Winter is coming and it looks like it promises to be brutal and divisive due to an energy crisis that is rapidly worsening as Vladimir Putin suffocates Europe with Russian gas supplies.. Several disasters over the past decade have nearly torn Europe apart, including the euro crisis in the early 2010s and the migration crisis in 2015.. The winter energy shock of 2022 could still be on a par with them. Once again, the continent's unity and resolve are being tested, The Economist writes..

Most Europeans Haven't Seen Or Smelled The Gas Disaster Yet, But Red Warning Signs Are Already Flashing In The Markets. Gas supply prices this winter at €182/MWh ($184/MWh) are almost the same as they were in early March after the Russian invasion of Ukraine and seven times their long-term level. Governments are preparing bailouts for failing utilities in France and Germany, and some investors are betting which industries will go bankrupt later this year when rationing comes into effect.. While most European politicians fail to negotiate with the public about the difficult decisions that lie ahead, even seasoned energy traders accustomed to wars and upheavals have begun to express concern..

A serious energy crisis has become a threat since Russian tanks entered Ukraine. As sanctions and Russian blackmail threaten to cut Europe off from its main energy supplier, where gas is the main stumbling block. It satisfies a quarter of the continent's energy needs, while Russia supplies a third of that.. Figures are higher for some countries, including Germany. Unlike oil and coal, which are interchangeable and sold worldwide, gas must either be transported by pipeline or transported as liquefied natural gas (LNG) using facilities that take years to build or reconfigure.

As Putin is well aware, the gas market is also a market in which Russia holds the whip in its hands.. Its economy will collapse without oil exports, which have averaged 10% of its GDP over the past five years - which is why Russia has taken incredible and mostly successful steps to break the Western embargo on crude oil.. But Russia can live without gas exports, which are only 2% of GDP. Turning off the taps on her pipelines, she thinks she can do Europe more harm than herself.

Until a few weeks ago, it seemed that Europe would be able to avoid the worst thanks to more LNG cargo from America and other countries.. Demand for gas is seasonal, so it is necessary to build up reserves in spring and summer. From a frightening 26% in March, Europe's storage facilities were more than half full by June and were set to reach 80% by November, the minimum needed to survive the winter..

Now the picture is worsening again. Failures at a Norwegian gas field are partly to blame, as well as hot weather, which creates a need for electricity to power air conditioners.. But the big problem is the flow of gas to Europe from Gazprom, the Russian gas monopoly.. Gazprom was already operating at about half the normal level and the volume of deliveries fell even more. Russia says major Nord Stream 1 gas pipeline has been undergoing repairs since July 11, to be completed by July 22. But this is not offset by an increase in supplies through alternative pipelines passing through Ukraine.. As traders believe Putin is deliberately squeezing supply, with shipping prices in two winters, for 2023-2024, four times the normal level.

Consumers who use gas directly for heating and cooking, and indirectly electricity, have little idea of \u200b\u200bwhat can hit them. For now, many are protected by price caps, subsidies and long-term contracts.. The typical German pays for gas at least 70% less than the market price. Industrial users such as chemical and glass firms may have problems. Problems also await a wide range of enterprises, including many German large enterprises. In the eurozone, cutting off Russian gas supplies could reduce GDP growth by 3.4 percentage points and raise inflation by 2.7 percentage points, according to UBS.. In Germany, the blow would be even worse.

You might think a recession and inflation would be bearable as coronavirus-hit Europe's GDP fell by 6% in 2020. But the energy threat is more insidious.. Shortages could fuel beggar neighbor behavior as states stockpile gas, preventing it from flowing to a neighboring country. Great Britain threatened the same. The gap in wholesale gas prices across the EU suggests that firms fear disruptions in the single market. Government debt is higher than ever. A stagflation shock could raise fears of defaults or even an Italian debt crisis that would threaten the entire euro area. Popular backlash against energy prices could also undermine popular support across the continent that opposes Putin.

For all these reasons, European governments must rise up now to confront the energy shock.. As with vaccines, they must overcome national differences. The European Commission is working on a plan to present at an emergency summit on July 26. Given their role in the gas trade, the UK and Norway should be included in the plan. Supplies should be maxed out, which is why general LNG purchases should continue and why the Netherlands should delay shutting down its Groningen gas field next year.

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Next comes the need for a common rationing hierarchy applied across the continent: heavy energy users must suffer first and energy consumers last.. Countries need to share storage and guarantee the free movement of gas. The more integrated the system, the more resilient it will be. Finally, politicians must be honest with the public. Consumer prices should rise now to cut demand and help create storage. Next winter, even small voluntary changes in living habits, such as turning down the heat, will help..

If Europe acts together, it will not just win an energy prize in the coming months. Europe forever free from Russian energy bullying. In addition, a coherent energy security mechanism across the continent will be created to help accelerate the transition to cleaner energy.. Europe has a habit of coming together in times of crisis. It's time to do it again. If you're reading this in Paris or Madrid with the air conditioner turned on, turn it down..

Earlier it was reported that Biden took part in the summit of the leaders of the Gulf and Arab states.. It seems that he has not yet succeeded in solving the main problem - increasing oil supplies and reducing prices for it..