Prof. ST Hsieh
Director, US-China Energy Industry Forum
626-376-7460
September 7, 2022
It is very clear that EU will suffer this winter with a crushing energy crisis. But:
- The root cause of this man-made energy crisis seems to be out of the sight already: the war in Ukraine.
- If “a Prolonged Crisis” is meant to last for the next few winters, no doubt Europeans should ask for new political leaders. The current “leadership,” which made this mess to begin with, does not have any credibility to resolve this Energy Crisis in such a short time.
- Ukraine is not a member of EU, should Europeans pay any attention to the people in Ukraine? Some Europeans are suffering the hardships already with cold showers, dimmed lights etc. What kind of sad lifestyle Ukrainians are going thru now? At the end of a “Prolonged Crisis” what will be left in the “nation” of Ukraine besides mass causalities and war ruined economy?
- EU politicians have run out of tools to win this war for Ukraine against Russia (Putin.) Now they are fully focused on salvaging their own political career. The “emergency measures” that they are contemplating are backwards and completely against the free trade market system. It will not be effective but left with great damages to the global trade system.
- The Biden Administration is busy with the mid-term election on November 8, 2022 and won’t touch European’s Energy Crisis. Because there is not much the US can help. Putin aside, Biden is working on a Biden-Xi summit in November. If they meet, they will not talk much about Europe Energy Crisis or Ukraine war. Because they have a much bigger pie to cut…
The EU Is Getting Ready for a Prolonged Crisis: Energy Update
Bloomberg News Wed, September 7, 2022 at 9:50 AM
(Bloomberg) — The European Union is set to intervene in energy markets to take the pressure off companies that are being squeezed by a liquidity crunch. It will also propose a clawback on excess profits by power and oil companies as it seeks to protect citizens from soaring costs.
EU officials are set to meet in Brussels on Friday to consider next steps. All eyes are on the calendar as the cold season approaches — but this winter may be just the beginning of a prolonged crisis, according to some observers.
The bloc is also considering capping the prices paid to Russia for imported gas, Commission President Ursula von der Leyen said earlier, raising the stakes in a standoff with Moscow. President Vladimir Putin has said Russia won’t supply oil or gas to any nations that introduce price caps.
Key Developments:
- Europe Faces Even Tougher Winters Ahead From Putin’s Gas Squeeze
- EU Set to Intervene to Ease Liquidity Strains in Energy Markets
- Citi Says High Europe Gas Prices to Stay Until Later in Decade
- Europe Aluminum Cuts Get Deeper by the Day
- Scholz Accuses Russia of ‘Blackmail’ Over Gas Pipeline Shutdown
Europe Faces Tougher Winters Ahead (2:25 p.m.)
The loss of Russian natural-gas supplies will cause reserves to be depleted faster when temperatures drop in the coming months and make the process of preparing for following heating seasons even more difficult, according to energy executives, who predicted the strain will last until at least 2025.
“Europe could have an even bigger problem next winter,” Niek Den Hollander, chief commercial officer at German energy giant Uniper SE, said in an interview at the Gastech conference in Milan this week.
The main issue is the lack of viable alternatives to gas piped from Russia, as new LNG export capacity takes some three years to build. That means Europe faces a painful reset with consumers and businesses forced to rein in energy consumption.
Citi’s Morse: Years Before Prices Recede (1:35 p.m.)
Citigroup Inc.’s Ed Morse says gas prices will be elevated for a while yet. “It’ll be somewhere between 2025 and 2027 that we’ll see the prices in Europe coming back to where they were at the beginning of 2021,” Morse, the firm’s global head of commodities research, said in an interview with Bloomberg TV.
“You can only produce as much LNG as you have liquefaction capacity, and it doesn’t grow overnight. That’s the reason why Europe is going to have to wait to mid- or later in the decade” to have ample supplies to replace Russian gas. He added: “We also have to remember that the Russian game plan isn’t completely over.”
Execs Pour Cold Water on Gas Price Caps (1:20 p.m.)
Executives at exporting and trading companies at the Gastech conference in in Milan have questioned the viability of gas price caps, including LNG. Europe needs to attract available supply from global markets and such measures won’t contribute to any additional supply for Europe, they have said.
