1. Natural Gas Crisis
Natural gas holds a significant position in Europe’s energy mix, with an annual consumption of 500 billion cubic meters used for electricity generation, heating, industrial production, and more. Therefore, Europe is highly dependent on natural gas imports from Russia.
Following the outbreak of the Russia-Ukraine conflict, European natural gas prices have been driven up by a series of factors including geopolitical tensions and subsequent sanctions. In the following months, frequent maintenance due to equipment issues on the Russian pipeline 'Nord Stream 1' kept gas prices high. On September 2, Gazprom announced the indefinite closure of 'Nord Stream 1'.
'Nord Stream 1,' as the main pipeline for Russia's gas exports to Europe, has an annual capacity of about 55 billion cubic meters, accounting for 9.63% of Europe’s total consumption in 2021.
From the supply side, gas flows through 'Nord Stream 1' have completely stopped, while on the demand side, colder weather ahead may lead to increased heating demand.
However, recently after the G7 indicated plans to impose a Western-imposed price cap on Russian oil exports, they are now pushing for a similar cap on Russian natural gas.
Clearly, there will be no short-term resolution to the Russia-Ukraine conflict. Moreover, Putin was straightforward in his response, saying, 'Stupid! This won’t have any effect; it will only drive prices further up.'
Data suggests that under pessimistic scenarios, Europe’s natural gas inventory is expected to be depleted by February 2023. Even under optimistic conditions, Europe will reach its lowest historical inventory level by April 2023.
It can only be said that Putin's move to cut off the gas supply is like activating a 'super double' in the context of Europe's energy crisis.