Iron Law of Energy Distortions: Both subsidies and sanctions *increase* prices in the long term.
Politics can’t solve economic problems.
Iron Law of Energy Distortions: Both subsidies and sanctions *increase* prices in the long term.
By Thomas Kirkman
Subsidies distort free markets in a negative way, akin to how sanctions negatively distort free markets.
Both subsidies and sanctions *increase* prices in the long term.
Short term market distortions create artificially higher prices later on as subsidies and sanctions screw things up.
● Subsidies are paid for by new taxes, and end up creating "artificial surpluses" due to consumers paying less than market demands. People buy more than they would otherwise, due to artificially low prices.
● Sanctions are paid for by higher costs, with the sanctioned goods supposedly taken off the markets, creating artificial shortages.
In the UK and the EU, Russian oil, natural gas, LNG and coal are being sanctioned (and some also price capped) while energy prices in the UK and the EU are being subsidized.
This will be a *double whammy* for Western countries that are both
● sanctioning energy
and also
● subsidizing energy.
Add in the petroyuan challenger which *will* be pushed against the petrodollar in 2023, and energy prices for Western countries could get really crazy.
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"22 December 2022, Luxembourg's Ministry of Energy and Spatial Planning announced that, given the current energy crisis and price increases, the tripartite agreement of 28 September 2022 provides for measures aimed at countering the disproportionate increase in energy prices;
earlier in the day, the Chamber of Deputies adopted three laws - unanimously - which introduce aid for households:
- the price of electricity for households is stabilised at 2022 levels for the year 2023;
- a temporary reduction in the sale price of wood pellets used for primary household heating is introduced from 1 January 2023;
- the prices for charging electric vehicles at charging stations accessible to the public are stabilised for the year 2023. ..."
https://lnkd.in/gXsH-Xfy