Europe Is Now “Powerless” And Its Inflation And Recession Are About To Get Even More Brutal

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FRIDAY, AUG 26, 2022 – 05:24 AM

By Bas van Geffen, senior macro strategist at Rabobank

In yesterday’s daily, we noted how an increasing number of US households is struggling to pay their utility bills. Yet, this situation pales in comparison to the price hikes that European consumers are facing. As a case in point, the OFGEM, UK’s energy regulator, lifted the energy price cap to £3,549 as of 1 October (from £1,971), adding a warning that prices could get “significantly worse” through 2023.

Indeed, yet another sharp move in European energy prices took benchmark rates to new record-highs. The 1 month forward Dutch TTF contract jumped to €311/MWh, while the 1 month French electricity contract reached a mindboggling €750/MWh. The fact that nobody wants to be short power right now certainly doesn’t help either as it reduces liquidity in the market – which may have been exacerbated by ICE’s decision to increase margin requirements on European gas futures.

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