Goldman Sachs says the Israel-Hamas war could have major implications for Europe’s economy
Armoured vehicles of the Israel Defense Forces (IDF) are seen during their ground operations at a location given as Gaza, as the conflict between Israel and the Palestinian Islamist group Hamas continues, in this handout image released on November 1, 2023.
Israel Defense Forces | Reuters
The Israel-Hamas war could have a significant impact on economic growth and inflation in the euro zone unless energy price pressures remain contained, according to Goldman Sachs.
The ongoing hostilities could affect European economies via lower regional trade, tighter financial conditions, higher energy prices and lower consumer confidence, Europe Economics Analyst Katya Vashkinskaya highlighted in a research note Wednesday.
Concerns are growing among economists that the conflict could spill over and engulf the Middle East, with Israel and Lebanon exchanging missiles as Israel continues to bombard Gaza, resulting in massive civilian casualties and a deepening humanitarian crisis.
Although the tensions could affect European economic activity via lower trade with the Middle East, Vashkinskaya highlighted that the continent’s exposure is limited, given that the euro area exports around 0.4% of the GDP to Israel and its neighbors, while the British trade exposure is less than 0.2% of the GDP.
She noted that tighter financial conditions could weigh on growth and exacerbate the existing drag on economic activity from higher interest rates in both the euro area and the U.K. However, Goldman does not see a clear pattern between financial conditions and previous episodes of tension in the Middle East
The most important and potentially impactful way in which tensions could spill over into the European economy is through oil and gas markets, Vashkinskaya said.
“Since the current conflict broke out, commodities markets have seen increased volatility, with Brent crude oil and European natural gas prices up by around 9% and 34% at the peak respectively,” she said.
Goldman’s commodities team assessed a set of downside scenarios in which oil prices could rise by between 5% and 20% above the baseline, depending on the severity of the oil supply shock.
“A persistent 10% oil price increase usually reduces Euro area real GDP by about 0.2% after one year and boosts consumer prices by almost 0.3pp over this time, with similar effects observed in the U.K.,” Vashkinskaya said.
“However, for the drag to appear, oil prices must remain consistently elevated, which is already in question, with the Brent crude oil price almost back at pre-conflict levels at the end of October.”
Gas price developments present a more acute challenge, she suggested, with the price increase driven by a reduction in global LNG (liquefied natural gas) exports from Israeli gas fields and the current gas market less able to respond to adverse supply shocks.
“While our commodities team’s estimates point to a sizeable increase in European natural gas prices in case of a supply downside scenario in the range of 102-200 EUR/MWh, we believe that the policy response to continue existing or re-start previous energy cost support policies would buffer the disposable income hit and support firms, if such risks were to materialize,” Vashkinskaya said.
Bank of England Governor Andrew Bailey told CNBC on Thursday that knock-on effects of the conflict on energy markets posed a potential risk to the central bank’s efforts to rein in inflation.
“So far, I would say, we haven’t seen a marked increase in energy prices, and that’s obviously good,” Bailey told CNBC’s Joumanna Bercetche. “But it is a risk. It obviously is a risk going forward.”
Oil prices have been volatile since Hamas launched its attack on Israel on Oct. 7, and the World Bank warned in a quarterly update on Monday that crude oil prices could rise to more than $150 a barrel if the conflict escalates.
General consumer confidence is the final potential channel for spillover affects, according to the Wall Street bank, and Vashkinskaya noted that the euro area experienced a substantial deterioration in the aftermath of Russia’s invasion of Ukraine in March 2022.
The same effect has not been historically observed alongside outbreaks of elevated tensions between Israel and Hamas, but Goldman’s news-based measure of conflict-related uncertainty reached record highs in October.
GreenPower Motor Company says it’s received three orders for 11 of its BEAST electric Type D school buses for western state school districts in Arizona, California, and Oregon.
GreenPower hasn’t made the sort of headline-grabbing promises or big-money commitments that companies like Nikola and Lion Electric have, but while those companies are floundering GPM seems to be plugging away, taking orders where it can and actually delivering buses to schools. Late last year, the company scored 11 more orders for its flagship BEAST electric school bus.
As far as these latest orders go, the breakdown is:
- seven to Los Banos Unified School District in Los Banos, California
- two for the Hood River County School District in Hood River, Oregon
- two for the Casa Grande Elementary School District in Casa Grande, Arizona
Those two BEAST electric school buses for Arizona will join another 90-passenger BEAST that was delivered to Phoenix Elementary School District #1, which operates 15 schools in the center of Phoenix, late last year.
