even tougher winter next year as natural gas stocks are used up and as new supplies to replace Russian gas, including increased shipments from the United States or Qatar, are slow to come online, the International Energy Agency said in its annual World Energy Outlook, released last week.

Europe’s activity appears to be accelerating a global transition toward cleaner technologies, the I.E.A. added, as countries respond to Russia’s invasion of Ukraine by embracing hydrogen fuels, electric vehicles, heat pumps and other green energies.

But in the short term, countries will be burning more fossil fuels in response to the natural gas shortages.

gas fields in Groningen, which had been slated to be sealed because of earthquakes triggered by the extraction of the fuel.

Eleven countries, including Germany, Finland and Estonia, are now building or expanding a total of 18 offshore terminals to process liquid gas shipped in from other countries. Other projects in Latvia and Lithuania are under consideration.

Nuclear power is winning new support in countries that had previously decided to abandon it, including Germany and Belgium. Finland is planning to extend the lifetime of one reactor, while Poland and Romania plan to build new nuclear power plants.

European Commission blueprint, are voluntary and rely on buy-ins from individuals and businesses whose utility bills may be subsidized by their governments.

Energy use dropped in September in several countries, although it is hard to know for sure if the cause was balmy weather, high prices or voluntary conservation efforts inspired by a sense of civic duty. But there are signs that businesses, organizations and the public are responding. In Sweden, for example, the Lund diocese said it planned to partially or fully close 150 out of 540 churches this winter to conserve energy.

Germany and France have issued sweeping guidance, which includes lowering heating in all homes, businesses and public buildings, using appliances at off-peak hours and unplugging electronic devices when not in use.

Denmark wants households to shun dryers and use clotheslines. Slovakia is urging citizens to use microwaves instead of stoves and brush their teeth with a single glass of water.

website. “Short showers,” wrote one homeowner; another announced: “18 solar panels coming to the roof in October.”

“In the coming winter, efforts to save electricity and schedule the consumption of electricity may be the key to avoiding electricity shortages,” Fingrad, the main grid operator, said.

Businesses are being asked to do even more, and most governments have set targets for retailers, manufacturers and offices to find ways to ratchet down their energy use by at least 10 percent in the coming months.

Governments, themselves huge users of energy, are reducing heating, curbing streetlight use and closing municipal swimming pools. In France, where the state operates a third of all buildings, the government plans to cut energy use by two terawatt-hours, the amount used by a midsize city.

Whether the campaigns succeed is far from clear, said Daniel Gros, director of the Centre for European Policy Studies, a European think tank. Because the recommendations are voluntary, there may be little incentive for people to follow suit — especially if governments are subsidizing energy bills.

In countries like Germany, where the government aims to spend up to €200 billion to help households and businesses offset rising energy prices starting next year, skyrocketing gas prices are hitting consumers now. “That is useful in getting them to lower their energy use,” he said. But when countries fund a large part of the bill, “there is zero incentive to save on energy,” he said.

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World is in its ‘first truly global energy crisis’ – IEA’s Birol

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SINGAPORE, Oct 25 (Reuters) – Tightening markets for liquefied natural gas (LNG) worldwide and major oil producers cutting supply have put the world in the middle of “the first truly global energy crisis”, the head of the International Energy Agency (IEA) said on Tuesday.

Rising imports of LNG to Europe amid the Ukraine crisis and a potential rebound in Chinese appetite for the fuel will tighten the market as only 20 billion cubic meters of new LNG capacity will come to market next year, IEA Executive Director Fatih Birol said during the Singapore International Energy Week.

At the same time the recent decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to cut 2 million barrels per day (bpd) of output is a “risky” decision as the IEA sees global oil demand growth of close to 2 million bpd this year, Birol said.

“(It is) especially risky as several economies around the world are on the brink of a recession, if that we are talking about the global recession…I found this decision really unfortunate,” he said.

Soaring global prices across a number of energy sources, including oil, natural gas and coal, are hammering consumers at the same time they are already dealing with rising food and services inflation. The high prices and possibility of rationing are potentially hazardous to European consumers as they prepare to enter the Northern Hemisphere winter.

Europe may make it through this winter, though somewhat battered, if the weather remains mild, Birol said.

“Unless we will have an extremely cold and long winter, unless there will be any surprises in terms of what we have seen, for example Nordstream pipeline explosion, Europe should go through this winter with some economic and social bruises,” he added.

For oil, consumption is expected to grow by 1.7 million bpd in 2023 so the world will still need Russian oil to meet demand, Birol said.

