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"Europe’s Energy Crisis Has Ended Its Era Of Abundance" by Irina Slav

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https://www.zerohedge.com/markets/europe-implodes-its-leaders-plan-radical-intervention-including-price-setting-suspending

As Europe Implodes, It Plans "Radical Intervention" Including Price-Setting, Suspending Derivatives Markets And Europe-Wide Margin Call Bailouts

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by Tyler Durden
Sunday, Sep 04, 2022 - 06:43 PM

Just when you thought the narrative couldn't get any more idiotic, Europe shocks just about everyone.

A few days after the EU threatened commodity traders it would stage an "emergency intervention" to crush energy prices which were rising at a pace of about 20% per day (perhaps Europe can now print nat gas and electricity in addition to monetizing all deficits while injecting trillions in the process)...

[IMAGES IN ARTICLE]

... a move which actually worked for a few days until Putin reminded Europe who's boss late on Friday when Gazprom suddenly decided it would "completely halt" all Nord Stream 1 transit altogether due to an "oil leak", with the news sending global stock markets plunging and threatening to push European gas and power prices back to all time highs when markets reopen on Monday as well as forcing Sweden to follow Austria and Germany in bailing out energy companies as Nordic authorities warned of a “Lehman” moment risk, late on Sunday Bloomberg reported that European ministers will discuss "special measures to rein in soaring energy costs - from gas-price caps to a suspension of power derivatives trading - as the bloc scrambles to respond to latest developments in the deepening crisis." A draft document seen by Bloomberg News notes that the Czech Republic, which holds the European Union’s rotating presidency, is set to include those tools on a list of emergency intervention options to be discussed at a meeting of energy ministers on Friday.

While anything it does is doomed to fail, Europe has been scrambling to stave off an energy catastrophe that’s threatening to become an economic, social, and even financial crisis too.

European leaders have been working for months to try to offset the impact of Russia’s squeeze on gas -- a move they describe as the weaponization of energy. But the decision late Friday by Gazprom PJSC to keep the crucial Nord Stream pipeline shut brought on a new sense of panic.

In response to soaring energy prices and rationing of firewood, over the weekend, Germany - the country most affected by the Nord Stream cutoff - unveiled a $65 billion package meant to boost demand and to protect consumers, with a levy on windfall profits, in effect completely undoing the ECB's efforts to squash demand by hiking interest rates and ending QE, similar to what the Biden admin is doing to the Fed in the US.

At the same time, thousands of Czechs protesting in the streets this weekend served as a reminder of the social and political risks.

“It is clear that the upcoming heating season will test the resilience of the EU energy market,” the Czech presidency plans to tell member states, according to the draft document for the emergency meeting. “It is critical to take stock of market developments and identify possible measures to address high electricity prices driven by high gas prices.”

So what can Europe do? Nothing really, but it will pretend to be in control until the bitter end. The options the Czech presidency is set to suggest - according to Bloomberg - would complement measures floated by the European Commission in a policy note seen by Bloomberg last week. They included a power-demand reduction and price caps on renewables, nuclear and coal, all of which are of course dead-ends. The presidency is poised to propose similar "solutions" in the power sector and float the following additional tools:

To limit the impact of gas prices on power prices:

  • temporarily capping the price of gas used for electricity generation
  • putting a price ceiling on gas imported from Russia
  • temporary exclusion of power production from gas from merit order and price setting on the electricity market could also be an option

Uhm, someone should tell Europe that since Russia is already barely exporting any "weaponized" gas to Europe to destroy the continental economy, setting a price cap on whatever molecules of gas are left won't really do anything at all. But this is what happens when Europe is run by absolute idiots.

It gets better: to increase liquidity in the energy market, where virtually nobody trades any more since there is simply no physical with which to hedge financial positions, Europe will propose:

  • an urgent Europe-wide credit line support for market participants faced with very high margin calls
  • capping the limits for margining or automatic price ceiling adjustment
  • temporary suspensions of European power derivatives markets.

In short, Pierre Andurand was not only absolutely spot on when he said the "oil market is completely broken" but now every other commodity market is about to be "regulated" to death. Which means paper prices may soon hit 0 as physical prices approach asymptote (i.e +∞).

The Czech presidency is also set to suggest an even more humiliating and laughable assessment of how the EU could use its "carbon market" to address high electricity prices and ensure a quick deal on a commission proposal earlier this year to sell some permits withdrawn from the market and kept in a special reserve. Such sales - Bloomberg reports - "would boost supply of emission permits, helping lower their prices." Spoiler alert: they won't do jack shit.

And in typical European word goulash style, the most hilarious idiocy was as usual saved for last: here it is from Bloomberg.

The planned intervention should be designed in a way to avoid an increase in gas consumption or jeopardize the efforts to cut gas demand. It should be simple to implement and coordinate across the bloc and be consistent with the bloc’s climate goals, the presidency said in the draft document.

Yup "simple to implement", and this is where laughter breaks out. Why? Because as even Goldman said on Friday, nothing Europe does will lead to lower prices and if anything will send prices much higher. First, we excerpt from Goldman's Damien Couravlin who explains - once again - why Europe's "brilliant" plans always works in theory and collapse in practice (full note available to pro subs😞

oil%20russian%20price%20cap.jpg?itok=avx

And while Europe's increasingly cartoonish leaders live in a Never Never land where they sacrifice their populations to freeze so they can continue their pro-Ukraine virtue signaling, here is Goldman explaining why Putin's response will lead to a "significant rally" in nat gas prices (full note here for pro subs).

nat%20gas%20NS1.jpg?itok=rdb97ves

 

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https://finance.yahoo.com/news/metal-plants-feeding-europe-factories-070106248.html

Metal Plants Feeding Europe’s Factories Face an Existential Crisis

(Bloomberg) -- In the aluminum industry, closing a smelter is an agonizing decision. Once power is cut and the production “pots” settle back to room temperature, it can take many months and tens of millions of dollars to bring them back online.

Yet Norsk Hydro ASA is preparing this month to do exactly that at a huge plant in Slovakia. And it’s not the only one — European production has dropped to the lowest levels since the 1970s and industry insiders say the escalating energy crisis is now threatening to create an extinction event across large swathes of the region’s aluminum production.

