The German government has agreed on a mini-relief package for fuel prices. It is a drop in the ocean given the massive energy-policy mistakes made in Germany — in Berlin and in Brussels. The world continues to rely on fossil fuels, and a boom in advanced nuclear power is emerging, all the while Germany stands increasingly alone with its climate ideology.
Last Friday, the center-right and center-left coalition agreed on a fuel discount and a government-imposed cap on gasoline prices: a mini-relief package totaling €2.5 billion for German motorists. The energy tax is to be reduced by 14 cents per liter. Including the effect of value-added tax, motorists would receive relief of 17 cents per liter. The measure is supposed to remain in place until the end of 2026, when it will be replaced by a state-imposed price ceiling linked to the development of the oil price. Central planning at the gas pump — what could possibly go wrong?
But this drop in the ocean changes nothing about the broader energy-policy picture confronting the German economy.
A war economy is taking the place of civilian production. Military Keynesianism instead of prosperity for all.
Globally, little has changed in the energy market’s structure. Fossil fuels and nuclear power still dominate the global energy system. Oil accounts for 33.5 percent of energy supply, followed by coal at 27.7 percent and natural gas at 25.1 percent. Nuclear energy adds another 5.2 percent. Around the world, the major powers are competing for access to these indispensable resources.
Global crises such as the war in Ukraine, which has led to the systematic destruction of Russian refining capacity, are intensifying this struggle. The closure of the Strait of Hormuz and China’s aggressive export strategy are further factors amplified by the EU’s ideological climate policy, weighing heavily on the economy.
Above all, high electricity prices and increasingly difficult access to energy sources and raw materials are becoming decisive location factors that weaken growth. All of this is reflected in industrial electricity prices: Depending on the consumption category, electricity currently costs German industry between 14 and 17 cents per kilowatt-hour, far above the level in France, whose industry benefits from nuclear power. In the United States, the price is currently around eight cents per kilowatt-hour, while in China it is between eight and ten cents. (RELATED: Germany’s Family Businesses Survived Everything — Until Net Zero)
No wonder more and more companies are leaving Germany behind and taking the flight forward.
The crises cited above are enough to make clear that the weakness of the German economy did not come out of nowhere. It is the result of deliberate political intervention, the nuclear phase-out and a climate policy geared toward degrowth. It can also be put this way: Brussels, inspired by German eco-socialism, is pushing German industry — and large parts of European industry as well — toward locations where investors and companies have rolled out the red carpet, such as the energy-policy-deregulated United States.
This small tax gift at the gas pump will, of course, change nothing about this situation.
Seen from a distance, the fog begins to clear: With its assault on the Maduro regime and the integration of Venezuela’s oil and gas fields into its resource strategy, the United States has created facts on the ground and now controls one of the potentially largest national oil reserves in the world.
Much like the closure of the Strait of Hormuz, this move has two major effects in particular: China, as the main buyer of fossil fuels from Iran and Venezuela, is now feeling Washington’s new negotiating power. Pricing power is increasingly shifting toward the U.S. petroleum sector, which has become the world’s largest exporter of fossil fuels. Will this development cause Beijing to scale back its subsidized export machine? Much is at stake: not only access to oil and gas — rare earths, a sector dominated by China, are also becoming fiercely contested. Trump’s power play in Greenland is part of the same story.
The conflict between the two superpowers has shifted onto the energy market and is playing out through the foreign-exchange and bond markets.
One collateral casualty of this development is the EU, led by Ursula von der Leyen and backed by political forces in Paris and Berlin. It has placed itself politically between all the chairs. On one side is the increasingly heated conflict with Russia, which could soon disappear completely as a gas supplier; on the other is the escalating trade dispute with Washington, while Europe has lost itself in a zigzag course toward China. For companies in the EU, the situation looks bleak because the political leadership shows no signs of moving toward a path of diplomacy. (RELATED: Germany’s Electricity Rationing Is No Longer Unthinkable)
Energy autonomy must be the goal — an EU-wide nuclear initiative, Euratom 2.0, if you will, could provide the starting signal for a catch-up effort. (RELATED: Trump the Wolf Topples von der Leyen From Her Pony — Saint Paul Style)
Fifty-seven percent of the EU’s primary energy must be sourced from abroad. This creates dependencies that could at least partly and temporarily be reduced by activating domestic resources — oil, gas, fracking, and coal.
But what happens? Nothing.
The Green Deal, this deliberate displacement of fossil fuels, has become Brussels’ actual power base.
Through ever-expanding bureaucracy, Brussels reaches deep into national legislative processes and takes its share through the CO2 mechanism, which will extract €25 billion from the German economy this year. Brussels’ climate-extraction business can only flourish if fossil fuels are simultaneously pushed out. Producing at the European location therefore becomes increasingly expensive.
At the same time, a war economy is taking the place of civilian production. Military Keynesianism instead of prosperity for all. This will not end well — what will remain are over-indebted state bureaucracies, industrial sectors, and mass poverty. (RELATED: The Road to Serfdom Has an EU Exit Ramp)
They are not entirely inactive in Brussels and Berlin, however. Lagarde, Merz, and von der Leyen want to activate the ten trillion euros sitting in the bank accounts of EU citizens. Activation? A new credit vehicle is needed to help the struggling EU economy get back on its feet through subsidies. The Green Deal demands ever higher levels of funding; even an initially friendly-looking activation of our cash deposits at attractive interest rates would probably be little more than a drop in the ocean. Yet a surprise awaits the top economists in Berlin and Brussels: bank deposits are not freely available — they circulate within the system and evade political control. They will have to come up with something else if they want to continue down their green path toward bankruptcy.
This is where the debate over an association of Canada, Australia, and New Zealand comes in. What is it really about? Europe’s banking system needs financial collateral, premium-quality security, to accelerate the credit mechanism. Integrating the banking systems in order to activate the abundant raw materials of Canada and Australia would be a major step toward creating new liquidity.
Oil and gas supplies may also play a role — but this process would take years; existing supply contracts prevent a rapid shift in these coveted resources. The military cooperation advertised in flowery language, or even political participation in the EU, plays no role either. This is merely media folklore for the public.
The European Union is mutating in fast motion into a power bloc that has cultivated a dangerous isolationism toward its antagonists in China, Russia, and the United States. This political hardening is dramatically worsening conditions for the EU’s different economic centers in these weeks, as negotiated solutions and diplomacy increasingly disappear from view.
READ MORE from Thomas Kolbe:
Germany’s Family Businesses Survived Everything — Until Net Zero
The Omnipresent State: From Free Citizen to Servant of Bureaucracy
Germany’s Electricity Rationing Is No Longer Unthinkable
Thomas Kolbe, born in Neuss, Germany, is a graduate economist. For over 25 years, he has worked as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.
Image licensed under Creative Commons Attribution 4.0 International.