Page 7 - FSUOGM Week 14 2022

FSUOGM COMMENTARY FSUOGM

will be extremely difficult to switch to another could go higher without ensuring Russian gas
source of energy and impossible to do so at short filling up Europe’s storage tanks ahead of this
notice. year’s heating season that starts in October.
“Due to the geographic proximity, Russia’s The resulting energy crisis would lead to
role as Europe’s largest natural gas supplier has ballooning energy bills and could result in
been well-established for decades. Dependence rolling blackouts or brownouts, reducing
on the country is highest in Central and Eastern economic output and putting both economic
Europe, including the Czech Republic, Hungary, and political pressure on governments. The
Poland, Romania and the Slovak Republic. With effects would be disproportionately pain-
EU-wide reliance on Russian oil at 10% and on ful for lower income families, where basics
natural gas at close to 35%, an embargo on the like utility bills make up a larger share of the
latter would be a more complex undertaking,” household spend.
IIF’s Hilgenstock and Ribakova said. The EU is conflicted, as in February the bloc
A short-term stoppage of Russian gas deliv- set a goal of filling Europe’s gas tanks to 80% full
eries to Europe would cause chaos. Unable to by October 1 to prepare for next winter, which
source enough LNG, European countries would means the EU should be buying as much gas as
be forced to restart coal-fired power stations, it can starting now as the 2021/2022 winter sea-
which can immediately be fired up, reversing son ends. But at the same time, some EU mem-
commitments to phase them out as part of the bers are demanding that Russian gas be blocked
EU’s Green Deal and “Fit for 55” plan to reduce immediately.
carbon emissions and endangering the EU’s “What they are saying is we should buy as
plans to hit climate targets on time. much Russian gas as we can now to make sure we
Restarting mothballed nuclear power are comfortable to put us into a position where
plants (NPPs) is a lot harder, as it takes at least we can cut Russian gas off next year and punish
a year to start up an NPP once it has been Russia. And we are signalling this policy to Mos-
decommissioned. cow trying to persuade us to help us carry it out,”
The other measure that western countries Professor Barry Ickes told bne IntelliNews in an
can take is to simply use less energy. That means online interview.
turning down the thermostats, introducing “no Western European countries are already
drive days” for motorists, and asking industry to scrambling to meet the challenge. For example,
produce less. Germany, which had supported and defended
“It's possible to switch and cut out Russian gas imports from Russia for years, is pushing for the
use, but it's a wartime mentality. It will be like construction of four LNG terminals with a total
the Berlin Luftbruecke all over again,” Christof capacity of 50 bcm by 2025-26, IIF reports.
Ruehl, Senior Research Scholar, Columbia Uni- “The capacity is slightly below Germany’s
versity, and the former chief economist at BP told current annual natural gas imports from Russia.
bne IntelliNews in a recent webcast. Due to limitations regarding the European pipe-
If Russia cuts off gas to Europe overnight then line system’s ability to flexibly distribute natural
gas prices will spike further from the already ele- gas, especially from Western European LNG ter-
vated levels. Earlier this year the cost of gas on minals to Eastern European countries, a greater
the Dutch TTF gas hub that sets prices in Europe geographical distribution of terminals will be
had already risen to 16 times its normal level, but critical,” Hilgenstock and Ribakova said. ™

Week 14 06•April•2022 www. NEWSBASE .com P7