Europe is winning the energy war with Putin, but food prices are likely to rise
Halfway through the first winter of Europe’s energy war with Russia, only one side is winning.
When Vladimir Putin warned in September that Europeans would “freeze” if the West stuck to its energy sanctions against Russia, Moscow’s fossil fuel blackmail appeared to be going exactly to plan.
European wholesale gas prices were north of €200 per megawatt hour, around 10 times higher than they had been for most of 2021. Plans were drawn up to cut gas demand and ensure supplies could move across borders to countries with the worst shortages. Regular rolling blackouts in the EU were a very real prospect.
Putin’s strategy — to make life miserable for the European public by shutting off their gas, forcing them to drop their support for Ukraine — looked a potent one.
But as a new year gets under way, the picture is more positive for Europe than almost anyone predicted. For Putin, playing war games with Russia’s vast gas and oil wealth is beginning to look like a self-defeating strategy.
Gas prices have crashed to €65 per MWh — still extremely high compared to the norm of the past decade, but more manageable than the eye-watering spikes seen in 2022.
The fall in price and stabilization of gas supply is down to two things: remarkably mild winter weather and Europe’s success at switching from Russian pipeline gas to shipborne liquefied natural gas (LNG) from friendlier suppliers. [Continue reading…]
If the winter is warm, the farmer will be poor … so goes an old German proverb. Record-warm temperatures across Europe so far this month are helping stave off an energy crunch. But they bode ill for farmers and food prices.
With highs of nearly 20 degrees Celsius in parts of Poland and more than 25 degrees in Spain, seven European countries recorded their highest ever January temperature on New Year’s Day.
As well as alarming climate scientists, this has farmers in many parts of Europe worried. Without snow, the countryside suffers, as Italy’s largest farmers’ association, Coldiretti, has warned.
The mild temperatures have eased energy prices, which is good news for consumers who have been hit by soaring costs since Russia’s invasion of Ukraine, and the EU sanctions in response, which have wreaked havoc with the region’s energy market.
But a warm winter risks curbing crop yields at a time when farmers are already struggling with fertilizer shortages — another fallout from the war — and have not yet recovered from last summer’s drought. This puts pressure on the region’s rising food prices, which have stayed at record highs even as headline inflation has eased. [Continue reading…]