G7 nations have proposed a mechanism that would allow emerging nations to buy Russian oil but at lower prices to cap Moscow’s revenues in the wake of the Ukraine war.

Birol said the scheme still has many details to iron out and will require the buy-in of major oil importing nations.

A U.S. Treasury official told Reuters last week that it is not unreasonable to believe that up to 80% to 90% of Russian oil will continue to flow outside the price cap mechanism if Moscow seeks to flout it.

“I think this is good because the world still needs Russian oil to flow into the market for now. An 80%-90% is good and encouraging level in order to meet the demand,” Birol said.

While there is still a huge volume of strategic oil reserves that can be tapped during a supply disruption, another release is not currently on the agenda, he added.

ENERGY SECURITY DRIVES RENEWABLES GROWTH

The energy crisis could be a turning point for accelerating clean sources and for forming a sustainable and secured energy system, Birol said.

“Energy security is the number one driver (of the energy transition),” said Birol, as countries see energy technologies and renewables as a solution.

The IEA has revised up the forecast of renewable power capacity growth in 2022 to a 20% year-on-year increase from 8% previously, with close to 400 gigawatts of renewable capacity being added this year.

Many countries in Europe and elsewhere are accelerating the installation of renewable capacity by cutting the permitting and licensing processes to replace the Russian gas, Birol said.

Reporting by Florence Tan, Muyu Xu and Emily Chow; Editing by Jacqueline Wong and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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Toll of Russian Strikes Mounts, Adding Urgency to Ukraine’s Pleas for Weapons

Credit…Jean-Francois Badias/Associated Press

PARIS — France began pumping natural gas directly to Germany for the first time on Thursday, part of a landmark agreement struck by both governments to help each other confront Europe’s energy crisis as Russia cuts off gas supplies to Europe.

Volumes of gas capable of producing around 31 gigawatt-hours per day of electricity began flowing early on Thursday into Germany, the French network operator GRTgaz said. The connection has a maximum capacity of 100 gigawatt-hours per day, equal to the power output of four nuclear reactors, or about 10 percent of the amount of liquefied natural gas that France imports each day, the company said.

GRTgaz said that months ago it had begun modifying its pipeline networks to be able to send gas to Germany. For years, the German economy has relied on Russian gas exports, but this year Moscow has slashed them in response to Western sanctions for its invasion of Ukraine.

France gets its gas from the Netherlands, Norway and Russia, according to the International Energy Agency, although supplies from Russia were cut off in September. It also receives deliveries of liquefied natural gas from several L.N.G. terminals.

To face the energy crunch, France has been storing gas and getting more of it from its European partners and Qatar. Recently, President Emmanuel Macron has burnished relations with Algeria, a former French colony, which has agreed to sharply increase gas exports to France.

In exchange for the gas from France, Germany has pledged to export more electricity to that country as it grapples with an unprecedented crisis in its nuclear power industry that has reduced power production.

“Germany needs our gas, and we need the electricity produced in the rest of Europe, and in particular in Germany,” President Emmanuel Macron said last month after speaking with the German chancellor, Olaf Scholz, about the agreement. “We will contribute to European solidarity in gas and benefit from European solidarity in electricity.”

“Merci beaucoup,” Klaus Müller, the head of Germany’s federal network agency, wrote in a Twitter message to GRTGaz on Thursday. “The gas deliveries from France, through Saarland, help Germany’s energy security.”

European countries have pledged to work together to get through winter as Russia’s aggression in Ukraine raises the prospect of a prolonged energy crisis. On Thursday, Spain proposed increasing its gas deliveries to France by 18 percent in the coming months, Spain’s ecological transition minister, Teresa Ribera, said.

As Europe’s largest economy and the one most dependent on Russian gas, Germany has been among the countries worst affected by the energy crisis rippling across Europe, where natural gas costs about 10 times what it did a year ago. Both Berlin and Paris have imposed a broad range of conservation measures, including lowering thermostats and hot water heaters, encouraging the use of public transport and requiring public buildings to turn off lights early.

The energy crunch has forced European governments to fall back on less-desirable power sources that they had been trying to phase out in a push to go green. Germany, for instance, has decided to keep coal-fired power plants online and restart several others that had been mothballed.

In addition, Germany decided to keep two of its three remaining nuclear power plants operational as an emergency reserve for its electricity supply, breaking a political taboo and delaying its plans to become the first industrial power to go nuclear-free for its energy.

And in France, the government is facing an energy crisis of its own after half its fleet of nuclear power plants — the largest in Europe — was taken offline earlier this year for inspections and repairs. The electricity shortage has driven prices to record levels, forcing factories to cut production and put tens of thousands of employees on furlough.

