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Gas prices hit record highs in Europe as crisis threatens to trigger recession

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The EU will convene an emergency meeting of energy ministers as gas prices spiral, hit an all-time high in Europe on Friday and threaten to plunge the region’s economy into a deep recession.

Czech Prime Minister Petr Fiala said on Friday that the Czechs, as holders of the rotating presidency of the European Council, will call energy ministers “to discuss specific emergency measures to address the energy situation.” Czech Trade Minister Jozef Sikela said it should meet “as soon as possible”.

The call came as European gas prices hit a record 343 euros per megawatt-hour ($100 per million British thermal units) on Friday, pointing to a strong threat to energy-intensive industries.

The regional fertilizer industry association warned on Friday that 70 percent of production in Europe was constrained by high gas prices, illustrating how the energy crisis is spreading across industries, threatening sectors from glassmaking to food production.

In July, EU ministers agreed to voluntarily cut domestic gas demand by 15 percent between August and March, a target that could be made mandatory if the crisis worsens in winter.

Europe’s benchmark gas price has risen by almost a third in the past week as traders and energy companies rush to secure supplies ahead of winter.

Gas is in short supply as Russia cut exports to Europe on the key Nord Stream 1 gas pipeline in June. The industry may also face winter rationing as the weather cools.

Governments across Europe are grappling with a cost-of-living crisis caused by Russia’s invasion of Ukraine and its subsequent cuts to gas supplies, which European politicians have described as “weaponizing gas”.

Prices are more than 10 times the level in the US, where the benchmark contract is trading at $10 per mmbtu, although it is also the highest since before the financial crisis, when US traders are rushing to ship LNG cargoes to Europe.

Danish Energy Minister Dan Jørgensen tried to emphasize EU solidarity on Friday, saying it was “extraordinary how the EU has been able to stick together in these very difficult times”.

An EU diplomat said the emergency meeting was a chance for the Czechs “to rally the troops and show Europe that they are serious”.

But there is skepticism in many countries about what can be done or whether it will go so far as to help neighbors with their energy bills.

Farmers and the fertilizer industry are warning of a danger to food crops as Europe cuts nitrogen fertilizer production due to its cost.

“We expect a sharp increase in prices [of nitrogen-base fertiliser] in the coming weeks,” said Chris Lawson of consultancy CRU. Nitrogen-based fertilizers typically provide up to two-thirds of the nutrients used to grow crops, and analysts fear that falling availability and rising prices in Europe will reduce food crop yields.

“The European fertilizer industry is in full crisis as the European gas market is in shambles,” said Jacob Hansen, CEO of the Crop Nutrition Organisation.

Companies including Norway’s Yara and Germany’s BASF, as well as Poland’s Grupa Azoty, have begun closing or curtailing production.

More news from Raphael Minder in Warsaw

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