Ian Krysztofiak, Staff
Energy prices skyrocketed on Monday as the state-controlled Gazprom PJSC announces the shutdown of the Nord Stream Pipeline that supplies the EU with 40% of its natural gas. The Nord Stream Pipeline runs from Vybord Russia under the Baltic Sea to Greifswald Germany. The Kremlin says western sanctions has made maintenance of the pipeline impossible yet declines to send the gas through other functioning pipelines. Prior to Russia’s invasion of Ukraine, wholesale natural-gas prices in northwest Europe were at around seventy euros a megawatt-a hour, as of Sept. 5, 2022, the price per megawatt-a hour is 252 euros.
Europe is on the front lines of this economic war with Russia, the soaring electricity prices and natural gas shortages has hindered the European economy and has them concerned about blackouts and shortages in the winter months when energy demand picks up. Heading into the winter, the analysts believe Europe will be able to survive without state-directed rationing. European utilities companies are working endlessly to find replacements to Russian gas, the U.S. and the middle east are sending them a supercooled liquified-natural gas alternative.
EU governments fear that power markets are posed to break due to the massive cash payments that these companies are required to make to trade on energy exchanges. Officials see that these failed payments could promote financial instability creating a vicious cycle of volatility.
By cutting gas supplies to Europe creates risk for Moscow, recently the EU has agreed impose a price cap on Russian oil to limit Russia’s ability to finance its war with Ukraine. Russia has threatened to retaliate by cutting off oil and gas exports to countries that implement this price cap.
But German Chancellor Olaf Scholz mentioned earlier this week that his country was “much better prepared” to secure enough national gas for Germany to avoid blackouts during the winter than they were a couple of months ago. He also mentioned that “we can deal quite well with the threats that are coming our way from Russia.”