European gas prices are still rocketing higher, a massive crisis for economic activity where gas prices are an unbelievable 600% up on the year, with no sign they will ease. It’s the biggest economic threat to Europe since 1939. We’re all aware it’s the result of massive energy security miscalculations across the continent:
Germany assumed Russian Gas would always be cheap, available and plentiful.
The Netherlands and Italy assumed Gas would always flow through Germany and winter reserves could be built up during the quiet and cheap summer months.
The UK neglected energy storage and the development of domestic Gas as a transition fuel, and assumed Gas supplies would always be available on the open market – failing to foresee the possibility of massive disruption events.
France is struggling with Nuclear Power – half the French reactor “fleet” is currently idled.
Across Europe Nuclear has been painted as wrong and non-green, development of new nuclear power has generally stalled or become too expensive.
Already consumers are experiencing massive shocks in terms of their monthly power bills, but the brutal reality is the Long Hot Summer means we’ve barely experienced the real consequences of the soaring Gas price shock. The costs already hurt, but the economic damage could be crippling. It will become unavoidable. Crisis approaches… and soon. Winter is coming…
Vladimir Putin could not have planned or executed his crippling energy strike on Europe better.
A dismal European winter is coming, and European politicians will do anything to avert it. That will include appeasement – putting pressure on Ukraine to come to a deal with Russia that allows Putin to end the war looking like he achieved something. It would be a major long-term blow to Europe – knowing we’d had to cut a deal with the Devil, and would not immediately solve the West’s reliance on Russian power. (It could take 3 years before Europe can eliminate its reliance of Russian gas with new gas distribution infrastructure – but it can be done!)
Power cuts, factory closures, business crisis already appear nailed on. It’s difficult to contemplate German workers welcoming job losses and stagflation, plus the expectation they pay the costs of Southern Europe to cope with the Energy war – but that’s effectively the ECB strategy: to balance European debt market credibility with German money to support Italy’s debt weakness.
While there may be many good reasons and indications to accept the US economy has already passed the nadir of economic woe for this year, the instability engendered by rising European energy prices, the threat of autumnal and winter power outages, combined with rising industrial strife across Europe as inflation and power trigger rising wage demands… means the whole Western Economy is going to struggle. It’s difficult to envisage the US market thriving when Europe is suffering a potentially crippling winter of stagflation and economic strife.
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