Quote of the week…

Kadri Simson, EU Commissioner for Energy, said: "The unprecedented energy crisis we are facing shows that we need to adapt the shape of the electricity market for the future to deliver the benefits of clean and affordable energy to all. I look forward to contributions from a wide range of stakeholders, which will help guide our legislative proposal this year.

ABC.es

Natural gas is the new “Russian winter” as a war element…

Norway does not consider an auxiliary international economic aid to lower the price of natural gas, as stated by the first Norwegian, Jonas Gahr Støre, on his official visit to Sweden on Sunday, August 28, 2022.

Emergency tax and energy-saving measures

Germany announces emergency measures to try to regain energy sovereignty

Today, the European political leadership speaks openly of an intervention in the electricity industry market, this interference refers to setting a ceiling on the price of the final service (Price-cap) of electricity. Undoubtedly, this measure will have an immediate contagion effect on other regions of the world, due to an economic recession.

However, current electricity prices are derived from a strategically restricted supply of natural gas due to a war conflict, which has increased the cost of producing electricity to current levels. In short, the increase in the price of electricity is beyond the responsibility of the electricity sector still less of the political authority.

Germán & Co

What is Artificial Intelligency?

Artificial intelligence (AI) is the ability of a computer or a robot controlled by a computer to do tasks that are usually done by humans because they require human intelligence and discernment. Although there are no AIs that can perform the wide variety of tasks an ordinary human can do, some AIs can match humans in specific tasks.

Artificial intelligence, Vargas Llosa and the virtue of the invisible

Logroño, La Rioja

Mario Vargas Llosa, the Nobel laureate, said the other day, at the inaugural event of the IX Jornadas organised by Futuro en español, that the writer must "polish the invisible prose until writing merges with reality". We could also recall here the maestro Paco de Lucia, who did win the Prince of Asturias, although he never won a Nobel Prize, simply because the Swedish Academy gets the categories wrong, leaving art aside. The maestro said that since he was a child he practised eight hours a day to master a technique with the ultimate idea of forgetting about it so that it would not limit his ability to express himself. Mastering a tool so as not to focus on it, so that it merges with his dialogue.

In the panel on artificial intelligence in Spanish

They might as well have both talked about technology: melting it down to make it invisible, giving software the value of the tool it should be, instead of raising it as the keystone and overvalued cornerstone of any current agreement on progress. We already lived through this bubble with the advent of computers, desktops, laptops, dotcoms, mobile phones and certainly before all this, according to chronicles of times past. And now it is the same circus with artificial intelligence (AI). It was born 70 or almost 100 years ago, depending on whether we assign its inception to Turing, McCarthy, IBM or any other personality.

The writer must polish the invisible prose until writing merges with reality.

Mario Vargas Llosa

As in some cases of collective progress, polygenesis over a period of time on a concept that evolves makes it impossible to give a single name and surname, no matter how much pressure is exerted by interested sectors. And in all these years we have seen a parade of concepts and techniques under this umbrella: neural networks, machine learning, learning analytics, heuristics, Bayesian networks, expert systems, cognitive modelling and a long etcetera.

On the panel on the future of education

Recently many people have been talking about AI in education and I keep thinking that, for a change, we teachers are too late. AI has been around for decades and has been applied in a very worthy way to estimate the future, to predict the most varied things: the weather, the stock market, migrations, the evolution of diseases or viruses, maintenance needs, troop movements and even chess games. Talking to my colleagues in education and research, at conferences and various meetings, we realise that teachers want to incorporate these tools, but they are afraid of the complexity of these tools. Beyond moral, ethical and legal considerations, which there are, the teacher finds any AI software complicated to learn, to configure and even to use on the ground. And this is where the bubble arises.

Mastering a tool so as not to focus on it, so that it merges with its dialogue.

