Germany Still Years Away From Replacing Russian NatGas, Official Admits To “Unspoken Strategy To Pay Crazy Prices”
Some European politicians and economists are breathing a sigh of relief after mild temperatures, increasing liquefied natural gas shipments, and above-average natural gas stockpiles have so far averted a worsening energy crisis this winter. Other politicians believe the energy crunch won’t be over for many years.
“Gas storage is up and gas prices are down. Inflation is falling and uncertainty is declining,” Deutsche Bank AG wrote in a note this week, adding, “We can afford to be more optimistic.”
As of late, Europe’s biggest economy, Germany, has seen an improvement in business outlook as recession fears recede, according to data from the Ifo Institute, a Munich-based economic researcher.
Ifo President Clemens Fuest told Bloomberg TV:
“The most important risk for the German economy was a gas-rationing scenario … and that risk is off the table now.”
There’s a lot to be happy about in Europe: Dutch front-month NatGas, the continent’s benchmark, slid as much as 5% to 55 euros a megawatt-hour today, the lowest level since late 2021. Prices have collapsed by more than 83% since peaking at 311 euros a megawatt-hour last August.
However, the optimism could be short-lived because Germany is years from entirely substituting Russian NatGas flows with LNG shipments.
Last week, Chancellor Olaf Scholz told Bloomberg that German learned a hard lesson in its addiction for cheap Russian NatGas. He said the country is now rejiggering supply chains that will increase capacity for LNG imports at major ports.
A new report via the country’s Economy Ministry shows Germany will install 56 billion cubic meters of domestic LNG import capacity by 2026. By 2030, capacities will increase to 76.5 billion cubic meters or about 80% of total German NatGas consumption in 2021.
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