Russia: Crimean PM hails renewed Russian gas supply to Ukraine's Genichesk
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Gas prices have rallied over the summer, at a time when demand is usually low. With utilities hiking up prices for consumers, food and transport costs are also rising, creating what looks to be a difficult winter for the European Union. The conditions will make it difficult for European politicians to build up support for the green energy transition, with targets such as reaching zero carbon emissions by 2050 looking increasingly difficult.
Making the situation worse is Vladimir Putin‘s reported restriction of gas flowing into Europe through Russian pipelines.
The Russian President is reported to have turned the tap on gas supplies in the build-up to the completion of the controversial Nord Stream 2 project.
Nord Stream 2 is the newly built pipeline that travels through the Baltic Sea from Russia into Germany, bypassing Poland and Ukraine.
Gazprom, the state-owned Russian gas company that built the pipeline, announced last week the construction is complete, but gas flow is yet to start as confirmation is needed from German regulators.
Mr Putin is hoping to avoid German Chancellor Angela Merkel from implementing EU law across the system, the reason for his restriction of gas flowing into Europe.
EU laws would force Russia to auction off access to the pipeline to third party regulators.
And with gas prices soaring too, it looks as though a gas supply crisis could be on the cards, according to some experts.
Alastair Syme, an analyst with the Citi group, said in a note: “The spectre of energy poverty may fall quickly across Europe this winter.”
The gas supply crunch is supposedly boosting the cost of producing power across Europe, just as lockdowns have started to end and business returns to normal.
The rising prices have created inflation and pose a threat to the much-needed economic recovery as energy-intensive may need to reduce their output.
Julien Hoarau, the head of EnergyScan, the analytics unit of French utility Engie SA said: “The problem hasn’t even started yet.
“Europe will face a very tight winter.”
Last week, benchmark European gas futures traded in the Netherlands and prices in the UK reached record highs.
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In the UK, short-term power also hit a record high.
German inflation due to the soaring energy prices has reached the highest levels since 2008, after prices soared to 3.4 percent in August.
That’s higher than the two percent target the European Central Bank set for the Euro area.
And experts have warned things could get worse, with fears a cold winter poses a further threat to energy supplies.
Mr Hoarau said: “If we have a weather event like the Beast of the East, I wouldn’t be surprised we could have spot prices reaching three digits.”
The Beast of the East refers to the freezing temperatures that were brought to Western Europe back in 2018.
But the UK power market has already shown some signs of strain before a cold winter has even hit.
An old coal power plant, West Burton A was fired up again this summer due to the rising prices of gas, despite the Government’s commitment to completely phasing out the use of coal by 2024.
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