Winter is coming and while for many, that means the start of snow, the Holiday Season, and hot chocolate, for Germany and other Eurozone countries, all they feel is the strain of an impaired energy supply. While the problems may not be prominent during this specific season, they could prove to complicate things in future years.
Currently, over 40% of Europe’s stored gas for this winter has come from Russia. Beyond this winter, Europe will need to find new sources for its natural gas, creating an increase in demand in the markets, thus driving up prices even more.
Over 40% of Europe’s stored gas for this winter came from Russia, despite sanctions and conflict. In 2023 and beyond, Europe will try to—will have to—source its energy imports from elsewhere, which will put it in direct competition with other countries and result in a bidding war for resources. This will, in turn, drive prices up even higher.
To all those hoping that new pipeline construction could solve the issue, according to Time and a paper from the Global Energy Monitor, “Building new pipelines takes 1.5-4 years and LNG (liquefied natural gas) terminals need 2-5 years. It will take another 3-5 years, at a minimum, for the LNG markets to balance supply and demand. Meanwhile, few reasonable investors will pour billions into infrastructure projects with a 10-30 year breakeven timeline for fuels the world is trying to phase out in 8 years because of climate change.”
Financing could prove an issue for Germany as well, as their agency sold just $1.78 billion Euros worth of new 2029 Bonds earlier this month, compared to their four ($4) billion target. Their 0.47 bid-offer ratio at sale was the lowest of any 7-year bond German offering on record and the second lowest of any of Germany’s auctions going back to 1999.
This can be compared to France’s ten ($10) billion sale on October 20th, which was received in strong demand.
The cost of borrowing is rising for the European Union (EU) as a whole, with a 10-year bond in June 2021 selling at a yield of 0.086 per cent, when French and Belgian 10-year debt was trading at yields of 0.171 per cent and 0.146 per cent respectively. But EU borrowing costs have since risen above those of France or Belgium. A 10-year debt now yields 2.89 per cent, compared with 2.63 per cent for France and 2.71 per cent for Belgium.The changes are leaving those in Europe looking for ways to adapt, with studies advocating for dialing back home temperatures by 5 degrees Farenheit on average, in order to preserve about 15% of an area’s energy supply. Other methods include retailers advocating workers work from home and shortening their store hours, as well as the recent move by ordinances to turn off public buildings lights and space lights at night.
Be First to Comment