Thoughts From The Divide – Volunteer or Else
“The crisis is already here”
Having warned about the potential for a diesel shortage in March, Javier Blas is back at it again with a recent opinion article warning that “another wave of curtailments and closures looms” amid “sustained high electricity and natural gas prices”. Blas also warns that while “rationing may still be a distant prospect”, “the crisis is already here” with year- and multiple-year-ahead contracts for power and natural gas “getting more expensive by the day”.
“Reluctant to voluntarily step up”
Given the gloomy outlook for price and supply, governments are acting like airlines who have overbooked flights, frantically looking for volunteers to make changes before forcing some to change their plans. Amid “hints at gas rationing”, fireworks continue in Germany as new chapters in the Uniper saga are being written. The latest developments include law changes that would “enable deep interventions in the gas market” and potentially allow Uniper “to pass on the higher purchase prices for gas to consumers in the future without regard to existing contracts”. (Calvinball!) German private companies appear to be forcing the issue on consumers, with the Vonovia housing group announcing it would throttle tenants’ heating at night. The UK appears to be still trying to go the voluntary route with its grid operator “meeting with regional gas network companies” to “discuss how to get more factories and businesses to cut consumption this winter. With companies reluctant to voluntarily step up, the grid managers will examine new incentives to reduce their gas use”. Pakistan was hoping to avoid kicking anyone off the flight, but their $1B tender for LNG fell flat on its face with a total of zero offers thanks to “unprecedented market conditions”. And the Aussies, whose recent energy woes we covered here, are also looking at business closures. One of the country’s producers of diesel exhaust fluid (see previous DEF hiccups here) sticks to its plan of ceasing operations later this year as it is “unable to secure affordable feedstock gas supply”. Even stateside, cracks are beginning to show in energy markets (thanks partly to a two-step forward, two-step back problem). A recent article covered the “temporary” closure of a Kentucky aluminum smelter, which is coincidentally the ”largest producer of military-grade aluminum in North America”, forced to shutter due to the high price of electricity.
P.S. Shipping and transportation are going “bananas” with problems getting containers out of ports, the threat of fees for the previous, and the recent Supreme Court non-action potentially sidelining 70,000 drivers in California. Plus, the cherry on top is ongoing dockworker negotiations, which “broke down” the last time the contract was being renegotiated!
P.P.S. The strategy of inflation relief through stimulus is gaining steam, with Massachusetts and Indiana moving in that direction.