Europe’s Energy Crunch
Europe Is Warned Against Complacency as Gas Crisis Eases
A relative calm has descended over Europe’s gas markets this year as mild weather and ample inventories all but eliminate the risk of a serious supply disruption this winter.
The torpor is prompting warnings: Don’t get complacent!
Germany’s top energy regulator, BNetzA President Klaus Mueller, took to Twitter on Friday to complain that his citizens weren’t saving as much gas as they should be.
Consumers only curbed their gas use 8.6% below the 2018-2021 average in the final week of January, well below the government’s 20% target.
On Thursday, the boss of Shell Plc said Europe should be ready for a long haul.
“I would not declare the end of the energy crisis,” Shell Chief Executive Officer Wael Sawan said in an interview with Bloomberg TV, after his company reported record 2022 profits due in large part to the high price of gas.
Europe found sufficient fuel for this winter because “LNG stepped up to fill the void” after Russia squeezed pipeline supplies, Sawan said. Shell alone delivered 194 cargoes to Europe and the UK in 2022, roughly five times what they would do in a typical year.
Calmer Gas Markets
Price swings for European gas have narrowed significantly this year
In 2023, the world will be “desperately in need of natural gas” as China’s appetite recovers after the end of Covid-zero, Sawan said. BloombergNEF expects China’s primary energy demand to grow by 5.3% this year, compared with 2.9% in 2022.
All of this means that the European Union can’t ease off its recent measures to curb natural gas demand, according to estimates from the think tank Bruegel. Consumption of the fuel will need to remain 13% lower than the five-year average from February to October, it said.
That assumes Russian pipeline flows remain at current levels and temperatures are around normal. Under a worst-case scenario, with no Russian pipeline gas and colder weather, demand reductions would need to reach almost 30%.
Germans Aren't Saving Enough Gas
Weekly change in gas consumption compared to average 2018-2021 levels
If the current winter does end without incident, Europe could be forgiven for celebrating the fact that last year’s race to refill gas stockpiles was successful. But this is a marathon, not a sprint. The absence of Russian gas will be felt keenly across the continent for a long time.
“The amount of rewiring of energy flows over the past year has been huge,” said Sawan. “This is going to be a journey of years and I would caution anyone that looks ahead and assumes the worst is over.”
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