The EU suggests a switch to renewable energy sources to cut off over-dependence of natural gas.
Europe is trapped in the fangs of an economic disaster provoked by the energy crisis in a post-pandemic recovery. Due to a rise in the demand accompanied by an alarmingly short surplus, current gas prices have escalated to new records, reaching a 600 percent high this year. For this, vulnerable consumers might need to seek solace in energy-saving schemes this coming winter.
Sooner or later, this debacle might alter other sectors such as the construction and food industry. Thus, governments are warning of blackouts and factories being forced to shut as electricity bills shoot up.
How did it get here? Russia, the EU energy giant
As the largest supplier to Europe, Russia hovers in the center of the gas shortage, as it provides a third of all-natural gas to the region. Ongoing political debates on the energy crisis suggest Russia as a profiteer. Critiques claim officials in Putin’s Administration used manipulation tactics to push gas prices up for economic gain. Whilst others, place the blame on the desire of Russia to amass political leverage.
Allegedly, Moscow and its gas company Gazprom, are intentionally withholding supplies as a pressure measurement to speed up approval of the Nord Stream 2 project. A controversial energy project, the Nordstream 2 pipeline plans are to directly connect Russia’s natural gas storage facilities with Germany via the Baltic sea. According to journalist Melinda Crane, “Germany insisted on completing the expensive project despite pressure from EU members and the US.” She argues that the project will “deliver Germany’s energy security into Putin’s hands.”
Despite these claims, Gazprom continues to affirm that the supply is met as per initial contracts. On this, Kremlin spokesman Dmitry Peskov said, “as far as I know, Gazprom is in constant contact with its customers in Europe, all permissible additional supply requests are being met by Gazprom.”
Ultimately, the blame game persists. The International Energy Agency commented that Russia could do more to increase gas availability to Europe. In addition to this, the IEA expounded on Russia’s ability to ensure gas storage is filled to adequate levels, in preparation for the coming winter heating season. Added, officials say Russia remains unresponsive to the surging demand by offering extra volumes to spot market buyers. “We are very grateful that Norway is stepping up its production, but this does not seem to be the case in Russia,” European Commission President Ursula von der Leyen said.
However, Putin denied the claims, asserting, “even in the most complicated periods of the Cold War, Russia regularly and fully fulfilled its contractual obligations and supplied gas to Europe.”
According to energy analyst Mikhail Krutijin, Gazprom Russia greatly altered the markets by refusing to sign new gas supply contracts and sticking only to those already agreed. He added, “It maintains a deliberate policy of restricting supplies as a blackmail scheme to promote Nord Stream 2.”
Even as Russia downplays its knowledge of strategic plans, it is a force to reckon with. In recent years, economic and political ambitions place it at a higher pedestal in comparison with neighboring states. Even though Putin’s administration extends political influence outside Europe, its leverage on the region precipitates political tension, hence a probable growth of future rivals.
Climate change and economic recovery post-pandemic era
The dependency of Europe on natural gas is one of the major causes of climate change. Although less polluting, it is still a fossil fuel that produces carbon dioxide emissions that are warming up the planet.
To worsen matters, gas storages were left depleted throughout Europe due to an overconfidence in the ability of renewable sources such as wind and tidal to pick up the slack. These plans have backfired.
In the case of the UK, some of their attempts to implement more eco-friendly energy initiatives have failed due to climate change. Recently, several wind farms filed for bankruptcy after the country experienced low wind speeds, which reduced their output. So much so, that 70 energy suppliers registered at the start of 2021, lessened to 49, by the end of March.
Overall, global economies are just resurrecting from the Covid-19 pandemic with the added pressure of rebounding from a shift in energy usage. Being that many people stayed home during quarantine measure, the change in lifestyle resulted in massive energy consumption. Simultaneously, the pandemic slowed industrial production almost everywhere causing a major escalation.
Important to realize, European gas production is in decline. Several North Sea gas deposits are running dry, as are several gas fields in the Netherlands, such as Groningen which is due to close in mid-2022. In Germany, some industrial plants spontaneously slowed down production to maintain profit margins in the face of increased spending on energy. All this leaves Europe increasingly dependent on gas imports, primarily from Russia and Norway.
Concerningly, there isn’t enough gas to fuel the post-pandemic recovery nor refill depleted stocks before the cold months. In response, countries try to outbid one another for supplies as exporters such as Russia move to keep more natural gas at home.
Italy’s post-pandemic energy woes
More than 20 percent of the electricity produced in the countries of the EU is obtained from natural gas. In Italy it is about 40 percent.
For the southern European country that took huge economic hits during their strict lockdown ordinances in 2020 and 2021, the energy crisis created a massive effect. Currently, fuel prices are at their highest since 2014. Particularly, Italy is vulnerable to price shocks as it is highly dependent on imports and consumes a large amount of gas.
Citing an instance, Italy’s national distributor of methane gas, Federazione Nazionale Distributori e Trasportatori di metano (Federmetano), stated that the value of methane gas arrived at levels “no one would have ever imagined.”
On the positive, the Italian government offered subsidies to manage the crisis. In September, Italy’s prime minister Mario Draghi unveiled a €3 billion package to mitigate the increase in energy prices, aimed at helping poorer households and small businesses pay their bills. A plan that might spare bills on up to 3 million households, 6 million small businesses will be renounced.
Bottom line, the EU is organizing methods to diversify the supply structure. According to Ursula Von Der Leyen, an effectivce solution would be to invest in renewables that give stable prices and more independence. She said, “the gas prices are increasing, but with renewables, the prices have decreased over the last few years.” All in all, if Russia does not loosen the knot soon, Europe will have to ambitiously evaluate future possible solutions.
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