Energy Price Surge Sends Shivers Through Markets as Europe Looks to Russia – Reuters

Soaring energy prices have alarmed European leaders and caused turmoil in global markets, raising fears of a winter fuel crisis that could benefit gas-rich Russia. U.S. oil prices reached their highest point in nearly seven years, while natural gas prices hit record levels, as major consumers like China grapple with recovering demand more swiftly than anticipated following the COVID-19 downturn.

In Europe, natural gas prices have surged nearly 600% this year, primarily due to concerns that current low storage levels will not meet winter demands. Meanwhile, prices in the United States have also reached a 12-year high.

The escalating energy prices sparked worries about potential inflation and rising interest rates, leading to declines in global equity markets and bonds, especially in the UK, where several energy companies have gone out of business as a result of the price surge.

Energy prices dominated the European Union’s political discussions. EU Commission President Ursula von der Leyen emphasized the need to address skyrocketing gas prices and advocated for a renewed focus on renewable energy.

The EU, which relies on imports for 90% of its gas supply, expressed concern that Russia has not increased its gas exports like Norway has. President Vladimir Putin announced that Russia is prepared to boost gas supplies to Europe and stabilize the market. However, a deputy CEO of Russian gas company Gazprom revealed that the company is still focusing on filling its underground storage facilities domestically and prioritizing its home market over exports due to expectations of a severe winter.

Some EU lawmakers have suggested that Gazprom’s reluctance to increase gas supplies may be a strategy to expedite the approval of the Nord Stream 2 pipeline, which would transport Russian gas to Germany. This project has faced opposition from the U.S. and some European nations, who argue it would increase the EU’s dependency on Russian energy resources. Russia has consistently denied any political motivations behind its gas supply decisions.

In response to the crisis, EU ministers discussed the possibility of joint gas purchases to enhance their bargaining power and create strategic reserves. EU Energy Commissioner Kadri Simson stated that there is an urgent need for policy interventions to address the situation, noting that some member states have already implemented national subsidies to mitigate the impact of high energy costs on consumers.

Simson reported that underground gas storage facilities in Europe were over 75% full, indicating adequate supplies for winter, but highlighted the importance of transitioning to renewable energy sources, especially considering that EU gas stocks are at a 10-year low. In the UK, which has exited the EU, storage capacity has significantly decreased, covering only about four to five days’ worth of winter gas demand, down from 15 days.

On Wednesday, the benchmark oil price dropped after reaching a multi-year high above $83 a barrel, although some traders viewed this decline as a temporary setback. “An energy crisis is unfolding as winter in the northern hemisphere has yet to begin,” warned Stephen Brennock of oil broker PVM.