"My Worry Is We Become Like France" Featuring Dr. Lars Schernikau and Dr. Daniel Stelter
Feb 19, 2025
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In this engaging discussion, Dr. Lars Schernikau, an energy economist and author, and Dr. Daniel Stelter, a macroeconomist and founder of the think tank Beyond The Obvious, explore the upcoming German elections. They express skepticism about meaningful reforms amidst Germany's economic decline, exacerbated by COVID policies and high energy costs. The duo also delves into the complexities of coalition politics, the need for strategic investments, and contrasts U.S. energy policies with Germany's challenges, emphasizing the critical role of communication in shaping a sustainable future.
The upcoming German election is viewed as crucial for economic reform, yet experts predict minimal changes due to current policy rigidity.
Germany's energy policy, largely reliant on renewables, is criticized for contributing to industrial decline and higher energy prices.
Collaboration with the U.S. is essential for Germany's energy strategy, but political narratives could hinder diplomatic relations and cooperative efforts.
Deep dives
Overview of the German Election and Energy Policy
The upcoming German election is viewed as a crucial event with significant implications for the country's energy policy, which directly affects the industrial economy and job market. Daniel Stelter highlights that many Germans lack optimism about the election's outcomes, stressing that the country needs a fundamental shift in economic policy to address high energy prices and industrial decline. Current energy policies, deemed to have led Germany towards deindustrialization, must be reevaluated, particularly as cheap energy access is critical for industrial competitiveness. The coalition dynamics are complicated, as the likely leading party, the CDU, may struggle to form effective partnerships that could enact substantial policy changes.
Market Trends and Economic Context
Despite market volatility, European markets have shown resilience, with Germany performing notably well compared to the U.S. market. Factors such as speculation on the outcome of the Ukrainian-Russian conflict influence energy prices and market expectations, affecting the broader economic landscape. The podcast discusses fluctuations in oil and natural gas prices, mentioning how geopolitical tensions and production changes by OPEC influence these trends. The discussion emphasizes that, although certain European markets show positive signs, deeper structural issues persist that could hinder sustainable growth.
The Need for Change in Energy Policy
There's a pressing need for a significant overhaul of Germany's energy policy to secure affordable and reliable energy sources for the future. Experts argue that the current reliance on renewables has led to economic disadvantages, including higher prices and supply scarcity. With the potential to pivot back to coal and considering nuclear energy options, the discussion underscores the importance of recognizing and adapting to changing energy demands. A proactive approach to energy sourcing is essential to mitigate industrial risks and enhance economic stability.
Influence of Business Leaders and Media
Business leaders in Germany are increasingly speaking out about the challenges they face due to current energy policies, but they previously remained largely silent. This newfound vocalization is crucial, as it reflects growing frustrations and calls for more realistic energy solutions. The media landscape also plays a critical role, often being accused of lacking diversity in perspectives on energy debates, which stifles innovative discussions needed to resolve policy shortcomings. A more open discourse is necessary to allow for a constructive evaluation of Germany's energy strategy and to facilitate necessary reforms.
Implications for U.S.-Germany Relations
The podcast raises the issue of how the United States could strategically support Germany in achieving a reinvigorated energy policy while strengthening both economies. Through a cooperative effort involving energy contracts and shared resources, the U.S. can help address Germany's energy issues while simultaneously benefiting from its industrial output. However, there are concerns over how some U.S. political narratives could alienate potential allies in Germany, complicating diplomatic relations. A collaborative approach is essential to navigate the challenges posed by current geopolitical tensions and foster a stable energy future for both nations.
Today we had two stellar guests for a COBT discussion focused on Germany’s significant upcoming election on February 23. We had the pleasure of hosting our good friend Dr. Lars Schernikau alongside Dr. Daniel Stelter. Lars is an energy economist, commodity trader, entrepreneur, and the author of “The Unpopular Truth about Electricity and the Future of Energy.” We have known Lars for a few years now and reached out to him for advice on an expert voice on the German elections, economy and overall macro outlook. He recommended Daniel and we were thrilled to get them both to join us. Daniel is an acclaimed macroeconomist and strategy consultant and his background includes 20 plus years as Senior Partner and Executive Committee Member at Boston Consulting Group. More recently, he founded the think tank “Beyond The Obvious.” We were delighted to visit with Lars and Daniel.
We covered a lot of territory in our conversation starting with asking Lars and Daniel for background on whether the upcoming election is likely to bring meaningful economic or policy reforms and probing its broader implications for Germany’s economic trajectory. They shared their unfortunately low expectations for significant change, pointing to Germany’s ongoing economic decline, which has been exacerbated by policy decisions during COVID, including heavy spending and regulatory shifts, and further strained by high energy prices, energy scarcity, and deindustrialization driven by the country’s aggressive transition to renewables and more recent closure of their nuclear plants. We explore Germany’s debt-to-GDP ratio as a strategic advantage, though constrained by debt brake laws, potential reforms to reallocate funds from subsidies and social programs toward more productive investments, hidden liabilities that significantly increase Germany’s actual debt burden, European debt dynamics, the Euro, and speculation on whether the U.S. will prioritize strengthening Germany’s economic resilience or focus on attracting German industries to America for lower energy costs. We touch on potential future scenarios, including the possibility for Germany to delay coal plant closures or access domestic gas reserves, the U.S.’s vested interest in supporting Germany and the EU to maintain geopolitical stability, and the increasing political polarization in Germany. We also discuss how China’s long-term strategic planning in EVs, batteries, and raw materials has outpaced European efforts, the strategic implications of sanctioning Russia, and much more. It was a candid look at the challenges and opportunities facing Germany and Europe and we can’t thank Lars and Daniel enough for sharing their time and thoughts with us.
Mike Bradley started us off by highlighting that broader equity markets seem to be focused solely on Trump-Trump-Trump policies, whether that be recent talks between Russia/U.S. on a Ukrainian peace deal or reciprocal tariff threats. He noted that there’s little in the way of market moving economic data this week which might allow broader equity markets to continue gravitating higher. Meta’s stock price has been up twenty consecutive trading days (an equity market record) and NVIDIA will be reporting quarterly results next week, which could create a lot of volatility and set the tone for the Technology sector in the coming weeks. On the crude oil front, he discussed rumors that OPEC might look to delay oil production increases (120kbpd) that were scheduled for April. The recent pullback in crude oil price also seems to be grounded in optimism for a breakthrough in the Ukrainian war. On the natural gas front, European natural gas price is trading at ~$15/MMBtu, down ~$2/MMBtu over the last few weeks, on optimism the EU will allow a more flexible gas storage refill this year. European gas storage levels are 44% full versus the 5-year average of 54% full, which provides a bit of a gas price floor heading into summer. He w
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