they’re pretty industrious, grow food etc. this won’t be Afghanistan but Germany. IMF is already prepping w/ former Iraq rebuilding chief in charge
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This is why you can’t raise capital for a free market solution to the EU energy crisis - if you make profits, they’ll just steal them.
The EU plan is intended to redistribute some energy companies’ windfall profits and revenue to cushion the blow of high prices for consumers. It marks one of the bloc’s most significant market interventions since the global financial crisis more than a decade ago.
The commission also wants to skim the profits of fossil fuel companies that aren’t covered by the revenue cap. The plan aims to raise €25 billion by demanding companies involved in oil, gas, coal and refinery activities fork over one-third or more of the money the commission deems excess profit. The proposal defines excess profit as taxable profits that surpass a 20% increase on average profits from the previous three years. Revenue from this part of the plan could be used to help vulnerable households, companies and energy-intensive industries, the commission said.
We’re so fortunate to live in the land of the free. Here, the Democrat tax_and_spend controlled congress will just try to pass a law to take that money.
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This is quite a good if longer interview with a group that knows commodity markets well. Two short answers I thought were good, but the whole piece is worth a read.
You thought the U.S. and European attempts to use economic sanctions to cut off Russian oil from the global market was a catastrophic error. Why?
We wrote a piece called “Crazy Pills” where we outlined our views in this regard. This is the type of insight that can only come from direct experience in the commodity sector. It intuitively feels right that if we just choke off Putin’s energy-export volume, we will choke off his revenue. But that’s just not how commodities work, especially when you’re the swing producer like Russia is. If you’re a small country and you produce a de minimis amount of energy and it’s choked off by a naval blockade, the rest of the world can make that up and it’s not a big deal. But when you are the single largest exporter of energy that the world desperately and critically needs, you hold all the cards.
And so here’s the example that we would use. Let’s just stick to round numbers. Putin exports 10 million barrels a day of oil. Assume we were to blockade the country of Russia — which, of course, is an act of war, but let’s just for the sake of analysis run the thought experiment. If we were to take 5 million barrels a day of this oil off the market, shut it in, blow up Russia’s wells, pick your favorite — the price of oil would way more than double, and Putin would make more revenue on the 5 million barrels of oil that are still finding a way into the market than he would lose by our cutting off the supply. It’s the same thing with natural gas. The price of natural gas in Europe today, despite coming down by 40 percent off its peak, is still seven or eight times what it is in the United States.
And if the price skyrocketed after Putin shut off the volume, well, that price is the benchmark he uses when he sells his gas to Asia via liquefied natural gas, or LNG. And so if you’re selling it for 40 and then you cut production and you sell half as much for 80, you’re coming out even. The price elasticity of demand in commodities is such that the only way to crush Putin’s revenue is to flood the world with energy. Oil was at -$37 a barrel when we had a lack of storage at the height of the COVID shutdown. That shows you how volatile oil can be.
During the first Gulf War, we went to all of our oil-producing allies and the coalition and said “Pump” because we were trying to rob Saddam Hussein of his oil revenue. The price of oil can be pushed down, but only with supply. So attacking his volume, which we have been loudly saying is a mistake from the beginning, has indeed proven to be a mistake. And I think the numbers are pretty definitive in this regard. August was perhaps a record revenue month for Putin, and this is how he’s funding his war machine.
What about Europe’s decision to abandon Nord Stream 2 natural gas pipeline?
Insane. The world cannot live without its energy. Again, let’s do the hypothetical and pretend we’ve surrounded the entire country of Russia and cut off all of its oil and gas to the outside world. The world would descend into energy starvation and mass death. The world literally cannot live without Russia’s energy, and we should not want them to. We should be flooding the market with energy. Every molecule that Putin’s willing to sell his enemies in Europe should be accepted.
By the way, we believe that Putin would not have moved into Ukraine had natural gas not already been a crisis. This is the part people forget. The price of natural gas skyrocketed in December in Europe, long before he moved into Ukraine. He likely did the calculation and realized, They don’t have enough molecules. They’re surely going to come to the table and give me what I want in Ukraine. He moved into Ukraine. He was incorrect — they didn’t come to the table. And here they are, weaker than they were if they had. And so he miscalculated Europe’s response. And I think he overestimated the long-term impact of his play. In the medium-to-long term, we think his invasion of Ukraine is a catastrophe for him and for Russia, but in the near term, winter 2022–23 …
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Germany starts seizing energy companies, assets.
- GERMANY CLOSES IN ON DEAL TO NATIONALIZE GAS GIANT UNIPER
- PARALLEL TO TAKEOVER, GERMAN GOVT STILL PLANNING GAS LEVY FROM OCT. 1 - BUSINESS INSIDER
- GERMAN GOVT CLOSE TO UNIPER TAKEOVER, EXPECTS COSTS OF OVER 30 BLN EUR - BUSINESS INSIDER, CITING GOVT SOURCES
- GERMAN GOVT SEEKING TO TAKE ROSNEFT REFINERY UNDER STATE CONTROL - SPIEGEL
- ZEW SAYS PROSPECT OF ENERGY SHORTAGES IN WINTER HAS MADE EXPECTATIONS EVEN MORE NEGATIVE FOR LARGE PARTS OF THE GERMAN INDUSTRY
See also my post on the green energy thread about energy prices in Germany
Russia doing a “partial war mobilization” to call up extra troops. Also pulling back some of their military from Syria, etc, to fight in Ukraine.
or just print more (not right now though)…
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where else are they besides Syria?
