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EU Considers Massive 100 Billion Euro Energy Relief Fund For Companies

EU Considers Massive 100 Billion Euro Energy Relief Fund For Companies

Europe faces an unprecedented energy crisis that requires extraordinary policy action, such as a possible 100 billion in relief funds to businesses hit the hardest by soaring energy prices.

Bloomberg cites MF daily that said the European Union on Wednesday is considering a massive 100 billion euro bond issuance for a new relief program that would provide relief funds to businesses hit hardest by rising gas and electricity prices, as criticism soars about out of control commodity inflation and the bloc’s inability to tame prices.

MF didn’t cite sources, though it said the issuance could be approved within the next 15 days.

The news comes as the European Commission has proposed a plan to make Europe independent from Russian fossil fuels following the invasion of Ukraine. Even before the invasion, many European countries were facing extraordinarily high natural gas, electricity, and fuel costs. There’s even risks of a diesel shortage emerging. The latest developments from Ukraine have exacerbated the situation.

On Tuesday, a working group of Germany’s coalition parties agreed on a relief package to strengthen Germany’s energy independence and help alleviate the burden of high energy costs sources, told Reuters. This comes as Europe’s biggest economy is attempting to decouple from Russian gas and oil due to the invasion of Ukraine.

Italian Premier Mario Draghi recently said the invasion of Ukraine had sparked high volatility for the markets for commodity markets, which were already at elevated prices before the conflict. He said, “We must intervene right away.”

Spanish Prime Minister Pedro Sanchez said, “committing ourselves to diversify energy sources as fast as possible” is necessary. He said “small businesses and citizens can’t bear” soaring gas and electricity costs.

European politicians are awakening to the fact that high energy costs could “re-awakening the nightmare of populism” on the European continent, Greek Prime Minister Kyriakos Mitsotakis warned.

That’s why the European Union is likely to pass some kind of energy relief package for businesses and households in the near term.

Oil Executives: Higher Energy Prices Are Here To Stay

Oil Executives: Higher Energy Prices Are Here To Stay

  • Big oil executives expect that higher energy prices are here to stay.
  • Underinvestment in new production is seen as one of the driving factors behind higher energy prices in the mid-term.
  • Low global inventories and limited spare production capacity are driving crude prices in the short term.

We are just at the beginning of consumers’ energy bill troubles, Big Oil executives have warned as they reported bumper earnings thanks to higher oil and gas prices.

“I’ve no good news to deliver, oil prices will remain high,” TotalEnergies’ chief executive Patrick Pouyanne told media recently in comments on the current situation with energy costs in Europe.

The comment was echoed by the Asian head of commodity major Vitol, Mike Miller, who earlier this month noted low global oil inventories and limited spare production capacity as the reason for his expectations that oil will yet go up.

BP’s Bernard Looney also projected higher energy prices. He called it “volatility” and said oil supply could decline further this year, supporting prices of over $90 per barrel.

“We expect a tight gas market going forward and we expect volatility in power price development,” Equinor’s chief executive, Andres Opedal chimed in at the release of the company’s latest financial results, as quoted by Reuters.

There are two things that all the Big Oil majors quoted share. The first is strong profits resulting from that very same tight supply, coupled with strong demand. The second is the absence of plans to ramp up oil production.

Europe’s Big Oil has been under growing pressure to reduce its emission footprint. Shell even got sued for it and was ordered to slash its emissions. The way to do it: cut oil production.

…click on the above link to read the rest of the article…

European Energy Prices Soar As Western Media Hypes Imminent Russian Invasion Of Ukraine

European Energy Prices Soar As Western Media Hypes Imminent Russian Invasion Of Ukraine

European natural gas and electricity prices jumped as Western corporate media continued to drum up headlines of an imminent Russian invasion of Ukraine that could spark World War 3.

Benchmark European gas prices rose more than 10% to 84 euros a megawatt-hour, the highest in weeks. German power prices also moved higher.

