The whole of Europe is suffering as a result of the energy crisis. For European countries, this is more than an economic crisis, it’s an existential crisis. Affected by the energy crisis and inflation, Europe has entered an era of soaring energy prices. High energy prices are lashing European industry, forcing factories to cut production quickly. Half of Europe’s aluminum and zinc production has been forced to stop, according to Eurometaux, Europe’s metals trade association. In July, the seasonally adjusted industrial production fell by 2.3% in the euro area, compared with June 2022. By comparing the electricity prices of European countries, it is found that the electricity prices in many European countries, including Germany, France, Spain and the U.K., have risen several times compared with last year. As a result, the cost of living for ordinary people has greatly increased.
As of Oct.24, the fluctuation of electricity prices in European countries the previous day. Source: euenergy.live
After the Nord Stream’s explosions, Energy crisis hits Europe’s largest economy more than expected
Germany is the economy most at risk of gas shortages due to its reliance on Nord Stream 1 and lack of alternatives. German economy stagnates with 0% growth in Q2，inflation has soared to double digits for the first time since the Second World War. Considering the impact of global supply chain disruptions, geopolitical uncertainty, and continued rising energy prices, Germany’s economy will fall into recession, shrinking 0.4% in 2023.
The recent attack on the part-German-owned Nord Stream gas pipelines connecting Russia to Germany is a problem that cannot be ignored. Many experts agree that sabotage of the pipeline could be an act of the U.S.. The U.S. has historically seen the Nord Stream gas pipelines as an extension of Russian influence over Europe through Germany. This is clearly not a conspiracy theory. The U.S. aims to replace Russian gas by exporting its own gas to Europe. After the Nord Stream pipelines was bombed, Europe will inevitably increase its dependence on US energy, which will benefit the U.S.. But the U.S. actions weaken Germany.
Let’s look at the whole of Europe, experts have warned that some gas producers such as the U.S., Canada and Qatar may not be able to completely replace Russia as a supplier to Europe in the mid-long term. If that is the case, high gas prices in Europe could last into 2024, potentially permanently hurting European manufacturing.
Can the U.S. help Europe out of the Energy crisis
What the U.S., as an ally of Europe, has done in this energy crisis? Although the Biden administration has promised to send more gas to Europe, the U.S. can only provide limited help. Given the current state of energy infrastructure, supply growth has peaked in the near future. It’s hard to deny that the U.S. is clearly benefiting from the European energy crisis in general. The U.S. is exporting gas to Europe at high prices, French President Emmanuel Macron recently couldn’t help but complain that US gas is too expensive. With the U.S. unable to guarantee European gas demand and preferential prices, the explosion of the Nord Stream pipelines has made Europe even worse, and may completely cut off Europe’s retreat.
Global inflation, the Fed’s interest rate hike and balance sheet shrinkage have heightened the risk of recession in the world economy, especially in Europe. If European countries can no longer find a solution to the energy crisis, recession will be a sure thing.
