Energy Crisis in Europe Will Lead to Years of Shortages and Blackouts

To replace Russian gas, Europe is buying fuel that typically goes to developing countries.

FREMONT, CA:Europe will survive the winter even if costs will be high because it has purchased enough oil and gas to go through the heating seasons. The world's poorest nations will bear much higher expenses due to being excluded from the natural gas market due to Europe's unexpectedly rabid demand. It has rendered emerging market nations unable to meet their needs in the future, and the most likely effects are industry closures, more frequent and prolonged power outages, and the stoking of social discontent that could persist for the next ten years.

According to a Credit Suisse Group AG energy expert, energy poverty in the developing world is being caused by energy security concerns in Europe. After a summer of continuous blackouts and political unrest, cooler temperatures and copious rains have eased the immediate energy situation in Pakistan, India, Bangladesh, and the Philippines. But any alleviation will only last a short while.

Parts of South Asia can soon see colder temperatures that can be harsher than London, and there are few chances of obtaining long-term supplies. The situation has only become more difficult due to the high US currency, which forces countries to decide between paying their debts and buying fuel. International petroleum providers are becoming more cautious when dealing with nations that might be on the verge of default.

The response of Europe to decreasing fuel supply and the conflict in Ukraine is at the heart of the problem. European nations that can no longer access Russian gas have moved to the spot market, where the energy that has not been committed to buyers is made available for urgent delivery. Traders claim that some suppliers to South Asia have merely postponed long-scheduled deliveries in favour of higher returns elsewhere due to the rising pricing.

According to a Wood Mackenzie Ltd. expert, suppliers do not need to concentrate on securing their LNG for markets with low affordability. Any fines they would incur for skipping planned shipments are more than offset by the greater rates they can obtain on the spot market. And that dynamic will probably persist for a long time.

This month, leaders at the UN climate meetings in Egypt discussed how richer countries could assist and provide greater support. Global warming damage, such as the terrible floods in Pakistan, is also wreaking economic havoc on emerging economies.

To import more petroleum in the future, Europe is hastening the building of floating import terminals. The plants are in Germany, Italy, and Finland. In September, the Netherlands began importing LNG from brand-new floating terminals. According to BloombergNEF, Europe's demand for natural gas is anticipated to increase by around 60 per cent by 2026.