Europe’s energy crunch is set to worsen if tensions in the region deteriorate. Russian gas supply is already low as storage facilities are well below average for this time of year (this means gas supplies will remain tight through spring). The risk of rolling blackouts across the continent increase if Russia cuts off gas to Europe.

“The immediate focus is on the potential for a disruption in Russian energy supplies to Europe, which would be very difficult to deal with, and could create a true energy shortage even beyond the challenge that we’re already seeing,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. “But before that, Europe was already in an energy crisis.”

According to monthly auction results on Monday, Russian supplier Gazprom PJSC didn’t book additional pipeline capacity for March to send gas to Germany via the Yamal-Europe pipe. Gas flows through Ukraine into Europe are also far below contractual volumes.

On Monday, Fatih Birol, the head of the International Energy Agency, told attendees at a conference in Cairo that politicizing gas in Europe is not a good idea because it translates to higher prices for consumers. Already, the UK has capped energy prices for households to mitigate further soaring costs.

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Days of reckoning

Days of reckoning

Here’s something which will likely be universally unpopular:  The government shouldn’t do anything to subsidise energy prices.  I say this in the face of a £700 or so increase on annual bills announced today.  And this is just the beginning, because, as Nils Pratley at the Guardian points out, when the price cap is raised again in October, it will add a further £300 to bills – just in time for next winter.

To be clear, I am not arguing that millions of households should be left to choose between heat and food; I am merely pointing out that there are better and more effective ways of alleviating poverty than bailing out a private energy industry which is the victim of its own past follies.  Rather, I agree with Torsten Bell from the Resolution Foundation, who told this morning’s Today programme that the best way of addressing poverty is through increases in the benefits system.  Restoring and adding to the £20 a week cut from Universal Credit and the triple lock on pensions would be by far the most effective way of alleviating fuel poverty.

The energy side of the crisis, however, requires sweeping restructuring which goes well beyond anything the government or the opposition are currently prepared to countenance – not least because the economic models they operate on are so out of step with the real world that they fail even to understand the problem, still less offer a workable solution.

Why the energy cap failed

The state-imposed energy cap, which is the focus of establishment media attention today, was always the wrong solution to the wrong problem.  As I explained four and a half years ago:

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Germany closes half its remaining nuclear power plants

Germany closes half its remaining nuclear power plants

The shutdowns of three plants take place as Europe faces one of its worst-ever energy crises and as support for nuclear as a low carbon energy is, once again, on the rise.

Germany's Grohnde nuclear power plantThe Grohnde nuclear power plant is one of three being shut down on Friday

Germany is to shut down three nuclear power plants on Friday, as part of the country’s phase-out of nuclear energy.

The closures take place as Europe faces one of its worst-ever energy crises and as nuclear power is, once again, gaining support as it produces significantly less carbon dioxide.

The plants in Brokdorf in the northern state of Schleswig-Holstein, Grohnde in Lower Saxony and Unit C at Gundremmingen in Bavaria in the south are being taken off the grid.

The decommissioning process will take two decades and cost €1.1 billion ($1.25 billion) per plant.

Germany: The end of nuclear power plants

Where does this leave nuclear in Germany?

This means that in 2022, Germany will have just three nuclear power plants — in the states of Bavaria, Baden-Württemberg and Lower Saxony.

They are due to cease production in exactly a year’s time, cutting nuclear energy output by around four gigawatts — equivalent to the power produced by 1,000 wind turbines.

However, two plants that produce fuel and fuel elements for export may continue to operate.

The closures will officially end the nuclear phase-out for domestic energy production started under former German Chancellor Angela Merkel.

Merkel’s government made the decision in 2011 after the accident at the Fukushima atomic power plant in Japan.

An earthquake and tsunami destroyed the coastal plant in the world’s worst nuclear disaster since Chernobyl 25 years earlier.

Germany's Brokdorf nuclear power plantThe Brokdorf plant is one of three nuclear power stations in Germany being shut down on New Year’s Eve

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France Faces Power Blackouts In Next Cold Snap, Grid Operator Warns

France Faces Power Blackouts In Next Cold Snap, Grid Operator Warns

France’s electricity grid is coming under strain, and the next cold snap could be devastating for the country as energy-intensive manufacturers would experience reduced power, according to a new report published by French power grid operator Reseau de Transport d’Electricite (RTE).