“It doesn’t create any solution to the problem,” Helge Haugane, senior vice president for gas and power at Equinor ASA, said in an interview earlier this week. “Suppliers need price signals to send gas to where it is needed most. Gas is a global commodity and there is not that much supply, so there is not much we can do.”
LNG Output Must Jump to Solve EU Problem: API (1:10 p.m.)
Europe can’t solve its energy crisis just via LNG cargoes being redirected to the region, according to Dustin Meyer, vice president of natural gas markets at the American Petroleum Institute. Replacing Russian gas is challenging and can only be achieved if the global LNG export capacity increases quickly, he said.
“That is a problem that must be solved only through investments in new capacity, new supply,” said Meyer in an interview in Milan. “The diversion of cargoes has been very helpful in the short term, but in the long term, we need investment in export capacity.”
Von der Leyen Pitches Emergency Plan (12:03 p.m.)
The European Union will pursue radical measures to reduce electricity consumption and cap power prices in an emergency intervention to curb soaring energy costs that are sending shockwaves through the region’s economy.
The EU’s executive arm plans to propose that the bloc’s 27 member states limit excessive revenues of companies producing power from sources other than gas and use the profits to support consumers, Commission President Ursula von der Leyen said. That would be done through imposing a price cap on electricity generated from technologies such as renewables, lignite or nuclear energy.
The unprecedented plan to step into energy markets also includes a levy on fossil-fuel producers, a price cap on Russian gas imports, measures to increase liquidity for energy companies if needed and a mandatory target reduction of electricity use.
China’s Gas Storage Review Risks Order to Buy LNG (11:25 a.m.)
China is checking if there is enough natural gas in storage before winter, sparking concern that importers may be asked to buy more LNG, exacerbating the global shortage.
Because of the slack demand at home due to virus restrictions, China’s LNG importers have been diverting shipments to more profitable markets overseas, like Europe. However, an order by the Chinese government to boost storage for winter could halt that and intensify competition for LNG, risking to drive up gas prices around the world.
EU Seeks Power-Demand Cut of 10% (10:25 a.m.)
The European Commission is seeking a deal to reduce power demand across the bloc by 10%, according to people familiar with the situation.
There’s also a proposal to cut demand during peak hours by 5%, while the commission is proposing a price cap on electricity not generated by gas of EU200/MWh, people familiar with situation said.
Gas Storage May Run Empty, Industry Warns (9:45 a.m.)
Europe’s gas storage could run empty this winter if demand cuts are not rolled out urgently, industry group Eurelectric warned.
“Energy prices are soaring, amid throttled gas flows and increased scarcity in the market, pointing towards supply shortages this coming heating season,” the lobby group said in a report. Record wholesale electricity prices are exerting pressure on the retail market with prices up 84% since January 2021, it said.
Scholz Accuses Russia of Blackmail (9:05 a.m.)
Chancellor Olaf Scholz accused Russia of seeking to blackmail Germany and its European partners by shutting off gas deliveries and dismissed an apparent leak in a key pipeline as “pretense.”
“Russia could deliver if it wanted to,” Scholz said Wednesday, according to the text of a speech to the lower house of parliament in Berlin. He said Gazprom PJSC simply needs to request a turbine for the Nord Stream 1 link that is in western Germany and ready for use after repairs.
Europe’s Energy Costs Surge by 1 Trillion Euros (8:11 a.m.)
Europe’s energy costs will exceed pre-pandemic levels by more than 1 trillion euros, according to estimates by S&P Global Ratings. The impending redesign of EU gas and power markets will be “complex and bear many risks” Emmanuel Dubois-Pelerin, lead analyst for EMEA utilities said.
“Given massive collateral postings in volatile power markets, we believe European governments are increasingly willing to support liquidity on energy exchanges and at European utilities against massive hedge collateral posting movements,” he said.
Crisis May Extend Beyond Next Winter (7 am)
Europe could face an even bigger problem next winter with no end in sight for the energy crisis, Niek Den Hollander, Uniper’s Chief Commercial Officer, said in an interview in Milan.
If Russian gas flows remain curtailed, it’s possible that nations won’t be able to fill up storage sites effectively next summer, he said.
“We could see low inventories in the end of this winter, and that would make it very difficult to procure gas and fill up storage again for security of supply next winter,” Den Hollander said. “It all depends on how much LNG Europe will be able to attract and will also depend very much on the weather.”