Lights Out!

Will the earnest Planet Savers plunge the world into darkness once again?

(Source: Getty Images)

Bill Bonner, reckoning today from Paris, France...

Europe is in a tight spot. It put itself there. 

It shut down its economy in the Covid Panic. It kept its interest rates way too low, for way too long. It aims to rid itself of fossil fuel, upon which its economy and its living standards depend. And now, in its misbegotten proxy war with Russia, it faces General Winter – Russia’s traditional ally.

We are here in Paris… enjoying a short holiday… and just finishing a $110 breakfast.

Consumer prices are almost all, to some measure, dependent on energy. And Europe’s most important source of energy is Russia. Now that the Russians have cut off, indefinitely, gas coming from the Nord Stream 1 pipeline, prices are on the rise. Consumer prices in England, for example, are expected to rise over 20%. Here’s Bloomberg:

Soaring energy bills are threatening to put six in 10 British manufacturers out of business, according to a survey that lays bare the extent of the crisis facing the next prime minister. 

“The current crisis is leaving businesses facing a stark choice,” the report said. “Cut production or shut up shop altogether if help does not come soon.”

And this from The Sun:

SEVEN in ten pubs could shut for good this winter because of rising energy costs, a survey reveals.

Thousands of landlords already rocked by repeated lockdowns are teetering on the brink following a doubling in gas and electricity prices

Another Curve to “Flatten”

Germany is shutting down its factories too. Its citizens are urged to turn off the lights, turn down the thermostat, and bathe in cold water. The French, meanwhile, are planning to ration electricity… but they’re also applauding this opportunity to shift to ‘green energy,’ as if it were possible to quickly replace Russian gas with windmills and solar panels.

Even level-headed Sweden, which resisted much of the Covid madness, has succumbed to anti-Russian propaganda. Aljazeera:

Prime Minister Magdalena Andersson warned that Sweden was facing the prospect of a “war winter” because of Europe’s energy crunch…

Speaking to reporters on Saturday, Andersson said [financial] guarantees were aimed at giving energy groups “the breathing room that is needed”.

And now, from the Covid Panic Playbook, Ursula von der Leyen, President of the European Commission, says the EU will propose a "mandatory target for reducing electricity use at peak hours" in order to "flatten the curve."

We’ve enjoyed using power, on-demand, when we wanted it, all our lives. Forcing us to stop is like downsizing packages or printing money – another subtle form of impoverishment.  

But it’s for a good cause, right? The feds say that lower output of carbon dioxide will mean lower surface temperatures on Planet Earth; ‘it will be worth it,’ they say. But we don’t yet know what the price will be (wearing sweaters in the winter… or 100 million dead?)

Goldman Sachs put out a report this week, guessing about what cutting off Russian gas will do to Europe’s consumers:  

In our view, the market continues to underestimate the depth, the breadth and the structural repercussions of the crisis – we believe these will be even deeper than the 1970s oil crisis. At current forward prices, we estimate that energy bills will peak early next year at c.€500/month for a typical European family, implying a c.200% increase vs. 2021. For Europe as a whole, this implies a c.€2 [trillion] surge in bills, or c.15% of GDP

Earnest Planet Savers

While cutting off fossil fuel supplies to Europe will purge some carbon dioxide from the air, we don’t know if any particular act of purgery will make any difference at all.  If we trade in our old F150 Ford truck for an electric model, will it reduce the heat of a Maryland summer by 1/100th of a degree? Or not at all? Or will we just sit in a long line waiting for a charge… like the Poles now sleeping in their cars at coal mines waiting for a sack of the dirty, old-fashioned fuel? And will our power plants end up running on coal, too, because the windmills can’t keep up?

Nor do we know what will happen if all goes ‘according to plan?’ Let’s say we all go along with Janet Yellen and rid the world of dependence on fossil fuel. And let’s say we pay the price – whatever it is… perhaps doubling the real price of food and energy… perhaps 100 million early deaths from cold or malnutrition (in areas of the world where people are already living on the edge)…

….and then, what a shame it would be if arriving at the water's edge… like the thousands of innocents in the ‘Children’s Crusade’ in 1212… the seas fail to part! What a shame if … despite all our sacrifices and suffering… the climate keeps changing anyway. What a pity if Planet Earth doesn’t really care what we think or what we do.

But the ‘we’ and the ‘our’ hide a great many distinctions and flimflam. Like so many Great Campaigns in history, the costs are likely to fall primarily on the poor, the weak… and the children. The price of energy could double; but the ‘deciders’ won’t have to explain to their children why they can’t afford heat. Janet Yellen… Ursula von der Leyen… Hillary Clinton – how many of the earnest Planet Savers will be forced to choose between feeding children or paying rent? Will any of them wait in long lines to recharge their electric cars… or buy a gallon of gasoline? Will their private jets be grounded? Will their café lattes become unaffordable?

And then… when the campaign to alter the world’s temperatures fails… will they own up? Will they gush tears, like Robert McNamara, finally admitting that ‘we’ had killed a million people in Vietnam for nothing? 

Will they admit that they didn’t know what the hell they were doing?

Regards,

Bill Bonner

Joel’s Note: Europe is in for a tough winter, no doubt about it. (So too, it seems, is California.) But it’s nothing you couldn’t have seen coming… if you knew where to look. In fact, Bonner Private Research hosted a Winter Catastrophe summit back in December of last year, in which a panel of experts – including Rick Rule and Byron King – warned members about the unfolding energy crisis well before the mainstream press got wind of it. Byron even went so far as to call the (then) coming catastrophe on the continent “German’s Energy Stalingrad,” a phrase that could hardly have been more prescient given what’s come to pass since.

With that in mind, a note to new readers, and a reminder to long time members: Our Trade of the Decade is long conventional, “old school” energy… that is ugly, unpopular and nevertheless stubbornly reliable oil and gas.

A week ago today, Bonner Private Research’s macro analyst, Dan Denning, walked us through the three primary reasons behind the trade. It’s worth a quick refresher, in light of events unfolding across the world energy markets today… even before the coming Winter Catastrophe has really begun. Here’s Dan:

First, the whole sector had been a dog for the previous ten years. The S&P Oil and Gas sector was the worst performing sector in the index in the previous ten years (tech was the best) and oil and gas stocks made up just three percent of the index (in terms of market capitalization) compared to almost 30% in the early 1980s.

The second reason was that low prices, hostile regulation, and subsidies for renewables caused a plunge in capital spending on new hydrocarbon exploration and production. You won’t find it if you’re not spending money to look for it. There is no such thing as ‘just-in-time’ oil production (unless you count shale, which is worth discussing at length, but beyond the scope of today’s update). 

Third was that the so-called Energy Transition to all electric and all renewables was/is a giant thermodynamic hoax; an exaggerated promise/marketing campaign that the world could (and urgently needed to) reduce carbon dioxide emissions rapidly by effortlessly switching to solar, wind, hydro (but not nuclear). The whole thing is absurd.

By ‘absurd,’ I mean it ignores how much conventional energy it will take to build out the infrastructure for renewable energy. Factories that make windmills need electricity. That electricity usually comes from burning coal or natural gas or oil. Ask Germany how it’s going, switching to an ‘aspirational’ energy policy in today’s world. 

If you haven’t already read our Trade of the Decade Report, in which Dan lays out the entire case for our big, ten year trade, we suggest you become a Bonner Private Research member today and take a look. See here…