Paco de Lucía

It seems that an interested sector complicates the product unnecessarily with the aim of over-pricing it, in the manner of a recalcitrant consultant, pointing out how necessary complicated and costly consultancy work is. A sector that could focus its efforts on improving and providing a service that is affordable and already translated for the average person. Advanced users will always exist, but that 20% of the market, if we listen to Pareto, should not govern the interaction with the other 80%. Just as it is not necessary to be a master mechanic to drive a car, it is not essential to learn cryptic terms to be a worthy user of artificial intelligence applied to any field, including education. The secret lies in improving the experience of teachers and students, simplifying and adapting services to their needs, and making all the technological paraphernalia transparent, like the prose of the Nobel Prize winner or the technique of the virtuoso.

How commodity traders in Switzerland are benefiting from the war

According to the NGO Public Eye, the profits of Swiss fossil and agricultural commodity traders have soared since the beginning of the war in Ukraine.

Le Monde by Serge Enderlin (Geneva (Switzerland) correspondent)

Published on January 24, 2023

War profiteer? The trading company Trafigura has made $7 billion (€ 6.45 billion) in profits in its 2022 fiscal year, twice as much as its previous record, in 2021. Covid-19, the war in Ukraine: The more the planet suffers, the more the traders cash in.

This is a paradox that does not trouble the Australian Jeremy Weir. Since 2014, he has been the boss of the company which is one of the principal brokers and charterers of black gold on the planet. Its trading activities are based in Geneva. "We have once again masterfully managed extreme market volatility across a wide range of commodities, and delivered outstanding results regardless of market conditions," he said.

The Swiss NGO Public Eye employed a less managerial language. On Thursday, January 19, it published a report on the ultra-lucrative commodities trading business in Switzerland. "While millions of people are under threat from acute food and supply insecurity caused by rising food and energy prices, commodity traders are booking historic record profits by taking advantage of market disruptions," the NGO said.

Flow growth

Just like its competitor Trafigura, the Vitol Group, the world's leading oil trading company, has also already broken through its own ceiling, with $4.5 billion in profits for the first six months of 2022, compared with $4.2 billion for the twelve months of 2021. The Gunvor company, for its part, has announced a fourfold increase in profits for the first half of 2022 compared with the first half of 2021.

It was co-founded by the Russian oligarch Gennadi Timchenko, a close associate of Vladimir Putin who is on all the Western sanctions lists. For a long time, the high society of Geneva has benefited from his generosity through Neva, his wife's philanthropic foundation. The man officially sold his shares in Gunvor to his Swedish business partner, Torbjörn Törnqvist, shortly after Russia annexed Crimea in the spring of 2014.

One commodities giant, however, outpaced  all others – Glencore (oil, gas, coal, minerals, metals, etc.). According to the Financial Times, the group based in Baar, in the mild tax climate of the Alemannic micro-canton Zug (central Switzerland), is "one of the biggest winners from the turmoil on the commodities markets unleashed by the war in Ukraine." It saw its profits grow by 846% to $12 billion in the first half of 2022 year-on-year.

Contrary to assumptions made at the beginning of the invasion of Ukraine in late February 2022, all indications are that commodity flows have not dried up, quite the opposite. The exponential increase in profits made by trading players would even tend to prove that this growth is not only due to the rise in prices. Clearly, the war has also led to an increase in the volumes traded in Switzerland.

A legal framework considered lax

Whether they "deal" in energy commodities (oil, gas, coal) or agricultural commodities (grain), none of the international operators based in the Swiss Confederation publishes precise figures that would provide details of their operations. "Because of that opacity, which is nothing other than a political choice," Public Eye has established its own estimates of the significance of the traders in the Swiss economy

In roughly a decade, the Alpine country has become the world's largest commodities trading center, overtaking London, without the goods ever physically passing through the shores of Lake Geneva. At least half of the world's grain trade takes place there, as does 40% of the coal trade, while one out of every three barrels of oil on the planet is sold in Geneva.

In roughly a decade, Switzerland has become the world's largest commodities trading center

The sector alone now accounts for 8% of Switzerland's gross domestic product, on par with the financial center, but ahead of the pharmaceutical and chemical industries. The financial center has been regulated since 2007 by a market surveillance authority, after Switzerland had gone through difficult years under double pressure from Europe and, above all, the United States. That, however, is still not the case for the trading sector, which benefits from a legal framework that is considered lax.

