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Culture War Roundup for the week of May 22, 2023

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First, natural gas demand has been much weaker than anticipated since China is weaker. Indeed, there is now a surplus of gas in the world market.Some people claim that "last winter we got lucky", but this doesn't explain how gas storage is at historically high levels. Germany, Europe's biggest gas consumer, has an excellent position going into the autumn.

I thought it was obvious. Germany, Europe's biggest gas consumer for businesses, spent commercially-unviable amounts of money to import gas through the shipping points it had, and told those businesses they weren't going to get what they were used to for commerce and to deal with it. This was surprising to those who thought the Germans wouldn't let the business lobby get gored and so would capitulate to Russian energy blackmail for geopolitical concessions, but is not surprising to those who considered what a non-capitulating Germany would look like.

As DaseindustriesLtd noted, Germany reduced production of its most gas and gas-energy dependent things. In the last day or so, Germany has done the not-at-all managed 'we're in recession now' dance, with a focus on GDP- which the German Stability Programme of last year was directly boosting by, well, stimulating GDP.

Other relevant factors involved the expansion of LNG import infrastructure and the sanctions structure that Germany successfully influenced.

For LNG imports, the Germans basically rented much of the global capacity for floating LNG terminals after the war started last year to bring in the ability to import LNG gas while they started construction on permanent terminals. As they expand import capacity, they will approach dynamics closer to Korea or Japan, where manufacturing is possible on the power of expensive but consistent global sea-based LNG.

The Germans were also successful in the ultimate shaping of Russia sanctions from a 'keep it in Russia' model of sanctions (a probably doomed idea to prevent Russia from exporting anything and getting any money), and instead 'deny Russia profits' model where mechanisms such as price caps and insurance risks were used to keep Russia energy on the market, but less profitable. This was considerably softer, especially for oil vis-a-vis gas, but also the price of not only European cohesion to get any unified position, but also more modest international acceptance (because they are happy to buy Russian oil for cheaper).

Finally, the consequences of energy crisis prediction beyond direct industrial contraction (which has occurred) were that of investment. This remains to be seen, because it's a long-term trend, but the economic data so far doesn't disprove it to any meaningful degree.