“People will have to change the way they live… Less cars, less heating, less lights, less industrial production”
The hybrid war between the West and Russia will not be a “100 ari”, but a Marathon, which means that everything will be judged on the endurance, not only of the governments, but also of the peoples. Analysts who spoke to Bloomberg about what’s to come happen precisely at Europepointed out that this winter will not be the only difficult one for energy prices, and thus for the entire market and commercial activity, but that the rally, insecurity and high costs will remain at least until 2025in which case a gradual de-escalation is foreseen, as long as no new crisis or worsening of the current situation occurs.
“Europe may face an even bigger problem next winter. States may not be able to fill storage facilities next summer to the extent they were able to this year,” Niek Den Hollander, chief commercial officer at Germany’s Uniper.
“Sometime between 2025 and 2027 is when we will see prices in Europe fall back to early 2021 levels,” predicted Ed Morse, head of commodity research at Citigroupadding that LNG export potential “doesn’t grow overnight.”
“Given the dependence that Europe has developed over the last decades on Russian energy, it will wreak havoc on demand. People will have to change the way they live. We will drive our car less often, turn on the heat less often, turn on the lights less often and have to live with limited industrial production,” said Charif Souki, president and co-founder of Tellurian.
“We will return to a more normal state, but it will take some time. Price fluctuations are here to stay for a longer time,” said Helge Haugane, vice president of the Norwegian Equinor.
The Commission’s proposal
A proposal to impose a ceiling of 200 euros per megawatt hour for electricity producers other than natural gas is being worked out by Brussels, according to a report in the Financial Times.
According to the draft proposal, the European Commission will propose to member states to limit the price of electricity from producers such as wind farms, nuclear farms and lignite plants, which are affected by the high price of natural gas.
Continuing, Ursula von der Leyen emphasized that the manipulation of natural gas markets has a secondary effect on the electricity market.
“We are facing astronomical electricity prices for households and businesses and huge market volatility,” he said, setting out a series of “immediate measures” proposed by the Commission to protect vulnerable consumers and businesses:
First, the Commission proposes a “smart electricity saving”, i.e. “a mandatory target to reduce the use of electricity during peak hours”. “We will work closely with member states to achieve this,” noted Ursula von der Leyen.
Second, the Commission proposes a cap on the revenues of companies that generate electricity at low cost. Low-carbon energy sources generate windfall revenues that do not reflect their production costs. “We will propose re-channeling these windfalls to support vulnerable people and companies to adapt,” the Commission President stressed.
Third, so should fossil fuel companies’ windfalls. Oil and gas companies also make huge profits. The Commission will therefore propose a solidarity contribution for fossil fuel companies. Member States should invest this revenue to support vulnerable households and invest in clean domestic energy sources.
Fourthly, the Commission proposes the facilitation of liquidity by the Member States for energy companies. Energy utilities must be supported to cope with market volatility. They are currently being asked to provide unexpectedly large amounts of capital, which threatens their ability to trade and the stability of future markets. In addition, the Commission will extend the legal framework allowing for the rapid granting of state guarantees.
Fifth, the Commission proposes a cap on the price of Russian natural gas. “The goal here is very clear. We need to cut the Russian revenues that Putin is using to finance this horrible war against Ukraine,” Ursula von der Leyen stressed.
In conclusion, the President of the Commission pointed out that at the beginning of the war, Russian gas imports by pipeline from Russia were 40% of all imported gas and today it has decreased to 9%. “These are difficult times. But I am convinced that Europeans have the economic strength, the political will and the unity to maintain the upper hand,” he added.
Berlin is wary
In Berlin, there is skepticism about imposing a cap on Russian natural gas import prices, as Politico reports.
We remain cautious when it comes to issues related to gas price ceilings, but in general we are ready for talks within the European framework, said a spokesman for Germany’s economy ministry.
A European diplomat criticized Berlin saying it was creating a problem as it “takes so long to decide on issues like the price ceiling”.
Last week, von der Leyen raised the issue of capping Russian gas import prices. Since then, EU officials have been working on alternative options for the adoption of such a measure, which will be discussed today by representatives of the member states ahead of the extraordinary meeting of EU energy ministers on Friday.
Putin: The pipelines will be closed
President Vladimir Putin said today that Russia will resume supplying gas to Germany through the Nord Stream 1 pipeline once damage to its turbine is repaired, and rejected Western claims that Moscow is using natural gas as a weapon.
Speaking as part of a speech at the Eastern Economic Forum being held in the Russian Far Eastern city of Vladivostok, the Russian president said that Germany and Western sanctions are responsible for the Nord Stream 1 pipeline not being operational and that Ukraine and Poland unilaterally decided to shut down other pipelines carrying natural gas to Europe.
Europe is facing a looming energy crisis and soaring energy bills after Gazprom completely suspended gas supplies through Nord Stream 1 after what it claimed was an oil leak in its turbine during maintenance work.
“Nord Steam 1 is essentially closed now,” Putin said, calling on Germany to return a turbine for the pipeline’s Portovaya compressor station, which would allow Russia to start pumping gas again.
“There is an oil leak there — it’s a potentially explosive situation, a fire hazard. The turbine can’t work. Give us a turbine and we’ll open Nord Stream 1 tomorrow. But they’re not giving us anything,” Putin said.
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