Bruno Le Maire, France’s economy minister, warned Thursday that high energy prices continued to pose a “major risk” to French industry and would lead to a 10 percent decline in industrial production this winter.

Berlin this month announced a 200 billion euro (about $196 billion) aid plan for German households, businesses and industries. It includes policies to curb natural gas and electricity prices domestically. And France has already spent around €100 billion since last winter doing the same.

But with Mr. Scholz facing pushback over his government’s decision to keep nuclear plants running, Germany’s ability to uphold its end of the energy-swap deal with France may wind up depending on the French themselves: GRTgaz said that the exported French gas would allow Germany to produce more electricity, which in turn would be sent back to the French grid during peak hours.

“If we did not have European solidarity,” Mr. Macron said in a televised interview on Wednesday, “we would have serious problems.”

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As E.U. Seeks to Curb Russia’s Revenues, Oil Supply Cut Poses Obstacle

Credit…Getty Images

What impact a European price cap on Russian oil may have remains a matter of conjecture because many of the details, including the price, remain to be determined. But some analysts say it could have unintended consequences.

Henning Gloystein, a director at Eurasia Group, a political risk firm, said that the cap might wind up just continuing the status quo, since Russia is already selling oil to China and India at a 30 percent discount. The end result of the cap may be to simply replicate that discount on Russian oil exports to those nations, which have resisted joining the West in imposing sanctions. “It is formalizing something that is already there,” he said.

Others say that the cap, which is expected to gain final approval on Thursday, will add more bureaucratic procedures to a long series of sanctions already in place against Russia. Those extra steps may impede the flow of oil around the world and raise prices, causing the sort of major disruption that Washington appears to be trying to avoid.

“It adds new complexity to the task of redirecting Russian oil to new destinations,” Richard Bronze, head of geopolitics for Energy Aspects, a political risk firm, said.

That the specifics of the cap, including the price, have not been spelled out will likely make life difficult for people buying and selling oil, who need to make decisions several weeks in advance, Mr. Bronze said.

“They would not know what they would need to do or what price they would need to agree with a Russian seller if they wanted to abide by the price cap,” he said. “This is another example of how policymakers are not in tune with what the industry and the market are saying to make this policy work.”

China has leaned in favor of Russia during the Ukraine war, repeating Russian disinformation, but so far, Western government experts say, China has refrained from providing Moscow military assistance or helping Russia to evade sanctions.

China’s foreign ministry criticized the concept of price caps soon after the idea was first unveiled by Western leaders a month ago, warning that oil was too important to the global economy to be subject to the planned price controls. “Oil is a global commodity — ensuring global energy supply security is vitally important,” Mao Ning, a foreign ministry spokeswoman, said on Sept. 5.

Four days later, Ben Harris, the assistant secretary of the U.S. Treasury for economic policy, said at forum that price caps by other countries would allow China to demand deep discounts on the oil it purchases from Russia as well. The United States would be satisfied with that indirect effect on Russia’s prices, he said.

China’s foreign ministry is closed this week for a national holiday, and issued no immediate response to the European action on Wednesday.

Fatih Birol, the executive director of the International Energy Agency, said in an email on Wednesday that while Russia had profited in recent months from high world energy prices, the country would pay a long-term price.

“It’s clear at this stage that Russia isn’t winning the energy battle,” Mr. Birol said. “Its short-term gain in income from the crisis is outweighed by the long-term loss of both trust and revenues that it has brought about by ruining its relationship with the European Union, its biggest customer.”

Before the invasion of Ukraine, Mr. Birol pointed out, about 75 percent of Russia’s natural gas exports and 55 percent of its oil exports went to Europe. “Finding alternative markets on this scale cannot be done quickly or easily, especially in the case of natural gas,” he said.

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U.S. gas at $4-$5 is a thing of the past, says Tellurian chairman

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LONDON, Oct 4 (Reuters) – The chairman of liquefied natural gas (LNG) company Tellurian Inc (TELL.A), Charif Souki, on Tuesday said that cheap U.S. gas is a thing of the past and the only solution for Europe’s energy crisis is to invest in U.S. gas infrastructure.

“Getting (U.S.) gas in the water for $4-$5 is something of the past; if you really want to justify an investment … you have to think of $10-$12,” Souki told the Energy Intelligence Forum in London.

Souki said investment in U.S. LNG projects could be Europe’s one option to solve the energy crisis sparked by Russia’s invasion of Ukraine, with Russian gas supplies to Europe having plunged since the start of the war.