The explanation lies in aluminum’s nickname: “congealed electricity.” The metal — used in a huge range of products, from car frames and soda cans to ballistic missiles — is produced by heating raw materials until they dissolve, and then running an electric current through the pot, making it massively power intensive. One ton of aluminum requires about 15 megawatt-hours of electricity, enough to power five homes in Germany for a year.

Some smelters are protected by government subsidies, long-term electricity deals or access to their own renewable power, but the rest face an uncertain future.

“History has proven, once aluminum smelters go away, they don’t come back,” said Mark Hansen, chief executive of metals trading house Concord Resources Ltd. “There is an argument which extends beyond employment: this is an important base metal commodity, it goes into aircraft, weapons, transport and machinery.”

As production drops, the hundreds of European manufacturers that turn metal into parts for German cars or French airplanes are left increasingly reliant on imports that could get costlier. Some buyers are also trying to avoid metal from Russia, which is usually a big supplier to Europe.

The industry says it urgently needs government support to survive. However, any measures like fixed price caps to keep power-hungry plants running may be difficult to justify while consumers face soaring power bills and the threat of rationing and blackouts looms.

Read: Europe Looks Set for Energy Rationing after Russian Cut

The woes of the aluminum sector offer a striking example of what's playing out in Europe's energy-intensive industries: across the continent, fertilizer makers, cement plants, steel mills and zinc smelters are also shutting down rather than pay eye-watering prices for gas and electricity.

Most worryingly for the region's manufacturing sector: it may not simply be a case of shutting for the winter. Power prices for 2024 and 2025 have also soared, threatening the long-term viability of many industries.

At recent market prices, the annual power bill for the Slovalco smelter would be around two billion euros, according to Chief Executive Officer Milan Vesely. Slovalco decided to mothball the plant due to a combination of surging energy prices and a lack of emissions compensation that is available to smelters elsewhere in the bloc.

Restarting the plant — which could take up to a year — will only be possible through some combination of cheaper power, a sharp rise in aluminum prices, and additional government support, Vesely said in an interview this week at the site.

“This is a genuine existential crisis,” said Paul Voss, director-general of European Aluminium, which represents the region’s biggest producers and processors. “We really need to sort something quite quickly, otherwise there will be nothing left to fix.”

Combined with import tariffs that Europe’s struggling producers have fought hard to put in place, the rising cost of energy could leave manufacturers facing an increasingly large premium over prevailing international prices in order to secure supply, in a further blow to Europe’s competitive standing in the global industrial economy.

“There will be nothing left to fix”

Producers of other metals like zinc and copper are hurting badly too, but the vast amounts of power needed to make aluminum have made the sector particularly unprofitable.

In Germany, the power needed to produce a ton of aluminum would have cost roughly $4,200 in the spot market on Friday after topping more than $10,000 last month, according to Bloomberg calculations. The London Metal Exchange futures price was around $2,300 a ton on Friday. That means curtailments look set to accelerate over the winter.

“Whenever we get downturns in economic growth and smelter margins come under pressure, we see European smelters shutting a decent portion of capacity,” said Uday Patel, senior research manager at Wood Mackenzie. “When things improve, there are some smelters that never come back online.”

Wood Mackenzie estimates that Europe has already lost about 1 million tons of its annual aluminum production capacity, and Patel said he expects that about 25% of that may be curtailed permanently. Another 500,000 tons is “highly vulnerable” to closure, Wood Mackenzie estimates.

The curtailments have had little impact on aluminum prices, which have fallen by more than 40% since a peak in March as traders brace for a global slump in demand that could be even more severe.

But while Europe’s production losses account for about 1.5% of global supply, they will leave consumers in Europe increasingly reliant on imports that will be costlier and carry a heavier carbon footprint.

Already, European manufacturers are paying hefty delivery fees to get aluminum shipped to local ports, and further increases could leave them in an increasingly uncompetitive position relative to peers across Asia and the US.

The energy crisis is also rippling quickly down the supply chain to companies that buy aluminum from smelters and transform it into specialist products used in everything from cars to food packaging.

They use significant amounts of gas in the process, and many are looking to pass on their surging energy costs via contractual surcharges that could bake in additional costs for manufacturers for years to come.

“The smelter curtailments are only the tip of the iceberg, because you also have downstream players who are buying prime metal and transforming it into products for use in sectors like beverage cans and automotives,” said Michel Van Hoey, a senior partner at McKinsey & Co. These companies have typically seen a ten-fold increase in their energy bills and “will not be able to fully pass on those costs without some degree of demand destruction or import substitution.”

At Slovalco, Vesely — who has worked at the company since 1989 — is hopeful it will be able to reopen the plant once energy prices fall, but acknowledges the risk that it could remain offline for years.

“Something must be done if we don’t want to destroy European aluminum production,” he said. “If Europe considers aluminum as a strategic metal, then aluminum plants should have guaranteed prices of electricity.”

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https://oilprice.com/Energy/Natural-Gas/Euro-Slumps-Stocks-Plunge-After-Russian-Gas-Cut-Off.html

Euro Slumps, Stocks Plunge After Russian Gas Cut-Off

By Alex Kimani - Sep 05, 2022, 10:00 AM CDT

  • EU equities plunged on Monday after Russia said it was cutting off Nord Stream 1 gas supply indefinitely.
  • The Stoxx Europe 600 dropped 1.2%, with chemical companies and automakers among the hardest hit.
  • The euro’s further decline also comes against the backdrop of rising social unrest across the European Union.

European stocks and the euro fell on Monday morning while natural gas prices skyrocketed after Russia said it was cutting off gas supplies through the Nord Stream 1 pipeline indefinitely. 

The Stoxx Europe 600 dropped 1.2%, with chemical companies and automakers among the hardest hit. Of the major regional indexes, the German DAX fell 2.7%; the French CAC 40 declined 1.9%, while the oil-producer heavy U.K. FTSE 100 weakened by 0.7%. Meanwhile, Dutch TTF gas futures rocketed a massive 26%, while the euro slipped 0.4% to $0.9916 to trade below 99 cents for the first time in 20 years.

