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People are blaming energy prices but I don’t understand: As far as I can tell, wholesale prices for both gas and electricity are lower than before the start of

People are blaming energy prices but I don’t understand: As far as I can tell, wholesale prices for both gas and electricity are lower than before the start of the war.

mamonster 3y ago
Supply curve shifts left, demand curve shifts left -> price is the same.
- konschubert 3y ago
  That’s not how demand curves work. If you hold the price fixed or your decrease it, demand will increase, not decrease. If you reduce supply, price finds a new equilibrium at lower demand, but that price is always HIGER than before. The fact that prices are equal or lower prices they this cannot be it.
  - mamonster 3y ago
    That is exactly how they work if both demand and supply shift. Example: P_d=100-Q P_s=Q Solve P_d = P_s to get Q=50, P=50 Take a left shift like 80 - Q in demand, and take a left shift in supply like P=1.66Q. Solving now you get Q=30, P=50
throwaway4good 3y ago
I think the problem is that German energy is expensive compared to other countries. On top of that you have regulation and lack of subsidies making other places more attractive to produce in ie. the US, Eastern Europe or China.
- skippyboxedhero 3y ago
  Correct. BASF is investing heavily in China. Nothing tells you more about this problem than the most German of companies moving to China. BASF's largest plant in Germany was hooked up directly to Russian gas. Russian gas is now going to China. So are BASF. I don't think regulation or subsidies are to blame either. Eastern Europe is receiving heavy investment because they have costs for workers under control and can provide a more stable political environment. The problem with Germany specifically is that they papered over a lot of bad fundamentals in the early 2000s with cheap energy and very close relations with Russia.
  - konschubert 3y ago
    Well, considering how great the Russia strategy of the German industry has worked out, I’m looking forward to bailing out basf
    - hulitu 3y ago
      > Russia strategy of the German industry Are you sure it's Russian ? /s
  - throwaway4good 3y ago
    While the media focuses on China, Germany invests much more in the US. And if you summarize the investment in eastern europe, it is probably larger as well. The current government has famously green policies: Shutting down nuclear plants and perhaps have a willingness to accept heavy industry leaving Germany. It is however a very unpopular government so I don't know if those policies will hold long term.
    - nradov 3y ago
      There's nothing "green" about shutting down nuclear power plants.
      - herbst 3y ago
        There is nothing "green" about German politics either way
    - throwaway11460 3y ago
      > It is however a very unpopular government so I don't know if those policies will hold long term. Doesn't matter as the investor trust is destroyed.
spqrr 3y ago
Yes, because industries (chemical especially) have already shut down their operations. Gas throughput is lower than before.
_heimdall 3y ago
The fact that prices haven't increased noticeably sure seems like a sign that sanctions against Russia were largely toothless and their oil is making its way into the global supply all the same. Russia is responsible for something like 12% of all global crude oil. If sanctions actually worked and global demand for oil went unchanged prices would have increased, likely quite a bit as the demand is very sticky and not likely to decrease quickly in response to prices. Best I can tell, the temporary bump in prices in Europe were largely a factor of political plays making oil temporarily more scare while Russia and the oil industry adjusted. Prices are back down now because Russia and the oil industry found a new flow pattern to move Russian oil into the global supply.
- spqrr 3y ago
  The sanctions are working. It's killing the German industry.
- The_Colonel 3y ago
  Sorry, but you don't understand the western sanctions on Russian oil. The goal is to keep it flowing (so that the prices don't explode), but to squeeze the Russian profits. Make their (e. g. transportation) costs high and sale price low (price cap).
  - petre 3y ago
    The sanctions worked somewhat. So did the destruction of North Stream. With it operational, Germany would have been buying Russian gas as usual. Recent Ukrainian strikes on Russian refineries will work even better. https://energyandcleanair.org/june-2023-monthly-snapshot-on-russian-fossil-fuel-exports-sanctions/ https://energyandcleanair.org/june-2023-monthly-snapshot-on-... The German auto industry should be building tanks and APCs instead of obnoxious diesel SUVs. And they should build them like a Renault, not like an Audi or BMW which are not easily serviceable. Their Puma APC fleet is plagued with issues.
    - nradov 3y ago
      And maybe German industry should build some regular guns as well so that their army will no longer have to rely on wooden broomsticks painted black. https://www.newsweek.com/germany-cant-explain-use-broomstick-instead-guns-nato-exercise-307902 https://www.newsweek.com/germany-cant-explain-use-broomstick...
hokkos 3y ago
Prices did got down but still not pre mid-2021 levels, and a lot of industries got close down during the high prices, also Biden plan to limit GNL export is not a good sign for Europe now that cheap russian gas is gone. Also electricity wholesale prices don't tell all, you then have to pay those renewable CfD and premiums somewhere.

