. 1, 2025, after Ukraine refused to negotiate an extension of the transit deal. However, some European countries, including Hungary, continued to receive gas through the Turkstream pipeline through the Balkans. Last month, the EU unveiled a roadmap to end dependence on Russian energy.

The roadmap calls on the EU to stop all imports of Russian gas by the end of 2027 by improving transparency, monitoring and traceability of Russian gas within EU markets. New contracts with suppliers of Russian gas will be avoided and spot contracts (with immediate payment) will be terminated by the end of 2025.

Price TTF gas supply year 2026 (eur/MWh) – day cloud candle, log scale

“Our existing fleet of coal plants can help us transition to a more reliable and resilient energy future as we build the next generation of baseload resources.” – Bernard L. Weinstein

Bernard L. Weinstein is retired associate director of the Maguire Energy Institute at Southern Methodist University, professor emeritus of applied economics at the University of North Texas and fellow of Goodenough College in London.

Coal is the new bridge fuel

Once again, the expectation of government and private weather forecasters that America will begin to see above-average temperatures next summer. There have already been warnings that America’s power grids will be under great stress, as they have been for years with a high probability of blackouts and brownouts in some parts of the country.

The stress on America’s power grids is easy to explain. After remaining relatively flat for a decade, electricity demand is predicted to increase 50% over the next 10 years. Investments in server farms, AI, crypto-mining and a return of manufacturing are responsible for most of this growth. A recent Berkeley National Laboratory study showed that data centers, which consumed 4% of total U.S. electricity in 2023, will be responsible for 12% of electricity demand by 2028.

At the same time, construction of new baseload power plants – natural gas, nuclear and coal – has collapsed. Driven by federal, state and local tax breaks, wind and solar have accounted for the lion’s share of new installed capacity in recent years. The problem, of course, is that these sources of electricity are variable. It’s why New Orleans experienced power outages in May for more than 100,000 customers in and around New Orleans and why the Iberian Peninsula blacked out in April.

Several states including Texas have programs adopted for the construction of new gas plants. For the short term, however, keeping coal plants online is essential. Since 2010, 300 “always on” coal plants were closed, reducing the share of coal in the electricity mix from 45% to 16%. Only 200 coal plants remain on regional grids. The Trump administration has taken several steps to improve grid reliability and resilience by keeping these coal plants online, including a series of signed executive orders in early April. One of these orders authorizes some aging coal plants, which were scheduled to be closed, to continue producing electricity.

Environmentalists are vehemently opposed to this. They remain committed to closing the remaining coal fleet and for banning the construction of new fossil plants. The renewable-or-nothing approach they advocate clashes with a new energy reality. Not only will electricity demand rise sharply, but the construction and connection of wind and solar farms, as well as the infrastructure needed, are proving increasingly costly and challenging. Higher interest rates, supply chain issues, local opposition to wind and solar farms, as well as new transmission cables, will also have a significant impact on the speed and scale at which this new generation can be realized.

The era of tearing down existing, functioning power plants before reliable replacement capacity is built and connected to the grid can no longer be. Already active on-demand power plants are more valuable than ever. While the long-term future of coal remains unknown, its short-term possibilities are clear.

The existing coal fleet can help manage the transition to a more reliable and resilient energy future with next-generation baseload resources.

Price ICE Coal delivery year 2026 (usd/t) – week cloud candle, log scale

“The government just needs to make sure it doesn’t over-prescribe and mandate too much with regard to solar on rooftops.” – Neil Jefferson, Chief Executive Home Builders Federation

Britain mandates solar panels on most new homes.

All new homes in England will soon be fitted with solar panels as standard , confirms UK energy secretary Ed Miliband. Developers warn of additional costs and bureaucratic hurdles. The announcement, part of Future Homes Standard that takes effect in the fall, is aimed at lowering household energy bills and Britain’s net-zero ambitions.

The British government’s proposal mandates solar panels on almost all new construction homes, with exceptions only for homes overshadowed by trees or otherwise impractical for solar generation. Miliband expects that with solar panels, homeowners can save about €629 annually, based on current energy price limits.

The measure is part of a broader “solar revolution” by the new British government led by Prime Minister Keir Starmer, which is committed to large-scale residential sustainability. The policy is in line with Labour’s broader green agenda, including less stringent regulations on heat pumps and a €15.68 billion insulation pot.

Miliband insists that this flexibility would ensure near-universal adoption without relieving developers of responsibility. According to the Home Builders Federation (HBF), which supports solar integration, additional paperwork due to exception checks could delay the government’s ambitious target for 1.5 million homes by 2029. Neil Jefferson, head of HBF, told the BBC that an estimated 2 out of 5 new homes have solar panels. The British industry has become increasingly accustomed to incorporating solar panels in new construction. The industry does call for investment in skills to enable this “rooftop revolution.”

Meanwhile, government figures show solar remains a minor player after gas, wind and nuclear in the British electricity mix. Despite 160% growth over the past decade and a 42% increase since 2024. Developers estimate that a solar installation would add about €3,560 to €4,750 per home in construction costs. Miliband dismisses concerns that these costs will be passed on to the buyer and claims that home prices will not rise. Smart tech and storage could further reduce energy costs to 90% for a portion of households.

