The current energy crisis could be one of the worst and longest in history and European countries could be hit particularly hard, the head of the International Energy Agency, Fatih Birol, said on Tuesday.
In an interview with German magazine Der Spiegel, Birol said that the fallout from the events in Ukraine is likely to make the current energy crisis worse than the crises of the 1970s.
“Back then it was all about oil. Now we have an oil crisis, a gas crisis and an electricity crisis at the same time,” Birol told the publication, adding that before the ongoing events in Ukraine, Russia was “a cornerstone of the global energy system: the world’s largest oil exporter, the world’s largest gas exporter, a leading supplier of coal.”
As part of its Ukraine-related sanctions, the EU introduced restrictions on Russian fossil fuels and has pledged to gradually phase them out.
Phase them out into what exactly? Experts have repeatedly said that there is no alternative to Russia’s supplies.
Birol warned that countries in Europe that are more dependent on Russian gas are facing a “difficult winter,” as “gas may well have to be rationed,” including in Germany. His comments came as Russia’s state gas supplier Gazprom cut off supplies to some energy firms in Germany, Denmark, the Netherlands and other countries, after their failure to pay for the fuel in rubles as per new requirements.
To try and mitigate the impact, EU states should procure as much additional gas as possible, for example pipeline gas from Norway or Azerbaijan, and LNG. According to Birol, coal-fired power plants could also partly replace gas-fired plants.
‘Partly’, which means that people will have ‘part’ of their usual energy supply. Moreover, as just one example, the UK doesn’t have the facilities to receive or store all of the expensive and unreliable shipments of US LNG.
The upcoming summer may be difficult as well in the EU and the US, due to the tight crude oil markets, Birol said. He warned that when the peak holiday season kicks off, fuel demand will increase, leading to “bottlenecks, for example with diesel, petrol or kerosene, especially in Europe.”
Number of UK mortgages approved hit two-year low in April, as consumers spend more on credit as inflation rises
UK mortgage approvals have fallen to their lowest level since June 2020 as higher interest rates and the cost of living squeeze cooled the market. There were below 66,000 mortgage approvals in April, below the pre-pandemic average.
Rising inflation also pushed people to borrow more on credit, with credit card borrowing rising at the fastest rate since 2005.
— jeroen blokland (@jsblokland) May 31, 2022
Pushpin Singh, economist at the CEBR thinktank, explains:
“With inflation accelerating rapidly and wage growth unable to match its pace, consumers’ real spending power is weakening.
“Moreover, an increase in living costs is likely prompting consumers to turn to borrowing to fund their expenditure, resulting in multi-year high growth rates for credit card borrowing.
“Meanwhile, net mortgage borrowing saw a stark downtick in April as borrowing costs have risen in recent months.”
Inflationary pressures continue to build in the eurozone, where consumer prices jumped by 8.1% over the last year – the fastest on record.
Updated growth figures showed that France’s economy shrank in the first quarter of the year, suggesting it could be falling into recession, while Italy managed modest growth.
Switzerland’s economy was supported by decent demand for manufactured goods, while India and Canada both slowed in Q1.
China’s factory slump may have bottomed out in May, as Covid-19 restrictions are eased.
Brent crude oil has hit a new two-month high, over $124 per barrel, after EU leaders agreed a partial ban on Russian imports.
Russia has further cut off gas supplies to Europe, after state energy giant Gazprom turned off the taps to a top Dutch trader, amid an intensification of the economic battle over Moscow’s invasion of Ukraine.
Baltic nation tops eurozone inflation chart
Estonia’s annual inflation reached 20.1% in May, the highest rate in the euro area, according to the European Union’s statistics agency Eurostat. The April figure was 18.1%.
Lithuania and Latvia had the second- and third-highest increases at 18.5% and 16.4%, respectively.
Estonia has been hit by the largest electricity price hike and one of the largest natural gas price hikes in the EU.
Global energy prices, which had already spiked amid surging demand following the Covid-19 pandemic, have climbed even higher over disrupted oil and gas supplies from Russia.
Some European states have stopped buying Russian gas, some have been cut off for refusing ruble payments, while the US has banned oil imports from the country.
In April, the head of Latvia’s natural gas storage operator Conexus Baltic Grid said the three Baltic states – Latvia, Estonia and Lithuania – were no longer importing Russian natural gas.
Annual inflation in the eurozone is expected to hit 8.1% in May, according to preliminary figures released on Tuesday. Energy prices continue to have the greatest impact on the region’s economy. [Guardian1, RT]
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