Recent reprieve in gas prices has brought Europeans temporary relief, but the energy crisis hasn’t been completely avoided yet.
- As Europe nears the first anniversary of Russia’s invasion of Ukraine, the continent is still feeling the side effects of the conflict.
- Potential energy shortages before winter worried European officials last year; however, a milder-than-expected winter has decreased the demand for fuel.
- But winter isn’t over, and European countries are still adjusting to new fuel sources as access to Russian oil has decreased. Even with less demand, the low supply will eventually run out.
- An unseasonably warm winter has also led to a stockpile of inventory for fuel companies. While this has led to reduced fuel costs for consumers, fuel companies are looking to divert the excess to more profitable markets.
- Currently, liquified natural gas (LNG) suppliers in the U.S. are Europe’s main fuel suppliers. With price cuts, U.S. LNG providers may find it more profitable to ship their products to Asian countries.
- The warmer weather has also allowed European countries to keep a surplus of fuel stockpiled in case of emergencies.
Why it’s news
Worries about Europeans freezing in their homes this winter seem to have lessened now that December is passed. However, there are still nearly two months before winter is officially over. Emergency fuel being redirected to Europe is now shifting to more profitable markets, but there is still the possibility that Europe could encounter an unexpected cold snap or some other emergency.
Since imposing sanctions on Russian oil, Europe has been searching for alternative energy sources. In some cases, countries have revived coal mines. More commonly, Europeans have looked to countries like France that house multiple nuclear power plants. However, 26 of France’s 56 plants were offline in November due to needed maintenance and repairs.
In December, French officials began to bring the plants back online. Plans to have all the plants back online by the end of December were delayed. Some of the plants are now scheduled to come back online as late as June of this year, Reuters reports.
While some fuel sources from other countries, such as LNG redirected from the U.S., alleviated some European concerns, demand in other parts of the world is starting to rise.
LNG prices have recently lowered, allowing countries like Thailand and India to make purchases. Demand from China will likely also trend upwards as the country drops its Zero Covid policies, Blomberg reports.
As fuel is redirected to other markets, Europe will lose some of the energy security it had regained.
Even with this increased risk, European energy resources remain at a higher capacity than usual this time of year—largly due to the warmer weather. Storage sites have hovered around 83% capacity for several weeks, Bloomberg reports.