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European benchmark natural gas prices rose 28 percent on Monday morning to 274 euros ($272) per megawatt – the first day of trading after Russian energy company Gazprom said it had found oil leaking from the turbine on the Nord Stream 1 pipeline.
Last year, pipelines accounted for 35% of Russia’s total gas imports. But Since June, Gazprom It has reduced water flow on Nord Stream 1 to just 20%, citing maintenance issues and a dispute over the missing turbine caught up in Western export sanctions.
Moscow’s decision not to open the pipeline last Saturday raised fears that the EU could face oil shortages this winter, despite successful efforts to fill storage tanks. Similar fears in the U.K. sent wholesale natural gas futures up more than a third on Monday.
Last Friday, news that the pipeline would be shut down indefinitely caused the euro to sink. Under $0.99 Monday – the lowest level in 20 years. The pound hit $1.14, its lowest since 1985, as traders worried about the risk of severe energy shortages. Regional economic activity and government budget.
Some countries are preparing to spend more to limit the pain.
On Sunday, the German government announced a 65 billion euro ($64 billion) aid package to help households and companies cope with inflation. Germany, Europe’s largest economy, relies particularly on Russian gas exports for its homes and heavy industry.
Together with previous measures, it will bring total government support to 95 billion euros ($64 billion), which is about 2.5% of Germany’s gross domestic product, Bernberg’s chief economist Holger Schmieding said in a note on Monday.
Liz Truss, who replaced Boris Johnson as UK prime minister this week, is under increasing pressure to announce more help for households and businesses as energy bills rocket higher.
Truss is considering a 100 billion pound ($115 billion) cost-of-living package, according to a report by The Sunday Times, citing unnamed sources in the country’s finance ministry.
If so, that would be more than the cost of the country’s pandemic relief plan, which saw the government subsidize workers’ wages by 30 billion pounds ($34 billion) to prevent mass layoffs.
Preparation for winter
The European Union has been stockpiling its energy reserves for months, as Russia fears further cuts to gas supplies.
Earlier, Moscow stopped supplying gas to several European countries and energy companies due to the Kremlin’s refusal to pay for gas instead of euros or dollars specified in contracts.
Friday’s Nord Stream 1 announcement comes hours after G7 nations agreed to cap the price at which Russia sells its oil to curb the Kremlin’s revenue to fund its war in Ukraine.
Spokesman b Siemens (GCTAF)The German maker of the faulty Nord Stream 1 turbine said on Friday that the oil spill was “not a technical reason to stop work”.
“Regardless of this, we have repeatedly indicated that there are enough additional turbines to operate Nord Stream 1 at the Portovia compressor station,” a spokesperson told CNN Business.
As energy shortages worsen, EU countries quickly fill their gas storage facilities. According to data from Gas Infrastructure Europe, stores are now 82% full to capacity – higher than the 80% target authorities set for countries to reach before November.
“Despite the serious threat of energy shortages, we still expect most of Europe to get through the cold season,” Schmiding said in the note.
Europe’s leaders know they must do more to avoid a wider crisis and limit the fallout. The European Union’s energy ministers will hold an emergency meeting on Friday to discuss plans to help protect Europeans from escalating energy price hikes.
Initial proposals include a mechanism that would lower electricity prices from wholesale natural gas prices and provide emergency loans to vulnerable power companies, according to draft documents seen by Reuters.
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