Vladimir Putin and Russian state energy giant Gazprom appear to be influencing Europe by restricting gas supplies. The head of the International Energy Agency has now advised that Europe must prepare quickly if Russia cuts off all gas supplies to the region this winter.
The invasion of Ukraine has prompted countries to quickly cut off Russian energy supplies, but the situation has heightened the urgency of such efforts.
Russia has apparently begun cutting off the countries’ oil supplies to thwart their efforts to fill their gas storage tanks before winter. Last week, Gazprom reduced the amount of supply from the main European natural gas pipeline, Nord Stream 1, by 60%. Reduced supply has resulted in Italy, Austria, Czech Republic and Slovakia. A number of other countries, including Poland, Bulgaria, France and the Netherlands, have also been cut off. An explosion at a massive Freeport LNG facility on the Texas Gulf Coast, which supplies gas to Europe, has also disrupted supplies.
Can Europe replace Russian gas by winter?
Since Russia supplied 40% of Europe’s gas supply before the war, restrictions on gas storage or increased LNG imports in some countries, such as Germany, would make it impossible to replace Russian gas in the short term. European Union leaders have dismissed the possibility of a Russian gas embargo as unrealistic and politically harmful.
Instead, countries are rushing to fill their storage caves earlier in the year than usual. Europe’s underground storage caverns are now 57 percent full. The European Commission has ordered every country to reach 80 percent storage by early November, with Germany targeting 90 percent by then. However, these ambitions will be difficult to achieve in the absence of Russian gas. The only way they get close to the goal is to pay exorbitant fees. “The US is sending LNG to Europe rather than Asia because European countries pay more,” said Investec oil and gas expert Nathan Piper.
Where can European countries turn for help?
European countries are increasingly relying on the United States to deliver large quantities of expensive LNG. The UK may benefit from the crisis by increasing natural gas exports to the EU through domestic connections. According to the Office for National Statistics, goods exports to the European Union rose for the third consecutive month in April to £16.4 billion, the highest monthly figure in current prices since similar records began in 1997, driven by gas exports and crude oil to this country. Holland and Ireland
European governments also plan to increase pipeline gas supplies from Norway and Azerbaijan, as well as increase the use of renewable energy. Meanwhile, as Europe consumes all the gas, Asian countries like Pakistan are increasingly forced to rely on highly polluting coal.
What if they can’t replace it?
The most likely effect is that companies reduce their energy consumption. Energy-intensive sectors such as steelmaking in Germany, which imports 35% of its gas from Russia, will face restrictions.
“Either the government will impose restrictions on energy use, or costs will increase to the point where it will be uneconomic to use,” Piper said. There could be a downside if Russia cuts off gas deliveries in the winter when demand is high. Russia was a stable energy source even during the Cold War. This connection is now broken.”
Could Russia’s shutdown affect the UK?
Last year, the UK bought just 4% of its gas needs from Russia and appears to be largely immune to supply difficulties. A mix of domestic gas sources, piped supplies from Norway, and LNG imports put the UK in a strong position, although it will continue to suffer from rising costs.
However, the Business Secretary, Kwasi Kwarteng is trying to increase domestic supply choices in the face of supply shortages this winter. This includes extending the life of West Burton A coal-fired power plant in Nottinghamshire. The government is also in talks with British Gas owner Centrica about reopening a large crude gas storage station on England’s east coast, which was closed in 2017.
How will this affect consumers?
Energy supplies in the UK and Europe are unlikely to be disrupted, as industrial consumption will be reduced first. However, already high prices are certain to rise further. According to research company Cornwall Insight, the price range for annual energy bills is likely to reach £2,980 in October and exceed £3,003 in January. If Russia completely stops natural gas exports, this could increase further.
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