I just read a great note and thread from Duncan Weldon and this guy that touches on the coming fallout in European energy markets.
It argues that the current energy prices in Europe and the UK "imply widespread poverty amongst households, a collapse in discretionary spending, utter ruin for many SMEs and a fair few larger firms too."
Then it goes a step further to argue that the market has failed in producing and distributing energy. That politically, it will be impossible for the market to be allowed to figure it out from here.
Governments can't magically create power so the question will be in how it's rationed.
"Imagine a starving village. Do we allocate scarce food resources by money or by other proxies? We would (hopefully) prioritize food for children regardless of wealth."
Governments are on the verge of choosing who will get energy and what will be sacrificed. It's the politics of scarcity.
Once the government has accepted that it can’t allocate energy using a price mechanism, then the only option left will be energy rationing. The politics of that are going to be exceptionally difficult.
I don't think anyone can forecast how that will go, but it will be expensive and disruptive.
