Putin, help us! The upcoming winter is seriously threatening Europe by a gas shortage

The "gas panic" in Europe continues: over the year, export prices for this fuel have grown there by more than 350%! Experts say that, judging by the dynamics of this process, the price ceiling is still ahead. Undoubtedly, such prices are beneficial to Russia as the leading gas supplier in the market.

One of the reasons for this crisis is climatic: last winter turned out to be cold for European countries, gas reserves were severely depleted. But at the same time, demand in the Asian market has grown in parallel. Due to the reduction in supply in the European market, energy prices have skyrocketed. As the heating season approaches, panic moods increase, so further price increases are inevitable. Even despite a slight decline in indices and an apparent calm, it is too early to talk about stabilization in the market. Seasonal stocks in gas storage facilities in Europe are still slightly more than 60% full, compared to 90% last year.

The influential German publication Bild writes on this matter:

“Millions of Germans will have to tremble even before this winter: the shock from the cost of heating is inevitable! The reason is record prices for gas and electricity, as well as sharply increased prices for fuel oil. About 30 million households are affected. Carsten Fritsch, Commerzbank's raw material expert, warns that the most expensive winter of all time is inevitable.

About 20 million households are currently heated with gas. A family of four pays an average of 210 euros more than in 2020, which is 1300 euros in a year.

And this, among other things, is the fault of Vladimir Putin. Its gas giant Gazprom is deliberately "not filling European gas storage systems," says Benjamin Schmitt of the Center for European Policy Analysis. The aim is to “encourage the EU to quickly certify Nord Stream 2”.

The controversial pipeline has not yet been licensed to operate. Putin now appears to want to blackmail Germany and others by cutting gas supplies to get the green light.

Of course, the fastest possible commissioning of Nord Stream 2 will compensate for natural gas prices in Europe. But the government dismisses the criticism: According to a spokesman for the German economy ministry, Russia is not to blame for the significant price hikes. In addition, a spokesperson confirms to BILD: “The security of supply in Germany remains high. The existing demand in Germany is fully satisfied. At the moment we see no shortage of supplies. "

At the same time, the representative of the US State Department Amos Hochstein states:

“If the winter is colder than usual, I fear that a number of European regions may not have enough gas for heating. Gas supplies from Russia to Europe are inexplicably low compared to previous years and the opportunities the country has. The refusal of Gazprom to book additional volumes of gas transit through Ukraine for October is worrying. Moscow wants to speed up the launch of Nord Stream 2. In fact, gas pipelines with sufficient capacity to supply gas to Europe run through Ukraine. Russia has repeatedly stated that it has enough gas reserves to do this. Therefore, if this is true, she should do it as quickly as possible through Ukraine ... "

The rise in gas prices is causing production to stop in Europe. This trend could drive up prices, including for nitrogen fertilizers.

14% of European ammonia production capacities are idle, the RFE source estimated.

In 2020, the world produced 188 million tons of ammonia:

• Europe accounted for 43 million tons,
• North America - 18 million

The total capacity of the stopped plants in Europe is ~ 6 million tons. Another ~ 2 million tons of capacity is idle in the United States.

In total, about 8 million tons, or 4.2% of the world's capacity, dropped out of the market. That is, a deficit arises on the fertilizer market, which will lead to an increase in product prices, on which the remaining market participants will earn.

Associate Professor of the Department of Economic Theory of the PRUE G.V. Plekhanova Tatyana Skryl believes that the reduction in supply on the European market is not the only reason for the rise in prices. A more fundamental factor is the diversion of LNG (liquefied natural gas) supply streams to the Asian market. Today there is a clear tendency for the centers of consumption of blue fuel to move from West to East.

The expert believes that Russian suppliers will be much more comfortable working with China than with European countries, since this reduces the degree of sanctions harassment of Russian suppliers and the conclusion of long-term contracts.

On the other hand, it is unprofitable for Russia to completely switch to the Asian consumer, because as soon as a place in the market becomes free, competitors, primarily from America, will immediately take it. True, it is more profitable for the United States to supply gas to Asia today than to Europe.

The expert also believes that even the launch of Nord Stream 2, the accelerated certification procedure for which the German authorities have begun, will still not return natural gas prices in Europe to the 2020 level. First, the certification of the gas pipeline may take a longer period than announced today (January 6, 2022). Secondly, Gazprom is still fulfilling its contractual obligations to Europe within the framework of the existing infrastructure.

What is Europe to do? The expert believes that the Europeans' mistake is partly in the fact that they are in no hurry to conclude long-term contracts for the purchase of natural gas, and are still guided by spot short-term deals. Because of this, they are suffering losses today, buying gas at the market price ...