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Sameer Kalra

Same Stimulus But Different Packaging

In the past few weeks, there has been a reintroduction of stimulus in most of the developed countries but thus the reason is not a health crisis but an energy crisis. Germany yesterday revealed a package of $13 Bn for 2022 and $42 Bn for 2023 for protecting consumers and companies against energy prices. Even though it has been only 48hours since the new UK prime minister was elected there are already talks of a $200 Bn plan for the next 18 months for protecting the consumers.


Two reasons can lead to such actions, one being that the power-generating companies cannot become insolvent as it would lead to a real financial crisis at the same time. And second, if the energy bills of consumers are not subsidised then there can be civil unrest and closure of small businesses. Though these trends are already occurring in some countries as winter approaches they can multiply quickly.


Despite all these actions, someone has to eventually pay those power bills. According to some reports, the increased in energy prices would result in an extra outgo of almost $1.5 Trillion by 2023. This accounts for 15% of the total European Union GDP and

cause of it is a $20 Bn supply of Gas.


All this has to be managed while the central banks raise interest rates to a level not seen in many years to fight inflation that has not been seen in many years. This does not bring good news to inflation peak trades.


In all this, the USA has gained a large market of the EU energy market but at cost of brining its local inventories of crude and refined oil products to the lowest level in decades. Any further pressure during the winter can lead to export bans, an option that the government has not removed off the table.

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