Monday’s Chorus: War derailing emissions plans
Germany to restart coal plants; NSW bans coal exports as power crisis deepens; Biden set to slash petrol tax; Bitcoin slumps below US$20k; BoJ stays loose; Australian house prices tipped to fall 30%
TLDR: The surge in oil and gas prices because of the war in Ukraine is derailing plans all over the world to wean consumers and businesses off fossil fuels in an effort to reduce emissions. Cost of living concerns and Germany’s fear of its exposure to Russian gas this coming winter sparked big moves over the weekend that set back emissions reductions plans by years.
In the news overseas overnight and this morning:
Germany announced overnight it would legislate to reopen coal-fired electricity plants able to generate 10 gigawatts of electricity, which is enough to power 5% of its power needs, and therefore swap out that 5% from using Russian gas;
US President Joe Biden is set to reduce its petrol or ‘gas’ taxes to reduce the costs of living for motorists and voters angry about US$5/gallon gas ahead of mid-term elections in November;
The New South Wales Government announced a ban on coal exports over the weekend in an attempt to reassure consumers it could keep the lights on at reasonable prices in the wake of the energy market regulator taking control of wholesale electricity markets;
The Bank of Japan decided late on Friday to plough ahead with its money-printing and bond-buying plans to keep longer term interest rates under a ceiling of 0.25%, making Japan the ‘odd man out’ of central banks hiking rates to control inflation;
Bitcoin slumped over the weekend below the key US$20,000 level, adding to a 30% fall in the previous week and extending the slide from its November 2021 to 74%;
Australian house prices could fall 30% from their recent peaks if the Reserve Bank of Australia hikes its official cash rate over 4%, according to a new forecast that uses a Reserve Bank of Australia model; and,
Aotearoa-NZ’s hospitals are under intense stress this morning as an extended cold and wet snap threatens to escalate winter illnesses and further overwhelm A&E departments already turning people away.
There’s more detail and analysis on this below the paywall fold. I’ll be covering the post-cabinet news conference this afternoon in Wellington before flying to Auckland tonight ahead of my Tuesday morning quarterly breakfast briefing for Auckland Chamber of Commerce members with Chamber CEO Michael Barnett.
How the war is derailing the world’s climate ambitions
Germany’s Green Party economics minister was forced overnight to announce the Federal Parliament there would have to legislate to re-open 10 gigawatts worth of coal-fired power plants to reduce the nation’s dependence on Russian gas before the winter and reduce the cost of living pain from soaring gas prices.
Russia’s Gazprom cut gas supplies to Germany through its Nordstream pipeline by 60% last week, blaming delays in getting gas turbines back from maintenance in Canada due to sanctions. However Germany said the move was political and designed to increase political stress on the alliance backing Ukraine.
The plants will increase Germany’s dependence on coal by up to a third or about 5% of total electricity production over the next two years, allowing Europe’s largest economy to substitute coal for Russian gas. Germany wants to be in position by the end of the year to get through a Northern winter without having to use Russian gas. Before Russia invaded Ukraine, Germany relied on Russia for 55% of its gas, which in turn generated 15% of Germany’s electricity.
Eyeing November’s elections, Biden is set to slash ‘gas’ tax
US Secretary of Energy Jennifer Granholm and US Treasury Secretary Janet Yellen used appearances of US political talk shows overnight to suggest US President Joe Biden is preparing to slash Federal taxes on petrol and diesel.
Having initially played down cost of living concerns last year, Biden and his Cabinet are now scrambling to take some of the pain away at the pump as prices head toward US$5/gallon1 ahead of mid-term elections. Biden’s approval ratings have slumped in recent months as fast as ‘gas’ prices have risen ahead of the key US summer ‘driving season’ when American holiday-makers take to the interstate highways.
Quote of the day
A German Green minister reopens coal mines
“The situation is serious. It is obviously Putin’s strategy to upset us, to drive prices upwards, and to divide us . . . We won’t allow this to happen.
“This is bitter, but in this situation essential to lower the use of gas.” German Federal Economics Minister Robert Habeck.
Number of the day
The ‘gas’ tax that might get cut
US18.4c/gallon - This is the Federal ‘gas’ tax in the United States that Joe Biden is considering suspending. That’s the equivalent of about 44 NZ cents per litre. Aotearoa-NZ’s petrol taxes are normally worth around NZ$1.22c/litre, including GST. They are currently NZ 96c because of a 25c/litre temporary cut that has already been extended once. It is due to expire in mid August.
Like for like, without taxes and adjusting for the currency, US ‘gas’ costs around NZ$1.86/litre, while ours also costs NZ$1.86/litre.
Chart-Map of the day
Europe and North America brace for record heat waves
Some fun things
Ka kite ano
US$5/gallon is the equivalent of NZ$1.86/l before the inclusion of NZ’s 94c/l of tax.