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“Europe will be spending $500 billion to $600 billion in subsidies for their consumers. For a fraction of that price, you could secure long term gas reserves from the Unites States,” he said.

“There are $100 billion of liquefaction projects in the United states that are permitted but have not been able to obtain financing …You have to make investments if you want to control the resource.”

The United States has been the biggest supplier of the seaborne fuel to Europe this year, with U.S. cargoes representing more than 70% of Europe’s Jan-Sept LNG imports.

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Reporting by Marwa Rashad
Editing by David Goodman

Our Standards: The Thomson Reuters Trust Principles.

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Nord Stream Gas Leaks Raise Suspicions of Sabotage

Credit…Fabrizio Bensch/Reuters

Suspicious leaks in two gas pipelines running from Russia to Germany under the Baltic Sea caused a sudden drop in pressure on Monday, raising concerns about possible sabotage and prompting the authorities in Germany, Denmark and Sweden to investigate.

Sweden’s national seismic network said it detected two large undersea explosions on Monday near the locations of the leaks. Neither of the pipelines — Nord Stream 1 and 2 — had been active, but they were filled with gas when there was a sharp drop in pressure, first registered on Monday.

Footage released by the Danish Defense Command showed a swirling mass of methane bubbling up onto the surface of the Baltic Sea. Officials in Denmark raised its security alerts at electricity and gas facilities around the country.

Speculation immediately fell on Russia, which denied responsibility. The leaks underscored the vulnerability of Europe’s energy infrastructure, even as the continent tries to wean itself off supplies from the Russia as punishment for Moscow’s invasion of Ukraine.

Mateusz Morawiecki, Poland’s prime minister, blamed Russia for the leaks, saying they were an attempt to further destabilize Europe’s energy security. He spoke at the launch of a new undersea pipeline that connects Poland to Norway through Denmark.

“We do not know the details of what happened yet, but we can clearly see that it is an act of sabotage,” Mr. Morawiecki said. “An act that probably marks the next stage in the escalation of this situation in Ukraine.”

Denmark’s prime minister, Mette Frederiksen, said that sabotage could not be ruled out. “It is too early to conclude yet, but it is an extraordinary situation,” she said during a visit to Poland to inaugurate the pipeline from Norway.

“There is talk of three leaks, and therefore it is difficult to imagine that it could be accidental,” she said.

Mykhailo Podolyak, a senior adviser to President Volodymyr Zelensky of Ukraine, said on Twitter that the leaks were “a terrorist attack planned by Russia and an act of aggression towards E.U.”

The Kremlin’s spokesman, Dmitri S. Peskov, said of the leaks that “no possibility can be ruled out,” but the Russian state media sought to blame the United States and Ukraine. The state-run RIA Novosti news agency reported that Washington “is an active opponent of Russian gas supplies to Europe,” and said that Ukraine opposed Nord Stream 2 because it “was afraid of losing revenues from the transit of Russian gas.”

Credit…Planet Labs

It was not immediately clear who would benefit from ruptures in the pipelines, which were not in operation. The leaks were found at different points on two branches of the Nord Stream 1 pipeline and one branch of Nord Stream 2, Danish and Swedish officials said. They warned ships to avoid the affected areas.

The pipelines have been a focal point of the broader confrontation between Russia and Europe. After the European Union imposed economic sanctions on Russia to penalize it for invading Ukraine in February, Russia began withholding the natural gas that for decades it had sent to Europe, threatening the continent’s energy supply as winter looms.

The governments in Denmark and Germany both said the leaks would not affect natural gas supplies in their countries. Gazprom had already halted nearly all deliveries of natural gas to Europe, through Nord Stream 1 as well as all but one of several overland pipelines, and European countries have turned to other suppliers, including Norway, to meet their energy needs.

But the incident made clear how vulnerable energy infrastructure could be. Norway’s Petroleum Safety Authority warned on Monday that unidentified drones had been sighted recently near its offshore oil and gas facilities, raising concerns of possible explosions, helicopter collisions or of “deliberate attacks.” It called for “increased vigilance by all operators and vessel owners,” citing the heightened security concerns following recent threats by Russia linked to its war in Ukraine.

Russia’s Gazprom halted deliveries through Nord Stream 1 indefinitely earlier this month, as part of a continuing dispute with Germany over gas deliveries. The pipeline is made up of about 100,000 concrete-coated steel pipes designed to withstand the change in pressure the gas undergoes on the 760-mile journey from Russia to Germany. They lie on the floor of the Baltic Sea.