On Friday, Gazprom shut Nord Stream indefinitely after claiming it had found an oil leak at a vital pipeline turbine, blaming Western sanctions and vowing to keep the pipeline offline until sanctions were lifted. 

That announcement follows a G7 announcement of an agreement to implement a price cap on Russian oil by December, with Moscow responding by threatening to stop selling oil to any country that supports price caps.

"The most obvious and likely risk with a price cap is that Russia might choose not to participate and instead retaliate by reducing exports. It is likely that the government could retaliate by cutting output as a way to inflict pain on the West. The tightness of the global oil market is on Russia's side,’’ J.P. Morgan analysts have said. It is worth remembering that JPM forecast earlier this summer that crude oil prices could skyrocket to as high as $380/bbl if Vladimir Putin retaliated G-7’s price cap on Russian oil with production cuts.

The euro’s further decline also comes against the backdrop of rising social unrest across the European Union, with mass protests–70,000 strong–in the Czech Republic on Saturday highlighting the increasing severity of an energy crisis that is striking hard at costs of living."

By Alex Kimani for Oilprice.com

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https://oilprice.com/Energy/Energy-General/Russia-Wont-Restart-Nord-Stream-Pipeline-Until-Sanctions-Are-Lifted.html

Russia Won’t Restart Nord Stream Pipeline Until Sanctions Are Lifted

By Tsvetana Paraskova - Sep 05, 2022, 7:21 AM CDT

  • Kremlin spokesman Dmitry Peskov has said that Russia will keep the Nord Stream pipeline shut until the Western sanctions impeding repairs are lifted.
  • Natural gas prices soared on the news, with Dutch TTF hub surging by 30% at market opening on Monday.
  • Europe, which has been struggling to build natural gas storage ahead of winter, will see this a Russia further weaponizing its natural gas supplies.

Russian natural gas supply via the Nord Stream pipeline to Germany will remain shut until the Western sanctions that impede gas turbine repairs are lifted, Kremlin spokesman Dmitry Peskov said on Monday. 

The gas crisis in Europe took a turn for the worse at the end of last week, when Russian gas giant Gazprom said after three-day maintenance ended on Friday that Nord Stream would remain shut until “operational defects in the equipment are eliminated,” upping the ante in its gas war against Europe. 

On Monday, Moscow blamed the difficulties in sending gas to Europe on the Western sanctions.

“The problems with gas shipments arose due to the sanctions western countries imposed against our country and several companies,” Peskov was quoted as saying by Russian news agency Interfax today. 

“There are no other reasons that could have caused this pumping problem,” Vladimir Putin’s spokesman added.

"The sanctions bring total confusion in the legal and practical aspect of everything connected with gas turbine maintenance, and Russia now hopes that it could somehow fix the only gas turbine on the Nord Stream route, which malfunctioned last week", Peskov added.   

Due to the sanctions, the entire work of the Nord Stream pipeline “depends on just one turbine which needs serious maintenance work,” he said. 

European governments were largely expecting Russia to not resume flows via Nord Stream once the three-day maintenance period on the pipeline ended on September 2. Most EU countries accuse Russia of weaponizing gas supply, looking to sink European economies and cause a lot of hardships to businesses and households ahead of and during the winter. 

The indefinite halt of all supply via Nord Stream—which was already operating at just 20% capacity before the complete stop—sent European benchmark gas prices soaring on Monday morning. Europe's benchmark gas prices at the Dutch TTF hub surged by 30% at opening on Monday to $270 (272 euro) per megawatt-hour (MWh). 

By Tsvetana Paraskova for Oilprice.com

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https://oilprice.com/Latest-Energy-News/World-News/Germany-And-Europe-Set-For-Energy-Rationing-After-Russian-Gas-Cuts.html

Germany And Europe Set For Energy Rationing After Russian Gas Cuts

By Alex Kimani - Sep 05, 2022, 11:00 AM CDT

German gas importer Uniper has said that the country does not rule out undertaking gas rationing at some point following Russia's decision to indefinitely halt gas flows via the Nord Stream 1 pipeline.

Uniper, Germany's biggest importer of Russian gas, says it’s also considering legal action against Gazprom to compensate its shareholders for a 90% drop in the company’s market value following a sharp drop in Russian gas supply since June.

"We cannot rule out that Germany might look at rationing gas as something that might have to be considered. We know that the government wants to avoid this as much as possible because that would be a disaster for so many reasons," CEO Klaus-Dieter Maubach has told Reuters.

Europe's gas prices surged 26% on Monday after Russia stopped pumping via Nord Stream 1, a major supply route to the continent. 

On Friday, Gazprom shut Nord Stream indefinitely after claiming it had found an oil leak at a vital pipeline turbine, blaming Western sanctions and vowing to keep the pipeline offline until sanctions were lifted. That announcement follows a G7 announcement of an agreement to implement a price cap on Russian oil by December, with Moscow responding by threatening to stop selling oil to any country that supports price caps.

But it’s not just Europe’s largest economy that might be forced to go to extremes to preserve its gas stockpiles especially during the upcoming winter season. The rest of the continent might be forced to follow suit if the season turns out to be more severe than expected.

Gas rationing will come at a heavy price: the partial shutoff of gas deliveries is already affecting European growth momentum, darkening the Eurozone outlook. 

Indeed, the Eurozone economy GDP is expected to grow by 2.4% in 2022 but slow down to 1.3% in 2023. The world’s largest chemical producer, BASF, says it’s closely monitoring the natural gas markets and could cut production if needed.

By Alex Kimani for Oilprice.com

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https://oilprice.com/Latest-Energy-News/World-News/European-Natural-Gas-Prices-Set-To-Soar-Following-Nord-Stream-Shutdown.html

European Natural Gas Prices Set To Soar Following Nord Stream Shutdown

By Irina Slav - Sep 05, 2022, 8:30 AM CDT

The European Union is bracing for more gas pain after Gazprom said Nord Stream 1 will remain shut down indefinitely, with prices expected to break another record today.

Russia’s Gazprom said on Friday it would not restart gas flows via the Nord Stream 1 pipeline because it had discovered a fault—and oil leak—that required repairs. The company said it could not say when the pipeline will restart.

Siemens Energy, which normally does maintenance on Nord Stream 1 said such leaks are no obstacle to the normal running of compressor stations along pipelines.

