EU Capitulates in Energy Battle
EU Energy Commissioner: Next Winter Will Be Even Worse Than This One. Energy ministers of the European Union met on Sept. 30 to address skyrocketing energy prices in Europe and come up with a package of emergency measures. Coming out of the meeting, EU Energy Commissioner Kadri Simson (Estonia) told the press: “Ministers were concerned, as am I, that this will not be an easy winter for us, and the next winter will be even more difficult.”
They did not reach agreement on capping the price of wholesale natural gas, which was one of the key demands issued to the European Commission by a group of 15 EU member states ahead of the meeting. And although they did agree to try and limit the excessive profits reaped by fossile fuel companies, that is basically meaningless in a world where free market speculation reigns.
A number of EU member countries, including Germany, Austria and the Netherlands, have refused to go along with any ceiling on prices, and the European Commission also warned that any such move would weaken the bloc’s ability to secure gas supplies in the global market. Austria’s Energy Minister Leonore Gewessler explained that her government cannot support a price ceilings on vital imported gas supplies, which are necessary for energy security. “Austria is dependent on natural gas imports and on Russian gas imports,” she told reporters before the Sept. 30 meeting. “In all these proposals, I have not seen any certainty that the partners supplying us would still deliver enough gas to Europe if we are not prepared to pay the price demanded.”
Germany’s Economy and Energy Minister, Robert Habeck of the Green Party, advanced the same argument, telling his colleagues meeting in Brussels that he fears exporters would simply cut off supplies to Europe in the event of a price cap.
Again, the key issue of shutting down the Amsterdam-based futures gas market, the TTF, was not addressed. And yet, no other measure will help bring energy prices under control.
Berlin Opts for a Massive Bailout. The German government is firmly opposed to an EU-wide ceiling on the price of natural gas. However, it has decided to “go it alone” to counter the soaring inflation rate. Thus, Chancellor Scholz announced on Sept. 29 that the government would provide a huge packageof €200 billion to help households and companies pay their energy bills. Shortly before, in the United Kingdom, the new government of Prime Minister Liz Truss had announced a plan for massive borrowing by the state to subsidize energy prices (cf. SAS 39/22).
Such new forms of Quantitative Easing, however, will not “make prices go down”, as they claim. It just means that the government will be paying the inflated prices of energy on behalf of the companies and households, thus creating plenty of demand for prices to continue rising. That, in turn, will bail out the various speculative funds and ultimately the banks, at least temporarily.
The German plan is strongly resented in other EU member countries, that do not have the financial means to launch similar “relief packages” (often enough because their public finances were deliberately looted under Brussels’ dictates). They complain that Berlin is only concerned with its own energy security.
Eurozone Inflation Reaches Historic 10%. According to Eurostat, consumer prices in the Eurozone rose a record 10% in September, compared to one year earlier. In August, the yearly rate of inflation was at 9.1%., whereas one year ago, it was as low as 3.4%. Energy prices led the way, with a 40.8% year-on-year increase in September, while food, alcohol and tobacco jumped 11.8%.
Prices in Germany rose 10.9%, hitting double digits for the first time in decades, while the Netherlands was hit with a staggering 17% increase in September. While energy prices were the main driver of the soaring prices, the rise had begun well before the conflict between NATO and Russia in Ukraine.
The European Central Bank has been raising interest rates in an attempt to slow the trend, but it hasn’t worked so far. Nonetheless, a new increase is said to be on the agenda for later this month.