Prof. ST Hsieh
Director, US-China Energy Industry Forum
September 21, 2022
This headline is not news anymore. Even their energy crisis is deepening is also not a surprise. Because the west has refused to address the root cause of this self-made crisis: the Ukraine war. The war is escalating to a dangerous level, but no one is seriously committed to a cease fire.
Money does not grow on trees, though US$500 Billion is not enough to sink Europe’s economy yet. However, US$500 Billion is only the first “down payment,” it looks more like a bottomless pit.
More significantly, whatever EU leadership is proposing now to manage the energy crisis will become a structural problem. It means Europe’s free energy market system will be forever changed. What will happen next or whether the “new energy market” will work better than the past system is anybody’s guess. But the prospect that “free market-based system” does no work anymore is frightening!
Second, “The rising costs of the energy crisis threaten to deepen economic divergencies among EU member states” has major implications for Europe. It may render the demise of EU. Because it is easy to share prosperous or abundance, so people stay united, but when pain or scarcity hits? If it comes to the case that basic needs such as a warm house, hot bath, lighting cannot be secured in a bitter cold winter, why people would support their governments?
It is time to end the war in Ukraine!
Europe’s Deepening Energy Crisis Pushes Bill to $500 Billion
Ewa Krukowska and Todd Gillespie Wed, September 21, 2022 at 1:40 AM
(Bloomberg) — The bill for Europe’s energy crisis is nearing 500 billion euros ($496 billion) as governments rush to soften the blow of soaring prices, according to the Bruegel think-tank.
The European Union’s 27 member states have so far earmarked 314 billion euros to cushion the impact of the energy crunch on consumers and businesses, while the U.K. has allocated 178 billion euros, Bruegel’s updated estimates showed on Wednesday.
The growing fiscal burden — EU spending accounts for 1.7% of the bloc’s gross domestic product — comes as European nations grapple with accelerating inflation and a bleak economic outlook. EU ministers are negotiating an emergency plan that will transfer windfall energy company profits to vulnerable households and firms. The deal, expected to be reached on Sept. 30, also includes a power price cap and a target to reduce electricity demand as Moscow squeezes gas flows to the region.
“Initially designed as a temporary response to what was supposed to be a temporary problem, these measures have ballooned and become structural,” said Simone Tagliapietra, researcher at Brussels-based Bruegel. “This number is set to increase as energy prices remain elevated. This is clearly not sustainable from a public finance perspective.”
While Bruegel’s estimates include measures such as lower value added tax rates on electricity, subsidies for heating and measures to keep some energy companies afloat, they do not fully reflect the scale of liquidity support across Europe. In Germany, the government will nationalize Uniper SE, a plan that involves injecting 8 billion euros ($8 billion) into the company and buying the majority stake held by Finnish utility Fortum Oyj.
“This level of intervention also entails a risk of fragmentation across Europe: governments with more fiscal space will inevitably better manage the energy crisis by outcompeting their neighbors for limited energy resources over winter months,” he said. “It is thus important to design policies that can ensure fiscal sustainability and coordinate them — notably among EU countries.”
European Commission eases coal sanctions on Russia to avoid harming ‘energy security’
Phil Rosen Wed, September 21, 2022 at 6:27 AM
- The European Commission pulled back sanctions on Russian coal to allow supplies to continue moving to other countries.
- Before, the Commission had said EU operators were not allowed to provide shipping services for Russian coal.
- Global coal prices hit record highs in September as the impact of the Ukraine war and EU energy crisis ripples around the world.
The European Commission eased sanctions against Russian coal to allow supplies to be transported to other countries around the world, the group said Wednesday.
The transfer of goods including coal “should be allowed to combat food and energy insecurity around the world,” the Commission said in new guidance.
Previously, European sanctions did not allow for EU actors to transfer or provide services for Russian supplies including coal.
“The EU is fully committed to avoiding that its sanctions unduly impact trade in critical items to third countries around the globe,” Commission Spokesman Daniel Ferrie said in a statement. “The financing, or provision of financial assistance — such as insurance or reinsurance — by EU operators for the transport to third countries of the products mentioned in our guidance note is also allowed.”
The Commission noted, too, that food and energy security remained a priority amid these sanctions adjustments, according to Bloomberg. None of the EU’s sanctions are set to impact wheat or fertilizer, Ferrie added.
Still, sources told Bloomberg that a group of nations were left confused by the Commission’s proposals, and are seeking further explanations behind references to wood, cement, and coal in the report.
Deutsche Bank now expects a ‘longer and deeper’ recession in Europe as the energy crisis takes a turn for the worse
Will Daniel Wed, September 21, 2022 at 10:32 AM
Europe is stuck in an energy crisis, and winter is coming.