Whatever the reason, the flow of Russian gas to Europe has once again been reduced, prompting expectations of energy rationing this winter even as EU energy ministers prepare to discuss gas import price caps at a meeting this Friday.

"On Friday... the market was already pricing in Nord Stream 1 (NS1) flows coming back," Leon Izbicki, gas analyst at Energy Aspects, told Reuters. "We expect a significantly stronger open for the TTF on Monday."

"Supply is hard to come by, and it becomes harder and harder to replace every bit of gas that doesn’t come from Russia," said Jacob Mandel, a senior associate for commodities at Aurora Energy Research, also quoted by Reuters.

Meanwhile, the European Union is frantically searching for a way out of the gas pickle, including, besides gas import price caps, a radical intervention in markets in the form of a power derivatives trading suspension, Bloomberg reported.

“It is clear that the upcoming heating season will test the resilience of the EU energy market,” a draft document from the Czech presidency for an emergency meeting of EU leaders, cited by Bloomberg, says. “It is critical to take stock of market developments and identify possible measures to address high electricity prices driven by high gas prices.”

By Irina Slav for Oilprice.com

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TTF natural gas futures, the European benchmark jumped more than 30% to above €280 per megawatt hour on Monday, after touching a three-week low of €203 on Friday, as Russia's Gazprom reversed its plan to resume flows through the Nord Stream pipeline and shut it indefinitely, citing maintenance requirements. The Nord Stream pipeline was already running at just 20% of capacity before flows were halted last week for a three-day maintenance period. Gazprom decision is set to deepen an ongoing energy crisis in Europe, with countries trying to find alternatives to Russian gas supply, including liquefied natural gas from the US. European Union ministers will have an emergency meeting this week to discuss the energy crisis and define special measures to fight rising costs, which could include gas prices caps.

https://tradingeconomics.com/commodity/eu-natural-gas

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https://greekreporter.com/2022/09/04/energy-crisis-greece-worst-winter/

Greece Braces for ‘Worst Winter Since 1942’ Due to Energy Crisis

 
September 4, 2022

Due to the energy crisis, Greece is bracing for the most difficult winter since 1942, the darkest year of the German occupation, a minister warned on Saturday.

Minister of Development and Investment Adonis Georgiadis advised Greeks to seek alternative ways for their energy needs and warned of the difficult months to come due to “the enormous damage that our economy and our pockets will suffer from Putin’s energy war in Europe.”

The World Bank has warned that the war in Ukraine will not only drive up energy prices but also food costs for the next three years, resembling the crises of the 1970s.

“There will be an immediate public information campaign on how to act this winter in order to reduce the enormous damage that our economy and our pocket will suffer from the energy war of Putin in Europe,” Georgiadis announced.

“We must keep in mind that we should not spend the electricity in the way we did…in the past,” Georgiadis said. “Electricity is now too expensive.”

Like many other European countries, Greece has been facing an energy crisis. Greeks are among those greatly affected, facing challenges on various fronts, including rising costs for electricity, fuel, and essential commodities.

Subsidies for households and businesses doubled

Georgiadis claimed that Greeks have still not realized how expensive energy has become due to the subsidies offered by the Mitsotakis government.

“What citizens see in their electricity bills is largely paid by the government,” Georgiadis said. “But, we all must now operate with energy savings in mind. There is no doubt that the Greek government will continue to support the citizens.”

In late August, Greece announced the doubling of power subsidies for households and businesses in September, as the price of electricity has skyrocketed.

State subsidies for household electricity bills in September will reach a record 0.639 euros per KWh, amounting to 1.9 billion euros in total.

Subsidies will absorb eighty-nine percent or more of the increase in rates, the government claims.

Athens has spent about eight billion euros in power subsidies and other measures since last September to help households, businesses, and farmers pay their electricity and gas bills.

Energy subsidies could harm the economy in Greece

Economists, however, are warning of the longer-term effects of the subsidies on the Greek economy.

A report in the Financial Mirror says that what has saved the Greek budget thus far has been the higher-than-expected gross domestic product, boosted in part by the record number of tourist arrivals, spending, and inflation.

These factors have made for higher than planned revenue.

But officials caution and fear that these factors cannot make up for the explosive growth of subsidy needs for long.

“There has to be a limit; otherwise, other parts of government expenditure will suffer and will inevitably result in the breakdown of services”, noted Finance Ministry sources.

Hence, finding a golden thread between rising energy prices and subsidies is becoming a nightmarish enigma, the Financial Mirror says.

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On 9/3/2022 at 1:40 PM, Tom Nolan said:

https://www.zerohedge.com/political/amid-historic-energy-crisis-bojo-tells-brits-buy-new-kettle

Amid Unprecedented Cost-Of-Living Crisis, BoJo Tells Brits "Buy A New Kettle"

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by Tyler Durden
Saturday, Sep 03, 2022 - 06:35 AM

As electricity bills hyperinflate due to dwindling natural gas supplies from Russia, half of all UK households risk being pushed into energy poverty in the coming months. Brits face a historic energy crisis that is morphing into a cost-of-living nightmare while disgraced and outgoing prime minister Boris Johnson told people this week to purchase a new efficient "kettle" to save on their power bill. 

"If you have an old kettle which takes ages to boil, it may cost you £20 to replace it – but if you get a new one, you'll save £10 a year every year on your electricity bill," Johnson said. 

Buy a new kettle and save £10 on your £3,549 energy bill, says Johnson....

What a clown!

At least he's gone now thank God.

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https://www.zerohedge.com/energy/italys-salvini-breaks-ranks-end-energy-sanctions-against-russia-because-we-are-our-knees

Italy's Salvini Breaks Ranks: 'End Energy Sanctions Against Russia Because We Are On Our Knees'

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by Tyler Durden
Tuesday, Sep 06, 2022 - 03:15 AM

European solidarity continues cracking amid growing protests in different corners of the EU, with citizens angry at the collective policy of "standing up to Russia" in support of Ukraine at all costs. For example, Germany's Foreign Minister Annalena Baerbock days ago openly expressed that she's committed to support Ukraine "no matter what German voters think."

