Europe is struggling to reduce its energy dependency on Russia and is bracing for a possible disruption to natural gas supplies as Russia’s war in Ukraine pushes prices to new highs.
Natural gas prices hit a record high Thursday for the second day in a row, as restrictions on oil and gas are increasingly treated as a possibility on the eighth day of the war, either through Western sanctions or Russian retaliation. .
That could put further pressure on people’s spending: Energy prices have been high for months due to low supplies, driving up the cost of everything from gas or electricity bills to groceries, as companies They pass on their costs to customers.
Traders are “taking into account the increasing likelihood of gas sanctions for each day the crackdown continues,” said Kaushal Ramesh, a senior analyst at Rystad Energy.
The price of gas is 10 times higher than it was in early 2021, but it continues to flow through major pipelines from Russia to Europe, including through Ukraine, energy companies say.
To prepare for any outages as the war intensifies and to reduce reliance on Russia, several countries are ordering supplies of liquefied natural gas (LNG) by ship. They are also accelerating plans for Russian-independent terminals and pipelines and talking about allowing coal-fired power plants to keep working, even if they spew polluting emissions longer if that means energy independence.
However, many of the steps will take months or—in the case of new pipelines and terminals—years. The long-term answer is to quickly build facilities from renewable sources like wind and solar, but for now, Europe relies on gas to heat homes, generate electricity and power industries like fertilizer producers.
Europe, which gets almost 40% of its gas from Russia, is in a different situation than the United States, which produces its own natural gas. Even so, the European Commissioner for Energy, Kadri Simson, assures that Europe “has the tools” to handle any Russian retaliation this winter and acknowledges that a total cut “of course, would continue to be a challenge”.
The countries of the European Union are working to establish a strategic gas reserve and establish storage requirements. Officials are urging countries to sign gas-sharing agreements in case of emergencies.