No More Russian Gas!! Will Europe FREEZE This Winter?!

It was entirely predictable and some Would say inevitable Russia is turning Off the Taps and Europe is scrambling Scrambling to secure supplies and Conserve energy before winter sets in However some are arguing that this may Already be too late in my video today I’m going to tell you exactly what’s Going on in the European energy market And what could happen this winter this Is a video you don’t want to miss Of whether Russia would actually turn Off the Taps was always in the air it Was arguably one of the main reasons why Europe was initially reluctant to impose Sanctions on Imports of Russian energy As I mentioned in a previous video there Were concerns that planned maintenance On nordstream 1 the main pipeline into Europe was meant as an intentional Warning sign to European leaders and While Putin was on a trip to Tehran a Few months ago he further warned European leaders that gas deliveries Could fall further due to these Maintenance issues It seems that one of the biggest Sticking points here was a turbine that The Russians said was being held up in Canada thanks to the sanctions now Despite the eventual delivery of that Turbine gas supplies through nordstream 1 dropped by a further 50 in the days That followed there was Panic on the

Continent as prices kept on Rising to Dangerous levels however that was only The first Salvo when European countries In conjunction with the G7 started Proposing price caps on Russian oil Putin didn’t take too kindly to the Speculation The gas flows coming through nordstream One were once again brought to zero as There were some more turbine related Issues that needed to be fixed in a Quote specialized Workshop now whether This was legitimate is anybody’s guess But the result was that gas flows coming Through nordstream were brought to zero This caused panic in Europe That’s because even though they were Scrambling to Source Gas from other Places this would still not be enough to Bridge the demand this winter the Complete shutdown of Russian gas made it Clear that either demand would have to Be curtailed or there would be shortages Later in the year In the immediate short term though the Price of gas skyrocketed on the Continent this led to some serious Concerns that not only could we have an Energy crisis but a financial crisis as Well allow me to explain You see there’s a massive derivatives Market for gas and energy worth Trillions of Euros this is used by a Number of participants but perhaps some

Of the most prolific are power companies And utilities that are looking to hedge Their exposure to Falling prices This makes sense when prices are falling And the power producers are trying to Protect their bottom line but it creates A whole lot of issues when we see prices Rally like this That’s because these power producers Will now have to put up collateral for Margin calls this becomes a serious Issue when it happens all at once and Power producers have not been able to Realize the profits from the higher spot Prices Collateral needs to be posted and fast That’s because there are numerous other Counterparties to that trade that could Also go Belly Up should they not get That collateral posted according to Bloomberg this has created a quote Layman moment for the European energy Market Highly leveraged derivative Market that Could see firms go bankrupt thanks to a Massive liquidity crunch by some Estimates the amount of margin calls That could be faced is near 1.5 trillion Euros the spike in these margin Requirements is forcing these energy Producers to tap numerous credit lines For example last week finish utility Fordham got 2.35 billion euros of bridge Funding over in Switzerland Expo got a

Credit line of up to 4 billion francs About 4.1 billion dollars over in the UK Centrica is in talks with banks about a Potential extension of credit lines Other companies are nearing bankruptcy And have had to get State support these Include the likes of Germany’s Juniper For instance it is facing a liquidity Shortfall not only because it can’t get Any more Russian gas through the Pipeline but also because it has had to Post close to 1 billion euros in Collateral Juniper has become one of the most High-profile casualties of the crisis And right now its survival hinges on Support from the state according to the Juniper CEO quote look the worst is yet To come what we see on the whole scale Market is 20 times the price that we Have seen two years ago 20 times Juniper may not be the only casualty Though throughout Europe there are a Number of utility companies that could Be teetering in Austria for example the Government stepped in with billions in Support for Vienna’s Municipal utility Supplier in Sweden the government Extended emergency liquidity support to Its electricity producers It has now become quite clear that Broader support will be needed in order To Stave off a full-blown credit crunch In Europe as such the European

Commission is examining a number of Measures to help with liquidity those Proposed include credit lines from the ECB expanding the acceptable collateral Or even in the worst case a temporary Suspension of the derivatives markets Whether these measures could work is Anybody’s guess So far prices appear to have eased after A meeting of EU energy ministers That’s because there appears to be some Disagreement around the initial spark That led to the gas being shut off the Suggestion of a price cap on Russian oil It’s another short-sighted action that Could potentially have disastrous Consequences The principal Mo behind the price cap is That by agreeing not to pay above an Agreed maximum for Russian oil and gas EU countries can reduce the income the Russians are earning by selling their Exports on the open market they’re also Hoping that should they band together With other members of the G7 they can Create a buyer’s market essentially Creating an environment where Russia Will have to take it or leave it the Buyers set the price and the seller will Just have to agree However there are a number of problems With this firstly it assumes that the Seller will accept Europe is taking a Gamble that Putin needs to sell them gas

