Podcast’s Essential Bites:
[16:19] JC: "Russia has essentially cut off gas from Europe right now by claiming that the North Stream I [...] pipeline [...] [has a broken] turbine. [...] This [is] in the face of Europe saying they were going to cap the price of Russian gas. [...] Russian gas shipments, which Germany is particularly dependent on, have fallen 89% since last year and the price of liquefied natural gas in Europe is four times the level a year ago. [...] This is the highest power prices have been in three decades. And the perfect storm is not limited to oil and the Russia and the Ukraine war. France's 56 nuclear power plants are running at half strength because of shutdowns over corrosion problems and [...] droughts have undermined hydroelectric power."
[17:44] DF: "40% of Europe's energy consumption comes from Russia and natural gas. [...] There's a baseload requirement for lighting and electricity, and then there's industrial production and then there's heating and cooling. Heating and cooling demand is linearly tied to the number of degrees above or below 65 Fahrenheit on average. And so as the temperature goes up, people turn air conditioners on as the temperature goes below 65, they turn their heaters on. [...] In a normal year [you could] see fluctuations around 5, 10, 15% maybe with good kind of action and behavior. 40% of energy being cut is a massive, massive problem."
[19:24] DF: "There's real concern that ultimately the shutting off of 40% of the energy supply to the continent leading into winter, winter is coming, where energy demand spikes because of the need for heating, is going to cause real problems. So there's the cataclysmic problem of people actually being able to heat their homes. There's the industrial problem of parts of the economy shutting down. And then there's the currency problem of the governments needing to step in and bail out industry, buy super expensive gas, give it to their citizens and their businesses at a discounted price and see their national and sovereign debt skyrocket, which is now expected to happen. And as a result, the British pound is trading at its lowest level since 1985. And as a result, people are rushing to the street, from Prague, to Cologne, Germany, even in London, proclaiming that the governments aren't doing enough."
[21:55] CP: "The reasons that Europe [is] in an energy crisis really should be discussed honestly. [...] An entire continent essentially allowed a 16 year old girl to dictate their energy policy. And when Greta Thurnburg was able to shame an entire continent to basically walking away from nuclear, and not really evaluating how you can actually have energy independence, what they did was they put Europe in an incredibly fragile position."
[24:11] CP: "In an effort to virtue signal to the hilt and beyond what we essentially did, what the entire world did, was turn a blind eye to science, and turn a blind eye to mathematics, and simple understanding of supply and demand. And so now you have a situation where the entire continent of Europe is probably on the precipice of at the minimum a recession. But frankly, there's a lot of scenarios where it could be meaningfully worse. And I think what it does is ultimately it has forced the Russian endgame. And that Russian endgame is essentially the following, which is that Germany will probably be the first to capitulate. But it'll be a combination of the United States and EU who negotiate some kind of a settlement. [...] People have decided that this war has gotten two or three steps beyond what they thought they were getting into. And that was shining light on a whole set of decisions that never should have been made."
[26:38] DS: "There's a good report by Goldman Sachs called "Europe's Energy Crisis is at a Tipping Point", [which] came out on September 8. And it says that the price of natural gas in Europe [...] used to just be 20€ per megawatt hour, it's now above 200€ per megawatt hour. So we're at 10 times the 10 year average in the market and winter isn't even here. [...] And yet no one is really changing course. [...] So the fact of the matter is that the European leaders are increasingly out of touch with their own people. [...] And this is why the crisis will only grow in winter. I think you guys are just assuming there's going to be a compromise. I'm not sure that's true. These leaders are stubborn."
[36:53] CP: "I think that the European system is going to be put under stress, because there are really a bunch of different countries with very different incentives right now. Where some countries are in desperate need of energy, some countries can probably stave it off for a little bit longer, other countries are so adamantly focused on their position on Russia over and above any source of energy that they may need or don't have. So I just think this is a really good point to take a step back and realize that in all of these conflicts, sadly, whenever you have all of these very complicated countries fighting very complicated wars, it's really important to understand what these trade offs are. Because ultimately, what we're learning in Europe is that irrespective of what you morally and ethically believe is right in the Ukraine, [...] the minute that you are affected at home, where you cannot take care of your children, or heat your house, all bets are off. And I think this just goes to show you that if you're going to [...] engage in proactive foreign policy, you need to make sure that domestically, you don't have any Achilles heels. And Europe had a massive Achilles heel, which is energy."