Bigger problem is troop motivation some talk of rebellion if he goes nuclear. Not sure how true?
This guy is really incompetent- good thing he’s not in charge any more. He fell down a couple flights of stairs instead of finding a window.
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As expected
- RUSSIA’S MEDVEDEV SAYS: RUSSIA IS READY TO DEFEND TERRITORIES ADDED TO IT WITH ALL MEANS, INCLUDING STRATEGIC NUCLEAR WEAPONS
- RUSSIA’S MEDVEDEV: REFERENDA IN DONBAS ‘REPUBLICS’ WILL TAKE PLACE, THERE IS NO WAY BACK
- RUSSIA’S MEDVEDEV: ANY RUSSIAN WEAPONS, INCLUDING NUCLEAR, CAN BE USED TO DEFEND TERRITORIES ADMITTED TO RUSSIA
- SILUANOV: PROPOSES INTRODUCTION OF EXPORTS DUTY FOR FERTILIZERS AND COAL
- RUSSIAN FINANCE MINISTER SILUANOV: WE PROPOSE HIKING EXPORT DUTY ON NATURAL GAS
meanwhile, paying the price
- GERMANY BEGINS TALKS ON URGENT FINANCIAL SUPPORT FOR REGIONAL PUBLIC ENERGY PROVIDERS - SOURCES
- MUNICIPAL UTILITIES HEAD LIEBING SAYS SUPPORT MIGHT HAVE TO REACH “DOUBLE-DIGIT BILLIONS” EUROS
- GERMAN FINANCE MINISTER: INFLATION THREATENS WEALTH, SECURITY AND STABILITY OF THIS COUNTRY
- GERMAN GOVT TO NATIONALISE SEFE, PREVIOUSLY GAZPROM GERMANIA, - SPIEGEL ONLINE
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The EU energy situation
Europe doesn’t have many options to deal with the immediate shortages. Essentially everything that can be done quickly has been done… Europe’s remaining near-term alternatives are now a brutal combination of more shutdowns, outright rationing, massive inflationary subsidies for citizens, and bailouts for industries. Some are already talking of nationalizing critical industries, which would hand Putin another victory.
At current prices, someone told me the cost of the war in terms of higher energy costs was on the order of 10-20% of Europe’s GDP. You might be able to print that for a year from your central bank (with predicable impacts to the Euro or Pound), but losing that much GDP every year is a recipe for disaster.
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bump
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Speculation is that Russia sabotaged the Nord 1 Pipeline and it’s now leaking lots of gas from underwater holes.
SWEDISH UPPSALA UNIVERSITY SEISMOLOGIST REGARDING NORD STREAM: WE ARE VERY CERTAIN THESE WERE EXPLOSIONS, THIS WAS NOT AN EARTHQUAKE AND NOT A LANDSLIDE
U.S. AUTHORITIES WEEKS AGO WARNED GERMANY ABOUT POSSIBLE ATTACKS ON GAS PIPELINES IN THE BALTICS -SPIEGEL, CITING SOURCES
Could well be a veiled threat to sabotage other north sea pipelines; Norway’s for example supply 1/4 of the nat gas to Europe and without those working, it would be a disaster.
https://twitter.com/AndreasSteno/status/1574790406998474765?s=20&t=mE9OqPlbHz1MTsoBtVapyA
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Roundup of commentary on the pipeline damage, which looks serious. Who to blame is less clear.
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I like the Polish guy who hilariously blamed Joseph Robinette Biden. Then, I read Biden’s threats. Yikes! Of course, Ukraine blamed Russia, which I suspect will be their default Boris Badenov for the next half-century. Germany will only say it was absolutely, positively sabotage.
I did not see who is responsible for maintenance/repair, but since Germany is nationalizing everything related to energy, I suppose they’ll get their u-boats out there to fix it pronto.
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After the local elections, where the locals overwhelmingly in favor of joining Russia and not being killed (either by Russia for not voting, or by Ukraine as traitors for putting up with Russian control), we have this
- RUSSIA TO FORMALLY ANNEX FOUR UKRAINE OCCUPIED REGIONS FRIDAY: KREMLIN
Other headlines today
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KREMLIN CALLS INCIDENTS ON NORD STREAM PIPELINES ‘VERY DANGEROUS SITUATION’ WHICH NEEDS INVESTIGATION
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[London Metals Exchange] TO CONSULT ON POSSIBLE BAN OF RUSSIAN METAL
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GERMAN ANNUAL INFLATION RATE AT 10.0% IN SEPTEMBER - BUSINESS INSIDER, CITING GOVT SOURCES
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More of the obvious from Germany
- SCHOLZ: NORD STREAM DAMAGE MEANS NO GAS IN FORESEEABLE FUTURE
- GERMAN CHANCELLOR SCHOLZ: GAS PRICES TO CONSUMERS HAVE TO COME DOWN
- GERMAN ECONOMY MINISTER HABECK: ENERGY CRISIS THREATENS TO GROW INTO A SOCIAL AND ECONOMIC CRISIS
- GERMAN FINANCE MINISTER LINDNER: WE ARE IN AN ENERGY WAR
- GERMAN FINANCE MINISTER LINDNER: WE WILL MOBILISE OUR ECONOMIC STRENGTH WHEN NECESSARY, LIKE NOW
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