The Key Factors Behind Energy Crunch In Europe

Shortages of natural gas supplies have sent prices soaring in Europe, pushing many energy companies to the edge and challenging major industries who rely on the fuel.

The shortage is also promising higher heating bills for the coming winter. There are few key factors behind the energy crunch in Europe.

The long winter depleted supplies of gas in the continent. Alternative energy sources are meanwhile tight; wind turbines at a near standstill in the North Sea as winds there stopped blowing and Asia is taking up a large part of liquefied natural gas supplies as China and India are facing power crisis as well.

All of this happening as natural gas deliveries from Russia fall. Russia blames infrastructural issues such as a fire at a processing plant in Siberia, but some believe the country is throttling supply as part of a bigger geopolitical game.

Russia is a very strategic player in the gas market which means that economic interests are in the foreground. Shortages naturally drive prices up and are very profitable to Russia. For an example; more than half of Germany’s natural gas supplies come from Gazprom Germania, a company close to the Kremlin.

Gazprom built the Nord Stream tube pipeline through the Baltic sea at a cost of 9 billion euros. It’s technically ready for operation but still lacks the regulatory green light. Critics of the project now see a link between the shortage of natural gas and the sluggish approval process.

In 2020, Russian gas exports to Europe (under contracts of Gazprom Export) amounted to 174.9 billion cubic meters.

Relief could come from liquid natural gas which is available world-wide but the liquefied gas tankers are currently their way to Asia where natural gas is scarce and prices are high. The European Union is left empty-handed.

Heating and cooking will be expensive this winter. Alternatives to natural gas are in high demand. The high price of natural gas could backfire for Russia’s Gazprom in the long run, prompting a boost for further investment in the development and rollout of green energy sources.

At present, power companies are struggling with high prices and these prices will be passed on to the consumers. Some countries have said that they are going to cushion the impact on end consumers and some have also turned interestingly to coal. But coal is also on short supply and the prices are going through the roof as there was a shortage due to heavy rains in Indonesia and Colombia which are major coal producers.