But elsewhere, Italy's League party leader Matteo Salvini, (which the mainstream media consistently dubs as "far-right wing" - though he would describe his party as the government of "good sense") on Sunday broke ranks with other European leaders who have lately seemed to echo some form of this 'Ukraine first' policy.

On Sunday Salvini urged an end to Russia energy sanctions which are only leaving Europeans "on their knees" due to higher energy bills and lack of supply. "Several months have passed and people are paying two, three, even four times more for their bills," he said in an interview RTL radio. "And after seven months, the war continues and Russian Federation coffers are filling with money."

 

salvinifile.jpg?itok=C4mdmQ76

He explained that not only are the sanctions not working, but they hit Italy harder. While saying he stands in solidarity with Ukraine, he's not willing to stick with something obviously counterproductive where the blowback is felt more in Europe, Italy in particular with its soaring energy import prices, and not the intended target of the Putin government.

This was the same message he issued to a gathering of Italy's political leaders on Lake Como, where he stressed that Russia's export surplus of $140 billion is the direct result of these backfired sanctions.

"Do we have to defend Ukraine? Yes," Salvini said. "But I would not want the sanctions to harm those who impose them more than those who are hit by them." Politico meanwhile noted his coalition is expected to win big in late September national elections

Salvini's remarks come just weeks before Italians head to the polls on September 25 in a national election in which a right-wing coalition that includes the League is expected to win. His comments could therefore raise concerns about the future government's resolve against Russia among other EU politicians, especially given one of Salvini's allies in the coalition, Brothers of Italy leader Giorgia Meloni, has vowed to stand firm with NATO on tough measures against Moscow.  

Salvini called for a rethinking of current tactics, but still vowed that if in power his League party won't stop backing Ukraine. "If we get into government will we change alliances? No. We remain deeply, proudly and firmly rooted in a free and democratic West that opposes war and aggression," he explained. "But if we adopt an instrument to hurt the aggressor and after seven months of war it has not been hurt, at least considering a change seems legitimate to me."

"We certainly need a European shield, like during COVID," Salvini said of collective measures which could be more sensible in lowering energy prices and saving jobs:

"In place of sanctions, which were supposed to hurt the Russians, it would be better to protect the Italians and Europeans with a shield, a parachute," Salvini said on the stump for the September 25 general election in the northern town of Bolzano.

"The only emergency in this moment are electricity and gas bills. It is serious that one side of politics does not understand this," he said referring primarily to the center left. "It is a continental and national problem".

Naturally (and just like is typical in US political discourse), the mere suggestion of backing down from any sanctions currently on the table resulted in his political opponents labeling Salvini essentially a Putin puppet.

Meanwhile, in the UK, where leaders have long demanded the population "sacrifice" for the sake of Ukraine...

Foreign Minister Luigi Di Maio of the Together for the Future party charged that Salvini's comments stem ultimately from wanting to "do [Vladimir] Putin a favor." Di Maio said in a Sunday media interview: "The issue of sanctions is very clear in the Italian right: They don't have a line," while at the same time Enrico Letta, the leader of the center-left Democratic Party, quipped: "I don’t think Putin could have said it better."

But underscoring that the proverbial chickens are about to come home to roost, Reuters on Monday writes in the wake of Salvini's warnings that "Italy’s net energy import costs are set to more than double this year to nearly 100 billion euros ($99.5 billion), the economy minister said, warning Rome could not spend indefinitely to cushion the blow on the economy."

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Norsk Hydro bans Russian aluminium from 2023 purchase deals

By Pratima Desai LONDON (Reuters) – A division of Norsk Hydro supplying aluminium products to industries including auto and construction will exclude Russian metal from deals to buy aluminium for 2023, the Norwegian company told Reuters.

https://www.fxempire.com/news/article/norsk-hydro-bans-russian-aluminium-from-2023-purchase-deals-1117972

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60% Of UK Manufacturers Could Close As Energy Prices Soar

By ZeroHedge - Sep 06, 2022, 11:00 AM CDT

  • MakeUK, a manufacturing lobbyist, is warning that soaring energy prices could force manufacturers to halt operations.
  • Skyrocketing energy bills and the wider cost-of-living crisis are squeezing plant owners.
  • The rise in prices has seen 13 percent of manufacturers already reduce their hours of operation, and 12 percent have been forced to make job cuts as a direct result of increased energy bills.

As many as six in 10 British manufacturing businesses are at risk of closure, according to a recent survey as soaring energy bills and the wider cost-of-living crisis has owners feeling the squeeze.

MakeUK, a manufacturing lobby organization in the U.K., announced on Saturday that 42 percent of manufacturers have seen their electricity bills rise by 100 percent in the past 12 months, and 32 percent have also seen their gas bill double.

The rise in prices has seen 13 percent of manufacturers already reduce their hours of operation, and 12 percent have been forced to make job cuts as a direct result of increased energy bills. The majority of businesses warn that if bills continue to increase this year and rise by over 50 percent as expected, closures and redundancies “will become inevitable.”

The lobby group issued on Monday a proposed 100-day plan for the incoming prime minister, Liz Truss, who was announced on Monday.

It includes a call for an emergency budget; a demand to commission the Migration Advisory Committee (MAC) to review the Shortage Occupation List (SOL), which outlines key job roles in high demand in the U.K. to allow businesses to recruit from overseas more easily; and an overhaul of the Apprenticeship Levy “to ensure British people are among the most productive and highly skilled workers in the world.”

Last week, U.S. investment bank Goldman Sachs predicted that inflation could rise to an eye-watering 22 percent in the U.K. next year if the current rise in wholesale energy prices continues as expected.

The energy price cap, which limits how much energy companies can charge domestic consumers in the U.K., could rise by more than 80 percent at its next review in January, which the bank warns would “imply headline inflation peaking at 22.4 percent.”

Inflation in Britain reached double digits for the first time since the 1980s in July, and if Goldman Sachs estimates were to be realized, the cost of living in the U.K. would come close to hitting the country’s post-war record of 24.5 percent inflation set in August 1975.

