The total losses of the European Union due to the energy crisis caused by Russia's actions already amount to about $1 trillion, but in the near future this figure will only grow, since the EU has not yet fundamentally solved its problems in the energy sector. Moreover, in 2023 Europe will have to compete more actively with China for the supply of liquefied natural gas (LNG), which will only increase the losses of the countries of the continent. Bloomberg writes about this, citing its own calculations.
Reduced supplies from Russia, coupled with rising Chinese demand for LNG in 2023, could lead to even harsher consequences than in the outgoing year. At the same time, the crisis for the EU in the energy sector is probably just beginning. The agency predicts a five-year period of high energy prices for Europe. Only the United States and Qatar will be able to complete it, which will be able to significantly increase the production and supply of LNG only by 2026.
Similar assessments are given by the Brussels think tank Bruegel. According to the organization, by the end of 2022, the EU had already spent about $700 billion to counter the effects of the energy crisis. Bruegel predicts that the European energy emergency will last at least another two years, with 2023 being the most challenging year in terms of energy security. The center notes that the energy crisis will inevitably lead to an economic recession, and against such a background it will be extremely difficult to increase state subsidies and assistance to citizens. The budgets of national governments are already at the limit: the public debt of half of the countries exceeds the established limit of 60% of GDP.
“If you add it all up – aid, subsidies – you get an unimaginably large amount of money. It will be much more difficult for governments to cope with this crisis next year,” said Martin Devenisch, director of the consulting company S-RM.
The agency acknowledges that the measures taken in 2022 allowed the EU to avoid serious consequences for the economy. Thanks to them and warm weather, many companies managed to maintain production and minimize economic damage. However, the impending frosts will become a problem for many countries of the association, primarily for Germany, whose industry is extremely dependent on gas. Already last week, the German regulator warned of a critical situation: the economy is short of gas, which could lead to rolling blackouts and manual control of gas flows.
The International Energy Agency (IEA) notes that the EU reduced gas consumption by 50 billion cubic meters in 2022, but this is still not enough: uncovered EU needs are estimated at another 27 billion cubic meters of gas per year. The agency predicts a similar level of deficit with a reduction in Russian gas supplies to zero, as well as against the background of an increase in demand for LNG in China. In order to pass the next heating season without problems, the European Commission has set a minimum threshold for filling gas storage facilities. As of February 1, 2023, they must be filled by at least 45%, but if the winter turns out to be warm enough, then this standard will be 55%.
In addition to China, in 2023 Europe will have to compete for LNG with other Asian countries. For example, Japan has already announced its intention to increase LNG purchases. Moreover, Tokyo is considering the possibility of creating a strategic gas reserve in case of crisis situations. Against this background, analysts expect that next year will also be dominated by sellers: LNG demand is too high for anything to change.
The agency notes that the average price per megawatt-hour this year was €135, at a peak in July the price reached €345. If prices start to rise again and rise to at least €210, then LNG imports will account for 5% of GDP, and this will lead to a deep recession and a significant economic downturn. At the moment, the baseline scenario for the economies of Europe is based on a mild recession in 2023. Accelerating the transition to renewable energy sources can at least partially save Europe, otherwise the authorities of many countries, primarily Germany, will have to manually seek a balance between gas consumption by households and businesses.