The world is experiencing one of the greatest crises in modern history. Pandemics, conflicts, and economic crises have created an atmosphere of tension around the globe and it is getting worse with time.
Oil and gas prices have reached a record high. The Ukraine-Russia conflict has disrupted the global energy structure. The conflict has created a huge shortage of gas and oil. This crisis has shocked the economic roots of the whole world.
Europe’s energy sector is in turmoil. The continent was highly dependent on the natural gas coming from Russia. The sanctions placed on Russia for invading Ukraine have reduced these supplies by a large margin.
By the time war started, the EU was importing 40 percent of its gas and 27 percent of oil from Russia. After the war, the numbers fell drastically. Also, Russia has threatened to cut the gas supply as long as the sanctions are not lifted. If Russia does so, it will have tragic consequences for European economies.
How Is The Crisis Affecting Europe?
Europe is struggling to contain the rising issues created by energy shortages. It looks like Europe is fighting an ‘energy war’ that it seems to be losing. The region was still recovering from the disasters of Covid-19 when another crisis knocked on the door.
Now, this energy crisis can lead to blackouts, deep recessions, and shuttered factories. Russia choking the supply lines of gas and oil has halted the pace of many European industries. This has slowed down the EU economies.
Russia has not only decreased the supply of its gas to Europe but it has also massively increased the prices. The prices of natural gas have topped $3100 per 1000 cubic meters. But this is not it, Deputy Chairman of Russian Security Council, Dmitry Medvedev, has already threatened that prices of natural gas will increase to $5000 by end of 2022. This has caused electricity prices in Europe to go up by 300 percent in 2022. Also, industries are cutting down their production.
This crisis is not calming down any time soon. It is about to get worse. The winters are coming when the EU’s energy demands will be the highest. Europe needs gas to keep houses warm and protect its people from freezing cold.
EU was importing 40 percent of its gas and 27 percent of oil from Russia. After the war, the numbers fell drastically. Also, Russia has threatened to cut the gas supply as long as the sanctions are not lifted. If Russia does so, it will have tragic consequences for European economies.
Challenges In Winter
The energy prices in Europe are rising rapidly even before the winter really kicked in. This will get even worse as the temperature starts to drop.
The experts think that the European energy markets have never been so vulnerable. The slightest rise in energy demand anywhere in the world could devastate European industries. This can cause a complete shutdown of European industries. This can lead to substantial economic crises that will eventually result in more high prices, unemployment, and probably public unrest.
The governments are far from ready to tackle the cold weather. The demand for gas and oil increases dramatically in winter to keep houses warm. A major part of the heating systems is still fuelled by petroleum which is mainly imported from Russia.
On other hand, Russia is not willing to export its natural gas to Europe easily. In response to the sanctions, Russia is playing with the European economy by limiting gas supply. Also, Russia is ready to make its big move when the winter finally hits Europe.
Many big European economies are sliding into recession. Germany, which is the largest European economy and also the biggest importer of Russian gas, is already being pushed into a recession by this crisis. This situation will only get worse as the temperature drops.
Also, many experts believe that the crisis will not last only this winter. It will leave long-term effects on the EU. The whole world would have to bear costs of this crisis.
The EU states are looking toward Qatar, US, and Central Asian states to secure deals for both natural gas and LNG (liquefied natural gas). This will allow Europe to easily import gas via sea. But the only problem in this plan is ‘time’.
Tackling The Crises
The European governments are scrambling to secure a considerable amount of gas supply for this winter. The EU is looking for new suppliers and striking new deals to counter the ongoing situation.
The EU states are looking toward Qatar, US, and Central Asian states to secure deals for both natural gas and LNG (liquefied natural gas). This will allow Europe to easily import gas via sea.
But the only problem in this plan is ‘time’. To import natural gas from new countries will require new pipelines and importing LNG will require dedicated terminals to re-gasify that liquid gas. This process could take years to complete. Also building infrastructure for new energy sources would require a huge investment.
For instant measures, the European Union is trying to cut down electricity demand by establishing targets for countries to save electricity.
EU also wants to apply profit sharing for big companies. The companies which made large profits by selling fossil fuels at higher prices will contribute financially to help citizens. The governments will place a temporary windfall levy on gas, oil, and fossil fuel refining companies.
The governments are also trying to skim off extra revenue made by power plants which do not use gas to produce electricity. The price limit would be applied to companies making electricity from wind, nuclear, solar, biomass, and few hydropower plants.
The crises have shown how vulnerable the European energy sector is. The European countries would surely learn a lesson from this and try to diversify their energy supplies in future. But for now, they must take the required steps immediately to save their citizens from freezing weathers.