More than they need to buy it for his Part Putin has said that he will quote Make Europe freeze and will turn off the Taps to any country that imposes price Caps it’s unlikely that countries like India or China will agree to these caps So he may just decide to direct oil and Gas there instead Yes it’s unlikely to make up for the Demand and the pipeline infrastructure In the East isn’t as developed but it’s Still something he can do Then of course there’s the question of How these price caps could impact the Power producers and utilities together With proposals to tax quote wind for Profits these measures could do further Harm to generation efforts more broadly If they can only charge a certain amount For gas that’s coming from Russia it Could limit their incentives to get Supply onto the market moreover if You’re going to tax them even more for Making money then you’re going to Disincentivize them from investing in And sourcing new Supply I’ll leave a link to this Bloomberg Interview with an energy expert where he Explains exactly why these measures are Going to lead to more shortages Now something else that needs to be Considered here is the demand side when You implement artificial price gaps the Dynamics of supply and demand don’t work

Consumers don’t adjust their usage lower Or conserve their energy which only Makes rationing inevitable The same can be said for some of the Other support measures that have been Proposed measures like subsidies for Example don’t do anything to limit Energy demand So it looks inevitable that Europe is Going to have to ration some of that Gas And energy in fact there are already a Number of European countries that have Proposed and indeed implemented laws Aimed at saving energy Fancy cold showers anyone how about no Street lights and lower thermostats that Is what is happening right now measures Have been implemented at a consumer Level to limit energy use so that European countries can fill up their Reserve gas tanks for the winter In the German city of Hanover hot water Has been banned in public buildings it’s The first city in Germany to make hot Water unavailable for hand washing and Other uses in government facilities gyms And swimming pools according to the Mayor of the city quote the goal is to Reduce our energy consumption by 15 Other cities in Germany are taking Measures such as dimming street lights So back to the Dark Ages am I right Sorry bad joke It’s not just in Germany though in Spain

Parliament recently approved a law that Would limit Heating and Cooling in most Businesses and public spaces aircon Temperatures are not allowed to go below 27 Celsius in summer and above 19 Celsius in winter in fact I remember Seeing signs to that effect when I was In Barcelona just a couple of weeks ago Those temperatures will make for a far From comfortable living environment for Many people and for any viewers who deal In Fahrenheit we’re talking 80.6 and 66.2 degrees respectively by the way And speaking of limiting temperatures There have been suggestions in Switzerland that would see people Potentially being jailed for heating Their homes higher than 19 Celsius in The event of rationing this is on top of The proposed fines that the government Could Dole out to those Scallywags who Skirt the Rules Speaking to the Blick newspaper Marcus Spondly a spokesman for the Federal Department of Finance explained that the Rate for fines on a daily basis could Start at 30 Swiss Francs and added that The maximum fine could be up to 3 000 Swiss Francs over in France meanwhile Things are similarly Bleak despite Generating more nuclear power than any Other European country it turns out Almost half of French reactors are under Maintenance

As a result rationing is also taking Place in a number of French cities They’re turning off street lights and Factories are shutting down their Furnaces in Normandy some schools will Even start heating their classrooms by Burning wood instead of gas there are Also efforts on a national level for Businesses and individuals to embrace Energy conservation by increasing Carpooling lowering thermostats and Shutting off illuminated Advertising Signs the restrictions are even more Forceful for French businesses the Prime Minister has called for companies to Reduce their consumption by up to 10 or Face enforced rationing basically you Make it happen or we will make it happen For you As if that wasn’t bad enough businesses Will also have to appoint a quote Ambassador of energy sobriety this month And present blueprints to the government For cutting their electricity Consumption the result is that some Businesses have decided to shut their Production for a couple of months These include duralex International Which said it would put its furnaces on Hold and its employees on furlough till November the same can be said for Crystal dark the maker of Crystal wine Goblets they’ve placed 1650 of their 5 000 employees on partial furlough