“As school districts continue to make the change from NOx emitting diesel school buses to a cleaner, healthier means of transporting students, school district transportation departments are pursuing the gold standard of the industry – the GreenPower all-electric, purpose-built (BEAST) school buses,” said Paul Start, GreenPower’s Vice President of Sales, School Bus Group. “(The) GreenPower school bus order pipeline and production schedule are both at record levels with sales projections for (2025) set to eclipse the 2024 calendar year.”
GreenPower moved into an 80,000-square-foot production facility in South Charleston, West Virigina in August 2022, and delivered its first buses to that state the following year.
Electrek’s Take
Since the first horseless carriage companies started operating 100 years ago (give or take), at least 1,900 different companies have been formed in the US, producing over 3,000 brands of American automobiles. By the mid 1980s, that had distilled down to “the big 3.”
All of which is to say: don’t let the recent round of bankruptcies fool you – startups in the car and truck industry is business as usual, but some of these companies will stick around. If you’re wondering which ones, look to the ones that are making units, not promises.
SOURCE | IMAGES: GreenPower Motors.
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While some recent high-profile bankruptcies have cast doubt on the EV startup space recently, medium-duty electric truck maker Harbinger got a shot of credibility this week with a massive $100 million Series B funding round co-led by Capricorn’s Technology Impact Fund.
It’s been a rough couple of weeks for fledgling EV brands like Lion Electric and Canoo, but box van builder Harbinger is bucking the trend, fueling its latest funding round with an order book of 4,690 vehicles that’s valued at nearly $500 million. Some of the company’s more notable customers including Bimbo Bakeries (which owns brands like Sara Lee, Thomas’, and Entenmann’s) and THOR Industries (Airstream, Jayco, Thor), which is also one of the investors in the Series B.
Other prominent investors include Tiger Global, the Coca-Cola System Sustainability Fund, and ArcTern Ventures.
As for what makes Harbinger such an attractive investment prospect, Dipender Saluja, Managing Partner of Capricorn Investment Group’s Technology Impact Fund explains that, “Harbinger has demonstrated a remarkable ability to reach significant milestones far quicker than other EV companies … the market has been impressed by their ability to develop large portions of the vehicle in-house to drive down unit costs, while remaining capital efficient.”
The company plans to use the funds to ramp up to higher-volume production capacity and deliver on existing orders, as well as build-out of the company’s sales, customer support, and service operations.
“Harbinger is entering a rapid growth phase where we are focused on scaling production of our customer-ready platform,” said John Harris, co-founder and CEO. “These funds catalyze significant revenue generation. We’ve developed a vehicle for a segment that is ripe for electrification, and there is a strong product/market fit that will help fuel our upward trajectory through 2025 and beyond.”
The company has raised $200 million since its inception in 2021.
SOURCE | IMAGES: Harbinger.
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There is no state more associated with cars and car culture than Michigan – and the state that’s home to the Motor City has just taken a huge step into the future with the deployment of its first-ever all electric police vehicle.
The 2024 Ford Mustang Mach-E patrol vehicle is assigned to the Michigan State Police State Security Operations Section, and will be to be used by armed, uniformed members of the MSP specializing in general law enforcement and security services at state-owned facilities in the Lansing, MI area.
“This is an exciting opportunity for us to research, in real time, how a battery electric vehicle performs on patrol,” says Col. James F. Grady II, director of the MSP. “Our state properties security officers patrol a substantially smaller number of miles per day than our troopers and motor carrier officers, within city limits and at lower speeds, coupled with the availability of charging infrastructure in downtown Lansing, making this the ideal environment to test the capabilities of a police-package battery electric vehicle.”
The MSP’s Precision Driving Unit is nationally renowned for its annual Police Vehicle Evaluation, which our own Scooter Doll participated in last year, driving the then-new Chevy Blazer EV Police Pursuit Vehicles in a game of “cops and robbers.”
In those tests, the EVs have impressed – but the MSP has been hesitant to commit to a BEV until now. “We began testing battery electric vehicles in 2022, but up until now hybrids were the only alternative fuel vehicle in our fleet,” said Lt. Nicholas Darlington, commander of the Precision Driving Unit. “Adding this battery electric vehicle to our patrol fleet will allow us to study the vehicle’s performance long-term to determine if there is a potential for cost savings and broader applicability within our fleet.”
Michigan joins other states like Wisconsin and California in deploying electric patrol cars and saving big money on fuel and maintenance, with many more out there and many more to come.
SOURCE | IMAGES: Michigan State Police.
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