One of the most fundamental rules of economics, and one which is intuitively obvious to most people with even a modicum of common sense, is the law of supply and demand.
If lots of people want a resource or product, and there’s not a lot of it around, the price will naturally go up as people compete for the little of it that’s there. Conversely, if lots of the resource becomes available, the price will naturally go down due to its abundance.
These are the most basic of market forces – it’s not rocket science, is it? It could be a primary school maths problem – a 5 year old could figure it out.
Well, as simple as this is, it’s apparently a baffling mystery to Irish and European politicians more broadly, particularly when it comes to energy costs.
It’s clear by now that European energy prices are exploding across the continent, with some consumers seeing a threefold increase in their bills within a matter of months.
Euro zone consumers in for a shock as power bills soar https://t.co/9cwLAKMogL pic.twitter.com/XZgL5NTJwc
— Reuters (@Reuters) January 18, 2022
Now what could possibly be causing this brutal price hike? Vladimir Putin? Climate change? Aliens? Black magic?
Or, perhaps, the answer is something much simpler: European leaders going out of their way to reduce Europe’s traditional energy supplies.
Here’s just a small sample of headlines from the last couple of years to demonstrate this point:
“Ireland joins alliance to phase out oil and gas production” – Irish Times
“France bans fracking and oil extraction in all of its territories” – the Guardian
“Portugal bids goodbye to oil and gas exploration” – The Portugal News
“German government agrees to ban fracking indefinitely” – Reuters
“Denmark set to end all new oil and gas exploration” – BBC News
“Italy to block oil and gas exploration permits” – Reuters
“Dutch confirm plan to end gas production at Groningen next year” – Reuters
“EU to seek ban on oil and gas exploration in the Arctic” – Reuters
“European Investment Bank to end all loans to oil and gas firms” – The Guardian
That’s a tiny sample of examples, by the way – there are many more that could be pointed to. And these are all from just the last couple of years.
Now here’s a fun test you can do at home if you have teenage children. Invite your kids into the room, and ask them this:
“If we spend years reducing the energy supply in Europe, don’t replace it with anything, and then everyone tries to use the small amount of resources left, will that make the price go up or down?”
If they answer “the price will go up,” congratulations: your child is officially smarter and has more common sense than virtually every government in Europe.
The fact that this is seen as strange or confusing is, in and of itself, strange and confusing.
The source of the problem is not a mystery – the fact that our politicians can’t diagnose the problem is the mystery. We’re led by people with so little basic foresight, and such an inability to plan for the obvious consequences of their decisions, that it should concern us all.