Alternate headline: Europe plans to lock itself out of lower prices.
The reality is with the rise of Asian economies they are just as hungry for gas. This means competition for prices. Europe is blessed with coastal reefs so we can really build a cushion of offshore wind power. Europe as a whole probably has the best capacity in the world for wind power.
However that leaves the base stability for the grid. You absolutely need some backup in case we have no wind. That means you need gas or some factor of power you can spin up quickly. Nuclear can provide base load but it isn’t something you can turn off quickly.
I think one thing Merkel will be criticized for is severely retarding the adoption and development of Nuclear power. France (and the UK) remain the only major European nations that are seriously advocating for a nuclear power strategy.
I for one am worried about the future. We don’t want to be in the grip of foreign powers for vital energy resources. The oil crisis of the 1970s crippled many countries when OPEC withheld oil. The same thing is open to happening and it’s a major geopolitical risk.
Gas is going to be the transition fuel. Every green strategy paper names it as one.
The thing with Russia is it could also be a strength for Europe in an alternative way.
Russian economy desperately needs foreign currency reserves and influxes of cash to pay for everything. Their entire economy is essentially a hydrocarbon mineral extraction. Even during the Coldwar the gas didn’t stop flowing. I think people have this reflex as Russia as more irrational than they actually are.
They mistake threats for actions.
If they cut off gas, they would lose the support of nations like Italy or the support of certain elements of the German political class who want rapprochement / appeasement (depending on your view) with Russia.
It means Europe could source it from the US or Qatar or they reopen some unproductive wells. Natural gas can be shipped, it’s just a factor quantity cheaper by pipe. Putin also knows if he loses the support of the Oligarchs his position is under threat. If Gazprom lost access to the European market it wouldn’t be out of the realms of possiblity to see him “retire” for health reasons. Or face a palace coup.
Russia is a mafia / feudal type state and it only works as long as the spice (gas) flows and everyone gets their kickbacks and pays up to the Vozhd.
Russia economy essentially is in golden handcuffs much like the Saudi’s are.
>The bloc’s executive arm wants to prevent such contracts from being extended beyond 2049
That is very long-term.
In the meantime we can expect some sky rocking gas prices I guess.. and giving the fact how long the EU takes on deciding and implementing measurements I guess that will take some time.
Wouldn’t you want long term contracts to provide stability instead of a variable spot market or are they just doubling on the ‘competition will fix it’ thing?
This seems very short sighted. If the goal is to get off Russian gas there should be no reason not to sign long term contracts for LNG shipments. Long term contracts reduce the risks for investors to build out the infrastructure needed to provide natural gas to Europe. If there isn’t one the supply side investors take on huge risks due to seasonal factors. It takes years to build an LNG terminal and it’s hard to predict how much demand there will be when the terminal is built. If there isn’t much demand you could end up going bankrupt by the time demand spikes up. So if the EU ever gets into trouble again, like it’s in right now, the supply links could simply not be there.
7 comments
Alternate headline: Europe plans to lock itself out of lower prices.
The reality is with the rise of Asian economies they are just as hungry for gas. This means competition for prices. Europe is blessed with coastal reefs so we can really build a cushion of offshore wind power. Europe as a whole probably has the best capacity in the world for wind power.
However that leaves the base stability for the grid. You absolutely need some backup in case we have no wind. That means you need gas or some factor of power you can spin up quickly. Nuclear can provide base load but it isn’t something you can turn off quickly.
I think one thing Merkel will be criticized for is severely retarding the adoption and development of Nuclear power. France (and the UK) remain the only major European nations that are seriously advocating for a nuclear power strategy.
I for one am worried about the future. We don’t want to be in the grip of foreign powers for vital energy resources. The oil crisis of the 1970s crippled many countries when OPEC withheld oil. The same thing is open to happening and it’s a major geopolitical risk.
Gas is going to be the transition fuel. Every green strategy paper names it as one.
The thing with Russia is it could also be a strength for Europe in an alternative way.
Russian economy desperately needs foreign currency reserves and influxes of cash to pay for everything. Their entire economy is essentially a hydrocarbon mineral extraction. Even during the Coldwar the gas didn’t stop flowing. I think people have this reflex as Russia as more irrational than they actually are.
They mistake threats for actions.
If they cut off gas, they would lose the support of nations like Italy or the support of certain elements of the German political class who want rapprochement / appeasement (depending on your view) with Russia.
It means Europe could source it from the US or Qatar or they reopen some unproductive wells. Natural gas can be shipped, it’s just a factor quantity cheaper by pipe. Putin also knows if he loses the support of the Oligarchs his position is under threat. If Gazprom lost access to the European market it wouldn’t be out of the realms of possiblity to see him “retire” for health reasons. Or face a palace coup.
Russia is a mafia / feudal type state and it only works as long as the spice (gas) flows and everyone gets their kickbacks and pays up to the Vozhd.
Russia economy essentially is in golden handcuffs much like the Saudi’s are.
>The bloc’s executive arm wants to prevent such contracts from being extended beyond 2049
That is very long-term.
In the meantime we can expect some sky rocking gas prices I guess.. and giving the fact how long the EU takes on deciding and implementing measurements I guess that will take some time.
Wouldn’t you want long term contracts to provide stability instead of a variable spot market or are they just doubling on the ‘competition will fix it’ thing?
This seems very short sighted. If the goal is to get off Russian gas there should be no reason not to sign long term contracts for LNG shipments. Long term contracts reduce the risks for investors to build out the infrastructure needed to provide natural gas to Europe. If there isn’t one the supply side investors take on huge risks due to seasonal factors. It takes years to build an LNG terminal and it’s hard to predict how much demand there will be when the terminal is built. If there isn’t much demand you could end up going bankrupt by the time demand spikes up. So if the EU ever gets into trouble again, like it’s in right now, the supply links could simply not be there.
“EU plans”.