Why Oil and Gas Strike At the Heart of German Geopolitics

 


INSIGHT


  • 1ST CENTURY A.D.: THE GERMANIC FOLK LEGEND ARMINIUS & THE GERMANIC TRIBES OF NORTHERN GERMANY FOUGHT AGAINST THE ROMAN ARMIES IN THE BATTLE OF THE TEUTEBURG FOREST.

  • THIS LEGENDARY BATTLE PUT AN END TO ROMAN EXPANSION BEYOND THE RHINE. ROMAN EXPANSION INTO NORTHERN EUROPE WAS FINALLY CONTAINED. ROME NEVER AGAIN EXPANDED EASTWARD ALONG THE NORTHERN EUROPEAN PLAIN.

  • AS A RESULT, GERMANY WAS DENIED ACCESS TO THE RICH ENERGY AND MINERAL DEPOSITS OF THE ROMAN WORLD – ON WHICH AN EMERGING GERMAN ECONOMY COULD HAVE BEEN BUILT IN LATE ANTIQUITY.

  • THE BATTLE OF TEUTEBURG FOREST CHANGED GERMAN AND ROMAN HISTORY. THIS MARKED THE BEGINNING OF GERMANY’S DEVELOPMENT INTO A CENTRAL HUB OF EUROPEAN AFFAIRS.

  • THE LIMES (GERMAN/ROMAN BORDER WALL) INITIALLY SLOWED ECONOMIC DEVELOPMENT EAST OF THE RHINE, BUT DID NOT PREVENT THE LATER EMANCIPATION OF THE EAST. UP TO THE ELBE, A GRADUAL ECONOMIC INTEGRATION TOOK PLACE, WHICH GRADUALLY LED TO A COMMON EUROPEAN MARKET IN THE EARLY MIDDLE AGES.

  • TO PUT GERMANY’S ECONOMIC DEVELOPMENT IN PERSPECTIVE, WE GOT TO TAKE A LOOK AT THE RESOURCE AVAILABILITY OF ENERGY IN GERMANY. 

  • GERMAN INDUSTRY HAS ALWAYS DEPENDED ON UNCOMPLICATED, EASY ACCESS TO THE WORLD’S ENERGY AND MINERAL RESOURCES; THE ACHILLES HEEL OF THE GERMAN ECONOMY.



1. Germany is a country with very few usable non-renewable, high-calorific energy resources. Coal is the only exception.


German history is best understood through the lens of the 1st millennium BC. At that time, the eastern Mediterranean was the true center of economic and civil life, and it maintained that status throughout antiquity. Part of the reason was the ease of doing business in a region that for its time had a dense concentration of resources and population. Along the borders of the eastern Mediterranean were a number of important states and little states. Although there was some variance in which states held dominion over this region, there was a consensus that the eastern Mediterranean was home to the most impressive cities in the ancient world during the 1st century, it could be argued. 

One could argue that the dominance of this region continues to the present day. We have recently seen the dramatic restriction of traffic through the Suez Canal. This has severely impacted international trade and resulted in decreased traffic through the Western Mediterranean and to Western and Northern Europe. So the region remains an important player in setting international energy policy. 

Roman civilization had nothing in the way of oil reserves and was focused on maintaining the status quo. Most of Roman society was organized on the basis of human labor, not technical scale. This is one of the most important differences between modern Western society and Roman civilization. 

What does all this have to do with German energy policy? The most important fact to consider is that Germany and northern Europe remained cut off from the international trade networks of the eastern Mediterranean throughout the 1st millennium. They had little access to the transportation nodes that would have allowed capital accumulation. This is important because economies of scale would have allowed for less energy to get goods to where they were needed. This significantly reduced the spread of a consumer culture beyond Gaul into northern Europe.

Extending overland trade networks farther north would have been considerably more expensive than trading goods along the Mediterranean coast. The costs would have been prohibitive and would not have justified the inclusion of transportation nodes further north in Germany. 

The ease of trade in the Mediterranean – and the network effects that occur in the eastern part of the Mediterranean – have given the Mediterranean an advantage over northern regions. Shipping can have significant cost advantages over land-based trade routes. This competition between sea-based and land-based trade continues to play out in European energy policy


2. Resource use in Germany has shifted over the centuries. German industry has moved away from low-energy biomatter to high-energy, dense, carbon-rich matter, rather than the other way around. This is food for thought for current developments in the German energy industry.


