Europe’s Energy Crisis Escalates as Prices Soar to Historic Record
Energy costs across Europe soared to the highest ever this week, amid widening natural gas shortages, reduced wind power output, outages at nuclear energy facilities, and swiftly-approaching cold temperatures.
Natural gas prices across Europe surpassed $2,150 per cubic meter on Tuesday for the first time ever, which amounts to an approximate 27% increase to almost $210 per megawatt-hour in household terms. The sharp jump mildly abated come Wednesday, when January futures fell to around $1,970 per 1,000 cubic meters.
The sharp increase in energy prices comes after natural gas deliveries to Germany through the Yamal-Europe pipeline were diverted to Poland, and Russian state-owned Gazprom has refrained from boosting volumes for the week. As such, utilities across Europe were forced to drain their reserves, which already sat at depleted levels for the season.
To further add fuel to the proverbial fire, energy output from wind turbines in Germany have fallen to the lowest in five weeks, as persistent cold weather adds further strain on the country’s power grid system. This has caused power prices across the region to jump an additional 30% to a record-high of $487 per megawatt hour.
To make matters worse, it appears that Europe’s energy crisis will not be abating anytime soon, as historically high power prices have forced the country’s main aluminum smelter to cut back output. France, which is typically an exporter of power, has been forced to draw energy sources from neighbouring countries, causing some industrial factories to reduce output.
Aluminium Dunkerque Industries France, an aluminum producer, has been slashing output over the past two weeks amid soaring energy prices. Likewise, Trafigura’s Nyrstar is also expected to temporarily halt production at its zinc smelter come the beginning of January.
Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
