By Zilber
Russian President Vladimir Putin plan to freeze European countries that opposed his war on Ukraine is wilting amid a warm winter on the continent.
Record temperatures from as far west as Portugal and northern Spain to Scandinavia, the Baltic region, and the former Yugoslavia have negated the need for Europeans to consume energy stores to heat their homes.
The Hungarian capital of Budapest set an all-time record when the mercury hit 66 degrees on Christmas Eve. Parts of France saw temperatures climb into the upper 70s on New Year’s Eve.
The result has left the continent’s gas reserves nearly full after European governments already encouraged their citizens to ration the use of energy in anticipation of colder temperatures, according to Bloomberg News.
Meanwhile, the ongoing COVID lockdowns in China have managed to reduce competition for energy resources, somewhat blunting inflationary pressures on Europe.
The combination of factors had European policymakers breathing a sigh of relief.
“The danger of a complete economic meltdown, a core meltdown of European industry, has – as far as we can see – been averted,” German Economy Minister Robert Habeck was quoted as saying during a recent trip to Norway.
Analysts expect that the surplus amounts of natural gas may be enough to allow Europe to weather a potential crisis this winter as well as the next one.
In a note dated Jan. 8, Goldman Sachs said the immediate spot demand hit to oil from lost gas-to-oil substitution in Europe due to falling gas prices could be as much 1.5 million barrels per day.
“Should European gas prices remain weak for the rest of this year, the extended loss of gas-to-oil substitution would lower our oil price forecast by $4 per barrel(/bbl) for 2023,” the bank said, but noted that a faster reopening of China is “alone worth +$5/bbl on the 2023 oil price forecast.”
Before the Russian invasion of Ukraine last February, the Kremlin provided some 40% of Europe’s natural gas, most of it via pipeline.
But the invasion prompted Western governments to place sanctions on Russia while vowing to wean themselves off Russian energy sources.
The EU halted the imports of Russian coal and crude oil while gas deliveries have dropped precipitously.
Without Russian natural gas, the EU has instead turned to Norway, Qatar, the US, and other suppliers.
Norway has now replaced Russia as Germany’s largest supplier of natural gas.
The rationing measures have paid off as Germany storage facilities are 91% full compared with 54% a year ago, according to Bloomberg News.
“We are very optimistic, which we weren’t really back in the fall,” said Klaus Mueller, who oversees Germany’s energy grid.
“The more gas we have in storage facilities at the beginning of the year, the less stress and cost we will face in filling them again for next winter.”
