Due to reduced supplies of Russian gas, Germany announced an alert, the second level of its emergency supply plan. It means the issue is severe but that there is still enough gas to avoid rationing, which is possible in the third phase. Gas deliveries via Nord Stream 1 began to decline on June 14, and now the flow is 60% lower than planned.
Market prices for natural gas didn’t drastically increase after Germany declared an alert today. But European futures for the delivery of fossil fuels soared 50% since the beginning of the reduction. The price is currently hovering around EUR 130 per MWh.
The alert level is declared when there are disruptions in gas supply or when demand is drastically increased. However, the market can still handle it without the need to activate emergency measures. Germany triggered the first early warning plan at the end of March when the Kremlin introduced payment in rubles as a condition to continue sending gas.
Habeck: Russia’s move is an economic attack on Germany
The third stage, the state of emergency, implies government measures, including a reduction in supplies. CNBC reported that it is declared when the market cannot overcome the issue.
Gazprom said it reduced deliveries because the equipment for the repair of the Nord Stream 1 gas pipeline was not shipped from Canada due to the sanctions against Russia. Germany and Italy dismissed the claims.
Germany’s Vice-Chancellor and Minister for Economic Affairs and Climate Action, Robert Habeck, claimed the cut in gas supply was an economical attack of Russian President Vladimir Putin on his country. He underscored that Germany is resisting it, but it is facing a rocky path. In the vice chancellor’s opinion, the country is in a gas crisis even though it’s not being felt yet.
The crisis will affect industrial production and become a great burden for many consumers
The vice-chancellor said it will affect industrial production and become a significant burden for many consumers. According to Habeck, gas has become scarce. He warned prices could continue to rise.
Germany will have a hard time achieving the goal set by the European Commission to fill up gas storage up to 90% by December if gas deliveries via Nord Stream 1 remain at a 40% level.
Germany secures a third of its gas consumption from Russia.
Fatih Birol (IEA): Europe must prepare for a complete cessation of supplies
Fatih Birol, director of the International Energy Agency (IEA), has warned that Europe must immediately prepare itself for a complete shutdown of Russian gas supplies this winter.
He called on European Union member states to take measures to reduce consumption and urged them not to shut down obsolete nuclear power plants, the Financial Times reported.
Birol explained that Russia’s intentions are becoming more evident as winter approaches. The Kremlin wants to prevent filling gas storage facilities in Europe by reducing deliveries and increasing its leverage in the winter months.
The emergency measures implemented in Europe to reduce gas consumption, such as restarting coal-fired power plants, are justified by the intensity of the energy crisis, despite concerns that emissions will increase, Birol said.