Europe is facing an unprecedented winter
without the Russian energy the continent
has come to rely upon wholesale prices
for electricity and gas are trading
around levels 10 times what they would
normally fetch
now the continent has managed to restock
its inventories not least thanks to a
surge in LNG arrivals this year but that
may not suffice yes the storages are
filling up yes they're at the levels
mandated by the EU the big concern is is
what will demand be
if we see a beast from these scenario
where demand significantly ramps up we
will see a depletion of storages if
current Supply Remains the Same with
energy one of the chief drivers of
surging inflation in Europe governments
are eager to prevent soaring gas prices
from dragging the cost of electricity in
their wake our perspective is that this
won't change for a long time even though
Germany and Europe as a whole is
bringing more and more Renewables to the
market
we see that there will be still a pretty
high link between gas prices and power
prices for the next 10 years so for
example for German power with every
increase in euro per megawatt hour gas
price the German base price increases by
one to one Euro 20 per megawatt hour
this has prompted A desperate hunt for
Alternatives not least coal which had
been on the way out in Europe for
climate reasons currently in Europe we
have consumed a 40 higher volumes in
2022
or 21 so basically January to August
and that definitely adds on the import
bill when we think about the volumes
needed and we also used to be dependent
on the Russian supply for 70 percent of
our code Imports at the moment actually
we are in a very tight situation and
this winter will be very important due
to the presence of La Nina in the global
markets this risks bringing more Supply
disruptions and therefore we could start
a very interesting War let's say meaning
a competition between Europeans and
Northeast Asian players for the
available spot cargos with European
Industries like aluminum and fertilizer
producers already raining in their
output by double-digit levels Europe may
not have long before it locks in
permanent levels of de-industrialization
I think the process has already started
and so I think the actions get it
planned to be taken will probably just
be Band-Aids on on an irreparable path
the European Union and member states
have
tabled ideas for tackling this energy
crisis how satisfied are you with the
ideas that are currently being floated
to reduce energy demand for example by
15 well I think mainly doesn't address
the fundamental problems that will
actually arise after this winter so
um their proposals now are based on an
assumption that the winter is going to
be mild and there will be no demand for
LNG in China so it's based on two very
large assumptions but most importantly
it doesn't deal with what happens after
the storages are empty in March on if
there is no Russian gas because then we
have an enormous Gap a hole that can't
be filled and that the market knows and
therefore the uncertainty will remain in
the market until that issue of the Gap
is is addressed
Europeans will need a mild winter and a
dose of luck to avoid rationing in the
months ahead experts told montel's
German energy day in Dusseldorf
