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Curiously, We Have Both a Shortage and an Excess Supply of Natural Gas

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34 comments on Curiously, We Have Both a Shortage and an Excess Supply of Natural Gas

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EU farmers protest emissions cutbacks. Image from a Tweet below

Dutch Farmers Issue Ultimatum

“After politicians’ decision to close dozens of farms and cattle ranches to reduce nitrogen to comply with absurd EU regulations on nitrogen pollution, the angry Dutch farmers have issued an ultimatum threatening to block the country’s airports, ports and distribution centers.“

Nitrogen Pollution

Food Crisis

https://twitter.com/thelinecanada/status/1544967074610544640

Protests that started in the Netherlands have spread to Poland, Italy, and the Netherlands border with Germany.

Farmers Poland

https://twitter.com/kr3at/status/1545053979305922561

Italy  Uprising 

German Border Blocked

Fishermen Block Ports

Record High Prices

These protests have taken place over the last week. Tensions are high. Shelves are completely empty in some Netherlands’ grocery stores.

Food and Water Supply Shocks

Eurointelligence covered Food and Water Shocks in its latest two posts. 

The food industry depends on gas and diesel for its fertilisers, tractors and irrigation. Energy costs can represent up to 50% of its variable costs. Add to this the price hikes for grains, packaging, and transport, and food producers are now facing a cost increase of 60%, according to Ania, the French food industry association. Nitrogen fertilisers also depend crucially on gas. Some fertiliser plants have announced temporary closures, citing spiralling natural gas costs as the cause.

Exploding prices for containers, energy, fertilisers, raw materials and food prompted calls to bringing production back home. But this is easier said than done. It requires a rethink in production and logistics on an unprecedented scale. New plants and warehouses have to be built, and new energy sources have to be sourced and developed for the production of fertilisers and transport. These are long-term decisions with immediate cost implications. 

Next Comes the Drought

In Italy the government announced a state of emergency in five regions over water shortages until the end of this year. Scarce winter rain and spring droughts lowered the water level of the Dora Baltea and the Po, the largest river in Italy, down to eight times lower than usual. Both rivers feed one of the most important agricultural regions in Europe, with 30% of production currently threatened by drought. In about 100 cities water use is restricted to reserve enough for drinking.

Portugal is small by comparison and comes better prepared for water shortages. They already started preparing for a dry season in the winter, restricting the use of hydroelectric power plants to two hours per week, thus saving water reserves. The drought hit in May, when 97% of the country was affected. Local farmers’ organisations also rolled out emergency plans to limit irrigation of some crops.

Spain is the third largest producer of agricultural products in the EU. At least 70% of all fresh water is used for agriculture. Some communes have been restricting the use of water since February, after the second driest winter since 1961. At risk of desertification, the country still needs to come up with a plan on how to preserve its water reserves.

Meanwhile, the EU Natural Gas crisis continues. 

EU Natural Gas chart courtesy of Trading Economics

For the First Time Since 1991, Germany’s Trade Surplus Vanishes

Export dependent economies are having a rough go of things. Let’s take a look at Germany and the Netherlands. But also keep in mind Japan and China.

For discussion, please see For the First Time Since 1991, Germany’s Trade Surplus Vanishes

Euro Monthly Chart

Euro chart courtesy of StockCharts.Com

The euro has plunged to a level last seen in 2002. With the Fed hiking away and the ECB sitting on a -0.50 percent interest rate. 

On July 5, I commented Euro Sinks to a 19-Year Low as the Dollar Continues to Strengthen, For How Long?

Shorting the Euro is a heavily lopsided trade from a sentiment standpoint. Yet the trend could last for a while depending on what the Fed and ECB do.

Ten-Point EU Recap 

  1. The Netherlands is forcing farms to close. It is the second largest food exporter following the US. 
  2. Fertilizer costs are soaring
  3. The price of natural gas in the EU is near record highs, about 14 times the long-term average.
  4. There’s a major drought in Europe. 
  5. Italy and Portugal are rationing water.
  6. Germany is discussing the rationing of natural gas. 
  7. EU food prices are at a record high.
  8. The German economy is collapsing.
  9. The Euro is sinking, exacerbating inflation pressures.
  10. The ECB is is holding interest rates at negative 0.50 percent.

