A crisis rarely comes alone and the current one certainly does not. How a war amplifies the energy crisis and will lead to higher food prices, declining food production and a greater need for warm clothing. Because oil and gas producers have invested little in new oil and gas extraction with a view to 'getting rid of fossils', they are unable to increase production in order to slow down oil and gas prices, writes the Financial Times. As a result, the green Western policy is pushing up prices even more, as a result of the battle between Russia and NATO for Ukraine. By Thursday morning, the international oil benchmark Brent had risen to $102 a barrel, the highest level since 2014. It later rose to $105; the price has now fallen below $100 again. Insiders stated yesterday morning that the gas price has already risen by more than 40% since the Russian attack, an unprecedented high percentage within a day. Much less barrels Russia is the world's third largest producer of crude oil and the main supplier of natural gas to Europe. Christyan Malek, head of global energy strategy at JPMorgan, expects Brent to reach $125 in the second quarter of this year. Global spare capacity, usually around 5 million barrels per day, has now fallen to 2.8 million barrels per day. According to Bob McNally, head of Rapidan Energy Group, the disruption from the Russian attack in Ukraine will likely be limited to that portion of the oil and gas transported through Ukraine. But more importantly, he thinks it becomes clear that there will be no interruption in the oil and gas supply. Putin guarantees it, but conditionally. Until that clarity is there, he expects prices to rise. Europe is 40% dependent on gas from Russia. Russia's Energy Minister Nikolai Shulginov also said at an energy conference in Qatar on Tuesday that Russia aims to keep its gas flows "uninterrupted." If that fails, there is no country that can take over this gas supply, the Qatari energy minister said at the same conference. After all, as with oil, there was already a shortage on the reserve market. Russia has long refused to supply more gas to Europe than was contractually required. As a result, Europe had to draw on its stocks, which meant that reserves had already dwindled sharply before the invasion of Ukraine. Germany announced last Tuesday that it was halting certification of the controversial Nord Stream 2 pipeline, which would bypass Ukraine to supply Russian gas directly to Germany via the Baltic Sea. It is not inconceivable that Russia will further restrict the supply of gas in response to this. Putin's power: Energy The rising gas price is a reason for Greenhouse Horticulture Netherlands to urge the government to act quickly. "The longer it takes, the more entrepreneurs get into trouble. Some of them are already eating their bank balance. But eventually all contracts will expire," says Alexander Formsma of Greenhouse Horticulture Netherlands. He also points out that this situation means that horticultural companies no longer have any money left over to become more sustainable. As I wrote before, everyone will notice if Russia turns off the gas tap. Within four weeks we will all be cold. For the time being, we can hope that the editor-in-chief's gamble will come true: it is to be hoped that Russia will indeed 'let us feel it for a while' and will leave it at that. According to the South China Morning Post, China still sees opportunities to get out of the process diplomatically, which started with bloodshed. After all, Europe - which depends on energy imports to keep daily life and industry running - has no way out at the moment. Putin has made it clear that he has the power to drastically disrupt life and has us by the throat. The forgotten power: corn and wheat
As if an energy crisis were not enough, the prices of nutrients such as wheat and sunflower oil have also risen sharply, according to Nieuwe Oogst. Russia and Ukraine produce 80% of global sunflower oil exports, about 25% of wheat and 20% of maize. Ukraine in particular is very important for Europe's maize supply. The country was expected to export 33.5 million tons this season. This puts the country in third place worldwide after Brazil and Argentina. Brazil exports 43 million tons, Argentina 39 million tons. And the region around the Black Sea is essential for the export of wheat. With 35 million tons, Russia is the world's most important exporter. This year followed by Australia with 25.5 million tons, and then Ukraine with 24 million tons. By comparison, the total EU is a net exporter of 32.5 million tons of wheat. It is not always the countries with the largest production of a nutrient that are the most important. It is especially countries with a large overproduction of their own needs that are important. And Ukraine is one such country, as far as wheat is concerned. Precisely yesterday there was also the periodic (two/three-weekly) meeting of the European grain committee. The European Commission said the situation is 'worrying'. The delegates (including the Dutch Ministry of Agriculture) have asked the committee on the spot how it intends to deal with trading companies that apply for certificates for the import of grains from Ukraine (for the week of 1-7 March), which may not be supplied due to problems in the ports or the Black Sea. Choosing between two evils The price of palm oil also rose to record highs and soy became more expensive. This is due to a shortage of workers in Malaysia (palm oil) and drought in South America (soy). And last but not least, the prices of fertilizers and fertilizers are rising. Following the sanctions of the United States, the market is already feeling the shrinking supplies of potassium from Belarus. Less manure will lead to fewer harvests, falling food production and therefore higher food prices. These higher food prices are also fueled by the higher inflation, which has been going on since last year. As we recently wrote, the food producers were given the Zwarte Piet because of the price increases. This was against the sore leg of Cees-Jan Adema, director of FNLI, the umbrella organization of Dutch food processing companies. Adema thought last month that the negotiations with supermarkets would end up on its feet in good consultation. What he could not have known then, we now know: there will now only be more pressure on prices and negotiations with supermarkets. MSN reports that the Russian invasion of Ukraine is putting central banks in Europe and the US in a difficult situation as a stagflation scenario, with high inflation and slumping economic growth, is approaching. This forces central banks to choose between two evils. To deal with the negative effect of rising prices on the purchasing power of the euro and the dollar, central banks usually turn to the interest rate weapon. Higher interest rates make loans more expensive for consumers and businesses and reduce demand. This can ensure that price increases are slowed down. On the other hand, higher energy prices may in themselves lead to declining economic growth. And the banks' response to declining economic growth is usually to keep interest rates low. It therefore seems to be a choice between high inflation or a recession. That's a choice between what Americans call a rock and a hard place, a choice between two evils. More fossil energy and Groningen open to gas production again would help the EU escape Putin's clutches in the short term. But how do you sell that to politicians and consumers? And China? While the West wants to financially isolate Russia by throwing Swift's land (the international payments system), China is opening the door wide for Russian grain to help the country survive economically.
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