Anti-nuclear movement, helping the German economy go wrong

This week we have witnessed the incredible announcement by German Chancellor Angela Merkel saying Germany will abandon nuclear power totally by 2022, when it will shut down the last 3 remaining nuclear plants that will be in service on that date. Germany has a total of 9 nuclear plants providing energy to the grid as of now, accounting for 23% of the energy mix. Merkel's bet is to replace nuclear power with renewable energies, a move that is expected to harm the German industry greatly by increasing its energy bill. In fact this will be the second most important factor to hit Germany's industrial competitiveness in a row, the first one being the actual exchange rate of the euro against its clients' currencies. 

Neckarwestheim nuclear plant

Even though Germany is the world's 4th biggest economy and Europe's number one, it is not bullet-proof. The last thing the German industrial sector needs is its energy bill rising non-stop or being unpredictable. Because let's face it, whether you are pro-nuclear or anti-nuclear you know shifting from nuclear power to any other source of energy is an expensive move. 

In the case of Germany, the shift will be made towards renewable energies, which are expected to add up to 35% of the total energy mix in 2022 (up from 13% today). In a country where the industrial sector takes more than 50% of the total energy used, the main problem with renewable energies will not be their price, but its unpredictability causing blackouts. The sun not shining, the wind not blowing or simply a specially cold winter day could cause a blackout on peak-hours. When renewable energies are used to cover domestic demand, this unpredictable behavior can be covered with some natural gas power plants, which are fast enough to be plugged into the grid when needed and disconnected shortly afterwards. But industrial demand is far bigger and more important, so that could mean said natural gas plants have to be on most of the day to avoid power disruptions, which would probably kill Merkel's objective of slashing carbon emissions by 40% in 2022, meaning she would have hurt German industry for nothing.

So what are the reasons for such a sudden rush in leaving nuclear energy behind?

Misunderstanding the commodities plunge

Last week we witnessed the biggest plunge in commodity prices since the post-Lehman era (2008). Every commodity fell an average of 10% during the weak: wheat, cotton, soybeans, iron, zinc, silver, gold... even the mighty oil took a step down (and that is big news!). Part of this plunge was quickly erased as a rebound started right on last friday, but the situation is quite stable at the time I am writing this.

People started to reason that the recession was back, that the industrial sector was not growing as expected, that we are not producing enough or consuming enough of what we produce, that a dry spell could risk wheat crops in some parts of the world... According to these same people sometime during last week we stopped eating too, because food commodities also fell. These people are very wrong, we never were recovering strong enough to justify the never-ending rise of the last months neither we have suddenly stopped recovering now to justify the plunge. What are the real conclusions we can take away from last week's events? 

I see clear proof that speculators rule the commodities market.