Thread by @AndrewJWHaynes

I have been a close observer of energy policy in Argentina for nearly twenty years. What I see now in the EU brings to mind Argentina's responses to high energy prices and shortages. A🧵to warn you what can happen when politicians take over energy markets: /1

https://twitter.com/AndrewJWHaynes/status/1564480013470093312

1. Politicians protect Voters/Households from consequences of bad energy policy - preventing Demand Moderation. Price Caps/Subsidies to Households/Limiting Supply to Industry - whatever they have to do to keep Voters/Households' energy supplied and costs low. /2

2. Utilities and Transporters Get Squeezed - Profits eliminated through Price Caps and Regulation. Shareholders and Creditors of Utilities and Transporters are left out in the Cold. /3

3. Capex Eliminated and Opex Slashed - Energy infrastructure does not grow - is frozen. Maintenance Capex ratcheted back as is Opex. Initially the system continues to function, but over time lack of Maintenance Capex sees regular Energy Infrastructure system failures. /4

4. Industry Left Short of Energy & Political Lobbying/Favouritism Determine Who is Supplied. Politicians incentivised to keep Voters happy, so Households come first. Critical industry like Power Plants & Hospitals have a good claim to be supplied. After that it's Political. /5

5. Buyers/Importers of Energy Become Less Credit-Worthy, so must provide more Credit Support & Pay Higher Prices to Foreign Energy Producers to obtain supply. Gov't support for Energy Importation becomes Vital. Who can obtain such Government credit support becomes Political. /6

6. Exports of Energy - Gas, Power, Liquid Fuels, Coal - are reduced or eliminated. Neighbouring countries and trade partners are left to share some of the suffering (as Argentina did to Chile in 2006). /7

7. Political Control of Energy Sector, Bad Reactive Energy Policy & Low Returns Lead Energy Companies & Investors to Avoid Investing in-country. Investors are local players connected to politicians. /8

8. Explicit & Implicit Energy Subsidies to Industry & Households Remain in Place for a long time for political reasons. This will create a fiscal issue for public finances for some time. /9

9. Politicians Like the Power and Stay Involved in Energy Policy and Energy Markets for a Long Time - well after any crisis. /10

10. Explicit and Implicit Subsidies for Existing Energy Sources make penetration of new energy supplies difficult. A stasis of sorts sets in in the energy sector. New innovation and investment is limited, and dependent on politics. /11

11. There are policy options to meet immediate crisis needs: e.g. Credit Support to Utilities; Direct Subsidies to Poorest Households; Incentives to Non-Exporting/Consumptio Industry to Restrict Energy Usage; but when Politicians Step into Heart of Pricing & Supply - watch out.