Europe’s energy situation is precarious. For years the continent has outsourced its gas and oil production to Russia, and also it has recently shut down much of its own coal and nuclear facilities for environmental reasons. Those decisions are coming back to bite. Paul Sacca reports in The Blaze:
Energy prices are soaring in Europe because of inflation and the repercussions of the invasion of Ukraine by Russia. There are numerous warning signs that Europe could face a crippling energy crisis this winter.
Inflation has spiked
Inflation is surging in Europe. In July, the annual inflation rate was up 9.8% among the 28 European Union member nations – up from 2.5% a year earlier.
Russia holds power over Europe’s natural gas supply
Gazprom – the Russian government-owned energy behemoth – has shut down a critical natural gas pipeline to Europe. Last week, Gazprom switched off the Nord Stream 1 pipeline to perform urgent maintenance work.
There are concerns that Russia may hold Europe hostage with the pipeline over the winter.
Before the Russian invasion of Ukraine, Russia supplied more than a third of Germany’s gas supplies.
Europe is already burdened with record-high energy prices
In August, Spain experienced its most expensive month for electricity since records have been kept.
France 24 reported, “The year-ahead contract for German electricity reached 995 euros ($995) per megawatt hours while the French equivalent surged past 1,100 euros – a more than tenfold increase in both countries from last year. In Britain, energy regulator Ofgem said it would increase the electricity and gas price cap almost twofold from October 1 to an average £3,549 ($4,197) per year.”
Daniele Franco – Italy’s Minister of Economy and Finance – warned that the country’s net energy import costs will more than double this year to nearly 100 billion euros ($99.5 billion). Franco said the nation was helpless in the matter, “To keep offsetting, at least in part, rising energy prices through public finances is very costly and we could never do enough.”
Germany faces a coal shortage
The lack of oil and gas has forced European nations to increase their dependency on coal.
In Germany, the water levels in the Rhine River have hit crisis levels amid summer heatwaves. The Rhine River – one of Europe’s key waterways – has already been closed due to low water levels.
“Due to very reduced domestic shipping, accumulated coal stocks could quickly fall,” Germany’s Federal Ministry for Economic Affairs and Climate Action said in a document obtained by Reuters.
Other major waterways have also prevented large vessels from bringing coal to European countries. That coal is now stuck in ports. Approximately 8 million tons of coal were stranded in ports at the end of July, Politico reported. If the supply chain woes continue, it will have dire effects on Germany, Poland, and Switzerland in the winter.
Scandinavian governments are bailing out energy companies
Finland and Sweden announced that they plan to offer billions of dollars to energy companies to prevent them from ending up in “technical bankruptcy.”
“The rapid rise in electricity prices has resulted in paper losses on electricity futures contracts of energy firms, forcing them to find funds to post additional collateral with the exchanges,” according to Reuters.
Finland will offer $9.95 billion, and Sweden will give $23.2 billion to energy companies.
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