Meanwhile, the Netherlands is worried about nitrogen and methane from animal farts, burps, and poop. 

Curiously, we have both a shortage and overabundance of natural gas. Given the fertilizer shortage, there should be an opportunity somewhere.

The key question remains: How Long Before Putin Shuts Off Natural Gas Delivery to Europe?

This post originated at MishTalk.Com.

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34 Comments
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Oldest Most Voted
Hansa Junchun
Hansa Junchun
4 years ago
“Curiusly, we have both a shortage and an excess supply of natural gas.”
Could you elaborate on that? I think I have an idea as to why, but a Mish Take is needed here.
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JRM
JRM
4 years ago
I’m confused when the EURO was first announced they stated they wanted it on par with the US dollar, now that its closing in on that par, the so called “Experts” are panicking!!
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RonJ
RonJ
4 years ago
“Food Crisis”
What the WEF can do for you.
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FromBrussels
FromBrussels
4 years ago
I could hardly believe The Netherlands being the world’s second agricultural products exporter, so I checked ; and indeed, 125 bln $ in 2021vs the US with 195bln. Incredible that is, have a look at the world map if you can be bothered, Nederland is a hardly visible spot, so Nitrogen pollution must indeed be enormous and alarming. We have the same problem in tiny neighbouring Flanders producing 25% !of Europe’s frozen vegetables, enormous amounts of pigs and cows and chicken too, the human version not included 😉 , Our belgian politicians, always behind the curve, are beginning to wake up. Drought in southern Europe is dramatic this year, once EV’s start hitting the roads in massive numbers though, that problem will be solved in a jiffy…. As far as gas shortages are concerned, all it takes is for our utterly useless, spineless idiotic european leaders, to pull their stupid heads out of the US polluted sands and open up Nordstream II ! Will they ? and will Russia still go along ? The EU did not shoot itself in the foot, it blew off both its legs…. what else to expect from disconnected, clueless reptile brains ….
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Webej
Webej
4 years ago
Reply to  FromBrussels
The Netherlands has actually been the second largest agricultural exporter for decades after the US, although not the second largest producer.
One might be tempted to think it is cheese or seeds or milk or greenhouse vegetables or something non-agricultural (natural gas, Philips lamps or medical gear, whatever), but I remember doing some macro research in the 80’s, and discovering that the biggest single source of foreign cash earnings was pigs/pork [!]. Ever since then, whenever I go on vacation and see all the trucks on the freeway, I’m thinking about all the Dutch pigs going to Germany or Italy on the highway, only to return as schnitzels and parma ham. It’s nuts!
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  FromBrussels
Incredible indeed, but then tulips probably cost more than beef pound-for-pound. The Dutch farmers must know something about agriculture.
Then again, maybe John Helmer is up to something when he says: Rutte is doing to convert Dutch farmland in order to build more houses for the annual influx of migrants now running at 300,000 a year.
Nothing would surprise me about the ultra-libtard cult when it comes to destroying European culture.
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Webej
Webej
4 years ago
Netherlands’ grocery stores
Dutch grocery stores
cattle ranches
There are no Dutch cattle ranches … the whole country is densely populated fertile river delta.
The Dutch problem is not a climate (change) issue, and the EU, although it has norms for ammonia and NO², cannot force anything.
The problem is Dutch laws about nature preserves & conservatories in combination with legal activism: it is the courts forcing the government’s hand, blocking construction everywhere. The ‘nitrogen’ problem is actually a conflation of ammonia and NO², combined in a “simplified” consolidated category of reactive nitrogen compounds. [intensive farming + exhaust emissions]
The problem is primarily that reactive nitrogen threatens certain rare plants and animals which grow in nutrient poor designated “nature” preserves. However, the heaths are not aboriginal but came about because of soil exhaustion [!] Many people, biologists among them, do not consider this to be an environmental problem, but a contest of wills between conservation/environmental fanaticism and a growing economy.
The farmers are often generational, and are threatened with expropriation of the inheritance of their ancestors & descendants, canceling part of the aboriginal population and way of life.
Irony is that in a fertilizer drought, these people are being destroyed because of a fertilizer glut.
