Skip to content Skip to sidebar Skip to footer

That's what happens when theory fails to take account of reality


The worldwide energy shortage is beginning to show its teeth, and threatens to literally bankrupt many businesses and consumers unless a solution is found.  The Financial Times reports:

Across the world, politicians are ever more desperately looking to contain the explosive consequences of the energy crisis. In those parts of Asia, the Middle East and Africa already mired in multiple economic and political difficulties, the crisis is proving catastrophic.

Those who import liquid natural gas must now compete with European latecomers to the LNG market seeking an alternative to pipelined Russian gas. In early summer, Pakistan was unable to complete a single LNG tender. In poor countries, a large proportion of the state’s resources go on subsidising energy consumption. At prevailing prices, some cannot: earlier this month, the Sri Lankan Electricity Board imposed a 264 per cent increase on the country’s poorest energy users.

In Europe, governments want to alleviate the dire pressures on households as well as energy-intensive and small businesses, while letting spiralling prices, pleas to consume less and fear about the coming winter drive down demand. Fiscally, this means state funding to reduce rising energy bills by subsidising distributors, as in France, or transferring money to citizens to pay those bills, as in the UK.

What is not available anywhere is a quick means for increasing the physical supply of energy.

. . .

The only way forward is realism for the short term, recognising that there is no way back to cheap energy, allied to radical, long-term ambition. A grasp of geopolitical realities is also essential ... This coming winter will bring a reckoning. Western governments must either invite economic misery on a scale that would test the fabric of democratic politics in any country, or face the fact that energy supply constrains the means by which Ukraine can be defended.

There's more at the link (article is paywalled).

There's more and more money chasing the world's limited supply of natural gas.  That's why US natural gas prices have jumped so high:  it's because our producers are selling as much gas as they can onto the international market, where they can get much higher prices than they can achieve domestically.  The only limiting factor to how much gas they can export is the restricted availability of LNG tankers, all of which are already booked solid.

Here in the USA, we're extremely fortunate in that we produce most of the fuel we need.  Most of the rest of the world isn't so fortunate;  and that's going to be a contributory factor to international instability for years to come.  Consider Pakistan, mentioned in the excerpt above, which has not been able to conclude a single contract for LNG because the price is too high and/or the tankers needed to ship it there are already busy elsewhere.  Imagine if you were living in that country now, and didn't know how you were going to cook or heat your home this winter.  Imagine if your electricity supplier told you he couldn't guarantee you'd have power, because he can't get fuel for his power station.  Imagine millions of Pakistanis getting angry, frustrated, cold and hungry, and demonstrating in the streets . . . and now remember that Pakistan has nuclear weapons, and is filled with (and surrounded by) religious fanatics.  How secure are those weapons in such an unstable environment?

It's not just the Third World, either.  A few days ago Bloomberg reported:  "Six in 10 British Factories at Risk of Going Under as Bills Soar".  If you work at one of those at-risk factories, that's your job and your income you see disappearing into the distance.  Thousands of UK pubs and restaurants may be forced to close because of skyrocketing energy bills.  The same bad news is cropping up all over Europe.

Karl Denninger puts things into perspective.

Europe -- and the US -- believed that shutting down coal-fired plants when coal has had a 100 year history of reasonably-stable price and none of the alternatives save nuclear, which both also refused to replace it with, was able to be replaced with a "green energy" nirvana.  That was a lie; Europe is now facing electrical power costs four, five or even ten times what it was just a year or two ago ... Literally everything -- down to the provision of water and sewer service for those living in towns and cities -- relies on reasonably-priced electrical power.

. . .

Tell me ladies and gentlemen -- if that crap comes here and your $100 electric bill becomes $1,000 a month can you pay it?  Can everyone else pay it?  If they can't pay it, including the store, the delivery driver and such at his apartment or home what happens?  How do you get food when the grocery store can't pay that bill -- when that power is what keeps the chiller cabinets running for meats, dairy, eggs and frozen items -- and thus closes?  Do recall that once you shut down a plant and let it sit for a while restarting it on short time is impossible and once you take a bulldozer to it you can never restart it.

Are you willing to take that risk?  Europe did and bought into the crap run by a teenager with no more grasp of the complexity of what she was screaming about than a two year old who just was told they couldn't have another candy bar.  How did it turn out?  How many tens of millions of people will go broke or even freeze to death this coming winter and how many businesses (that's jobs, income and economic output) will fail as a direct result?  How many governments will fall to civil unrest or even revolution and what leads you to believe whoever takes over will be better rather than even worse than what they have now?  How many of those nations have nuclear weapons?

This is not speculative with a timeline five or ten years down the road.  It is real, it is fact, it is happening now and, due to the decisions made over the last several years that are irreversible in a short period of time the consequences for Europe are going to occur, like it or not, starting within the next few months!

Again, more at the link.

It's going to be a fun and interesting winter . . .


Post a Comment for "That's what happens when theory fails to take account of reality"