Estonia’s inflation hit 25% year-on-year in August, energy prices to blame

https://estonianworld.com/business/estonias-inflation-hit-25-year-on-year-in-august-energy-prices-to-blame/

by possiblelion • 4 years ago

44 119 4 years ago

gadders6• 4 years ago

Net Zero and allied green policies really are the gift that keeps on giving.

nicoburns4• 4 years ago

If we’d built out renewables more aggressively in the last decade we’d be a lot less reliant on fossil fuels, and energy costs would be a lot lower.

gadders6• 4 years ago

We physically can't build enough windmills to replace fossil fuels. They'd take up too much space.

I'm all for having renewables when the technology is ready, but it's not and high energy prices will start killing old people that can't afford to heat their homes.

djbebs• 4 years ago

Of course, and im sure if the soviet union had just been more socialist we'd all be living in a workers paradise.

hotz• 4 years ago

LOL

omginternets3• 4 years ago

Where does the power come from on overcast and windless days?

Renewables definitely have their place, but they are nowhere near being able to replace the continuous production of FF and nuclear plants. Moreover, the grids were neither designed nor built to deliver power from massively distributed, massively variable sources.

There's a third problem too, which ecologically-minded people seem to overlook: renewables are only "renewable" if you consider the real estate they occupy to be infinite.

Again, there is an important place for these technologies, but it is not the case that we simply should have built more.

belorn• 4 years ago

The two data points that determine the market price in nord pool right now is the gas price and transmission costs. The revenue that renewable power plant owners get is determined through those mechanism rather than by what production cost those renewable plant owner has. As the economist here has reported in the news, more renewable energy doesn't translate to lower prices at this point in time.

EU are considering capping the price roof in order to address this so that energy prices start to match that of production costs. The European grid also need overproduction if we are to have market forces driving down prices, and you need large and effective transmission lines in order to distribute the renewable energy without bottlenecks. We also need to have reduction in energy usage when renewable energy production is low, and we need to reduce the dependency on the quite aged hydro power installations in the northern parts of Europe. The water reserves at those hydroelectric stations is also in a historically low levels, likely caused by a combination of climate change and poor management.

We need more of everything if we are to disconnect the Russian gas from European energy market.

tehlike2• 4 years ago

ESG is the other one.

__alexs• 4 years ago

How has ESG increased prices for consumers?

_njyk2• 4 years ago

It started before the war.

The cash that the governments printed via negative interests to give to the VCs and to real-estate owners really skewed the local market (increasing both prices and costs of producing).

The Estonian gov has basically no tools to fight against the real estate bubble either or to bankroll the most fragile startups (and they may not be as strong as they seem), so we're basically fucked.

Regarding energy, we had 4000 EUR / MWh prices a couple of weeks ago for an hour.

Think of it as oven / sauna / air conditioner costing you 10 to 25 euros per hour (if I remember right, it didn't matter that much when you have no other choice than turning them off).

For energy this is mostly because of the war, but ecological policies also affected (Estonia was known for "dirty" petrol, known as shale oil, and they are restricted there).

The only retail companies that try hard to provide good prices are LIDL and IKEA, and in that regards, they are great.

Other distributors have very poor logistics as they consider Estonia as the very end of their distribution chain (no matter if for Baltics, or for Scandinavia we are at the end of the West).

Etheryte2• 4 years ago

This makes no sense, the majority of the inflation is simply due to rising energy prices, what does the small Estonian startup scene have to do with any of this?

_njyk2• 4 years ago

It's a mix, but startups clearly skew prices higher.

Salaries gets higher too because of much corporate cash, there is this nasty infinite loop of inflation -> salaries -> inflation -> salaries.

This is why in the newspapers we occasionally see rants from the population that foreigners destroy the quality of life by pushing prices higher.

One cause is that there is a limited amount of space in Tallinn but high attractivity for IT foreigners (due to low taxes and high startup funding).

This means that good housing is though to find for a decent price (check kv.ee for example), and that there is not enough housing for everyone.

Not enough housing means lot of construction needed.

Lots of construction worldwide + scarce construction supply + abundance of money + lot of people = potential housing catastrophe.

Concretly, for example, I wanted to buy a reasonably priced house in the countryside (500K EUR for 160m2 / 1700sqft), and someone who sold his Pipedrive or Transferwise shares (I don't remember) came and offered over 100K more than the list price. This is very broken (and I say that though I am also a startup guy, so I feel it's sad/wrong for the non-IT Estonians).

The city also have 50K to 80K refugees that came in a few months. Where do you host them ?