By Zerohedge.com

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https://oilprice.com/Energy/Energy-General/60-Of-UK-Manufacturers-Could-Close-As-Energy-Prices-Soar.html

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(edited)

On 9/1/2022 at 6:02 AM, Tom Nolan said:

EXCERPT

“In any case, there isn’t enough LNG capacity in the world to make up for the Russian exports to Europe,” the former executive said, adding that, “It will take years for the EU to find resources to replace Russian supply.”

https://www.zerohedge.com/commodities/europe-has-no-real-alternatives-russian-gas-ex-aramco-evp

Europe Has No Real Alternatives To Russian Gas: Ex-Aramco EVP

Tyler Durden's Photo
by Tyler Durden
Thursday, Sep 01, 2022 - 01:45 AM

Echoing what Zoltan Pozsar said in his latest must read note, the former executive vice president at Saudi Aramco, Sadad Al-Husseini, told CNBC on Monday that there’s not enough capacity in the world to replace Russia’s gas supply to the European Union, while Moscow has plenty of markets to sell its energy to.

“The US doesn’t have the LNG capacity to replace Russia’s exports to Europe,” he said, noting that power bills across the EU are set to soar this winter. He did not comment on China reselling Russian LNG to Europe although we expects others will soon. 

According to Al-Husseini, the lack of freely available supply could lead to serious problems on the global energy market. “This situation is a new world, and it’s not a very good one for energy,” he warned.

“In any case, there isn’t enough LNG capacity in the world to make up for the Russian exports to Europe,” the former executive said, adding that, “It will take years for the EU to find resources to replace Russian supply.”

He also said that while Russia may lose Europe as an end-market, there are “plenty of alternative markets” for Russian energy, including China, Japan, or India, that eagerly flount Western sanction, realizing that the Biden admin is increasingly toothless in punishing sanctions violators.

41_2022-637947801409186063-918.jpg?itok=

Meanwhile, Europe does not have alternative energy sources, he said, “while the US is maxed out already, North Africa has got problems,” and OPEC is also running out of spare capacity.

“So, it’s a global problem,” he said.

The official suggested that, while the Russian economy may suffer under Western sanctions, the rest of the world will be suffering with them.

However, he stressed that “Russia may recover a lot sooner than Europe.”

There is virtually unlimited natural gas supply throughout the land and sea. All we have to do is develop it. Then we can also produce all the energy we want from biogas, cellulose etc. Then there is wind , wave, nuclear and solar. It will take about three years to get this all leveled out. Russia will no longer be able to threaten to cut off European supplies. 

Whatever oil and gas Russia produces will have to be sold at a discount but will still add to the total supply! That should be easy to understand!

 

Edited by Ron Wagner

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https://www.zerohedge.com/geopolitical/antwerp-mayor-blasts-green-dogmatics-admits-bankrupt-belgium-new-greece

Antwerp Mayor Blasts "Green Dogmatics", Admits "Bankrupt" Belgium Is "The New Greece"

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by Tyler Durden
Wednesday, Sep 07, 2022 - 01:45 AM

"In America people are not in this shit," exclaims mayor of Antwerp, Bart De Wever during an interview on Belgian TV.

"They are now exporters of oil and gas, but they certainly weren't twenty years ago. Climate standards are not of much use if all your companies go to America and China to produce, then you are bankrupt and the climate is not yet saved. This is the green dogmatics. People should start realizing this."

The outspoken mayor held nothing back during the Flemish current affairs program De Zevende Dag.

“Oil, gas and coal were no longer allowed. No investments were allowed in reserves. Germany does not have a single LNG terminal (a terminal for liquefied natural gas, ed.). The dumbest countries, Germany and Belgium, have phased out nuclear energy in parallel. We have pushed away all energy sources, making ourselves dependent on Putin. Now we hang on to it.”

2022-09-06_13-09-21.jpg?itok=OjMgvqwX

The previous government, of which De Wever's party was part, decided that the Belgian nuclear centers Tihange 2 and Doel 3 should close.

 “It's a purple-green law. We now have a purple-green government. That is a recipe for catastrophe.”

Prime Minister Alexander De Croo says the country is 'in an economic war situation'. 

“Everything has to be on the table.”

According to De Wever, it is time 'for bitter truths'...

“This country is bankrupt.”

Somebody's not going to get invited to Van der Leyen's Christmas party this year...

Watch the full interview (in Dutch but you can select translation to English subtitles with the CC section - not available fort Embed) below:

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https://oilprice.com/Energy/Energy-General/Europes-Reaction-To-The-Energy-Crisis-Is-Turning-Into-A-Ponzi-Scheme.html

Europe’s Reaction To The Energy Crisis Is Turning Into A ‘Ponzi Scheme’

By Irina Slav - Sep 06, 2022, 7:00 PM CDT

  • The European Union is struggling to find effective ways to alleviate its ongoing energy crisis. 
  • Countries have already passed windfall taxes and energy subsidies to little avail.
  • Some are warning that the bloc’s proposed solutions are comparable to a Ponzi Scheme.s

The leadership of the European Union has been hard at work these days, trying to find a lasting solution to an energy crisis that is worsening by the day. Yet the way they are approaching the solution is unlikely to produce any lasting results. And so far, it has been compared to a Ponzi scheme. “One of the easiest policy levers if you will, is that you can pass a bill, appropriate money and give money to citizens to pay their electricity bills,” former Energy Secretary Dan Brouilette told CNBC this week.

He went on to agree when asked whether the approach could be compared to a Ponzi scheme. Yet the windfall tax and energy subsidies are only the beginning, it seems, and the final product might turn out to be much worse than a Ponzi scheme.

The Financial Times reported this week that the EU is seeking sweeping powers over businesses in member-states that would basically allow Brussels to tell these companies what to produce, how much of it, and whom to sell it to in times of a crisis. The definition of a crisis would be the prerogative of the same EU.

“We would be very concerned if this proposal was adopted in such an interventionist shape,” said Martynas Barysas, an executive for BusinessEurope, an employer association.

“It could oblige member states to override contract law, force companies to disclose commercially sensitive information, and share their stockpiled products or dictate their production under any type of crisis the commission decides upon,” he explained.

Another report, by Bloomberg, focused on direct energy market intervention measures that are being mulled over by Brussels. The report cited several bailouts that the governments of Germany, Sweden, and Finland had to resort to in order to avoid utilities going under because of the price crisis as the events that spurred the bloc into action.

