Ultimately this comes down to energy costs. Production in Eurozone is now much more expensive because input costs are now higher. Cheap pipeline gas was what allowed Germany to compete with US and China. There is no viable alternative in the near term. It’s possible that Germany will be able to build out renewable infrastructure that will provide cheap energy at some point in the future, but that’s going to take years to do.
German companies are already starting to rely on Chinese companies
As for your video on “Germany’s worst fears are coming true: car brands moving production to China”. I think the car sector has it way worse. China is way better at building EV vehicles, which is pushing European companies out of China. German car sales will drop massively.
Yeah, I saw that domestic cars are have now surpassed foreign sales in China, and I expect the trend will continue. Germany is basically screwed in the near term given that car industry is a huge part of the economy there.
Low demand is part of the reason why the prices have come down recently, but the problem is that LNG pricing is volatile and LNG simply can’t be delivered in the same volumes as pipeline gas. Meanwhile, Russia is selling oil at a discount to both India and China. India then resells the oil to Europe at a markup. Russia is also expanding their gas pipelines to China as we speak.
Again, if you don’t believe me, then just wait and see where things are next year.
So you think that the biggest thread energy wise is the votality of lng? I believe that this is a problem, and if it’s true it may lead to another crisis in winter.
But right now the storage is nearly full, so if the winter is weak there will probably no shortage of gas and no problem in winter.
I thought that you had a different reason that will more likely (say >70%) cause more chaos in winter.
There are several issues here. First, LNG prices are volatile which makes it problematic for the use in the industry. If you’re doing manufacturing, you can’t have your input costs fluctuating all the time. Second, LNG capacity is much lower than pipeline capacity even when accounting for storage. So, overall available energy is lower. Third, there aren’t a lot of LNG terminals available at the moment, so it’s not possible to process LNG quickly if demand rises.
All of these problems make it difficult for industry to operate in Germany, and hence why we’re seeing it moving out of Germany right now. As the industry leaves that means jobs are going to be disappearing leading to higher unemployment, and economic activity will slow down because people are going to be saving money. This is the real concern for Europe and Germany in particular.
Ultimately this comes down to energy costs. Production in Eurozone is now much more expensive because input costs are now higher. Cheap pipeline gas was what allowed Germany to compete with US and China. There is no viable alternative in the near term. It’s possible that Germany will be able to build out renewable infrastructure that will provide cheap energy at some point in the future, but that’s going to take years to do.
German companies are already starting to rely on Chinese companies
I think things will be a lot more clear by next year, but so far all the indicators seem to point towards only one possible trajectory here.
As for your video on “Germany’s worst fears are coming true: car brands moving production to China”. I think the car sector has it way worse. China is way better at building EV vehicles, which is pushing European companies out of China. German car sales will drop massively.
Yeah, I saw that domestic cars are have now surpassed foreign sales in China, and I expect the trend will continue. Germany is basically screwed in the near term given that car industry is a huge part of the economy there.
Energy was expensive, especially last winter, but it came back to “normal” levels.
Gas for example is at 10% of the high of last August and around the level of 2019.
Oil is more or less the same worldwide, so there is no disadvantage for Europe.
So which energy do you mean?
https://tradingeconomics.com/commodity/eu-natural-gas
Low demand is part of the reason why the prices have come down recently, but the problem is that LNG pricing is volatile and LNG simply can’t be delivered in the same volumes as pipeline gas. Meanwhile, Russia is selling oil at a discount to both India and China. India then resells the oil to Europe at a markup. Russia is also expanding their gas pipelines to China as we speak.
Again, if you don’t believe me, then just wait and see where things are next year.
So you think that the biggest thread energy wise is the votality of lng? I believe that this is a problem, and if it’s true it may lead to another crisis in winter.
But right now the storage is nearly full, so if the winter is weak there will probably no shortage of gas and no problem in winter.
I thought that you had a different reason that will more likely (say >70%) cause more chaos in winter.
There are several issues here. First, LNG prices are volatile which makes it problematic for the use in the industry. If you’re doing manufacturing, you can’t have your input costs fluctuating all the time. Second, LNG capacity is much lower than pipeline capacity even when accounting for storage. So, overall available energy is lower. Third, there aren’t a lot of LNG terminals available at the moment, so it’s not possible to process LNG quickly if demand rises.
All of these problems make it difficult for industry to operate in Germany, and hence why we’re seeing it moving out of Germany right now. As the industry leaves that means jobs are going to be disappearing leading to higher unemployment, and economic activity will slow down because people are going to be saving money. This is the real concern for Europe and Germany in particular.