Europe in the grips of a full-on energy crisis - ERDAL TANAS KARAGÖL

Europe in the grips of a full-on energy crisis

Due to the high demand by European countries for Russian natural gas in recent years, and their lack of alternative sources of energy, the issue of the security of natural gas supplies has reached a completely different stage, especially with the Russia-Ukraine war that began this year and is still raging on.

With the start of the Russian invasion of Ukraine, the reciprocal and ongoing sanctions between Europe and Russia turned into an energy game, and we can say that a completely different process proved an obstacle to sanctions due to Russia's superiority in the field of energy and European countries' dependence on Russian gas.

As winter looms ever closer in Europe, EU countries are preparing to face the frightening scenarios that they may witness if Russia cuts off supplies of natural gas, and the problems they may face in meeting the needs of natural gas within a short period.

For this reason, many scenarios related to the measures that must be taken to mitigate the possible negative effects of the energy crisis that the European countries will witness and to secure alternative sources of energy are discussed.

Europe's energy dilemma

While European countries are considering decisions on how to ensure the security of their energy supplies, and how they will secure their natural gas needs, it should be noted that there are strong expectations that the potential disruption and insufficient natural gas will slow the economy.

Given the strong relationship between energy and economic growth, natural gas has become a strategic input; Because many countries in Europe are highly dependent on Russia, and because natural gas has become the main entry point for many sectors.

Therefore, problems related to the security of natural gas supplies and the lack of sufficient natural gas for consumption will have a negative impact on many sectors. And many sectors that require the consumption of large quantities of natural gas may have to stop temporarily or reduce their production.

This is expected to cause problems in supply chains, as happened in some products during the Covid-19 pandemic period, as well as exorbitantly high prices again due to reduced production of certain goods.

Meanwhile, we see that there is a very sharp increase in the price of natural gas even before the start of the winter season; As a result of Russia cutting off the supply of natural gas to many European countries for various reasons. While this increase in natural gas prices is a negative factor for production, it is also clear that it will lead to a high rate of inflation that is constantly increasing.

It is indisputable that the negative impact of high natural gas prices and inflation on purchasing power is a separate cost factor that will lead to social unrest.

More importantly, many central banks in many countries are expected to turn to higher interest rate policies to curb inflation, and this policy will have a negative impact on the already low economic growth outlook and will accelerate and deepen the expected recession of economies.

As this winter is going to prove difficult in Europe, the problem of energy security may be the start of a new era in energy politics.


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