Related: Russia Is Now Producing LNG Near The Shuttered Nord Stream Pipeline

The action itself, to be discussed at a Friday meeting of energy ministers, consists in capping Russian gas imports, temporarily capping the price of gas used in electricity generation and suspending power derivatives trading in a bid to boost liquidity on the troubled electricity market.

Natural gas prices in Europe have soared by some 400% over the past year. The crunch actually started this time last year and the Ukraine events from this year only served to severely aggravate an already bad situation. 

Solutions are tricky.

For Dan Brouillette, president of Sempra Infrastructure, active in the LNG business, the solution is easy, though: Europe just needs to invest in more oil and gas dependency on the U.S. For Europe itself, replacing one dependency with another is hardly the best course of action, even if political relations with the U.S. are vastly different from relations with Russia.

“Home-grown” clean energy, as EC President Ursula von der Leyen called it last week, however, is also not a solution, for purely physical reasons. There are not enough raw materials in the world to make Europe 100% wind and solar reliant. And that’s without mentioning the global dependency on China’s rare earths and lithium processing capacity.

Europe has a difficult winter ahead to cope with. As attempts at coping become increasingly desperate before the first heating season bills start coming in, this desperation is driving into an increasingly interventionist direction. This has already prompted some to accuse the EU of being authoritarian and comparisons with the Soviet Union have appeared on social media.

People are already protesting European countries’ energy policies and there will be more protests as autumn advances to winter. Sadly, besides direct intervention on energy markets and “a Ponzi scheme” for households, European governments do not have many cards to play. 

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Energy-General/Putin-Threatens-Complete-Energy-Cut-Off-To-West-If-Price-Caps-Are-Imposed.html

Putin Threatens Complete Energy Cut Off To West If Price Caps Are Imposed

By Charles Kennedy - Sep 07, 2022, 8:00 AM CDT

  • Last week, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil.
  • The planned price caps on Russian oil and gas exports is yet another "stupidity," the Russian president said on Wednesday.
  • Putin said his country will not supply any energy commodity if price caps are imposed.

Russia will stop supplying all energy products to Europe if the EU and its Western allies impose price caps on Russian oil and natural gas, Russian President Vladimir Putin said on Wednesday. 

"There are contractual obligations. Will there be any politically-driven decisions that contradict contracts? Yes, we just won't fulfil them. We will not supply anything at all if it contradicts our interests," Putin said at an economic forum in Russia's Far East city of Vladivostok. 

"We will not supply gas, oil, coal, heating oil - we will not supply anything," Putin added. 

The planned price caps on Russian oil and gas exports is yet another "stupidity," the Russian president said, adding that Europe has made "stupid decisions" and is now trying to figure out how to get away from them. 

Last week, the G7 group of the most industrialized nations agreed to finalize and implement a price cap on Russian oil, aiming to reduce Vladimir Putin's oil revenues for his war chest. 

Russia, for its part, said it would not be selling its oil to countries that choose to adhere to the price cap and would increase its shipments of oil to Asia after the G7 finance ministers announced a price cap on Russian oil and fuels, to enter into effect from December 5 and February 5, 2023, respectively. 

The EU will propose a cap on Russian gas to cut Putin's revenues as part of a wider set of immediate measures to address Europe's energy crisis and help households and industries through the energy market turmoil, European Commission President Ursula von der Leyen said on Wednesday. The proposed measures include a mandatory target for the EU to cut power consumption at peak hours, a revenue cap on electricity producers and fossil fuel companies, and a price cap on Russian gas.  

 The EU energy ministers are meeting on Friday when they are expected to discuss a price cap on Russian gas and electricity market reforms such as decoupling the price of gas from power prices.  

By Charles Kennedy for Oilprice.com

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https://www.fxempire.com/news/article/german-adblue-maker-running-out-of-stock-after-production-halt-1119305

German AdBlue maker running out of stock after production halt

By:Reuters
Updated: Sep 7,
FRANKFURT (Reuters) – Supplies of diesel exhaust cleaning liquid in Germany were thrown in doubt on Wednesday as one of the country’s largest makers of the AdBlue-branded fluid said it was running out of stock after stopping production due to high natural gas prices.

Germany’s biggest ammonia and urea maker SKW Piesteritz, which relies on natural gas as its key feedstock, stopped producing about two to three weeks ago to avoid further losses and is about to sell off its remaining AdBlue inventories, a spokesperson told Reuters.

“We are running dry. We are emptying our inventories because we are no longer producing,” he said.

AdBlue is needed in modern diesel engines of trucks and buses to comply with nitrogen oxides exhaust rules. Germany is particularly reliant on AdBlue because of the large proportion of diesel-powered passenger cars on its roads.

The energy crisis facing Europe has grown more acute after Russia’s Gazprom indefinitely suspended gas supplied through the Nord Stream 1 pipeline to Germany last week.

“We have not yet been able to observe a real shortage, but we are prepared for this and will turn to measures if necessary to keep this important substance available,” an economy ministry spokesperson said at a regular news conference in Berlin, adding the government would monitor the market, among others that rely heavily on gas.

Imports from abroad may be an option and producers might qualify for emergency state funding, he added.

In the AdBlue market, SKW Piesteritz competes with companies including BASF and Norway’s Yara, which run large plants in Germany for ammonia and related substance urea.

These basic chemical feedstocks also play a key role in the manufacturing of nitrogen fertilisers as well as some engineering plastics. The chemical reactors also yield high-purity carbon dioxide (CO2) as a byproduct, which is needed by the meat and fizzy drinks industries.

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China Is Aggressively Buying Up Cheap Russian LNG

By Irina Slav - Sep 08, 2022, 2:45 AM CDT

  • Russia is selling liquified natural gas from the Sakhalin-2 project at a 50% discount and the operating company, a new state-owned entity, is still making a profit.
  • In August, China's imports of Russian LNG rose to the highest level since at least 2019, with the country buying volumes that were previously going to Japan and South Korea.
  • China's imports of liquified natural gas from the United States have been on the decline as Europe has been paying a premium for those shipments. 