Well, you pay high price for rent.

zoobab• 4 years ago

"The cash that the governments printed via negative interests to give to the VCs and to real-estate owners really skewed the local market as well (thus increasing prices)."

Finally someone who undestood this was not linked to the war in Ukraine, but to the policy of the ECB to print money at will.

epistasis4• 4 years ago

Are you saying that it's "not links" and that Ukraine did not have an impact on energy prices? That does not seem plausible but I may be misreading you.

pydry2• 4 years ago

I'll never understand people who try to chalk up inflation to one reason alone.

epistasis4• 4 years ago

That's not the full picture. Demand for gas is still down below pre-pandemic levels.

Inflation may be too much money chasing too few goods, but the "too few goods" part is absolutely crucial here. And if we want and expanded economy, the "too few goods" part should be the focus.

mrtksn2• 4 years ago

IMHO free movement of capital without free movement of labor is a true plague.

Any country that has achieved good living standards sees their citizens pushed out of housing by the rich people of other countries. Since the inflow is capital-only, you don't see inflow of people who can contribute to the society but you see people who come and consume resources just because they made wealth buildup oversees.

People like to blame it on immigrants but when working class immigrants come they works their a*ss off and contribute huge amount into the society.

It's almost like enslavement.

Someone in a corrupt county somehow builds up some wealth, which is essentially what the society owes them(IOU). Normally they would figure out what is actually owed to who by themselves but they take that IOU's and move to, let's say a country that has good living standards, like Portugal. Now the government is happy about it because they have IOU inflow that they can tax or stir up the economy but these rich people often don't use the IOU's to bring machinery or pay Portuguese to do research or anything like that. What they do is real estate investments.

Normally that would have been O.K. but since that money is not moving in a free market(remember, only the money can move. It's very hard to move around people and services), what you have is extreme market movements due to extreme capital movements without extreme movements in labour.

For example, when a Russian oligarch brings 10 billion dollars to London, suddenly huge demand is created but Russians who owe the oligarch the services can't come to build houses needed. Obviously their money goes into other parts of the British economy but you end up with Russians in poverty, overpaid people in some sectors where the oligarch money flows and local residents who cannot afford to pay rent despite working very hard.

That's why I'm proponent for restriction of capital movements wherever there are restrictions on human movements OR removing all restrictions on all kind of movements. In the first case we will have a patchy world where those societies who got their act together flourish(but they might do nasty things to the weaker ones. Also we lose many benefits of globalisation, like specialisation) and with the second option we will have an equalised world based on merit(however the transition will be very painful for those who are in a good standing currently, it also takes generations to learn to live together).

cloutchaser4• 4 years ago

I think you are right about the symptoms but misdiagnosed the disease.

Unfortunately I think our minds cannot comprehend how much wealth has been created in the world in the last 30-40 years, and how many rich people that's created out of the 8bn world population.

Something like 1.4m americans have a net worth above $10m. 1.4m!!! And that's just the US. Can you imagine how many millionaires the world has created? Now imagine how much real estate actually exists in the city centers of large cities in the world. Not that much. Especially in popular cities. Nowhere near enough for this wealth to go into.

This isn't about oligarchs, or rich dictators. There's nothing illegal going on here (there is a little, but its negligible).

It's the world population and the wealth we've created. It's insane. A lot of people have gotten very rich.

_xnmw2• 4 years ago

The utter stupidity of thinking that sanctions could be an effective response or deterrent to military aggression boggles my mind. Force must be countered with force, nothing less. Anyone willing to expend soldiers lives is not going to be deterred by mere economic pain (the pain they've already chose, i.e. war, is much worse!). We don't impose monetary fines on murderers, we capture them and put them in jail, or kill them in the process.

Furthermore, sanctions, by definition, hurt both parties. It is impossible to design a boycott that doesn't hurt both the buyer and the seller. The only question is: who gets hurt more? If Europe was so determined to "stand with Ukraine" then they should've put soldiers on the ground over there, not shot themselves in the foot with sanctions on goods that they need.

idontwantthis• 4 years ago

How do you go to war with a country you also rely on economically?

Would Europe keep buying Russian gas while killing Russian soldiers?

skylabmelody2• 4 years ago

Europe is buying Russian gas at a premium through China and India.

lazyjones3• 4 years ago

Putting NATO soldiers on the ground is equivalent to declaring WW3, few are willing to do that.

Therefore, Ukraine's fate is sealed and the outcome is dictated by Russia's desires.

The open question is how long it will take and at what cost, to Ukraine, its allies and Russia. And it seems that there are vested interests in prolonging the conflict as much as possible.

