Thoughts on the Energy Crisis
So the general consensus is that the Russian War in Ukraine is causing an energy crisis throughout Europe. In turn, Europe has done what it usually does and panicked beyond all measure and continued to shoot itself in the foot as much as it possibly can. The thing is, there’s only one energy crisis that matters, and it doesn’t seem to be upon us just yet. This turbulence could have acted as conscious-shock to test the waters for the coming 200 years, to see how we’re going to handle a lack of energy, but no, instead we’ve doubled-down on all the abstract modern supports we usually use to ignore the obvious.
At the moment, however, the ‘energy crisis’ doesn’t appear to be (though a reader may be able to correct me here) a crisis of energy, as much as it’s a crisis in relation to an already-determined future, a crisis-yet-to-come if you will. The reason I say this is because the EU initially panicked, believing it wouldn’t have enough energy to get it through this winter due to destabilization due to Russia pipeline cuts off. The EU’s target was to get to 80% storage capacity before October 1st, as it stands (here) the EU is already at 80.4% storage capacity. The UK is currently at 100% storage capacity (here).
The reason, then, that energy prices are going through the roof, and the price gaps are rising by the minute, isn’t actually to do with any empirical gas drought, or any actual crisis of energy, but to do with the abstraction which is the Futures Market. The Futures Market, as per its name, is market wherein buyers and sellers predict the price of certain goods, and lock-in the price in the ‘future’. Gas prices are currently up so high because of general perceived turbulence, but not actually in relation to any specific lack of supply (see the previous two links). The worry for many nations is that Russia will cut off gas entirely, and it’s far beyond my ability to predict whether or not this will happen. This energy crisis is, practically speaking, a small network of various events culminating into an economic panic.
The Covid-19 event was a historically anomalous two years in relation to the demand of various fuels and supplies. So much so that the production itself got effected. As demand has begun to slingshot back into full force, the supply-side appears to be worrying about keeping up. At the same time, supplies are seeing that consumers are more than happy (and able) to bear these extra costs, and so it of course isn’t in their interest to sell their goods for less than they possibly could. My thesis here would be that a large part of this panic on behalf of governments is a somewhat sneaky mitigation tactic. Scaring people into understanding that energy costs will be extremely high, thus getting people to start using less and purchasing alternative forms of heating, thereby avoiding the future possibility of a genuine energy crisis.
As for the the 5-fold increase in business energy bills, who’s to say what will happen? Pretty much everyone understands that such an increase in energy bills for any small, independent business means shutting down. The thing is, in relation to what I’ve already written, this energy crisis isn’t a crisis of energy itself (which will come as we continue down the descending side of Hubbert’s Peak), but simply a crisis of planning and dependence. It’s not that we have a current lack of energy – the tanks are full – it’s that this war has revealed the fragility of the system itself, thus spurring nations into restarting various efforts for energy independence (the Rough facility, for instance). The price of gas is back to what it was in May (here) and there’s no sign of it stopping its fall. Anyone who was attempting to profit off this trade has likely done so. No one gets beyond supply and demand. In short:
Covid-19 happened and caused various odd things to happen on the demand-side for both gas and fuel, the supply , in turn, decreased. As we came out the other side of Covid-19 and everyone wanted to get back to their McCruise mega holidays, the demand increased beyond its pre-Covid levels, and thus we find ourselves – with the addition of the war in Ukraine – in our current situation. However, the ongoing media panic around energy prices has led most consumers to begin to prepare for a hard winter, likely already causing a blow to the gas industry from the demand side.
If I was to dare to make a prediction, I would say that the energy-cap will decrease around mid-September to October to around £2500, up from its previous £1900, but down from the £3500 predicted. Much the same thing happened with fuel. Fuel was around £1.20 a liter, it went up to almost £2, and is now down to around £1.60. Basically a very basic tactic to make certain goods look affordable again, very much a ‘Ah, that’s not as bad as I thought!’ moment.