- While Europe managed to fill its gas storage ahead of winter this year, it will have to import huge amounts of LNG in a competitive market to survive next winter.
- The next 12 to 24 months will be critical in establishing whether Europe can stave off a long-term energy crisis.
- According to the IEA, if Russian gas supply drops to zero and Chinese LNG demand hits 2021 levels, the EU could have a supply-demand gap of 27 billion cubic meters in 2023.
Despite successfully filling its gas storage ahead of winter this year, Europe’s energy crisis is far from over. The situation for Europe could, in fact, be worse next winter when Russian pipeline gas supply will be down to a trickle, at best.
European households and businesses have already seen a rise in total energy costs by $1.06 trillion (1 trillion euros), according to estimates by European economic think-tank Bruegel published by the International Monetary Fund (IMF). According to Bruegel’s analysts, if governments in Europe do nothing except offer financial support, and if they cover the price increases, this sum would represent a massive 6% of the annual GDP of the EU.
“Massive government support could delay adjustment to a new price equilibrium and create the need for even more support,” Bruegel’s experts say.
Instead, the EU needs a “grand bargain” to encourage savings and increase supply at the same time.
The next 12 to 24 months will determine whether Europe will be able to cope with the energy crisis without having to resort to mandatory rationing or without losing too much industry competitiveness.
Europe’s energy systems were already put to the first real test this month amid an Arctic blast that swept through most of northwestern Europe, bringing freezing temperatures, snow in the UK, and depressing wind speeds in Germany.
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