Bloomberg assessed Europe's ability to survive the heating season in the event of a complete cessation of Russian gas supplies. Analysts estimate that if the current status quo is maintained, European countries will be able to survive the winter relatively calmly if it is as warm as it was a year ago; however, in the event of severe climatic conditions, the continent could experience demand cuts and rolling blackouts.
To date, the EU has been preparing a plan to reduce energy consumption by 15%. This involves a set of measures that were supposed to reduce the consumption of gas and electricity. The plan included, among other things, lowering the temperature in homes and public institutions, building up alternative sources of generation. However, the potential of alternative energy sources raises questions, since these sources are highly dependent on weather conditions: hydro and nuclear power plants may not provide the volumes of energy expected from them due to record heat and drought in Europe.
Rising energy costs are already hitting European businesses and households. Gas prices accelerate inflation, which is why many enterprises are forced to abandon the increase in production, reduce staff and save in every possible way. Politicians and business representatives are already talking about the risks of "de-industrialization of Europe", but experts are sure that the current situation is still not the limit.
“High prices and the resulting fall in demand may ultimately mean that Europe will avoid gas shortages. However, the cost of such solutions will be astronomical,” said Catriona Lindsay, Senior Analyst at DB Group Europe.
Additional risks – Liquefied natural gas (LNG) supplies, which should become the main replacement for Russian fuel, may be under threat due to a combination of circumstances. As an example, the agency cites the incident with a fire at the largest US LNG plant in Freeport, which hit the stability of gas supplies to Europe. The Freeport is due to open in November and this will likely ease the pressure on the European market. However, experts suggest that repairs may be delayed, and in this case, the pressure on the energy market will only increase.
There are also risks of increasing gas consumption from China. In 2022, Beijing reduced consumption amid pandemic toughness and lockdowns, and it fell by 20%. However, the agency notes, these measures can be lifted and the economy will begin to grow again, then the PRC will enter the world gas market, which will further accelerate prices. At the moment, the Chinese authorities are increasing gas supplies from Russia, while simultaneously selling surplus LNG on the market, sending them, among other things, to Europe.
On Friday, EU energy ministers are to come up with a new plan based on a complete shutdown of gas supplies from Russia. One of the key issues of discussion – the introduction of a price ceiling for Russian supplies – has already been rejected, since the risks of introducing this mechanism are too high and difficult to predict.