Although ammonia in the run off causes algae blooms and excess plant growth/hypoxia in surface water (occurs in the US as well), Dutch farmers have invested heavily in the past to fix the problems with leakage into the ground water and effluent.
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Maximus_Minimus
Maximus_Minimus
4 years ago
Reply to  Webej
Good analysis.
Netherlands: territory 33,893 sq km, population: 17,400,824
Allow me to say, this is nuts, and the main reason the fertilizer use is what it is. Cultivation must be very intensive to make it worth.
Allow me to guess that this score is more imported than native.
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effendi
effendi
4 years ago
Poop is a nitrogen rich fertiliser. Find more efficient ways to incorporate that poop back into the soil and reduce the use of expensive synthetic fertilisers. That saves the imported gas for better uses(and cuts down the import bill) and reduces the environmental effects of nitrogen runoff into the rivers.
Probably a lower crop yield but better than shutting farms down.
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Mish
Mish
4 years ago
Corrected sentence to read: Meanwhile, the Netherlands is worried about nitrogen and methane from animal farts, burps, and poop.
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PapaDave
PapaDave
4 years ago
The world is caught between a rock and a hard place. In the short run we need food, clean water, and energy to survive. But our production and use of these items is causing the global warming and climate change that threaten us in the long run.
Of course, short run survival takes precedence over long run survival. So I expect any rules, guidelines or laws that cause short term pain for long term gain to fall by the wayside when the going gets tough.
Climate change is already affecting food production. And it is only going to get worse over time. Hopefully we will be clever enough to find appropriate solutions, such as indoor hydroponics, more meat substitutes (not that I want to eat them), etc.
Climate change is also affecting water availability in many regions. More droughts in some regions, while others suffer more flooding. Which of course also hurts agriculture.
Regarding energy, we are going to be using fossil fuels much more and much longer than some expected. Most oil and gas firms have been cutting capex for quite some time now in the expectation that we would be using less oil and gas in the future. Which has put us into our current predicament of not enough supply to meet demand. You can’t fix years of underinvestment quickly, so I expect demand to keep exceeding supply until such time as prices rise high enough to cut demand. A recession (if it happens) is unlikely to provide more than a brief pause in this supply/demand imbalance.
Which means we are going to keep pumping green house gasses into the atmosphere for a long time, and global warming is going to get a lot worse.
But as I always say, there is nothing I can do about this problem other than recognize that it exists. In addition, I can try to take advantage of the situation. Which is why I am heavily invested in those very oil and gas companies that provide the fossil fuels that we so badly need in the short run, even though they will cause us problems in the long run. They are going to make a crap load of money, given the high demand, and high prices that will result going forward.
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honestcreditguy
honestcreditguy
4 years ago
Reply to  PapaDave
keep the Blueberries in Chile over winter, suck it up and just eat seasonal local fruit and vegetables. Meat from same area. Who needs Tilapia from Vietnam pond. We survived all those winters on canned peaches, apples, pears or persimmons….
Suck it up, save the environment, stop shipping berries around the world
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RonJ
RonJ
4 years ago
Reply to  PapaDave
“Climate change is already affecting food production.”
Weather has affected food production every year.
“Which means we are going to keep pumping green house gasses into the
atmosphere for a long time, and global warming is going to get a lot
worse.”
That is what the climate alarmists want us to believe. It got colder from the end of the 1930’s to the 1970’s.
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PapaDave
PapaDave
4 years ago
Reply to  RonJ
Lol! Believe whatever you want. I don’t argue with cultists. Its a waste of my time. Have a nice life.
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8dots
8dots
4 years ago
Putin fart on Europe. The Dow moved up but the US 2y/10Y inverted.
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TexasTim65
TexasTim65
4 years ago
I hope the Dutch farmers (and Italian and Polish ones too) force the EU to back down.
It doesn’t take a genius to see how closing 1/3 of the farms plays out.
1) They spend the next 8 years closing farms putting countless farmers out of work forever (older ones probably can’t do anything else so they will be permanently unemployed and need welfare).
