With absolutely no idea about what they're doing, the European Commission lead by the great Ursula von der Leyen tries to convince people that the self inflicted energy crisis is only Putin's fault, but fear not! great measures will be taken along the way and in the end, everyone will be happy (although not sure about "owning nothing" part - most likely that will come sooner than later).
Following this article on euronews.com, we find out straight from the horse's mouth some interesting aspects. Like...
"While gas prices have come down in the past weeks, they remain very high and are putting a heavy burden on people and our economy," the European Commission president wrote in a letter to EU leaders on the eve of a high-level meeting in Prague.
Well, no wonder after EU decided to cut off the Russian supply of natural gas, with absolutely no consideration about the economical impact.
And then Ursula von der Leyen envisions two different forms of gas caps that would work in parallel. Well, "work" is kind subjective here and most of the time, if not always, the caps on pricing leads eventually to shortages of that product. It's not that socialist countries didn't apply this before. Like Venezuela for example.
So the European Commission tries to control the (as possible as it is) free market (in this case TTF - Europe's leading benchmark)
The Commission believes the TTF is overly influenced by pipeline gas due to the EU's long-standing dependence on Russian imports. The countries have this year drastically shifted to liquefied natural gas (LNG), a flexible alternative that is shipped around the world on tankers.
The LNG might be an alternative, but it's hard to find it available, costs are way higher than the one coming via a land pipeline and it cannot be applied in the same measure for all the EU countries (some of them with no sea connection). LNG shipping rates are also shooting through the roof, and it's not even winter yet (500.000$/day doesn't sound that crazy anymore).
While the Commission works to create a "complementary" benchmark for LNG, the bloc should impose a "price limitation" on the transactions taking place across the TTF in order to prevent excessively high fees for companies that buy gas – costs that are then passed onto consumers.
So the Commission wants an alternative way to decide the pricing (controlled by itself, obviously) and for the moment a price cap on these transactions. Which it will lead, sooner than later, to a shortage of transactions. Nobody will sell at a loss in EU when they can take their fancy LNG ships somewhere else.
But this market cap, the president said, should be accompanied by more stringent gas reduction plans – beyond the 15% target agreed in July – as well as legally-binding solidarity agreements so that member states can help each other out in the event of scarcity of supplies.
Ursula realizes that this plan sounds even crazier than it is, but she strongly believes that, if the Europeans will stay a little bit in cold this winter, or not taking showers at all or maybe quite eating, this is doable due to the gas consumption reduction. By force, if necessary. Yes, a little bit like the COVID vaccination not so long ago.
The second part of member states helping each other, but forced by law, probably eyes Hungary, who has a deal in place for the winter with Gazprom. Of course, Hungary intends to get rid of the bad Russian gas by... 2050. This is at least to say, hilarious, but also keeps in check the crazy EU wishes. Clever move from the Hungarians, we have to admit that.
A second price cap would apply to the gas used for electricity generation.
"We should limit this inflationary impact of gas on electricity, everywhere in Europe," von der Leyen says.
The cap resembles the goals of the Iberian model adopted by Spain and Portugal: a massive state aid programme that partially compensates the high costs bore by gas-fired plants.
We have even the examples here, state aid based power plants. Which are subsidized from... exactly, not quite taxes but massive loans from ECB. Which means more inflation money. Which in turn it will require even more subsidies. And so forth...
Both gas caps would be time-limited, she said.
Of course it will be time-limited. Like the inflation, that it was only temporary. Or the COVID lockdowns (which luckily ended due to the light version of the virus, Omicron). I would speculate to say that even Ursula's leadership is now extremely time-limited.
But like any other socialist measure, once in place, it's hard to be removed. People are getting used to this sort of help, and when it's taken from them, they will react in a negative way. This might lead to some political parties popularity going down the drain. And politicians usually, are very keen about the prosperity of their own asses.
Ursula shouldn't fear though, since she's not elected and she's not responsible in front of any nation across Europe.
But she doesn't stop here:
Beyond the market intervention, von der Leyen suggested the EU should step up bilateral discussions with "reliable suppliers," like Norway and the United States, in order to negotiate lower prices for the bloc.
Reliable? But Russia was also very reliable for so long. To me, it seems that the EU acted like an unreliable customer. Leaving that aside, negotiating lower prices is pure bullshit. Lower than what? Than the Russian price?? Well, good luck with that.
Ursula even has the arrogance to reminds about her successful business with Pfizer vaccines. We still didn't get any replies to that monkey business.
The Commission chief also wants to set up a joint procurement scheme that would allow the EU to act as a single buyer, as it was the case for the COVID-19 vaccines.
Of course, let's not forget about the green energy, which will saves us all. Not quite right now, after decades of punishing oil industry and pushing the green energies by force in all countries (Germany realizes how stupid was to give free hand to the whole green movement)
Finally, von der Leyen called for stronger investments in green technology and energy efficiency to slash dependency on imported fossil fuels.
More green is better, especially when we discuss about USD.
But where the money is going to come from, you might be asking, to support such crazily creative measures? Well, fear not, EU is full of money. It lacks gas, some stable industry, but overall money is no issue.
The Commission will try to expand the public funds allocated to the REPower EU programme, which aims to raise up to €300 billion by the end of the decade. Of these, €225 billion will come from unused loans taken out from the coronavirus recovery fund.
Just to remind you here, the coronavirus recovery fund is an unicorn fund, based on (again) ECB printer of inflation carrying euros.
Even if Ursula is going berserk mode about the energy crisis, there are some opposing voices:
Bruegel, a Brussels-based economics think tank, has warned against this targeted cap, arguing it would lead to a higher consumption of gas and a spill-over of subsidised electricity beyond the EU borders.
While a growing number of member states are actively calling for a price cap on gas, others, like Germany and the Netherlands, remain opposed and prefer instead to bet on joint procurement.
In the big picture, these opposing voice don't matter that much. EU Commission, lead by Ursula von der Great, will prevail.
So, what we have learned today?
- Socialism will be served cold this winter for all Europeans
- Price control for the gas, and soon other items such as food, is around the corner
- Green energy is awesome, even if it fails to save the situation when is actually needed. In reality is awesome when backed up by some dirty energy sources.
- Money is no issue, we can print exactly how much we need
- What inflation?!
