ALTERNATIVES TO FUEL THE EUROPEAN ENGINE NOW!

During the early 1970s, just about 4% of the gas consumption requirements of Europe were dependent on Russian imports, which in the year 2021, went up to almost 40%. Economists and policymakers have defined this dependency as being a “major strategic blunder”, especially when Russia is planning to weaponize the oil trade. Furthermore, as retaliation for imposing restrictions on Moscow for invading Ukraine and also due to certain infrastructural blocks, oil imports to Europe have been cut down by almost 88%. It has been placed one of the world’s greatest economic powers left wondering how to gather enough firewood to survive the winters.

IMPACT OF PROLONGED SHUT-OFF

Such hindrances in the fuel trade market bring major repercussions for the entire economy. Most of the impact would is caused by supply-side influences like the usage of gas in the manufacturing process, substitutability of fuel with other alternatives and the blow economy would have to absorb as sickness mushrooms from one sector to the other.

SUPPLY

Addressing the unaltered demand, the market is assumed to automatically adjust the supply disruptions by calling in for alternative energy sources and otherwise proceeding for demand cutbacks too. Alternative sources of energy so found such as LNG imports are estimated to cover almost 80 Billion Cubic Meters (bcm) of demand and will likely go up the next year too.

DEMAND SIDE:

Such temporary alternatives will, however, satisfy demand only shortly therefore countries of the EU have already started regulating gas and electricity prices to shield the vulnerable household demand and also protect them from escalating prices. Households seem to exhibit an inelastic behavior towards changes in prices and hence the fall in consumption was found to be negligible at 4bcm for the last quarter of 2022. On the other side, industries priorly involved in global trade seem to be comparatively sensitive towards the flared cost of gas, forcing them to cut down on production and use gas as a fuel. Industries that exclusively use gas as a direct input into production, find themselves in a dire state as no close substitutes are accessible.

The European Union's first step to cushion itself should be to disengage the energy imports from Russia and find immediate alternatives to keep in the continuum of the production of electricity, and fuel industries and to keep the households warm. Diversification of natural gas supplies will spread the risk of being dependent on foreign energy resources to run the domestic economy. To achieve this, the EU is planning to conclude its dependence on Russian fossil fuels by the latest 2027 and upscale imports from Norway and Algeria and LNG from the United States. As compared to the previous year, now the EU and UK together import close to 68% more of LNG from sources other than Russia, post the collapse of Russian imports. With this, the gas storage in the EU was packed by almost 91% above the expected target of 80%.

The search for substitutable sources has led them to look out for green energy wherever possible, as wind energy and solar power are estimated to harvest almost 6bmc this annual year alone. In the meantime, as the EU hunts for alternatives, letting go of Russian sources along with fossil fuels, the fuel prices have skyrocketed to a never seen 265% high as compared to the previous year's benchmark prices. The government is forced to expand its public spending threshold as inflation cripples the households’ and industries’ purchasing power.

Germany has been the EU’s breeding ground for the manufacturing sector is also expecting a negative growth rate of 0.4% in the coming year. To keep up with the demand, few nations have gone back to their old ways of firing up power stations irrespective of their alarming emission rate. As a result industries’ dependence on hard coal as a fuel increased up to 15% from March to September of the previous year. Along the same lines of becoming self-reliant, the EU is trying to build up a stock of renewable energy sources which could approximately account for almost 45% of the energy needs by the end of the decade.

SOLUTION

To tackle the energy crisis together as a bloc, exploring mutually accessible resources is a must along with possible energy rationing. Complimenting this strategy, there has to be a cross-flow of fuel trade wherever possible. Developing renewable energy sources and employing economical nuclear energy would better help in withdrawing from traditional techniques. Thereby diversification of energy and enhancing the capacity to store the newly imported LNG would provide the continent with secured stocks of fuel.