2) They expropriate that land at fire sale prices since if you can’t farm on it, you can’t make a living and thus can’t pay the taxes so *someone rich* sweeps in and buys at a discount.
3) Sometime after 2030 the inevitable food shortage happens (caused by a drought or some swine/bird flu or something similar) due to lack of farms / total food output.
4) This ’emergency’ necessitates the government suddenly needing to ration food and take control of all the remaining farms in order to distribute food in an ‘equitable way’ (those Ration Cards from WWII) by some new food czar.
5) During this ’emergency’ this food czar will lament the fact there are no good qualified farmers (the old ones are either in new jobs or too old/died) who can get the most crops/animals per acre on the expropriated land as sharecroppers (since the rich now own it).
6) The government will blame the ’emergency’ on the free market for not producing enough so to prevent this from happening again the food committee/czar will become a permanent fixture in order to begin food planning on a country wide scale where each farm is told exactly what they can and can’t grow/raise.
In other words, the government is going to cause the future crisis which is going to necessitate them taking complete control of food production in order to grow/raise just what they decide you can eat. It will of course be filled with all the inept bureaucracy and waste that the government brings to everything else it touches.
Just say no to reducing farming for some abstract concept like Nitrogen reduction which we have yet to see any study that says it’s a problem.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  TexasTim65
Pretty reasonable. But you forgot the part where the Government sends the population surplus to work on the farms. Crop pickers need less diesel, and, like horses, they can eat what they’re standing on.
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Call_Me
Call_Me
4 years ago
As another commenter stated, methane (CH4) is not nitrogen (N, or, as it is more commonly found in nature, N2).
The arm-waving hysteria over what politicians/law-making groups deem a crisis is pathetic. They are forever jumping from one issue to the next, completely oblivious to their inability to intelligently ‘solve’ a problem and usually leaving a swath of damage in their wake that are often labeled “unintended consequences“. Now that more attention is being paid to the impending cuts, perhaps the autocrats will adjust their goals.
So much of this could be addressed by a reversion to traditional grazing and restoration of some of the millions of hectares of grasslands that have been lost over the years across the planet. Enhanced food production, reduced synthetic fertilizer use, and peace of mind for the environmentally-minded!
Call_Me_Al
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Mish
Mish
4 years ago
Reply to  Call_Me
Cow farts are methane
EU upset about that too I believe
Corrected my sentence as follows
Meanwhile, the Netherlands is worried about nitrogen and methane from animal farts, burps, and poop.
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Doug78
Doug78
4 years ago
Reply to  Mish
They are not worried about wild animals or domestic animals farting, only animals raise for food.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Call_Me
I have a great idea. Clear some of the troublesome forests in the Southern Hemisphere and plant grasslands for traditional grazing. Oh, look, a squirrel.
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vboring
vboring
4 years ago
Methane from animals is a rounding error compared to the methane needed to run an industrial economy. It also comes with a lot of junk mixed in. Biogas is wildly unaffordable.
Nitrogen emissions from farming can be managed with much more targeted measures. Incentives to use less fertilizers, education and training programs, special crop insurance for farms that try new approaches to reduce emissions.
I can’t imagine what they were thinking with such a blunt tool of shutting whole farms. This was a dumb decision. They earned these protests.
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Pontius
Pontius
4 years ago
Curious with all the posts on Twitter commenting on how Russia is losing. Putin, somewhere, smiling. Chess vs. checkers. The west with their sanctions have inflicted a terminal wound on themselves.
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Doug78
Doug78
4 years ago
Reply to  Pontius
What does Putin have to do with cow farts? Is there a connection between them?
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Karlmarx
Karlmarx
4 years ago
Reply to  Doug78
Putin is just a scapegoat to blame. Of course invading another country isn’t particularly Kosher, but Putin is not the source of the enviro stupidity coming out of the UN, the EU and every other acronym on the planet.
Nobody likes pollution, and in general pollution is a cost, but the insanity of the enviro movement is really amazing. It was one thing when the rivers in Cleveland were igniting, its another to worry about cow farts.
