Europe gas prices hit record as crisis threatens to trigger recession

The EU will call an emergency meeting of energy ministers as gas prices surged, hitting an all-time European high on Friday and threatening to send the region’s economy into a deep recession.

Czech Prime Minister Petr Fiala said on Friday that the Czechs, as holders of the rotating European Council presidency, will convene energy ministers to “discuss specific emergency measures to resolve the energy situation”. Czech Trade Minister Jozef Sikla said a meeting should be held “as soon as possible”.

The call came as European gas prices hit a record high of €343 per megawatt hour ($100 per million British thermal units) on Friday, posing a major threat to energy-intensive industries.

The region’s fertilizer industry association warned on Friday that 70 percent of Europe’s output could be cut by high gas prices, highlighting how the energy crisis is spreading across industries and threatening sectors from glassmaking to food production.

In July, EU ministers agreed to a 15 percent voluntary cut in national gas demand between August and March, a target that could be mandated if the crisis worsens in winter.

Europe’s benchmark gas prices have risen by almost a third in the past week as traders and utilities rush to secure supplies ahead of winter.

The gas shortage comes after Russia cut exports to Europe on the key Nord Stream 1 pipeline in June. Industries may also face rationing in winter when the weather turns cold.

Governments across Europe are facing a survival crisis due to Russia’s invasion of Ukraine and subsequent cuts in gas supplies, which European politicians have described as the “weaponization of gas”.

Prices are more than 10 times their level in the US, where the benchmark contract is trading at $10 per mmbtu, although that is also the highest since before the financial crisis as US traders rush to ship ocean cargoes of LNG to Europe.

Danish Energy Minister Dan Jorgensen sought to emphasize EU unity on Friday, saying it was “amazing how the European Union has been able to stay together in these difficult times”.

An EU diplomat said the emergency meeting was an opportunity for the Czechs to “must the troops and show Europe they are taking it seriously”.

But many countries are skeptical about what can be done to help neighbors with their energy bills, or whether it will go ahead.

Farmers and the fertilizer industry are warning of threats to food crops as Europe cuts production due to the cost of nitrogen-based fertilizers.

“We expect some sharp price increases [of nitrogen-base fertiliser] in the coming weeks,” said CRU consultant Chris Lawson. Nitrogen-based fertilizers typically provide two-thirds of the nutrients used to grow crops, and analysts fear that declining availability and rising prices in Europe will reduce food crop production.

“The European fertilizer industry is in full crisis because the European gas market is booming,” said Jacob Hansen, director general of the Crop Nutrients Association.

Companies such as Norway’s Yara and Germany’s BASF, as well as Poland’s Group Azoti, have started to stop or reduce production.

Additional reporting by Raphael Minder in Warsaw

Source link

Leave a Comment