The leaders of the European Union have been working hard these days, trying to find a lasting solution to an energy crisis that is getting worse every day. Yet the way they approach the solution is unlikely to produce lasting results. And so far it has been compared to a Ponzi scheme. “One of the simplest policy levers, if you will, is that you can pass a bill, earmark money, and give citizens money to pay their electricity bills,” said the former Energy Secretary Dan Brouillette. Told CNBC this week.
He then agreed when asked if the approach could be compared to a Ponzi scheme. Yet the windfall tax and energy subsidies are just the start, it seems, and the end product could turn out to be far worse than a Ponzi scheme.
The Financial Times reported this week that the EU is seeking sweeping powers over member state companies that would essentially allow Brussels to tell those companies what to produce, how much and to whom to sell it in times of crisis. The definition of a crisis would be the prerogative of the same EU.
“We would be very concerned if this proposal were adopted in such an interventionist form,” said Martynas Barysas, an executive with BusinessEurope, an employers’ association.
“It could force member states to override contract law, compel companies to disclose commercially sensitive information and share their stocked products or dictate their production in any type of crisis the commission decides,” he said. Explain.
Another one report, from Bloomberg, focused on the measures of direct intervention in the energy market envisaged by Brussels. The report cites several bailouts that the German, Swedish and Finnish governments had to resort to to prevent public services from going bankrupt due to the price crisis as the events that spurred the bloc into action.
Related: Russia Now Produces LNG Near Closed Nord Stream Pipeline
The action itself, which will be discussed at a Friday meeting of energy ministers, involves capping imports of Russian gas, temporarily capping the price of gas used in power generation and suspending power derivatives trades in an effort to boost liquidity in the struggling power market.
Natural gas prices in Europe have soared by some 400% over the past year. The crisis actually started around this time last year, and the events in Ukraine this year have only seriously worsened an already bad situation.
Solutions are tricky.
For Dan Brouillette, president of Sempra Infrastructure, active in the field of LNG, the solution is simple: Europe only has to invest in greater oil and gas dependence on the United States. For Europe itself, replacing one dependency with another is not the best solution. of action, even if political relations with the United States are very different from relations with Russia.
“Homemade” clean energy, as EC President Ursula von der Leyen called it last week, is not a solution either, however, for purely physical reasons. There are not enough raw materials in the world to make Europe 100% wind and solar. And that’s not to mention the global reliance on China’s rare earth and lithium processing capabilities.
Europe has a difficult winter to face. As attempts to adapt become increasingly desperate before the bills for the first heating season begin to roll in, that desperation takes an increasingly interventionist direction. It has already prompted some to accuse the EU of being overbearing and comparisons to the Soviet Union have emerged on social media.
People are already protesting against the energy policies of European countries and there will be more protests as autumn moves into winter. Unfortunately, apart from direct intervention in the 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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