Dr. Ken Rietz
This is a selection of energy article summaries, focusing on topics that are a bit off the beaten path, but are worth considering. The topics covered this month are:
- Crude oil: How the shadow fleet avoids capture
- Natural gas: Traders are angry at NYMEX for extended circuit breaker
- Gasoline: As US EVs rise, gas stations disappear
- Wild card: Risks cause Brazil to pull back on sharing power
Oil
Figure 1: Number of ships in shadow fleet; graph by Brookings Institute
Ghost Busters: Options for Breaking Russia’s Shadow Fleet
Benjamin Jensen and Jose M. Macias III, Center for Strategic and International Studies
Defeating Russia’s war economy in Ukraine requires cutting off the illicit maritime trade that fuels it, specifically the so-called shadow or “ghost” fleet of tankers and support vessels that help Moscow evade sanctions. Since sanctions on Russian oil exports began in late 2022, this clandestine fleet, comprising hundreds of vessels, has carried a large share of Russia’s seaborne oil, generating roughly $87–$100 billion in annual revenue, nearly matching Western economic and military aid to Ukraine. Many of these older, poorly insured ships routinely spoof their identity, turn off tracking systems, and use complex networks of shell companies to obscure ownership; these practices pose strategic challenges, environmental risks, and sustained economic lifelines for the Kremlin.
To counter this, Western countries use the concept of commerce raiding, historically a way to weaken an adversary by targeting its trade rather than engaging in direct military confrontation, and adapt it for the modern era using open-source intelligence, maritime law, sanctions, and multilateral diplomacy. The authors stress that traditional military action alone isn’t feasible for the United States and its allies without risking escalation. Instead, they propose a suite of legal, economic, and data-driven tools to expose, pressure, and ultimately restrict the shadow fleet’s operations. These include strengthening sanctions enforcement, using maritime legal provisions to board or inspect suspicious vessels, augmenting international cooperation (e.g., through a G7 task force), and applying financial and logistical pressure on neutral actors that facilitate illicit oil shipments. Success hinges on timely, accurate data and coordinated global efforts to make it harder for Russia to use the high seas to sustain its war effort.
Natural Gas
Figure 2: Natural gas futures closing prices in 2026; January 27 is the day before the peak
The Two Minutes That Made Traders Lose Faith in the Gas Market
Julian Hast, Ruth Liao, and Naureen S Malik, Bloomberg
Traders in the U.S. natural gas futures market are sharply criticizing a “technical glitch” on the New York Mercantile Exchange (NYMEX) that triggered market chaos during a period of intense volatility. On January 27, natural gas futures surged dramatically amid a wave of cold-weather-driven demand, prompting multiple circuit breakers. An unexpected two-minute trading halt at the close—far longer than the typical five-second pause—distorted the official settlement price, leaving many traders confused and frustrated. Participants, including large institutional desks, said the malfunction likely affected profits and called into question the reliability of price discovery mechanisms at a time when weather and demand shocks are already stressing the market.
The episode has also sparked broader concerns about liquidity and market structure as prices swung wildly due to both fundamental pressures and the disruption itself. Natural gas futures had already experienced record gains and sharp reversals in the weeks leading up to the glitch as extreme cold and thin liquidity around contract expiry amplified moves, further unsettling traders. Investors are demanding clearer explanations and potential remedies from the exchange and regulators, with some warning that repeated technical issues during critical settlement periods could erode confidence in a market that serves as a key price benchmark for energy costs nationwide.
Gasoline
Figure 3: Percentage change year-over-year of California gasoline consumption
Looking Ahead to When Gas Stations Vanish
Dan Gearino, Inside Climate News
It is perhaps obvious that traditional gasoline stations could decline dramatically or even disappear in some regions as the electric vehicle (EV) transition accelerates, particularly in areas where EV adoption is high, such as parts of California. As demand for gasoline falls, refining capacity is already shrinking, which raises the cost of fuel distribution and puts pressure on gasoline retailers. This creates a scenario where selling gasoline may no longer be profitable for many private businesses; in such cases, remaining outlets might only exist through government ownership or subsidies to maintain basic access. The authors stress that these shifts could happen sooner than many expect, potentially by the mid-2030s in certain markets, even while gasoline still retains some share of overall transportation energy demand.
Standard energy demand forecasts, like those from the International Energy Agency, which project rising global oil use for decades, don’t fully capture how quickly infrastructure can fail once demand weakens. Gasoline stations operate within a complex supply chain that depends on stable demand; when that demand drops, closures can cascade rapidly. There are concerns that fuel infrastructure could shrink faster than the vehicle fleet electrifies, potentially leading to fuel access challenges for drivers who still rely on internal-combustion vehicles. Researchers urge policymakers to plan now for this transition, including preparing for scenarios where government intervention might be needed to ensure fuel availability and manage broader impacts on communities and industries tied to fossil fuels.
Wild Card
Figure 4: Billions of kilowatt-hours of electricity exported by Brazil. Source: US EIA
Brazil power firms retreat from trading as risks rise
Leticia Fucuchima, Reuters
Brazilian power companies are pulling back from energy trading as rising credit risk, intense price volatility, and shrinking market liquidity make such activities riskier and less attractive. Major generators like CPFL and CTG Brasil—both controlled by Chinese groups—have exited “directional trading,” which involves betting on price moves, while local traders such as Capitale, Urca, and Trinity Energia have sharply reduced or nearly halted their trading operations. The market’s heavy reliance on bilateral deals without a central counterparty heightens pressure on firms’ reputations and creditworthiness, leaving smaller, independent traders especially exposed.
The retreat follows notable defaults, including Gold Energia’s multi-billion-real collapse in 2024, which reshaped how participants assess risk. At the same time, larger generators, including Copel and Axia, are holding back more of their energy to benefit from high spot prices instead of trading it, contributing further to lower liquidity. While firms with strong credit and generation assets continue participating, smaller players are disproportionately scaling back amid what some industry participants call a “natural shakeout” driven by systemic financial concerns.
Trading Implications
Determining natural gas futures prices can be slippery as they depend on the weather in the U.S., and also on global weather since that drives LNG exports. Right now, the U.S. is recovering from a heavy and extensive cold snap, and the same is true in portions of Europe. So, it seems clear that the price of natural gas will climb for a while. Crude oil is also unclear, partially because OPEC+ does not act as a single unit anymore. But as the shadow fleet becomes more of a target for more countries, the supply of crude oil will likely drop, causing the price of crude oil to increase. Finally, the argument that gasoline stations are going to go the way of the dodo bird seems a bit hard to support, given that even in California, the rate of gasoline consumption is staying fairly flat. Gasoline prices will likely trend with the price of crude oil.