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.
As far as I can tell, wholesale prices for both gas and electricity are lower than before the start of the war.
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.
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.
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.
Doesn't matter as the investor trust is destroyed.
Are you sure it's Russian ? /s
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.
It was never the goal to keep Russia from selling its oil as it would hike up prices globally. The goal was to force them to sell it for cheap so they barely make any profit. That at least worked somewhat.
Unless sanctions succeed at blocking Russian oil from hitting the market entirely a loss in profit would be short lived at best.
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).
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.
https://www.newsweek.com/germany-cant-explain-use-broomstick...
Even if sanctions did somehow target profits directly, has it worked? Do we know that Russian oil profits are meaningfully less than they would otherwise have been? And how do we balance that benefit with the damage caused to European markets that had to scramble to adapt?
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.
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