over 1 year ago • 3 mins
The EU proposed that its member countries cut their gas use on Wednesday.
What does this mean?
Russia already cut capacity of the Nord Stream – one of the main gas pipelines between Russian and Europe – by around 60% last month, almost certainly in retaliation for Europe’s support of Ukraine. So when the pipeline closed earlier this month for maintenance, economists weren’t holding out much hope it would come back on at all. They weren’t far wrong: the Russian government warned on Wednesday that it would restrict supplies to around 20% unless a spat over sanctioned pipeline parts gets resolved.
Not that there’s any guarantee that’ll do the trick either. So the EU is now scrambling to refill its stockpiles ahead of winter, recommending its member states reduce usage in public buildings and switch to alternatives like renewables or coal. It might just work: the plan could cut their gas consumption by as much as 15% over the next eight months – roughly equivalent to the amount France uses in a year.
Why should I care?
The bigger picture: Sharing is caring.
The drop in European gas consumption this year has already knocked 0.2 percentage points off the region’s economic growth, according to the International Monetary Fund. So the IMF has raised a scenario where Russia’s power play now leads to severe recessions, while forcing multiple member countries to shut down swathes of their industry. But it is only a worst case, and the IMF thinks it’s avoidable if only countries share their gas supplies with one another.
Zooming out: When the sun shines, make energy.
Europe’s renewable dreams are starting to take shape, with Germany – which boasts a third of Europe’s solar capacity – now planning to double down on its use of solar in the next decade. And judging by the current heatwave in Europe, it’ll do well out of it: the country produced a record amount of electricity from solar panels earlier this week.
Keep reading for our next story...
Chipmaking equipment maker ASML reported record new orders on Wednesday.
What does this mean?
Some of ASML’s customers have been warning that demand for certain chips has slowed down, but it doesn’t seem to have impacted their relationship with the equipment maker just yet. They put in their most new orders ever with ASML last quarter, pushing up its revenue by a better-than-expected 36% from the same time in 2021.
And yet: the company’s now expecting that revenue to grow 10% this year, rather than the 20% it previously estimated. This, even though it thinks global trends in carmaking, high-performance computing, and the green energy transition will help prop up demand. It’s all down to accounting intricacies, really: ASML’s been skipping quality checks to get orders out to customers in good time, but it can’t count them as complete until it finalizes them on site. That means around $2 billion worth of sales probably won’t be signed off until 2023.
Why should I care?
The bigger picture: ASML needs time to think.
ASML’s most advanced systems – which cost around $160 million each – take almost 18 months to build, and demand is still significantly higher than it can keep up with. That’ll only get more severe as chipmakers follow through on their multibillion-dollar expansion plans, which might be why ASML is now thinking up ways to boost supply by 2025. Watch this space: the company said it’ll update investors later in the year.
Zooming out: Don’t forget the shortages.
Carmakers are more dependent than ever on chips and, by extension, chipmaking equipment. So the pandemic-driven disruptions of both are still taking their toll on Volvo, with the Swedish carmaker saying on Wednesday that it’s being hobbled by production issues. That caused its retail vehicle sales to fall 27% last quarter from the same time the year before, and it’s predicting that this year’s will be the same as or even slightly lower than that of 2021.
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