Sunday, April 2, 2023

Energy crisis in Europe as winter approaches

TookEuropeans, plagued by rising electricity bills, took to the streets. In question, the ban on gas exports by Russia, in particular through the Nord Stream 1 pipeline, which has been completely closed since the beginning of September. The price of electricity per kilowatt hour in the UK has risen from 22 euro cents in January 2021 to 62 euro cents today: it has almost tripled. It’s the same story in many other European countries: in Germany, it went from 32 cents to 55, in the Netherlands from 15 cents to 45, in Spain from 20 cents to 40.

Everywhere, prices have at least doubled, if not tripled. However, the two countries are doing well. This is France: the price has risen from 20 cents to just 25 cents. and Hungary, where the price held steady at around 12 euro cents. President Orban’s pro-Russian policy has enabled his country to continue receiving gas and oil from Russia without interruption, keeping electricity prices stable.

How to explain the fact that some countries are more affected than others? First, is the country’s energy mix. For example, we can see that the United Kingdom is one of the most affected countries, with the highest electricity prices on the continent. This stems from a heavy reliance on natural gas in its energy mix. In fact, about 40% of British electricity comes from natural gas (the country took the lead in reducing coal consumption over its neighbors in favor of natural gas, which is regarded as a transition energy towards low-carbon). Even in normal times, the cost of electricity in the UK is 30% higher than the price of European neighbours.

The United Kingdom is not connected by pipeline to Russian gas like Germany, so it doesn’t really suffer from cuts. But it is indirectly affected by the jump in the global price of natural gas. On the other hand, France, for example, which is among the least affected countries, benefits from its nuclear fleet which gives it a certain energy autonomy, which is very precious in these uncertain times. But the prices felt by the consumer also depend on the measures taken by the governments to counter the rise in prices. On a case by case basis, governments set price limits – as in France – or cut taxes to reduce the end customer’s bill.

At the European level, the EU proposes to set a limit on the price at which members buy Russian gas, and impose a tax on energy producers, in order to overload Russian financial resources. The money allocated by governments is enough to protect households against rising energy prices, and tends to destabilize the budgetary balance. Between September 2021 and August 2022, Greece spent the equivalent of 3.5% of its GDP for this purpose, Lithuania 3.4%, Italy 2.7%, Spain 2.2%, France and Germany 1.8% each, the United Kingdom 1.5%, and the Netherlands 0.7%.

Sweden, Finland, Ireland and Denmark are the countries that have spent the least, with envelopes representing less than 0.5% of their respective GDPs. The gas prices paid by the households have increased in the same way as the electricity prices discussed earlier. Between January 2021 and August 2022 the price was multiplied by 4.4x in the United Kingdom, 3.5x in Germany, 3x in the Netherlands, 2x in Spain and 1.7x in France. Here too, Hungary is doing well with a price that is not only very stable, but also one of the cheapest in Europe. Along with electricity prices, the United Kingdom is the country most affected by the price of gas in households. The new prime minister, Liz Truss, who replaces Boris Johnson, intends to cut gas bills to £2,500 a year.

Energy prices are expected to rise further this winter due to strong demand pressures, restricted nuclear production in France due to maintenance issues, and reduced use of hydraulics due to drought this summer. Germany has turned to coal for a third of its electricity generation, and has decided to close two of the three nuclear power plants by the end of the year, if the situation so demands. Officials reassured the level of gas storage in Germany is higher than last year, but the unpredictability of the situation prompts them to maintain it all over. Ration measures are already in place from this summer. For years, everyone was a winner. The Russians have built infrastructure to deliver gas to Europeans on the best terms, and Europeans have created industries that rely heavily on Russian gas delivered at competitive prices.,

Today, Russia sells less gas and oil to Europeans, but it does so at a much higher price than in the pre-war period. In the end, he is the winner in financial terms! The average revenue generated from Russian oil and gas exports to Europe in the 5 months between March and July before the conflict in Ukraine was $50 billion. This year, these revenues represent approximately $96 billion between March and July 2022! She sells less, but at a higher price, and becomes the winner financially. Now, the task is complicated, as everyone has entered a vicious circle: Europeans impose more sanctions, and their economies are suffering from rising energy prices.

Conversely, Russia is benefiting from rising energy prices, but the rest of its economy is suffering (it itself is calling for the lifting of Western economic sanctions so that gas distribution via North Section 1 is resumption for this winter) able). There is no winner now. This is a reminder of the fragility of economies that do not have a certain margin of energy autonomy. It is even more reminiscent of the fragility when a country that is unable to build its energy autonomy chooses to rely on a single supplier because of a competitive price, rather than diversify its partnerships, even if its That means paying for more expensive imports. This supplement added to the invoice is a margin of safety that makes it possible not to depend entirely on one manufacturer.

After the invasion of Crimea in 2014, Europe could have changed its stance, but it did not. In 2014, Russian gas accounted for 35% of European gas imports. In 2019, the stock rose to 45%, going against what should have been done. Several lessons must be learned: to develop its energy autonomy through an effort to develop exploration, drilling and production capabilities, even if it is less competitive than energy imports. Without going to the extreme, purely local production that would have no economic meaning; Generating part of the needs locally would raise the bill slightly in exchange for a certain margin of autonomy. Finally, diversify your partners so as not to find yourself dependent on one supplier, while achieving a more comfortable margin of safety by increasing its storage capacity.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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