The European energy crisis is getting worse: “This winter is a bit cold”
“As a Frenchman, I pay close attention to the price of bakery shops. The price increase is very high. Many people are worried about it,” European Central Bank President Lagarde said in an interview with the media recently. She emphasized that as the inflation rate continues to rise, the rise in energy prices attracts the most attention. “When people refuel at a gas station or buy heating oil for the winter, they will involuntarily notice the price increase…”
Against the background of the imbalance of global energy supply and demand, the energy crisis that plagued Europe has intensified. Natural gas and electricity prices continue to rise, and the risk of power curtailment and blackout continues to rise. At the same time, high inflation, mainly driven by energy prices, has increasingly affected enterprise production and residents’ lives.
Analysts believe that the current energy crisis reflects the contradiction between the dependence of the European economic sectors on fossil energy and the insufficient supply of renewable energy. Although the European Union has proposed ambitious energy transition and carbon neutral goals, the establishment of a sustainable and stable renewable energy supply capacity is likely to be time-consuming, and the global supply chain obstacles caused by the new crown epidemic have exacerbated the complexity of the energy transition and dragged down the transition of the European economy The process of green and sustainable development.
Since August this year, European natural gas prices have been operating at a high level. According to data from the Dutch Natural Gas Trading Center (TTF), the European natural gas trading benchmark, the European natural gas wholesale price in November was approximately 6 times that of the same period last year. Driven by gas prices, electricity prices in Europe have also soared, and electricity prices in Germany, France, the United Kingdom, and Spain are all at historical highs.
The European Commission pointed out that the wholesale price of energy in Europe has increased significantly. The main driving force is the surge in natural gas demand in the global market and the reduction in European natural gas imports. Coupled with the unfavorable weather conditions in 2021, there will be a large gap in the supply of renewable energy such as wind power and solar energy, which will exacerbate the energy supply shortage in Europe. In addition, the price of carbon emissions trading permits under the European Emissions Trading System (ETS) has increased, which has also pushed up energy prices.
As the most important alternative energy source for the transition from fossil fuels to green energy, which can take into account energy consumption and carbon reduction, demand for natural gas in Europe has increased, and 90% of natural gas in the EU is dependent on imports, most of which come from Russia. Therefore, geopolitical factors also play an important role in European energy prices. Affected by American factors, the “Beixi-2” natural gas pipeline project connecting Germany and Russia has yet to be put into operation, making it even more difficult for Europe to supply natural gas this winter.
For European companies and people, rising energy prices are directly reflected in raw materials and consumer prices. According to Eurostat data, the Eurozone inflation rate climbed to 4.1% in October, a 13-year high. Among them, energy prices rose sharply by 23.5% year-on-year, which was the main reason for pushing up inflation.
Analysts believe that because they usually provide long-term supply contracts at a fixed price, some small energy suppliers in Europe are often unable to pass on higher procurement costs to their customers, and their ability to survive is facing severe challenges, largely depending on how cold and cold the European winter is. How long will energy prices go up.
Alexander Macdonald, chief executive of the London Energy Brokers Association, believes that some industries in the UK may face the risk of shutdowns this winter due to high energy costs. For millions of domestic energy users in the UK, this crisis may herald the end of the era of cheap natural gas and electricity.
In the face of the current energy crisis, European countries are pinning their hopes on an increase in external supply, including Russia, on the one hand, they have also adopted some internal support measures on the other. For example, the Spanish government requires restrictions on energy prices and the profits of power companies; France, Italy and many other European countries have pledged to provide relevant subsidies for low-income families.
However, from a fundamental point of view, the structural contradictions in energy supply during the green transition are expected to continue to plague Europe for a certain period of time. European Commission President Von der Lein said that the key to resolving the energy crisis lies in “speeding up the transition to clean energy.” Some analysts pointed out that the EU’s energy transition requires not only sufficient nuclear power, coal power and natural gas power stations as a supply guarantee for the transition period, but also a stable renewable energy supply capacity, and the need to strengthen the internal energy market. Each task is very important. difficult.