Some analysts and politicians are saying the EU has sorted out its energy problems – but that’s not entirely true
Amid the European Union’s looming energy crisis and attendant signs of social unrest, some are now painting a rosier picture of what’s in store for the bloc. Journalists and academics are now pointing to a report by Goldman Sachs that says Europe has “successfully solved”Due to gas shortages in the region as well as globally, there is plenty of reserve capacity.
Olaf Scholz (German Chancellor) also expressed optimism by stating that the country will be fine. “probably get through this winter”To be energy self-sufficient from Russia by 2023. This comes after a €13 billion aid package aimed at helping citizens and businesses cope with rising utility prices. Even small countries such as the Czech Republic are showing positive signs. Finance Minister Zbynek Sstanjura said last Thursday to parliament that the country had enough energy supply for the winter.
All of this is remarkable because Scholz has faced opposition within his own party, including his left flank demanding an immediate ceasefire in Ukraine and negotiations with Russia. In Germany, there are ongoing protests over the current energy crisis. Likewise, the Czech government has faced heavy criticism from the opposition over its policies. Prague, Czech capital, saw an estimated 70,000 people protest rising energy prices just weeks ago. Demonstrators demanded that Russia’s gas suppliers be negotiated with and military neutrality is achieved.
In a previous column, I said that the social unrest in Prague was just a sign of what’s to come for the rest of Europe this autumn and winter. After these optimistic forecasts, should I consider letting my guard down?
No. It is worth noting how fluid the current situation is. Just last week Goldman Sachs was singing a different tune, arguing that “Market continues to underestimate the extent, breadth, as well as the structural repercussions. [energy] crisis – we believe the repercussions will be even deeper than the 1970s oil crisis.”
Not surprisingly, Goldman Sachs doesn’t appear to be the only international financial institution. BlackRock said in a note on Monday that the “energy crunch will drive a recession in Europe, as we’ve argued since March”And that the crisis has not improved. Analysts pointed out that many European countries are not dependent on their gas resources alone for powering through winter. This raises questions regarding the efficacy of rationing.
It is also important to remember that although reserves may be sufficient to sustain European consumers for this winter’s, they do not predict the future. It takes a lot of time to build energy infrastructure. This includes pipelines, reactors and renewables. That’s why a hypothetical analysisConsider the potential impact on Czech economic if Russian gas supplies were cut off. The most significant impact would occur in 2023 or 2024.
The prediction was made just before Nord Stream 1 became inactive. It predicted that the gross domestic product (GDP), would drop by 2.9% and 1.6% respectively in 2023, 2024, and 2023. This is a two year minimum recession due to Russian gas cessation. It is impossible to speculate on what will happen beyond this point, as the ministry did not go past 2024.
New sources of gas that could replace Russian gas are possible, including the United States. Three new US projects have been launched, which are expected to increase the US’s gas exporting capabilities. Analysts believe that Washington may be able to replace Moscow as an energy supplier.
It’s notable that the location of these existing and under-construction gas projects are right in America’s hurricane zone, making them particularly vulnerable to extreme weather events. We have already seen with the shuttering of the Freeport LNG plant in Texas over a fire earlier this year how shaky America’s energy infrastructure is – and, moreover, how unprepared it is for the future.
One last important point to be aware of, and Goldman Sachs acknowledged it, is the fact that gas capacity has grown despite lower demand. That is to say that Europe’s ability to stock its gas reserves has been predicated on the fact that the European economy is slowing down to the point of a recession. This is not sustainable and is therefore desirable. However, it ignores that the economy performs poorly in virtually all metrics.
This all seems to confirm the fact that Russia’s decoupling is not only impossible, but also undesirable.
Statements, opinions and views expressed in this column do not reflect those of RT.