At the height of the summit’s nervousness, capitalism’s first major crisis erupted in Brussels on Friday afternoon: the 1637 tulip bubble, when a market frenzy in Amsterdam brought in orders that vastly exceeded the intrinsic value of the flower bulbs. Of course it ended in a devastating implosion. Something similar is happening today with the gas price, which has increased tenfold compared to a year ago due to the war in Ukraine.
With the umpteenth Dutch call not to intervene in the market mechanisms, Mario Draghi brought a piece of history to light: “The gas market works today like the tulip market did in the seventeenth century, said the Prime Minister to colleague The Hague Mark Rutte. The conclusion: There is no point in hiding behind liberal fundamentalism while a war in Europe is generating an energy shock that threatens to shut down entire industries. Italy, Spain, Greece, Portugal and the opening of France and Commission President Ursula von der Leyen continued to propose caps on the prices of natural gas that can be bought in Europe through the pipeline. The Netherlands, home of the Gas Contract Exchange (the Title Transfer Facility), continued to invoke “the market. With the support of Sweden and Germany. Rutte tried to answer Draghi’s implicit accusation that even in the midst of a dramatic crisis, The Hague put all the interests of its financial center above all other interests. “I do not defend traders said the Dutch Prime Minister . I defend the market, which today is dominated by the Iskander missiles raining down on Ukraine.
The most significant split today, however, is with Berlin. Olaf Scholz fears that any measure involving gas or even Russian coal will lead to supply bottlenecks and a recession in Germany. In office for three months, at the helm of a divided government and under enormous pressure from industrialists, the socialdemocratic Chancellor does not want to change anything about energy imports from Russia. Not now. In a few days, the Berlin executive mobilized by blocking three of the six or seven regasification ships from the USA or Qatar that were offered on the world market for liquid gas. But at the European summit, Scholz clashed with Draghi, proposing to respond to the current emergency with an acceleration of renewable energy that will start to have an impact in three or four years. The Italian Prime Minister replied: “We stick to the European emissions targets, but we are in a difficult situation: it is not the time for new leaks forward”. In the end, the summit mainly brought up the idea of trying to reach an agreement in May. But the European standstill will have immediate consequences. Because, as with respirators two years ago, at the start of Covid, a competition has now begun between major European countries to find supplies of gas to replace those of the Russians. Everyone runs for themselves, despite the intention of the Brussels summit to develop joint purchases. And for the most part it’s a race to Africa, in which Italy exceptionally has a relative advantage for two reasons: it moved around ten days ago and Eni licensed the fields in Algeria, Egypt, Congo, Angola or Mozambique within two years with methane or LPG could make up for most of Russia’s doomed 29 billion cubic meters of supply. Meanwhile, Spain will share most of the 15 billion cubic meters of LPG promised by the US government with the Benelux countries. And Germany and the UK have launched a round of African capital (plus Qatar) to look for new offers.
With Snam, Italy is trying to lease two regasification vessels costing around 35 million a year, with at least tenyear contracts. If everything goes according to plan, the first ship should go into operation next winter and the second only in 2023 with a capacity of ten billion cubic meters more. Almost ten more are to come from Algeria, two or three from domestic production, whereby the expansion of renewable energies will also help. In as little as two years, Italy could replace almost all of Russia’s gas supply if all goes well. But even then he will not be able to avoid reducing consumption next winter: a little saving is just around the corner.