As Europe’s energy crisis worsens, Europe was urged to plan for a complete cut-off of Russian gas supplies.
The International Energy Agency warned that Putin’s decision to cut off flow through the Nord Stream pipeline in the past week could signal a complete shutdown.
Fatih Birol (head of the IEA) told the Financial Times that Europe should be prepared in case Russian gas is cut off completely.
He suggested that European countries take steps to reduce the demand before the winter key period. He suggested that old coal-fired power plants be used, despite concerns over emissions.
Bloomberg reported that Germany was about to initiate the second phase of its emergency gasoline plan, known as the “alarm stage”, amid growing fears that Putin might turn off the taps.
The deliberations surrounding the move reveal serious concerns about the possibility of a worsening supply situation after Moscow cut deliveries to Europe. Germany is one of the largest buyers of Russian fossil fuels and it wants to reduce gas demand in order to increase its stockpiles for winter.
According to someone familiar with the matter, the government could soon move to the “alarm” phase, which is the second stage of its three stages plan. The “early warning phase was enacted at the end of March after the Kremlin demanded payment in rubles. Germany had to prepare for a possible cutoff in supply.
The second stage can be triggered by a law change that allows energy companies to pass cost increases on to consumers and businesses. This could also mean more coal-fired power stations to reduce gas consumption. The government is still analyzing the measures.
As Europe struggles with rising inflation, a further rise in household and business bills would be a blow to Europe’s largest economy. Industries ranging from steelmakers to chemicals have already warned that they might have to cut production or close down factories due to rising energy costs.
Robert Habeck, Economy Minister, stated that Russia’s decision to reduce gas deliveries via the Nord Stream pipeline by 60% was motivated politically and aimed at disturbing the markets.
European gas futures rose by a third this month. They are now trading at nearly 128 euros per megawatt-hour, four times the level they were a year ago.
This makes it difficult for Germany’s gas buyers, who need to get enough supplies to replenish inventories before winter. The government wants to increase storage capacity to 90% by November from 58% currently. Last week, the country’s energy regulator, urged consumers to reduce their gas consumption to help this effort.
Germany, which is still dependent on Russian gas for 35%, has attempted to decrease its dependence following the invasion by Ukraine. It plans to fast-track terminals to import liquefied natural gases and secure more piped supplies from other countries.
The state would take control of all the nation’s distribution networks if the country increases its gas plan to an “emergency”.
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