Electricity prices in Europe have reached their all-time record after Russian gas supplies dropped. As of July 5, gas futures in Europe exceeded $1,800 per 1,000 cubic meters, according to Financial Times.
Over 18 months (between January 2021 and late June 2022), the gas prices in Europe soared 700%, causing a drastic inflation, bankruptcies and shutdowns of several resource organizations. Currently, even these developments are not stopping European officials from imposing more sanctions on Russia, which only means that the gas in Europe will continue to get more expensive, pushing the entire euro zone into a collapse before the end of this year, AMarkets Analytics Director Artem Deev warns.
Even today, gas is traded at over $1,800 per 1,000 cubic meters at European commodity exchanges. This rate is equal to that of last fall when Europe was rushing to replenish its storage facilities. In addition to Nord Stream supplies dropping 60%, oil and gas sector workers in Norway are currently on strike, which should cause exports to fall 13%, and the operation of the largest US LNG plant has been suspended until the end of the summer. Starting July 11, Nord Stream is going into scheduled maintenance and will not be able to operate without the gas turbines that are currently stuck in Canada due to Western sanctions. Poland’s Yamal-Europe leg is out of operation due to Russia’s countersanctions while the Ukrainian gas transit station is operating at its minimum level.
“The shortage of Russian pipeline commodities, which are usually two or three times cheaper than the LNG supplied by the United States, will definitely result in most serious consequences for Europe. Neither US LNG, nor LNG from Qatar or Australia will be able to replace the lacking Russian gas,” the analyst stresses. “Even more so because the prices will still be at their historic high, especially considering logistics issues and expensive delivery.”
Germany is entering a structural crisis of the economy, confirmed by the trade deficit happening in Europe’s leading economy for the first time in decades. Following Germany, where many companies have reported being close to bankruptcy and asked for budget money, similar prospects await other countries, primarily France, Italy and Greece.
“The gas crisis is Europe is aggravating the negative trends pushing major global economies into a large-scale crisis that will break out within the next 12 months and affect the world’s first economies. Nomura’s economist Rob Sabberaman is one expert anticipating such developments. Europe, the United States, Japan, South Korea, Australia, Canada and Great Britain risk going into recession, a crisis that will subsequently spread to other countries, including developing economies. We are witnessing the arrival of the most significant global crisis over the past 100 years, in real time,” Artem Deev concludes.