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OIL PRICE CAP AIMED AT PUTIN’S WAR CHEST: Group of Seven finance ministers formally approved the Russian oil price cap today after months of protracted negotiations, delivering what U.S. Treasury Secretary Janet Yellen has described as one of the most powerful tools available to clip Vladimir Putin’s war machine.

The group said in a joint statement this morning outlining the major tenets of the price cap that they plan to have it in place by December 5, when the EU’s ban on seaborne imports of Russian crude also goes into effect.

Ministers did not set a price for the planned cap, and instead said it will be based on a “range of technical inputs” and “revisited” as necessary.

Senior Treasury officials said this morning that the price will be set “above the price of production”—high enough to encourage Russia to continue to produce, while low enough to put downward pressure on Russia’s high oil revenues.

“Our overarching goal here is to make sure that we're in a position where we're giving Russia hard choices,” the Treasury official said.

How it will work: G-7 nations will cut off insurance for all Russian oil shipments sold above the price cap. This would force would-be buyers to find alternative, more costly ways to ship and finance Russian supplies, which would also cause prices to drop.

Selling outside the price-cap coalition will cost more “because the services will be more expensive,” Treasury officials said. They also noted that potential buyers of Russian oil would have greater bargaining power to lower prices.

Approval of the plan comes after a months-long lobbying effort led by Yellen and other senior department officials, who traversed the globe in hopes building out a global coalition.

Russia’s response – vowing to stop selling oil to any countries that participate: "Companies that impose a price cap will not be among the recipients of Russian oil," Kremlin spokesman Dmitry Peskov told reporters today, describing the price cap as an “absurd decision” that would “lead to a significant destabilization of oil markets.”

But that threat was dismissed by State Department sanctions coordinator James O'Brien. Russia “needs to keep its energy machinery running and needs the money,” he told reporters in Brussels.

“Ultimately, it’s going to be in Russia's economic interests to sell [oil] for less, because the biggest source of their revenues is selling energy,” a senior Treasury official said.

Russia needs revenue from oil exports “even more than they did before the start of the war,” due to pain caused by the West’s sanctions and export controls, this person added.

As for India and China: It is thought that the success of the price cap could hinge on what India and China choose to do. Deputy Treasury Secretary Wally Adeyemo and other senior Treasury officials traveled to India last month to lobby for the oil price cap plan.

A Treasury official said this morning, though, that the aims of the cap might be achieved even without full buy-in from those countries.

“Ultimately, what China and India do is going to be a national decision for them,” the Treasury official said. “But our view is that if China and India end up in a place where, because of the price cap, because of the price we’re setting, [they] can negotiate lower prices with Russia, that’s accomplishing our goal—which is reducing Russia's revenues that they can use to fight this war and prop up their economy.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

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Programming note: Daily on Energy will not publish Monday, September 5, but will be back in your inboxes Tuesday. Enjoy the holiday weekend!

GERMANY ANNOUNCES FIFTH FLOATING LNG TERMINAL: The German government said it plans to charter a fifth floating liquefied natural gas terminal as it races to find alternative suppliers to replace Russian gas.

German Vice Chancellor Robert Habeck said at a news conference in Berlin that the new terminal is an “impressive” step towards helping the country wean itself off Russian gas supplies. “We will have a different situation next year,” he promised.

“By importing liquefied natural gas, we are making ourselves less dependent on imports of Russian pipeline gas,” Habeck said. “At the same time we are accelerating the import of green hydrogen in parallel.”

Each of Germany’s five floating LNG terminals will be able to provide a minimum of 5 bcm of gas next year. The first two are slated to go online before 2023, with the other three expected to begin operations before next winter.

“Together, the FSRUs alone can cover about one third of the current gas demand,” Germany’s economy and climate action ministry said in a press release.

OPERATOR DATA SUGGESTS NORD STREAM 1 COULD RESUME FLOWS THIS WEEKEND: Operator data from the Nord Stream 1 pipeline suggests gas deliveries could resume to the EU this weekend, after Russia’s Gazprom halted supplies for a three-day maintenance period.

Many feared that the temporary shutdown for maintenance work as a pretext to more permanently halt gas delivery to the bloc.

But according to nominations data listed on the operator’s website, gas nominations were at 14,437,507 kilowatt hours per hour (kwh/h) for the four-hour delivery period on Sept. 3, when gas flow was expected to resume.

As Reuters notes, those amounts are similar to delivery levels prior to the cutoff, which had already been slashed to just 20% of total capacity. Nominations can also be changed by the supplier as needed, meaning Europe is not out of the woods on this yet.

INTENSE RHETORIC FROM SOUTH KOREA AGAINST MANCHIN-SCHUMER LAW: A senior South Korean official told Bloomberg that the domestic sourcing rules for EV credits in the Manchin-Schumer law represent a “betrayal” of South Korea.

The major South Korean automakers Hyundai and Kia don’t build in North America, meaning that the rules will put them at a disadvantage.

Here’s another noteworthy quote from the story: “South Korea may consider the IRA like being stabbed in the back,” said Cheon Seong-whun, a former presidential secretary for security strategy. “After putting in that much amount of investments, the South Korean administration, as well as its public, expected the same amount of economic benefits back from the US in the form of market accessibility.”

Undersecretary of state for economic growth Jose Fernandez told the publication that South Korea’s complaints are taken seriously and that “we will have more details in the coming months as we begin the domestic rule-making process.”

FIRST HURRICANE OF SEASON AFTER ‘EERILY’ QUIET AUGUST: Tropical Storm Danielle is set to intensify into a hurricane Friday, becoming the first of the season.

Notably, there were no named storms in August.

Colorado State University hurricane researcher Philip Klotzbach said the last time there wasn’t a named storm in the month was 1941.

“It’s been eerily quiet out there,” Klotzbach told E&E News.

CALIFORNIA LATEST: California asked residents to voluntarily conserve power between peak demand hours yesterday, issuing its third “flex alert” warning in a row as grid operators brace for a record-breaking heatwave expected to last through next week.

The flex alert system asks residents to voluntarily conserve electricity by turning up their thermostats to at least 78 degrees and to avoid charging EVs or using large appliances between 4 and 9 p.m., when solar power generation decreases and the grid is most strained.

The state is hoping to avoid the same rolling blackouts they saw in 2020, which California grid operators warned “are a possibility, but not an inevitability” in the coming days, when the state’s most intense heat wave of the year is forecasted to bring triple-digit temperatures to many regions, and will cause temperatures in other areas to climb as much as 20 degrees higher than normal. Demand is expected to peak on Monday, when electricity demand is slated to exceed 48,000 megawatts. (Read more on why California’s grid is so vulnerable to extreme weather events.)

The Rundown

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Energy News Network Maine farmer pairs solar panels with wild blueberries. Will it bear fruit?

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Calendar

WEDNESDAY | SEPTEMBER 7

11 a.m. The U.S. Department of Energy is holding a virtual meeting of the President’s Council of Advisors on Science and Technology to discuss semiconductor research and development. Learn more and register here.

2:30 p.m. 406 Dirksen The Senate Environment and Public Works’ Subcommittee on Clean Air, Climate, and Nuclear Safety will consider the nominations of three pending members of the Tennessee Valley Authority.