Taken today: state energy
Britannia Unchained’s most high-profile co-writer finds himself trapped in a bear hug. Faced with an energy crisis intensified by Russia’s invasion of Ukraine, new British Prime Minister Liz Truss ditched her 2012 book laissez-faire for a massive state program to cap bills.
As my colleague Javier Blas writes today, the package has its flaws, but perhaps the Prime Minister shouldn’t feel too bad about the direction of the trip – one of his predecessors identified there has long been the most serious challenge of any government: “events”.
Moscow has launched an energy war against Europe and wars tend to require drastic measures from the powers that be rather than the invisible hand. Letting the gas market price households to demand destruction — read: leave them dark and freezing — could fuel a backlash in democracies that the Kremlin would welcome. Truss knows an earlier winter of discontent brought his icon Margaret Thatcher to 10 Downing Street, but a new one could mean his own swift departure.
Additionally, Truss’ actions match the energetic spirit of the intervention. There are the demands of Russia’s war, generating sanctions, as well as measures to deal with their consequences. European officials, having seen energy deregulation crumble in the face of Russian hostility, are meeting on Friday to discuss a panoply of mandates, including possible windfall energy taxes.
Another chronic challenge, climate change, has also attracted a growing thicket of subsidies and mandates, which tend to be politically easier than pure carbon pricing. Russia’s war has also realigned decarbonization with national security in a way we haven’t seen since fears of peak oil supplies coincided with the War on Terror more than a decade ago. year.
Meanwhile, efforts to contain the 2008 financial crisis and the pandemic have reaffirmed governments as front-runners in ways not seen in a generation. People are looking for stability. The adjacent backlash against globalization is now also directing energy towards state priorities, as with the domestic content contingencies on clean technology subsidies in recently passed climate legislation in the United States.
An important reaction to the oil crises of the 1970s was the promotion of liquid markets to capture the pricing power of opaque oligopolies like OPEC. Half a century later, against a backdrop of renewed turbulence, global energy appears to be moving in a different direction.
–Liam Denning, Bloomberg Opinion
In a new report, the International Energy Agency finds that the industry employs around 65 million people worldwide, 24 million of them in end-use sectors such as vehicle manufacturing. Employment in clean technologies and the decarbonization of energy systems is growing rapidly and already accounts for half of the wage bill.
The European Union is rolling out sweeping plans to rein in soaring energy prices and keep the lights on. Ministers meeting on Friday need to find solutions that can be applied across the bloc and still tailored to each of the 27 member states’ national economies and power systems, which are powered by different energy sources. Liz Truss’ hugely expensive energy bailout is a risky one-way gamble that does nothing to address the need to reduce energy demand during a winter of limited supply, writes Bloomberg Opinion’s Javier Blas. global agricultural markets and exacerbate food inflation and hunger.
California faces the dual threat of power outages from an overwhelmed grid as well as the risk of wildfires as a punishing heat wave continues to wreak havoc on the state’s power system.
The rapid fall of the yuan adds to the litany of challenges facing global commodity prices. Since China generally buys raw materials in dollars, the weakening yuan increases costs for importers, depressing demand and forcing prices lower.
• What does the current energy crisis centered on the Russian invasion of Ukraine mean for the energy transition? What will energy geopolitics look like in a decarbonizing world? Jason Bordoff of the Columbia Climate School and Meghan O’Sullivan of the Harvard Kennedy School appear on a recent Foreign Affairs podcast.
• Robinson Meyer of The Atlantic looks at a new study detailing decades of climate science denial in another sector of the energy industry: utilities.
• Simon Fraser University’s Geoff Mann discusses green growth and “degrowth” in this London Review of Books podcast.
This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Heard on the Street section of the Wall Street Journal and a reporter for the Lex section of the Financial Times.
More stories like this are available at bloomberg.com/opinion