Germany is facing a certain recession if Russia’s already stagnant gas supply shuts down altogether, industry groups warned Tuesday.
European Union countries from the Baltic Sea in the north to the Adriatic Sea in the south have outlined measures to address the supply crisis after Russia’s invasion of Ukraine puts energy at the center of the economic battle between Moscow and the West. ..
The EU relies on Russia for 40% of its prewar gas demand, rising to 55% in Germany, leaving a big gap to fill the already tight global gas market. Some countries have temporarily overturned plans to close coal-fired power plants accordingly.
Gasoline prices have reached record levels, inflation has skyrocketed, and there are increasing challenges for policy makers seeking to recover Europe from the economic crisis.
The German BDI Industry Association lowered its 2022 economic growth forecast on Tuesday to 1.5%, down from the 3.5% forecast before the start of the war on February 24. Russia’s gas outage will inevitably make Europe’s biggest economic recession inevitable.
Russian gas is still being pumped via Ukraine, but at a slower rate, the Nord Stream 1 pipeline under the Baltic Sea, an important supply route to Germany, operates at only 40% capacity. I am. This is because Western sanctions are preventing repairs. Europe says this is an excuse to reduce the flow.
The slowdown is hampering Europe’s efforts to replenish storage facilities that are currently about 55% full to reach the EU-wide target of 80% by October and 90% by November. This is a level that will help you see the blocks throughout the winter if available. I was even more confused.
Italy’s Ecosystem Transition Minister Roberto Cingolani said Italy needs to accelerate its replenishment efforts and Rome should consider how to help businesses fund the purchase of gas for storage. rice field.
Italian government sources said state guarantees could be an option to reduce the cost of financing.
“Currently, gas is so expensive that operators can’t put money into it,” Cingolani said.
Benchmark gas prices in Europe traded at around € 126 per megawatt hour (MWh) on Tuesday, below this year’s peak of € 335, but still rising more than 300% at the level a year ago.
“There is a problem”
Italy and other countries such as Austria, Denmark, Germany and the Netherlands have begun the first early warning phase of a three-stage plan to address the gas supply crisis.
As part of Germany’s emergency response plan, Bundesnetzagentur’s gas regulators have announced details of a new auction system that will be launched in the coming weeks with the aim of encouraging manufacturers to consume less gas. did.
The head of the Bundesnetzagentur questioned whether the current gas supply would survive the winter, but he said it was too early to declare a full-scale emergency, or the third phase of the crisis plan. Said.
“Currently, there is a problem,” said President Klaus Mueller of the Federal Network Agency, as a bystander at an industry event in Essen, Germany.
Markus Krebber, CEO of Germany’s largest electricity company RWE, said Europe has little time to plan.
“How would we redistribute the gas if we were completely shut down? Currently at the European level … there are no plans as all countries are considering emergency plans,” he said. Spoke to the same event.
Europe’s high prices have attracted more LNG cargo, but Europe lacks the infrastructure to meet all the needs of LNG, a market that had been expanding since before the Ukrainian War.
The turmoil to major US producers of liquefied natural gas that provided shipments to Europe adds to the challenge.
Wall Street falls as the fear of recession accelerates
Europe wants more pipeline supply from its own producers such as Norway and other states, including Azerbaijan, but most producers are already pushing the limits of production.
As the crisis spread throughout Europe, even small consumers like Sweden joined the European allies to trigger the first phase of the energy crisis program.
Supply remains strong on Tuesday, but the state’s Energy Agency said, “Industry and gas consumers connected to West Sweden’s gas network could be tense in the gas market and worsen gas supply. It shows that there is. “
Sweden, where gas accounted for 3% of energy consumption in 2020, relies on pipe gas supply from Denmark, where storage facilities are now 75% full. Denmark began the first phase of its emergency program on Monday.