Imagine being sent home from work and Then having to contend with cold showers And a home no warmer than 19 Celsius That is the reality facing many today So that’s it then a cold dark winter Well there are a few Silver Linings to These wintry clouds first you have to Assume that it is going to be a Particularly cold winter which is not Guaranteed Trying to forecast winter temperatures This early in the year is incredibly Difficult moreover there are so many Drivers of weather that forecasts can Change on a dime But having said that there are some Indications that it could be warmer than Usual this is thanks to the influence of La Nina which could be felt later this Year I’ll leave a link to this very Helpful blog post below which gives you More of an overview about the forecast For this winter but the tldr is quote Europe is expected to have warmer than Average temperatures over most of the Northern and North Central parts of the Continent Then of course you have to consider that Europe is trying to Source other Supplies of gas they’re scrambling to Secure contracts for gas pipelines and Liquid natural gas shipments these are Making up some of the shortfall but even Then it’s not been plain sailing

That’s because Europe hasn’t been too Active in developing regasification Plants on its Shores this means that They’re limited to how quickly they can Bring these gas shipments on Shore Building these plants can’t be done Overnight but European countries are Doing what they can to approve the Construction of these they’re also Making use of offshore ships which can Do the job of a regasification plant These are called floating storage Regasification units frsus and they Could help to bring a lot of this gas on Shore But you also have to consider the fact That Europe isn’t the only region that’s Competing for these LNG shipments Countries in Asia such as South Korea And Japan are big consumers of LNG as Well They have also secured longer-term Contracts which have to be fulfilled Long before the Europeans can even Consider buying up additional Supply Whether Europe will be able to do this Also really depends on how cold things Are over in Asia if it’s unseasonably Warm there then there will be a lot of LNG Supply that can be scooped up by the Europeans Beyond this European countries are Rushing to fill gas storage units and They are well ahead of schedule

They have already reached 80 percent of Storage limits a Target that they were Initially aiming to reach by the 1st of November Typically gas storage is able to absorb Supply shocks and typically provides at Least 25 to 30 percent of the fuel Consumed in Winter if we were to assume More gas stored and a slightly warmer Winter in Europe and Asia than the big European energy freeze could be narrowly Averted and those hot showers May not Just be a fond memory Okay time for a few of my closing Thoughts on the matter It’s quite clear that we’re going to see Some challenging times in the coming Months nearly every country in Europe Short of perhaps Norway is concerned About the prospect of gas and energy Shortages this winter it was always Clear that Putin would use gas supplies As the ultimate trump card of course Cutting gas to Europe and killing demand From the continent won’t come without Long-term implications for Russia and Europe knew this however they still Played Russian roulette with a madman And that is a dangerous game Firstly it’s important that Financial Regulators find a way to provide Liquidity to those companies facing a Credit crunch the last thing that the Continent needs now on top of an energy

Crisis is another Layman moment for the Derivatives markets it seems as if They’re managing here though and Solutions such as posting alternative Collateral are being considered Governments are also rushing to support These companies with state-funded Lifelines Now while I was heavily against bailouts Of over leveraged Wall Street banks in 2008 supporting an energy company under A crunch caused by geopolitics does make Sense bankruptcies of power companies Would not help an already fraud Situation in Europe When it comes to short-term policies Governments should refrain from Knee-jerk reactions price caps and Taxing windfall profits could Potentially warp the market and Exacerbate the supply shortages the best Solution for this winter is to reduce Demand and increase Supply On the demand side these energy saving Policies appear to be the only solution Europe needs to cut at least 10 percent Of its demand and if this can be done by Temporary power saving Solutions then it Should help Stave off a crisis Cold showers are a bitter pill to Swallow but they aren’t deadly Now when it comes to the supply side Europe is finding additional sources They’ve been in frantic negotiations

With LNG exporters and they are making Plans for temporary regasification Facilities offshore storage facilities Are getting full and there is a chance That this winter the weather could be on Their side Then in the longer term Europe is laying The groundwork for more energy Independence the politicians needed a Wake-up call from woke environmental Policies that sacrificed energy Independence at the altar of green power Hopefully they’re going to implement Common Sense policies that find a Balance between emission reduction and Energy security And that’s it for my video today folks But I would love some of your feedback So would any of my European viewers care To opine on the situation on the Continent how are you managing the Increased energy prices any top tips for Saving electricity let me know in the Comments below In the description you can also find Links to all the other places that you Can follow me Twitter telegram Instagram And Tick Tock if you want a preview of What videos are about to be released as Well as a breakdown of my personal Portfolio then you should sign up to my Free newsletter all of that is down Below oh and if you would like to Support the channel then you should also

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