Worse to come for Europeans hit with costly energy

LONDON/OSLO/WASHINGTON－Consumers in the European Union and Britain face further gas price spikes this winter as flows of Russian gas via major transit routes are proving too little, too late.

The new Nord Stream 2 pipeline running from Russia to Europe might have eased a tight market. But it has faced more delays as German certification has been suspended amid opposition to the whole project from the US and some Europeans.

On Monday, the United States State Department sought to keep up pressure on Russia over the pipeline, sanctioning what the US said was a Russia-linked company and ship working on the project. The move targets Transadria and one of its vessels that had worked on the pipeline.

Last week, Germany's energy regulator temporarily halted the certification process for the new pipeline that will carry Russian gas into Europe, throwing up a new roadblock to the contentious project and driving up regional gas prices.

This year's power price shock has pushed several European and British energy suppliers out of business, as they cannot always pass on price rises to customers. Britain's Bulb Energy, with 6 percent of the domestic market share, was the latest to go bust.

Sky-high electricity costs have forced some power-hungry industries to curtail production and European consumers are now paying more for home heating as winter approaches, adding to wider inflationary pressures.

Surging prices

Benchmark European gas prices this year surged as much as 700 percent by October and British prices climbed 500 percent or so, as global economies recover from the pandemic and suck in gas, particularly Asian nations, while European stocks are low.

European gas was up by more than 300 percent this year on Monday and the British benchmark was up by about 250 percent.

Prices eased when President Vladimir Putin said in October that Russia would boost gas supplies to record levels, raising hopes that bumper flows would ward off supply shortages.

But supplies to the spot market, which many domestic gas providers rely on for their supplies, remain low.

Refinitiv Eikon data shows daily flows were barely changed in September, October and so far in November from a year ago via the three main routes from Russia to Europe.

Volumes are slightly higher than the average for November 2020, when economic shutdowns due to the pandemic limited demand, and are 40 percent lower than the average for November 2019.

Renewables, such as wind and solar that account for a growing portion of European power supplies, are not guaranteed to be able to fill the gap in electricity supplies in order to ease demand on gas-fired generation.

"If flows don't pick up and there is a cold snap or low wind speeds, we could see crazy prices again. We are living hand to mouth," a gas trader said.

Suspension of the certification for Nord Stream 2 adds to market jitters as demand rises during Europe's main heating season running from Oct 1 until the end of March.

Once German certification is secured, the European Commission still has to sign off on the project. It will have two more months to do so.

Agencies Via Xinhua