Europes energy crisis deepens: Its a bit of a cold winter

"As a Frenchman, I keep a close eye on bakery prices, which have risen quite a lot many people are worried," European Central Bank President Christine Lagarde said in a recent media interview. She stressed that rising energy prices were a concern as inflation continued to rise. "When people fill up at the gas station buy heating oil for the winter, they can't help but notice price increases..."

In the context of the imbalance between global energy supply demand, the energy crisis plaguing Europe is becoming more more severe. The prices of natural gas electricity keep rising, the risk of power brownouts keeps rising. At the same time, high inflation, largely driven by energy prices, is a widening impact on business production household life.

Analysts say the current energy crisis reflects the conflict between the European economy's reliance on fossil fuels the lack of renewable energy supplies. Although the EU has put forward ambitious energy transition carbon neutrality targets, it may take a long time to build sustainable stable renewable energy supply capacity, the global supply chain barriers caused by COVID-19 have exacerbated the complexity of the energy transition slowed the process of the European economy towards green sustainable development.

European gas prices have been running high since August. Wholesale gas prices in Europe were about six times higher in November than a year earlier, according to TTF, the European gas trading benchmark. Driven by gas prices, electricity prices in Europe have soared, with prices in Germany, France, the UK Spain all at historic highs.

The Commission noted that wholesale energy prices in Europe had risen significantly, driven mainly by a surge in gas demand on global markets a decline in European gas imports. In addition, adverse weather conditions in 2021 will make the supply gap of renewable energy such as wind power solar power larger, exacerbating the energy supply shortage in Europe. Energy prices have also been boosted by a rise in the price of permits for carbon trading under Europe's Emissions Trading System (ETS).

As an important alternative energy source for the transition fossil fuels to green energy, which can balance energy consumption carbon reduction, demand for natural gas is rising in Europe, the EU imports 90 percent of its natural gas, most of it Russia. So geopolitics also play a big role in European energy prices. Nord Stream 2, a gas pipeline linking Germany Russia, has so far struggled to open because of the US, making supplies to Europe even more difficult this winter.

For European businesses citizens, higher energy prices are directly reflected in raw material consumer prices. Eurozone inflation climbed to a 13-year high of 4.1 per cent in October, driven by a 23.5 per cent year-on-year jump in energy prices, according to eurostat, the European Union's statistics office.

Analysts say the viability of some of Europe's smaller energy suppliers, which are often unable to pass on higher procurement costs to customers because of long-term supply contracts typically offered at fixed prices, is severely challenged, largely depending on how cold the European winter is how long energy prices rise.

Alexander MacDonald, chief executive of the Association of Energy Brokers in London, believes some UK industries could face shutdowns this winter because of high energy costs. For millions of UK domestic energy users, the crisis could spell the end of cheap gas electricity.

In the face of the current energy crisis, European countries, on the one hand, hope to increase external supply including Russia, on the other hand, have also taken some internal support measures. Spain's government, for example, has demanded curbs on energy prices electricity profits. France, Italy other European countries have pledged to provide subsidies for low-income families.

Fundamentally, however, structural contradictions in energy supply in the process of green transition are expected to continue to plague Europe for some time. European Commission President Von der Leyen said the key to solving the energy crisis was to "accelerate the transition to clean energy". Some analyses point out that the EU's energy transformation needs only sufficient nuclear, coal natural gas power stations as the supply guarantee in the transition stage, but also the establishment of stable renewable energy supply capacity, the strengthening of the internal energy market. All of these tasks are very difficult.

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Source: Reference Information Network

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