Macro commodity concerns

How will the winter and Russian gas prices affect Germany and the EU in general?

I have my ideas, but wonder what this board thinks about the global economy?

Sincerely,

jan

:^)

I think recession is clearly expected in Germany and maybe in all of Europe. Manufacturers are shutting down or reducing production due to anticipated natural gas shortages. Chemical companies like BASF and Bayer come to mind as having announced reduced production.

We also hear of businesses like bakeries closing due to higher energy costs. And fishing boats that can no longer afford to fish due to higher diesel costs.

Increasing shipments of LNG and new pipelines may resolve these issues given time, but this winter seems likely to be difficult once cold weather arrives.

Meanwhile pray for peace!!!

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How will the winter and Russian gas prices affect Germany and the EU in general?

Europeans are a little more familiar with hardship than us Americans (using the term broadly), and I think they will get through just fine. Because of their misguided politics, many countries will worsen the problems by subsidizing energy costs, giving rebates, capping utility rates, etc., rather than just providing help to the minority of people that can’t cope with the new prices, but nevertheless, the market will mostly work and. people will keep their use of electricity and gas to a minimum, and over a few years, nuclear power, LNG shipments, new pipelines, etc. will chip away at the problem, and who knows, peace in Russia would solve the problem even more quickly.

But the winter Europe will have to go through, while uncomfortable, will be nothing like being in an active war zone. The constant reminders of the tremendous suffering in the Ukraine will make it hard for other Europeans to complain that they have to wear sweaters, postpone vacations, and cut back on energy-intensive manufacturing.

Of course, there will be a big slowdown in Europe, and that will contribute, in a small way, to the many problems the rest of the world already had, with that being almost certainly enough to put us into a recession, on top of interest rate hikes, self-inflicted COVID damage (on top of the damage from the virus itself), and the end of a long upwards move in stockmarket and housing prices. But I don’t think the damage from the war is in the top 3 reasons for our oncoming downturn.

Sorry to be so cheerful!
dtb

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We just had a house guest here from Sweden. She and I talked about Sweden’s energy surplus and how they export energy and do not get natural gas from Russia.

IIRC, she said that nuclear power has or will be completely shut down in Sweden. As much as spent fuel pollution seems awful, I wonder if Germany will change course and keep more reactors going rather than continue the shut down.

There are many decisions that need to be made quickly, but cannot imagine how effective and quick decisions can be made in a huge democracy.

It boggles the mind.

Our friends in Berlin and Dresden seem stoic.

ugh…

thanks for responding.

jan

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Germany has had a similar policy of shutting down nuclear power, and this is popular in Germany, but they have at timidly reversed course because of the current crisis. Not all countries will, but at least some will. It’s like quitting a bad job - probably a good idea, but maybe wait until you find another job, first? Germany should shut down nuclear power when their overall energy supply is firm (not dependant on Russia) or when fusion power arrives or when we are swimming in renewable power and can cheaply store a lot of it. None of those things are true yet, so closing the nuclear option is madness.

Wikipedia:

On 21 August 2022, German Economy Minister Robert Habeck said that Germany would not reverse the phase-out itself, but said that he was open to the idea of extending the lifespan of the Isar Nuclear Power Plant in [Bavari), subject to a stress test of Germany’s electricity system.

On 5 September 2022, the Federal Government announced that two of the three remaining nuclear power plants (Neckarwestheim and Isar 2) will operate beyond 31 December 2022 until April 2023 (cycle stretch out), while the Emsland Nuclear Power Plant will be shut down as planned.

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I’d have to say it’s forked, to use the euphemism.

We’ve seen what energy shortages do to an economy in the 70’s; without checking the stats I’d guess Europe is as dependent on Russian oil as the US was on Middle East supplies then. As I recall from the 70’s, everything else was irrelevant; the inflation raced through all sectors and was particularly hard to erase; European workers are more truculent and will be restive, and it’s hard to see anything good coming of this, even if the war ended tomorrow, which it won’t.

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