Europe is more prepared for a “harsher” winter (analysis)

Hasan Almajidy
Hasan Almajidy
10 Min Read

Until the end of last November, Europe managed to overcome the worst scenarios of the energy crisis resulting from the decline in Russian gas supplies, but the most difficult phase has yet to begin.

With the onset of the winter season, this December, temperatures are expected to drop more than usual compared to last winter, according to meteorological sites, such as “Maxar Technologies”, which will further raise the demand for heating gas, and thus increase prices.

While the mild weather last November encouraged the filling of gas tanks in the European Union countries by 100 percent, while the desired goal was to reach 80 percent by the first of November.

This means that the European Union countries have successfully achieved this goal, taking advantage of the relatively mild weather in the fall, and the continued flows of liquefied gas from the United States, Qatar and Nigeria, and natural gas through pipelines from Norway, Algeria and Azerbaijan, and to a lesser extent from Libya.

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Indeed, shipments of liquefied gas arrived in Europe for the first time from distant regions such as Mozambique in southern Africa, and from Australia, which is about 20 thousand kilometers from Europe.

And with the decline of the Chinese economy’s craving for gas consumption due to the harsh closures of Corona, which prompted people to go out into the streets and demonstrate in rare scenes, this affected the global demand for gas, and encouraged price stability.

Also, the double increase in gas prices led importing countries to search for alternative sources of energy, not only clean ones, but even environmentally polluting ones such as coal, and dangerous ones such as nuclear energy, not to mention the economy in gas consumption due to high prices, as the European Union countries consumed less gas. By 10 percent until November, according to The Economist.

This led to a 22 percent drop in global LNG imports until October, according to the US Bloomberg Agency.

Prices have fallen, but they may jump in the winter

As a result of a combination of these and other reasons, gas prices have fallen from their peak last summer of more than 300 euros per megawatt-hour to less than 200 euros per megawatt-hour.

Rather, gas prices fell, last Monday, to 116.5 megawatts / hour, which is the lowest price since last June, before rising Thursday to 159.5 megawatts / hour, which is the highest since last October 13.

This rapid fluctuation in prices reflects the sensitivity of gas to the political situation and its fluctuations, especially after the threat of the Russian company Gazprom to reduce gas supplies to Moldova, after it confirmed that “some natural gas, which was sent to Moldova, will remain in Ukraine.”

This sparked panic in Europe, about the possibility of Russia cutting gas supplies towards it through the pipeline network that passes through Ukraine, which the French newspaper “Le Zico” says that “by cutting off the flow to Ukraine, Gazprom can put an end to the only remaining supply route to Ukraine.” Old Continent (with 43 million cubic meters per day).

But the continued flow of Russian gas in the same quantities to Moldova, on November 28, reassured the markets, and prices fell, but reports of severe cold in December raised them again.

Not only weather temperatures affect energy prices, but the war in Ukraine and its repercussions are considered the main factor in the rise in prices to at least four times compared to last year, when it did not exceed 20 euros per megawatt hour, according to specialized Western media.

Russia has threatened that gas prices may reach $3,000 per megawatt-hour, if the European Union proceeds with its plan to cap gas at 285 megawatt-hours.

The crisis has not yet begun

Talk about a global recession due to the rise in energy prices is no longer on the table with the same severity that it was raised months ago. It is true that the growth of the European economy as a whole is small and did not exceed 0.2 percent in the third quarter compared to the second quarter of this year, but at least it did not record negative growth. The unemployment rate in Germany, the largest European economy, is stable at around 3 percent, according to the British “Economist”.

However, this situation is likely to turn upside down, if this winter comes harsh and harsh, because this would bring with it a rise in gas prices, inflation, and perhaps recession, and worse than that, the inflationary stagnation driven by consumer demand for bank loans, even with high interest rates.

European liquefied gas tanks, even if they are full, their reserves have begun to decline, and their capacity is only sufficient for two or three months, according to the capacity of each European country. The crisis of maintaining nuclear power plants in France has not yet been completed, and in Germany the closure of nuclear plants has been postponed until next April only. .

Not to mention that the drought of Europe’s rivers last summer is still on the table despite the onset of the rainy season, as river water is used to cool nuclear plants and produce hydroelectric power through the water flowing from dams built across them.

And if the cold winter in Europe coincides with a harsh winter in Asia, this will create competition for shipments of liquefied gas between the two largest regions of gas consumption, which will raise prices to new levels, especially if the Chinese economy recovers, and its wheel returns to turning again, even if this is unlikely in Corona cases continued to rise.


The last winter

The European Union is moving at an accelerated pace to wean its countries from Russian gas, which before the war in Ukraine represented more than 40 percent of imported gas, while Brussels says, according to the “Le Zico” website, that in November it did not exceed 10 percent only.

At this pace, the European Union countries will not import a single drop of Russian gas after one year.

Russia is well aware that if it does not take advantage of this winter to put pressure on the European Union and achieve the greatest amount of gains, a similar opportunity is unlikely to be repeated.

Brussels believes that Russia’s threats to reduce gas supplies to Moldova, a small Soviet country aspiring to join the European Union, comes in the context of increasing pressure on Europe, with the onset of winter and lower temperatures.

Meanwhile, Moscow warns the European Union of the consequences of imposing a ceiling on its gas prices, and threatens to stop gas supplies to any European country that adopts such a step.

And after stopping Russian gas exports to Europe from the Nord Stream line, stopping exports from the Ukraine line in the dead of winter will be a harsher step than the winter cold for the Europeans.

But Russia also needs the continuation of the flow of its gas to Europe, in order to achieve more revenues that allow its economy to withstand Western sanctions, finance the war in Ukraine, and also continue pressure on the European Union, especially since the Chinese economy is not yet ready to absorb all the Russian gas destined for Europe. Not to mention the absence of sufficient infrastructure to carry out a revolutionary process in this direction.

Russia does not have the comfort of stopping gas from Europe, but it can escalate through the method of reducing supplies, searching for alternative markets, and preparing the infrastructure for transporting gas through pipelines to Asia.

The next winter will not pass mostly cold and peace in Europe, but it will be less harsh than expected last summer.


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Posted by Hasan Almajidy
Hasan Almajidy is an Iraqi Musical Artist, Composer and Music Maker from Baghdad. The founder of Almajidy Production Company is a well-known Iraqi writer in Iraq, one of the first contributors to the development of music production and a digital music distributor.
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