Russia is selling liquefied natural gas from the Sakhalin-2 project in the Far East to China at a 50-percent discount and still making a profit on it, Bloomberg has reported, citing unnamed traders.

“Russian supply is still making its way into the market, just with a reorganization of trade flows via market participants who don’t take issue with accepting Russian cargoes,” Saul Kavonic, an energy analyst at Credit Suisse, told Bloomberg.

The other two big buyers of Sakhalin-2 LNG, Japan, and South Korea, according to Bloomberg, stopped buying the commodity after Russia’s invasion of Ukraine. Japan, however, continues to receive Russian LNG from Sakhalin-2 under other contracts.

“It appears China is happy to take Russian LNG cargoes at discounts, swapping out alternative supply that can then be directed to Europe at higher prices.”

Despite the discount, LNG prices this year have soared so high that the operator of Sakhlin-2 is still making a profit. This operator, by the way, is a new state-owned entity that replaced the previous consortium.

The two Japanese partners in the original consortium were allowed to keep their stakes in the new entity as well. Shell abandoned its 27.5-percent stake in the project.

Bloomberg reports that data shows China’s imports of Russian liquefied natural gas rose to the highest since at least 2019 in August while shipments from the United States have been on the decline as they get diverted to Europe, which is ready to pay a premium for the supply.

Speaking of Europe, Poland this week suggested the European Union introduce a price cap on all gas imports, including LNG, as the costs of this alternative gas supply contribute to the energy price inflation cross the bloc.

For now, the European Commission, however, has only proposed a gas price cap on Russian imports following the same logic as the one employed by the G7 in imposing an oil price cap on Russian exports.

By Irina Slav for Oilprice.com

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https://oilprice.com/Energy/Energy-General/China-Is-Aggressively-Buying-Up-Cheap-Russian-LNG.html

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https://oilprice.com/Energy/Energy-General/Europe-Is-Buying-All-The-Russian-Oil-It-Can-Before-Banning-It.html

Europe Is Buying All The Russian Oil It Can Before Banning It

By Irina Slav - Sep 07, 2022, 6:00 PM CDT

  • Europe is currently importing over one million barrels per day of Russian oil, attempting to fill up before the EU-wide embargo on Russian crude imports comes into effect.
  • Oil prices have fallen as demand concerns grow and China struggles with Covid lockdowns, and Europe is attempting to take advantage of those lower prices to stock up on oil.
  • Alternative sources of crude oil are abundant for Europe, but the price will be set by the seller and the EU may soon find itself paying more for this critical energy source.

Three months from now, an EU-wide embargo on Russian crude oil imports will kick in, shutting off almost all shipments of the commodity from Russia to Europe. But right now, Europe is importing over 1 million barrels of Russian crude daily and has been doing so for the last month. Someone is stocking up before the taps turn dry.

While they publicly condemn Russia for its actions in Ukraine and equally publicly assure their constituents that sanctions are working, European (and other) politicians make no mention of the continuing Russian oil purchases.

Yet, Russia is exporting some 3.32 million barrels of crude daily by sea, Bloomberg calculations have shown, which means Europe is buying a third of that, while it still can. And this means that nothing has changed since June when the embargo was approved, and Europe will have to find alternative oil suppliers at a time of likely higher prices.

Right now, prices are slumping because of new lockdowns in China and expectations of rate hikes by central banks, but once the embargo door shuts, chances are that prices will rebound just when Europe finds it most painful. And that is exactly why it’s stocking up now on the oil it’s about to ban. 

It’s not only oil that Europe is stocking up on, either. All fossil fuels are in greater and more urgent demand on the continent than they have been for years. The FT called it “the unavoidable evil of wartime fossil fuels” in a recent report and the European Union has kept repeating that the emission reduction plans are still in place although it is increasingly looking like they’ve taken the back seat to energy security.

Exports of oil from Russia to northern Europe rose particularly markedly in the first week of this month, the Bloomberg calculations showed, suggesting India’s Petroleum Minister Hardeep Singh Puri, who told CNBC this week that “I said the Europeans buy more in one afternoon than I do in a quarter. I’d be surprised if that is not the condition still.”

Puri’s comments came in response to a question about criticism leveled at India for continuing to buy crude from Russia despite Western sanctions and condemnation for the invasion of Ukraine.

The Indian top oil official took things a step further, as well. Asked about whether he had any moral qualms about importing oil from Russia, he said “No, there’s no conflict. I have a moral duty to my consumer. Do I as a democratically elected government want a situation where the petrol pump runs dry?”

It would be difficult to argue this point for any politician, even a European one.

One might reasonably argue that the European Union is not an authoritarian state in which the government tells commodity traders where to buy their oil from. However, one could equally argue that the bloc is trying to turn into precisely that sort of an authoritarian state.

Earlier this month, the FT reported that the European Commission had drafted a document seeking sweeping powers over European businesses. The sweeping powers, if approved, would include the “powers to require businesses to stockpile supplies and break delivery contracts in order to shore up supply chains in the event of a crisis such as the coronavirus pandemic.”

Deciding what constitutes a crisis would also be the prerogative of the European Commission under this draft document. Businesses have not exactly welcomed the suggestion that they could be told what to produce, stockpile, and who they trade with by the EC, so the sweeping powers are far from a certain thing. Yet, there is more than one signal the EU is moving into a more centralized-intervention style of government amid the energy crisis.

Right now, Brussels is mulling over direct intervention into energy markets because of the tidal wave of margin calls looming over an already struggling energy industry. Bloomberg reported earlier this month that the suspension of power derivatives was among the options, along with a cap on the price of gas used for power generation.

The power market has a lot more to do with the price of gas than oil, but it’s worth recalling that some European utilities switched from gas to oil for power generation when gas prices skyrocketed earlier this year. Prices have not exactly returned to normal yet, so oil continues to be a viable alternative for power generation. And in three months, imports are going to take a 1-million-bpd dive. Unless, of course, buyers find an alternative.

In all fairness, alternative sources of crude oil are abundant. Middle Eastern producers, for example, would be only too happy to sell their oil to Europe. So would Nigeria and Angola. Yet they would be setting the price. One cannot help but wonder if the European Union will start threatening OPEC with a price cap, too. 

By Irina Slav for Oilprice.com

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