Putin, Nord Stream 1 and Pakistan's cataclysm

...are all connected.

Germany is in turmoil over natural gas supplies and prices and the closure of the Nord Stream 1 pipeline - a pipeline transferring natural gas (a fossil fuel) from Russia to Germany.

I have just returned from there, and a visit to, amongst other landmarks, the extension to Berlin’s German Historical Museum, designed by star architect I. M. Pei.

The museum is staging a startling and revealing exhibition of photographs of ex-Chancellor Angela Merkel taken over the years 1991 - 2021.

For all her weaknesses and policy failures - and some were disastrous - Chancellor Merkel never succumbed to the siren voices of Big Money. The same cannot be said for another ex-Chancellor, Gerhard Schröder, who remains, as far I can ascertain, as chairman of Nord Stream AG’s shareholders committee. He is in a strong position to defend the interests of his country, but appears to prefer protecting the interests of fossil fuel producers and the Russian state.

Back in mid-July I argued that

Prices of commodities in [energy] markets are determined by speculators on Wall St and and at the Chicago Mercantile Exchange – not by politicians in Riyadh or Moscow. Not by the CEOs of global oil companies like BP or EXXON.

Not even by rising demand.

This last week German commentators have competed to attack President Putin for his conduct of “economic warfare” with the decision to shut down Nord Stream 1 - “for maintenance” reasons.

Drogon @drogon_dracarys

Gazprom, Russia’s government-owned energy giant, shut off natural gas flows early Wednesday through Nord Stream 1, the critical pipeline that connects Russia to Germany, raising fresh worries about European energy supplies

nytimes.comRussia Halts Natural Gas Flows to Germany AgainGazprom said the Nord Stream 1 pipeline would undergo three days of maintenance, raising worries about a complete shutdown of Russian gas deliveries to Germany.

President Putin is accused of “blackmailing” the EU and Germany in particular. [Before proceeding, I want to make clear: my views are not in defence of, or in anyway an endorsement of President Putin’s authoritarian actions at home or his military or economic war-mongering internationally.]

But now the debate has taken a new turn. Prof. Lion Hirth, a director of Neon “sustainable energy systems and power markets” - commented today, with some apparent satisfaction:

Lion Hirth @LionHirth

Russia's energy blackmailing potential has evaporated. Nord Stream is closed ("maintenance") and the market doesn't care. Prices are collapsing.

The logic here is inverted. If Russia is blackmailing Germany, “weaponising energy” by closing down the pipeline - then surely the price would have risen, not ‘evaporated’? Is that not Putin’s rationale for further “maintenance” (of an already excessively well maintained) Nord Stream 1? It must be surely, because Russia’s Gazprom, according to the Economist, stands to lose between $203m and $228m for every day the Nord Stream is shut down.

But contrary to expectations the natural gas price has not risen at this suspension of supplies.

Instead the price has fallen.

Has the price fallen because as Prof. Hirth suggests “the market” - newly anthropomorphised - “doesn’t care” about his blackmail? Or is that Russia is too ignorant to understand that, contrary to the laws of supply and demand, lowering the supply of natural gas to Germany lowers the price rather than hiking it? Is that what Prof. Hirth is suggesting?

Holgar Zschaepitz is a little more cautious than Prof. Hirth.

Holger Zschaepitz @Schuldensuehner

German 1y ahead Power Price has almost halved within 2 days from €1,050 per MWh to €545 today. This raises the question of who is operating in the electricity market. Is it pure speculation? Are these meaningful prices that reflect real scarcities?

Truly the right question: do these prices reflect real scarcities? Are they meaningful?

And of course they are not…

Having said that, it is clear that Germany is urgently and wisely building natural gas inventories - with its target of gas inventories nearly 80% full. But this build-up in inventories - i.e. an increase in locally available supplies - has not had an impact on the global price, which cares little for Germany’s prudence. As ICIS, the Independent Commodity Intelligence Services company explains:

…..increased interdependence between US LNG production, Europe and the LNG markets in Asia the TTF gas benchmark has become more interconnected as a global gas index.

Despite shifts in supplies of natural gas, the global gas price remains at a 14-year high of $10/MMBtu- as this chart from Trading Economics shows:

There may be one positive to emerge from these high prices and this halt to Natural Gas Flows via Nord Stream 1.

It may be this.

Twenty seven years after the first UN COP meeting in Berlin in 1995; and seven years after the historic Paris Agreement - a legally binding international treaty on climate change adopted by Germany at COP 21 and entered into force on 4 November 2016 - greenhouse gasses are still rising.

Far from emissions falling (in the fantasy ‘net zero’ world created by Big Money) the world has got hotter, much hotter since those empty promises were made in first, Berlin and then Paris seven years ago. ….

Pakistan’s cataclysm is a consequence.

Will that cataclysm motivate western politicians to act urgently to slash demand for, and the supply of, fossil fuels and their emissions?

Maybe high gas prices and Putin’s closure of Nord Stream 1 is just the kick up the backside needed to ensure Europe’s politicians finally begin to act; to scale back on the consumption of goods and services fuelled by fossil energy; to end fossil fuel subsidies and dependence on the autocrats in control of the world’s fossil energy supplies - and to transition to cleaner energies..?

If and when they do - it will be far too late to save the homes, livelihoods and lives of 33 million Pakistanis.