Europe's energy crisis queers the pitch horribly for COP26 - article for the Telegraph 15.09.21

We are living through a fossil fuel shock, but make no mistake: net zero is the solution - not the problem by Ambrose Evans-Pritchard.

The right conclusion to draw from spiralling gas, coal, and electricity prices in Europe is that fossil fuels are dangerously volatile. Supply can be manipulated at critical moments by hostile powers playing geostrategic games.

The wrong conclusion is that this month’s energy shock is an indictment of renewable power, or chiefly caused by carbon prices, or that it is the first cruel taste of what awaits us as net-zero tightens, and therefore that decarbonisation should be abandoned.

This is not to deny that the green switch will cause plenty of headaches before we get over the hump and reap the runaway benefits of better technology and the much cheaper energy than fossil combustion could ever achieve - and in Britain’s case, before this country again becomes a net exporter of North Sea energy.

The UK’s energy deficit is 2pc of GDP - or nearer 5pc annualised, this quarter - and is the core component of our chronic structural trade gap. It is beyond me why anybody thinks that transferring so much national income to despotic foreign states is acceptable.

We are living through the gas equivalent of the Opec oil shock of 1973, when the cartel restricted crude supplies to punish America over the Yom Kippur War. The Saudis choose their moment well. Oil prices were already stretched by inflationary monetary policy in the US.

This time the manipulator is Vladimir Putin, the target is Europe, and the pressure tool is pipeline gas. The Kremlin is limiting the normal top-up flows through Ukrainian and Polish pipelines needed to replenish European inventories before winter.

It is not the only reason why UK natural gas prices have risen five-fold in a year, this week hitting an outlandish 192 pence per therm for October contracts. But it is the crucial element that has turned shortage into panic. Goldman Sachs says the futures market is pricing in a “growing winter risk premium” as people brace for potential blackouts and power rationing for European industry.

Mr Putin’s objective is no secret. It is openly discussed in the Moscow media citing official sources. He aims to force Europe to certify the Nord Stream 2 pipeline on his abusive terms - in violation of EU energy law - giving him a greater stranglehold over Eastern Europe.

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Europe's energy crisis queers the pitch horribly for COP26 - article by Ambrose Evans-Prit
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