Gas supply Russia escalation: What should consumers expect now?
Frankfurt · Rising energy costs are already a burden for many households. Will the escalation of the conflict between Russia and Ukraine make gas unaffordable? Consumers and industry are facing burdens.
The conflict between Russia and Ukraine is escalating and Germany's consumers are looking anxiously to the East. Because what is happening there is having an impact on the domestic economy and could further fuel the already high energy prices.
German Minister of Economics Robert Habeck said, "I assume we will now see gas prices rise in the short term, but in the medium term I hope the market will calm down again quickly.“
Is the economy's recovery from the pandemic faltering? According to economists, this is not out of the question. "Fritzi Köhler-Geib, chief economist at the development bank KfW, puts it this way: "The fear of war in Europe is in the air - with potentially significant effects on energy supply and energy prices, among other things.
Will consumers in Germany soon run out of gas?
"Europe is dependent on Russian gas. The EU obtains almost half of its demand from Russia. These gas deliveries cannot be fully compensated," says Thomas Gitzel, chief economist at VP Bank. This affects industry and consumers alike. The President of the Ifo Institute, Clemens Fuest, does not expect private households to ration their gas supplies. "However, gas prices will be higher than they would have been without an intensification of the crisis," Fuest predicts.
How have Germany and Europe made provisions for possible shortages?
Natural gas storage facilities are intended to compensate for fluctuations in gas consumption. According to the industry association INES, there are 47 underground storage facilities in Germany. Should Russia turn off the gas tap, Western Europeans could, according to Commerzbank chief economist Jörg Krämer, "probably hold out until autumn because there are still 30 billion cubic metres in storage, more liquefied gas would be imported and consumption in the summer half-year is comparatively low anyway". During the summer, however, the stocks would have to be replenished.
Tobias Federico of the consultancy Energy Brainpool says the gas storage facilities are fuller than recently expected: "We thought they would be empty during a cold winter in mid or late February. Now we actually still have enough." According to the Working Group of European Gas Storage Companies, the fill level of German gas storage facilities was 31 percent on Sunday. Hopes of gas deliveries from Russia through the Nord Stream 2 Baltic Sea pipeline soon have been dashed: the German government halted the approval process for the time being on Monday.
Is a general price surge looming?
"It is to be expected that the prices for oil and gas will continue to rise," says Ifo President Fuest. After a meeting with North Rhine-Westphalia Minister President Hendrik Wüst (CDU) in Düsseldorf, Federal Economics Minister Habeck made it clear that there could be an increase in gas prices in the short term. Markets are "susceptible to speculation". If the future is more uncertain, it is feared that prices will go up. Further developments also depend on how the supply develops. As the winter is slowly "hopefully" coming to an end, there could also be relief effects if demand for gas as a whole falls and there is more supply on the world markets.
At the same time, Habeck said that Germany was "secure in terms of supply". In the long term. Germany would make great efforts to ensure that the gas price as a whole would no longer be at the current level and burden German consumers as well as businesses. The goal: Germany should become less dependent on fossil fuels such as Russian natural gas through a faster expansion of green electricity from wind and sun.
In recent months, the price of petrol and heating has already skyrocketed for consumers. Driven by global demand, energy prices climbed and with them the general inflation. 5.1 percent inflation in the euro area in January was the highest value since the introduction of the euro. In Germany, inflation remained high at 4.9 percent.
Higher inflation weakens consumers' purchasing power - an end to the price spiral is not in sight for the time being. In January, producer prices for commercial products in Germany were 25 percent higher than in the same month last year. This means that many products could become even more expensive for consumers, because companies react to higher purchase prices, for example for raw materials, with a price surcharge.
Can a monetary policy counteract this?
Since inflation is more persistent than expected, Europe's monetary guardians are under pressure. Economists expect the European Central Bank (ECB) to set the course for an exit from years of ultra-loose monetary policy at its next meeting on 10 March. But the escalating conflict between Russia and Ukraine is an additional burden for the economy in Europe, which is just recovering from the strains of the Corona pandemic. Therefore, monetary watchdogs will weigh their steps even more carefully.
Original text: Jörn Bender, Friederike Marx, Andreas Hoenig and Helge Toben, dpa
Translation: Mareike Graepel
