September 28, 2022

Europe Plans “Emergency Intervention” within Power Market as Just about all Hell Breaks Loose

Energy prices in Europe hitting record highs every single day

With even Zoltan Pozsar warning that  Europe faces an apocalypse of sorts  now that the  Eurussia  divorce is complete and power prices in Europe are usually hitting fresh daily record highs every single day – just today, German 1Year  forwards baseload electricity rose above € 1000, or 10x where they were a year ago, before easing after European nat gas  prices plunged the most since March after Germany said its gas stores are usually filling up faster than planned ahead of winter…

… moments ago the European Union appears to have lastly realized that it faces a good armed revolt this winter, or worse, when hundreds of thousands face freezing cold with out power and heat (see “ This Is Over and above Imagination”: Polish Homeowners Fall into line For Days To Buy Coal In front of Winter “ ), and announced that it was planning “ urgent steps” in order to push down soaring power prices, Commission President  Ursula von der Leyen  stated on Monday.

“ The skyrocketing electrical power prices are now exposing, for different reasons, the limitations of our own current electricity market style, ”   von dieser Leyen said in a presentation at the Bled Strategic Summit in Slovenia, pointing out what has been obvious for years to those who warned frequently that Europe should probably not take make its power policy based on the idiotic ravings of a self-absorbed, petulant, Scandinavian teenager. “ It was developed under completely different circumstances plus completely different purposes. ”

Ah yes, it is the “ circumstances and purposes” that are at fault, not Europe’s catastrophic “ green” force over the past decade that left the continent at the mercy of Putin, very much as one Donald J Trump warned would happen… and speaking of Putin, probably Europe can impose some more self-destructive sanctions on Russian energy exports. But we digress…

Ursula then added “ that’s why we are now working on an urgent situation intervention and a structural change of the electricity market”,   one which would look roughly like this.

The unprecedented spike in strength prices, which have soared almost 10-fold in the past year, provides fueled inflation, increased the economic burden on companies and households recovering from the particular pandemic, and forced the particular ECB to aggressively hike rate in hopes of mashing demand into what is now a definite recession if not the depression. One could say that Putin couldn’t have planned their revenge on Europe better.

According to Bloomberg, more and more member states are calling for a price cap and the Czech Republic, which holds the rotating presidency of the EU,   plans to convene  an extraordinary conference of energy ministers on Sept. 9.

In other words, while the ECB plans in order to crush demand with tight monetary conditions, European governments will ease demand and inject fiscal stimulus to prevent an angry mob descending on various local parliaments.

Of course , being a harebrained European “ plan” which doesn’t make any sense – just like anything out of Europe  – the exact details of an EU intervention plan are still being created, and EU diplomats stated the EU’s executive provide could offer a detailed strategy as soon as this week. Don’t hold your breath: after all, missing a massive ECB-funded stimulus – the proceeds of which will immediately go to Putin – unless Europe has somehow found brand new deposits of nat gas which are immediately accessible and don’t require tens of great and years of development to become extracted, what Europe does is just the latest jawboning.

With Russia blending gas deliveries, power-plant black outs further sapping supply, whilst droughts and lack of wind make a mockery of “ green” energy sources, the pressure is growing on EU leaders to act quickly or even risk social unrest plus political upheaval. Czech Best Minister  Petr Fiala  is seeking backing for his price-cap plan and programs to discuss possible limits along with German Chancellor  Olaf Scholz.

“ Cardio prices are a Europe-wide problem that we need to tackle at European level, ” Fiala said on his Twitter account. “ Ahead of the EU Power Council we want to find a way to assist people and businesses that we can agree on with other Western european leaders. ”

Czech officials are suggesting to cap prices associated with natural gas used for power era, Industry and Trade Minister  Jozef Sikela  said upon Monday.

“ We may open the question associated with emission allowances, as some other member states have done in past, that also existing a major part of the total cost, ” Sikela said. “ We may open the question of the overall market regulation, complete decoupling of the prices, ” adding that the bloc cannot meddle too much with the marketplace or fuel speculation.

Amusingly,   EUROPEAN UNION member states have  already earmarked  about 280 billion dollars euros (or roughly the same in USD now that we are at parity) in procedures such as tax cuts and subsidies to ease the pain of surging energy prices meant for businesses and consumers,   but the aid risks becoming dwarfed by the scale of the crisis. In other words, the ECB will be hiking rates even while it has to inject a lot more liquidity into the market to allow the latest helicopter money stimulus. Governments have also started to restrict energy use, banning outdoors lighting for buildings in Germany and lowering interior heating temperatures, to meet the EU voluntary target of cutting gas demand simply by 15%.

Upon Saturday,   Belgian Leading Minister  Alexander De Croo  warned that the EU aren’t continue resolving the problem of sky-rocketing energy costs by cutting taxes and called for a price cap instead. Should the bloc fail to reach an agreement, Belgium will consider national measures, he told VTM television.

Italy last week reacted skeptically in order to the  idea  of setting limits on power costs, saying its situation differs from other European countries thanks to authorities measures offering protection against inflation.

Within kneejerk response, some European commodity prices dipped through all time highs, while US nat gas slumped to session lows amid anticipation Europe’s “ energy emergency” could mean fewer All of us LNG exports. We question that, and in fact anticipate that the nat gas surge will continue as European countries doubles down in pleading for every last drop people, Canadian, Qatari LNG it could find.

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