Thursday, April 7, 2022




Russia’s invasion of Ukraine has led European countries to resolve to end their dependence on Russian natural gas. The Telegraph reports:

We are now in a world where Germany and much of the rest of Europe is planning for almost complete disengagement from Russia as a supplier of both oil and gas. The only question is how quickly this will happen.

Germany gets half of its gas from Russia, the highest percentage among large European countries.

Yet, particularly when it comes to gas, immediately available alternatives are hard to find. The scramble for them is going to ensure prices remain high for a long time to come.

The upshot is that a much larger proportion of national income will in future need to be devoted to energy than anyone would hitherto have thought remotely tolerable.

The Europeans have hurt themselves badly by chasing after the false dream of “green” energy rather than looking to their own supplies of fossil fuels. There is another culprit, too:

The economically crippling on-off lockdowns of the past two years have left many western economies completely unprepared for the challenges ahead.

It was a classic case of sledgehammer to crack a nut, a way-over-the-top response to the Covid menace, the full costs of which are only now starting to be properly appreciated.

In any case, lockdown has drained economies of the resilience needed to face up to the current energy price shock.

By causing a two-year hiatus in energy investment, the lockdowns were actually partially responsible for the depleted state of today’s supply.

Emphasis mine. The Russians and Europeans are engaged in a game of chicken:

For Russia, the euro payments have become almost completely useless. Even if they can be accessed in the Russian banking system, they may not be exchangeable. For Putin, it is as if the gas is being sold for free.

Yet if Europeans are forced to buy roubles to finance their purchases, it helps prop up the Russian currency and becomes an even more potent source of funds to pay for Putin’s hubris.

The situation is almost farcical, for this is by no means a one-sided dependency; Putin is as reliant on Europe as Europe is on him. Threatening to end the co-dependence kills both parties in equal measure. If the parasite kills its host, it dies too.

Putin assumed he had Europe over a barrel, that German dependence on his gas ensured its effective silence over his invasion.

Instead, he’s turned himself into an international pariah who either this year or next will end up losing the only market he has for his gas.

Where do the Germans and other Europeans turn? A likely answer is nuclear power:

Nuclear is the UK Government’s preferred solution. Regrettably, it is neither immediate – nuclear power stations take a long time to plan and build – nor cheap.

Nuclear is nearly always a vastly more expensive form of power generation than almost any conceivable alternative.

I disagree with that last assertion. My own experience with nuclear power suggests that it is inherently a cheap way to boil water. But it is hard to run an industry efficiently when people are trying to put you out of business. And while safety of nuclear power plants is a legitimate concern, over-regulation has been a sort of environmental voodoo that has driven up the cost substantially.

The age of abundant, inexpensive energy is over. Get used to it.

It’s not necessarily over in the U.S., but we need an administration that isn’t trying to impoverish us all by making energy expensive on purpose.

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