The Climate Change Commission insists that near-complete decarbonization of the housing market is essential to the 2050 net-zero goal. Leader of the Conservatives Kemi Badenoch says this plan is impossible without undercutting living standards. Reform UK wants to scrap the plan altogether with the higher energy bill as the showstopper. Supporters, including Liberal Democrat MP Max Wilkinson, hail the decision as a victory for both wallets as well as the climate.

Price Emission Rights – Dec-25 contract EEX (eur/t) – 4-hour cloud candle, log scale

“Europe is learning the hard way: in geopolitics there are no friends, only temporary alliances. – Thomas Kolbe, German economist and journalist

Thomas Kolbe, a German economist, has worked for more than 25 years as a journalist and media producer for clients from various sectors and business associations. As a publicist, he focuses on economic processes and views geopolitical events from the perspective of capital markets. His publications follow a philosophy that focuses on the individual and the right to self-determination.

European industry under siege: China deploys rare earth minerals as economic weapon

As U.S. tariffs tighten the screws on China’s export machine, the country is striking back. With strategic precision. Export restrictions on rare earth minerals are now the latest move to break European trade barriers and push back against escalating U.S. pressure.

In the current global trade impasse, the gloves are off. America is waving its clout in the marketplace. A quarter of global consumption comes from the U.S. domestic market. Everyone in the export business deals with America. Meanwhile, China has an undisputed monopoly on rare earth minerals. The country is making it clear that it will not hesitate to use this dominance. The stakes are rising. National interests are now more important than global courtesies.

No friends, only alliances

Europe is learning the hard way: in geopolitics, there are no friends, only temporary alliances. China’s tightening export restrictions on rare earth minerals increase the likelihood that Germany’s industrial sector will be plunged into a serious resource crisis. With nearly 85% of global rare earth mineral refining under its control, China is the main supplier of key metals such as dysprosium, terbium and yttrium. These metals are critical for electric motors, medical technology and defense systems.

Since April 2025, access to these raw materials has been restricted to only licensed exporters. So in effect a ban. The fallout is immediate: several German manufacturers are already being forced to scale down their operations. Others are facing complete closure. Industrial metal prices continue to rise. The fragility of global supply chains is now exposed in detail. Europe’s dependence on natural resources is beginning to be a major risk and a strategic weakness during the upcoming negotiations in this trade war.

Objective: new markets

China’s export restrictions are a calculated tactic to pressure the standoff with both America and the EU. China is feeling the squeeze from the Trump administration’s tough trade policies. If America fails to cut its massive trade deficit and restore industrial capacity, Trump’s economic agenda is in jeopardy.

China is facing its own nightmare scenario. To meet U.S. demands and reduce China’s trade surpluses, the country must allow the yuan to appreciate, risking domestic unrest. The middle class could start demanding more political influence. That is a nightmare for China’s authoritarian elite.

At the same time, the Communist Party’s economic foundation is collapsing. China’s domestic economy is faltering. Its real estate and industrial sectors are signaling recession. The Party’s once effective social contract, “stay away from politics and we will deliver prosperity,” is losing credibility under youth unemployment and economic stagnation.

Last refuge or last battle?

Driven into a corner, China plays its most effective hand: rare earth minerals. This is not just about economics, but is a geopolitical chess move aimed at shielding internal stability. China’s message is clear: Europe must absorb the blow of lost access to the U.S. market. China, like the EU, has no intention of abandoning its mercantilist model. This is “beggar-thy-neighbor” economics, a crude attempt to break free from domestic dysfunction via the global export channel.

The threat is explicit: compliance or being cut off. Europe’s vulnerability lies in its dependence on critical raw materials. A strategic Achilles heel is now fully exposed.

Mirror Images

In reality, the EU and China are ideologically related in economic areas. Both countries embrace protectionism, currency management and top-down trade policies. The EU has long had a surplus with America, made possible by regulatory barriers, currency manipulation and bureaucratic hurdles that hinder non-European companies.

It’s hard to imagine the EU tolerating a Chinese strategy that dumps American-made goods in Europe. The consequences would be dire: flooded markets, collapsing industries and rising unemployment. All this at a time of fiscal and political fragility for Europe.

This is no ordinary trade dispute, but open economic warfare. At stake: sovereignty, economic survival and Europe’s ability to remain viable in an era of geo-economic confrontation.

Airbus: Trojan horse diplomacy

China is also dangling a carrot. Behind closed doors, China is negotiating a multi-billion dollar deal with Airbus, potentially for 300 aircraft, according to Bloomberg. A signed deal would be a windfall for Airbus, but also a geopolitical statement. China would present it as a diplomatic outreach, even as it tightens the noose with restrictions on rare minerals. The deal with Airbus resembles a Trojan horse, wrapped in a worn cloak of cooperation that masks a much more aggressive underlying strategy.

Europe must decide now: chase short-term industrial gains or guard against long-term strategic dependence.