Here’s The Real Price for Going Woke

Guest Post by Chris MacIntosh

It seems that each week that goes by we come up with variations of the same themes, one of which is supply destruction and restriction of fossil fuels. For want of doubt check out the latest garbage from Deutsche Bank. It seems that the energy crisis of last year taught them nothing. Without coal, where would Germany be?

Deutsche Bank’s actions are nothing short of malthusian (depopulation):

Deutsche Bank AG is expanding restrictions on its financing of coal, one of the main sources of energy in its home market of Germany, as part of a wider crackdown on high-emitting sectors.

Companies that have “no credible plans” to reduce thermal coal’s contribution to their revenue below half by 2025 will see their financing cut off, the Frankfurt-based bank said in its initial transition plan, published on Thursday. For companies operating outside the OECD, the revenue threshold is 30% by 2030.

Here comes the “contradiction:”

For coal, Deutsche’s target covers both thermal and metallurgical coal and builds on an existing thermal coal policy. The bank is aiming for a 49% cut in absolute terms in the broadest measure of financed emissions — known as Scope 3 — by 2030. By 2050, its goal is a 97% reduction. In cement the bank is targeting a 29% reduction in Scope 1 and 2 physical emissions intensity by 2030, and a 98% reduction by 2050.

We say contradiction because without met coal you don’t have any steel, and without coal you don’t have any cement (thermal coal is mainly used in the cement manufacturing process). And without thermal coal you don’t have any electricity… and without electricity you don’t have any aluminium (amongst other base metals) or polysilicon.

Cutting a long story short: without coal you cannot produce renewable energy producing equipment.

But wait, this story becomes even more logic defying. From a bloomberg article:

Here is an excerpt from the EU Commission press release:

Achieving the recently agreed EU target of at least 42.5% renewable energy by 2030, with an ambition to reach 45% renewables, will require a massive increase in wind installed capacity with an expected growth from 204 GW in 2022 to more than 500 GW in 2030.

Can this be achieved?

Well, miracles have been known to happen from time to time:

In 2022, the cumulative EU-27 offshore installed capacity amounted to 16.3 GW. This means that to bridge the gap between the 111 GW committed by the Member States and the 2022 capacity, we must install almost 12 GW/year on average – that is 10 times more than the new 1.2 GW installed last year.

The only poetic phrase we can think of to describe the EU’s thinking is bat shit crazy.

We shudder to think of the magnitude of the energy/economic crisis it will take for the Europeans (and most other Western nations) to realize their stupidity. Guess we will find out sooner rather than later.

Wind Power is Far from Being Cheap

Putting aside the fact that wind power isn’t base load and you have to include the cost of backup generation sources for when the wind isn’t blowing, wind is far from being “the cheapest source of electricity” as many would have us believe.

It doesn’t take much to figure out that electricity generated by offshore wind farms is likely significantly underpriced:

Offshore wind developers are reevaluating some New York projects after regulators rejected higher rates by Equinor ASA, Orsted A/S and others that would have added as much as $12 billion in costs.

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Developers planning to build more than 4 gigawatts of wind-power capacity off Long Island must abide by existing contracts to deliver power, the New York Public Service Commission unanimously ruled during a meeting Thursday.

The ruling is the latest blow to the US offshore wind industry already contending with inflation and supply-chain issues. The future of projects such as Orsted’s Sunrise Wind is now in question after Thursday’s decision.

Equinor, along with BP Plc, is planning the Empire and Beacon offshore developments, with a combined total capacity of 3.3 gigawatts that could together power around 2 million New York homes. The companies in June told the state that “adverse economic impacts have imposed unprecedented and escalating cost increases on the projects.” To remain viable, they asked the state to approve a 54% price increase.

So when it is all said and done, anyone expecting electricity prices to come down due to the wonders of “free wind” is in for a nasty surprise. This ultimately is going to lead to higher electricity prices and that is higher inflation, higher interest rates, and everything thereafter.

Venezuela is Far From Getting Back to Previous Oil Production Levels

There has been quite a bit of talk about sanctions being relieved on Venezuela so as to allow it to produce more oil, but will that actually result in any material increase in production?

Here is the common narrative (from Bloomberg article):

The resumption of unimpeded Venezuelan oil exports after the US eased sanctions will mark yet another major reshuffle to global crude flows in the past two years.

The Biden administration’s decision to relax sanctions appears likely to boost shipments of Venezuelan crude to the US and Europe while squeezing out some deliveries from Canada, Mexico and Colombia. It also means fewer cargoes from the Latin American nation making the long trek to China, currently the top destination for Venezuelan oil.

Exports to the US are expected to swell from the current daily level of roughly 116,000 barrels to satiate Gulf Coast refineries specially designed to process the type of heavy, dense oil Venezuela produces. Before sweeping sanctions were imposed in 2019, the US imported an average of half-a-million barrels daily from the OPEC founding member and Venezuela was the primary source of oil for Gulf Coast fuel makers.

“The scope of the sanctions easing package was surprisingly comprehensive, effectively lifting most restrictions on the oil sector,” said Fernando Ferreira, director of geopolitical risk at Rapidan Energy Advisors LLC. “The immediate impact should be an increase of crude oil exports from Venezuela to the US, and of US petroleum products, including diluents, to Venezuela.” Diluents are lightweight crude components mixed with heavy crude so it can flow on pipelines and into tanker ships.

Well, the Venezuelan oil industry infrastructure is in disarray after years of neglect, underinvestment, vandalism, and corruption. It will take years to bring it back to standard. As our friend Tracy explains:

Here is Venezuela’s oil production:

The long and short of it: those who are expecting Venezuelan oil production to get back to where it was some five years (let alone 10 years) ago, this side of 2030 are going to be sorely disappointed.

Editor’s Note: The Western system is undergoing substantial changes, and the signs of moral decay, corruption, and increasing debt are impossible to ignore. With the Great Reset in motion, the United Nations, World Economic Forum, IMF, WHO, World Bank, and Davos man are all promoting a unified agenda that will affect us all.

To get ahead of the chaos, download our free PDF report “Clash of the Systems: Thoughts on Investing at a Unique Point in Time” by clicking here.

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