European energy crisis is a globally systemic event

30 August, 08:25 PM

Just did another Gulf TV gig - I would not normally do them, but they always come on with typically pro-Russian/anti-Western angles that I feel almost compelled to set the record straight and to give the alternative view to the Gulf/Middle East audience.

First, and I always set this out from the outset, this crisis is because of blatant and unprovoked aggression from Russia.

No "ifs", no "buts", Russia is the aggressor, don't give me the NATO provoked this bull shit.

This is a plain and simple imperialist expansion from Russia which is committing war crimes and genocide in Ukraine like Putin did before in Syria. 

Video of day

Second, the West is not going to roll over on this, opinion polls suggest that populations understand that Putin is causing it, he is the aggressor and is attacking us, our system of governance. We will rally together, with Ukraine, against this. And therein there is little to suggest that support for Ukraine is diminishing.

Third, fiscal policy will be deployed to help the poorest in our societies, with targeted support.

Prices have risen massively, and likely will continue to rise. Demand will be constrained to balance markets. It will be painful, but it will happen. It is in fact happening and one thing that is already noticeable in the European energy - supply-demand balance is how rapidly demand is falling, like 15-20% already.

Fourth, if I was Russia or other carbon exporters I would not be gloating about Europe's problems. Likely the result of higher energy prices and demand destruction will be a global recession, and actually an acceleration in the carbon transition.

Likely one year out oil/gas prices will crater because of the global recession.

For Russia, this will be catastrophic as this will come as it is cut out of European supply chains, so it will suffer both price and volume effects. But if I were a Gulf carbon exporter I would be working overtime to supply more energy to avert a global recession which will likely future crash global energy prices.

Fifth, and related above, the huge rise in energy prices in Europe, and demand destruction will cause massive disruptions to global supply chains.

Manufacturing production which used to be competitive in Germany will no longer be at this level of energy prices, which means the output will be taken offline. This means that different parts of the supply chain will be disrupted - think of the supply chain disruptions during Covid but on steroids. This likely will accentuate global stagflationary pressures - the world will suffer because of this, and ultimately because of Putin's unfettered ambition and brutality. 

So my advice to ME readers and listeners is to be careful/cautious in how you view this crisis, and this is not a time for schadenfreude, but for building your own economic defenses for likely much harder economic times for all looming globally.

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