Fears of Limited Natural Gas Supplies Hound Europe

Ursula von der Leyen, President of European Commission, warned that countries and industry need to be ready in case Russia completely cuts off already limited natural gas supplies. Fears are growing that the Nord Stream 1 pipeline from Russia to Germany under the Baltic Sea will not restart after a scheduled maintenance shutdown later this month.

Russian state-owned energy giant Gazprom has reduced supplies through the Nord Stream 1 pipeline running under the Baltic Sea from Russia to Germany by 60 percent. Supplies to Italy have been cut by half. Germany relies on Russia for 35 percent of its gas imports; Italy for 40 percent.

Europe is clambering to fill its underground gas storage ahead of the winter. As less expensive gas could be purchased during summer and be utilised over the winter as heating demand rises. The current reductions will make refilling storage more difficult and expensive.

Declining energy supplies has brought closer the specter of a complete Russian gas shutoff that would make it impossible for Europe to get all the fuel it needs for next winter. 

Natural gas is used by several energy-intensive industries that are already facing higher costs and dialing back consumption, which has contributed to a slowing European economy.

It was reported that Europe’s underground storage caverns are 60 percent full currently.

Meanwhile, the European Commission’s latest proposal is for each country to reach 80 percent by November 1, 2022.

If Russian does not resume deliveries through Nord Stream 1 after July 24, the EU “would likely be running on empty at the end of winter. To be on the safe side, some rationing of gas would likely set in beforehand,” as some economist suggested.

The downside of rationing would be industrial cutbacks and shutdowns that could cost jobs and growth in an economy that is already squeezed by high inflation and could be headed for a recession.

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