Europe’s energy crisis is just beginning | Popgen Tech

Despite the successful filling of gas storage facilities before winter, the energy crisis in Europe is far from over. In fact, the situation for Europe could get even worse next winter, when Russian pipeline gas supplies will drop to a minimum at best, Oilprice.com reported.

According to estimates by the European economic think tank Bruegel, published by the International Monetary Fund (IMF), European households and businesses already face a $1.06 trillion increase in total energy costs. According to Bruegel analysts, if governments in Europe did nothing but provide financial support, and if they covered the price increases, the amount would amount to a whopping 6 percent of the EU’s annual GDP.

Massive government support could delay adjustment to the new price equilibrium and create a need for even more support, say Bruegel experts.

Instead, the EU needs a big bargain to boost savings while increasing supply.

The next 12 to 24 months will determine whether Europe can deal with the energy crisis without resorting to mandatory rationing or losing too much competitiveness in the industry.

Europe’s energy systems have already been put to their first real test this month amid an Arctic cyclone that is flooding a large part of north-west Europe.

According to Gas Infrastructure Europe, natural gas storage in the EU has begun to deplete, and as of December 17, storage levels were at 84 percent. Stocks are higher than this time last year, but the real test for Europe will come next year, when it will have to add enough gas storage to meet the requirements of winter 2023/2024.

This is where planning becomes more difficult, depending on how low inventories will be after this winter and whether the EU has the ability to import record quantities of LNG and continue to beat prices in Asia, especially if demand in China recovers.

With lower gas consumption and little Russian gas coming through pipelines, the EU continues to reduce its dependence on Russia from about 40 percent of its imported gas supplies to less than 9 percent, according to September EU data.

However, a significant drop in Russian gas supplies this year only occurred in June.

Before the winter of 2023/2024, the gap in Europe’s gas supply will be much larger without Russian gas. Europe will not import much Russian gas – or at all if Russia stops supplying via the only remaining active link via Ukraine and via Turkish Stream – compared to relatively stable imports from Russia in the first half of this year, before Moscow begins to gradually reduce volumes via Nord Stream in June and then stopped the pipeline in early September.

According to a recent IEA report, if Russian gas supplies fall to zero and Chinese LNG demand recovers to 2021 levels, the gap between supply and demand in the EU could reach 27 billion cubic meters in 2023.

Major weather uncertainty and the EU’s ability to compete with a potential increase in Asian LNG demand will determine how Europe fares next winter.