One month ago, Goldman said that the one thing that could accelerate the resolution of Europe's energy crisis was plain, simple "demand destruction" - i.e., a plunge in demand due to prices that were too high until the reduced demand leads to less supply and a lower price. Specifically, Goldman estimated "that the potential capacity for gas-to-oil substitution could be larger should gas rally further, of up to 1.35 mb/d in power and 0.6 mb/d in industry (in Asia and Europe), although such a large demand boost would prove too large for the oil market to absorb, leading to a spike in prices to in turn achieve oil demand destruction, the ultimate solution to widespread energy scarcity."
There is just one problem with this: "demand destruction", i.e., forcible shutdown of manufacturing facilities has direct cost on output.
And as Charif Souki, Executive Board Chairman at U.S. LNG developer Tellurian, said at the online IEF gas forum, the demand destruction that results from high natural gas prices could lead to global recession.
“We are dealing not with a gas crisis, the gas is simply the leading horse, but we are dealing with an energy crisis”
Echoing what Goldman said a month ago, Souki said that the first manifestation of demand destruction is a switch from one fuel to another.
“But if all fuels become too expensive then you ask people to start changing their lifestyles, start driving less, turning off the lights more often, not putting the air conditioning on, not heat your home."
“My great fear is the lack of planning is going to lead us to global recession.” He also added that having adequate gas storage is “critical” as is investment in infrastructure.
Pointing out the obvious, he also said that current oil prices at about $85/bbl for oil and the equivalent of $200 for gas, are not sustainable.
“Eventually, after the winter, gas prices will come back down to a more reasonable level. But at the same time oil prices will continue to increase to a more reasonable level, in order to find an equilibrium.”
Translation: the recent blind (and stupid) push for ESG at all costs, has not only not led to a viable ESG output equilibrium - that won't be achieved for years if not decades - but the price shock that has already been triggered thanks to the "greens" who has forced fossil companies to shrink spending on existing and new capacity, will be directly responsible for the next big recession.
Which, paradoxically, makes sense: after all, it is hardly a secret that the Fed will have no choice but to do even more QE after the next downturn (in fact, the only question traders should be asking today is not whether the current yield curve collapse suggests a recession is coming - of course it is - but how forceful the Fed's response will be). And with Bank of America estimating that some $150 trillion in spending will have to be paid out to enable the "net zero" reality (as discussed in "Here is The Hidden $150 Trillion Agenda Behind The "Crusade" Against Climate Change") much if not all of which will have to be monetized via global QE.
As such the recession that the ESG fanatics trigger will be just the catalyst that greenlights the next $150 trillion in global QE that cements the coming Great Reset to every aspect of modern civilization.