MCViewPoint

Opinion from a Libertarian ViewPoint

The Unintended Consequences Of The EU Energy Emergency Plan

Posted by M. C. on September 19, 2022

A EU (US) plan to save them from the current EU (US) plan that was saving them from the previous EU (US) plan. What could go wrong?

Advice: Stock up on fire wood.

https://www.zerohedge.com/energy/unintended-consequences-eu-energy-emergency-plan

Tyler Durden's Photo

BY TYLER DURDEN

MONDAY, SEP 19, 2022 – 03:30 AM

Authored by Irina Slav via OilPrice.com,

  • The EU Commission presented an energy crisis emergency plan this week.
  • The plan includes a windfall tax and a framework on capping energy prices in EU member states.
  • The $140 billion windfall tax plan could slow down investment in both oil and gas and renewables.

This week saw the European Commission’s President Ursula von der Leyen do something that would have probably been considered the opposite of democracy just a few years ago. She proposed that governments impose a ceiling on certain energy producers’ revenues and add a windfall profit for Big Oil majors. Called “a solidarity contribution” or “a crisis contribution,” the windfall tax’s aim is the same as the aim of the revenue ceiling: manage energy costs in a runaway inflation environment and get some additional money to, according to the plan, distribute among those who most need it.

Like all grand plans, however, unintended consequences abound with this one, and one of the gravest is the discouragement of oil and gas investments at a time when global oil and gas investments are already lower than they should be in light of demand projections.

JP Morgan’s head of global energy strategy said it this week in an interview with Bloomberg.

“If you’re planning your capital budget, you have to think twice now that you have a new risk,” Malek told Bloomberg.

“It encourages majors to return cash to shareholders as they use that free cashflow that could have been used in investment.”

Per plans, the EU seeks to “raise” some $140 billion from windfall taxes on non-gas electricity generators and oil gas, and coal companies for their “extraordinary record profits benefiting from war and on the back of consumers,” to quote Von der Leyen.

See the rest here

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