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Current Affairs

Europe dealing with energy crisis

Date: 19 January 2022 Tags: Energy

Issue

Europe is facing a natural gas shortage of high magnitude. The reserves have been all-time low and prices have gone up.

 

Background

Natural gas is the major source for heating homes during the harsh winters. Customers are already facing high bills.

 

Details

  • European countries import majority of their energy from middle-east. The pandemic has affected supply chains and raised costs.

  • Countries rely on underground gas stored in caverns to handle sudden additional demand for gas for heating or electricity.

  • This year, the caverns were only 56% full compared to 73% last year. The reasons include harsh winters, non delivery from Russia and high demands in Asia.

  • The cold weather would mean that the countries would need to import 5-10% more gas compared to normal times.

 

Effects

  • The shortage of supply and growing demands has pushed the prices higher. Prices have climbed to nine times their level at the start of last year.

  • Analysts have observed that traders have diverted their Asia bounds ships from middle of the ocean towards Europe to take advantage of lucrative prices.

 

Role of Russia

  • State-owned Gazprom has sold less gas on short term. The company is focusing on fulfilling its long-term contracts.

  • Russia may be using the opportunity to pressurize west European nations in resolving border tensions that occurred near Ukraine.

 

Role of weather

Mild winter will be the key in averting the shortage disaster. The temperatures have been normal till now but it can change fast.

 

Moves by government

  • Many countries are offering cash subsidies to consumers to tide over high prices and soften the impact on household income.

  • On a long term, there should be focus on renewable energy such as solar and wind.

 

Cooperation between countries

  • In extreme situations, countries can declare gas emergency and shut down industrial customers to spare households. This will hurt economy but save lives.

  • Countries can request supplies from neighbouring countries under EU legislation. It remains to be seen if countries are willing to help even if they face shortages.

  • The mechanism has not been tested till now but many changes are being envisioned such as joint purchase of gas.