Putin given 'vast power' over European economies says expert
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The Russian President restricted gas deliveries into the EU travelling through the Yamal pipeline after Gazprom, the state-owned gas conglomerate, diverted flows to the east earlier this week. The move quickly saw Europe’s gas prices skyrocket to record highs, a 90 percent increase recorded since December 1, costing €180.27 (£152.42) per megawatt-hour (MWh).
But while the move also ramped up prices in Britain, with energy bills expected to rise as much as 50 percent, Peter McNally, Global Lead for Industrials, Metals & Energy at Third Bridge said that this is largely a “EU problem”.
He stressed that Britain is still “better off” than the EU because its gas inventories are “meaningfully higher”.
He said that in Europe, “natural gas inventories are 20 percent below their seasonal averages and 25 percent lower than where they stood a year ago”.
Mr Mcnally added: “This is the point of the year for the next several months where inventories are going to draw lower.
“Germany was making itself too dependent on Russian gas, and the reality is that Europe needs more gas in the short-term and Russia is one of the options.”
But the UK, instead of depending on Russia for its gas supplies, instead gets the large bulk of its imports from Norway.
Mr McNally said: “Norway is a big source of the stuff [gas], and having a direct connection certainly benefits the UK.
“It’s a big resource in Norway which has grown.
“There sure seems to be less political risk than in Russia, so it comes down to the economics of what the UK is willing to pay, but is certainly a resource that is not going to run out any time soon.”
In 2020, some 11.7 million metric tons of crude oil and 1.4 million metric tons of natural gas were imported from Norway.
Meanwhile, Europe has failed to sign long-term supply contracts for gas, and has seen its gas prices soar as a result.
On Tuesday, Europe’s benchmark gas price skyrocketed to a record high, up nearly 800 percent since the start of the year.
And even though the price eased on Friday, it was still up over 400 percent.
But this does not mean that Britain is in the clear.
In fact, rising prices in Europe affect Britain too as it is vulnerable to international markets.
Mr Mcnally told Express.co.uk: “The problem maybe for the UK is that if these prices on the continent are still higher, you could see volumes get diverted and inventories evaporate.”
Business Secretary Kwasi Kwarteng told MPs back in September: “There’s no way that any storage in the world will mitigate a quadrupling of the gas price in four months.
“The answer to this is getting more diverse sources of supply, more diverse sources of electricity, through non-carbon sources.”
And as gas prices rise across the continent, even though Mr Mcnally claims Britain is better off than the EU, households will be hit with higher bills if prices are not eased.
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In fact, the soaring cost of energy has prompted fears that the energy price cap could jump from £700 to £2,000, as the maximum tariff energy suppliers can charge from April.
This move would send could send gas and electric bills soaring, with some experts warning that this rise, which is 56 percent above the current cap, could tip a further 1.5 million households into fuel poverty if the Government does not act fast.
It comes after 26 energy suppliers have already gone bust due to gas shortages ramping up European prices over the last few months, also somewhat to blame on Russia’s gas squeeze.
Mr Putin has been accused of deliberately withholding gas deliveries in order to speed up certification of Nord Stream 2, which will transit gas from Russia to Germany, bypassing Poland and Ukraine, once gas is up and running.
But Russia claims that instead of being the cause of the crisis, Nord Stream 2 is actually the solution.
Russian Deputy Prime Minister Alexander Novak said Europe is missing out on additional Russian supplies due to the new pipeline.
Mr Novak told Russian state TV channel Rossiya-24: “To my mind, European consumers are very interested in the project to start working, while the companies, which participate in it, they could have submitted additional requests as part of long-term relations on gas supplies via this new gas pipeline.”
But Mr Mcnally does not seem to think that this will avert a crisis.
He said: “Third Bridge experts have been dubious about how quickly natural gas can be delivered by Nord Stream 2.
“One of the pipes has yet to be pressurised so the volumes would be limited even if Russia committed to exporting more to European customers.
“The net result is that European gas inventories are 23% lower since the end of October, and inventories typically decline through late March or early April. As stockpiles deplete, the market is going through price discovery, trying to find the level that rations demand.“
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