Its amazing how people don’t understand statistics or how they are being manipulated into poverty. At least Europe has all of that good medieval architecture for people to use when they are pushed back into serfdom.
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hamsaplo
hamsaplo
4 years ago
The Netherlands must just be worried about how the country smells. Nitrogen is not methane from burps. Methane is CH4 and is much more potent a greenhouse gas than CO2. The atmosphere is 79% nitrogen, a colorless, odorless gas, so trying to reduce the level in the Netherlands is what I call futile. They may be referring to ammonia, NH3, which contains nitrogen. That is not a greenhouse gas. That is highly soluble in water and smells like urine. Or the other way around. I never noticed fields of vegies smelling like ammonia. Animals can smell, probably because of poor personal hygiene and careless management of urination. (My dog has a habit of peeing in my yard and then walking through the pee.) They just need a good shower.
Here is a good idea. Solve the fertlizer cost problem by letting cows poop on the soil and rinsing the urine (ammonia/nitrogen) off them. The cows then have a better lifestyle as well. Then leave the rest of the intelligensia to worry about greenhouse gases.
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Doug78
Doug78
4 years ago
Reply to  hamsaplo
The solution:
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Doug78
Doug78
4 years ago
Reply to  hamsaplo
Overuse of nitrogen fertilizer is the culprit. Too much gets into the ground water, lakes and the ocean causing algal blooms.
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hamsaplo
hamsaplo
4 years ago
Reply to  Doug78
That seems credible to me but why don’t they frame the problem in that way? The Netherlands are not the only country fighting this problem. Why does every problem have to have a connection to climate change? (rhetorical question.) Just the word “overuse” suggests a solution and it does not have to mean starving people. The epa states ” Our homes, yards and streets contribute to nitrogen pollution in a variety of ways, but solutions exist to address this pollution at its source.” (https://www.epa.gov/nutrientpollution/sources-and-solutions) So there! Note that they also say “Electric power generation, industry, transportation and agriculture have increased the amount of nitrogen in the air through use of fossil fuels.” Just to cover themselves?
No! EPA. Let’s all starve. We’ll have a lottery to decide who has to give up eating. Then we don’t have to think for ourselves.
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Webej
Webej
4 years ago
Reply to  hamsaplo
It’s basically an ammonia problem, not smell or greenhouse gasses or anything like that.
The ammonia is not from too much fertilizer but from intensive cattle farming (pigs, chickens, cows/dairy): the animals are fed grain (corn & soy from abroad) and produce too much! The ammonia is conflated with NO² problems. Problems with effluent and algal blooms have been solved in recent decades with heavy investments (for nothing). They do actually dump the ammonia on the fields, but the land areal is too small in comparison to the production. The problem is too much production [!] colliding with court injunctions blocking all new construction, judicial activism at the behest of conservation/environmental fanatics protecting Nature, which in this case is not-aboriginal heaths that were created in the past by soil exhaustion ! All served with a rich sauce of woke-activism, climate alarmism, population alarmism, economic degrowth hysteria, etc.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  hamsaplo
Dead people can be used as fertilizer. See the Soylent Corporation processes.
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Doug78
Doug78
4 years ago
Reply to  Lisa_Hooker
They used them as food, not fertilizer. The 1973 film is a fictional account of 2022. I am glad that we are not that far along.
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Lisa_Hooker
Lisa_Hooker
4 years ago
Reply to  Doug78
I do believe that Soylent used them as a fertilizer and a growth medium to grow the algae they made into food. That was Soylent’s business – algae for food production.
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Cocoa
Cocoa
4 years ago
This is all due to political decisions, not even remotely a climate issue. Politicians closed down the global economy for COVID. They made massive restrictions on energy usage, not understanding how energy is used. They closed down nuclear power plants and refuse to consider safer and smaller nuclear energy. They got into a ridiculous spat with Russia over a mobster state like Ukraine and gave themselves NO energy alternatives. EU doing all this self-harm at the behest of the USA -and Europe is NOT a strategic interest anymore
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