Europe is facing concerns about another energy crisis due to rising gas prices and the impending end of a key pipeline gas contract. The crisis has led to problems for energy-intensive industries, resulting in closures and job losses, and fueled already rampant inflation.
Europe is facing concerns about another energy crisis due to rising gas prices and the impending end of a key pipeline gas contract.
Factors Contributing to the Concerns
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A cold start to November has contributed to a fresh surge in natural gas prices.
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The likely imminent end to a key pipeline gas contract, which could lead to higher prices and stoke inflation.
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Europe is buying less gas from Russia and more on the global market.
Impact of the Crisis
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Persistently high prices have led to problems for energy-intensive industries, resulting in closures and job losses.
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The crisis has also fueled already rampant inflation.
Alternative Solutions
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LNG (Liquefied Natural Gas) could potentially solve the problem, as it has become more important for both Europe and Russia since Russian pipeline gas was largely cut off in 2022.
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New LNG capacity coming from the US could meet Europe’s energy needs.
Expert Opinions
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Borys Dodonov, head of the Center for Energy and Climate Studies at the Kyiv School of Economics, expects the gas transit deal to end because Ukraine has no economic rationale to renew it.
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Dodonov believes that some kind of alternative deal could be done instead, possibly with hidden agreements or corruption.
Statistics
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In October, the EU bought 49% of all Russia’s LNG exports and 40% of all its pipeline gas exports.
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Russian LNG volumes into the bloc have increased by close to 15% so far this year.
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Rising Gas Prices: Recent weeks have seen a surge in natural gas prices, reminiscent of the issues that arose following Russia’s invasion of Ukraine in 2022.
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End of Pipeline Gas Contract: The five-year gas transit deal between Gazprom and Ukrainian state company Naftogaz is set to expire at the end of 2024, with indications suggesting it will not be renewed.
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Decline of Russian Gas Imports: Since 2021, the share of Russian pipeline gas imported by EU member states has significantly decreased, from 40% to about 9% in 2023.
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LNG as an Alternative: Despite Russia’s decline in pipeline gas supply, it still accounts for 18% of the EU’s total gas imports due to increased LNG deliveries.
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New LNG Capacity from the US: Incoming US President Donald Trump is expected to increase LNG output, potentially leading to a major gas trade deal between Europe and the US.
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Katinas suggests that talk of a “crisis” is overblown, given the decrease in Russia’s grip on the European market since 2022.
Conclusion
While concerns about another energy crisis are valid, it seems that Europe has made significant progress in reducing its dependency on Russian gas. The prospect of a colder winter and potential depletions of inventories could lead to cyclical price surges, but alternative solutions such as LNG from the US may help mitigate these issues.
Sources
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DW News: “Is Europe on the brink of a new gas crisis?”
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CREA Data: Recent statistics on EU gas imports
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Interview with Borys Dodonov
