Europe’s energy crisis could get a lot worse as Russia’s gas-withholding moves threaten the global economy
All dried up… Europe’s at the boiling point of an epic energy crisis as political tensions and record heat waves ripple through the continent. This week, Russia’s Gazprom (the biggest natural-gas company by sales) halted exports to three major European customers citing force majeure — a stoppage for extraordinary circumstances. Europeans aren’t buying it:
- Hot air: Uniper, Germany's largest gas importer, said the halt was “unjustified” (read: Gazprom has gas to spare). Uniper’s already tapped a $2B credit line and drawn down winter reserves to keep Germany’s gas-fueled electricity and A/C flowing.
- Heat-pocalypse: Yesterday, the UK had its hottest day ever recorded, while the Netherlands had record July temps and France sent out extreme-heat warnings.
Pipe problems… Russia supplies nearly half of the EU’s natural gas. Problem: over the past month, Gazprom’s cut its export capacity to 40%. The Nord Stream pipeline (the main connection between Germany and Russia) closed last week for an annual maintenance check. But Europeans worry that the force majeure signals Russia won't reopen its taps by tomorrow’s deadline. And Europe’s gas prices are already up 8X from a year ago.
Europe’s crisis could be a global disaster… This year, Europe has surpassed Asia as the top importer of US oil for the first time since 2016 (because it’s getting way less gas from Russia). But US production isn’t growing fast enough to meet the needs of both continents and its own. Eventually, the energy crisis could cost European taxpayers $200B through higher energy bills and higher taxes. Globally, a tighter gas market could trigger more inflation, hurt economic output, and fuel a recession.