Isinlor10• 4 years ago

It's not equivalent to declaring WW3.

Russia is not capable of fighting NATO and nobody besides Russia has any interest in Ukraine invasion.

But NATO soldiers are not needed in Ukraine. Ukrainians just need weapons.

Ukrainians have plenty of capable and very motivated men.

And the weapons are cheap, very cheap in comparison to loses from gas etc.

hkpack2• 4 years ago

Therefore, Ukraine's fate is sealed and the outcome is dictated by Russia's desires.

That is very far from the truth - please check the recent events. It is possible to fight against Russia, and it is in the best interest of the Europe and the collective west to do so.

For multiple decades Russia was using energy as a way to corrupt EU.

It was never only about Ukraine - occupation of Ukraine was always the first step. Baltic countries and Poland understand that very well, please listen to them. If Ukraine falls, Russia will invade Europe in a decade with Ukrainian military on its side.

Europe need to remove its dependence on the Russian gas completely for its own safety. Inflation is a very small price to pay compared to the alternative.

QuadmasterXLII• 4 years ago

If russia could conquer ukraine by wanting it harder, I think they’d have tried that? Russia has stalled and began losing ground because their army isn’t very good, not because of some detail of russia’s desires

ajsnigrutin2• 4 years ago

We don't impose monetary fines on murderers, we capture them and put them in jail, or kill them in the process.

Depends on the murderer.... sometimes we send them more soldiers to help them in places like afghanistan.. and syria.. and iraq.. and many more.

I live in a very small eu/nato country that noone cares about, and we still do it... so my taxpayer money is used for occupying eg. syria right now, in a conflict we literally have no interest in and profit nothing from.

thinkindie• 4 years ago

I think I've missed the news that EU/Nato occupied Syria.

dougmwne• 4 years ago

These sound like nice words on paper, but how do you go to war with a nuclear power without triggering Armageddon? It’s a serious question. MAD is absolutely still a thing and nukes are the best protector of sovereignty ever devised.

Isinlor10• 4 years ago

What should we do if Russia attacks Finland tomorrow? Or Baltics or Poland?

Well, good game, now give up, they have nukes? ...

Also Ukraine does not ask for military interventions.

Poland offered military intervention, Ukraine refused.

Ukrainians want weapons.

viraptor3• 4 years ago

Anyone willing to expend soldiers lives is not going to be deterred by mere economic pain

You're assuming that money and power matters less to Putin / oligarchs than soldiers' lives. I'm not sure that's a valid assumption.

We don't impose monetary fines on murderers

Individually - no. At a larger scale - yes. For example fines / taxes from https://www.epa.gov/laws-regulations/summary-clean-air-act

_xnmw2• 4 years ago

You're assuming that money and power matters less to Putin / oligarchs than lives. I'm not sure that's a valid assumption.

My point is, they've already risked far more than just their money and power by going to war. They've also risked their lives (if there was a coup, they'd be dead), and the lives of their countrymen, and the future/standing of their whole country. Such people are not going to be deterred by sanctions they already knew were coming.

nprateem2• 4 years ago

Most murderers don't have thousands of nukes

celticninja3• 4 years ago

The sanctions ensure that even those Russians who don't send their children to fight and die in Ukraine feel the effects of the war. Plus if Europe out boots on the ground the chance of nuclear escalation is increased. Sanctions are part of the package, not the whole package.

Also Europe doesnt need Russian gas. It has become reliant on it sure, but it is weaning itself off that and that gives them more power and Russia less in the long term. Your points look at the immediate short term (less than 12 months) and does little to consider beyond that timeframe.

cloutchaser4• 4 years ago

Also Europe doesnt need Russian gas.

Jesus christ. What have you been reading.

criley26• 4 years ago

The utter stupidity of thinking that (hey, this is your line, I'm just repeating it) NATO could put soldiers into Ukraine without starting a thermonuclear global holocaust in the form of WW3.

I would go so far as to suggest that NATO has done 110% of what they can against Russia. Unlimited money for Ukraine, unlimited supplies for Ukraine, unlimited training for Ukraine, and even now basically unlimited intelligence! Think of the HIMARS! The Karkhiv offensive is Ukraine's 'first truly western' attack, complete with a southern feint, built entirely on western intelligence and strategy. And as a result, Ukraine is routing the Russian military who are in drop-everything-and-run mode in half of Ukraine. Is that not a success??

Europe/US westernized/NATOized the Ukrainian military in about 6 months flat and spared no expense in the process.

Short of starting a nuclear world war 3, it's hard to imagine doing more.

