Winter is here

And the "Russian energy roulette" truly begins

From Tuomas Malinen’s Forecasting Newsletter

Issues contributed:

• How is the second ‘leg’ of the energy crisis likely to proceed and what are the effects?

• What will the effects of sanctions of the EU, hitting Europe and world at the worst possible time, be?

• What are the likely responses of global leaders?

This week a long overdue winter is arriving to Europe. A very mild October and start of November have led some to conclude that Europe would have solved her dependency on Russian imported energy (gas and oil).

However, for example, German natural gas authority, the Bundesnetzagentur, begs to differ. In its most recent summary, the agency states that:

Avoiding a national gas supply emergency this winter depends on three things: cutting gas consumption by at least 20%, LNG terminals starting operation at the beginning of next year, and the winter decrease.

Essentially, the agency states that avoiding a gas emergency still depends on three “wishes”: rather extreme belt-tightening from households and companies (also called de-industrialization), no hiccups in complex construction projects and an ‘act of God’. I would not be very confident that all these come to be, even though they naturally can. Some forecasts are, for example, predicting a very cold winter for the northern hemisphere.

I have already written on the vulnerabilities of European gas and electriticity markets in detail before and will not repeat them here. I will make few notions, though.

The German play?

First warnings of possible rolling blackouts have appeared in Finland. This is not an encouraging sign, because it implies that politicians at the Nordpool electricity market area are planning to conduct an electricity hara-kiri (or maybe seppuku). Nordic countries are 100% self-sufficient in energy production and we will only have an energy crisis and blackout, if we try fill the energy glut of central Europe. I consider that this would be extremely foolish decision as it would just weaken us, but that’s where we are heading.

German Chancellor, Olaf Scholz, have been making rounds in energy exporters and China. Leaders of other European countries have not accompanied Chancellor Scholz. This implies that his tour has been an effort to secure supplies of liquified natural gas, or LNG, to Germany.

I have warned that Russo-Ukrainian war and especially the sanctions attached to it, may lead to the fragmentation of the European Union. The actions of Chancellor Scholz, imply that this may have already occurred.

Every country for itself and ‘fast eat the slow’ may become the norm. Those who are slow to acknowledge this, will be hurt the most.

The gamble of the EU