China is experiencing its own energy crunch as shortages have led to record coal prices and soaring natural-gas costs. It’s beginning to have an impact; production at a number of factories—including some supplying Apple and Tesla—has been halted. Nomura and China International Capital Corp have already downgraded Chinese growth forecasts as a result.
The bigger question is whether the energy disruptions will derail the economic recovery or not. In any case, for all the talk of a green energy transition, the unfolding events show the economy is still very much powered by traditional fossil fuels.
Congress faces several major initiatives this week, including Monday’s Senate vote on federal government funding and the debt ceiling, a House vote on the $1 trillion bipartisan infrastructure bill later this week, and ongoing negotiations on the $3.5 trillion bill Democrats expect to pass by reconciliation.
The scenes in the U.K. over the weekend were reminiscent of the 1970s, as drivers queued at thousands of filling stations amid fears of a fuel shortage, sparked by a lack of truck drivers. But the panic at the pumps is really a sideshow. Natural-gas prices in Europe and around the world have skyrocketed amid shortages, leading to higher household bills and suppliers collapsing.
Meanwhile, oil prices and energy stocks are gaining early on Monday. Goldman Sachs raised its year-end Brent crude price forecast to $90 from $80, also lifting its West Texas Intermediate forecast to $87. Most notably, the bank’s analysts said Hurricane Ida should prove to be “the most bullish hurricane in U.S. history.” They added that the global oil supply-demand deficit is larger than they expected, with the recovery in demand from the Delta coronavirus variant impact faster than anticipated. Throw in the global gas shortage and winter oil demand is firmly skewed to the upside, they said.