That Swiss exception has so far not given rise to any political will to clarify the situation. Only the Zurich Green MP Balthasar Glättli has taken up the issue. In September 2022, he submitted an initiative to the National Parliament in Bern, calling for "significant windfall profits resulting from the war against Ukraine" to be subject to a higher federal tax rate. But in Switzerland, most taxes are levied at the cantonal level, resulting in constant tax underbidding between cantons to attract international players.

France's elusive promise: Cutting nuclear power to 50% of electricity production

At first, France planned to cut the share of nuclear power in its electricity production to 50% by 2025. Then, 2035. Now, the target looks set to be scrapped altogether.

Le Monde by Adrien Pécout

Published on January 24, 2023

The French state's inconsistencies on nuclear power can be expressed in a single percentage, originally one of the 60 electoral commitments made by candidate François Hollande ahead of the 2012 presidential election. That promise was to reduce the share of nuclear power in France's electricity production to 50%. But in 2021, the figure stood at 69%, down from 75% a decade ago. Ahead of the 2012 legislative elections, this promise had also helped seal the victorious alliance between the Socialists and the Greens. The promise became law in 2015, under Hollande's presidency, with a "horizon" set for 2025. Four years later, under President Emmanuel Macron, the "horizon" was postponed to 2035.

"This measure primarily has a declarative value," explained a person familiar with the inner workings of Hollande's Socialist government. "The horizon, when you approach it, moves further away." In a speech on the environment in November 2018, Macron stated that this percentage had been "brandished as a political totem", but that after a "pragmatic expertise", it had turned out to be "unattainable" by 2025.

Pushed back by a decade, the "totem" finds itself, even today, threatened to the point of risking obliteration. Its critics are already interpreting this as a sign that nuclear energy is back in favor. Which does not necessarily mean that the goal of reducing the share of nuclear power in the electricity mix out of reach. That will also depend on the State's capacity to speed up the production of wind and solar energy.

From ceiling to floor

The question is back on the table sooner than expected. On Tuesday, January 24, the Sénat will vote on a bill aiming to simplify administrative procedures for the construction of new nuclear reactors. Amended by the right-wing Sénat majority, the bill now plans to set a new energy policy. Rather than cutting nuclear power down to half of all electricity production, the new target is to "maintain the share of nuclear power in electricity production at more than 50% until 2050". The ceiling would turn into a floor.

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According to Energy Minister Agnès Pannier-Runacher, such a decision would be premature. But the government itself proposed to remove the 50% target. Their amendment, which was rejected by the Sénat, sought to include a vaguer goal, defined as "diversifying the electricity mix, aiming for a better balance between nuclear and renewable energies". Some observers believe the proposal was primarily a political play before sending the bill to the Assemblée Nationale, as way of pleasing pro-nuclear MPs, particularly on the right.

When contacted, the minister's entourage justified its "objective of diversifying the energy mix without setting a reference figure" by saying it was better to wait for the conclusions of public debates on energy consumption and the construction of new nuclear reactors. In the second half of the year, Parliament will discuss the "programming law" on energy and climate which sets policy goals over a timespan of several years. The 2019 energy-climate law had set a deadline on July 1 for this new programming law, but the pension reform will take up most of the legislative agenda until then.

Promised shutdowns

"The share of renewable energies will increase" over the decade, according to the same government source, insofar as the inauguration of any new nuclear reactor is envisaged at the earliest for 2035 – apart from the eternally pending EPR reactor in Flamanville, Normandy, where construction began in 2007, but which will only be functional in 2024 at the earliest.

A decade ago, the mood was more one of promised closures. In November 2011, eight months after the Japanese disaster at Fukushima, the governing agreement signed by the Socialists and the Greens targeted a "progressive" closure of 24 out of the 58 working reactors. The first ones to shut down, with "immediate" effect, were meant to be the two units at Fessenheim plant along the German border. They eventually were decommissioned – in February and June 2020, well after Hollande left office.

His successor Macron initially followed in the same direction. In 2018, he announced the definitive shutdown of 14 reactors by 2035, including those at Fessenheim. These are 14 closures are written into law, as they were included in the pluriannual energy programming law of April 2020.