451mov3• 4 years ago

The wests "support" amounts to indebting Ukraine for the next 100 years.

https://en.wikipedia.org/wiki/Ukraine_Democracy_Defense_Lend...

Bayart3• 4 years ago

The Ukrainian army has been brought up to NATO standards over the last 8 years. The training programs for officers and NCOs were quite successful.

Isinlor10• 4 years ago

NATO intervention would not trigger WW3. Nobody is interested in invading Ukraine, besides Russia.

Also, Russia is capable to start a thermonuclear global holocaust at any point. They could literally say tomorrow - either you give us Warsaw Pact / Russian Empire territories or we start a thermonuclear global holocaust. What then?

But Ukrainians are not asking for military intervention. They are asking for stuff like ATACMS.

brnt• 4 years ago

Force ain't free either. I frankly think it's pretty good, being at war without the casualties (on my safe-ass European side that is).

Vinnl• 4 years ago

I think (though I'm just regurgitating something I read somewhere) that the idea behind sanctions is not to use them. If you're using them, they've failed, in a sense.

So the idea is not so much to "stand with Ukraine", it's to stand with whoever is next. The threat of sanctions should be enough to prevent the future use of force, but you have to be prepared to pull through when they're ignored for that to work.

hackerlight• 4 years ago

effective response or deterrent to military aggression

(1) We shouldn't conflate current deterrent & future deterrent. Putin may be all in already, but you can signal to a future autocrat that he'll risk the stability and safety of his rule if he follows in Putin's footsteps. Selfish autocrats don't want to die.

(2) Some targeted sanctions are actually effective. You hamper their military industry supply chain, which they need for a long war.

agilob• 4 years ago

Sanctions made things worse, but Baltic countries and Poland were leaving Russian and Belarusian gas, oil and coal for long time making it not great before Russia attacked Ukraine. Estonia left Belarusian gas a month before the attack, same as Poland banned import of Russian coal causing shortage of coal locally. The countries were doing it for decades, slowly but surely moving to others sources of fuels. The sanctions only accelerated this energy crisis that was in the making. The countries are not super relevant and I wasn't able to find many sources for it in English, but here are some:

08.12.2014 https://www.reuters.com/article/baltic-gas-idUSL6N0TS2T32014...

17.10.2018 https://www.washingtonpost.com/world/2018/10/17/eastern-euro...

03.02.2022 https://news.err.ee/1608487619/estonia-suspends-all-oil-tran...

Bayart3• 4 years ago

Utter rubbish. If you want to send kids to war, do it with your own.

Ukraine is neither in NATO, nor the EU. The best course of action is supporting it while it frees itself with its own means, which is what is happening.

Isinlor10• 4 years ago

Ukraine is not even asking for military intervention.

Poland was offering intervention, Ukraine refused.

They want weapons. Offensive, long range weapons for counteroffensives. They have plenty of very motivated and capable men.

NATO can do that easily. We just adhere to some imaginary list of things that can and can not be delivered.

The cost of gas shortages are many times the cost of weapons and weapons make actual, immediate difference for people on the ground.

cloutchaser4• 4 years ago

So support it with weapons and whatever you want. But don't commit economic suicide in the meantime. Then you won't be able to support ukraine over the long run anyway.

Support and sanctions are two seperate things.

Isinlor10• 4 years ago

Ukraine does not ask for military interventions.

My country Poland offered military intervention during the first trip to Kyiv after invasion, Ukraine refused.

Ukrainians want weapons. Last I check they were asking for stuff like ATACMS.

Listen to what Ukrainians are saying. They know what is the best for them in the current situation.

type04• 4 years ago

Yeah, if Polish troops entered, with high likelihood Belarus would as well. At that point it was Putins dream to escalate it to as many countries as possible.

BurningFrog2• 4 years ago

War also hurts both parties.

bryanlarsen2• 4 years ago

This comment is not going to age well. Russian positions in Kherson and Kharkiv are collapsing like dominoes. The price that Russia is receiving for their oil due to sanctions is approaching their cost of production. Most Russian natural gas production is being flared off rather than being sold. European natural gas storage tanks are 80-95% full. 6 new LNG terminals are coming online in December. Rather than 40% less gas this winter, Europe will have 15% less gas.

Everybody who had a part to play in Russian defeat is going to be patting themselves on the back. Sanctions may have had only a small part in that, but it was a part, and anybody complaining about sanctions is going to be on the wrong side of history.

qwerty456127• 4 years ago

Can we be sure energy prices to blame alone, no serious contribution by the lockdowns?

wyuenho2• 4 years ago

And yet the EU keeps opposing an oil price cap

pydry2• 4 years ago

An oil price cap is fundamentally little different to a ban.

refurb• 4 years ago

How would that work?