Nord Stream 2 was never put into operation after Germany canceled its certification on the eve of Russia’s invasion of Ukraine.

Senators and members of Congress had lobbied for years to impose sanctions on Nord Stream 2. After Germany halted certification, President Biden imposed sanctions on the Russian-owned operator of the pipeline.

Monika Pronczuk, Oleg Matsnev and Torben Brooks contributed reporting.

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An Israel-Lebanon Border Deal Could Increase Natural Gas Supplies

Israel and Lebanon have been at war since 1948, but the countries are close to an agreement that could increase production of natural gas, helping energy-starved Europe.

Officials from the two countries have said they are close to resolving long-running disputes over their maritime borders, which would allow energy companies to extract more fossil fuels from offshore fields in the Mediterranean Sea.

The increased production won’t make up for the gas that Europe is no longer getting from Russia. But energy experts say an Israel-Lebanon agreement should give a vital push to efforts to produce more gas in that part of the world. Over the last four years, energy production in the eastern Mediterranean has been growing as Israel, Egypt, Jordan and Cyprus have worked together to take advantage of oil and gas buried under the sea.

“This is a very important step for the region to come into its own,” said Charif Souki, the Lebanese-American executive chairman of Tellurian, a liquefied natural gas company based in Houston. “Players are finally realizing that it’s better to cooperate than to continuously fight.”

The Israel-Lebanon negotiations will most directly affect the Karish field, which is set to produce gas for Israel’s domestic use. That fuel is expected to displace gas produced from other fields, which can then be exported. The new field is also expected to produce a small amount of oil.

Chevron, the second-largest U.S. oil and gas company, and several smaller businesses are already producing gas from two larger fields off Israel’s coast. That fuel has increasingly replaced coal in the country’s power plants and factories. Israel now has so much gas that it has become a net exporter of energy, sending fuel to neighbors like Jordan and Egypt. Some of that gas has also found its way to Europe and other parts of the world from L.N.G. export terminals in Egypt.

The U.S. government, across several administrations, has encouraged the growth of the gas trade in the region by helping to negotiate deals between countries that have long had tense relations. The Ukraine crisis has accelerated efforts to explore and produce natural gas because of the soaring cost of the fuel in Europe, where countries are desperate to end their dependence on Russian gas.

Chevron and its Israeli partners are discussing the possibility of building a floating liquefied natural gas platform in the Leviathan gas field, Israel’s largest. The companies are expected to make a decision on the project in a few months.

But getting the gas out of the region will not be easy. Floating export terminals are vulnerable to terrorist attack. And, even if they could be adequately secured, the terminals will not be able to process as much gas as the larger coastal facilities used in major gas producers like the United States, Qatar and Australia. Building terminals on land can take several years, if not often longer, because of opposition from environmental and other groups.

“Energy infrastructure offshore is very volatile and vulnerable,” said Gal Luft, a former Israeli military officer who is the co-director of the Institute for the Analysis of Global Security in Washington. “You have to manage risk.”

Theoretically, transporting gas by pipelines would be easier than liquefying natural gas for export before converting it back into gas at its destination. But building long-distance pipelines is expensive and difficult. A long-running conflict between Turkey, Cyprus and Greece, for example, has made constructing a pipeline from Israel to southern Europe incredibly challenging, if not impossible.

Even an Israel-Lebanon border agreement faces risks. Hezbollah has threatened to attack the Karish field, and it sent unarmed drones over it in July; Israeli officials said they had shot down the ‌aircraft.

Still, Israeli and Lebanese officials have said in recent days that they are pressing on with the negotiations, with officials from the Biden administration acting as a go-between, and are close to a deal. The talks gathered momentum during the United Nations General Assembly last week.

Prime Minister Najib Mikati of Lebanon said on Thursday at the United Nations that he was confident about reaching an agreement with Israel. “Lebanon is well aware of the importance of the promising energy market in the eastern Mediterranean for the prosperity of all countries in the region,” he said, “but also to meet the needs of importing nations.”

U.S. and other Western oil companies have long shied away from Israel, in part because they do not want to alienate Arab countries. But, as relations between Israel and countries like Egypt, Jordan and, more recently, the United Arab Emirates have improved more companies have expressed interest in the eastern Mediterranean.

An agreement between Israel and Lebanon could accelerate that trend.

“I think it will appease many minds,” said Leslie Palti-Guzman, chief executive of Gas Vista, a consulting firm. “Companies that have been reluctant to invest could be more incentivized to develop additional projects.”

