December 8, 2022

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Electricity Prices Could Cause Economic Crisis – NRK Urix – Foreign News & Documentaries

Economists recently warned that the danger signs of an economic crisis are becoming more apparent.

In Norway and the rest of Europe, rising electricity prices have raised concerns rationing.

According to economist Jack Allen Reynolds, electricity shortages are likely to be accompanied by an economic crisis.

Allen-Reynolds is a European economist at Capital Economics.

In the coming months, we’ll see the impact of the energy price shock, Allen-Reynolds tells NRK.

As he says, I absolutely believe the possibility of an economic crisis is starting to emerge.

Jack Allen Reynolds

Photo: Capital Economics

The economic crisis can lead to a tightening of conditions for households and businesses, and higher unemployment rates.

In addition, the euro weakened significantly against the US dollar.

Already last fall, electricity prices in Europe began to rise abnormally. However, there were a few who expected that we would reach the level we are at now, as Allen Reynolds believes.

The war had a major impact on the global commodity market. He says oil and gas prices in particular are much higher than some had expected before the war began.

According to Allen-Reynolds, Capital Economics and other economic analysts did not expect to see electricity prices as high as they were.

We expected oil and gas prices to fall this year.

When families have to spend more of their income on electricity, they will have little left to spend on other things.

Power can be rationing

Economic historian Adam Toze points out that the Corona pandemic has done far more damage to the global economy than the Ukraine war has done so far, but we have already seen the dire consequences of the Ukraine war on the global economy.

Tooze is Professor of Economic History at Columbia University and is a frequent guest on the foreign policy podcast, Ones and Tooze.

EU countries import about 40 percent of their gas from Russia.

Since the beginning of the war, there has been talk of what to do with Russian oil and gas exports to Europe.

European countries have tried to reduce their purchases of oil and gas from Russia, but prices have soared that Russia still enjoys good fossil earnings.

trucks

Earlier this year, rising oil and gas prices sparked demonstrations in Germany.

Photo: Fabian Beimer/Reuters

report from Energy and Clean Air Research Center From the first 100 days of the Ukraine war, it shows that Russia’s revenue from fossil energy is at a record high, although it is exporting less.

According to the report, Russia’s fossil proceeds help fund the war in Ukraine.

However, an energy boycott of Russia could backfire on European economies, says Adam Tows.

– So you can expect an economic crisis, especially in Germany and Eastern Europe, says Adam Toze.

Many EU countries, including Germany, are largely dependent on Russian gas and energy. Now the fear of rationing power is spreading.

At the NATO summit last week, German Foreign Minister Annallina Barbock said the country was in a “hybrid war”.

Germany’s Minister of Trade and Industry, Robert Habeck, has already warned that the country is beginning to approach legalization.

Three weeks ago, Russia decided to reduce its gas supplies to Germany by 40 percent. Klaus Muller, President Federal Network AgencyLast week, it announced that gas prices may triple.

Adam Toze

Adam Toze is Professor of Economic History at Columbia University

Photo: Columbia University

The West wants a ceiling on oil prices

met last week G7Countries to a conference in Germany. Among the topics they discussed were stabilizing the global economy and imposing additional sanctions on Russia.

During the G7 meeting, the United States proposed a cap on the price of oil, so that Russia’s revenue would fall.

oil prices

Oil and gas prices in Europe are on the rise. If families have to spend more money on electricity, it could lead to an economic crisis.

Photo: Mike Segar/Reuters

Russia in recent months has increased oil exports to Asian countries, including India. But Allen-Reynolds believes it will not be able to replace revenue from the European Union and the G7 countries.

Among other things, France proposed importing oil from Iran and Venezuela, which had previously been sanctioned and therefore did not have the opportunity to export oil.

Is it realistic for Russia to agree to such a request?

The idea is that the G7 economies are so large that Russia will have no choice but to lower oil prices, says Jack Allen Reynolds.

Joe Biden

During the G7 summit last week, US President Joe Biden encouraged a cap on Russian oil prices.

Photo: Lukas Barth/APPhoto: Lukas Barth/AP

Not sure if sanctions are working

International Monetary Fund It is estimated that the Russian economy will contract by 8.5%.

The Central Bank was punished, Russia was banned from the international payment system, Swift.

After the invasion of Ukraine, the West imposed extensive sanctions on Russia. This includes the country’s military, but also the country’s economic institutions.

However, Jack Allen-Reynolds believes that the sanctions are paying off, and that they will significantly affect the Russian economy already this year.

H&M store is closed

Many foreign companies left Russia after the invasion of Ukraine.

Photo: KIRILL KUDRYAVTSEV / AFP

Several media outlets reported last week that for the first time since 1998, Russia defaulted on its debt.

However, Russia said it repaid the debt in May, but the payment was withheld from the Belgian banking company Euroclear due to the sanctions.

– What Russia did is not pay. The signals it sends, says Jack Allen Reynolds, is that if you lend Russia money, you’re not sure you’ll get that money back.

Adam Toze still thinks it’s too early to say anything about the impact of the sanctions.

The simple answer is that we don’t know if they’re working yet, says Adam Toze.

– You have to ask yourself the reason for the sanctions before you decide how successful they are. It is not clear to me that they intend, for example, to stop the war in Ukraine, or that they should help Ukraine win the war.

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