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Due to Russia’s continued reduction of gas supply to Germany and other central European countries, gas prices have risen earlier this week’s warning to do so.
Gasoline prices in Europe rose by almost 2% and are already close to the record high reached after Russia invaded Ukraine. Critics accuse the Russian government of using gas as a political instrument.
Due to flow limitations, the Nord Stream 1 pipeline from Russia to Germany has been running at less than a quarter of its regular capacity.
Germany obtained more than half of its gas requirements from Russia before the Ukraine War, the majority of it through Nord Stream 1 and the remainder through land-based pipelines. By the end of June, that had decreased to a little more than a quarter.
Russian energy corporation Gazprom has made an effort to defend the present power drop by stating that a turbine needed maintenance. The German government, however, asserted that there was no technical basis for doing so.
Ukraine has claimed that Moscow is launching a “gas war” against Europe and cutting off supplies in order to instill “fear” in the populace. Poland has announced that it will be completely independent of Russian gas by the end of the year.
A disruption in the gas supply would not have a substantial impact on the UK, which only receives less than 5% of its gas from Russia. However, when European demand grows, it will be impacted by rising market prices globally.
The cost of wholesale gas in Europe was the third-highest ever at €204.85 (£172.08) per megawatt hour. The cost per kilowatt hour peaked on March 8 when it hit a record high of €210.50 (£176.76). But last year’s wholesale gas price in Europe was just over €37 (£31.08) per megawatt hour.
On Wednesday, gas prices in the UK rose by 7%; as a result, they are now more than six times more than they were a year earlier. However, it is still much lower than the peak seen after Russia’s invasion of Ukraine.
In April, the cost of energy in the UK increased by an astounding £700, and more price hikes are anticipated. Contrary to earlier projections this month, one management consultancy cautioned that the average annual energy expenditure might exceed £3,850 by January.
The surge in wholesale prices over the preceding two weeks as ongoing tensions with Russia generated concerns about winter supplies were taken into consideration in BFY’s prediction.
The most recent flow decline places pressure on EU countries to further reduce their dependency on Russian gas and will probably make it harder for them to resupply their gas supplies in time for the winter.
Since the Russian invasion of Ukraine, European leaders have considered ways to reduce their dependency on Russian fossil fuels.
EU decided to cut back on gas use
In case Russia cuts off supply, the European Union voted on Tuesday to cut back on gas use, while some countries would be exempt to avoid rationing.
EU members have now voluntarily agreed to reduce their gas consumption by 15% from August to March. The deal was eased nonetheless, after lacking exemptions at first.
According to the EU, the purpose of the agreement is to save money and stockpile gas before winter, and Russia is “constantly exploiting energy supplies as a weapon,” the organization has warned. The voluntary agreement would become necessary if supplies ran out.
The EU decided to prohibit all maritime imports of Russian oil by the end of this year, but it took longer to get an agreement on import limitations for gas.
Since Russia invaded Ukraine in February, wholesale prices have risen, impacting consumer energy prices globally.
Officials from the Kremlin believe that Western sanctions are to blame for the recent disruption of supply and that they are a reliable energy partner and are not to blame for the price increase.