RTE said due to the lack of wind and nuclear power generation. The next cold snap would force it to cut electricity to energy-intensive companies to stabilize the grid. There’s even the possibility widespread rolling blackouts could be implemented for two hours to mitigate grid collapse during peak energy demand.

The good news is that weather forecasting models provided by Bloomberg don’t show an imminent cold blast for the first half of January.

“Based on the latest forecast for January, such meteorological events — including a severe cold snap — seem very unlikely for the start of the month, and less likely for the rest of the month,” RTE said. “Hence, the risk of power cuts is essentially ruled out at least for the start of January.”

Mild temperatures and a flotilla of liquefied natural gas tankers have been a temporary relief for Europe, sending Dutch TTF natural gas and power prices lower in the last week.

France’s grid remains under pressure but not as bad as last week when day-ahead power prices rose to the highest level since 2009 and have since halved. Prices remain at extremely high levels.

Energy inflation is a politically sensitive issue for President Emmanuel Macron ahead of April’s presidential elections. If renewable power generation lags, nuclear reactors remain halted for maintenance, and natural gas prices remain elevated, then higher power bills into January and February could create more unpopularity for Macron.

European Firms Warn “Unbearably High Energy Costs” May Spark Wave Of Production Shutdowns 

European Firms Warn “Unbearably High Energy Costs” May Spark Wave Of Production Shutdowns 

Years of mindless green energy policies across the European continent are about to unleash an economic crisis. Energy-intensive companies are paying “unbearably high energy prices” that may force them to shutter operations.

Eleven European associations (from steel to fertilizers to cement to paper mills) published a press release Wednesday that warned the energy crisis that plagues the continent has worsened over the few months and accelerated in the last several days as European natural gas hit a record high on Tuesday.

“The main reasons for this situation are the financial market speculation from financial players including hedge funds and commodity trading houses, the imbalances in the gas market, seasonally decreased renewable energy production, reduced nuclear energy production, coal mine closures, and increased carbon costs passed on in electricity prices,” the eleven associations said in a press release.

Europe’s energy crisis has snowballed into what could be an economic downturn. The groups warned, “numerous industrial energy consumers” have “to curtail and/or temporarily close plants” because “energy prices have increased 4 to 5 times” and made the cost of operating uneconomical.

“The ongoing situation has severely impacted the competitiveness and profitability of energy-intensive sectors’ European operations as they are most exposed to dramatic price spikes,” the groups continued.

They said, “a prolonged period of unbearably high energy prices could lead to severe losses, relocation of European companies and an increase of carbon leakage.” 

The groups called on European leaders to combat the energy crisis and “quickly exploit the full potential of the toolbox presented by the European Commission in October. Furthermore, urgent actions are necessary at EU level to enable affected companies to overcome this situation.

…click on the above link to read the rest of the article…

The UK energy rationing plan

The UK energy rationing plan

The establishment media are suspiciously silent about the energy crunch facing Europe in general and the UK in particular.  In October, when the wholesale gas price spiked at 400 percent above its January 2021 level, energy prices were headline news.  So too was the sight of energy supply companies falling like dominoes.  But then, perhaps because energy supply problems couldn’t be blamed on Brexit, the news moved on to MPs sleaze and the Prime Minister’s Christmas parties.  Most Brits today are entirely unaware that our energy situation has become far more precarious.

It falls to the business pages of the American press to spell out what UK outlets refuse to consider.  For example, Anna Shiryaevskaya, Jesper Starn, and Elena Mazneva at Bloomberg explain that:

“Temperatures are forecast to fall below zero degrees Celsius in several European capitals this week, straining electricity grids already coping with low wind speeds and severe nuclear outages in France. To make matters worse, Russia is limiting natural gas flows through a major transit route to Germany…

“Energy prices have spiraled this year, with European gas surging more than 600%. The region’s benchmark gas contract climbed as much as 8.8% Monday and closed record-high, while German year-ahead power, a benchmark in Europe, rose as much as 5.7% to a record 256.25 euros ($289) a megawatt-hour. The French contract jumped 9% to an all-time high.”