Gas fields in the Mediterranean are one of several new suppliers that Europe will need as it seeks a long-term replacement for Russian gas. Other suppliers include energy companies operating in the United States, Qatar, Africa, the Caspian Sea and the North Sea.

“There is no silver bullet,” said Paddy Blewer, spokesman for Energean, a London-based exploration company that hopes to begin producing gas in the Karish field. “The East Mediterranean is one of a series of marginal gains that Europe has to look at.”

Energean plans to begin production in the next few weeks, and has said it expects to produce up to 8 billion cubic meters of gas a year by 2025. If it is successful, the company could significantly add to Israel’s output. The country will produce roughly 22 billion cubic meters this year. Once an importer of almost all of its energy, Israel increased gas production by 22 percent in the first half of the year compared with the same period in 2021. It exported roughly 40 percent of its gas, earning the government royalties of $250 million.

The agreement between Israel and Lebanon will also open the way to drilling in Lebanese waters by a consortium led by Eni of Italy and TotalEnergies of France. Lebanese officials view natural gas as a critical financial tool in its attempts to revive the country’s depressed economy. The government has wanted to drill offshore since at least 2014, but disputes with Israel over the border have delayed exploration.

“It’s not for sure Lebanon will find gas,” said Chakib Khelil, a former president of the Organization of the Petroleum Exporting Countries. “But, if they do, Lebanon will get a big boost.”

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Strong Dollar Is Good for the US but Bad for the World

The Federal Reserve’s determination to crush inflation at home by raising interest rates is inflicting profound pain in other countries — pushing up prices, ballooning the size of debt payments and increasing the risk of a deep recession.

Those interest rate increases are pumping up the value of the dollar — the go-to currency for much of the world’s trade and transactions — and causing economic turmoil in both rich and poor nations. In Britain and across much of the European continent, the dollar’s acceleration is helping feed stinging inflation.

On Monday, the British pound touched a record low against the dollar as investors balked at a government tax cut and spending plan. And China, which tightly controls its currency, fixed the renminbi at its lowest level in two years while taking steps to manage its decline.

Somalia, where the risk of starvation already lurks, the strong dollar is pushing up the price of imported food, fuel and medicine. The strong dollar is nudging debt-ridden Argentina, Egypt and Kenya closer to default and threatening to discourage foreign investment in emerging markets like India and South Korea.

the International Monetary Fund.

Japanese yen has reached a decades-long high. The euro, used by 19 nations across Europe, reached 1-to-1 parity with the dollar in June for the first time since 2002. The dollar is clobbering other currencies as well, including the Brazilian real, the South Korean won and the Tunisian dinar.

the economic outlook in the United States, however cloudy, is still better than in most other regions.

loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. It is typically expressed as the annual change in prices for everyday goods and services such as food, furniture, apparel, transportation and toys.

A fragile currency can sometimes work as “a buffering mechanism,” causing nations to import less and export more, Mr. Prasad said. But today, many “are not seeing the benefits of stronger growth.”

Still, they must pay more for essential imports like oil, wheat or pharmaceuticals as well as for loan bills due from billion-dollar debts.

debt crisis in Latin America in the 1980s.

The situation is particularly fraught because so many countries ran up above-average debts to deal with the fallout from the pandemic. And now they are facing renewed pressure to offer public support as food and energy prices soar.

Indonesia this month, thousands of protesters, angry over a 30 percent price increase on subsidized fuel, clashed with the police. In Tunisia, a shortage of subsidized food items like sugar, coffee, flour and eggs has shuttered cafes and emptied market shelves.

New research on the impact of a strong dollar on emerging nations found that it drags down economic progress across the board.

“You can see these very pronounced negative effects of a stronger dollar,” said Maurice Obstfeld, an economics professor at the University of California, Berkeley, and an author of the study.

central banks feel pressure to raise interest rates to bolster their currencies and prevent import prices from skyrocketing. Last week, Argentina, the Philippines, Brazil, Indonesia, South Africa, the United Arab Emirates, Sweden, Switzerland, Saudi Arabia, Britain and Norway raised interest rates.

World Bank warned this month that simultaneous interest rate increases are pushing the world toward a recession and developing nations toward a string of financial crises that would inflict “lasting harm.”

Clearly, the Fed’s mandate is to look after the American economy, but some economists and foreign policymakers argue it should pay more attention to the fallout its decisions have on the rest of the world.

In 1998, Alan Greenspan, a five-term Fed chair, argued that “it is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress.”

The United States is now facing a slowing economy, but the essential dilemma is the same.

