Europe is almost helpless in the face of the crazy high gas price crisis: what are its causes and repercussions?

Europe is almost helpless in the face of the crazy high gas price crisis: what are its causes and repercussions?
Europe is almost helpless in the face of the crazy high gas price crisis: what are its causes and repercussions?

The European continent is almost powerless in the face of a crazy rise in gas prices, which threatens hundreds of thousands of families from not bearing the high cost of heating during the winter season, or the fear of several countries in the European Union that they will not be able to secure basic energy sources for their citizens. France will have its share of this crisis, with more than a third of its population relying on this substance for heating. While most of the reasons for this rise lie in economic and technical aspects, political factors may have an important role, according to many experts and analysts. Why did the prices of this vital substance rise and what are its repercussions on Europe and the world?

prices continue Gas Its crazy rise in Europe, in light of the fear of economic experts that the continent will witness a shortage of this material, which is essential for heating during the winter season. Gas prices recorded historical levels, rising by 250 percent in almost a year.

To clarify the picture more, the price of European gas reached the limits of 100 euros per megawatt hour on Friday, knowing that its prices were less than 20 euros in 2019 before the crisis of the Corona virus and the stagnation of the global economy.

In France, it was announced on Wednesday that gas prices would rise by 12.6 percent, starting from the first of October, despite the noticeable increase in prices in July, August and September. Do the economic reasons stand alone behind this crazy rise, or do political factors include it as well?

High demand and scarcity of stocks in European countries

At the outset, an important factor that contributed to the increase in prices should not be overlooked, which is the simultaneous restoration of economic activity among most countries at the global level. This return led to a noticeable increase in the prices of all energy resources, including gas and other fuels. According to statistics, in September, China became the first importer of liquefied gas in the world against Japan.

In addition, European laws that seek to combat pollution and reduce greenhouse gases harmful to the environment have led many countries to resort to gas instead of coal to produce electricity, as it emits less carbon dioxide.

The European continent experienced a relatively cold winter in 2021 and it lasted for a longer period. For example, a severe cold wave swept France in the month of April, which affected agricultural crops in several regions, and led to the consumption of gas for heating by 15 percent more compared to the year 2020. As a result, European stocks were significantly depleted and could not be restored Storage is fully in place in the summer as global demand rises, according to the French Energy Regulatory Authority.

Technical faults in Norway

Europe mainly depends on two sources of gas: Russia (32.9 percent) and Norway (19.8 percent), which constitutes more than half of the sources of gas imports to Europe. France imports more than 40 percent of its needs from Norway, and 16.8 percent from Russia.

But it should be noted that gas constitutes 15 percent of the total electricity production sector in France, as the country depends mainly on the nuclear reactor. As for heating, the French depend 38% on electricity and 35% on gas.

And in the fall of 2020, a fire broke out in one of the main facilities in Norway, which led to its closure, and work in it is still suspended until now, pending repair of the damage, which extended for a longer period as a result of the Corona virus pandemic. Therefore, the European dependence has become more on the Russian exporter, specifically the “Gazprom” company, which has a monopoly on the export of gas to European countries.

Is Russian “legalization” intentional?

In mid-September, a group of 40 MEPs asked the European Commission to investigate Gazprom, accusing it of cutting gas supplies through Ukraine to push Germany to agree to laying a gas pipeline.Nord Stream 2The service crossed the Baltic Sea faster, but the Russian company denied any market manipulation.

For its part, the Kremlin announced Friday that Russia is fulfilling all its obligations under the existing natural gas contracts, and that most of the complaints against Moscow about natural gas are due to political reasons.

In this context, US Energy Secretary Jennifer Granholm issued a warning Wednesday against “manipulating” gas prices in Europe through “storage or failure to produce sufficient supplies” during the meeting of European Union ministers to discuss the shortage of gas. “We take this matter very seriously and stand by our European allies to ensure they have adequate and affordable supplies of gas this winter,” she said.

The repercussions of the European and global crisis

In a study published by the European Confederation of Trade Unions, it was found that nearly 3 million poor European workers “would not be able” to pay their autumn and winter heating bills across the union. Some European countries are trying to take some steps to ease the burden of electricity and heating prices on their citizens.

French Prime Minister Jean Castix announced steps to freeze electricity and gas prices until April 2022, with losses being compensated gradually after the winter has passed. However, French newspapers described this step as “late”, worried about the situation of families who would not be able to afford the cost of providing warmth for their members.

And in Spain, where there were angry street demonstrations over high electricity prices, the government took fiscal measures to help families and raise taxes on producers who make more profit during this crisis.

Economists expect global gas prices to remain high during this decade compared to the previous decade. And the French newspaper “Le Figaro” warned against returning to coal plants to produce energy due to its low cost, which will largely overthrow previous efforts to reduce polluting emissions.

Indeed, Britain has begun to restart its coal plants, as its electricity production sector depends mainly on gas, which posed a real threat to the continuation of production. It is noteworthy that the British government was seeking to stop the coal plants completely in the year 2024, but current developments may not help it meet its obligations.

On the global level, the economic magazine “Bloomberg” published an article warning that the world should be aware of what is happening in Europe, because its repercussions will affect all continents. Gas prices rose in Asia by 175 percent, and the magazine pointed out the danger of stopping factories in China or having to raise their prices, which will affect the prices of products globally. And other poorer countries will not tolerate a huge rise in gas prices.

Fouad Bishop

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