The EU countries are “starving” for fuel as the region’s natural gas production has been in continuous decline because the fields in the North Sea, a particularly important source of natural gas for Britain and the Netherlands, have dried up
Since the late February, Europeans have suffered from the dizzying spikes in energy prices following the escalating tension in Ukraine. There was a time in the first half of March when the world’s oil prices jumped to their highest levels since 2008 as the US and European allies considered banning Russian oil imports while it looked less likely that Iranian crude would swiftly return to global markets.
In the context of serious deterioration of Russia-West relations and the recent escalating tension in Ukraine, the EU is looking to cut its gas dependency on Russia.
Currently, the EU is the largest natural gas importer in the world, with the largest share of its gas coming from Russia (41 percent), Norway (24 percent) and Algeria (11 percent). In terms of foreign suppliers, Russian gas was just the cheapest.
Germany has recently announced the suspension of the Nord Stream 2 Baltic Sea gas pipeline project, which was designed to double the flow of Russian gas direct to Germany. This decision came in the context that Berlin is still very short on energy supply. German press reported that the country’s gas reserves have fallen to a "worrying" level and are now at 35-36 percent, under the “critical level” of 40 percent which the German government deems necessary.
The EU’s difficulties in energy supply have been exacerbated as the bloc's countries are working to reduce their dependence on coal to achieve the goal of being carbon neutral by 2050 and cutting greenhouse gas emissions by at least 55 percent by 2030.
Currently, about 20% of EU's electricity comes from coal production. Since 2012, the EU has decreased its coal power generation by about a third. In addition, since 2011, Germany rejected investments in nuclear energy following the Fukushima nuclear disaster in Japan. Although the EU is focusing on building renewable energy sources, the process has not been fast enough to reduce fuel dependence on Russia and foreign partners.
While the problem of energy has not been resolved, inflation is another challenge for the EU as soaring oil and gas prices pushed up prices of essential goods. According to the statistical office of the EU (Eurostat), inflation in the Eurozone increased to a record high of 5.8 percent in February mainly due to rising energy prices. According to Eurostat, energy prices in February saw the biggest price increase at 31.7 percent (compared with 28.8 percent in January 2022). Food prices also rose 4.1 percent in February from 3.5 percent the previous month.
The above difficult situation is putting great pressure on European policymakers and forcing the "big EU family" to diversity suppliers of energy. President of the European Commission (EC) Ursula von der Leyen said the EU is talking to the United States and other suppliers about boosting gas deliveries to Europe amid concerns over supply from Russia.
Speaking at a press conference held by German media, the EC President stressed that the “EU is talking to other gas suppliers, for example Norway, about increasing their supplies to Europe”. In addition, to cope with inflation, EU countries have introduced many measures including tax reduction, subsidies and others to help consumers not face skyrocketing bills.
Analysts said that he above solutions are not enough to quench the thirst for energy and cool down inflation for the EU. Although the International Energy Agency’s members are ready to release more oil if needed, analysts at market research firm Commerzbank Research (Germany) have forecast that oil prices will stay at more than 100 USD per barrel in the second quarter of 2022.
In the above context, finding a solution to the EU's energy problem will continue to be a big challenge for the leaders of the "old continent" this year.
