The reason for the rise in energy prices in Europe

Europe is facing a power outage by increasing wholesale prices for natural gas, raising consumer demand for higher prices, and forcing some producers to shut down.

Complicated forces are creating an unprecedented storm in the European gas market, creating a “perfect hurricane” of high and low supply.

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Ira Joseph, head of global oil and electricity pricing at S&P Global, has never seen such a price. Last year prices were very low and we expected some sort of recovery after Covi, but this is really, really hard. Things. “

With the emergence of economies in the wake of the cholera epidemic, global demand has risen, and the cold snap at the end of this year has weakened storage levels below normal, meaning there is less reserve capacity.

There are other reasons for the game. In the more competitive Asian markets, the demand for liquefied natural gas exports has shifted from Europe.

Europe has experienced an unusually stable climate in recent weeks, which has pushed wind power to low output, and in the UK in particular the wind has put more pressure on gas supplies, which typically supply 20% of the country’s electricity.

“They put a lot of things together and ended up in a perfect storm,” says Anna Mikulkasca, a resident of the Institute for Energy Studies at Rice University Baker.

Rising natural gas prices are causing pain throughout Europe, where the fuel is used for home heating, cooking and power generation.

A major fertilizer company has announced the closure of two factories in the UK due to rising natural gas prices. UKSteel, an industry group, said this week that some steel producers had to stop working regularly due to “stolen” energy prices.

Governments in some countries, including Spain, Italy, France, and Greece, have taken steps to reduce consumer bills.

And when the demand for fuel is often high, it can get worse as winter approaches. On that occasion, the US State Department’s energy security envoy, Amos Houstin, warned that Europe was not doing enough this week.

During his visit to Warsaw, Poland, Houstin said: “I am worried because if it is a cold winter, I do not think we should ever be there.

Gas prices in the United States have also risen, but not to the same extent. The United States is less prone to inflation due to shale gas production, but Europe needs to import most of its gas.

In addition, Russia, Europe’s largest exporter of natural gas, is not sharing as much as expected at such high prices, although its production remains stable.

“This is not just about some geopolitical games,” Houstin told the Financial Times. “Lives Are in Danger”

Although the US project will boost confidence in Moscow in Europe, this year’s deployment of Russia’s Nordic Stream 2 natural gas pipeline has been sent by Hochstein management to reduce the risks to Germany. Energy.

Russia’s state-owned power company Gazprom has called for an investigation into the price hike, saying a group of EU lawmakers in Moscow had deliberately cut off natural gas supplies to Europe.

Analysts, however, say there is clear evidence of this. Gazprom denied the allegations.

“It was not the kind of response one would expect from Russia,” Joseph says. But now what is happening is not unusual in terms of their export status.

Critics of the EU’s aggressive climate policies have blamed Brussels for the price, including fossil-dependent Poland.

As countries shut down their traditional “base load” of coal and nuclear plants and rely more on wind and sun on renewable energy to achieve emissions reduction goals, they will put more pressure on natural gas in the absence of these uninterrupted sources.

As part of Europe’s emissions trading system, the cost of licenses to export carbon is at an all-time low, so gas prices are rising and not as much as expected from natural gas to high-volume coal.

Nikos Schafos of the Center for Strategic and International Studies says there is no evidence that European climate policies are causing natural gas shortages.

“There is no limit to the supply of gas that guarantees these prices,” said Tsaphos, who studies geopolitics for energy and natural gas and European climate policy.

However, the EU expects an increase in energy prices, which could lead to significant opposition to climate change.

One thing we cannot bear is the social opposition to climate change. Now that we are talking about inflation in the energy sector, I can clearly see this threat, ”said Fran ቲois Timmerman, vice-president of the European Commission on Climate Change, at a parliamentary session this week.

However, he said, higher natural gas prices will strengthen the transition to clean energy sources to reduce dependence on fossil fuels.

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According to Tsfos, the effects of climate change can be devastating to all energy sources, so switching to renewable energy does not prevent temporary fluctuations in energy prices.

“The idea that we would not have a big price change if we had a quick transition is crazy,” Saphos said. With bad weather, you still have the flexibility and desire to go up and down. The question is do you have a flexible swing system to these shifts? ”

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