Germany is grappling with its worst energy shortage in decades as it might not meet the threshold of adequate natural gas reserves before winter.
Germany’s national Sunday newspaper Bild am Sonntag interviewed Klaus Muller, head of the Federal Network Agency, the government regulator of electricity, gas, telecommunications, post, and railway markets, who warned NatGas inventories are “nearly 65% full” and “it’s better than in the previous weeks,” though not enough to “go through the winter without Russian gas.”
The German government sets a yearly target of 90% by November for NatGas inventories, and with nearly 3.5 months until the target date, injections have turned to withdraws due to the Nord Stream 1 pipeline scheduled maintenance and a menacing heatwave that has bolstered electricity demand.
Muller said Nord Stream’s 10-day scheduled maintenance ends July 21 or this coming Thursday. The energy situation could worsen if Russian state-controlled natgas exporter Gazprom doesn’t resume deliveries or continues to restrict flows.
When asked how long until energy prices decrease, Muller said, “there hasn’t been any significant price surge this week, even though the Nord Stream 1 was shut off.” He said this could signify that “markets have already internalized the loss of Russian gas supplies, and we’ve reached a gas price plateau.”
Berlin triggered the second stage of its national NatGas emergency plan last month — the next phase is rationing NatGas. Muller said there is a rising probability of rationing, which would wreak havoc on the economy and supply chains.
Germany also receives NatGas from Belgium, Norway, and the Netherlands, but the plunge in Russian supplies indicates Germany is behind on filling up its storage facilities to create reserves for winter.
Dutch front-month gas, the European benchmark, traded around 163 euros per megawatt-hour last week.
A recent Bank of America research note outlined how an “ugly” scenario of supply disruptions could push NatGas over 200 euros this year and in 2023.
The energy situation in Germany is worsening, and more insight into Russia’s pipeline flows will be available after Thursday, when Nord Stream is expected to return to service. Suppose Gazprom throttles flows and or even halts after the scheduled maintenance period is over. In that case, it will result in a situation that would spark economic doom for Germany and the continent this winter.
Even though Muller predicted Germany would be independent of Russian NatGas by the summer of 2024, Europe faces two years of tight supplies that will continue to feed into energy inflation and crush households and businesses.
Finally, Deutsche Bank senior economist Eric Heymann told clients Friday that German households will be chopping a lot of wood this winter and using fireplaces for heating as a cheap alternative to expensive NatGas.