THERE was an old video of President Trump warning German officials of their country’s overdependence on Russian oil. The Germans were chuckling in that video.
I don’t think they’re chuckling anymore.
According to some analysts, projections for power prices in France are projected to exceed €1,000 per megawatt hour. At the same time, Germany’s power prices has gained a record high of high €829 a megawatt hour this week, a rise of 48%. And these are only for the two largest countries in the Eurozone. Imagine the difficulty faced by smaller countries.
For Europe, this is an unprecedented event, and I believe will have widespread economic and political repercussions going forward.
And there are concerns that this is only the beginning. Russia’s decoupling (via sanctions) from its European market has led to this crisis, and there’s no easy answer.
Renewables don’t produce enough power, and coal and nuclear power are politically sensitive issues. This is why Europe is currently facing very high inflation, while the U.S. and other developed countries are facing less of it. It’s because of the power prices.
Now, the best case scenario for this is that the US will build up its logistics infrastructure to feed Europe’s need for energy, and thus stop the crisis. The problem is that this infrastructure does not exist. Yet. But even if Europe can get fuel from the U.S., it will still be expensive relative to Russian energy, since it will have to travel across the Atlantic.
The worst case scenario is that Europe will face an energy crisis, with rolling blackouts across parts of the continent, and gas shortages freezing the old and destitute. I have no idea how Europeans will deal with this problem, but it will greatly alter Europe’s economic and political power, which in turn will change the way it sees itself and its place in the world./PN
