Europe is heading toward an energy crisis, and some economists are even predicting the continent will experience a serious recession.
“My best guess is we’ll have a recession in the United States but I’m much more confident that there’s going to be a recession and an element of stagflation in Europe that comes as a consequence of what is going to happen as a consequence of the staggering vulnerability that they created for themselves,” economist and former Obama adviser Larry Summers said.
The situation is getting serious for many countries across the continent of Europe. Germany is trying to finalize liquefied natural gas contracts with Middle Eastern producers. Germany’s gas storages are currently around 90%, but its economy minister said Monday that that will probably be “empty” after winter.
France’s electric company is also working on fixing its nuclear reactors and the country’s energy regulator chief said that if there are setbacks in that process, then the country could be forced to take “exceptional” steps during the winter, including concentrated cuts to power — but she stressed that there will “never” be “gas cuts for households.”
The Spanish Industry Minister made a similar statement, saying that businesses which use a lot of power might be forced to shut down during peak periods this winter.
Finland’s grid operator also predicted outages this winter. Finland gets some power from Sweden, but now a major Swedish power company said it’s putting off resuming its nuclear reactor for two months.
Experts are now saying that Europe could import the most thermal coal this year than it has in at least four years.
Russia’s actions are a major factor. Russia previously supplied about 40% of the EU’s natural gas, but in response to Western sanctions Russia has cut off the majority of what it was exporting.
Gas makes up around 21% of the EU’s main use of energy, but importantly, it’s the way many households get their power, so this is an extremely precarious position for Europe to be in.
Economist and former Obama adviser Larry Summers recently discussed the situation. He said that the U.S. is mainly self-sufficient, but “Europe, on the other hand, is completely dependent on imports of fossil fuels.”
“In a decision that in retrospect looks inexplicable Germany decided to make itself completely dependent on natural gas as the basis of its industry and the basis of heating most of its homes and then it decided to make itself completely dependent on Russia as a supplier of natural gas. Well, that was asking for trouble…” he added.