European gas and electricity prices jumped more than 10% after the US said Russia could soon invade Ukraine or try to provoke a conflict within its borders, according to Bloomberg.
U.S. National Security Adviser Jake Sullivan said there was information that Russia may attack its neighbor before the Beijing Olympics. Russia, for its part, has repeatedly denied plans to invade the country, with Ukraine’s foreign minister downplaying tensions over the weekend, saying there had been “no major change”.
An escalation of the situation could exacerbate Europe’s energy crisis, possibly affecting gas and oil supplies, thus increasing blackouts. Russia is Europe’s main source of natural gas, with about a third of its exports going through Ukrainian pipelines, while Europe’s storage facilities are already at very low levels, with prices four times higher than normal levels for this time of year.
“The immediate focus is on the possibility of cutting off Russian energy supplies to Europe, something that would be very difficult to deal with and could create a real energy shortage, even beyond the crisis we are already seeing,” said Jason Bordoff, its director. Center for Global Energy Policy at Columbia University. “But before that, Europe was already in an energy crisis.”
European gas reference prices jumped up 14% to 88 euros per megawatt-hour, the highest level for the most active contract since January 31, according to the report, while German electricity for March rose 11% to 177 euros per megawatt hour.
It is recalled that US President Joe Biden had a telephone conversation on Saturday with his Russian counterpart Vladimir Putin, which did not seem to lead to any progress. Biden then spoke by telephone Sunday with Ukrainian President Volodymyr Zelensky, promising swift and decisive action in the event of a Russian invasion. Meanwhile, Ukrainian Foreign Minister Dmitry Kuleba downgraded concerns, saying the situation remained under control.
Europe, meanwhile, is already facing an energy crisis, as Russia has cut back on gas flows since the summer, forcing utilities to rely on coal to stay afloat. At the same time, Europe is also facing a series of nuclear shutdowns in France, the largest producer of atomic energy, with Electricite de France SA warning that production this year could fall to its lowest level since 1990.
It should be noted that higher energy prices have boosted inflation across Europe, causing a cost-of-living crisis, prompting several governments to step in to help mitigate the blow to rising energy bills for consumers. In the UK, the cost of goods and services is already at its highest level in three decades and will exceed 7% when the ceiling on gas and electricity bills is lifted in April.
“We are facing a cost-of-living crisis and energy is a big aspect of it,” said John Sinha, an anti-climate change activist who protested against high energy bills in London at the weekend.
The recent arrivals of liquefied natural gas (LNG) cargo from the US have helped ease the narrow energy market, as has mild weather in Europe. But diplomatic efforts to seek additional flows in the event of a conflict disrupt supplies have so far yielded little.
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Source: Capital
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