As a result of escalating prices, Germany is one step closer to gas rationing. Germany’s top economic official has warned against spillover effects of further cuts to gas supplies. The European Union has taken steps to minimize its reliance on Russian gas by reducing the amount of coal and oil it imports and phasing out an embargo on most Russian oil and gas.
European Union heads of state agreed on Monday to step up preparations for possible further gas cuts from Russia. Some EU nations have bolstered gas supplies from the United States, Norway, Algeria, and Azerbaijan to compensate for a reduction in Russian gas. However, some countries don’t have the necessary storage facilities to meet the growing demand. To avoid this situation, EU members are required to store 15% of their annual gas demand in other member states. However, Cyprus, Malta, and Ireland are exempt from these obligations until 2025.
The European Commission plans to put together a plan for future gas shocks this July. France, Spain, and Italy have reported gas cuts from Russia since July. In Germany, the gas cuts have been politically motivated and have slowed the economy further. Germany has accused Russia of seeking to divide the EU and its citizens while demonstrating solidarity with Ukraine. These are all amidst the rising concerns over Europe’s energy supplies.
According to Jeffrey Schott, senior fellow at the Peterson Institute for International Economics, the EU needs to be prepared for possible further gas cuts. This could have devastating effects on the economy of the Group of Seven nations. In addition to rationing its own gas supplies, the German government could choose to shut down its own pipelines, which would cause further disruption in the energy market.
Europe is looking to diversify its gas supplies. In May, the EU broke a record by importing more LNG than any other country in the world. However, the EU hopes that these measures will also help combat this potential problem. In the meantime, the EU is also coordinating with the US in terms of energy security. It is attempting to diversify its gas supplies by increasing renewable technology and expanding the use of unconventional fuels.
In addition to these measures, the German government has also approved a 15 billion euro line of credit to utilities. This money will be used to purchase natural gas and fill storage facilities. The government plans to start a program aimed at helping the gas system deal with the reduced demand. The government wants to encourage companies to temporarily suspend gas usage, but it will also make the fuel available to other industrial users at the lowest possible price. The government argues that past German governments have failed to develop alternatives to gas supply, which led to the crisis in the first place.
The European Commission has pledged to draft a plan this month for the summer and winter months. The plan will focus on helping EU member countries do without Russian gas and coal while also accelerating renewable energy deployment. It is important to remember that any supply crisis in one country could lead to a broader economic crisis in another. This is especially true if a country uses a lot of fossil fuels for electricity generation.