The intention of Russian President Vladimir Putin to turn energy into another weapon against Western countries, in particular against the European Union, and thus pressure politicians to support Ukraine in the war, has failed, at least for the moment. This conclusion was reached by Bloomberg, which analyzed how European countries are going through the current heating season.
The key reason for the low effectiveness of the “energy war” is warm weather, as well as a wide diversification of gas supplies, primarily liquefied natural gas (LNG), which European countries managed to organize against the backdrop of a sharp reduction in pipeline gas supplies from Russia. In addition, the situation with the provision of gas has been positively affected by the reduction in consumption of energy and directly gas in Europe. In 2023, the decline in consumption, according to Morgan Stanley, will continue, the investment bank predicts a decline of another 16%.
Gas prices in Europe have already fallen below pre-war levels. On Monday, January 9, a thousand cubic meters of gas at the largest gas hub in the Netherlands was trading at around $770, the level of February 2022. The still relatively low demand for LNG in China also helped lower prices, where the Russian Gazprom partially redirected its capacities after losing the European market. An additional factor in the decline in demand for gas in China was a new outbreak of COVID.
The decline in energy prices also had a positive effect on Western economies. According to the latest consumer price index data, the central banks of Europe and the US are seeing a slowdown in inflation, which allows the European and US economies to avoid a severe recession while maintaining growth.
“As far as we can tell, the danger of total economic collapse, the collapse of European industry, has been averted,” said German Economy Minister Robert Habeck, whose country could have been hardest hit by the gas supply disruption in Europe.
Despite the difficulties during the current heating season, Germany managed to fill gas storage facilities at the current moment by 91% against 54% a year earlier. The more gas European countries can keep in their storage facilities for next year, the easier it will be for them to get through the 2023 heating season, the first year without stable supplies from Russia.
“We are very optimistic, which in fact was not there in the fall. The more gas we have in storage at the beginning of the year, the less stress and expenses we will incur in preparation for next winter, ”admits Klaus Müller, head of the German grid regulator.
The energy crisis has cost the economy of the European Union a round sum, according to the agency, the EU economy has missed about $ 1 trillion, and the costs of mitigating the consequences of the energy crisis in the EU have collectively cost about $ 700 billion. A combination of factors has led to the fact that the European market even created local excess of gas, which had a positive impact on prices. However, the risks for European energy still remain: the winter is not over, the Chinese economy is recovering, and the authorities are lifting coronavirus restrictions. Yes, and summer for Europe can become an additional trigger for consumption growth, weather forecasters predict record high temperatures, which can increase energy consumption.