March 2, 2023 - 7:00am

One can — still — almost hear the collective sigh of relief throughout Europe that this year’s winter was one of the warmest in recorded history. While it might be tempting to point to the irony of global warming saving Europe from the consequences of its own climate change policies, the real question is whether the crisis is truly over.

Optimists draw attention to European prices for natural gas, which have slumped to their lowest level since 2021, surely an indicator that all the panicking of the past was baseless alarmism. But such optimism ignores that in addition to the fortunate weather, Europe bought every morsel of energy it could on the global markets. 

In addition to spending $1.2 trillion on energy over the last 14 months, LNG imports in 2022 were 60% higher than in 2021, and Europeans outspent China, Japan, and South Korea combined, with an extra $25 billion dedicated to LNG alone. Keep in mind, though, that Chinese demand was severely reduced by its Zero Covid policy, a condition that is about to change soon with China’s factory activity hitting the highest level since 2012.

These panic-buys have left their scars on the global markets, and triggered a widespread return to coal as the primary source of energy, since developing countries in particular fear that Europe outbidding them on global LNG markets will leave them literally in the dark. In other words, Europe might have saved itself in 2022, but in doing so sacrificed addressing the global climate crisis. With most of the developing world building out coal — which is dirty but also reliable, cheap, and easily storable — global emissions will not be significantly reduced any time soon.

But it would be unfair to point to the developing world, since Germany has done exactly the same: in addition to LNG, it was “King Coal” that kept the lights on. Thus one should not put too much stock into German promises to exit coal by “2030 or earlier” given that it’s highly unlikely that there will be any significant improvement in 2023 and beyond when it comes to matters of energy, especially natural gas. This has been laid out in great detail by the most recent Shell LNG Outlook 2023, which predicts significant global supply gaps in LNG during the coming decade and warns of ongoing under-investments in fossil fuels, despite their continuously rising use. 

Once again, the optimist will tell you that these issues can be overcome by reducing gas demand, which is certainly possible. Europe has curbed its industrial use significantly below the 2013-2019 average, but at significant costs to the production of fertilisers, chemicals, steel, and cement. These four materials are usually considered the most important ingredients to maintain modern civilisation

This might also help to explain why sanctions on Russian energy have been somewhat disappointing in their effect so far. While they are of course painful for Russia’s economy, this pain has not exactly been terminal, and the sanctions are often circumvented by European states themselves, like Austria or Spain.

Looking at the European energy situation, it increasingly looks like 2022 is closer to a new norm than an outlier. The question of energy security in Europe remains unanswered. Hoping for warm winters in the year to come is not a strategy: it is an act of desperation.