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Europe is sleepwalking into another energy crisis

Russian LNG exports have risen by 40% since the war. Credit: Getty

September 8, 2023 - 3:15pm

As winter approaches, so too do Europe’s energy woes, along with the question of whether the continent has learnt from last year’s crisis. Although the worst fears from last winter did not materialise, it was the second warmest on record. The upcoming months will reveal whether Europe’s energy strategy was a sound one or whether this outcome was pure luck.

This morning, it was reported that planned strikes in Australian liquefied natural gas (LNG) factories caused an 11% surge in European gas prices. Gas reserves in the European Union are at a record 93.5%, but, if events in Australia are any indicator, the continent’s supply rests on a knife-edge.

Australia supplies about 7% of the world’s LNG, and with Russia no longer Europe’s primary supplier any disturbance of global supply immediately causes concern in continental markets. This volatility also benefits Moscow, which is still a supplier of fossil fuels to the EU. Its LNG exports to Europe are up 40% according to a recent study, and Brussels has no plan to immediately stop this intake. 

With Russian LNG exports rising by 40% since the war, Moscow is now the second most important LNG supplier with a share of around 20%, second only to the 40% share boasted by the US. Vladimir Putin might be a politically unreliable supplier, but moving LNG from American ports to Europe comes with its own risks. 

Most export facilities are located on the Gulf coast, and it would not take much beyond a severe hurricane to put almost half of Europe’s LNG supply into jeopardy. Combine a harsh hurricane season in the Gulf of Mexico with a cold winter in Europe and a strike in Australia — and those 93% full storages will drain much faster than spring can arrive. Observers of the international gas market are aware of these risks, which explains why even a small disruption in Australian supply sends prices up.

Europe’s leaders may hope for last year’s luck, but this approach isn’t sustainable for industries which would have to continue producing in a climate where production costs depend on the whims of dictators, warm winters, a dearth of hurricanes, and Australian worker morale. 

The temptation to move energy-intensive industries ever closer to the resource-rich Southern US states will only continue to grow if Europe doesn’t get its act together on energy. Yet this would mean scaling up inner-European energy production, including offshore drilling and lifting fracking bans.

One should not confuse striking lucky once or twice with a sound strategy, but — at the moment — it would appear this is precisely what Europe plans to do.

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David McKee
David McKee
10 months ago

Suddenly, closing the giant gas field at Groningen in the Netherlands does not seem like such a hot idea (https://www.offshore-technology.com/news/groningen-gas-field-closure/). And they did that just ten weeks ago.
Not that we in Britain have much to feel smug about. The Rough gas storage field has been reactivated, but our capacity for gas storage is much smaller than it is for other major European countries.
But then, the civil servants who run Europe’s energy ministries are in thrall to ‘net zero’, so they make decisions with this in mind. They ignore the here and now of Putin, Ukraine and gas. They cannot see that short term requirements and long term requirements contradict each other.
Scott Fitzgerald reckoned that the mark of intelligence is to be able to hold two opposing and contradictory ideas in your head, and still function. In that case, these civil servants must be a pretty dim bunch.

Susan Grabston
Susan Grabston
10 months ago

Weather favoured Europe last year and politicians banked it as a result of their brilliance. This year the weather is forecast to be disproportionately cold. And energy prices forecast to be volatile at minimum and – more likely – trending up. This household planning for occasional blackouts.

Susan Grabston
Susan Grabston
10 months ago

Been reflecting on emigration recently as friendship/ acquaintance circles are showing distinct signs of a brain drain (techies to Dubai, medics to Antipodes, entrepreneurs to US). Given the 80% if the world’s population has no intention of pursuing NZ I sapect as policies become more draconian.(eg criminalisation of non NZ compliance), yet more will vote with their feet.

Jim Haggerty
Jim Haggerty
10 months ago

And once again the poorer countries like Pakistan will be left out in the cold as the EU bids up LNG prices which forces them back to coal…And then wonder why these countries don’t jump aboard the Net Zero train to nowhere

UnHerd Reader
UnHerd Reader
10 months ago

The strike, actually threatened strike by Australian Gas Field Workers. Shows the huge profits involved. The Gas Companies and the Australian government are making Billions out of the industry. A side bar is the Australian Government making a kings Ransom out of Gas. Which they are idoligicialy opposed to, but I digress.
The Workers involved are among the highest paid in the country. Admittedly doing trips to Japan or Europe on. Gas tanker is probably not a lot of other peoples cup of tea. But they are after their cut of the profits involved.