"bloomberg"Only 3 months to avoid disaster in Germany

Bloomberg magazine published an article that revealed the final timing of Europe’s recovery from the crisis of gas shortages and rising gas prices next winter, and also explained Germany’s policy in this regard.

The article says that it was the indecisive policy of German Chancellor Olaf Scholz and his slowness in reducing dependence on Russian energy sources that led to such an unfavorable situation.

The article continued: “Cities are now forced to impose restrictions on citizens, the presidential palace in Berlin is no longer illuminated at night, the city of Hannover has turned off hot water in swimming pools and gyms, and municipalities across the country are preparing shelters. with heaters to protect people from the cold, and only those. Only the beginning of the crisis that will engulf Europe.”

The article notes that Germany no longer has time to avoid an unprecedented energy shortage for a developed country this winter. While much of Europe is under pressure from cuts in natural gas supplies from Russia, no other country is as vulnerable as the region’s largest economy, with nearly half of homes using fuel for heating.

German Vice-Chancellor and Economics Minister Robert Habeck said the challenges facing the country are “enormous and affect important areas of the economy and society” but continued: “But we are a strong and strong democracy and these are good elements.” overcome this crisis.

The article noted that the prospect of gas rationing and stagnation loomed ahead of Germany as authorities expressed concern about social unrest if the energy shortage got out of hand, noting that Germany could not even count on France, where dilapidated nuclear reactors were exacerbating the situation. crisis and May Electricity prices in Europe’s two largest economies rose last week to record levels.

To imagine how serious the energy crisis in Europe is, we only need to realize that energy prices in Germany are now equivalent to $600 a barrel of oil.

Russia’s latest move made matters worse last week when Russia’s Gazprom blamed a turbine problem for cutting gas flow through Nord Stream 1 to about 20% of its capacity. This led to the fact that last week gas prices rose by more than 30%, and electricity prices broke one record after another.

Khabek, who oversees energy policy, called Gazprom’s logic “ridiculous” but acknowledged the situation was dangerous and reiterated his call for companies and consumers to intensify efforts to save energy. To fill the gap, his department allowed coal-fired power plants to be resurrected, hurting efforts to fight climate change.

And if measures to rebalance supply and demand don’t work, the government will have no choice but to declare a “state of emergency” on gas, which would entail government control over distribution, deciding who gets the fuel and who doesn’t.

Rising spending, set to rise sharply this fall, has put pressure on the poor and has already pushed one in four Germans into energy poverty, according to the Cologne Institute for Economic Research, meaning heating and lighting costs are taking a toll on other spending. . . The government is working on programs to help low-income families.

Cold waves in Europe and Asia will also force energy companies to scramble for already limited LNG supplies, which could also drive up prices in this scenario, wiping out about 17% of industrial fuel demand. “If Nord Stream flows stay at 20%, we are approaching the danger zone,” said Penny Lake, an analyst at Wood Mackenzie Ltd.

A survey of 3,500 German companies found that 16% of industrial companies are considering cutting production or abandoning certain operations due to the energy crisis, including chemical giant BASF, which plans to cut its intensive production of ammonia, a major component of fertilizers, after rising costs, which made business unprofitable. The company also plans to partially convert electricity and steam production at its main site in Ludwig-Schaffen to fuel oil, which will help free up gas for resale to the grid.

The International Monetary Fund estimates that Germany risks losing 4.8% of its output if Russia cuts off gas supplies, while the Bundesbank has estimated a potential damage of 220 billion euros. While this will certainly be a painful blow, Germany fears it will lead to structural losses in the country’s competitiveness. Indeed, energy-intensive industries are likely to attract regions with reliable renewable energy sources, such as the coast of Germany, or sun-rich areas of the Mediterranean, potentially devastating industrial areas along the Rhine and in southern Germany. According to a senior executive at a large German company, some executives are likely to move production to Turkey, where there is access to Azerbaijani pipelines.

For his part, Saxon Prime Minister Michael Kretschmer told the conservative opposition that “the German economic system is in danger of collapse.” Kretschmer told Die Zeit: “If we are not careful, Germany could turn into a non-industrial state,” echoing his call to “freeze” the war and “embrace Putin’s military achievements.”

While a majority of Germans, according to Bloomberg, support Ukraine, and almost half of them agree to support Kyiv despite rising energy prices, a poll conducted by Policy Matters for Die Zeit concluded that critics such as Kretschmer, can gain momentum. as the temperature drops, which will put more pressure on Schultz.

His administration, despite the fact that the crisis has been underway for months, has just begun to unveil a 20% demand cut target and, as a sign of urgency, recently raised the minimum gas storage target to 15 percentage points above global levels. Union.

Bloomberg also pointed out that Germany now needs support because it has not followed the European Union’s recommendations to diversify its energy sources, which threatens to reopen old fault lines in the Union, as some officials, who asked not to be named, recalled the financial crisis. when Berlin lectured the member states of the South about their debts that are still alive.

Although Italy depended on Russia for more than half of its gas supplies, it has moved more quickly to alternative energy sources from countries such as Algeria and Qatar, and its terminals have allowed it to import LNG shipments. Germany found itself in a more difficult position due to the amount of heat, industrial demand and low storage levels. The country is only now developing LNG infrastructure, but the first floating plant, according to German energy giant Uniper (which is receiving a €17 billion bailout package from the government to prevent the crisis from worsening in broader industrial sectors), will not be ready anytime soon. The time to help is this year, just as the government had hoped.

European solidarity remains unwavering and EU countries have reached a political agreement on a 15% “voluntary reduction” in gas use over the course of this winter if Russia cuts off gas supplies, but there are certain exceptions that could make the reduction “mandatory” “In an emergency .

In Ludwig-Schaffen, an industrial center on the Rhine, officials are checking critical infrastructure that could be left open in the worst case. They are also considering turning the municipal square, which usually hosts music events and even dog shows, into a “warm oasis” where hundreds of people can escape the cold for hours. Mayor Ludwig Schaffen said: “We understand that many people are concerned at the moment and we take these concerns very seriously.” “Everyone can do something themselves and save energy where possible. Every kilowatt-hour saved now will help us in autumn and winter,” he added.

Source: bloomberg

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