People are blaming energy prices but I don’t understand: As far as I can tell, wholesale prices for both gas and electricity are lower than before the start of the war.

mamonster 3y ago

Supply curve shifts left, demand curve shifts left -> price is the same.

konschubert 3y ago
That’s not how demand curves work. If you hold the price fixed or your decrease it, demand will increase, not decrease. If you reduce supply, price finds a new equilibrium at lower demand, but that price is always HIGER than before. The fact that prices are equal or lower prices they this cannot be it.
- mamonster 3y ago
  That is exactly how they work if both demand and supply shift. Example: P_d=100-Q P_s=Q Solve P_d = P_s to get Q=50, P=50 Take a left shift like 80 - Q in demand, and take a left shift in supply like P=1.66Q. Solving now you get Q=30, P=50

throwaway4good 3y ago

I think the problem is that German energy is expensive compared to other countries. On top of that you have regulation and lack of subsidies making other places more attractive to produce in ie. the US, Eastern Europe or China.

skippyboxedhero 3y ago
Correct. BASF is investing heavily in China. Nothing tells you more about this problem than the most German of companies moving to China. BASF's largest plant in Germany was hooked up directly to Russian gas. Russian gas is now going to China. So are BASF. I don't think regulation or subsidies are to blame either. Eastern Europe is receiving heavy investment because they have costs for workers under control and can provide a more stable political environment. The problem with Germany specifically is that they papered over a lot of bad fundamentals in the early 2000s with cheap energy and very close relations with Russia.
- konschubert 3y ago
  Well, considering how great the Russia strategy of the German industry has worked out, I’m looking forward to bailing out basf
  - hulitu 3y ago
    > Russia strategy of the German industry Are you sure it's Russian ? /s
- throwaway4good 3y ago
  While the media focuses on China, Germany invests much more in the US. And if you summarize the investment in eastern europe, it is probably larger as well. The current government has famously green policies: Shutting down nuclear plants and perhaps have a willingness to accept heavy industry leaving Germany. It is however a very unpopular government so I don't know if those policies will hold long term.
  - nradov 3y ago
    There's nothing "green" about shutting down nuclear power plants.
    - herbst 3y ago
      There is nothing "green" about German politics either way
  - throwaway11460 3y ago
    > It is however a very unpopular government so I don't know if those policies will hold long term. Doesn't matter as the investor trust is destroyed.

spqrr 3y ago

Yes, because industries (chemical especially) have already shut down their operations. Gas throughput is lower than before.

_heimdall 3y ago

The fact that prices haven't increased noticeably sure seems like a sign that sanctions against Russia were largely toothless and their oil is making its way into the global supply all the same. Russia is responsible for something like 12% of all global crude oil. If sanctions actually worked and global demand for oil went unchanged prices would have increased, likely quite a bit as the demand is very sticky and not likely to decrease quickly in response to prices. Best I can tell, the temporary bump in prices in Europe were largely a factor of political plays making oil temporarily more scare while Russia and the oil industry adjusted. Prices are back down now because Russia and the oil industry found a new flow pattern to move Russian oil into the global supply.

spqrr 3y ago
The sanctions are working. It's killing the German industry.
The_Colonel 3y ago
Sorry, but you don't understand the western sanctions on Russian oil. The goal is to keep it flowing (so that the prices don't explode), but to squeeze the Russian profits. Make their (e. g. transportation) costs high and sale price low (price cap).
- petre 3y ago
  The sanctions worked somewhat. So did the destruction of North Stream. With it operational, Germany would have been buying Russian gas as usual. Recent Ukrainian strikes on Russian refineries will work even better. https://energyandcleanair.org/june-2023-monthly-snapshot-on-russian-fossil-fuel-exports-sanctions/ https://energyandcleanair.org/june-2023-monthly-snapshot-on-... The German auto industry should be building tanks and APCs instead of obnoxious diesel SUVs. And they should build them like a Renault, not like an Audi or BMW which are not easily serviceable. Their Puma APC fleet is plagued with issues.
  - nradov 3y ago
    And maybe German industry should build some regular guns as well so that their army will no longer have to rely on wooden broomsticks painted black. https://www.newsweek.com/germany-cant-explain-use-broomstick-instead-guns-nato-exercise-307902 https://www.newsweek.com/germany-cant-explain-use-broomstick...

hokkos 3y ago

Prices did got down but still not pre mid-2021 levels, and a lot of industries got close down during the high prices, also Biden plan to limit GNL export is not a good sign for Europe now that cheap russian gas is gone. Also electricity wholesale prices don't tell all, you then have to pay those renewable CfD and premiums somewhere.