Friday, March 28, 2014

The wages of public control of the economy

From today's Open Europe news summary:

German Energy Minister warns that there is “no reasonable alternative” to Russian gas
German Minister for Economic Affairs and Energy, Sigmar Gabriel, yesterday warned that there is “no reasonable alternative” to Russian gas imports, but suggested that “scaremongering” around a potential cut off was not warranted as Russia is likely to honour its contracts. His comments seem to run counter to German Chancellor Angela Merkel’s calls for a “new inspection” of Europe’s energy policy.
All nations seem to assume that a public energy policy will bring their citizens and industries cheaper and more stable energy.  The opposite, of course, always happens.  This is just the latest example of government meddling in a key sector of the economy.  Germany's government has chosen to close its nuclear plants.  It subsidizes windmills.  Germany's green movement is very powerful and exerts a negative influence on Germany's ability to exploit domestic energy supplies through new techniques, such as fracking.  As a result, energy prices in Germany are approximately double those of the US and it is dependent upon supplies from political dictatorships like Russia.

In a free market for energy firms would rush to fill energy orders when a rival supplier appeared to be unreliable.  In a free market for energy a Russian cut off of natural gas would result in a permanent loss of customers to rival suppliers.  The current situation is made worse by US law that prohibits exports of natural gas.  In an unhampered market, US firms would be free to sell gas to the highest bidder and there is little doubt that Europe would negotiate alternative sources with a threatened Russian supply cutoff.  A Russian embargo would permanently damage its natural gas industry by proving it to be an unreliable supplier, costing it the loss of business for many, many years.

Unfortunately, all nations use the economic output of their citizens and firms as weapons of national policy, even in the absence of war.  The result is the opposite of their intentions, which should surprise no one.


  1. I cannot begin to tell how much I appreciate reading your blogs. I look forward every day to reading them . I have recently discovered you within the past six months and I have learned so much from you since then. Questions . Why has the German stock market been going up so high for the past few years if their cost of energy is double that of the U.S..How are they so profitable? I did not know that U. S. Companies were not allowed to export natural gas. How long has that been a law? And why was a law such as that ever passed ?

  2. Not allowed to "never ever" need russian gas, like Germany.