If it costs $250EUR to deliver a barrel of oil, and you cap it at 100EUR, what happens?

If you were an oil company and the government says you can only sell your 250EUR barrel of oil for 100EUR, what would do?

wyuenho2• 4 years ago

Except that oil is nowhere near that expensive in reality, and oil companies aren't buying oil at anywhere near that price. The reason it's expensive in Europe now (for consumers) is because the EU lump oil and gas together into one price, and gas is expensive, so oil got expensive, but the oil companies haven't paid nearly that much to buy it in the first place. That's why they are having a massive windfall and the EU is going to tax them.

These are all problem can be solved by capping oil price. Oil is a buyer's market, the US and Canada are producing so much of it, if OPEC+1 reduces output, it just amounts to a suicide for them.

vintermann• 4 years ago

I guess this time we can admit a supply problem is to blame and not the usual money printing/government spending explanation, since Estonia is well known for having a tiny debt to GDP ratio.

markvdb3• 4 years ago

Properly managed, the Baltic states in particular will come out of this energy crisis as winners. Green energy is the very obvious answer for them, even more than for other countries. Cheap and reliable.

They have all that's required to be self sufficient and even exporters in terms of energy:

- little heavy industry

- very low population density in rural areas

- mostly centralised heating networks in urban areas

- plenty of cheap biomass, mostly for use in winter

- a fairly decent bit of sun, mostly for use in summer

- plenty of hydro power [0]

- fairly good hvdc interconnects

- plenty of cheap EU cofinancing

- a population largely ready to stick it to the godfather in Moscow

[0] https://en.wikipedia.org/wiki/List_of_power_stations_in_Latv...

heavenlyblue• 4 years ago

So given there's plenty of hydro available in Latvia, why are they only using 3% of their generational capacity and instead are burning gas?

Source: https://app.electricitymaps.com/zone/LV

markvdb3• 4 years ago

Thank you for the link. Really useful.

I don't know the answer to your question for certain, but let me make an educated guess:

- Some electricity production in Latvia is natural gas based cogeneration, meaning it needs to run for inhabitants to have hot water.

- At Pļaviņas hydro station [0], the biggest in the Baltics with 894 MW, water levels were lowered from July 11 until August 20 for maintenance work. Production might not have resumed yet.

- Latvia has an extremely large natural gas storage facility at Inčukalns [0]. This might have something to do with it.

[0] https://lv.wikipedia.org/wiki/In%C4%8Dukalna_pazemes_g%C4%81... (sorry, Latvian only)

Etheryte2• 4 years ago

These are the pros but you forgot to outline the cons. One of the big issues with green energy in the Baltics is the lack of grid capacity. You can have solar panels fitted but unless the grid has enough throughput for you to be able to actually sell it back it's not worth much. These days the costs to upgrade the local grid are prohibitively expensive so it's not going to happen unless the government does it.

markvdb3• 4 years ago

I'd expect a somewhat half capable government to take care of that using 85% EU co-financing like what happens for about all crucial infrastructure in the Baltics.

I only know about the situation in Latvia in detail. There, installing small scale solar really is quite lucrative. You can use the amount of excess electricity produced in summer in winter, paying only the very low standard network infrastructure fee on top. Plus subsidies: up to 4k€ for your solar install, up to 4k€ for buying an electric car, and up to 4k€ for a heat pump install.

ZeroGravitas• 4 years ago

Inflation that's not to do with wages seems a different problem to me.

If gas or tomato prices are going up such that everything that uses gas or tomatoes goes up. You could say that's inflation because gas and tomatoes are so widely used.

Or you could just say it's a price signal. You need to use less gas/tomatoes as they are in short supply.

It doesn't seem to be as circular as the wage based inflation, where the higher wages and the higher costs are the same thing and recurse.

tbihl• 4 years ago

If your wages track inflation, then you were previously underpaid for your skill set.

In reality, higher costs may eventually be followed by compensating higher pay, but in the interim everyone just works the same for the same (devalued) pay with a steep drop in discretionary spending because the step function to 'unemployed' is so painful that everyone would rather handle the price feedback through attrition. And in the meantime we get the shittification of all service that wasn't previously operating at high margins, because everyone is making do with understaffing.

And, of course, tomatoes are ridiculous equivalency to attempt. Transportation, energy, and agriculture all lie directly downstream of oil/methane costs, to name a few obvious examples.

Estonia’s inflation hit 25% year-on-year in August, energy prices to blame

Related Stories