Georgy Bovt: The main beneficiaries of the energy and logistics crisis in Europe – USA and China

First of all, the relatively warm winter – yes, reduced energy consumption. Second, city dwellers, frightened by politicians and the prices of “commons”, began to save, and some saving measures were directly prescribed by European regulators. And generally speaking, the mobilization capacities of the European bureaucracy should not be underestimated. He also succeeded in partially replacing the Russian gas pipeline with LNG supplies, which the United States gladly took advantage of. Third, the reduction in energy consumption occurred due to the reduction of energy-intensive industries or their transfer to other countries, about which some began to speak of the threat of “deindustrialization of Europe”. Which could become a long-term trend.In 2022, electricity consumption in the EU decreased by 7.9%, which is almost equivalent to a sharp drop in 2020 in the context of “lockdowns” – by 9.6%. Gas consumption from August 2022 to January 2023 decreased by 19.3% compared to the average level of the same months over five years. Such a large “saving” cannot be explained solely by warm winters. The “relocation” of many industries to other countries is already having an effect. In addition to jobs. For example, in China, where the growth in the use of foreign direct investment in 2022 was 20%, and in high value-added industries – 30-40%. Thus, the German petrochemical group BASF invests 10 billion dollars in new production in China, the automotive giant BMW – more than 2 billion dollars, the medical manufacturer Merck Group invests 110 million dollars in the production of consumables and another billion in the manufacture of chips for medical equipment. Companies from other EU countries have rushed to China. And all because gas and electricity account for 75% of industrial energy consumption in Europe. It cannot rely solely on solar panels and wind turbines, and not everyone has a nuclear power plant. The process of “moving” to China for a number of manufacturers has not started in 2022; last year it accelerated.Electricity consumption in the EU has fallen comparably in the era of hard covid shutdownsThe United States has become another beneficiary of the energy and logistics crisis in Europe. Plus the fact that they luckily replaced Gazprom with their LNG. The first to look to America were the steelmakers and producers of mineral fertilizers, who prospered on the supply of cheap Russian resources. Thus, the Luxembourg steel producer (during the period of still cordial relations between Russia and Europe was not allowed to buy Severstal – simply “because the Russians”) ArcelorMittal reduced its production in Germany and expanded in Texas. Dutch fertilizer producer OCI is also moving there, closer to cheap oil and gas. Volkswagen has US expansion plans. The American Tesla changes its mind about the production of lithium batteries in Germany (very energy-intensive) and transfers production to the USA.
The Italian solar panel manufacturer Enel is also interested. Pharmaceutical companies, food companies, manufacturers of paper, cement, ceramics and many European car manufacturers are establishing themselves more and more firmly in the United States. And the Biden administration is not standing idly by: it has offered major tax breaks to foreign industrial “removals” as part of a plan to boost industrial production and reduce inflation, the “weight of this stimulating legislation is $370 billion. Large profits are promised to investors in “green energy”, which can only undermine similar efforts by Europeans. They are outraged, but they can’t do anything. European direct investment in the United States has already reached nearly $1.4 trillion by 2022, and in the past year the process of “displacement” has accelerated. Europe is no longer price competitive in many industries due to much lower electricity and gas prices in the US and China. It was the result of a breakdown in cooperation with Russia. But if large companies can afford to “relocate” to another continent, then for small and medium-sized companies that produce from 60% of GDP in EU countries, there is no such option, but there is an option to go bankrupt.The EU hopes that high-tech industries, on the contrary, will return to the Old World from Asia. For political reasons. And big tech companies like Philips, Siemens, Alcatel, Ericsson, Nokia are really coming back. More likely to set up in Europe and have highly automated production with low energy consumption and a small number of employees.The main beneficiaries of the energy and logistics crisis in Europe are the United States and ChinaEurope is betting on “green energy”: its share in electricity production has already exceeded 22% (bypassing gas). They planned to ban the sale of cars with internal combustion engines from 2035. But here the same Germans rose up, – and where are we going with our factories and workers? Also, let’s not forget that the path to “green energy” goes through increased consumption of energy and resources: you have to produce all those lithium batteries, wind turbines, solar panels and new infrastructures. And if all “dirty” industries are moved from Europe to third world countries, then, firstly, this will not solve the problem of cleaning the atmosphere of the “carbon footprint” on a planetary scale. Secondly, it will place before Europe the most urgent task of occupying something after the elimination of millions of jobs from these forced “retirees”. Not everyone can work in the service sector, in cafes and restaurants.