Energy Crisis: Record Gas Prices in Europe, Plants on the Brink of Closure, and the Mirror-Image Positions of Orbán and Putin

The Russian president blamed the European Commission for everything.

The European Union's energy crisis is deepening amid continued rising gas prices.

Although last week the price of blue fuel reached an all-time high due to extremely low levels of filling in European gas storage facilities, the price increase is not even slowing down: on October 6 it rose by about 40%, and one thousand cubic meters of gas almost reached the $2,000 mark, which is 11 times higher than in the same period of 2020. 

How Putin is manipulating the EU gas market in anticipation of the launch of Nord Stream 2, and where the current energy crisis in the EU is already leading today, is detailed in this article.

New Price Record

Today, October 6, gas at the main European TTF hub soared by 40%, setting a new record of nearly $2,000 per thousand cubic meters.

At the same time, just yesterday gas futures reached a new record of $1,427 per thousand cubic meters. 

The cause of the crisis remains depleted gas storage facilities in the EU and Gazprom's restriction of gas supplies in an attempt to blackmail EU regulators into speeding up the certification of the Nord Stream 2 pipeline and ignoring the court decision on splitting Gazprom's monopoly.

Thus, on October 4, the operator of the Nord Stream 2 AG pipeline stated that a test filling of the first pipe of the pipeline with gas had begun, but that the other end is not yet ready to receive gas due to unfinished procedures for approving the project's launch.

A Blow to Industry or the First Consequences of the Crisis

Due to the worsening crisis, EU industry has begun approaching a critical point, and some energy-intensive enterprises are temporarily halting production because operating costs have become too high.

"Electricity and gas prices are setting records almost every day, and some energy-intensive companies are temporarily stopping their operations because they are becoming too expensive to run. As winter approaches and Europeans begin turning on their heaters, the crisis will intensify, forcing executives to make tough decisions," Bloomberg reports.

German ammonia producer SKW Stickstoffwerke Piesteritz GmbH reportedly said it will cut production by 20% to offset rising gas prices.

"There is no point in producing ammonia at this price level. If the government does not take measures, a complete shutdown of production is inevitable," said the company's CEO, Peter Singer.

In addition, in September the fertilizer producer CF Industries Holdings halted operations at two plants in the UK for the same reason. At such gas prices, production simply became unprofitable.

Meanwhile, Austria's Borealis AG and Norway's chemical company Yara International ASA have also reduced production volumes.

The EU added that it will outline measures, including tax cuts and state aid, that governments could use to provide support.

At the same time, a number of experts emphasize that the longer the crisis lasts, the greater the likelihood of a total shortage of energy supply.

What Is Wrong with Putin's Statement

Russian President Vladimir Putin, in his typical manner, shifted responsibility for the crisis onto the European Commission, saying they "rushed, and the gas market does not like sudden movements."

Vladimir Putin

The global energy market does not tolerate haste and lurching; investment plans here are long-term in nature. Therefore, abrupt, thoughtless actions can and, judging by today's market situation, already do lead to serious imbalances.

He called it a mistake that the European Commission announced it would wind down long-term gas supply contracts and shift to exchange-based fuel trading.

According to him, the sharp rise in gas prices is allegedly also linked to the fact that "the world is recovering from coronavirus, and therefore demand for energy resources is growing." However, he did not explain how this relates to the fact that Gazprom is not delivering gas to European underground gas storage facilities via the Ukrainian gas transmission system.

Most telling in this case is that Hungarian Prime Minister Viktor Orbán spoke in roughly the same terms, blaming the European Commission's "Green Deal."

At the same time, Hungary is not affected by the gas crisis thanks to its contract with Gazprom. Russia supplies gas to Budapest via longer routes, but at a lower price, clearly acting to its own detriment, solely to achieve the goal of reducing dependence on transit through the Ukrainian gas transmission system.