Photo by Peter Macdiarmid

Qatar of Hydrogen, Saudi Arabia of Wind

Governments are gambling their economies on the Green agenda — and the people are paying

Artillery Row

Some very odd things are happening across the Western World. It feels like a dam has been breached. 

Only last Friday, Jean Castex, the French Prime Minister, announced that 38 million people, who earn less than EUR2000 net per month would receive EUR100 to help them against inflation relieving inflationary pressure by printing more money.

Across the Rhine, in Germany, there is talk of a “bottle neck” recession. Business confidence is at a near decade low. Severe disruptions of the global supply chain are blamed. 

Pump prices for petrol and diesel are near record highs

Inflation is also talked of. Officially at 4.1 per cent, it has reached levels not seen in three decades. As a result, three quarters of retailers are experiencing difficulty in getting goods, the Ifo research institute in Germany found.

In the South, we read in Austrian newspapers that 20,000 drivers are missing in a country of around 8 million. Adjusted to the UK population, the Alpine country is missing an astounding 91 per cent more lorry drivers than Britain. 

As Brexit is not an available explanation for Austria’s shortages, it is working conditions and inflation that get the blame. These two things are of course related. Salzburg Nachricthen, Salzburg’s daily broadsheet, reported that “weekly purchases, which also include fuel and services, were 6.8 per cent more expensive”. 

In September, the United Nations found that food prices had increased by a third in a year. It said that the “Food and Agriculture Price Index rose 32.8 per cent” in the 12 months prior to August 2021. The rise was largely driven “by higher prices of most cereals and vegetable oils”. 

Throughout 2021, central bankers across the Western World repeated authoritatively and ad-nauseam that inflation was “largely transitory”. Having set their store on “transient” inflation, they are now retracing their steps, equally as authoritatively. 

The Federal Reserve is now saying that inflation might turn out to be “a little stronger than they forecast for a little longer than they had forecast”. 

Whilst prices are rising across the board with no compensatory interest rate to offset purchasing power losses, energy is the field to watch. Pump prices for petrol and diesel are near record highs. The BBC claims “global oil prices, rather than supply chain disruption” are to blame, adding that “a barrel of crude oil has doubled in the past year”. Indeed, a barrel of crude oil now stands at around $85. It was $39.90 this time last year. 

However, a barrel of oil was $132 in July 2008. The same month of that year, a litre of petrol at the pump was 119.7p. Pump prices are now nearly 20 per cent more expensive at 140p with crude oil nearly 40 per cent cheaper than they were then. In other words, prices are getting higher for retail when the costs of production are broadly in line with historical median prices. 

Germany chose to hurt her own workers

An area of investigation, of course, could be the large oil producers. This would be the usual thing to look at and might be productive. However, the other area to consider is policy. 

In every western country, on every official’s lips, we hear of the need to transition to Green Energy. Among other things, it is the alacrity and the intensity of the insistence that raises eyebrows. Boris Johnson recently mentioned that the United Kingdom would become the “Qatar of Hydrogen”, adding at around the same time that we should turn ourselves into the “Saudi Arabia of Wind”. 

Across the English Channel, in the European Union, Germany’s incoming administration promises to focus laser-like on Green Energy as well. Annalena Bearbock, the Green Party leader, has made it clear. Every aspect of life will be gauged against climate change goals. 

The issues however are three-fold. Firstly, as Manish Singh, Chief Investment Officer at the multi-billion pound wealth manager Crossbridge Capital, reminds us, “the world economy is over $90 trillion and it depends on fossil fuels for over 84 per cent of its energy”. 

Secondly, whilst the promises made for Green Energy have something quixotic about them, the costs implied if the promises fail to deliver will be existential. 

As first mover in the field of self-harm, Germany shifted away from nuclear power after the Fukushima nuclear disaster in 2011. At the time, to keep her mighty industry going, Germany turned eastwards for gas into the embrace of a welcoming Russia transforming herself and much of the European Union into “a hostage of Russia” in the process. 

A decade later, this policy has led to an increase in Germany’s manufacturing costs on her own soil. To remain competitive, and to reach abstract climate targets, she chose to hurt her own workers by outsourcing jobs to her manufacturing rival, China. 

Having thus gambled, the new administration is promising to double down. Bearbock promises daily to accelerate Germany’s transition from an industrial state into a museum (with no lights). 

Centralisation leaves the door open for powerful lobbyists

Thirdly, centralisation of decision making on such issues has left the door open for powerful lobbyists. Which Green solutions will be selected as industry standards? Who will benefit? And can we trust those who will make these fateful choices? The European Union decided to phase out palm-oil based biofuels, a key component to biodiesel. Palm oil is known to be at least 10 times more efficient than any other oil crop, such as rapeseed, soybean, olive or even sunflower. Nature Plants, a peer reviewed scientific journal, says that expanding palm oil production would require around 36 million hectares of additional land, 500 per cent less than other alternatives. However, Indonesia, Malaysia, Papua New Guinea and their palm oil solution don’t seem to have the “influence” reach of their rivals. 

Governments are paying lip service to the Green agenda but choosing solutions based on the power of lobbying. At the moment, these changes are manifesting themselves in price rises. These are making life for the majority of our people decidedly more uncomfortable. In the near future, if the policy makers fail on their bets, we will have a combination of price rises and black outs. 

It is a huge gamble, pushed with absolute certainty, by people who are perennially wrong.

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