The energy crunch has been exacerbated by the political games being played out by the new German government and Russia – the former refusing to finalise the Nord Stream 2 pipeline deal, and the latter choosing to store gas reserves for its own population rather than pump it over to Western Europe.  One consequence for the UK – which is now at the end of the pipelines from Russia – is that the price of gas spiked above £3.70 per therm this afternoon (20.12.2021):


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European Nuke Plants Offline As Power Prices Hit Record 

European Nuke Plants Offline As Power Prices Hit Record 

Bloomberg’s Chief Energy Correspondent Javier Blas tweeted a disturbing map of European day-ahead electricity prices that will hit record highs on Monday.

“EUROPEAN ENERGY CRISIS: Wow, wow, wow… I’m running out of words to describe the European short-term electricity market,” Blas said.

He continued, “Multiple records breached for Monday. With the exception of Poland and Scandinavia, all Europe is above €300 per MWh (France and Switzerland near €400).”

The continuation of surging power prices, as Blas explained, is due to “Lots of nuclear reactors are down, demand is high (electricity used for heating), so it’s burning gas to bridge the gap.” 

Days ago, we told readers multiple nuclear power plants in France were taken offline due to routine safety inspections that found cracks at one power plant.

European daily power demand continues to soar as colder-than-normal temperatures are present across the continent.

Benchmark natural gas prices surged to a new high last week, up more than 650% on the year, on concerns of declining gas flows via the Yamal-Europe pipeline that runs across Belarus and Poland to Mallnow, Germany; low storage on the continent, and geopolitical risk.

European natural gas prices hit a new record high.

The amount of gas entering Germany at the Mallnow compressor station collapsed. The pipeline only booked for 4% of space for Dec. 20.

The latest geopolitical flare-up occurred last week when Germany’s federal network agency, Bundesnetzagentur, said Russia’s Nord Stream 2 pipeline won’t be cleared until July. On Sunday, Germany said they could entirely block the Nord Stream 2 if a possible conflict between Russia and Ukraine erupts.

Europe’s energy crisis worsens and risks sparking discontent among many Europeans. How long until politicians order utilities to implement price caps on power rates? If politicians want to stay in power, they might also have to subsidize people’s power bills as energy inflation runs wild.

White House Debates Immediate, ‘Radical’ Action To Lower US Energy Prices

White House Debates Immediate, ‘Radical’ Action To Lower US Energy Prices

The Biden administration is actively debating whether to immediately intervene to lower US energy prices, rather than letting markets ride and hope they settle, as the ‘most popular president in history’ grapples with soaring inflation amid trade and foreign policy matters, according to Bloomberg.

A pipeline carries oil at the US strategic petroleum reserve facility known as Big Hill near Beaumont, TX

While White House aides have reportedly been lobbying to release the nation’s Strategic Petroleum reserve – or even halting oil exports, several Energy Department officials have pushed back.

For several weeks, a small group of top Biden aides has discussed measures to bring down the cost of gasoline, according to people familiar with the matter. Consensus has so far been elusive, with some Energy Department officials pushing back against tapping the Strategic Petroleum Reserve while White House aides lobby for a release, or the even more radical step of halting oil exports, the people said.

With gasoline at a seven-year high and the US consumer price index hitting a multi-decade high this week, the Biden administration is stuck between trying to boost fuel production to bring down costs, while showing the world how ‘green’ his administration is while the UN climate conference in Glasgow winds down.

“It’s decision time for the Biden administration,” according to Bob McNally, president of consultant Rapidan Energy Group and a former White House official under President George W. Bush.

Those running the show include White House Chief of Staff ‘President’ Ron Klain, National Security Advisor Jake Sullivan, head of the National Economic Council Brian Deese, Energy Secretary Jennifer Granholm and her deputy, David Turk, and finally, energy expert Amos Hochstein who was hired earlier this year to work at the State Department.

