In a post earlier this week, I said that Europe’s energy crisis isn’t over – contrary to what some other commentators have argued recently. Here I thought I’d go into slightly more detail as to why I don’t buy their arguments.
The optimists’ basic contention is that markets will solve the problem. When gas becomes scarce, this sends a ‘price signal’ to the market, prompting people to change their behaviour. Consumers use less, and substitute into alternatives like diesel, which reduces demand. Meanwhile, producers bring online new sources like LNG, which enhances supply.
As the Telegraph writes:
Putin failed to appreciate the power of free markets. Understandably for someone who spent his early career as a KGB operative … he didn’t understand that, for all their faults, free markets have two core strengths. They are adaptable and innovative.”
And according to the Financial Times:
No one should feel delighted they are paying more for energy this winter, but the price signal has done its job. It has forced Europe to adapt. Advanced capitalist economies are remarkably successful in this regard.
The problem here is that the numbers don’t add up. Yes, consumers have reduced their consumption, and producers have replaced pipeline gas with LNG. But even after these ‘adaptations’, prices are six times higher than normal.
Markets for some products – soft drinks, say – are highly efficient. When a Pepsi factory gets shut down, it’s not long before lorries full of Coke arrive to replace the lost inventory. And it all happens so quickly you barely notice any change in the sticker price.
The market for gas doesn’t work like this. You can’t just build a new pipeline overnight. (It took four years to build Nord Stream 2.) And LNG is more expensive, so even if we could replace Russian pipeline gas overnight – which we can’t – we’d still be paying a lot more for energy.
Europe’s problems are illustrated by a recent survey of German manufacturers, the results of which are shown below:
About 20% of manufacturers said they needed to reduce or halt production over the past six months. Yet more than 50% said they will need to do so over the next six months. There are only so many ways you can adapt to high gas prices before cutting output becomes unavoidable.
The analyst Javier Blas says it’s “likely” Europe will go back to buying Russian gas. “If it’s going to keep its chemical, food and heavy industries competitive,” he notes, “it will need some cheap gas. And there isn’t cheaper gas for Europe than Russia’s.”
To join in with the discussion please make a donation to The Daily Sceptic.
Profanity and abuse will be removed and may lead to a permanent ban.
I’m looking forward to the follow up, The Prime Minister and the Entire Cabinet Impaled on Spikes on Westminster Bridge – The Musical
When do the tickets go on sale?
Just as soon as I’ve finished sharpening these wooden sticks
How about Kim Jong Johnson vs Frank Bruno?
A co-(vid)production with Andrew Lloyd Whassisname? Lyrics by Tim Starchysubstance.
Maybe a tadge off topic, but I had the most amusing, and also the most telling, exchange with the owner of a pub about a scotch egg. Trying to get a pint without ordering a three course meal (back in the day when Covid could only attack you if you hadn’t ordered food) I tried to defuse the situation by mentioning that perhaps I could have a nice scotch egg with my pint. The landlady then went on a full five minute tirade about how a scotch egg was definitely not a ‘substantial meal’. I actually learnt a lot about people from that one 5 minute exchange. More than I had in my previous 49 years. That actually set me up for the rest of the irrational nonsense that followed. The power of a scotch egg!
Propaganda works. Acceptance is much easier than thinking.
Good theatre/cinema is very effective propaganda. Bravo to all those involved; and let there be more of it.
P.S. I do like the sound of your musical. Were you thinking of a sort of Life of Brian crucifixion scene, or did you have something like Les Mis in mind? I rather fancy a new version, called The Miserables. It would start with misery and end with a sort of V for Vendetta triumph.
Also a tad OT, but I watched Have I got a Bit More News for You last night. This was the extended version of the most recent episode, so current then. Not historic.
All the participants were STILL sitting in between perspex screens. I thought Covid had been declared to be over.
Does BBC wish it wasn’t? Is it still trying to perpetuate the fear among its audience members?
I was in Durham yesterday, they have a lot of chinks at the uni there. 90% of them at least were wandering around in face nappies. This was not happening before the pandemic.
And they complain when we comment that they all look alike!
Many Asian I suspect!
Plenty of small theatres in Scotland that need some trade, and a populace that needs a kick up their fundament. Hopefully the Scotch egg will travel that far….
One hopes that the witty lyrics are more discernible than those that I hear in BBC radio shows that include ‘comic songs’. These are invariably performed by those whose talents don’t include a good voice or clear enunciation, which makes the whole enterprise rather pointless.
Please let us know when future performances are taking place!