New York Times headline, September 7:
Europe Says Putin’s Gas Power Is Weakening
New York Times headline, also September 7:
The E.U. weighs a Russian gas price cap and other measures to rein in ‘astronomic’ energy prices.
So, what is it? Here are some facts.
Russia shut its key Nord Stream natural-gas pipeline last week, leaving Europe guessing again about whether supplies will restart, as temperatures fall and demand for the fuel grows.
Due to a drop in consumption this year, Europe is on track to secure enough gas to avoid outright rationing this winter. However, its governments are struggling to secure supplies for next year and beyond, despite wooing top producers from the likes of the U.S., Canada and Qatar. Whatever the outcome, European officials and energy executives say the continent faces years of high energy prices and possible shortages as efforts to replace Russian imports clash with limited supplies elsewhere and regulations that discourage hydrocarbon usage.
Few Western politicians and economists think Europe will receive enough Russian natural gas next year because of expectations that the economic war with Moscow will intensify.
As Europe's energy crisis intensifies we are seeing calls for price caps, rationing, and command and control.
What's happening: A range of government-imposed restrictions, akin to the kind of restraints during wartime, here is a sampling.
In Germany:
Cologne's magnificent cathedral — normally lit throughout the night — now goes dark over night. Public buildings, museums and other landmarks — such as the Brandenburg Gate in Berlin — will no longer be illuminated overnight either.
In Hanover last month, hot water was cut off at public buildings, as the city seeks to cut consumption by 15%.
The southern city of Augsburg decided to turn off traffic lights.
Spain:
Congress agreed to temperature limitations — air conditioning no cooler than 27 degrees Celsius, or nearly 81 degrees Fahrenheit.
After 10 p.m. shop windows and unoccupied public buildings won't be lit.
Italy:
Air conditioning in schools and public buildings has already been limited in what the government labeled "Operation Thermostat," starting in May.
France:
Shopkeepers will now be fined for keeping doors open and air conditioning running, a common practice.
Illuminated signs will be banned between 1 a.m. and 6 a.m.
Britain:
Families were already struggling to pay their bills, thanks to high prices resulting from the US-led proxy war in Ukraine. Now energy regulator Ofgem has announced an 80 percent rise in the annual energy price cap for suppliers—a cap that is pegged to market rates and must go up when global gas prices do—on top of its earlier huge rise in April. That means British energy bills could nearly triple over last year’s as the country enters the winter months, forcing families to make hard choices between buying food or keeping the heat on.
And Russia?
Russia pumps almost as much oil into the global market as it did before its invasion of Ukraine. With oil prices up, Moscow is also making more money.
Demand from some of the world’s largest economies has given Russian President Vladimir Putin the upper hand in the energy battle that shadows the war in Ukraine, and has confounded the West’s bid to cripple Russia’s economy with sanctions.
Sales are booming in Russia’s export market, the world’s largest in crude and refined fuels. And new trade arrangements have given Mr. Putin cover to use natural-gas exports as an economic weapon against Ukraine’s European allies. Before the war, Russia supplied Europe with 40% of its gas. It has since throttled flows through the Nord Stream pipeline to Germany and other conduits, driving prices higher and putting pressure on European households and businesses.
Oil revenue more than makes up the difference. “Russia is swimming in cash,” said Elina Ribakova, deputy chief economist at the Institute of International Finance. Moscow earned $97 billion from oil and gas sales through July this year, about $74 billion of that from oil, she said.
The country exported 7.4 million barrels of crude and products such as diesel and gasoline each day in July, according to the International Energy Agency, down only about 600,000 barrels a day since the start of the year.
The Group of Seven wealthy nations rolled out a plan to cap the price of Russian oil on global markets, committing to a novel sanctions design aimed at limiting Russia’s revenue from oil sales as its invasion of Ukraine grinds on.
The finance ministers of the G-7 said they would move to ban the insurance and financing of shipments of Russian oil and petroleum products unless they are sold under a set price cap.
With the plan, the U.S. and its allies are hoping to leverage their control over the financing and insurance of global shipping to force Russia to comply with the cap or face the possibility of being unable to ship its oil. Over 90% of the world’s ships are insured through a London-based association of insurers, according to Bruegel, a Brussels-based think tank.
The announcement didn’t include several key details, including the level at which the price cap would be set. The G-7 ministers said they would consult with international partners about where to set the cap, with the possibility of changing the cap level over time.
The ultimate design will include three price caps, with one set for Russian crude and two sets for Russian petroleum products, according to a senior Treasury official.
The plan seeks to resolve a dilemma that has so far confounded Western attempts to penalize Russia for its invasion of Ukraine: how to cut off Russia’s revenue without reducing global oil supply and raising prices. Inflation is already running at the highest levels in decades, posing a major economic and political problem for governments across the West.