…click on the above link to read the rest of the article…

Two Big Myths About Why Energy Prices Are Rising

Photo: Bridget Bennett/Bloomberg via Getty Images

The global economic recovery is running low on fuel. Chinese factories have been flickering on and off as Beijing rations electricity. Britons have been parking in petrol lines as their nation’s pumps run dry. Americans have turned on their president as spiking gas prices eat their wage gains. And the entire northern hemisphere is sweating the cost of keeping warm this winter.

High energy prices have long been the bane of the post-2020 recovery. But as the days grow shorter and the nights get colder, their salience is steadily rising. In recent days, Democrats and Republicans alike have called on Joe Biden to take immediate action to reduce the cost of energy. The former implored the president to bring down gas prices by tapping the nation’s emergency oil reserves. The latter chastised Biden for personally driving up energy prices by blocking new oil and gas drilling on federal land.

Meanwhile, fossil-fuel lobbyists and eco-socialists alike are casting the energy crunch as a byproduct of the world’s (slow and uneven) green transition. In their account, investors have been spurning new oil and gas production out of fear of future regulations, while renewables have failed to scale up fast enough to compensate. For oil barons, this narrative functions as an argument against stringent carbon pricing. For Marxists, it offers hope for an impending crisis of capitalism, as the old energy system dies and the new one struggles to be born.

Global energy markets contain multitudes. The price of oil internalizes myriad forces, from the financial to the macroeconomic to the geopolitical to the meteorological. So, one can tell a wide range of true stories about the energy crisis of 2021…

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“It’s A Really Dangerous Situation” – Afghanistan Faces Imminent Blackouts As Power Bills Skyrocket

“It’s A Really Dangerous Situation” – Afghanistan Faces Imminent Blackouts As Power Bills Skyrocket

While the Taliban are clearly preoccupied with the security situation inside the Islamic Emirate of Afghanistan, as emphasized by Sunday’s bombing at a major mosque in Kabul (ironically, the former insurgents are facing an insurgency of their own led by ISIS-Khorasan, the Islamic State’s Central Asian faction), there’s an even more pressing issue currently confronting Afghanistan’s new leadership.

It’s looking increasingly likely that the Central Asian suppliers who contribute roughly half of the country’s electricity are getting ready to pull the plug, according to the guy who used to run Afghanistan’s state power authority, Da Afghanistan Breshna Sherkat, which he quit roughly two weeks after the Taliban takeover and likely fled. He at least felt safe enough to tell WSJ that the consequences of the Taliban not making good with Afghanistan’s Central Asian power suppliers could be “really dangerous.”

“The consequences would be countrywide, but especially in Kabul. There will be blackout and it would bring Afghanistan back to the Dark Ages when it comes to power and to telecommunications,” said Mr. Noorzai, who remains in close contact with DABS’s remaining management. “This would be a really dangerous situation.”

Afghanistan lacks a national power grid, and is thus dependent on a network of suppliers in Turkmenistan, Tajikistan and Uzbekistan to supply roughly half the country’s power, while Iran supplies some in the western part of the country. Domestic production inside Afghanistan mostly relies on hydroelectric power grids, which haven’t been functioning at anywhere near full capacity due to a drought.

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Skyrocketing Energy Prices Could Cripple Europe’s Economy

Skyrocketing Energy Prices Could Cripple Europe’s Economy

Surging energy prices in Europe are hurting more than just consumers. The price spikes have started to hit industrial activities, threatening to deal a blow to the post-COVID recovery in European economies with a triple whammy of reduced consumer purchasing power, lower industrial production, and higher operating costs.

Giant European firms, from chemicals and mining to the food sector, say sky-high gas and electricity prices are hitting their profit margins and forcing some of them to curtail operations.

Some factories have shut down because of record natural gas prices. More idling of industrial activity across Europe is likely in the coming weeks, analysts say.

Meanwhile, the record European natural gas prices are sending Asian spot prices of liquefied natural gas (LNG) to record levels for this time of the year—between peak summer demand and ahead of the winter heating season.

