The cause of the European energy crisis is in Europe itself

While untold numbers of pundit articles have been quick to point the finger at Putin for exacerbating Europe's energy crisis, Russia's scapegoat distracts from European energy policies that put the continent in such a precarious position in the first place. Over the past 20 years, Europe has steadily deregulated its gas sector and has invested heavily in expanding LNG gas pipelines and regasification facilities with the intention of enabling a more market free approach. In doing so, they abandoned the previous system of linking long-term gas prices to oil prices and allowed the price of gas to be regulated by supply and demand . It became clear in 2021 that while this system allowed gas prices to be lowered in the short term, Europe was faced with a severe adhesive shock as gas stocks began to decline during the pandemic.

" Putin should not be blamed for the energy crisis in Europe ," proclaims a recent Foreign Policy analysis. “No matter what happens in Ukraine, this winter is not an aberration ,” writes Columbia Climate School co-founder Jason Bordoff. “ Even if Russian gas continued to flow, Europe would be increasingly exposed to the volatility of the price of imported gas in the years to come unless its leaders take steps to reduce the risk of energy price spikes and prepare for inevitable and unpredictable fluctuations in energy supply and use . "

These price swings have led to significant political unrest in Europe and prompted leaders to slap the issue by removing VAT on household energy bills and sending aid directly to poor families, among other emergency measures. However, these efforts will fall far short of what is needed to protect European consumers and the problem will only get worse. " BofA analysts estimate that average Western European households spent about 1,200 euros ($ 1,370) per year on gas and electricity in 2020 ," Reuters wrote last month. " Based on current wholesale prices, they estimate it will increase by 54% to € 1,850 ."

To be sure, Putin's recent actions have done nothing to calm Europe's energy crisis and the brewing conflict on the Ukrainian border will make matters worse. It is not the Kremlin's fault, however, that the European energy landscape is as vulnerable as it is to these last drops on the camel's back. To resolve the energy crisis, European leaders will need to stop diverting blame and take a serious assessment of their energy policies. Creating price stability and energy security will become increasingly essential in the coming decades as the world begins to seriously decarbonise, a radical energy reform and an economic experiment that is sure to hold many more ups and downs for energy markets.

Europe's dependence on Russia is now extreme. In the past year alone, supply chain hitches and fuel shortages have led to a staggering 330% increase in gas prices across Europe, affecting consumers as the global economy is attempting to recover and adapt to the pandemic. of Covid-19 in progress. European governments have had to impose costly interim measures to mitigate the economic fallout from the energy supply crisis and so far "have spent tens of billions of euros trying to protect consumers from record energy prices and themselves from the wrath of voters. ”According to recent reports and analysis by Reuters.

Furthermore, despite the best efforts of the European Union, the Kremlin has not only refused to turn its taps on enough to moderate Europe's energy crisis, but has actually reduced exports to Europe just as the continent has the most. need. The EU's new dependence on Russia has given Putin new leverage to try to pursue some of his interests, most notably the Nord Stream 2 pipeline, which would allow Russia to pump liquefied natural gas directly to Germany (which gets 50 % of its natural gas from Russia) across the Baltic Sea, bypassing Ukraine altogether. This pipeline, although already built, was unable to get the final green light to go online due to strong opposition in the West, with leaders including Joe Biden arguing the move would give the Kremlin too much bargaining power, thereby reducing further the continent's energy security and geopolitical stability.

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The article The cause of the European energy crisis is in Europe itself comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/la-causa-della-crisi-energetica-europea-e-nelleuropa-stessa/ on Sun, 13 Feb 2022 07:00:34 +0000.