“ The markets assess that Europe is on now track to get through the Winter, with or without Russian gas. Natural gas prices in Europe have dropped almost in half over the last month.”
“At what costs?”
Tens of billions of euros for new infrastructure, hundreds of billions for higher fuel costs during the roughly two year transition period. Maybe a trillion total.
Bottom Line: European Governments signed the check, and are already over the hump for this Winter. Russia is screwed.
Putin did that.
Again, at what price? There will be civil unrest in Europe over energy and food prices. A deep recession is inevitable. Europe is not over the hump. What fantasy world are you living in?
Hopes for a “mild recession” in Europe this winter have been abandoned by Deutsche Bank strategists, who have dramatically slashed their 2023 growth forecasts.
The economists explained what they see as a persistent competitiveness threat from the gas crisis. First, countries will see output losses from gas consumption cuts and this will amplify through supply chains. The drag from higher energy prices may then hit real incomes, then comes the uncertainty shock and finally second-round impacts via trade.
“The near-term impact this winter will be most affected by the extent of rationing — whether through enforced cuts or price-based mechanisms — as well as uncertainty effects on consumer and firm behavior,” they said.
And while the impact of gas demand cuts has been moderate so far, Deutsche Bank warns it will worsen this winter as countries move into the heating season. They see Germany and Italy most at risk, given the reliance those countries have had on Russian gas. German GDP is expected to drop 3.5% in 2023, and Italy is forecast to see a 2% decline, with a recession and higher rates also a threat to Italian stability. General elections will be held September 25.
While less impacted by a gas shock, countries such as France and Spain will still be exposed to a “deepening real income squeeze, competitiveness of higher energy prices and contagion via trade.”
The economists seemed unable to see any near-term light at the end of the tunnel.
“Beyond the winter, the expected U.S. recession next year and the tightening of financial conditions on the back of the ECB’s more front-loaded hiking cycle will limit the speed of the recovery during the remainder of 2023. We see quarterly growth moving above potential only in Q2 2024,” they said.
Russia is screwed.
Oil and gas are global commodities. China and India are becoming alternate markets for Russian energy,
China spent a record-breaking $8.3 billion importing Russian oil products, gas, and coal in August, official customs data showed.
Chinese buyers have now purchased a record-breaking $44 billion of Russian energy in the six months since President Vladimir Putin's forces invaded Ukraine in February. August's fuel spend rose 68% when compared with a year prior, according to the customs data.