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Europe's Energy CRISIS!

Tribe's Weekly
Tribe's Weekly
700% increase in Natural GAS prices!

The past two years have been crazy for many industries, including the oil and gas market. The 2021–2022 global energy crisis is the most recent in a series of circular energy shortages experienced over the last fifty years. The price of natural gas in European countries has risen 700% in 2022, pushing the continent into recession. Europe is fighting a record-breaking increase in energy prices that threatens the economy and the working class. Increasing energy prices have created a living crisis and boosted costs for industry. It has already forced European capitals to take steps to try to protect consumers and industry from runaway prices.
“We are in a situation in which gas is now part of Russian foreign policy and possibly part of its war strategy”
Klaus Mueller, president of Germany’s federal network agency
Why The Prices Are Rising?
The Gas prices in European countries have reached high as a result of many problems that have gathered together. The companies have shut down their operations and are preparing for the worst.
Here are some of the reasons that have caused the prices to reach such a high level in a short period.
Natural Gas Plant
Natural Gas Plant
Russia’s invasion of Ukraine
One of the main reasons for the increase in gas prices is Russia’s invasion of Ukraine. The European Union relies on Russia for more than half of its gas and about a third of its oil. Gas deliveries from Russia last year were around 155 billion cubic meters which is more than 50% of the total usage. Many companies have opposed Russia’s actions and started planning to reduce their reliance on Russian gas. While the demand remains high, Russia has decreased the natural gas supply to the European countries. The fear of further shortage prompted panic buying. The countries have been trying to become independent from Russian gas but this will be a long time.
Low Gas Storage
The gas storage levels in European countries are historically low. Countries like France, Germany and Italy have nearly 50 Terrawatt Hour of gas which used to be three times as much as it does now. These countries are using all their reserves so the prices do not blast for the poor. The Governments of various countries have intervened in the current situation to reduce the cost of energy bills and slow down the growing crisis.
Asian & South American Nations
The European countries would have purchased more Natural Gas to cover up the shortfall. But due global increasing demand for Natural Gas has made it impossible. Over the past years, countries like China, Japan and South Korea have purchased huge amounts of Natural gas to change their energy supply from coal to gas. South American nations have also increased their import levels significantly over the past years. This increase in demand by the countries has resulted in a fall in the imports of Natural gas for the European Nations by nearly 19%
Effect On Poor
The rise in energy prices has threatened the stability and livelihood of poor people. Not only gas but also there is also a rise in electricity bills as the wholesale price of electricity has increased by nearly 250% in the past 12 months.
The Energy companies and factories in many European countries have been closed in huge numbers, thus making people working in these factories unemployed. In addition to the energy companies, the other industries that are indirectly dependent on gas have also been affected, affecting the poor. The Governments of all European Nations have been trying to provide all sorts of aid to poor people by providing certain benefits and perks to the people.
Winter Is Coming
Europe is preparing for more challenging times as the continent relies heavily on Russian gas even though it has been securing shipments from elsewhere. Colder temperatures lead to an increase in demand for gas, thus more natural gas will be demanded in winters. The EU’s aim is to refill 85% of storage before winter comes and by curbing demand by 15% because supply is likely to fall short even if they are getting support from the LNG market.
“It is arduous to make predictions about this winter, but it will be a demanding winter for Europe, that is obvious,”
Anders Opedal, CEO of Equinor ASA.
Effect On Indian Stock Market
It is becoming harder for Indian companies to import Natural gas from the international market as European countries are drawing the majority of global gas supply towards them due to Russian supply cuts. The long-term contracts with the Indian companies aren’t secured as Russia’s Gazprom has suspended its stores to GAIL. GAIL has been unable to secure enough LNG for its domestic customers, forcing it to cut supply to major users such as petrochemical plants and fertilizer makers thus having a slow and deep effect on the Indian economy. 
On the other hand, Strong gas prices have boosted ONGC’s results for the quarter. The high demand for gas has resulted positively for the company.
Reliance Industries Ltd expects prices of natural gas in India to rise again in October. After remaining a loss-making provision for several quarters, Reliance’s gas exploration business has begun reaping the rewards due to a global surge in energy prices.
How Prices Can Be Controlled
The UK government is talking to the energy industry about short-term ways to mitigate the increase in gas prices. The long-term solutions are more energy efficient. They are reducing methane gas in homes, and diversifying the power sector so people are less reliant on geopolitics and more reliant on lovely offshore wind, nuclear and hydropower.
The policy should shift from broad-based support such as price controls to targeted relief such as transfers to lower-income households who suffer the most from higher energy bills.
So far, Europe’s policymakers have responded to the energy cost surge mainly with broad-based, price-suppressing measures, including subsidies, tax cuts and price controls. The government providing direct financial support to some households could reduce the average annual bill for poor people.
Conclusion
The rise in natural gas prices is not only Europe’s issue but has become a global issue. The combined increase in prices of oil, natural gas and coal could reduce global growth by 0.5% in 2022 and a further 0.3% in 2023. It has to be addressed globally so it does not harm economies worldwide. Policies should be framed to encourage greater energy efficiency and accelerate the transition towards low carbon energy resources. 
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