A disoriented industry

In the meantime, the war in Ukraine and soaring energy costs caused the matter to be reconsidered. Nearing the end of his first term, Macron announced in February 2022 that France would relaunch its nuclear industry, citing the need for low-carbon electricity.

Not only did he announce the building of six to 14 new reactors – he also opened the door for an extension of the lifetimes of all existing units beyond 50 years, contradicting his previous announcements on closures. "I hope that no nuclear reactor in a state of production will be closed in the future, given the very significant increase in our electricity needs, unless, of course, safety reasons were to prevail," he said.

"As it stands, the percentage is vague and unquantified, everyone can interpret it as they wish"– Boris Solier, lecturer at the University of Montpellier

The contradictory promises of the past decade disoriented the industry, which was more readied for closing reactors than building them, according to Jean-Bernard Lévy, who was head of the state-owned electricity company EDF until August 2022. "We were told: 'your nuclear fleet will decline,'" he said.

The frequent revisions of the 50% target "reflect the strategic hesitations of the government regarding nuclear energy," said Bruno Villalba, a professor of political science at AgroParisTech. "When Hollande gave the environmentalists a pass with Fessenheim, he did not, for all that, program a series of closures."

During his first presidential campaign, in 2017, candidate Macron took up the promise to reduce the share of nuclear energy by 2025. The energy chapter of his policy platform had been co-ordinated by former Socialist MP Arnaud Leroy, who was subsequently appointed to head ADEME, the government agency for environmental transition. The goal was "difficult" to fulfill, admitted then environment minister Nicolas Hulot as early as November 2017. "I prefer realism and sincerity to mystification," he added.

Lack of precision

The 50% figure always lacked precision, for the simple reason that the energy legislation does not define the goal with an absolute value. It was born from the need to reach a compromise between the Greens, who wanted to abandon nuclear power, and the Socialists, who wanted to preserve the industry. It was a political target more than anything – "A goal or massive and structural reduction for the first time since the installation of the nuclear facilities [in the 1970s], without new construction," said Green MEP David Cormand, who was involved in crafting the agreement with the Socialists.

Another key goal, from the outset, was to reduce dependence on nuclear energy in the event of problems (such as the corrosion observed in recent months in some reactors) and to encourage investment in renewable energy.

"As it stands, the percentage is vague and unquantified, everyone can interpret it as they wish," according to Boris Solier, lecturer at the University of Montpellier, a specialist in energy economics. And for good reason: The more electricity production increases, the heavier the 50% benchmark would weigh in absolute terms.

But since 2015, the law on the energy transition for green growth sets a better-defined ceiling: It limits the maximum power of the French nuclear fleet at 63.2 gigawatts (GW). This regulation was meant to force EDF to shut down the Fessenheim power plant in exchange for the launch of the Flamanville EPR reactor, which is still pending. "A law on energy transition that really followed the goal of reducing the share of nuclear power should have included a gradual decrease in this ceiling. That solution was not chosen," said former environment minister and Green politician Cécile Duflot.

Coupled to wind and solar energy

That ceiling is now likely to be removed by another amendment from the Sénat's right-wing majority. Some experts say that would be a non-issue, because the ceiling seemed compatible with all models for 2050, alongside a massive deployment of wind and solar power, according to the analyses from grid operator RTE.

Assuming that some of France's nuclear reactors – 37 years old on average – are still functioning by then (24 GW of the current 61 GW, with the oldest reactors due to close), and if 14 new reactors are built along with several small modular SMRs (a total of around 27 GW), the combined power of the nuclear plants would still be lower than the 63.2 GW limit currently written in law..

"Even with 14 new reactors, the share of nuclear power will not exceed 50% by 2050," Minister Pannier-Runacher told the Sénat. But for 2035, that remains to be seen.

Is Venezuela back on its feet?

by Elias Ferrer, 20 January 2023

The oil market determines the fortunes of Venezuela’s leaders.

