What Germany’s ‘sea-change’ shift on nuclear power means for the industry

Hi there, and welcome back to Energy Source, coming to you today from London.

This week we look at a big moment as Germany changes its tune on nuclear power. But first, let’s take stock of oil prices.

So far, the big oil companies have insisted they can cope with lower prices, after a 15 per cent fall over April. Only Eni, the Italian energy major, has so far published its revised assumptions for its finances, based on a price of $65 a barrel. The others all kept their frameworks tied to a $70 a barrel price and are waiting to see what happens next.

The bad news is that while there was a bounce in the price last week, most analysts think the market is going to be depressed for the rest of this year and into next year and beyond. In fact, the forward curve for benchmark Brent crude does not show prices picking up past $66 a barrel until 2028.

While the economic fallout from the US-China trade war has been blamed for the price fall, the bigger factor may well be Opec. The oil cartel, led by Saudi Arabia, seems determined to pump more crude into the market, even if the demand for it is uncertain.

How low can prices go? Goldman Sachs thinks Brent will be $60 for the rest of this year, and $56 next year. If Opec keeps pumping AND the global economy slows down, Goldman thinks it could hit $40 a barrel next year.

What sort of impact would that have on Big Oil? BP, which is perhaps the most exposed to prices, has modelled its finances on $70 this year and $71.50 next year. Each $1 decrease from that, per barrel, will drop its pre-tax operating profits by about $340mn. At ExxonMobil, each $1 difference affects earnings by $650mn.

What Germany’s shift means for nuclear power

One of the most-read stories on the FT on Monday was the news that Germany is changing its stance on nuclear energy.

“This will be a sea-change policy shift,” said a German official, as the new government dropped its long-standing opposition to the expansion of nuclear power in the EU.

Germany, which finished phasing out its own nuclear power stations in 2023, has strenuously argued against nuclear power being treated as a low-carbon energy, on a par with wind and solar.

As one of the EU’s most powerful voices, Germany’s anti-nuclear stance stymied funding and political will for new nuclear projects throughout the bloc. Germany has also supported a World Bank ban on any funding for nuclear projects, an approach that other development banks follow.

But Friedrich Merz, the new German chancellor, has signalled that he takes a more pragmatic view and has said in the past that the country’s decision to shut down its nuclear plants was “a grave strategic mistake”, exposing it to high prices for imported gas.

The new government will now look at building small modular reactors and is discussing whether it might join France’s nuclear defence shield.

“Those countries in Europe who are looking to develop nuclear, will receive less opposition from Germany,” said Jonathan Cobb, a senior policy expert at the World Nuclear Association. “The number of countries supporting nuclear compared to those opposing it [has] switched quite a lot over the last year,” he added.

Cobb said that with Germany and other European countries changing their position on nuclear, it would also help Ajay Banga, the president of the World Bank, push through a change on its ban on funding nuclear.

In the EU, Cobb said that policies that until now have only referred to renewables as a way of increasing low-carbon energy might now also refer to nuclear power as well. At future G7 meetings, nuclear might be treated in the same discussion as other low-carbon technologies, instead of being carved out into its own session, he added. (Malcolm Moore)

Power Points

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.