(ORDO NEWS) — There are many reasons for the energy crisis in Europe. But the key factors are the arrogance of the EU with its green policy and the energy poker played by the adamant Russia, the author is sure. He gives examples of how exactly Europe has hurt itself, writes Forbes.
Europe has found itself in the grip of an unprecedented energy crisis. Some say that if this problem is not tackled, it will be comparable to the Arab oil embargo of the 1970s, and there will be serious economic, social and political consequences. Mark Brent is today at a five-year record of $ 84 a barrel, and gas spot prices are more than five times higher than a year ago. Because of this, countries are switching from gas to dirty coal, and the EU’s transition to green energy is being postponed.
The current crisis in Europe is fueled by rising energy demand following the pandemic, extreme weather events (unprecedented heat waves and prolonged winters), supply chain disruptions, and regional and global fuel shortages. Russian boss Vladimir Putin has a reason to open champagne in view of new EU sanctions against the Kremlin. He says Europe has hurt itself. He may be right.
Samer Moses, global LNG analyst at S&P Global Platts, said:
“Europe found itself between a rock and a hard place. The global liquefied natural gas market has been in short supply for almost a year, and Russia has its own problems in the field of production and infrastructure. Thus, Europe has lost two key sources of flexible gas supplies. As the vaults in the region have been emptied, any hint of pessimistic news, be it weather disasters or supply disruptions, could force markets to push prices up even further. The underlying factors dictate the market to find a balance due to the surge in demand. This dynamic can already be seen throughout Asia and Europe.”
This unfortunate set of circumstances is rare, but illustrates how much energy experts (including the author of this article) are concerned about Europe’s hasty abandonment of traditional energy sources (gas, coal, nuclear power plants) and the transition to fickle renewable sources. Europe’s master plan for carbon neutrality is forcing EU member states to abandon long-term procurement contracts and move to short-term pricing. Because of this, the crisis is even more costly for energy companies and consumers who are now looking for alternative fuel suppliers. Gas exporters such as Russia and Qatar are not averse to making extra money on this.
Qatari Energy Minister Saad Al-Kaabi said: “We see huge demand from all our buyers, but unfortunately we are not able to satisfy all.” Qatar favors East Asian consumers who pay more. The EU is no longer the main market. This trend is noted by exporters all over the world. And as production within the European Union declines, as reserves are depleted, say, at the giant Groningen gas field in the Netherlands, the EU has to pay more and more for imports. At the same time, the demand for LNG is increasing all over the world, as countries see gas as a transitional fuel for the period of abandoning hydrocarbons and developing green energy.
At the same time, China is also experiencing an acute energy crisis, which has been exacerbated by unprecedented flooding, supply disruptions after the pandemic and rising demand. To make up for insufficient domestic coal production, China has doubled its LNG imports over the past year (this is another reason why supplies to Europe are lower than usual). More than 20 Chinese provinces have introduced rationing to deal with the worsening situation. “Ensure the supply of energy resources at any cost,” ordered the country’s ruling Politburo. This clearly shows how much the giant Chinese economy depends on imports of coal and gas.
Although Russia does not look like an outright market fraudster, it has a good opportunity to cash in on the current situation, seeing that Europe is ready to buy gas in any volume and at monstrous prices. The Kremlin took advantage of the gas shortage and started talking about the need to put Nord Stream 2 into operation as soon as possible. This is an ambitious (and scandalous) geostrategic project by the Kremlin, which has laid an underwater pipeline directly to Germany and intends to pump 55 billion cubic meters of gas there a year. Some German industrialists and Russian political leaders call it a boon for Europe’s energy security, but in reality, this pipeline will make the EU even more dependent on the whims and whims of state-owned Gazprom.
Several years ago, the head of Gazprom, Alexei Miller, in my presence declared that his company was “half a commercial and half a political enterprise of the state.” Since then, this ratio has moved even more towards politics and is now 40 to 60.
European leaders immediately started talking about the fact that Russia was using the situation in the gas markets as an instrument of pressure to obtain certification for Nord Stream 2. Currently, Gazprom supplies pipeline gas through Ukraine. The new pipeline has been laid bypassing this difficult country. According to the law, Russian energy producers must first satisfy domestic demand, and only then deal with export supplies. This means that the missing export volumes can be attributed to the lack of fuel reserves in Russia.
Fatih Birol, Executive Director of the International Energy Agency, said: “Russia could do more to increase gas supplies to Europe and fill storage facilities to the required level in preparation for the coming winter heating season.” Birol went on to say that Russia could immediately increase supplies by 15%.
Former German Chancellor and staunch supporter of Russia Gerhard Schroeder has published an article in which he argues that the Russian government is unable to manipulate the markets: “Anyone who does serious analysis will say: the reasons for the rise in prices must be sought in the international market. This is an increase in demand, global trends in the world market and the weather.”
The EU seeks to move away from hydrocarbons in its energy infrastructure, but Brussels has not yet managed to create sufficiently reliable capacity for electricity production. Without a large number of nuclear, coal and gas power plants, Europe will become a dark and cold continent. Moreover, it does not have energy sources at a time when renewable energy will not be able to operate at full capacity, say, a calm summer, which was in Britain this year. In the context of increasing climatic changes, calm and cloudy weather are becoming more and more unpredictable, and the lack of basic generation has just led to the current crisis.
Some have suggested buying alternative fuels such as coal, which has twice the carbon footprint of gas. This negates all energy transformation efforts.
UK, France and Spain have announced new price ceilings. France went even further and announced that it would commit one billion euros to nuclear energy by the end of the decade. Better late than never.
Despite all its rationality, Germany will decommission almost all of its reactors next year, relying on wind and solar energy. But it is possible that very soon she, who supported Nord Stream 2, will have to kneel before Russia and her supreme ruler Putin in order to satisfy her energy needs. Jack Sharples, a research fellow at the Oxford Institute for Energy Research, said:
“We will only know for sure if we see Russia suddenly pulling extra gas out of its back pocket, which we knew nothing about, as soon as Nord Stream 2 is put into commercial operation … And vice versa, if / when JV-2 will be approved and launched, and we will suddenly see a sharp decrease in gas transit through Ukraine, this will indicate that Gazprom does not have any excess reserves, and the goal of Nord Stream 2 is simply to displace Ukraine.”
Relying on Russia to close the energy supply gap is risky. But Europe’s reluctance to cooperate with the United States beyond short-term contracts is even more shortsighted. Europe refused to enter into long-term procurement agreements, and America diverted its LNG to Asia, leaving the EU with nothing.
There are many reasons for the energy crisis in Europe. But the key factors are the EU’s arrogance with its green politics and the energy poker played by an unyielding Russia. The main lesson is this: it is impossible to transform the energy sector without creating a sufficient number of reliable and cost-effective base generating capacities.
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