Today we are going to show and analyse the consequences of the very serious energy crisis that is taking place mainly in Europe. Of course, everyone is suffering from the crisis, but it is especially serious for countries that are highly dependent on energy imports and that are not self-sufficient. Japan for example is in panic because it is an energy importer country, and in Sri Lanka the crisis is so serious that they have extended for another week the closure of schools because there is no fuel to move the students and teachers.

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The case of Europe is particularly serious because it is a continent with a very important, very significant industrial base and for this industrial base, the energy problem can be fatal.

What conflicts have resulted in the energy crisis in Europe?

The energy crisis mainly of Europe is one of the main consequences of the Ukraine conflict, so it is not possible to understand the conflict without analysing this issue. Before the crisis with Ukraine, Europe had 40% of its energy needs supplied by Russia, this is because Russia has the cheapest energy supply, mainly gas.

There are pipelines also within Norway, Algeria and Libya, but Norway and Algeria, it is known that they have no more supply capacity and Libya is in civil war, so energy supply from Libya is very uncertain. The accident is also in conflict with another party supported by Russia and in principle, it is also winning the war there.

How does the great gas pipeline from Russia to Europe work?

The large gas supply network by which Russia supplies gas consists of several pipelines that bring that gas from Russia to Europe. It turns out that these pipelines were created to bring the gas from east to west, that is, from Russia to western and southern Europe.

One of the characteristics is that the diameter of the pipe at the beginning of the pipeline is larger and it gets smaller as it passes to the countries as those countries withdraw their consumption and it decreases in diameter in the west and south direction. The alternative that Europe is now looking at is liquefied gas supplies from Qatar and the United States.

What are the problems encountered in the supply of natural gas?

The first problem they say is that even if Qatar and the United States supply the maximum they are forecast to supply in the coming years, they would still be short of supplying a quarter of Europe’s need. But talking about the pipelines, the truth is that this supply through southern Italy when coming from Qatar and through Spain when coming from the United States for example, would pass through the opposite direction of the current direction of the flow of gas, that is, the gas would be placed in the lower volume ends, so this will imply a technical problem to be solved. It is probably possible to find technical measures to solve these problems, but this will take time and obviously investment.

Another problem is that Europe does not have the terminals to receive the necessary liquefied gas, it is estimated that Europe has only 40% of the terminals to receive the gas it would need for its consumption. Another difficulty is that there are not enough gas carriers.

European industry needs energy from Russia. Even if all the problems I spoke about before were not enough, the gas to be supplied to be infrastructure, by ships, is going to be much more expensive than gas supplied by pipelines. This is vital for European industry because it needs cheap gas to become competitive. Germany which is the most industrialised country in the EU is suffering from this. Recently the head of the German trade union said that the whole industrial complex in Germany may collapse, and that collapse will not be temporary but may be permanent.

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Russia supplies natural gas to India and China

And if the gas price increase for industry wasn’t enough, Russia is now focused on moving its pipelines to India and China, which are becoming the biggest buyers of oil and gas in Russia, meaning German industry will not only get more expensive gas and oil, but its competitors India and China will get it cheaper. After all, Russia was excluded because of sanctions and it ends up selling more to the non-sanctioned countries, India and China, selling cheaper than the international market price.

Strike in the oil industry

The oil industries are making historic profits because oil, on the international market, ended up becoming more expensive. With this, oil workers and workers are starting to strike because of inflation, because the increase in the price of fuel was too big, and because of the increase in company profits they want a pay rise.

We are already starting to see a severe start in Norway, which has already reduced the price of Norwegian oil and gas by 15%. So this phenomenon could also make the situation worse.

The arrival of the European winter

Another problem is that we are two or three months away from the arrival of the European winter. The President of Ukraine, Zelensky, spoke at the meeting with TV stations that the conflict in Ukraine should be over by winter. That was very significant because he knows that the Russian troops will have an advantage in the winter camp because they are better equipped.

Another factor is that Ukrainian support, which comes mainly from Europe, the United States, from the Northern Hemisphere of Europe, will be greatly shaken because the lack of energy will greatly affect support for the conflict, simply because there may be a shortage of gas and oil, accompanied by an increase in the price of these commodities.