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Europe faces unprecedented gas crisis and next winter looks set to be brutal

RIO DE JANEIRO, BRAZIL – By winter at the latest, things will be bleak in Europe as far as liquefied natural gas (LNG) supplies are concerned. There isn’t enough supply to meet European demand. And there is no improvement in sight before 2024. The sanctions against Russia are a blow to its people and its economy.

The Europeans are currently in a veritable quandary. On the one hand, politicians want to punish Russia economically and financially by no longer purchasing energy sources (oil, natural gas, and coal) from there; on the other hand, there are not enough substitutes for the Russian supply on the world markets.

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Diesel prices are already skyrocketing, and things don’t look rosy for natural gas either.

Europe faces huge gas crisis and next winter looks set to be brutal. (Photo internet reproduction)
Europe faces a huge gas crisis and next winter looks set to be brutal. (Photo internet reproduction)

According to a report by Rystad Energy, demand for liquefied natural gas at the global level will rise to 436 million tons this year, while the total supply is only 410 million tons.

This is because more liquefaction plants and, above all, transport ships first have to be built to meet the sharp rise in demand due to the sanctions against Russia.

This will take a long time. By winter, the Europeans will be short of gas, primarily as they have relied on the cheaper natural gas via the pipelines from Russia but now want to impose an embargo on it.

The European Union’s REPowerEU plan aims to reduce dependence on Russian gas by two-thirds this year. This goal clashes with the EU’s goal of filling gas storage facilities to 80% capacity by November 1.

But in doing so, the Europeans are upsetting the global LNG market and causing huge price increases worldwide. That means other countries are suffering due to EU energy policy because they now have to bear much higher costs.

“There is not enough LNG to meet demand. In the short term, this will lead to a harsh winter in Europe,” says Kaushal Ramesh, senior analyst for gas and LNG at Rystad Energy

For producers, this means that the next LNG boom is just around the corner, but it will come too late to meet the sharp increase in demand.

The stage is set for a continued supply deficit, high prices, extreme volatility, rising markets, and increased LNG geopolitics.

If Russian gas supplies were to fail tomorrow, current stored gas reserves (which are about 35% full) would likely be exhausted before the end of the year, leaving Europe exposed to a brutal winter.

Private households and industry would suffer enormously, and many companies might even have to shut down production. Entire industrial sites in Europe would collapse within a few months because European politicians prefer to sacrifice them for ideological reasons.

After all, we are talking here about measures that threaten the industry’s very existence, which would bring an enormous economic and financial shock.

For example, the Emirate of Qatar would also supply liquefied natural gas to Germany. Still, the conditions do not suit Economics Minister Hofreiter (Greens).

For example, the Arab monarchy wants a minimum of 20 years for a contract, especially since extremely expensive new LNG tankers would have to be built to transport the LNG to Germany.

But this does not fit into the decarbonizers’ concept of reducing CO2 emissions by 88 percent by 2040. Qatar also wants to link the price of gas to the cost of oil, while Berlin wants it to be connected to the European gas index.

However, European supplicants do not stand much chance of negotiating success with the Arabs unless they bring good deals in return that also promise benefits to the negotiating partners.

Putting oneself in a self-inflicted predicament and making demands does not work here, especially if you have previously been a fierce critic of Qatar like the Greens.

The Qataris surely remember how the Greens sharply attacked Bayern Munich in 2020 because of their training camp in the emirate, claiming arrogantly that the Arabs disregard human rights.

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