Europe shows nerves of steel in new 'cold war'

Europe might have the reputation for loving and creating luxury, but it is proving it can tough it out if need be. Despite dropping temperatures, residents of the region have joined government efforts to keep the heating off in the face of potentially fearsome energy prices.

As a result, wholesale prices plummeted as a glut from eager suppliers of liquefied natural gas (LNG) hit the market. While a mild autumn helped and much remains to be seen, Europe’s response to the energy crisis has surprised critics. Many are wondering if the crisis has established a new paradigm that will supercharge conservation efforts and the long-term battle against climate change – or simply drive efforts to find more carbon-based fuels.

Faced with a diminished supply of natural gas from Russia related to the Ukraine conflict, governments across Europe decided to keep the heat off in public buildings until December 1 and asked consumers to do the same. When the heating is switched on, they want to limit the thermostat setting to 19 C.

Huge shipments of LNG – so great has been the response that full massive tankers are lined up at sea queuing to offload – and brimming storage facilities are now easing concerns over gas rationing or truly disastrous prices. Anecdotal reports say gas prices to residential users appear to have about doubled over the low traditional rate, allaying fears publicized early in the fall over a potential price rise of five times or greater.

Julien Hoarau, head of analysis at Energy Scan, a firm that monitors usage for the energy industry, told the press that there are “emerging signs of behavioural change regarding heating usage” resulting in “strong bearish pressure on spot gas prices across Europe and strengthened ability for the continent to balance its gas system this winter”.

Natural gas usage in Western Europe fell 22 per cent in October from the same month a year earlier, according to data from Energy Scan. Residential and business-related gas usage fell by an even steeper 33 per cent.

A cold snap that hit Europe this week could alter the short-term figures and send costs higher in the extremely price-sensitive and volatile market, but long-term changes are already affecting the outlook.

In just 200 days Germany will have completed construction of its first import terminal for LNG, at Wilhelmshaven on the North Sea, easing fears that Europe’s largest economy could face gas rationing this winter. Earlier this year, it chartered five floating storage units, with the first LNG tankers due to dock early next year.

“Germany can be fast and advance infrastructure projects with great determination when the federal and regional governments, together with the project participants, all pull together,” said German Economy Minister Robert Habeck.

Italy also moved in record time to approve a controversial new LNG terminal in the port of Piombino in Tuscany. With little domestic gas production and a ban on nuclear power, Italy is heavily reliant on imports. Before the Ukraine war, Russia supplied nearly 40 percent of its total energy.

Italian energy giant Eni is roaming far afield in search of new supplies, particularly in Africa. It hailed what it called a major achievement as the first shipment of LNG left the Mozambique Coral Sul gas field it has developed. One of the world’s poorest nations, Mozambique ended a decade-long wait to sell gas extracted from the large offshore field as President Filipe Nyusi announced the first shipment in a statement this week.

The developments come at a poignant time – world leaders have gathered for a G20 summit in Indonesia and the COP27 climate summit now underway in Egypt – as the planet clearly feels the impact of severe weather and lower food production due to global warming.