English is a boring language. “Suicide mission” doesn’t leave much to the imagination. Other nations have elegant euphemisms to describe European energy policy.
The Japanese have Kamikaze, meaning “divine-wind”. It’s a reference to when the Japanese relied on the wind for their own geopolitical security and independence, as the UK does today.
And the Germans, I recently discovered, have “Himmelfahrtskommando”. That’s what Germany’s top tabloid called the country’s economic and climate change plans.
Despite knowing the literal meaning, which is “heaven-driving-mission,” I still needed to translate what the combination of the three words really meant. They were used in a tabloid headline claiming that Germany’s economy and energy minister Robert Habeck’s plan for the German economy and the global environment is a “Himmelfahrtskommando”. I can confirm it really is a suicide mission. And that’s what “Himmelfahrtskommando” really means too.
It was followed by the simpler German version of, “Climate-protection goals are not achievable”.
The next bit left me confused again. Literally, it says “Germany is a dirt-sling”. This has several interpretations listed on the internet’s various translations services… all of which apply.
Anyway, as you can tell, things are getting totally crazy in Europe’s energy markets. And the dead of winter keeps getting ever closer.
In November, the plan was for the EU to ban Russian crude imports from 5 December, and Russian oil products from 5 February. Having figured out the consequences of their own policy ahead of time for once, the Europeans recently changed their mind at the last minute.
The new version is to permit Russian oil after all, but only if the Russians agree to sell it below the market price…
Why would the Russians agree to sell oil below the market price?
Seaborne oil is the bit that’s easy to sell elsewhere, after all…
The Russians have already said they won’t sell to those countries that actually enforce the price cap. But if they don’t sell, the European politicians will be accusing the Russians of economic warfare…
Perhaps that’s why they’re doing it?
While the EU is busy imposing a ban on seaborne Russian oil, and then trying to buy the same oil it on the cheap, their imports of seaborne Russian gas hit an all-time record.
Is money for gas different to money for oil?
Diesel, meanwhile, is getting the oil treatment starting in February, when the EU’s ban still comes into effect. It is not that I expect it to do so in practice. The Europeans will realise their mistake even faster than on oil this winter.
Here is Bloomberg on why this is so:
Europe continues to lean heavily on Russia as a source of diesel with fewer than ten weeks to go until sanctions all but block the trade — a stark reminder of the work that still needs to be done to find new supplies.
The European Union and UK received almost half their waterborne imports of diesel-type fuel from Russia in the first 24 days of this month, Vortexa Ltd. data compiled by Bloomberg show. The level of reliance jumped sharply from October, when the region’s overall imports surged to cope with strikes that knocked out French oil refining capacity.
Once Europe’s favourite fuel for its climate change fighting abilities, diesel has now fallen out of favour. Unfortunately, we still rely on it for our supply chains. These aren’t exactly running smoothly these days. Is it really a good time for sanctioning Europe’s most important provider?
The good news is that Europe’s politically incorrect diesel-producing industry is firing on all renewable energy charged batteries at the moment. “We expect the higher production to continue to be supported by the strong net cash margins, and expect gasoil/diesel stocks at end-December to have built almost three million barrels,” an energy market analyst told Bloomberg.
That is interesting. I wonder if the same economic incentives apply elsewhere?
What’d happen if you cut those diesel refining margins by way of a windfall profits tax, for example? You would take away the incentive to produce. And that’s precisely what European governments have been doing to electricity producers, of course.
To be clear, they’ve sanctioned Russian energy and windfall-taxed local energy production. What do they expect? An energy glut?
Of course, liquefied natural gas (LNG) imports from Russia are still booming. Seaborne imports are at a record – up 40% compared to 2021 so far this year. The FT hilariously alludes to this “highlighting the difficulty for Europe in weaning itself off gas from Moscow despite Brussels’ attempts to shift away from Russian sources.” If you call that shifting away, I wonder what dependency looks like!
Apparently, unlike heavy emitters diesel and oil, Russian gas is simply too important to Europe to sanction. The worry is that Russia will simply stop the exports, leaving Europe high and dry. It is almost as if Europe planned for its economic development on the basis of abundant supplies of oil and diesel…
As ever, the real concern is not for people in Europe facing impossible energy bills. No, what really matters is European solidarity. Georg Zachmann, senior fellow at Bruegel explained to the Financial Times:
“What Europe urgently needs is a mechanism to protect against the event that Russia selectively sends gas to individual buyers in Europe in order to buy political benefits” and disrupt Europe’s unity.
If the solidarity breaks, “then we might run the risk that more countries than just Hungary would be very willing to accept Russian gas easily and that would be a big issue”, Zachmann said.
Heaven forbid European solidarity breaking down in favour of keeping the lights on!
But the comments are a bit odd given what else Zachmann told the FT: “My somewhat cynical take is if we buy LNG from Russia, that’s OK. Because we are getting from the Russians what would otherwise have been sent [somewhere else].”
So we can buy Russian gas because someone else would anyway, but we need to find alternatives in case someone else buys it…? And doesn’t the same apply to oil and diesel, if not more so?
Wind power, meanwhile, turns out to require wind. And wind is turning out to be rather unreliable so far this winter.
Who would’ve thought that unusually cold periods are correlated with less wind? Actually, it’s common knowledge…
But researchers are “discovering” that the extreme weather events which are caused by climate change include “global stilling” – less wind.
Even renewable energy havens in Scandinavia are struggling with extraordinary energy prices at the moment.
British Gas is preparing for the rough winter ahead by producing more power. I am just kidding. The company’s solution is to cut off the businesses who can’t pay their impossible power bills and are applying for winding-up petitions.
That’s one way of cutting demand, I suppose.
Cue article from the indefatigable Ambrose Evans-Pritchard: “Putin has another gas shock for us – the deindustrialisation of Europe.”
Anyone would think that it’s Russia sanctioning us!
There comes a point when there are so many government policies applying to an industry that the convoluted mess is its own tug of war. The subsidies and the windfall taxes, the consumption taxes and the price caps, the sanctions and the reliance – who knows what it all really amounts to?
For now, all we can do is hope for a bit of global warming to keep the wind blowing and the energy bills down.
Nick Hubble
Editor, Fortune & Freedom
