Welcome to the Shortage Apocalypse

A supply shock cascade is causing chaos around the globe, but who's really to blame?

“Greenflation Is Very Real and, Sorry, It’s Not Transitory,” read the headline of Bloomberg opinion columnist Javier Blas’s latest article. Marking yet another day in the botched transition toward a carbon-neutral future, Blas’s piece highlighted the most alarming episode in a brand-new series of governmental ineptitude. According to both the ECB (European Central Bank) and the European Commission, Europe’s carbon-neutral revolution must involve an almost all-or-nothing shift to renewables, no matter how inflationary or financially oppressive. “You can almost hear the collective ‘I told you so’ from Houston,” Blas wrote, responding to Europe’s rampant rise in commodity prices. “After all, if you reduce supply and don’t lower demand, prices have only one way to go: up.”

In the name of a quick energy metamorphosis, further episodes of unanticipated price inflation will likely grace audiences globally. Also in Europe, the EU’s Avant-garde system for marketizing carbon credits, the EU Emissions Trading System, could potentially join the long line of mechanisms experiencing #ToTheMoon-style “short squeezes” — with Germany’s alleged economic recovery being the trigger. Moreover, with most of the bloc’s natural gas coming from Putin’s keggers, the EU’s refusal to diversify its energy imports has not only resulted in an epic rally in futures markets. It’s also given Russia the “upper hand” in the ongoing Ukrainian proxy war, which will likely fuel a further rise in oil prices. On the other side of the Atlantic, meanwhile, New England’s bureaucracy has induced power shortages by refusing to build key energy infrastructure for “environmental reasons”, while also importing its supply via — get this — 2000-mile, fossil-fuel-burning boat trips! As for Asia, Indonesia has recently joined in on the shortage jamboree, banning — some — coal exports to economic powerhouse China. The mass interference and mismanagement of natural resources, it seems, has become a truly global marvel.

Consequently, throughout the dying stages of the Covid-19 era, the number of supply shocks worldwide has gone from near-zero to “meh” to unbelievable. China choosing to ban exports of phosphate — a critical element in food production — till May 2022 looked like a one-off, but it set the scene for a cascade of state interventions, resulting in subsequent craziness. The butterfly effect has been on full display, but instead of a mere flap of the wings provoking an enormous tornado, an export ban or other course of intervention has led to unforeseen circumstances. Throughout 2021 the price of fertilizer, another elixir of mass-scale food production, has gone parabolic in both America and Europe, and despite prices easing over the past week or so, supplies remain limited. Green Markets analyst Alexis Maxwell, in an email to Bloomberg, reveals how this one geopolitical decision from China has evolved to wreak havoc on our increasingly interconnected system:

“Major producers like the Middle East and Egypt are sold out of urea [a key nitrogen-based fertilizer] through February and much of Europe remains shut-- so those looking for tons will have to search far afield,” she said. “China, the best option for spare supply, remains out of the market on an export ban that runs until May.”

Unfortunately, this is one of many scenarios creating fears of further commodity shortages around the world. Just last week, on January 4th, unrest exploded in the oil-rich authoritarian country of Kazakhstan. Following nationwide protests erupting over rising fuel prices, president Tokayev declared a two-week state of emergency, stoking further fears of geopolitical sandwiching of natural resource supply; this time around Uranium. With the Central Asian behemoth possessing just under half of the world’s Uranium reserves and 40% of global production, Kazakhstan’s governmental collapse could have added an extra block to the global append-only database of shortages. Any disorder in mining or exporting will have led to a radioactive supply shock.

Fortunately, angered citizens did not disrupt their country’s Uranium production, which required embarking on Kazakhstan’s desolate mines, located in the sparse region of Turkestan’s oblast. Nor did Kazatomprom, the world’s largest Uranium producer, have trouble fulfilling its vast export contracts. But even if societal unrest had severed Kazakhstan’s Uranium supply off from the rest of the world, who would have noticed or cared? As leaders of nearly every hyperpower have vowed to embark on a Hail Mary transition from fossil fuels to renewables, they have omitted nuclear energy from their strategy altogether, even though it’s not only a carbon-neutral fuel source but the safest to produce — even despite the tragedies involved in Chernobyl and Fukushima.

