There is nothing like a political crisis to force politicians hands is there? Reuters today reporting some really interesting turnarounds by political leaders in Europe from Liz Truss, new UK PM, who apparently wants more extraction of oil and gas from the North Sea.Six new oil and gas fields have been approved for development this year so far and recently, it was announced that Centrica’s Rough gas storage site off England’s east coast could reopen this winter as well. Meanwhile, one of ex-PM’s last decisions was to push for the development of a new nuclear reactor to be developed and plans to build a total of eight new reactors between now and 2050. In Germany, the environment minister has asked for new legislation to keep its nuclear reactors and generation capabilities to remain on standby beyond a planned exit from nuclear power at the end of this year. The government also announced on Monday that it will keep two of its three remaining nuclear plants available for power production as part of a reserve scheme to avoid possible power shortages, according to the Reuters article.
The main news however was the decision by EU leaders to cap Russian gas prices. Other measures to be considered by the EU include mandatory cuts in power use during peak periods and a cap on revenues of energy generated from other sources. There has been much criticism of windfall profits experienced by renewable generators who are in some instances already subsidized. The windfall profits are a direct result of the marginal pricing system used to “form” the price of wholesale electricity in all EU member states. In return, Russia has vowed to cut off all energy supplies to the EU.
Making things harder is a strong USD, which has gained as traders ramped up Federal Reserve rate hikes bets with a 75 bp rise now expected. The Euro is now trading at below 1 dollar US.
