Winter is coming



Business Developer

ActivTrades Corp


I do believe there are catastrophes that everyone can see coming long before they happen. Events and developments that become apparent long before they occur, initially often swept under the carpet, then deliberately ignored before being trivialised in their effects a little later - and whose impact is only recognised at the very end, when there is nothing left to deny.

Therefore, no one draws the conclusions that made it possible to avoid the catastrophe until it is too late. Climate change and Putin’s war in Ukraine are good examples of this. Anyone who was not completely blind saw, and sees, what is still to come. It is time to recognise the true dimensions of the problems, to show maximum willingness to change and to accept considerable welfare losses in return. Otherwise history will overwhelm the Europeans first, and then climate change will overwhelm the whole world.

The energy crisis in Europe is another example. The growing dependency on Russian gas deliveries in Western Europe was largely ignored in recent years. And now Germany and other European Union (EU) countries are worried about their energy supply. Their plans for the winter are very different, though. The degree of dependency differs greatly from country to country - as do the strategies with which the respective governments try to replace Russian oil and gas, curb energy consumption and protect citizens and companies from excessive cost increases or even supply bottlenecks.

France already lost the supply of Russian gas, but is less dependent on it since it gets most of its supply from Norway. And 70 percent of French energy demand is normally covered by its traditionally strong nuclear sector, although half the 56 nuclear plants are undergoing maintenance at the moment and are offline. France also has three liquefied natural gas (LNG) terminals that can receive LNG.

Spain and Portugal have permission from the EU Commission to cap gas prices for a period of one year. In the first six months, the price of gas used in the power plants to generate electricity will not exceed 40 euros per megawatt hour (MWh). The cap will be gradually increased over the following months to 50 euros per MWh. The energy price decreased by 25 percent on day one after the cap was imposed, but it is estimated that the cap will cost the Spanish government around 6.3bn euros.

At first glance, the situation in Switzerland does not look so bleak compared to other countries since it generates a large part of its electricity with hydropower. But, especially in the winter, the output is not sufficient to cover the demand. Then the Swiss are dependent on electricity imports from abroad, especially from Germany and France. And those countries might not be able to deliver.

If the gas supplies from Russia fail completely, all of Europe is threatened with a serious economic crisis and rapidly increasing unemployment.

But energy is only one of the Euro zone’s problems. The development of the euro could fuel inflation even further. When other currencies become stronger, goods imported into the continent become more expensive. While the euro has been significantly stronger than the US dollar for around two decades, on July 14, 2022, the currency briefly traded below parity with the greenback for the first time since 2002. The extreme price hikes in import and producer prices overshadow any gain that European exporters can take from the weaker euro.

It might be an extreme winter for the European continent since there is no alternative to energy abstinence.


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