The European Energy Crisis

BLOG

Apurva Dhamankar

9/22/20221 min read

Since the beginning of the Russia-Ukraine war, inflation has been skyrocketing and the entire world is facing the heat of this crisis. Prices of key exports of Russia like Crude Oil, Natural Gas, Wheat, Coal, Metals, etc have more than doubled. This has developed tension in the West’s treasury as many countries are the importers of Russian goods.

Russia supplies natural gas to five EU countries, including Germany, the largest purchaser of these exports, which is heavily dependent on Russian gas to generate power and electricity in the country. Prices of Natural Gas topped $500 per barrel, 10 times the normal average. Russia exports natural gas supplies through Nord Stream 1 Pipeline & Nord Stream 2 Pipeline (built-in September 2021) which is operated by state-owned Gazprom. A total of 40% of natural gas purchases in Europe come from Russia. After the outbreak of the war, Russia cut its supplies by 60% to retaliate against the sanctions by the West and also increased its prices, pressuring Europe to spend more or look towards other countries to fulfill their demand.

The President of the European Commission, Ursula Gertrud, said that it will completely cut off Moscow’s gas purchases by 2027. In the wake of this crisis, Germany started to fire up its idle coal power stations to save its natural gas supplies for winter. Germany phased out coal power since it is highly carbon intensive and creates mass destruction to the environment.

During the winter, the EU’s consumption of natural gas increases as it faces severe chills in the region, and natural gas is extensively required in households to keep the surroundings warm. So, it purchases its gas requirements in summer when the demand as well as the price is less and uses it over the winter. Russia’s next step is predicted to announce more cuts in its supplies during winter, forcing Europe to possibly look towards Norway, Algeria, Qatar, the US, and the UK for its gas purchases.

Thank you.

Regards,

Siddharth Mehta,

Kautilya, IBS Mumbai.

Related Stories