L.C.Nøttaasen

As I roamed around Caracas in November, I could not help but become frustrated by the traffic jams. Just two years ago, drivers could hardly get any petrol. In 2020, unable to produce its own fuel, the oil-rich country had to wait for Iranian tankers to bring the refined product. But in shops across the city, full shelves contrasted with the infamous images from just a few years ago. Prices were often displayed in US dollars rather than the national currency, bolivars. Malls, supermarkets and restaurants were full of customers. I was puzzled, as many could afford $18 for a burger and chips at Puerkos, a popular fast-food chain.

During this stay, I witnessed the ‘clásico’: Venezuela’s main baseball rivals, Leones and Magallanes, played before a packed stadium, with energetic fans drinking pints of beer and splashing them on each other. My local friends said it was nice to see the seats fill up again. In the depths of the crisis that wreaked havoc on the country, few could afford to enjoy themselves at stadiums.

The recovery was evidently unequal. On the wealthier east side of Caracas, where Ferrari opened a new franchise last year, locals were building new fancy homes and offices. The international front was also changing. As I landed in Venezuela, the country’s ruler Nicolás Maduro attended COP27 and had a short exchange with Emmanuel Macron. Between handshakes and smiles, the French president offered to call his counterpart after the meeting.

The new normal

Since economic troubles started around 2014, between 5 and 7 million people have left the country, with many sending much needed remittances back home. US dollars have become widespread, slowing inflation as parts of the economy stay unaffected from the local currency’s downturn. Oil production has timidly picked up and, crucially, after Russia’s invasion of Ukraine the US and Europe are once more interested in buying it, after having banned Venezuelan oil as part of a broader an economic blockade. The Venezuelan state has also sought to increase domestic production and, most importantly, encourage other exports.

In this vein, mining has become an important source of export revenue. The country’s soil is abundant in gold, cobalt, iron, bauxite and diamonds but, with the discovery of oil in the early 20th century, swathes of Venezuela’s interior were depopulated and much of its vast mineral wealth remained untapped. While some foreign corporations were interested in exploiting these minerals, their worth was small in comparison to the revenues brought in by black gold. I spoke to a government official from Ciudad Guayana, in the mineral-rich Orinoco basin. He told me that gold is flown from there to a Congolese mining firm, which manufactures ingots, to pay for imports in lieu of cash. Turkish firms have also been involved in processing Venezuelan gold ore. Still, given that this trade is intended to counter sanctions, it is hard to know the details. Journalists from the Wall Street Journal, the Times and the BBC have offered numbers, but they are not able to know with certainty.

Maduro’s socialist-styled government has given concessions to local and foreign businesses. Many price controls have been removed, and state-owned firms are now issuing a minority of shares in the national stock market. Special economic zones are being prepared, for instance in Tortuga Island, in a bet to bring back international tourism. In the year up to August 2022, the bolivar saw a period of surprising stability. Most investors, however, are wary of the risks, and have a bad memory of expropriations, bond defaults and hyperinflation. Even if the economy is recovering, it is still far from what it once was. At $82.15bn, Venezuela’s GDP is still 62% lower than in 2014, when the crisis began, according to IMF figures. It is true that most Latin American economies are yet to return to the abundance afforded by the commodities boom between 2000 and 2014, but no other has fallen so deep as Venezuela’s.

The official inflation rate for the first 11 months of 2022 is 145%. In relative terms, this is good news to those used to six-digit figures. According to the official rate, on January 1st, 2022 $1 was equivalent to Bs4.60, but by December 1st it had risen to 11.25 bolivars. I paid $5 for a traditional arepa plus a drink. At the start of the year, that would have been 23 bolivars. Yet as I sat down at the table, the price had become 56.25 bolivars. Many workers, especially in the public sector — including teachers and doctors — are paid in bolivars, and rapidly lose their spending power by the day. Meanwhile, business owners or the self-employed can demand to charge only in dollars, and can therefore afford to have a more stable lifestyle.