Energy sets clear limits to economic growth. The energy required to sustain our modern Western civilization has changed. In the past, wood was used as an energy source. This changed in the 19th century, shifting from wood to other forms of energy-dense, carbon-rich matter.

Hardwoods were more abundant in northern Europe than almost anywhere else in and around the centers of trade and commerce. Streams of revenue were already concentrated in this part of the world. This was a huge advantage Europe has held over other regions. Northwestern Europe has not abandoned its ancient strength and has maintained supremacy of resource flows until very recently. This shows that things have changed significantly recently, but more on that later.

In the northern part of the European peninsula, hardwood was still abundant until the 15th century. One of the main causes of the decline in the value of the woods was population growth after the worst of the Little Ice Age and the growth of shipping. Hardwoods were found in a region that had strong economic growth, in an area with a dense population per square mile.

In the end, northern Europe prevailed due to its combination of abundant labor, fertile land, easy transportation, and direct access to energy sources. This combination was a huge advantage over other regions and countered the previous advantages that the southern part of the European peninsula had held for millennia. 

This initially led to a shift from southern Europe to the north of the continent. But it did not stop there. Wood was not the end point of the use of energy resources. Coal eventually led to a major advantage for northwestern European countries over southern European and Mediterranean countries. This advantage that coal brought to trade in northern Europe was significant. Two countries that benefited most from the growth of fossil fuels, particularly coal, were the United Kingdom and Germany. Both nations had significant coal reserves.


3. The coal age changed the face of Germany and shaped the landscapes of East and West. But by the same token, Germany changed the coal age and tied its fate to coal. Germany has made better use of energy resources.


Coal has played a central role in Germany’s economic development. It has also made a major contribution to the economic development of Europe. The arrival of coal dramatically changed Germany’s fortunes. It was the first time that Germany had a dense, energy-rich resource to drive its own industrialization. Germany lacked, or to be more precise, slacked mineral resources, especially iron ore. Among all the other things that played a role in German industrialization, coal mining, especially the vast anthracite deposits of the Ruhr, tipped the scales in Germany’s favor.

This energy wealth formed the basis of German prosperity. German coal deposits allowed for economic development and economies of scale.  The geography of the Mediterranean region did not allow for the same level of industrialization. Comparable coal reserves were not available.

German industry found better ways to exploit fossil fuel reserves. German industrialists not only improved their ability to exploit coal mines and coal seams. The pace at which technological progress progressed led to greater energy efficiency. The pace quickened. The pace at which technical progress led to greater energy efficiency accelerated, as did the use of energy resources, as energy demand grew almost exponentially. This made German industry even more dependent on a continuous supply not only of energy sources but also of mineral raw materials, which had to be brought in from abroad.

It became increasingly difficult to tap new coal seams rich in carbon. The same was true for mineral ores. The ore grades declined. It became necessary to import more and more ores. This meant that the ongoing industrialization could only be financed through economies of scale. As fate would have it, new export markets were needed. 


4. The oil age dawned and everything changed.


The use of the diesel engine made coal less suited as a fuel. Oil replaced coal as the main fuel for German industry. Oil became indispensable, necessary to power industry (and commerce). The functioning of industry and commerce had become inconceivable without oil. In the early 20th century, oil began to replace coal in transportation and industry.

To this day, Germany relies on oil and gas supplies from a variety of trading partners. This may explain Germany’s willingness to expand trade relations with a variety of countries in LNG and pipeline gas. This is being done to diversify away from fossil fuels into renewables. It may also explain Germany’s interest in developing hydrogen as a fuel and driving the electric car revolution. This can provide tremendous benefits to German industry.


5. Conclusion


  • Germany attaches enormous importance to global energy trade. Oil and gas have replaced coal as primary energy sources. It is unlikely that oil and gas will be replaced by other forms of energy in the foreseeable future. Hydrogen fuel, wind and solar energy and biomass have a much lower EROI (energy-return-on-energy-invested).

  • Germany depends on the sea routes AND land transport routes to supply its industry with sufficient energy. Germany’s industry forms the basis for German prosperity and prosperity.


Many thanks for the shared interest in the energy world!



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