“Central banks have purely domestic mandates,” said Mr. Obstfeld, the U.C. Berkeley economist, but financial and trade globalization have made economies more interdependent than they have ever been and so closer cooperation is needed. “I don’t think central banks can have the luxury of not thinking about what’s happening abroad.”

Flávia Milhorance contributed reporting from Rio de Janeiro.

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Bank Of England Raises Rates But Avoids Bolder Hike Like Fed

By Associated Press
September 22, 2022

Surging inflation is a worry for central banks because it saps economic growth by eroding people’s purchasing power.

The Bank of England raised its key interest rate Thursday by another half-percentage point to the highest level in 14 years, but despite facing inflation that outpaces other major economies, it avoided more aggressive hikes made by the U.S. Federal Reserve and other central banks.

It is the Bank of England’s seventh straight move to increase borrowing costs as rising food and energy prices fuel a cost-of-living crisis that is considered the worst in a generation. Despite facing a slumping currency, tight labor market and inflation near its highest level in four decades, officials held off on acting more boldly as they predicted a second consecutive drop in economic output this quarter, an informal definition of recession.

The bank matched its half-point increase last month — the biggest in 27 years — to bring its benchmark rate to 2.25%. The decision was delayed for a week as the United Kingdom mourned Queen Elizabeth II and comes after new Prime Minister Liz Truss’ government unveiled a massive relief package aimed at helping consumers and businesses cope with skyrocketing energy bills.

The new measures have eased uncertainty over energy costs and are “likely to limit significantly further increases” in consumer prices, the bank’s policymakers said. They expected inflation — now at 9.9% — to peak at 11% in October, lower than previously forecast.

“Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back,” the monetary policy committee said.

The bank signaled it is prepared to respond more forcefully at its November meeting if needed. Its decision comes during a busy week for central bank action marked by much more aggressive moves to bring down soaring consumer prices.

The U.S. Federal Reserve hiked rates Wednesday by three-quarters of a point for the third consecutive time and forecast that more large increases were ahead. Also Thursday, the Swiss central bank enacted its biggest-ever hike to its key interest rate.

Three of the British bank’s nine committee members wanted a similar three-quarter-point raise but were outvoted by five who preferred a half-point and one who voted for a quarter-point.

The decision “suggests the Bank of England is concerned about the U.K.’s economic deteriorating outlook amid the looming threat of recession,” said Victoria Scholar, head of investment at interactive investor. “The timid increase will do little to stem the slide in sterling but may avoid inadvertently inducing unnecessary pain for the economy which is already grappling with slowing demand and deteriorating confidence.”

Surging inflation is a worry for central banks because it saps economic growth by eroding people’s purchasing power. Raising interest rates — the traditional tool to combat inflation — reduces demand and therefore prices by making it more expensive to borrow money for big purchases like cars and homes.

Inflation in the United Kingdom hit 9.9% in August, close to its highest level since 1982 and five times higher than the Bank of England’s 2% target. The British pound is at its weakest against the dollar in 37 years, contributing to imported inflation.

To ease the crunch, Truss’ government announced it would cap energy bills for households and businesses that have soared as Russia’s war in Ukraine drives up the price of natural gas needed for heating.

The Treasury is expected to publish a “mini-budget” Friday with more economic stimulus measures, and the bank said it won’t be able to assess how they will affect inflation until its November meeting..

The Bank of England expects gross domestic product to fall by 0.1% in the third quarter, below its August projection of 0.4% growth. That would be a second quarterly decline after official estimates showed output fell by 0.1% in the previous three-month period.

The weakness partly reflects a smaller-than-expected rebound after an extra June holiday to celebrate the queen’s 70 years on the throne and the impact of another public holiday Monday for her funeral, officials said.

The bank avoided pressure to go bigger even as other banks around the world take aggressive action against inflation fueled by the global economy’s recovery from the COVID-19 pandemic and then the war in Ukraine.

This month, Sweden’s central bank raised its key interest rate by a full percentage point, while the European Central Bank delivered its largest-ever rate increase with a three-quarter point hike for the 19 countries that use the euro currency.

But British policymakers signaled they will “respond forcefully, as necessary” if there are signs that inflationary pressure is more persistent than expected, “including from stronger demand.”

The bank said it’s also moving ahead with plans to trim its bond holdings built up under a stimulus program, selling off 80 billion pounds ($90 billion) worth of assets over the next year to bring its portfolio down to 758 billion pounds.

Additional reporting by The Associated Press.

