“Every year of the baby steps we’ve been taking up to this point means that we need to be taking bigger leaps with each following year, if we are to stay in this race. The science is absolutely clear.”
Chemicals and the Economy
Energy markets could be heading towards a new crisis
It’s too soon to talk of an actual energy crisis. But as the charts showing Brent oil and European natural gas prices confirm, it is certainly time to start planning for the possibility: Oil prices have recently risen 25%. And Europe risks gas shortages if there is a cold winter
Europe’s chemicals market highlights move into recession, and risk of future deflation
The chemical industry is now starting to warn us of a new risk. Europe is already suffering from a cost of living crisis. And people simply can’t afford to pay even higher prices for energy. At a certain point, therefore, demand may simply collapse, and usher in deflation
Food prices set to remain volatile as the war continues and fertilizer costs remain high
Food prices have stayed high due to the disruption caused by the war. They are unlikely to fall back quickly as the war continues and economic volatility intensifies.
Food prices hit record level as fertilizer costs/availability reduce farm output
As the World Food Programme warns, “High fertilizer prices could turn the current food affordability crisis into a food availability crisis, with production of maize, rice, soybean and wheat all falling in 2022.”
Clean energy set to squeeze fossil fuel demand as ‘the electrification of everything’ continues
Portugal is showing the way. Despite 6 months of drought last year, 57% of its electricity came from renewables. And its clean energy focus means it is becoming “one of the cheapest markets in Europe”. CO2 emissions will also have reduced by 75% in 2030 versus 2021.
Food costs and interest rates rise as energy and fertilizer supplies are hit by the invasion
It’s going to be a very difficult winter. Most of the world will be impacted as Europe bids up energy/food prices to keep its people warm and fed. And it would never have happened if policymakers had recognised the importance of geopolitics, energy markets and demographics.
Jackson Hole is a chance to prepare for a financial shock
The problems began with the supply chain crisis caused by the pandemic. Russia’s war in Ukraine then created a further challenge. And now we face the risk of famine as fertiliser costs become unaffordable. Central bankers at their annual Jackson Hole get-together should therefore focus on preparing for the arrival of a potential Fourth Horseman of the Apocalypse, in the shape of a major financial crisis.
IMF warns the risks “for the economy are overwhelmingly tilted to the downside”
Millions of people around the world are already having to cutback on buying food for their families due to today’s high prices. By wintertime, the risk is that they will have to choose between buying food or heating their homes.
Energy market chaos highlights risks to the global economy, as US consumer sentiment hits all-time lows
Consumer sentiment is already at all-time lows. Rising energy, transport and food prices will likely soon push inflation above 10%, and interest/mortgage rates to 5%+, adding to the risk of a major and long-lasting downturn.