Europe beset by relentless natural gas crunch

Energy crisis: An employee works at a gas receiving station in Lebus, Germany. There is little hope of an increase in supplies as the European Union remains embroiled in a row with Russia, its single biggest exporter of natural gas. — Bloomberg

BRUSSELS: Europe is heading toward an energy crisis as the storage of natural gas runs low and a supply shortfall remains worrying, a think tank warns.

When an energy crisis comes, gas in storage will deplete rapidly in Europe, the Brussels-based think tank Bruegel said, adding that the natural gas supply balance must be monitored closely in the coming months.

As the cold weather sets in, demand for natural gas to heat homes and generate electricity at power plants will grow.

Yet there is little hope of an increase in supplies as the European Union remains embroiled in a row with Russia, its single biggest exporter of natural gas.

The natural gas price frenzy in Europe shows no signs of easing. European prices for natural gas exceeded US$2,150 (RM9,019) per 1,000 cu m last Tuesday for the first time in history, according to Intercontinental Exchange’s London clearing house.

The Dutch TTF gas futures traded last Tuesday at a price nearly doubled that at the beginning of this month and nearly 10-folds of the level from a year ago.

The storage level of natural gas in Europe hit a six-year low in December. Europe had 690 terawatt hours of gas in storage in mid-December, according to a report by Bruegel, a Brussels-based think-tank.

The amount is below the minimum volume recorded in any of the past five years, said the report.

The EU is heavily reliant on imports of natural gas, with 90% of its total supply coming from countries outside the bloc in 2019. Around 40% of its imported natural gas came from Russia that year.

The hope is slim that flows from Russia to Europe can increase significantly, given that the soaring demand in other parts of the world has led to a supply squeeze.

Surging natural gas prices in the EU have already taken a toll on the economy.

Inflation rates in the region are hovering at levels unseen for decades. Inflation in the 19-member eurozone climbed to 4.9% in November, a 25-year high. In the 27-member EU, the rate stood at 5.2%.

The European Central Bank said energy inflation accounted for more than half of headline inflation in the eurozone.

The rise in natural gas prices has found its way into households and factories across the EU.

In Italy, an estimate by local media found that households will have to pay €155 (US$175.54 or RM737.10) more for their consumption of natural gas in 2021, up 15% year-on-year. Electricity bills are expected to rise 30%.

For a lot of small businesses that have little wriggle room to weather the crisis, surging energy prices are tantamount to a test of survival.

So far there is little sign that the imminent threat of an energy crisis can be easily tackled, especially against the backdrop of a green energy transformation and low domestic production in the region.

The EU has committed itself to an ambitious goal of carbon neutrality by 2050. To achieve that target, the proportion of renewable energy in the energy mix will be lifted to 40% by 2030.

Analysts say the European Commission’s Green Deal to some extent aggravates the natural gas crunch in Europe given its reliance on natural gas. — Xinhua

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