Germany faces ‘gas crisis’ as minister warns of ‘Lehman effect’

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“We are in a gas crisis,” said Robert Habeck, German Economy Minister, on Thursday. “Gas is now a scarce commodity.”

These blunt words accompanied Berlin’s decision to activate the second stage of the country’s National Gas Contingency Plan, just over a week after Russia cut gas pipeline supplies from the country by 60%. largest economy in Europe. Things won’t get any easier from here.

Arming for rationing

The second stage of the German plan means that the government believes there is “a substantial deterioration in the gas supply situation”, but the situation still does not justify state intervention. Russian gas giant Gazprom decided to drastically cut deliveries to Germany via the Nord Stream 1 gas pipeline last week, putting German supplies under sudden and extreme stress. Gazprom claims German conglomerate Siemens delayed repairs to technical parts, which Hackeck considers a mere “pretext”.

The ugly stalemate could get worse. Earlier this week, the head of the International Energy Agency, Fatih Birol, warned Europe to prepare for Russia to end gas exports to the region this winter. Germany was already in a frantic race against time:

  • Gas storage facilities in Germany have a capacity of 58%, but Habeck said if supply remained that low the country would miss its 90% target for December, introducing the real risk of gas shortages. supply during the cold months. Dutch gas futures, the European benchmark, hit €133.35 per megawatt hour, up more than 50% since Gazprom cut gas flows.
  • Energy suppliers have already been forced to buy gas on the spot market at higher prices to compensate for the reduction in Nord Stream. “If that minus becomes so big that they can’t take it anymore, the whole market is likely to collapse at some point,” Habeck said. “So a Lehman effect on the energy system.

Germany depends on Russia for about a third of its energy supplies. Under stage two of the contingency plan, the government could allow energy companies to pass on cost increases to households and businesses. Habeck is waiting for now. There are even greater fears that Gazprom could completely cut off the supply when Nord Stream 1 is due to be shut down for annual maintenance this summer – which could lead to the third stage of the German emergency plan, the last stage, which could include the rationing of the gas.

Poison pill: Germany, which plans to end its use of nuclear power by the end of the year, has already resorted to reopening coal-fired power plants to deal with the crisis. “It’s painful because coal-fired power plants are just poison for the climate,” said Green Party member Habeck.

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