An acute shortage of gas in the German market could lead to a sharp reduction in production, the deindustrialization of the economy and the exodus of companies to markets where production would not be so expensive. Bloomberg writes about this with reference to representatives of German business, who are already forced to respond to a sharp rise in energy prices.
The entire German economy has been hit by the energy crisis, but the automotive and chemical industries have experienced particular pressure, for which rising electricity prices are becoming a major obstacle to developing and maintaining business. The agency notes that in two months, electricity prices for enterprises have doubled, a megawatt-hour costs a business €540, although two years ago it was only €40.
“Energy inflation here is much more dramatic than anywhere else. I fear the gradual de-industrialization of the German economy,” said Ralf Stoffel, CEO of BIW Isolierstoffe GmbH.
The agency notes that the problems are caused by a sharp reduction in the supply of gas from Russia, which was used to generate energy at power plants, and by business in production. Now the government is preparing for an unprecedented reduction in consumption, which will require businesses to adapt to the harsh realities of rising prices and energy shortages, and households to austerity.
The authorities are helping ordinary Germans survive the energy crisis, but business remains face to face with the problem. Many enterprises are considering various options for optimizing costs: from increasing the cost of production to moving production to another country or closing the business altogether.
“Prices are a heavy burden for many energy-intensive companies that compete internationally,” says Matthias Ruh, spokesman for Evonik Industries AG, one of the world's largest chemical producers.
He said that the company has switched about 40% of its consumption from gas to other fuels, including coal. Data from the consulting company Oxford Economics shows that the German chemical industry is in crisis, despite a sharp increase in imports of products (growth by 27% in the first six months), production fell by 8%. The International Monetary Fund (IMF) expects Germany to have the worst economic performance among the G7 countries.
BMW intends to reduce the use of gas in its production in Germany and Austria and to use more local power generation capacity. Delkeskamp Verpackungswerke admitted that due to rising energy prices, it will be forced to close its plant, which will lead to layoffs. Simone Tagliapietra, a senior fellow at the Brussels think tank Bruegel, believes that the new energy crisis in Europe will significantly change the "economic landscape of the continent."
The shortage of gas in Europe led to a sharp increase in the cost of electricity, gas prices rose to multi-month highs and exceeded $2,600 per thousand cubic meters. The key reason for the shortage is the debate between Russia and Europe regarding gas supplies through the Nord Stream pipeline. Russia has reduced supplies to a minimum, arguing its decision by the inability to service gas turbines due to sanctions. Europe has already agreed to remove the turbines from the sanctions and supply the previously repaired turbine to Russia, but Gazprom is demanding that all maintenance of the turbines be removed from the sanctions.
Sources say that Russia is deliberately using gas as a tool to put pressure on the EU for supporting Ukraine in the war. The dispute between Europe and Russia has already led to a collapse in gas production within Russia, as well as to a sharp jump in gas prices on world markets. Moreover, experts predict that as the heating season approaches, Europe will have to compete for liquefied natural gas (LNG) supplies with Asian countries, including China, Japan and South Korea.