Source: newsy.com

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U.S. Northeast faces potential energy shortages as rails start to shut

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Unused oil tank cars are pictured on Western New York & Pennsylvania Railroad tracks outside Hinsdale, New York August 24, 2015. Picture taken August 24, 2015. REUTERS/Lindsay DeDario/File Photo

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NEW YORK, Sept 14 (Reuters) – Some trains carrying fuel components to the U.S. Northeast have been halted in preparation for a possible railroad shutdown in the coming days, two sources familiar with the situation said on Wednesday.

The northernmost East Coast states rely on railroad shipments to supplement pipeline deliveries from the U.S. Gulf. The region is among the largest fuel consumers in the nation, where U.S. Energy Information Administration (EIA) data shows that in July inventories of heating oil and diesel reached the lowest levels in at least three decades.

Major railroads, including Union Pacific (UNP.N) and Berkshire Hathaway’s (BRKa.N) BNSF, must reach a tentative deal with three unions representing 60,000 workers before 12:01 a.m. on Friday to avert a shutdown.

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Unit trains to the Northeast that carry commodities including ethanol and crude oil have already stopped, two sources told Reuters on the condition of anonymity.

All railroads are preparing to wind down operations in the next day, said a spokesperson at Norfolk Southern (NSC.N) who declined to comment further. Passenger rail operator Amtrak has already canceled all long-distance routes nationwide as their trains run largely on freight lines outside of the U.S. Northeast. read more

Nationwide, stocks of distillates, which include heating oil and diesel, are at their lowest levels seasonally since 2000, according to EIA data.

The situation is more dire in New England and the Central Atlantic states. In that region, stretching from Maine to Maryland, stocks are at 16.6 million barrels, lowest seasonally since the EIA started keeping the data in 1990.

Fuel distributors generally have inventories to last several days and those markets can also receive imports, but prices would be expected to rise in anticipation of a possible shortage.

Some shippers, anticipating a shutdown, have already stopped transporting hazardous materials around the United States, including fuel blending components.

“I already have companies that have been limiting their production knowing this was coming and now they’ll have to face the music and shut down,” said Tom Williamson, a railcar broker and owner of Transportation Consultants, which manages over 2,000 railcars.

He said he has been busy the past few days communicating with clients who are starting to shut down production of hazardous materials.

The upper Northeast relies on rail for shipments of crude oil, natural gas and fuel products more than other regions because of a lack of pipelines. New England receives most of the natural gas it uses to heat homes and light stoves by rail, according to consultancy RBN Energy, making it vulnerable to a stoppage.

“Over the past 20 years, regional imbalances between where products are produced and where they are demanded has increased,” said Debnil Chowdhury, vice president, Americas head of refining and marketing, S&P Global Commodity Insights. “This has increased the need to transfer products from the Gulf Coast to the (Northeast).”

Pipelines carrying fuel and natural gas from Texas and other oil and gas-producing states of the U.S. South are already full, Chowdhury said, leaving little room to increase flows on the lines if a shutdown happens.

“All sorts of stuff is going to grind to a halt,” said one executive familiar with the region’s rail operations, who asked not to be named. “It’s going to be brutal.”

In July, governors of New England states wrote a letter to U.S. Secretary of Energy Jennifer Granholm warning her that the region faced surging winter heating bills due to lack of natural gas pipeline connectivity.

They also asked the Biden Administration to suspend the Jones Act, which requires goods moved between U.S. ports to be carried by ships built domestically and staffed by U.S. crew, for the delivery of LNG for at least a portion of the upcoming winter.

In 2021, the six-state New England region got most of its power, or 46%, from natural gas, according to ISO New England, the region’s power grid operator. On the coldest winter days, the grid relies on oil as well to fuel a much bigger percentage of power generation.

Nationwide, shippers for oil and chemical companies are making contingency plans.

“We are starting to see impacts already,” said Chris Ball, chief executive officer of Quantix, a Houston-based company that provides trucks and trailers to transport chemicals for companies including Exxon Mobil, Dow and LyondellBasell.

“They (railroads) have already restricted what they’re taking and so we’re getting a fair amount of trucking orders across our whole network,” Ball said.

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Reporting by Laila Kearney, Laura Sanicola and Jarrett Renshaw; Additional reporting by Arathy Somasekhar in Houston and Scott DiSavino in New York; Editing by David Gregorio and Muralikumar Anantharaman

Our Standards: The Thomson Reuters Trust Principles.

Laura Sanicola

Thomson Reuters

Reports on oil and energy, including refineries, markets and renewable fuels. Previously worked at Euromoney Institutional Investor and CNN.

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