HindeSight Letters #90 July 2022 - NEWSLETTER

August 2nd 2022

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OVERVIEW

As the European Union reaches a political agreement on a voluntary reduction of natural gas demand by 15% this winter, the sun is still shining amid heatwaves across the region, but as the weather changes, an increasing number of people will wonder “How did we really get ourselves in this mess ?”

Cold showers as German city of Hanover reacts to Russian gas crisis
https://www.bbc.co.uk/news/world-europe-62335911

When Edwin Drake struck “rock oil” in Titusville, Pennsylvania in 1859, the world started to change dramatically, as the ability to access the new combustible material for energy enabling the industrial age to rapidly develop across the globe. While wood and coal had been able to provide some basic energy requirements prior, it was the access to the higher energy density material, that doubled the output, with far easier transportation issues for liquid crude oil. Over the next two centuries, the world would industrialise, with growing availability to the fossil fuels and despite all the concerns of climate change and renewables investment, modern society is still very much dependent on Drake’s discovery.

Energy Density by Material, (MJ/Kg)

Source: Energyeducation.org

Unfortunately, the large, easily accessible/ cheap fossil fuels were often discovered in countries that were only too happy to trade these resources for hard cash, IF it suited them to do so, and at the price they could heavily influence. Much has been written about the 1970’s oil crisis, when the oil-rich producers of the Middle East saw significant supply issues, as a result of the Yom Kippur war and the Iranian Revolution, leading to the stagflation decade, but now, in 2022, Europe, especially, is looking like it is heading right “Up sh*t creek, without a paddle”. Call me old-fashioned, and repetitive, but surely, the first rule of imposing sanctions, for the sanctioners, however, ‘principled’ they are, is that the sanctionee feels significantly more pain that the sanctioner? Well, currently, it has all the hallmarks of the old Laurel and Hardy sketch, in my opinion.

No one should be surprised that the Nord Stream pipeline from Russia to Germany came back on line on 22nd July at just 20% of the capacity compared to the start of the year, as Russia “weaponises”, against the West’s ‘moral’ sanctions. The outlook for the forward estimate for Germany/EU’s GDP is falling off the proverbial cliff into recession/depression.

Source: The Economist

Source: Zerohedge

As Germany starts to dim her lights….

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