Europe’s tight gas market, low wind speeds, abnormally low gas inventories, and record carbon prices have combined in recent weeks to send benchmark gas prices on the continent and power prices in the largest economies to record highs. Almost daily, gas and power prices in Europe surge to fresh records, putting pressure on governments as consumers protest against soaring power bills.

It’s not only consumers that struggle with the record energy prices. Industries are starting to feel the heat, too.

CF Industries, a manufacturer of hydrogen and nitrogen products, said this week it was halting operations at both its Billingham and Ince manufacturing complexes in the UK due to high natural gas prices.

“The Company does not have an estimate for when production will resume at the facilities,” CF Industries said.

Norway-based Yara, one of the world’s top ammonia producers, is curtailing production due to the record-high gas prices.

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Catabolism: Capitalism’s Frightening Future

Catabolism: Capitalism’s Frightening Future

Photo Source SPACES Gallery | CC BY 2.0

“Out of the frying pan, into the fire” is an apt description of our current place in history. No matter what you think of globalization, I believe we’ll soon discover that capitalism without it is much, much worse.

No one needs to convince establishment economists, politicians and pundits that the absence of globalization and growth spells trouble. They’ve pushed globalization as the Viagra of economic growth for years. But globalization has never been popular with everyone. Capitalism’s critics recognize that it generates tremendous wealth and power for a tiny fraction of the Earth’s seven billion people, makes room for some in the middle class, but keeps most of humanity destitute and desperate, while trashing the planet and jeopardizing human survival for generations to come.

Around the world, social movements believe “Another World Is Possible!” when neoliberal globalization is replaced by a more democratic, equitable, Earth-friendly society.  They assume that any future without globalization is bound to be an improvement. But now it appears that this assumption may be wrong. In fact, future generations may someday look back on capitalism’s growth phase as the dynamic days of industrial civilization, a naïve time before anyone realized that the worst was yet to come.

The Return of Scarce Oil and Peak Debt

Today, rising energy prices and ballooning debt are poised to strangle the global economy once again. These suffocating conditions brought the economy to its knees in 2008. Afterward, fracking helped increase the supply and lower the price of oil and gas temporarily. Meanwhile, debt-dependent cash infusions in the form of bailouts, low interest rates, corporate tax cuts and leveraged stock buy-backs were injected into the economy to prop up stock prices and profit margins. [1]

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Mnuchin’s Wrong: Here’s Why Investors Should Be Very Worried About Inflation

Despite Treasury Secretary Steven Mnuchin’s bizarre insistence that there’s no connection between consumer-price inflation and rising energy prices and wages, these factors – plus a spate of others – are forcing some food companies to consider raising prices on goods from chicken to cereal, according to Reuters.

One of these factors, as Reuters explores in a wide-ranging feature published on Monday, involves US trucking and railroad operators foisting higher shipping rates on customers like General Mills Inc. and Hormel Foods Corp.

According to Reuters, transportation costs are climbing at double the rate of inflation.

These increases are catching food companies off guard. Struggling railroads and trucking companies haven’t expanded their capacity, choosing instead to focus on cost cuts – much to Wall Street’s delight.

Interviews with executives at 10 companies across the food, consumer goods and commodities sectors reveal that many are grappling with how to defend their profit margins as transportation costs climb at nearly double the inflation rate.

Two executives told Reuters their companies do plan to raise prices, though they would not divulge by how much. A third said it was discussing prospective price increases with retailers.

The prospect of higher prices on chicken, cereal and snacks costs comes as inflation emerged as a more distinct threat in recent weeks. The U.S. Labor Department reported earlier this month that underlying consumer prices in January posted their biggest gain in more than a year.

As US economic growth has revved up, railroads and truck fleets have not expanded capacity to keep pace – a decision applauded by Wall Street. Shares of CSX Corp, Norfolk Southern, and Union Pacific Corp have risen an average 22 percent over the past year as they cut headcount, locomotives and rail cars, and lengthened trains to lower expenses and raise margins.

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Olduvai IV: Courage
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Olduvai II: Exodus
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