Why is the energy crisis not over yet?
Europe's energy crisis began with Russia's invasion of Ukraine on February 24, 2022. Russia imposed sanctions, which led to a tightening of the global gas market, especially in Europe, as Russia previously supplied around 40% of the region's natural gas.
In response to the price caps, Russia banned the export of oil and petroleum products under contracts with price cap compliance provisions. And when several EU member states refused to adhere to the new payment system imposed by Russia in the second quarter of 2022, Russian state-controlled energy firm Gazprom unilaterally cut off a significant portion of its gas supplies it is with gas.
Overall, the sanctions, combined with various economic countermeasures and the sabotage of Nord Stream 2 – a gas pipeline running from Russia to Germany – led to tight supply in the gas market, especially in Europe. This led to a drastic increase in the price of energy.
Despite the fact that the current market prices are much lower than the expectations at the beginning of this year, they are still 2-3 times higher than the period before the energy crisis.
The calm winter in 2022-2023 has significantly helped in terms of the crisis and Europe has used a lower amount of gas, which has affected lower prices not only for the winter but also for the summer season.
The current ratio of gas storage is higher than 80%, which is a good figure and EU countries have time to increase this amount. This figure maintains the expectations that we will have lower prices, but this does not mean that the crisis is over, because it is known that there will be no increase in the flow of gas in the future, and normally this will keep energy prices twice as high as the normal period. Moreover, if we face a colder winter, this will affect not only the crisis situation in the same period but also in the coming seasons.
It is known that there will be no increase in gas flow in the near future. Which keeps the prices twice as high as the normal period. Moreover, if we face a colder winter, this will not only affect the situation for the same period but also in the coming seasons.
So, from the beginning of this year compared to last year, the prices of the energy markers are much lower. However, at this moment we cannot conclude that the crisis is over. It will take 4-5 years to return to pre-crisis conditions.
Although Europe's energy crisis may be over in an acute sense, now comes the hard part. The EU and national governments will need to go beyond emergency measures and put in place structures that ensure long-term lower gas consumption.
However, we have all learned some lessons from last year to avoid prices rising sharply again. All countries must fulfill their obligations within this period. All of Europe was ready to change towards a green transition, but this crisis reminded us that we have to be faster to adapt to the new normal.
Especially in a time of crisis like now, the issue of prices is difficult to predict as prices reflect the ratio between demand and available energy, which can be influenced by many other factors. In our case, the price of imports depends on the price of stock exchanges in the region. The winter for us will depend a lot on the availability of local production, and on the prevailing climatic conditions as the import will come mainly from these factors. Also, saving energy from consumers will be a help.
What should we do and what is the solution from the European Union in this situation?
Governments should continue with supportive policies for the energy sector, call for consumer awareness to save electricity as well as implement possible measures as the EU did.
The European Union (EU) has implemented several measures to address energy crises such as:
- Diversification of Energy Sources with the aim of reducing dependence on a single energy source. This includes promoting the use of renewable energy sources such as wind, solar, and hydropower, as well as exploring alternative energy options such as nuclear power.
-Energy efficiency measures to reduce overall energy consumption. This includes promoting energy-efficient technologies, improving energy efficiency standards for buildings and equipment, and encouraging energy-saving practices.
- Investing in the development of energy infrastructure to improve connectivity and facilitate the smooth flow of energy across member states. This includes the construction and expansion of gas pipelines, electricity networks, and interconnections to ensure a supply.