Uranium stocks and ETFs have remained muted during the Kazakh turmoil

Still, because of their nuclear availability bias consisting of these former crises, and the infinitesimal risk of meltdown haunting their subconscious, policymakers have overridden their ability to think critically about how nuclear is actually the safest form of energy. Paired with natural gas, it provides a transition without the same turmoil we’re experiencing now. We could have easily cruised toward a greener future with little supply shocks and the ensuing risk of societal upheaval. But only if less carbon-intensive non-renewables had become core to that transition.

Instead, we’re witnessing a new kind of nuclear winter. The state of California is decommissioning its last remaining plant, while Germany has pledged to shut down its last trio by the end of this year. Nuking carbon-neutral energy sources in the face of mandated and spontaneous blackouts, like those occurring in China, Berlin, and Kosovo, is utter madness.

Mass energy mismanagement, however, has not just created energy swoons. Globally, it’s added to the rampant rise in consumer prices and falling standards of living. When you’re a blue-collar worker and you see food and gas prices explode, that takes precedence over everything else at the voting booth. So if shortages continue, and Covid assists in making that happen, inflationary pressures could define upcoming electoral battles. At least for the current U.S. administration, inflation-adjusted salaries have recently turned chipper:

Inflation-adjusted salaries, aka purchasing power, finally turn positive

Financial repression fuels anger, which translates into conspiratorial views. The common skeptical takes of the green agenda are that it’s a blatant cash grab or an outright conspiracy. But even if you do believe that, know this: “going green”, regardless of whether it actually lowers global temperatures or carbon emissions, reduces overall pollution. We collectively improve lung and heart health, bolster cognitive abilities, and reduce our risk of diabetes. We eliminate roughly two million early deaths every year worldwide. The air we breathe grows cleaner, and the quality of our food improves. The green benefits are undeniable, even for skeptics, and it’s worth the transition.

These proposed benefits, however, don’t justify the terrible state-level decision-making we’re witnessing worldwide. How multiple governments chose to FOMO into a quick verdant transition, despite the apparent risks of creating poverty, social unrest, and financial repression, even after witnessing rampant inflationary pressures building throughout the Covid age, remains inexcusable. The various supply shock crises have proven that gradually pulling the plug on fossil fuels, via a hybrid solution of renewables and low-carbon resources, is not just the soundest way forward. It’s necessary to maintain economic and societal stability.

“In retrospect, it was inevitable,” is how Elon Musk once described Bitcoin’s ascent to stardom, and that now applies to radical energy transitions as well. Looking back, it should have been obvious to policymakers that trying to aggressively rid the world of fossil fuels would end in some disaster, because, as it turns out, the world still using coal, gas, and oil for 84% of its consumption remains a significant hurdle. You can’t just yank the stopper.

Officials are starting to realize that forcing an all-or-nothing energy transition on a world still heavily reliant on fossil fuels is anything but straightforward. European authorities, who have arguably mishandled the supply shock crisis more than any other administration, have therefore begun to see sense. On New Year’s Day, the European Commission coincidentally released a proposal to include natural gas and nuclear as “sustainable energy sources” in its planned transition.

But it’s too late for indirect apologies, and using doublespeak like “transitional challenges” is a kick in the teeth for EU citizens who’ve already endured rampant “greenflation”. Since the easily avoidable economic damage of higher food and energy prices has already been imposed on most of the public, they must now face the rest of an icy winter, also knowing it’s not just the weather that could cause them further hardship.

Right now, in the free world, the same calamity looks to be repeating itself. Though hopefully, for the sake of struggling Americans — especially those located in the six states of New England — doom via commodity inflation won’t emerge.