Products from global conglomerates, from Mars Incorporated and Nestlé to Mexico’s Bimbo fill the shelves to the brim in supermarkets and bodegones — local shops that flourished by selling foreign items during shortages in the economic crisis. Still, prices are only affordable to those with dollar incomes. The poor majority relies on a monthly subsidised food package and buying from street markets where they can procure fruit, vegetables and the staple corn flour. Prices are abysmally different for different people; I bought two kilograms of fresh produce for the equivalent of $1.5. This was cheap for me, and for Venezuelans who earn in dollars. However, the monthly minimum wage is Bs130, which at the end of November equalled $11.56.

All-in on oil

The political fortunes of Venezuela’s presidents have historically depended on the oil market. Hugo Chávez, whose presidency lasted from 1999 to 2013, rode the commodities boom. Under his presidency, Venezuela’s GDP quadrupled. In 1998, the year Chávez won his first election, GDP stood at $91.8bn. In 2012, the year before he passed away in office, he saw the figure reach its highest peak at $372.75bn. His project, the ‘Bolivarian revolution’, brought education, health and housing to many of the country’s poor, alongside other subsidised services. He also offered poorer countries and communities fuel at discounted prices.

In 2013, the ‘OPEC basket price’ for oil — Venezuela is a member of the club — stood at $109. Prices only fell from there, and sharply. As Chávez died, then-vice president Maduro stepped in, taking the full hit. In 2016 the same benchmark price was at $40.76. The regime that could pay for everything it wanted was now cash-strapped. At first, the response was to print bolivars to pay the exorbitant bill, but that became the catalyst for the extreme hyperinflation that has made Venezuela infamous.

From 2015, US-led international sanctions started hitting Venezuela’s economy. Individuals were targeted, but the country as a whole was effectively blockaded. Among other measures, the government was cut off from debt and equity markets, Venezuelan oil was banned in the US and overseas assets were frozen. Western banks withheld reserves and refused to process payments. Citgo, a sizable subsidiary of Venezuela’s state-owned oil company (PDVSA) in the US, was seized and many of its assets liquidated. In a move that later proved ironic, Texan refineries were repurposed to process Russian oil, as it was of a similar grade. The sanctions and low oil prices not only hit government coffers, but also PDVSA’s capacity to sustain its operations. For a few years, having the world’s largest known oil reserves meant little.

In 2019, the economy was in full collapse with little export income, hyperinflation and asphyxiating sanctions. The Trump administration recognised the then-head of the national assembly and opposition figure Juan Guaidó as interim president until free and fair elections were held. A coalition of Western and Latin American countries followed suit in recognising Guaidó and sanctioning Venezuela. Maduro was no longer ‘president’ but an illegitimate ‘usurper’. Isolated and unpopular, it seemed like Maduro’s days were numbered.

Oil is back on the table

Now, Maduro’s status as a pariah seems to be ending. Most of the Latin American governments that once called for his removal have been ousted by their electorates. Brazil, Colombia and Argentina are the most notable cases. Though not allies of Maduro, they are reopening trade and embassies. This year, Macron also publicly called for the US to allow for Venezuelan fossil fuels in Europe. As recently as 2019, France had recognised Juan Guaidó as the legitimate president.

This year, the Biden administration has sent at least two delegations to negotiate with Maduro, who is once again ‘president’ in Western discourse. He was not invited to this year’s Conference of the Americas, though Guaidó was also shunned. When asked about the absence of Venezuela’s ‘interim president’ in a press conference, House Speaker Nancy Pelosi asked, ‘Who?’ and failed to acknowledge him.

The Biden administration is toeing a thin line. On one hand, it cannot simply turn around and declare Maduro a friend now that Russia is the official enemy. On the other, Texan refiners and European consumers need Venezuela’s oil and gas fields running. As of today, forcing regime change seems unlikely. By lifting some sanctions, the US has brought chavistas and the opposition together at the negotiating table in Mexico. The aim is to bring about ‘free and fair’ elections; the US could judge them not to be adequate and reimpose sanctions. So far, the Biden administration has opened up on the energy front. Chevron has been given permission to pump Venezuelan oil, and European firms Repsol and Eni to ship it home to repay debt. Additionally, frozen assets worth $3bn in Western banks have been freed up to be invested in health, education and infrastructure under the UN’s supervision.