Russian President Vladimir Putin’s plan to freeze European countries that opposed his war with Ukraine is withering amid the continent’s warm winter.
Record temperatures from as far west as Portugal and northern Spain to Scandinavia, the Baltic region and the previous Yugoslavia have worn out the necessity for Europeans to use energy reserves to heat their homes.
Hungary’s capital, Budapest, set an all-time record when the mercury hit 66 degrees on Christmas Eve. In parts of France, temperatures rose to greater than 70 degrees on Recent Yr’s Eve.
Because of this, the continent’s gas reserves are almost full after European governments have already encouraged their residents to ration their energy consumption in anticipation of cooler temperatures, according to Bloomberg news.
Meanwhile, the continued COVID-19 lockdowns in China have managed to reduce competition for energy resources, easing inflationary pressures on Europe somewhat.
The mixture of those aspects has made European policymakers breathe a sigh of relief.
“The danger of a complete economic collapse, the collapse of the core of European industry, has been averted so far as we all know,” said German Economy Minister Robert Habeck on a recent trip to Norway.
Analysts expect surplus natural gas may very well be enough for Europe to weather a possible crisis this winter and next.
In a January 8 memo, Goldman Sachs said that the immediate spot demand for oil from the lack of petrol-to-oil substitution capability in Europe due to falling gas prices may very well be as high as 1.5 million barrels a day.
“If European gas prices remain low for the remainder of this 12 months, the prolonged lack of gas-to-oil substitution will lower our oil price forecast by $4 per barrel (/bbl) for 2023,” the bank said, but noted that a faster reopening of China is “in itself value +$5 a barrel over the 2023 oil price forecast.”
Prior to Russia’s invasion of Ukraine last February, the Kremlin supplied around 40% of Europe’s natural gas, most of it via pipelines.
However the invasion prompted Western governments to impose sanctions on Russia while promising to wean off from Russian energy sources.
The EU has halted imports of Russian coal and oil, while gas supplies have plummeted.
Without Russian natural gas, the EU turned as a substitute to Norway, Qatar, the US and other suppliers.
Norway has replaced Russia as Germany’s largest supplier of natural gas.
According to Bloomberg News, the rationing measures have paid off as German warehouses are 91% full compared to 54% a 12 months ago.
“We’re very optimistic, which we didn’t come back to in the autumn,” said Klaus Mueller, who oversees Germany’s power grid.
“The more gas we’ve in storage at the beginning of the 12 months, the less stress and value we could have when refilling it for next winter.”